<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 1, 1996
REGISTRATION NO. 333-153
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
TRUMP HOTELS & CASINO RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
7011
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)
DELAWARE 13-3818402
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
NICHOLAS L. RIBIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRUMP HOTELS & CASINO RESORTS, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
WITH COPIES TO:
DANIEL D. RUBINO, ESQ. ROBERT M. PICKUS, ESQ.
WILLKIE FARR & GALLAGHER EXECUTIVE VICE PRESIDENT
ONE CITICORP CENTER TRUMP HOTELS & CASINO RESORTS, INC.
153 EAST 53RD STREET MISSISSIPPI AVENUE AND THE BOARDWALK
NEW YORK, NEW YORK 10022 ATLANTIC CITY, NEW JERSEY 08401
(212) 821-8000 (609) 441-6060
NICHOLAS F. MOLES, ESQ. EMANUEL S. CHERNEY, NICHOLAS P. SAGGESE, ESQ.
SECRETARY ESQ. SKADDEN, ARPS, SLATE, MEAGHER
TAJ MAHAL HOLDING CORP. ANDREWS & KURTH L.L.P. & FLOM
1000 THE BOARDWALK 425 LEXINGTON AVENUE 300 SOUTH GRAND AVENUE
ATLANTIC CITY, NEW NEW YORK, NEW YORK SUITE 3400
JERSEY 08401 10017 LOS ANGELES, CALIFORNIA 90071
(609) 449-5540 (212) 850-2800 (213) 687-5000
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(continued on next page)
<PAGE>
(continued from preceding page)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement and concurrent with the merger (the "Merger") of a wholly owned
subsidiary of Trump Hotels & Casino Resorts, Inc. (the "Registrant") with and
into Taj Mahal Holding Corp. ("Taj Holding") pursuant to the Agreement and
Plan of Merger, as amended, attached as Annex A to the Joint Proxy Statement-
Prospectus forming a part of this Registration Statement (the "Merger
Agreement").
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
----------------------- ---------------------
<S> <C>
1.Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus. Forepart of the Registration
Statement and Outside Front Cover
Page of Joint Proxy Statement-
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back
Cover Pages of Joint Proxy
Statement-Prospectus
3.Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.......... Proxy Statement-Prospectus
Summary; Risk Factors
4. Terms of the Transaction................. Proxy Statement-Prospectus
Summary; Special Factors; The
THCR Special Meeting; The Taj
Holding Special Meeting; The
Merger Agreement; Description of
THCR Capital Stock; Comparison of
Stockholder Rights
5. Pro Forma Financial Information.......... Unaudited Pro Forma Financial
Information; Selected Historical
Financial Information of THCR
6. Material Contracts with the Company Being
Acquired................................. Special Factors; Certain
Transactions
7.Additional Information Required for
Reoffering by Persons and Parties
Deemed to Be Underwriters.............. Not Applicable
8. Interests of Named Experts and Counsel... Not Applicable
9.Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Not Applicable
10. Information with Respect to S-3
Registrants............................. Not Applicable
11. Incorporation of Certain Information by
Reference............................... Not Applicable
12. Information with Respect to S-2 and S-3
Registrants............................. Not Applicable
13. Incorporation of Certain Information by
Reference............................... Not Applicable
14. Information with Respect to Registrants
Other than S-3 or S-2 Registrants
a) Description of Business.............. Joint Proxy Statement-Prospectus
Summary; Risk Factors; Regulatory
Matters; Business of THCR
b) Description of Property.............. Business of THCR
c) Legal Proceedings.................... Business of THCR
d) Market Price of and Dividends on
Registrants' Common Equity and Related
Stockholder Matters................... Security Ownership of Certain
Beneficial Owners and Management
of THCR; Market Price and
Dividend Data
e) Financial Statements................. Financial Statements
f) Selected Financial Data.............. Selected Historical Financial
Information
g) Supplementary Financial Information.. Not Applicable
h) Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................ Management's Discussion and
Analysis of Financial Condition
and Results of Operations of THCR
i) Changes in and Disagreements with Ac-
countants............................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION HEADING IN PROSPECTUS
----------------------- ---------------------
<S> <C>
15. Information with Respect to S-3
Companies............................... Not Applicable
16.Information with Respect to S-2 or S-3
Companies.............................. Not Applicable
17.Information with Respect to Companies
Other than S-2 or S-3 Companies........ Joint Proxy Statement-Prospectus
Summary; Risk Factors; Regulatory
Matters; Business of Taj Holding;
Financial Statements; Selected
Historical Financial Information;
Market Price and Dividend Data;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations of Taj
Associates
18.Information if Proxies, Consents or
Authorizations Are to Be Solicited..... Outside Front Cover Page of Joint
Proxy Statement-Prospectus; Proxy
Statement-Prospectus Summary;
General Information; The THCR
Special Meeting; The Taj Holding
Special Meeting; Dissenting
Stockholders' Rights of
Appraisal; Security Ownership of
Certain Beneficial Owners and
Management of THCR; Security
Ownership of Certain Beneficial
Owners and Management of Taj
Holding; Management of Taj
Holding; Certain Transactions
19.Information if Proxies, Consents or
Authorizations Are Not to Be Solicited
or in an Exchange Offer................ Not Applicable
</TABLE>
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
February , 1996
Dear Stockholders:
You are cordially invited to attend a Special Meeting of stockholders of
Trump Hotels & Casino Resorts, Inc. ("THCR"), which will be held on March ,
1996 at , commencing at 10:00 a.m., local time. At this important meeting,
you will be asked to approve the Merger Transaction (as defined below), which
approval will constitute approval and adoption of the Agreement and Plan of
Merger, as amended (the "Merger Agreement"), among THCR, Taj Mahal Holding
Corp. ("Taj Holding") and THCR Merger Corp. ("Merger Sub"), a wholly owned
subsidiary of THCR. Pursuant to the terms of the Merger Agreement, Merger Sub
will be merged with and into Taj Holding (the "Merger").
As a result of the Merger and the related transactions discussed below,
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"), a subsidiary
of THCR, will indirectly wholly own Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"). Following the Merger Transaction, THCR's gaming operations will
include the Taj Mahal, the Trump Plaza Hotel and Casino ("Trump Plaza") and
THCR's riverboat gaming project 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
Donald J. Trump ("Trump") will engage in new gaming activities in both
emerging and established gaming jurisdictions.
The Merger Agreement provides that each outstanding share of Class A Common
Stock of Taj Holding ("Taj Holding Class A Common Stock") (other than
Dissenting Shares (as defined in the accompanyingJoint Proxy Statement-
Prospectus)) will be converted into the right to receive, at each holder's
election, either (i) $30.00 in cash or (ii) that number of shares of Common
Stock of THCR ("THCR Common Stock") as shall have a market value equal to
$30.00. No fractional shares of THCR Common Stock will be issued in the
Merger.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger:
(i) the consummation of the offering by THCR of up to $140,000,000 of
THCR Common Stock (and an amount to be issued pursuant to the underwriters'
over-allotment option) and the consummation of the offering by a wholly
owned subsidiary of THCR Holdings, Trump Plaza Holding Associates ("AC
Holdings"), and its wholly owned finance subsidiary, of up to
$1,180,000,000 aggregate principal amount of first mortgage notes (the
"Mortgage Note Offering"), the aggregate proceeds of which will be used,
together with available cash, to (a) pay cash to those holders of Taj
Holding Class A Common Stock electing to receive cash in the Merger, (b)
redeem the outstanding 11.35% Mortgage Bonds, Series A due 1999 of Trump
Taj Mahal Funding, Inc. (the "Taj Bonds") (the "Taj Bond Redemption"), (c)
redeem the outstanding shares of Class B Common Stock of Taj Holding as
required in connection with the redemption of the Taj Bonds, (d) retire, by
purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due
2001 of Trump Plaza Funding, Inc. (such purchase and/or defeasance,
together with the Mortgage Note Offering and the Taj Bond Redemption, are
collectively referred to as the "Debt Refinancing"), (e) satisfy the
indebtedness of Taj Associates under its loan agreement with National
Westminster Bank USA, (f) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (g) purchase certain real property used in the
operation of Trump Plaza that is currently leased from an unaffiliated
third party, (h) make a payment to Bankers Trust Company ("Bankers Trust")
to obtain releases of liens that Bankers Trust has with respect to certain
equity interests of Taj Associates and related guarantees, and (i) pay
related fees and expenses;
(ii) the contribution by Trump to AC Holdings of all of his direct and
indirect ownership interests in Taj Associates; and
<PAGE>
(iii) the contribution by THCR to AC Holdings of all of its indirect
ownership interests in Taj Associates acquired in the Merger.
The Merger is contingent upon the consummation of the other transactions
contemplated by the Merger Transaction. As a result of the Merger Transaction,
THCR's and Trump's beneficial equity interests in THCR Holdings will be
approximately % and %, respectively. In addition, as part of the Merger
Transaction, THCR will issue to Trump a warrant to purchase an aggregate of
1.8 million shares of THCR Common Stock at $30.00, $35.00 and $40.00 per
share. The Merger and the related transactions discussed above are
collectively referred to as the "Merger Transaction." For purposes of the
proposal to be submitted to the stockholders of THCR for approval at the
Special Meeting, the term "Merger Transaction" shall exclude the Debt
Refinancing.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), THCR's
financial advisor, rendered its opinion on January 31, 1996 to the effect
that, as of such date, the aggregate consideration to be paid by THCR pursuant
to the transactions contemplated by the Merger Agreement is fair, from a
financial point of view, to THCR. The written opinion of DLJ dated January 31,
1996 is included in the accompanying Joint Proxy Statement-Prospectus, and
should be read carefully in its entirety by the stockholders of THCR.
THE BOARD OF DIRECTORS OF THCR AND THE SPECIAL COMMITTEE OF THE BOARD OF
DIRECTORS OF THCR HAVE CONSIDERED THE TERMS AND CONDITIONS OF THE MERGER
TRANSACTION, DETERMINED THAT THE PROPOSED MERGER TRANSACTION IS FAIR TO, AND
IN THE BEST INTERESTS OF, THCR AND UNANIMOUSLY APPROVED THE TERMS OF THE
MERGER TRANSACTION AND THE MERGER AGREEMENT. ACCORDINGLY, THE BOARD OF
DIRECTORS OF THCR RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER TRANSACTION.
The accompanying Joint Proxy Statement-Prospectus explains in detail the
Merger Transaction. Please read the Joint Proxy Statement-Prospectus 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
Merger Transaction.
Sincerely,
2
<PAGE>
TAJ MAHAL HOLDING CORP.
1000 THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
February , 1996
Dear Stockholders:
You are cordially invited to attend a Special Meeting of stockholders of Taj
Mahal Holding Corp. ("Taj Holding"), which will be held on March , 1996 at
, commencing at 10:00 a.m., local time. At this important meeting, you will
be asked to approve and adopt the Agreement and Plan of Merger, as amended
(the "Merger Agreement"), among Trump Hotels & Casino Resorts, Inc. ("THCR"),
Taj Holding and THCR Merger Corp. ("Merger Sub"), a wholly owned subsidiary of
THCR. Pursuant to the terms of the Merger Agreement, Merger Sub will be merged
with and into Taj Holding (the "Merger").
As a result of the Merger and the transactions discussed below, Trump Hotels
& Casino Resorts Holdings, L.P. ("THCR Holdings"), a subsidiary of THCR, will
indirectly wholly own Trump Taj Mahal Associates ("Taj Associates"), the owner
and operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal"). Following
the Merger Transaction, THCR's gaming operations will include the Taj Mahal,
the Trump Plaza Hotel and Casino ("Trump Plaza") and THCR's riverboat gaming
project 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 Donald J. Trump ("Trump")
will engage in new gaming activities in both emerging and established gaming
jurisdictions.
The Merger Agreement provides that each outstanding share of Class A Common
Stock of Taj Holding ("Taj Holding Class A Common Stock") (other than
Dissenting Shares (as defined in the accompanying Joint Proxy Statement-
Prospectus)) will be converted into the right to receive, at each holder's
election, either (i) $30.00 in cash or (ii) that number of shares of Common
Stock of THCR ("THCR Common Stock") as shall have a market value equal to
$30.00 (the "Merger Consideration"). No fractional shares of THCR Common Stock
will be issued in the Merger.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger:
(i) the consummation of the offering by THCR of up to $140,000,000 of
THCR Common Stock (and an amount to be issued pursuant to the underwriters'
over-allotment option) and the consummation of the offering by a wholly
owned subsidiary of THCR Holdings, Trump Plaza Holding Associates ("AC
Holdings"), and its wholly owned finance subsidiary, of up to
$1,180,000,000 aggregate principal amount of first mortgage notes, the
aggregate proceeds of which will be used, together with available cash, to
(a) pay cash to those holders of Taj Holding Class A Common Stock electing
to receive cash in the Merger, (b) redeem the outstanding 11.35% Mortgage
Bonds, Series A due 1999 of Trump Taj Mahal Funding, Inc. (the "Taj
Bonds"), (c) redeem the outstanding shares of Class B Common Stock of Taj
Holding as required in connection with the redemption of the Taj Bonds, (d)
retire, by purchasing and/or defeasing, the outstanding 10 7/8% Mortgage
Notes due 2001 of Trump Plaza Funding, Inc., (e) satisfy the indebtedness
of Taj Associates under its loan agreement with National Westminster Bank
USA, (f) purchase certain real property used in the operation of the Taj
Mahal that is currently leased from a corporation wholly owned by Trump,
(g) purchase certain real property used in the operation of Trump Plaza
that is currently leased from an unaffiliated third party, (h) make a
payment to Bankers Trust Company ("Bankers Trust") to obtain releases of
liens that Bankers Trust has with respect to certain equity interests of
Taj Associates and related guarantees, and (i) pay related fees and
expenses;
(ii) the contribution by Trump to AC Holdings of all of his direct and
indirect ownership interests in Taj Associates; and
(iii) the contribution by THCR to AC Holdings of all of its indirect
ownership interests in Taj Associates acquired in the Merger.
<PAGE>
The Merger is contingent upon the consummation of the other transactions
contemplated by the Merger Transaction. As a result of the Merger Transaction,
THCR's and Trump's beneficial equity interests in THCR Holdings will be
approximately % and %, respectively. THCR will also issue to Trump a
warrant to purchase an aggregate of 1.8 million shares of THCR Common Stock at
$30.00, $35.00 and $40.00 per share. The Merger and the related transactions
discussed above are collectively referred to as the "Merger Transaction."
Rothschild Inc. ("Rothschild"), Taj Holding's financial advisor, rendered
its opinion on January 31, 1996 that, as of such date, the consideration to be
received by the holders of Taj Holding Class A Common Stock in connection with
the Merger Transaction, is fair, from a financial point of view, to the
holders of Taj Holding Class A Common Stock. The written opinion of Rothschild
dated January 31, 1996 is included in the accompanying Joint Proxy Statement-
Prospectus, and should be read carefully in its entirety by the stockholders
of Taj Holding.
THE BOARD OF DIRECTORS OF TAJ HOLDING (INCLUDING THE CLASS B DIRECTORS OF
TAJ HOLDING WHOSE APPROVAL IS SEPARATELY REQUIRED) HAS CONSIDERED THE TERMS
AND CONDITIONS OF THE MERGER AGREEMENT, DETERMINED THAT THEY ARE FAIR TO, AND
IN THE BEST INTERESTS OF, TAJ HOLDING AND THE HOLDERS OF TAJ HOLDING CLASS A
COMMON STOCK, AND UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT. THE
BOARD OF DIRECTORS OF TAJ HOLDING RECOMMENDS THAT YOU VOTE TO APPROVE AND
ADOPT THE MERGER AGREEMENT.
The accompanying Joint Proxy Statement-Prospectus explains in detail the
Merger Transaction. Please read the Joint Proxy Statement-Prospectus 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 and
adoption of the Merger Agreement.
Holders of Taj Holding Class A Common Stock electing to receive cash rather
than shares of THCR Common Stock must return the enclosed election form,
properly completed, to Continental Stock Transfer and Trust Company so that it
is received before by 5:00 p.m. on March , 1996, as instructed in the
accompanying Joint Proxy Statement-Prospectus.
As soon as practicable after the consummation of the Merger, holders of Taj
Holding Class A Common Stock will be provided with instructions for
surrendering share certificates and a letter of transmittal to be used for
such purpose. You should not submit your share certificates for surrender
until you have received such instructions and letter of transmittal.
Sincerely,
2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
TELEPHONE NUMBER: (609) 441-6060
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH , 1996
----------------
To the Stockholders of Trump Hotels &
Casino Resorts, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of stockholders (the "Special
Meeting") 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 on March , 1996, at 10:00 a.m., local time, and thereafter as it
may from time to time be adjourned or postponed, for the following purposes:
(1) The holders of Common Stock ("THCR Common Stock") and Class B Common
Stock ("THCR Class B Common Stock") of THCR will be asked to approve the
Merger Transaction (as defined below), which approval will constitute
approval and adoption of the Agreement and Plan of Merger, dated as of
January 8, 1996, among THCR, Taj Mahal Holding Corp. ("Taj Holding") and
THCR Merger Corp. ("Merger Sub"), a wholly owned subsidiary of THCR, as
amended by Amendment to Agreement and Plan of Merger, dated as of January
31, 1996 (the "Merger Agreement"), pursuant to which, among other things,
(a) Merger Sub will be merged with and into Taj Holding (the "Merger"); and
(b) each share of Class A Common Stock of Taj Holding ("Taj Holding Class A
Common Stock") issued and outstanding immediately prior to the Effective
Time (as defined in the Merger Agreement) (other than treasury stock held
by Taj Holding, shares owned by any direct or indirect subsidiary of Taj
Holding and Dissenting Shares (as defined in the accompanying Joint Proxy
Statement-Prospectus)) will be converted into the right to receive, at the
election of each holder, either (i) $30.00 in cash or (ii) that number of
shares of THCR Common Stock as shall have a market value equal to $30.00.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger: (a) the consummation of the offering by THCR of
up to $140,000,000 of THCR Common Stock (and an amount to be issued pursuant
to the underwriters' over-allotment option) and the consummation of the
offering by a wholly owned subsidiary of Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings"), Trump Plaza Holding Associates ("AC
Holdings"), and its wholly owned finance subsidiary, of up to $1,180,000,000
aggregate principal amount of first mortgage notes (the "Mortgage Note
Offering"), the aggregate proceeds of which will be used, together with
available cash, to (i) pay cash to those holders of Taj Holding Class A Common
Stock electing to receive cash in the Merger, (ii) redeem the outstanding
11.35% Mortgage Bonds, Series A due 1999 of Trump Taj Mahal Funding, Inc. (the
"Taj Bonds") (the "Taj Bond Redemption"), (iii) redeem the outstanding shares
of Class B Common Stock of Taj Holding as required in connection with the
redemption of the Taj Bonds, (iv) retire, by purchasing and/or defeasing, the
outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding, Inc. (such
purchase and/or defeasance, together with the Mortgage Note Offering and the
Taj Bond Redemption, are collectively referred to as the "Debt Refinancing"),
(v) satisfy the indebtedness of Trump Taj Mahal Associates ("Taj Associates"),
the owner and operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal"),
under its loan agreement with National Westminster Bank USA, (vi) purchase
certain real property used in the operation of the Taj Mahal that is currently
leased from a corporation wholly owned by Donald J. Trump ("Trump"), (vii)
purchase certain real property used in the operation of Trump Plaza Hotel and
Casino that is currently leased from an unaffiliated third party, (viii) make
a payment to Bankers Trust Company ("Bankers Trust") to obtain releases of
liens that Bankers Trust has with respect to certain equity interests of Taj
Associates and related guarantees, and (xi) pay related fees and expenses; (b)
the contribution by
<PAGE>
Trump to AC Holdings of all of his direct and indirect ownership interests in
Taj Associates; and (c) the contribution by THCR to AC Holdings of all of its
indirect ownership interests in Taj Associates acquired in the Merger.
The Merger is contingent upon the consummation of the other transactions
contemplated by the Merger Transaction. As a result of the Merger Transaction,
THCR Holdings will indirectly wholly own Taj Associates, and THCR's and
Trump's beneficial equity interests in THCR Holdings will be approximately %
and %, respectively. In addition, as part of the Merger Transaction, THCR
will issue to Trump a warrant to purchase an aggregate of 1.8 million shares
of THCR Common Stock at $30.00, $35.00 and $40.00 per share. The Merger and
the related transactions discussed above are collectively referred to as the
"Merger Transaction." For purposes of the proposal to be submitted to the
stockholders of THCR for approval at the Special Meeting, the term "Merger
Transaction" shall exclude the Debt Refinancing.
A copy of the Merger Agreement is attached to the accompanying Joint Proxy
Statement-Prospectus as Annex A. The Joint Proxy Statement-Prospectus and
Annexes thereto form a part of this Notice.
Only holders of record of THCR Common Stock and THCR Class B Common Stock as
of the close of business on February , 1996 are entitled to notice of, and to
vote at, the Special Meeting and any adjournment or postponement thereof.
To ensure that your shares are represented, you are urged to please fill in,
sign, date and return the enclosed proxy card promptly 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 Merger Transaction. If you attend the Special
Meeting, you may vote your shares in person.
By Order of the Board of Directors,
Robert M. Pickus
Secretary
February , 1996
2
<PAGE>
TAJ MAHAL HOLDING CORP.
1000 THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
TELEPHONE NUMBER: (609) 449-5540
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH , 1996
----------------
To the Stockholders of Taj Mahal
Holding Corp.:
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of
stockholders of Taj Mahal Holding Corp., a Delaware corporation ("Taj
Holding"), has been called by the Board of Directors of Taj Holding and will
be held at on March , 1996, at 10:00 a.m., local time, and thereafter
as it may from time to time be adjourned or postponed, for the following
purposes:
(1) The holders of Class A Common Stock ("Taj Holding Class A Common
Stock"), Class B Common Stock ("Taj Holding Class B Common Stock") and
Class C Common Stock ("Taj Holding Class C Common Stock") of Taj Holding
will be asked to approve and adopt the Agreement and Plan of Merger, dated
as of January 8, 1996, among Taj Holding, Trump Hotels & Casino Resorts,
Inc. ("THCR"), and THCR Merger Corp. ("Merger Sub"), a wholly owned
subsidiary of THCR, as amended by Amendment to Agreement and Plan of
Merger, dated as of January 31, 1996 (the "Merger Agreement"), pursuant to
which, among other things, (a) Merger Sub will be merged with and into Taj
Holding (the "Merger"); and (b) each share of Taj Holding Class A Common
Stock issued and outstanding immediately prior to the Effective Time (as
defined in the Merger Agreement) (other than treasury stock held by Taj
Holding, shares owned by any direct or indirect subsidiary of Taj Holding
and Dissenting Shares (as defined in the accompanying Joint Proxy
Statement-Prospectus)) will be converted into the right to receive, at the
election of each holder, either (i) $30.00 in cash or (ii) shares of Common
Stock of THCR ("THCR Common Stock") having a market value equal to $30.00.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger: (a) the consummation of the offering by THCR of
up to $140,000,000 of Common Stock (and an amount to be issued pursuant to the
underwriters' over-allotment option) and the consummation of the offering by a
wholly owned subsidiary of Trump Hotels & Casino Resorts Holdings, L.P. ("THCR
Holdings"), Trump Plaza Holding Associates ("AC Holdings"), and its wholly
owned finance subsidiary, of up to $1,180,000,000 aggregate principal amount
of first mortgage notes, the aggregate proceeds of which will be used,
together with available cash, to (i) pay cash to those holders of Taj Holding
Class A Common Stock electing to receive cash in the Merger, (ii) redeem the
outstanding 11.35% Mortgage Bonds, Series A due 1999 of Trump Taj Mahal
Funding, Inc. (the "Taj Bonds"), (iii) redeem the outstanding shares of Taj
Holding Class B Common Stock as required in connection with the redemption of
the Taj Bonds, (iv) retire, by purchasing and/or defeasing, the outstanding 10
7/8% Mortgage Notes due 2001 of Trump Plaza Funding, Inc., (v) satisfy the
indebtedness of Trump Taj Mahal Associates ("Taj Associates"), the owner and
operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal"), under its
loan agreement with National Westminster Bank USA, (vi) purchase certain real
procertain equity interests of perty used in and related guarantees the
operation of the Taj Mahal that is currently leased from a corporation wholly
owned by Donald J. Trump ("Trump"), (vii) purchase certain real property used
in the operation of Trump Plaza Hotel and Casino that is currently leased from
an unaffiliated third party, (viii) make a payment to Bankers Trust Company
("Bankers Trust") to obtain releases of liens that Bankers Trust has with
respect to certain equity interests of Taj Associates and related guarantees ,
and (xi) pay related fees and expenses; (b) the contribution by Trump to AC
Holdings of all of his direct and indirect ownership interests in Taj
Associates; and (c) the contribution by THCR to AC Holdings of all of its
indirect ownership interests in Taj Associates acquired in the Merger.
<PAGE>
The Merger is contingent upon the consummation of the other transactions
contemplated by the Merger Transaction. As a result of the Merger Transaction,
Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings") will indirectly
wholly own Taj Associates, and THCR's and Trump's beneficial equity interests
in THCR Holdings will be approximately % and %, respectively. THCR will also
issue to Trump a warrant to purchase an aggregate of 1.8 million shares of
THCR Common Stock at $30.00, $35.00 and $40.00 per share. The Merger and the
related transactions discussed above are collectively referred to as the
"Merger Transaction."
A copy of the Merger Agreement is attached to the accompanying Joint Proxy
Statement-Prospectus as Annex A. The Joint Proxy Statement-Prospectus and
Annexes thereto form a part of this Notice.
Only holders of record of Taj Holding Class A Common Stock, Taj Holding
Class B Common Stock and Taj Holding Class C Common Stock as of the close of
business on February , 1996 are entitled to notice of, and to vote at, the
Special Meeting and any adjournment or postponement thereof.
To ensure that your shares are represented, you are urged to please fill in,
sign, date and return the enclosed proxy card promptly 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 and adoption of the Merger Agreement. If you attend the
Special Meeting, you may vote your shares in person.
By Order of the Board of Directors,
Nicholas F. Moles
Secretary
February , 1996
2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 1, 1996
JOINT PROXY STATEMENT-PROSPECTUS
-----------
JOINT PROXY STATEMENT PROSPECTUS
OF OF
TRUMP HOTELS & CASINO TRUMP HOTELS & CASINO RESORTS, INC.
RESORTS, INC.
AND
TAJ MAHAL HOLDING CORP.
-----------
SPECIAL MEETING OF STOCKHOLDERS OF TRUMP HOTELS & CASINO RESORTS, INC. TO BE
HELD MARCH , 1996
SPECIAL MEETING OF STOCKHOLDERS OF TAJ MAHAL HOLDING CORP. TO BE HELD MARCH ,
1996
-----------
This Joint Proxy Statement-Prospectus (the "Proxy Statement-Prospectus") is
furnished in connection with the solicitation of proxies by the Board of
Directors of Trump Hotels & Casino Resorts, Inc., a Delaware corporation
("THCR"), for use at a Special Meeting (including any and all adjournments or
postponements thereof, the "THCR Special Meeting") of stockholders of THCR, and
in connection with the solicitation of proxies by the Board of Directors of Taj
Mahal Holding Corp., a Delaware corporation ("Taj Holding"), for use at a
Special Meeting (including any and all adjournments or postponements thereof,
the "Taj Holding Special Meeting") of stockholders of Taj Holding. The THCR
Special Meeting will be held on March , 1996 at and the Taj Holding
Special Meeting will be held on March , 1996 at .
This Proxy Statement-Prospectus relates, among other things, to the proposed
merger (the "Merger") of THCR Merger Corp., a Delaware corporation ("Merger
Sub") and a wholly owned subsidiary of THCR, with and into Taj Holding pursuant
to the Agreement and Plan of Merger, dated as of January 8, 1996, among THCR,
Taj Holding and Merger Sub, as amended by Amendment to Agreement and Plan of
Merger, dated as of January 31, 1996 (the "Merger Agreement"). As a result of
the Merger and the related transactions discussed below, Trump Hotels & Casino
Resorts Holdings, L.P., a Delaware limited partnership ("THCR Holdings") and a
subsidiary of THCR, will indirectly wholly own Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"). If the Merger is approved and consummated, each share of Class A
Common Stock, par value $.01 per share, of Taj Holding ("Taj Holding Class A
Common Stock") issued and outstanding immediately prior to the Effective Time
of the Merger (as defined in the Merger Agreement) (other than treasury stock
held by Taj Holding, shares owned by any direct or indirect subsidiary of Taj
Holding and Dissenting Shares (as defined herein)) will be converted into the
right to receive, at each holder's election, either (a) $30.00 in cash or (b)
that number of shares of Common Stock, par value $.01 per share, of THCR ("THCR
Common Stock") as is determined by dividing $30.00 by the Market Value. Market
Value is defined as the average of the
(Continued on following page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE MERGER AND RELATED
TRANSACTIONS.
-----------
This Proxy Statement-Prospectus also constitutes the Prospectus of THCR with
respect to the shares of THCR Common Stock to be issued in the Merger. The THCR
Common Stock is listed on the NYSE under the symbol "DJT." On February ,
1996, the last reported sales price of THCR Common Stock on the NYSE was $ .
See "Market Price and Dividend Data."
This Proxy Statement-Prospectus and the accompanying forms of proxy are first
being mailed to stockholders of THCR and Taj Holding on or about February ,
1996.
-----------
NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE FAIRNESS OR MERITS
OF THIS TRANSACTION OR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION, THE INDIANA GAMING
COMMISSION NOR ANY OTHER REGULATORY AUTHORITY HAS PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
-----------
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS FEBRUARY , 1996.
<PAGE>
(Continued from previous page)
high and low per share sales prices on the New York Stock Exchange ("NYSE") of
a share of THCR Common Stock on the 15 trading days immediately preceding the
Effective Time of the Merger. No fractional shares of THCR Common Stock will
be issued in the Merger.
The Merger Agreement also contemplates the following transactions occurring
in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) (the "THCR Stock Offering") and the consummation of the
offering by a wholly owned subsidiary of THCR Holdings, Trump Plaza Holding
Associates ("AC Holdings"), and its wholly owned finance subsidiary, THCR
Atlantic City Funding, Inc. ("AC Funding"), of up to $1,180,000,000
aggregate principal amount of first mortgage notes (the "Mortgage Notes")
(the "Mortgage Note Offering," and, together with the THCR Stock Offering,
the "Offerings"), the aggregate proceeds of which will be used, together
with available cash, to (i) pay cash to those holders of Taj Holding Class A
Common Stock electing to receive cash in the Merger, (ii) redeem the
outstanding 11.35% Mortgage Bonds, Series A due 1999 of Trump Taj Mahal
Funding, Inc. (the "Taj Bonds") (the "Taj Bond Redemption"), (iii) redeem
the outstanding shares of Class B Common Stock, par value $.01 per share, of
Taj Holding (the "Taj Holding Class B Common Stock") as required in
connection with the redemption of the Taj Bonds pursuant to the Amended and
Restated Certificate of Incorporation of Taj Holding (the "Taj Holding
Certificate of Incorporation"), (iv) retire, by purchasing and/or defeasing,
the outstanding 10 7/8% Mortgage Notes due 2001 (the "Plaza Notes") of Trump
Plaza Funding, Inc. ("Plaza Funding") (the "Plaza Note Purchase," and,
together with the Mortgage Note Offering and the Taj Bond Redemption, the
"Debt Refinancing"), (v) satisfy the indebtedness of Taj Associates under
its loan agreement with National Westminster Bank USA (the "NatWest Loan"),
(vi) purchase certain real property used in the operation of the Taj Mahal
that is currently leased from Trump Taj Mahal Realty Corp. ("Realty Corp."),
a corporation wholly owned by Donald J. Trump ("Trump"), (vii) purchase
certain real property used in the operation of Trump Plaza Hotel and Casino
("Trump Plaza") that is currently leased from an unaffiliated third party,
(viii) make a payment to Bankers Trust Company ("Bankers Trust") to obtain
releases of liens that Bankers Trust has with respect to certain equity
interests of Taj Associates and related guarantees, and (xi) pay related
fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
The Merger is contingent upon, among other things, the consummation of the
other transactions contemplated by the Merger Transaction. As a result of the
Merger Transaction, THCR's and Trump's beneficial equity interests in THCR
Holdings will be approximately % and %, respectively. In addition, as part
of the Merger Transaction, THCR will issue to Trump a warrant to purchase an
aggregate of 1.8 million shares of THCR Common Stock, (i) 600,000 shares of
which may be purchased on or prior to the third anniversary of the issuance of
the warrant at $30.00 per share, (ii) 600,000 shares of which may be purchased
on or before the fourth anniversary of the issuance of the warrant at $35.00
per share, and (iii) 600,000 shares of which may be purchased on or before the
fifth anniversary of the issuance of the warrant at $40.00 per share. The
Merger and the related transactions discussed above are collectively referred
to as the "Merger Transaction." For purposes of the proposal to be submitted
to the stockholders of THCR for approval at the THCR Special Meeting, the term
"Merger Transaction" shall exclude the Debt Refinancing.
<PAGE>
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT-PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES
OFFERED BY THIS PROXY STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR THE
ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN SINCE THE DATE HEREOF OR INCORPORATED BY REFERENCE HEREIN SINCE
THE DATE HEREOF.
AVAILABLE INFORMATION
THCR has filed with the office of the Securities and Exchange Commission
(the "SEC") in Washington, D.C., a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. The
Registration Statement includes the Joint Proxy Statement of THCR and Taj
Holding filed with the SEC in connection with the Merger Agreement. Trump,
THCR, THCR Holdings, Taj Holding, TM/GP Corporation ("TM/GP"), AC Holdings and
Merger Sub have filed with the SEC a Rule 13e-3 Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3") with respect to the Merger. This Proxy
Statement-Prospectus does not contain all of the information set forth in the
Registration Statement and the Schedule 13E-3, certain portions of which have
been omitted as permitted by the rules and regulations of the SEC. Such
additional information can be inspected at, and obtained from, the SEC in the
manner set forth below. For further information pertaining to the securities
offered hereby and to Trump, THCR, THCR Holdings, Taj Holding, TM/GP, AC
Holdings and Merger Sub, reference is made to the Registration Statement and
to the Schedule 13E-3, including, in each case, the exhibits filed as parts
thereof.
THCR, THCR Holdings, Taj Holding, Taj Associates and Trump Taj Mahal
Funding, Inc. ("Taj Funding") are subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, accordingly, have filed reports and other information with the
SEC. Reports, proxy statements and other information of THCR, THCR Holdings,
Taj Holding, Taj Associates and Taj Funding filed with the SEC, as well as the
Registration Statement and the Schedule 13E-3, 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 Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621-2511 and 7 World Trade Center, New
York, New York 10048. Copies of such material can be obtained from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. The THCR Common Stock is listed on the New York Stock
Exchange, and reports and other information concerning THCR can be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005. The units consisting of $1,000 principal amount of Bonds and one
share of Taj Holding Class B Common Stock (the "Units") are listed on the
American Stock Exchange, and reports and other information concerning Taj
Holding, Taj Associates and Taj Funding can be inspected at the offices of the
American Stock Exchange, 86 Trinity Place, New York, New York 10006.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
AVAILABLE INFORMATION .................................................... 2
PROXY STATEMENT-PROSPECTUS SUMMARY........................................ 8
General................................................................. 8
Parties to the Merger................................................... 9
The Special Meetings.................................................... 10
Recommendations of the Boards of Directors.............................. 11
Opinions of Financial Advisors.......................................... 12
The Merger Agreement.................................................... 12
Related Merger Transactions............................................. 13
Dissenting Stockholders' Rights of Appraisal............................ 16
Risk Factors............................................................ 17
Stock Exchange Listing.................................................. 17
Comparative Per Share Prices............................................ 17
Comparative Rights of Stockholders...................................... 17
Certain Federal Income Tax Considerations............................... 17
Accounting Treatment.................................................... 18
Regulatory Approvals.................................................... 18
Summary Financial Information of THCR................................... 18
Summary Financial Information of Taj Associates ........................ 21
Corporate Structure and Organization.................................... 23
CURRENT OWNERSHIP STRUCTURE............................................... 24
OWNERSHIP STRUCTURE AFTER THE MERGER TRANSACTION.......................... 25
RISK FACTORS.............................................................. 26
High Leverage and Fixed Charges ........................................ 26
Holding Company Structure; Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing............................ 27
Restrictions on Certain Activities...................................... 28
Recent Results.......................................................... 28
Trump Plaza Expansion and the Taj Mahal Expansion....................... 29
The Indiana Riverboat................................................... 31
Competition............................................................. 33
Conflicts of Interest................................................... 35
Control and Involvement of Trump........................................ 36
Reliance on Key Personnel............................................... 37
Strict Regulation by Gaming Authorities................................. 37
Considerations with Respect to the Acquisition or Development of Addi-
tional Gaming Ventures................................................. 39
Limitations on License of the Trump Name................................ 39
Fraudulent Transfer Considerations...................................... 40
Interests of Certain Members of the Boards of Directors of THCR and Taj
Holding................................................................ 41
Limitations Inherent in Fairness Opinions............................... 41
Shares Eligible for Future Sale......................................... 41
Effect of Merger Transaction on Holders of THCR Common Stock............ 42
Trading Markets; Potential Volatility of Market Price................... 42
SPECIAL FACTORS........................................................... 43
Background of the Merger Transaction.................................... 43
Recommendations of the Board of Directors; Reasons for the Merger
Transaction; Fairness of the Merger Transaction........................ 48
Opinions of the Financial Advisors...................................... 52
AGI Appraisals.......................................................... 61
Purpose and Structure of the Merger Transaction......................... 63
Related Merger Transactions............................................. 64
Sources and Uses of Funds in the Merger Transaction..................... 67
</TABLE>
3
<PAGE>
<TABLE>
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Certain Effects of the Merger Transaction; Operations of Taj Associates
After the Merger Transaction........................................... 67
Interests of Certain Persons in the Merger Transaction.................. 68
Certain Federal Income Tax Consequences................................. 69
GENERAL INFORMATION....................................................... 70
THE THCR SPECIAL MEETING.................................................. 70
Purpose................................................................. 70
Record Date; Voting Rights; Proxies..................................... 70
Quorum.................................................................. 70
Required Vote........................................................... 71
Solicitation of Proxies................................................. 71
THE TAJ HOLDING SPECIAL MEETING........................................... 72
Purpose................................................................. 72
Record Date; Voting Rights; Proxies..................................... 72
Quorum.................................................................. 72
Required Vote........................................................... 72
Solicitation of Proxies................................................. 73
Election Procedures..................................................... 73
THE MERGER AGREEMENT...................................................... 74
The Merger ............................................................. 74
Closing; Effective Time ................................................ 74
Terms of the Merger..................................................... 74
Election Procedures..................................................... 74
Surrender and Payment; Exchange Fund.................................... 75
Dividends; Liability; No Further Rights for Holders Electing Cash Con-
sideration ............................................................ 76
Fractional Shares....................................................... 77
Dissenting Shares....................................................... 77
Conditions to the Merger................................................ 77
Representations and Warranties.......................................... 78
Conduct Pending the Merger.............................................. 79
Other Covenants......................................................... 80
No Solicitation......................................................... 80
Indemnification and Insurance........................................... 81
Termination............................................................. 82
Fees and Expenses....................................................... 82
Amendment; Waiver....................................................... 82
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL.............................. 83
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................. 86
SELECTED HISTORICAL FINANCIAL INFORMATION OF THCR......................... 98
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THCR....................................................... 100
General................................................................. 100
Results of Operations for the Nine-Month Periods Ended September 30,
1995 and 1994.......................................................... 100
Results of Operations for the Years Ended December 31, 1994 and 1993.... 101
Results of Operations for the Years Ended December 31, 1993 and 1992.... 102
Liquidity and Capital Resources......................................... 104
Seasonality............................................................. 107
Inflation............................................................... 107
BUSINESS OF THCR.......................................................... 108
Trump Plaza............................................................. 109
Facilities and Amenities............................................... 110
</TABLE>
4
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Trump Plaza Business Strategy.......................................... 111
Seasonality............................................................. 113
Employees and Labor Relations........................................... 113
Indiana Riverboat....................................................... 113
Other Jurisdictions..................................................... 116
Properties.............................................................. 116
Trademark/Licensing..................................................... 120
The 1992 Plaza Restructuring............................................ 120
Certain Indebtedness of THCR............................................ 121
Legal Proceedings....................................................... 122
SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES............... 126
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF TAJ ASSOCIATES............................................. 127
General................................................................. 127
Results of Operations for the Nine-Month Periods Ended September 30,
1995 and 1994.......................................................... 127
Results of Operations for the Years Ended December 31, 1994 and 1993.... 128
Results of Operations for the Years Ended December 31, 1993 and 1992.... 130
Liquidity and Capital Resources......................................... 131
Taj Associates........................................................ 131
Taj Holding........................................................... 134
Seasonality............................................................. 135
Inflation............................................................... 135
BUSINESS OF TAJ HOLDING................................................... 136
General................................................................. 136
Business Strategy....................................................... 136
Properties.............................................................. 139
Seasonality............................................................. 140
Employees and Labor Relations........................................... 140
The 1991 Taj Restructuring.............................................. 140
Certain Indebtedness.................................................... 141
Bonds................................................................. 141
NatWest Loan.......................................................... 142
First Fidelity Loan/Specified Parcels................................. 143
TTMI Note............................................................. 144
Working Capital Facility.............................................. 144
Legal Proceedings....................................................... 145
ATLANTIC CITY MARKET...................................................... 147
COMPETITION............................................................... 149
REGULATORY MATTERS........................................................ 152
Antitrust Regulations................................................... 152
Gaming Laws--General.................................................... 152
New Jersey Gaming Regulations........................................... 152
Indiana Gaming Regulations.............................................. 159
Clean Water Regulations................................................. 164
Other Laws and Regulations.............................................. 164
MANAGEMENT OF THCR........................................................ 166
Directors and Executive Officers........................................ 166
Management of Trump Plaza............................................... 168
Executive Compensation.................................................. 169
Employment Agreements................................................... 172
Compensation of Directors............................................... 173
</TABLE>
5
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Committees of the Board of Directors.................................... 174
Compensation Committee Interlocks and Insider Participation............. 174
MANAGEMENT OF TAJ HOLDING................................................. 175
General................................................................. 175
Directors and Executive Officers........................................ 176
Executive Compensation.................................................. 178
Employment Agreements................................................... 180
Compensation of Directors............................................... 181
Compensation Committee Interlocks and Insider Participation............. 181
CERTAIN TRANSACTIONS...................................................... 182
THCR.................................................................... 182
Plaza Associates........................................................ 183
Taj Holding and Affiliates.............................................. 186
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THCR.... 189
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TAJ
HOLDING.................................................................. 190
DESCRIPTION OF THCR CAPITAL STOCK......................................... 191
General................................................................. 191
THCR Common Stock and THCR Class B Common Stock......................... 191
THCR Preferred Stock.................................................... 192
Provisions Having Possible Anti-takeover Effects........................ 192
Delaware Law and Certain Charter and By-Law Provisions.................. 193
DESCRIPTION OF THE THCR HOLDINGS PARTNERSHIP AGREEMENT.................... 195
Distributions and Allocations of Profits and Losses..................... 195
Management.............................................................. 195
Transferability of Interests............................................ 196
Additional Capital Contributions; Issuance of Additional Partnership In-
terests................................................................ 196
Exchange and Registration Rights........................................ 196
Tax Matters Partner..................................................... 197
Term.................................................................... 197
Contribution Agreement.................................................. 198
Indemnification......................................................... 198
Certain Regulatory Matters.............................................. 199
Other................................................................... 199
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 200
Voting Rights........................................................... 200
Issuance of Preferred Stock............................................. 200
Stockholders' Meetings.................................................. 201
Business Combinations................................................... 201
Change of Control....................................................... 201
Board of Directors...................................................... 202
Indemnification and Liability of Directors and Officers................. 202
Amendment of Certificate of Incorporation and By-Laws................... 203
Disqualification of Stockholders........................................ 203
MARKET PRICE AND DIVIDEND DATA............................................ 204
THCR.................................................................... 204
Taj Holding............................................................. 204
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 206
The Merger.............................................................. 206
Redemption of the Bonds................................................. 206
Redemption of the Taj Holding Class B Common Stock...................... 206
</TABLE>
6
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Purchase and/or Defeasance of Plaza Notes................................ 207
Backup Withholding....................................................... 207
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS........................ 208
Dividends................................................................ 208
Gain on Disposition...................................................... 208
Federal Estate Taxes..................................................... 208
Information Reporting and Backup Withholding............................. 209
SUBMISSION OF STOCKHOLDER PROPOSALS........................................ 209
LEGAL MATTERS.............................................................. 210
EXPERTS.................................................................... 210
INDEX TO FINANCIAL STATEMENTS ............................................. F-1
</TABLE>
<TABLE>
<C> <S>
Annex A: Merger Agreement, as amended
Annex B: Fairness Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation
Annex C: Fairness Opinion of Rothschild Inc.
Annex D: Delaware General Corporation Law Section 262
</TABLE>
7
<PAGE>
PROXY STATEMENT-PROSPECTUS SUMMARY
The following is a summary of certain of the information contained in this
Proxy Statement-Prospectus and is qualified in its entirety by the more
detailed information and financial statements included elsewhere herein.
Certain capitalized terms used herein are defined elsewhere in the Proxy
Statement-Prospectus. Unless otherwise indicated, the term "THCR" as used
herein includes THCR and its subsidiaries and the term "Taj Holding" includes
Taj Holding and its direct and indirect interests in Taj Associates.
Stockholders of THCR and Taj Holding are urged to read carefully the entire
Proxy Statement-Prospectus and Annexes hereto in their entirety.
GENERAL
The Merger Transaction will create one of the largest casino entertainment
companies in the United States by combining two "Four Star" Atlantic City
casino hotels, a riverboat gaming project currently under development
approximately 25 miles southeast of downtown Chicago (the "Indiana Riverboat")
and the rights to any new Trump gaming venture. Upon consummation of the Merger
Transaction, THCR will own and operate the Trump Taj Mahal Casino Resort,
currently Atlantic City's largest casino hotel, and the Trump Plaza Hotel and
Casino, which will be the largest casino hotel in Atlantic City upon completion
of its ongoing expansion program (the "Trump Plaza Expansion"). Following the
consummation of the Merger Transaction, THCR plans to undertake an expansion
program at the Taj Mahal to increase its hotel room inventory and casino floor
space and expand its parking facilities (the "Taj Mahal Expansion"). In
addition, THCR is in the process of developing the Indiana Riverboat at
Buffington Harbor on Lake Michigan which will establish THCR's position in the
greater Chicago metropolitan area market, one of the most successful new gaming
markets in the United States. Furthermore, 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 of the Taj Mahal will strengthen THCR's position as a leader
in the casino entertainment industry through its ownership of two successful
land-based casino hotels. Furthermore, the Merger Transaction will enhance
THCR's presence in the growing Atlantic City market, which, in terms of gaming
revenues, has demonstrated a ten-year compound annual growth rate of 5.8% and a
growth rate of 9.5% for calendar year 1995 versus calendar year 1994. After
giving effect to the Merger Transaction and the Trump Plaza Expansion, THCR
will have approximately one-quarter of Atlantic City's casino square footage,
slot machines, table games and hotel room inventory. In addition, the
combination of the Taj Mahal with THCR's existing and planned operations will
provide opportunities for operational efficiencies, economies of scale and
benefits from the talent, expertise and experience of management at the
operating entities. Management believes that, along with the critical mass
resulting from the Merger Transaction, the marquee status of the "Trump" name
will allow THCR to compete more effectively for prime gaming licenses in other
jurisdictions.
The following table profiles THCR's casino and hotel capacity following the
consummation of the Merger Transaction:
<TABLE>
<CAPTION>
CURRENT PLANNED
-------------- ---------------------------------------------
TRUMP TAJ TRUMP PLAZA INDIANA TAJ MAHAL
PLAZA MAHAL EXPANSION(/1/) RIVERBOAT(/1/) EXPANSION(/2/) TOTAL
------ ------- -------------- -------------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Casino square footage... 73,000 120,000(/3/) 66,340 37,000 60,000 356,340(/3/)
Slot machines........... 2,325 3,550 2,025 1,500 2,500 11,900
Table games............. 97 162 46 73 -- 378
Hotel rooms............. 555 1,250 849(/4/) -- 1,280 3,934
</TABLE>
- --------
(1) Scheduled to be completed early in the second quarter of 1996.
(2) Plans for the Taj Mahal Expansion, scheduled to be completed in phases from
the first quarter of 1997 through 1999, are preliminary and subject to
modification.
(3) Excludes a 12,000 square foot poker, keno and race simulcasting room which
contains 64 poker tables.
(4) Includes 150 rooms which were opened at Trump Plaza East on October 30,
1995.
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<PAGE>
THCR will continue to capitalize on the widespread recognition of the "Trump"
name and its association with high quality amenities and first class service.
To achieve this end, THCR will seek to provide a broadly diversified gaming and
entertainment experience consistent with the "Trump" name and reputation for
quality, tailored to the gaming patron in each market. THCR will also seek to
benefit from the "Trump" name in connection with efforts to expand and to
procure new gaming opportunities in the United States and abroad.
PARTIES TO THE MERGER
Trump Hotels & Casino Resorts. THCR owns and operates Trump Plaza, a luxury
casino hotel located on The Boardwalk in Atlantic City, and is currently
developing the Indiana Riverboat. THCR's strategy is to capitalize on Trump
Plaza's reputation 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 ongoing Trump Plaza Expansion, scheduled to be
completed early in the second quarter of 1996, involves the renovation and
integration into Trump Plaza of a hotel located adjacent to Trump Plaza's main
tower ("Trump Plaza East") and the former Trump Regency Hotel ("Trump World's
Fair"), and the construction of new gaming space, retail operations and
entertainment venues.
Upon completion of the Trump Plaza Expansion, Trump Plaza's hotel room
inventory and casino floor space will be the largest in Atlantic City. The
following table details the plans for the Trump Plaza Expansion:
<TABLE>
<CAPTION>
TRUMP PLAZA TRUMP TRUMP
FACILITY(/1/) PLAZA EAST WORLD'S FAIR TOTAL
------------- ---------- ------------ -------
<S> <C> <C> <C> <C>
Casino square footage.......... 75,000 15,000 49,340 139,340
Slot machines.................. 2,400 400 1,550 4,350
Table games.................... 97 13 33 143
Hotel rooms.................... 555 349(/2/) 500 1,404
</TABLE>
- --------
(1) Includes the 2,000 square foot area which will connect the existing
facility with Trump Plaza East and the 75 slot machines to be included in
this area.
(2) Includes 150 rooms which were opened on October 30, 1995.
The Indiana Riverboat, currently scheduled to open for business early in the
second quarter of 1996, will feature an approximately 280-foot luxury yacht
with approximately 37,000 square feet of gaming space, will contain 1,500 slot
machines and 73 table games and will be one of the largest riverboat casinos in
the United States. The Indiana Riverboat's principal market will be the
approximately 6.8 million people residing within 50 miles of Buffington Harbor
in the greater Chicago metropolitan area.
Taj Holding. Taj Holding has no business operations and serves as a holding
company for an investment in 50% of Taj Associates. Taj Associates owns and
operates the Taj Mahal, a luxury casino hotel located on The Boardwalk in
Atlantic City. The Taj Mahal is currently the largest casino hotel in Atlantic
City, and has ranked first among all Atlantic City casinos in terms of total
gaming revenues, table revenues and slot revenues since it commenced
operations. The Taj Mahal capitalizes on the widespread recognition and marquee
status of the "Trump" name and its association with high quality amenities and
first class service as evidenced by its "Four Star" Mobil Travel Guide rating.
Management believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities will enable the Taj Mahal to benefit
from the growth of the Atlantic City market.
The Taj Mahal consists of a 42-story hotel tower and contiguous low-rise
structure, sited on approximately 17 acres of land. The Taj Mahal has 1,250
guest rooms (including 242 suites), 15 restaurants, six lounges, parking for
approximately 4,600 cars, an 18-bay bus terminal and approximately 65,000
square feet of ballroom, meeting room and pre-function area space. The Taj
Mahal is currently contemplating adding several new themed restaurants to be
owned and operated by nationally recognized restaurant operators, including the
Rainforest Cafe and the All-Star Cafe. In addition, the Taj Mahal features a
20,000-square-foot multi-purpose entertainment
9
<PAGE>
complex known as the Xanadu Theater with seating capacity for approximately
1,200 people, which can be used as a theater, concert hall, boxing arena or
exhibition hall (the "Taj Entertainment Complex") and the Mark Etess Arena,
which comprises an approximately 63,000-square-foot exhibition hall facility.
The Taj Mahal regularly engages well-known musicians and entertainment
personalities and will continue to emphasize weekend marquee events such as
Broadway revues, high visibility sporting events, international festivals and
contemporary concerts to maximize casino traffic and to maintain the highest
level of glamour and excitement at the Taj Mahal.
It is currently expected that the Taj Mahal Expansion will be funded
principally out of cash from the operations of the Taj Mahal and Trump Plaza
and will be completed in phases from the first quarter of 1997 through 1999.
The Taj Mahal Expansion, the plans for which are preliminary and subject to
modification, involves the construction of an approximately 2,200 space
expansion of the Taj Mahal's existing self-parking facilities and a new arena
on a surface parking area located adjacent to the Taj Mahal, each scheduled to
be completed in the first quarter of 1997; the conversion of the current site
of the Mark Etess Arena into a new 60,000-square-foot circus-themed casino with
2,500 slot machines, scheduled to be completed in 1997; and the construction of
two new hotel towers adjacent to the Taj Mahal's existing hotel tower, each
containing in excess of 640 rooms, the first of which is scheduled to be
completed in 1997, and the second of which is scheduled to begin construction
following the completion of the first tower and is scheduled to be completed in
1999. See "Risk Factors--Trump Plaza Expansion and the Taj Mahal Expansion."
THE SPECIAL MEETINGS
Time, Place and Date. The THCR Special Meeting will be held at on
March , 1996, at 10:00 a.m., local time.
The Taj Holding Special Meeting will be held at on March , 1996, at
10:00 a.m., local time.
Purpose of the Special Meetings. At the THCR 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 Merger Transaction, which
approval will constitute approval and adoption of the Merger Agreement. The
term "Merger Transaction" shall exclude the Debt Refinancing for purposes of
the proposal to be submitted to the stockholders of THCR for approval at the
THCR Special Meeting. Stockholders of THCR will also consider and vote upon
such other matters as may properly be brought before the THCR Special Meeting.
At the Taj Holding Special Meeting, holders of Taj Holding Class A Common
Stock, Taj Holding Class B Common Stock and Class C Common Stock, par value
$.01 per share, of Taj Holding ("Taj Holding Class C Common Stock") will be
asked to approve and adopt the Merger Agreement. Stockholders of Taj Holding
will also consider and vote upon such other matters as may properly be brought
before the Taj Holding Special Meeting.
Votes Required; Record Date. Approval of the Merger Transaction will require
the affirmative vote of (i) the holders of a majority of the outstanding shares
of THCR Common Stock (excluding directors and executive officers of THCR and
their affiliates) voting as a separate class (representing the approval of a
majority of THCR's unaffiliated stockholders); and (ii) the holders of shares
representing a majority of the outstanding voting power of the THCR Common
Stock and THCR Class B Common Stock voting together as a single class. Only
holders of record of THCR Common Stock and THCR Class B Common Stock at the
close of business on February , 1996 (the "THCR Record Date") are entitled to
vote at the THCR Special Meeting. As of the THCR Record Date, (i) directors and
executive officers of THCR and their affiliates had the power to vote shares
representing approximately % 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 40% 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 Merger Transaction. Trump has agreed with THCR
to vote his shares of THCR Class B Common Stock for
10
<PAGE>
approval of the Merger Transaction, and at the THCR Special Meeting, such
shares will be voted accordingly. See "The THCR Special Meeting."
Approval and adoption of the Merger Agreement will require the affirmative
vote of the holders of a majority of the outstanding shares of each of the Taj
Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding
Class C Common Stock, each voting as a separate class. Only holders of record
of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj
Holding Class C Common Stock at the close of business on February , 1996 (the
"Taj Holding Record Date") are entitled to vote at the Taj Holding Special
Meeting. As of the Taj Holding Record Date, (i) directors and executive
officers of Taj Holding and their affiliates had the power to vote shares
representing approximately % of the Taj Holding Class A Common Stock; (ii)
directors and executive officers of Taj Holding and their affiliates had the
power to vote shares representing approximately % of the Taj Holding Class B
Common Stock; and (iii) Trump had the power to vote 100% of the outstanding
shares of Taj Holding Class C Common Stock. All of such officers, directors and
affiliates have indicated that they intend to vote their shares for approval
and adoption of the Merger Agreement. Trump has agreed with Taj Holding to vote
his shares of Taj Holding Class C Common Stock for approval and adoption of the
Merger Agreement, and at the Taj Holding Special Meeting, such shares will be
voted accordingly. See "The Taj Holding Special Meeting."
As of the Taj Holding Record Date, there were 1,350,000 shares of Taj Holding
Class A Common Stock outstanding, each of which entitles the holder thereof to
one vote per share. Pursuant to an agreement, dated as of October 6, 1995 (the
"Class A Agreement"), the holders of 701,840 shares of Taj Holding Class A
Common Stock (representing approximately 52% of the outstanding shares of Taj
Holding Class A Common Stock) agreed to vote such shares in favor of the Merger
and at the Taj Holding Special Meeting, such shares will be voted accordingly.
See "Special Factors--Background of the Merger Transaction."
In considering whether to vote for approval of the Merger Transaction or
approval and adoption of the Merger Agreement, as applicable, stockholders
should be aware that certain members of the Board of Directors and management
of each of THCR, Taj Holding and certain of their affiliates have interests
which may present them with actual and potential conflicts of interest in
connection with the Merger Transaction. Trump is the Chairman of the Board of
Directors of THCR and Taj Holding and currently is the beneficial owner of
approximately 40% and 50% of THCR and Taj Associates, respectively.
Furthermore, in connection with the Merger Transaction, certain debt
obligations of Trump and certain of his affiliates will be satisfied, and
certain guarantees of indebtedness by Trump and certain of his affiliates will
be released. See "Risk Factors--Conflicts of Interest," "--Interests of Certain
Members of the Boards of Directors of THCR and Taj Holding" and "Special
Factors--Interests of Certain Persons in the Merger Transaction."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of THCR and a Special Committee of the Board of
Directors of THCR, consisting of its three independent directors (the "THCR
Special Committee"), have considered the terms and conditions of the Merger
Transaction and certain other information, including the opinion of THCR's
financial advisor, have determined that the proposed Merger Transaction is fair
to, and in the best interests of, THCR, and have unanimously approved the terms
of the Merger Transaction and the Merger Agreement. ACCORDINGLY, THE BOARD OF
DIRECTORS OF THCR RECOMMENDS THAT THE STOCKHOLDERS OF THCR VOTE FOR APPROVAL OF
THE MERGER TRANSACTION.
In order for the Merger to be approved by the Board of Directors of Taj
Holding, it must be approved by both a majority of the entire Board of
Directors of Taj Holding and a majority of the Class B Directors of Taj Holding
(the "Class B Directors"). After considering the terms and conditions of the
proposed Merger Agreement and certain other information, including the opinion
of Taj Holding's financial advisor and the Class A Agreement, the Board of
Directors of Taj Holding (including the Class B Directors) determined that the
11
<PAGE>
proposed Merger is fair to, and in the best interests of, Taj Holding and the
holders of Taj Holding Class A Common Stock, and unanimously approved the terms
of the Merger Agreement. ACCORDINGLY, THE BOARD OF DIRECTORS OF TAJ HOLDING
RECOMMENDS THAT THE STOCKHOLDERS OF TAJ HOLDING VOTE FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT.
For more information on the considerations and recommendations of the Board
of Directors of each of THCR and Taj Holding, see "Special Factors--Background
of the Merger Transaction," "--Recommendations of the Board of Directors;
Reasons for the Merger Transaction; Fairness of the Merger Transaction" and "--
Interests of Certain Persons in the Merger Transaction."
OPINIONS OF FINANCIAL ADVISORS
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") was retained by
THCR to act as its financial advisor and was asked to render its opinion to the
THCR Special Committee as to the fairness to THCR, from a financial point of
view, of the aggregate consideration to be paid by THCR pursuant to the
transactions contemplated by the Merger Agreement. At a meeting of the THCR
Special Committee held on January 31, 1996 to consider and vote on the Merger
Transaction, DLJ delivered its written opinion to the effect that, as of such
date, the aggregate consideration to be paid by THCR pursuant to the
transactions contemplated by the Merger Agreement is fair, from a financial
point of view, to THCR. A copy of the full written opinion of DLJ, dated
January 31, 1996, is attached to this Proxy Statement-Prospectus as Annex B,
and is incorporated herein by reference and should be read carefully in its
entirety. See "Risk Factors--Limitations Inherent in Fairness Opinions" and
"Special Factors--Opinions of the Financial Advisors."
Rothschild Inc. ("Rothschild") was retained by Taj Holding to render its
opinion to the Board of Directors of Taj Holding, including the Class B
Directors, as to the fairness, from a financial point of view, of the
consideration to be received by the holders of Taj Holding Class A Common Stock
in connection with the Merger Transaction. At a meeting of the Board of
Directors of Taj Holding held on January 31, 1996 to consider and vote on the
Merger, Rothschild delivered its written opinion to the effect that, as of such
date, the consideration to be received by the holders of Taj Holding Class A
Common Stock in connection with the Merger Transaction, is fair, from a
financial point of view, to the holders of Taj Holding Class A Common Stock. A
copy of the full written opinion of Rothschild, dated January 31, 1996, is
attached to this Proxy Statement-Prospectus as Annex C, and is incorporated
herein by reference and should be read carefully in its entirety. See "Risk
Factors--Limitations Inherent in Fairness Opinions" and "Special Factors--
Opinions of the Financial Advisors."
THE MERGER AGREEMENT
Terms of the Merger. The Merger Agreement provides that, subject to the
satisfaction or waiver of the conditions to the Merger, Merger Sub will be
merged with and into Taj Holding, in accordance with the Delaware General
Corporation Law ("DGCL"), whereupon the separate existence of Merger Sub will
cease and Taj Holding will be the surviving corporation in the Merger (the
"Surviving Corporation"). The Merger will become effective at such time as a
certificate of merger for the Merger (the "Certificate of Merger") is accepted
for filing by the Secretary of State of the State of Delaware in accordance
with the DGCL or at such time thereafter as provided in the Certificate of
Merger (the "Effective Time").
Conversion of Outstanding Shares. At the Effective Time, (i) each share of
Taj Holding Class A Common Stock outstanding immediately prior to the Effective
Time will, except as otherwise provided in the Merger Agreement, be converted
into and represent the right to receive, at the holder's election, either (x)
$30.00 in cash (the "Cash Consideration") or (y) that number of shares of THCR
Common Stock as is determined by dividing $30 by the Market Value (the "Stock
Consideration" and collectively with the Cash Consideration, the "Merger
Consideration"); (ii) each share of Taj Holding Class C Common Stock
outstanding immediately prior
12
<PAGE>
to the Effective Time will be contributed by Trump to Taj Holding and canceled;
(iii) each share of Taj Holding Class A Common Stock held by Taj Holding as
treasury stock immediately prior to the Effective Time or owned by any direct
or indirect subsidiary of Taj Holding immediately prior to the Effective Time
will be canceled, and no conversion or payment will be made with respect
thereto; and (iv) each share of common stock of Merger Sub outstanding
immediately prior to the Effective Time will be converted into and represent
the right to receive one fully paid and nonassessable share of common stock of
the Surviving Corporation. Market Value is defined as the average of the high
and low per share sales prices of the THCR Common Stock during the fifteen
trading days immediately preceding the Effective Time. No fractional shares of
THCR Common Stock will be issued in the Merger.
Election Procedures. Each holder of Taj Holding Class A Common Stock will
receive an election form (the "Election Form") together with this Proxy
Statement-Prospectus permitting each holder of Taj Holding Class A Common Stock
to elect to receive only Stock Consideration or only Cash Consideration. Any
holder of Taj Holding Class A Common Stock who wishes to receive Cash
Consideration must send the Election Form properly completed to the Exchange
Agent (as defined) so that the Election Form is received by the Exchange Agent
on or before 5:00 p.m. on the business day prior to the Taj Holding Special
Meeting or such other date as determined by THCR and Taj Holding (the "Election
Deadline"). Holders of the Taj Holding Class A Common Stock who (i) fail to
complete properly the Election Form, (ii) fail to send the Election Form to the
Exchange Agent so that the Election Form is received by the Exchange Agent
prior to the Election Deadline or (iii) make no election, shall be deemed to
have elected to receive the Stock Consideration. Any Election Form may be
revoked prior to the Election Deadline by submitting a new Election Form to the
Exchange Agent.
Conditions to the Merger. The respective obligations of Taj Holding, THCR and
Merger Sub to consummate the transactions contemplated by the Merger Agreement
are subject to the fulfillment at or prior to the Effective Time of certain
conditions which may be waived in whole or in part to the extent permitted by
applicable law, including, among other conditions, (i) consummation of the
transactions contemplated by the Merger Transaction; (ii) the Merger
Transaction (other than the Debt Refinancing) and the Merger Agreement shall
have been duly approved by the requisite votes of the stockholders of THCR and
Taj Holding, respectively; (iii) the receipt of certain regulatory approvals,
including approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") and the approval of applicable State gaming
authorities; (iv) the number of shares of Taj Holding Class A Common Stock for
which written demand for appraisal has been properly made pursuant to Section
262 of the DGCL shall not have exceeded 5% of the total number of shares of Taj
Holding Class A Common Stock outstanding immediately prior to the Effective
Time; and (v) the shares of THCR Common Stock to be issued pursuant to the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance. The obligation of THCR to consummate the Merger is also
subject to the Market Value of the THCR Common Stock being $20.00 or more.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (i) by joint written consent
of Taj Holding and THCR; (ii) by either Taj Holding or THCR and Merger Sub if
certain conditions of the Merger have not been satisfied or waived at such time
as such condition is no longer capable of satisfaction; or (iii) by any party
to the Merger Agreement if the Merger has not been consummated on or before
June 30, 1996.
RELATED MERGER TRANSACTIONS
The Offerings; Sources and Uses. The Merger Transaction includes the
Offerings, the aggregate proceeds of which will be used, together with
available cash, to (i) pay cash to those holders of Taj Holding Class A Common
Stock electing to receive cash in the Merger ($40.5 million assuming all such
holders elect Cash Consideration); (ii) redeem the outstanding Taj Bonds at a
redemption price equal to 100% of the principal amount thereof (approximately
$780 million assuming a redemption date of March 31, 1996), plus accrued
interest to the date of redemption; (iii) redeem the outstanding shares of Taj
Holding Class B Common Stock, as
13
<PAGE>
required in connection with the Taj Bond Redemption, at the redemption price of
$.50 per share (approximately $400,000 in the aggregate); (iv) retire the
outstanding Plaza Notes through purchases and/or defeasance; (v) satisfy the
indebtedness of Taj Associates under the NatWest Loan (approximately $36.5
million); (vi) purchase, for $50 million in cash and 500,000 shares of THCR
Common Stock, certain real property that is currently leased by Taj Associates
from Realty Corp., a corporation wholly owned by Trump, including land
underlying the Taj Entertainment Complex, land adjacent to the Taj Mahal used
by it for surface parking and bus terminals, the pier located across The
Boardwalk from the Taj Mahal (the "Steel Pier"), and a warehouse complex
(collectively, the "Specified Parcels"); (vii) purchase Trump Plaza East
pursuant to the purchase option (the "Trump Plaza East Purchase Option") held
by Trump Plaza Associates ("Plaza Associates"), the owner and operator of Trump
Plaza ($28.0 million); (viii) pay Bankers Trust $10 million to obtain releases
of liens and guarantees that Bankers Trust has in connection with certain
outstanding indebtedness owed by Trump to Bankers Trust (the "Trump
Indebtedness") and (ix) pay related fees and expenses. See "Special Factors--
Related Merger Transactions."
Real Property Purchases. The Specified Parcels are currently leased by Taj
Associates from Realty Corp. for approximately $3.3 million per year. See
"Business of Taj Holding--Certain Indebtedness--First Fidelity Loan/Specified
Parcels." Realty Corp. has outstanding indebtedness of approximately $78
million owing to First Fidelity Bank, National Association, New Jersey ("First
Fidelity") (the "First Fidelity Loan") which is due November 15, 1999. The
First Fidelity Loan is currently secured by a mortgage on the Specified
Parcels, and Taj Associates has previously guaranteed the repayment of the
First Fidelity Loan up to a maximum of $30 million. Trump has also previously
personally guaranteed (up to a maximum of approximately $19.2 million), and
pledged his direct and indirect equity interests in Taj Associates as
collateral for, the First Fidelity Loan. As mortgagee, First Fidelity has the
right to terminate the lease on the Specified Parcels under certain
circumstances. See "Business of Taj Holding--Certain Indebtedness--First
Fidelity Loan/Specified Parcels."
In order to secure future use of the Specified Parcels and eliminate all
future lease payments on the Specified Parcels, Taj Associates expects to
satisfy the First Fidelity Loan through the payment of $50 million in cash and
500,000 shares of THCR Common Stock and purchase the Specified Parcels from
Realty Corp. for a nominal amount by exercising a purchase option with respect
to the Specified Parcels. Upon consummation of the purchase of the Specified
Parcels, (i) the lease relating to the Specified Parcels will be terminated,
thus eliminating Taj Associates' rental obligations thereunder; (ii) the $30
million guaranty by Taj Associates of the First Fidelity Loan will be released;
and (iii) Trump's guaranty of such indebtedness will be released and First
Fidelity will relinquish its lien on Trump's direct and indirect equity
interests in Taj Associates. The Specified Parcels will be part of the
collateral securing the Mortgage Notes. See "Business of Taj Holding--Certain
Indebtedness--First Fidelity Loan/Specified Parcels."
Pursuant to the Trump Plaza East Purchase Option, Plaza Associates has the
right to purchase Trump Plaza East for a purchase price of $28.0 million
through December 31, 1996, increasing by $1.0 million annually thereafter until
expiration on June 30, 1998. Plaza Associates intends to exercise the Trump
Plaza East Purchase Option in connection with the Merger Transaction and
thereby eliminate approximately $3.1 million of annual lease payments
associated with Trump Plaza East. See "Business of THCR--Properties--Trump
Plaza East."
Consent and Release Payment. The Trump Indebtedness is currently secured by,
among other things, a promissory note from Trump Taj Mahal, Inc. ("TTMI"), a
corporation wholly owned by Trump and the holder of a 49.995% general
partnership interest in Taj Associates, to Trump (the "TTMI Note"), as well as
a lien on Trump's direct and indirect equity interests in Taj Associates. As
part of the Merger Transaction, Taj Associates will pay $10 million to Bankers
Trust to obtain the consent of Bankers Trust to the Merger Transaction and to
obtain releases of certain liens on Trump's direct and indirect equity
interests in Taj Associates and related guarantees, and the pledge of the TTMI
Note, all of which secure a portion of the Trump Indebtedness. See "Business of
Taj Holding--Certain Indebtedness--TTMI Note."
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<PAGE>
Plaza Note Purchase; Consent Solicitations. As part of the Merger
Transaction, Plaza Associates and Plaza Funding intend to purchase and (to the
extent not purchased) defease the Plaza Notes. Any such retirement of Plaza
Notes will be conditioned upon, among other things, the concurrent consummation
of the other transactions contemplated by the Merger Transaction. Plaza
Associates and Plaza Funding also intend to solicit the consent of holders of a
majority in aggregate principal amount of the Plaza Notes to amend certain
provisions of the indenture pursuant to which the Plaza Notes were issued (the
"Plaza Note Indenture"). Under the terms of the Plaza Note Indenture, Plaza
Associates and Plaza Funding have the right to retire the Plaza Notes through
defeasance by depositing in trust a sum sufficient to provide for the
redemption of the Plaza Notes on June 15, 1998 at 105% of their principal
amount, plus accrued interest.
To effect the Merger Transaction, THCR Holdings and its subsidiary Trump
Hotels & Casino Resorts Funding, Inc. ("THCR Funding"), the issuers of the 15
1/2% Senior Secured Notes due 2005 (the "Senior Notes"), will solicit from the
holders of the Senior Notes the waiver of, and consent to modify, certain
provisions of the indenture pursuant to which the Senior Notes were issued (the
"Senior Note Indenture") (the "Senior Note Consent Solicitation"). Consent of
holders of a majority in aggregate principal amount of outstanding Senior Notes
is required in connection with the Senior Note Consent Solicitation.
Trump Contribution and Consideration. In connection with the Merger
Transaction, Trump will contribute or cause to be contributed all of his direct
and indirect equity interests in Taj Associates (representing a 50% economic
interest) to AC Holdings (on behalf, and at the direction, of THCR Holdings).
Trump will contribute to AC Holdings his shares (consisting of 50% of the
outstanding capital stock) of The Trump Taj Mahal Corporation ("TTMC"), the
holder of a .01% general partnership interest in Taj Associates, and will cause
TTMI to contribute to AC Holdings (on behalf, and at the direction, of THCR
Holdings) TTMI's 49.995% general partnership interest in Taj Associates.
In addition, Trump will contribute to Taj Holding all of his shares of Taj
Holding Class C Common Stock, which will be canceled pursuant to the Merger
Agreement. The Taj Holding Class C Common Stock provides Trump with the ability
to elect a majority of the members of the Board of Directors of, and thereby
control, Taj Holding. It also affords Trump separate class voting rights in
certain events, including in connection with the Merger. The Taj Services
Agreement (as defined herein), pursuant to which Trump has received or will
receive approximately $1.7 million, $1.4 million and $1.6 million (less
$575,000 which was paid annually by Trump to First Fidelity to reduce the
amount owed by Taj Associates under the leases for the Specified Parcels) in
respect of the years ended 1995, 1994 and 1993, respectively, as compensation
for services rendered to Taj Associates, will also be terminated in connection
with the Merger Transaction.
In exchange for the contribution by Trump and TTMI to AC Holdings (on behalf,
and at the direction, of THCR Holdings), Trump's directly held limited
partnership interest in THCR Holdings will be modified and TTMI will receive a
limited partnership interest in THCR Holdings. As a result of the Merger
Transaction, Trump's aggregate beneficial ownership of limited partnership
interests in THCR Holdings will decrease from approximately 40% to
approximately %, of which an approximately % interest will be held
directly by TTMI (assuming a price of $ per share of THCR Common Stock as
the Market Value in connection with the Merger and as the public offering price
in the THCR Stock Offering).
Trump's current limited partnership interest in THCR Holdings represents his
economic interest in the assets and operations of THCR Holdings and is
convertible, at Trump's option, into 6,666,667 shares of THCR Common Stock
(representing approximately 40% of the outstanding shares of THCR Common Stock
after giving effect to such conversion). Upon consummation of the Merger
Transaction (assuming a price of $ per share of THCR Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the THCR Stock Offering), Trump's and TTMI's limited partnership interests in
THCR Holdings will be convertible into an aggregate of shares of THCR
Common Stock, representing approximately % of the then outstanding shares of
THCR Common Stock (after giving effect to such conversion). At the time that
TTMI becomes a limited partner of THCR Holdings, Trump will contribute
shares of THCR Class B
15
<PAGE>
Common Stock to TTMI. THCR Class B Common Stock has voting power equivalent to
the voting power of the THCR Common Stock into which a THCR Class B Common
Stockholder's limited partnership interest in THCR Holdings is convertible. The
THCR Class B Common Stock is not entitled to dividends or distributions. Upon
conversion of all or any portion of a holder's THCR Holdings limited
partnership interest into shares of THCR Common Stock, the corresponding voting
power of such holder's THCR Class B Common Stock (equal in voting power to the
number of shares of THCR Common Stock issued upon such conversion) will be
proportionately diminished.
Concurrent with the consummation of the Merger Transaction, THCR will issue
to Trump a warrant to purchase an aggregate of 1.8 million shares of THCR
Common Stock, (i) 600,000 shares of which may be purchased on or prior to the
third anniversary of the issuance of the warrant at $30.00 per share, (ii)
600,000 shares of which may be purchased on or prior to the fourth anniversary
of the issuance of warrant at $35.00 per share and (iii) 600,000 shares of
which may be purchased on or prior to the fifth anniversary of the issuance of
the warrant at $40.00 per share.
Trump, through TTMI, has the right to reduce the equity interest of the Taj
Holding Class A Common Stock in Taj Associates from 50% to 20% by causing Taj
Associates to make a payment to the holders of the Taj Bonds in an amount
calculated to provide them with a cumulative return equal to approximately 14%
per annum (the "14% Payment"). If the 14% Payment is made (which can occur only
if the Taj Bonds are retired, redeemed or paid in full), Trump would
beneficially own 80% of Taj Associates. Moreover, the 14% Payment is permitted
to be financed with Taj Associates' borrowings. In connection with the Merger
Transaction, TTMI will not exercise its right to cause Taj Associates to make
such payment and such right will terminate upon the redemption of the Taj
Bonds.
THCR Contribution and Consideration. In connection with the Merger
Transaction, THCR will cause TM/GP, which will become an indirect wholly owned
subsidiary of THCR after the Effective Time and which holds a 49.995% general
partnership interest in Taj Associates, to contribute to AC Holdings (on
behalf, and at the direction, of THCR Holdings) its general partnership
interest in Taj Associates, and will cause Taj Holding, which will become a
direct wholly owned subsidiary of THCR after the Effective Time, to contribute
to TM/GP and will then cause TM/GP to contribute to AC Holdings (on behalf, and
at the direction, of THCR Holdings) its shares (consisting of 50% of the
outstanding capital stock) of TTMC (the holder of a .01% general partnership
interest in Taj Associates). As a result of the Merger Transaction, THCR's
beneficial equity interest in THCR Holdings will increase from approximately
60% to approximately %, of which an approximately % interest will be held
directly by TM/GP (assuming a $ price per share of THCR Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the THCR Stock Offering).
Redemption of the Taj Bonds and the Taj Holding Class B Common Stock. The Taj
Holding Class B Common Stock is essentially a nonparticipating stock issued as
part of a Unit in connection with the Taj Bonds that entitles the holders
thereof to elect the Class B Directors, to vote on matters presented to the
stockholders of Taj Holding and to separately approve certain matters. The Taj
Holding Certificate of Incorporation provides that the outstanding shares of
Taj Holding Class B Common Stock must be redeemed at such time as the principal
amount of Taj Bonds are redeemed, defeased or paid, at the redemption price of
$.50 per share. In connection with the Merger Transaction, Taj Funding will
redeem the outstanding Taj Bonds at a redemption price equal to 100% of the
principal amount thereof plus accrued interest to the date of redemption and
Taj Holding will cause each outstanding share of Taj Holding Class B Common
Stock to be redeemed at the redemption price of $.50 per share in accordance
with the provisions of the Taj Holding Certificate of Incorporation.
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
Under Delaware law, appraisal rights with respect to the Merger may be
available to stockholders of Taj Holding. Appraisal rights with respect to the
Merger are only available if such holders (i) neither vote for approval of the
Merger Transaction nor consent thereto in writing; and (ii) comply with the
other statutory requirements of the DGCL. See "Dissenting Stockholders' Rights
of Appraisal" and "Annex D."
16
<PAGE>
Stockholders of THCR are not entitled to appraisal rights with respect to the
Merger.
RISK FACTORS
In deciding whether to approve the Merger Transaction or approve and adopt
the Merger Agreement, as applicable, and, with respect to the holders of Taj
Holding Class A Common Stock, to elect Cash Consideration or Stock
Consideration, the stockholders of THCR and Taj Holding should carefully
evaluate the matters set forth herein, including those under the heading "Risk
Factors." Factors to be considered include: (i) the high leverage and fixed
charges of THCR; (ii) THCR's holding company structure, the risk in refinancing
and repayment of indebtedness, and the need for additional financing; (iii) the
restrictions on certain activities imposed by certain debt instruments; (iv)
the recent results of Trump Plaza and the Taj Mahal; (v) risks associated with
the Trump Plaza Expansion and the Taj Mahal Expansion; (vi) risks relating to
the Indiana Riverboat; (vii) competition in the gaming industry; (viii)
conflicts of interest; (ix) control by and the involvement of Trump; (x)
reliance on certain key personnel; (xi) the strict regulation by gaming
authorities, including the potential disqualification of holders of THCR Common
Stock; (xii) considerations with respect to the acquisition and development of
additional gaming ventures; (xiii) limitations on THCR's license of the "Trump"
name; (xiv) fraudulent transfer considerations; (xv) interests in the Merger
Transaction of certain members of the Boards of Directors of THCR and Taj
Holding; (xvi) limitations inherent in the fairness opinions of DLJ and
Rothschild; (xvii) the shares of THCR Common Stock eligible for future sale;
(xviii) the dilutive effect of the Merger Transaction on existing holders of
THCR Common Stock; and (xix) the trading markets and potential volatility of
the market price of the shares of THCR Common Stock.
STOCK EXCHANGE LISTING
The listing on the NYSE, subject to official notice of issuance, of the
shares of THCR Common Stock to be issued pursuant to the Merger Agreement is a
condition to the consummation of the Merger.
COMPARATIVE PER SHARE PRICES
On January 8, 1996, the last sales price of THCR Common Stock reported on the
NYSE was $21 3/4 per share and the last sales price of a Unit as reported on
the American Stock Exchange ("Amex") was $98 per $100 principal amount of Taj
Bonds. The initial public announcement of the Merger occurred after the close
of trading on such date. The Taj Holding Class B Common Stock and the Taj Bonds
trade together as Units and may not be transferred separately. On , 1996,
the last sales price of THCR Common Stock was $ per share and the last sales
price of a Unit was $ per $100 principal amount of Taj Bonds. There is no
established market for the THCR Class B Common Stock, the Taj Holding Class A
Common Stock or the Taj Holding Class C Common Stock. See "Market Price and
Dividend Data."
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of stockholders of Taj Holding are currently governed by Delaware
law, the Taj Holding Certificate of Incorporation and the Amended and Restated
By-Laws of Taj Holding (the "Taj Holding By-Laws"). Upon consummation of the
Merger, holders of Taj Holding Class A Common Stock who receive THCR Common
Stock in the Merger will become stockholders of THCR, which is also a Delaware
corporation, and their rights as stockholders of THCR will be governed by
Delaware law, the Amended and Restated Certificate of Incorporation of THCR
(the "THCR Certificate of Incorporation") and the Amended and Restated By-Laws
of THCR (the "THCR By-Laws"). For a discussion of the various differences
between the rights of stockholders of Taj Holding and the rights of
stockholders of THCR, see "Comparison of Stockholder Rights."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Holders of Taj Holding Class A Common Stock, holders of Taj Holding Class B
Common Stock and Taj Bonds and holders of Plaza Notes should consult their tax
advisers concerning the tax implications of the Merger
17
<PAGE>
Transaction and of the ownership and disposition of their stock or debt
interests under applicable state, local, foreign income and other tax laws. The
exchange of Taj Holding Class A Common Stock for cash or THCR Common Stock in
the Merger is anticipated to be a taxable event for the holders thereof, and
the redemptions of the Taj Bonds and the Taj Holding Class B Common Stock will
be taxable events for the holders thereof. The purchase of the Plaza Notes will
also be a taxable event for the holders thereof. Based on counsel's opinion, it
is expected, however, that, under current law, the defeasance of Plaza Notes
will not cause the holders of such Plaza Notes to recognize income, gain or
loss. Rather, until Plaza Notes are sold or redeemed, the holders thereof will
be subject to federal taxation on the same amounts, in the same manner and at
the same times as would have been the case if the defeasance had not occurred.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "purchase" for accounting and
reporting purposes.
REGULATORY APPROVALS
Certain aspects of the Merger Transaction will require notification to,
and/or approvals from, certain federal and state regulatory authorities.
Consummation of the Merger is conditioned upon, among other things, receipt of
certain regulatory approvals including approval under the HSR Act and the
approval of the CCC. See "Regulatory Matters."
SUMMARY FINANCIAL INFORMATION OF THCR
The following tables set forth (a) certain historical consolidated financial
information of AC Holdings and Plaza Associates (predecessors of THCR) for each
of the five years ended December 31, 1990 through 1994 and for the nine months
ended September 30, 1994 and certain historical consolidated financial
information of THCR for the period from inception (June 12, 1995) to September
30, 1995 (unaudited) (see Note 1 below) and (b) unaudited pro forma financial
information of THCR (giving effect to the offering by the THCR of $140 million
of Common Stock (the "June 1995 Stock Offering") and the offering by THCR
Holdings and Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding") of
$155 million aggregate principal amount of 15 1/2% Senior Secured Notes due
2005 (the "Senior Notes") (the "June 1995 Note Offering" and, together with the
June 1995 Stock Offering, the "June 1995 Offerings")). The unaudited pro forma
information also gives effect to the Merger Transaction. The historical
financial information of AC Holdings and Plaza Associates as of December 31,
1993 and 1994 and for the years ended December 31, 1992, 1993 and 1994 as set
forth below has been derived from the audited consolidated financial statements
of AC Holdings and Plaza Associates included elsewhere in this Proxy Statement-
Prospectus. The historical financial information of AC Holdings and Plaza
Associates for the years ended December 31, 1990 and 1991 as set forth has been
derived from the audited consolidated financial statements of AC Holdings and
Plaza Associates not included in this Proxy Statement-Prospectus.
The unaudited financial information as of September 30, 1994 and 1995 and for
the periods then ended has been derived from the unaudited condensed
consolidated financial statements included elsewhere in this Proxy Statement-
Prospectus and in the opinion of management, includes all adjustments,
consisting of only normal, recurring adjustments, necessary to present fairly
the financial position, results of operations and changes in cash flows for the
periods presented. The results of these interim periods are not necessarily
indicative of the operating results for a full year. The pro forma Statement of
Operations Data and Other Data give effect to the Merger Transaction as if it
had occurred on January 1, 1994 and the pro forma Balance Sheet Data gives
effect to the same as if the same had occurred on September 30, 1995. The pro
forma financial information should not be considered indicative of actual
results that would have been achieved had the transactions occurred on the date
or for the period indicated and does not purport to indicate results of
operations as of any future date or for any future period. All financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of THCR," "Unaudited
Pro Forma Financial Information" and the consolidated and condensed financial
statements and the related notes thereto included elsewhere in this Proxy
Statement-Prospectus.
18
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL HISTORICAL
------------------------------------------------ ------------- ----------------
NINE FROM INCEPTION
MONTHS (JUNE 12, 1995)
ENDED TO SEPTEMBER 30,
YEARS ENDED DECEMBER 31, SEPTEMBER 30, 1995 (NOTE 1)
------------------------------------------------ ------------- ----------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- ------------- ----------------
(DOLLARS IN THOUSANDS) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $319,937 $279,684 $313,318 $300,491 $295,063 $222,066 $113,301
Depreciation and amor-
tization.............. 16,725 16,193 15,842 17,554 15,653 11,734 5,091
Income from operations. 19,109 16,087 35,003 49,640 43,415 33,952 23,134
Interest expense, net.. 33,128 33,363 31,356 39,889 48,219 36,051 16,816
Extraordinary gain
(loss)................ -- -- (38,205) 4,120 -- -- --
Net income (loss) (a).. (10,591) (29,230) (35,787) 9,338 (8,870) (5,305) 1,299
OTHER DATA:
EBITDA (b)............. $ 44,016 $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 46,908 $ 28,630
Capital expenditures
(c)................... 11,002 5,509 8,643 10,052 20,489 14,611 102,535
Ratio of earnings to
fixed charges
(deficiency) (d)...... (11,902) (32,094) 1.1x 1.1x (9,735) (5,828) 1.2x
Cash flows provided by
(used in)
Operating activities... 7,297 9,514 $ 26,191 $ 21,820 19,950 19,817 $ 10,315
Investing activities... (6,959) (6,175) (10,469) (12,679) (21,691) (14,611) (198,530)
Financing activities... (1,960) (2,870) (7,367) (13,550) (1,508) 2,560 183,386
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $395,775 $378,398 $370,349 $374,498 $375,643 $386,080 $ 599,415
Total long-term debt,
net of current
maturities (e)........ 247,048 33,326 249,723 395,948 403,214 398,644 486,655
Total capital (defi-
cit).................. 83,273 54,043 11,362 (54,710) (63,580) (60,068) 53,727
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
------------------------------------------------------------- -----------------------
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -----------------------
1990 1991 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA (AT END OF
PERIOD): (F)
Casino square footage... 60,000 60,000 60,000 60,000 73,000(n) 66,299 74,033
Number of hotel rooms... 557 557 557 557 555 557 555
Hotel occupancy rate.... 88.3% 87.1% 86.9% 87.6% 88.6% 89.9% 92.2%
TABLE GAMES:
Total Atlantic City
table drop (g)......... $7,903,248 $7,219,192 $7,055,034 $6,835,572 $6,832,517 $5,131,243 $5,350,188
Atlantic City table drop
growth................. 3.1% (8.7)% (2.3)% (3.1)% 0.0% (1.3)% 4.3%
Trump Plaza table drop
(g).................... $ 848,823 $ 646,480 $ 689,919 $ 626,621 $ 599,881 $ 450,595 $ 473,153
Trump Plaza table games
market share (h)....... 10.7% 9.0% 9.8% 9.2% 8.8% 8.8% 8.8%
Trump Plaza table games
fair share (i)......... 8.9% 8.5% 8.2% 7.8% 8.0% 7.9% 8.6%
Trump Plaza table games
efficiency (j)......... 120.6% 105.1% 118.8% 118.0% 110.6% 110.9% 102.8%
Trump Plaza table units. 117 112 98 87 89 88 97
Trump Plaza table
revenue................ $ 127,993 $ 98,905 $ 95,864 $ 93,392 $ 92,770 $ 69,284 $ 72,293
Trump Plaza table
revenue per unit per
day (actual dollars)... $ 2,997 $ 2,419 $ 2,679 $ 2,940 $ 2,855 $ 2,877 $ 2,740
SLOTS:
Total Atlantic City slot
revenue................ $1,724,309 $1,851,070 $2,113,829 $2,214,638 $2,297,280 $1,738,656 $1,971,442
Atlantic City slot
revenue growth......... 9.3% 7.4% 14.2% 4.8% 3.7% 1.7% 13.4%
Trump Plaza slot revenue
(k).................... $ 150,715 $ 136,128 $ 168,388 $ 173,215 $ 170,316 $ 129,370 $ 154,157
Trump Plaza slot market
share (h).............. 8.7% 7.4% 8.0% 7.8% 7.4% 7.4% 7.8%
Trump Plaza slot fair
share (i).............. 8.2% 7.8% 7.8% 7.6% 8.0% 8.0% 8.3%
Trump Plaza slot
efficiency (j)......... 107.2% 94.5% 102.6% 103.1% 92.5% 92.8% 94.6%
Trump Plaza slot units.. 1,661 1,659 1,727 1,812 2,076 2,047 2,342
Trump Plaza slot revenue
per unit per day
(actual dollars) (k)... $ 248 $ 225 $ 267 $ 262 $ 225 $ 232 $ 241
</TABLE>
(footnotes on the following page)
19
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA (O)
------------------------------------
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1995
DECEMBER 31, 1994 (NOTE 1)
----------------- ------------------
STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net revenues............................. $812,245 $ 668,445
Depreciation and amortization............ 60,285 47,861
Income from operations................... 121,231 120,997
Interest expense, net (l)................ 160,952 116,565
Net (loss) income........................ (30,609) 1,580
Net (loss) income per common share (m)... (1.56) .08
OTHER DATA:
EBITDA (b)(l)............................ $182,972 $ 168,330
Ratio of earnings to fixed charges
(deficiency) (d)........................ (44,724) 1.02x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................. -- $1,646,313
Total long-term debt, net of current
maturities.............................. -- 1,340,330
Total capital............................ -- 174,164
</TABLE>
Note 1: THCR was incorporated on March 28, 1995 and conducted no operations
until June 12, 1995, when THCR issued $140,000,000 of Common Stock in the June
1995 Stock Offering and contributed the proceeds therefrom to THCR Holdings in
exchange for an approximately 60% general partnership interest in THCR
Holdings. At the consummation of the June 1995 Stock Offering, pursuant to the
Contribution Agreement, dated as of June 12, 1995, between Trump and THCR
Holdings (the "Contribution Agreement"), Trump contributed his 100% beneficial
interest in Plaza Funding, AC Holdings and Plaza Associates to THCR Holdings,
among other things, for an approximately 40% limited partnership interest in
THCR Holdings. The financial data as of September 30, 1995 and for the period
ended September 30, 1995 reflect the operations of THCR from inception (June
12, 1995) to September 30, 1995.
- --------
(a) Net loss for the year ended December 31, 1990, includes income of $2.4
million resulting from the settlement of a lawsuit relating to a boxing
match. Net loss for the year ended December 31, 1991, includes a $10.9
million charge associated with the rejection of the lease of the former
Trump Regency Hotel and $4.0 million of costs associated with certain
litigation. Net income for 1992 includes $1.5 million of costs associated
with certain litigation. Net income for the years ended December 31, 1993
and 1994, and the nine months ended September 30, 1994 and the period from
inception (June 12, 1995) to September 30, 1995, includes $3.9, $4.9, $3.7
and $1.3 million, respectively, of real estate taxes and leasing costs
associated with Trump Plaza East.
(b) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, non-cash compensation
charges associated with awards to the President of THCR under the 1995
Stock Incentive Plan, and the non-cash write-down of New Jersey Casino
Reinvestment Development Authority ("CRDA") investments. EBITDA should not
be construed as an alternative to net income or any other measure of
performance determined in accordance with generally accepted accounting
principles or as an indicator of THCR's operating performance, liquidity or
cash flows generated by operating, investing and financing activities.
Management has included information concerning EBITDA as management
understands that it is used by certain investors as one measure of THCR's
historical ability to service its debt.
(c) Capital expenditures attributable to Trump Plaza East were approximately
$2.8 million and $8.7 million for the years ended December 31, 1993 and
1994, and $6.2 million and $14.3 million for the nine months ended
September 30, 1994 and 1995.
(d) For purposes of computing this ratio, earnings consist of loss before
income taxes, extraordinary items, minority interest and fixed charges,
adjusted to exclude capitalized interest. Fixed charges consist of interest
expense, including amounts capitalized, preferred partnership distribution
requirements and the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one-third of operating
lease rental expense). Earnings were insufficient to cover fixed charges
for the years ended 1990, 1991, 1994, and the nine months ended September
30, 1994 and, on a pro forma basis, for the year ended 1994 and the nine
months ended September 30, 1995.
(e) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
(f) Atlantic City industry data has been compiled from information filed with
and published by the CCC and is unaudited.
(g) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(h) Market share represents the total Trump Plaza gaming revenues expressed as
a percentage of total Atlantic City gaming revenues.
(i) Fair share is the percentage of the total number of gaming units (table
games and slot machines) in Trump Plaza to the total number of gaming units
in casino hotels in Atlantic City.
(j) Efficiency is the ratio of Trump Plaza's market share to its fair share.
(k) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(l) Does not give effect to any return on investment of the net proceeds of the
June 1995 Offerings.
(m) Pro forma earnings per share is based upon weighted average shares
outstanding as of September 30, 1995, shares and phantom stock units
awarded to the President of THCR pursuant to the 1995 Stock Incentive Plan
and shares to be issued in the THCR Stock Offering. The shares of THCR
Class B Common Stock owned by Trump have no economic interest and
therefore, are not considered.
(n) The expansion of 13,000 square feet was commenced in April 1994 and
completed at the end of that year.
(o) The Pro Forma Statement of Operations Data and Other Data give effect to
the Merger Transaction as if the same had occurred on January 1, 1994 and
the Pro Forma Balance Sheet Data gives effect to the Merger Transaction as
if the same had occurred on September 30, 1995.
20
<PAGE>
SUMMARY FINANCIAL INFORMATION OF TAJ ASSOCIATES
Taj Holding has no business operations and serves as a holding company for an
investment in 50% of Taj Associates. Therefore, historical financial
information for Taj Holding is not presented below. The audited consolidated
financial statements of Taj Holding as of December 31, 1993 and 1994 and for
the years ended December 31, 1992, 1993 and 1994 are included elsewhere in this
Proxy Statement-Prospectus.
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1990 through 1994 and for the nine months ended September 30, 1994 and 1995.
The financial information of Taj Associates as of December 31, 1990, 1991,
1992, 1993 and 1994 and for the years then ended set forth below has been
derived from the audited consolidated financial statements of Taj Associates.
The audited financial information as of December 31, 1993 and 1994 and for the
years ended December 31, 1992, 1993 and 1994 are included elsewhere in this
Proxy Statement-Prospectus. The financial information as of September 30, 1994
and 1995 and for each of the nine months then ended has been derived from the
unaudited consolidated financial statements of Taj Associates included
elsewhere in this Proxy Statement-Prospectus and in the opinion of management,
includes all adjustments, consisting of only normal, recurring adjustments,
necessary to present fairly the financial position, results of operations and
changes in cash flows for the periods presented. This information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Taj Associates," "Unaudited Pro Forma
Financial Information" and the consolidated financial statements and the
related notes thereto included elsewhere in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- -----------------------
1990(a) 1991(b) 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net Revenues............ $ 356,698 $ 438,313 $ 469,753 $ 498,911 $ 517,182 $ 386,538 $ 417,296
Depreciation and
amortization........... 44,647 36,202 36,388 36,858 39,750 28,944 32,407
Income (loss) from
operations............. (23,289) 31,828 68,027 84,458 76,634 54,190 72,404
Interest expense, net... (82,105) (100,683) (103,126) (106,997) (113,292) (85,512) (86,112)
Extraordinary gain
(loss)................. 0 259,618 0 0 0 0 0
Net income (loss)....... (124,269) 188,513 (35,099) (22,539) (36,658) (31,322) (13,708)
OTHER DATA:
EBITDA(c)............... $ 62,361 $ 96,234 $ 106,978 $ 124,080 $ 120,018 $ 85,282 $ 107,126
Capital expenditures.... 178,060 17,045 12,111 16,752 23,030 15,749 19,477
Ratio of earnings to
fixed charges
(deficiency)(d)........ (143,612) (71,105) (35,099) (22,539) (36,658) (31,322) (13,708)
Cash flows provided by
(used in)
operating activities... 7,798 35,126 31,786 48,634 33,422 40,562 73,310
Investing activities.... (117,965) (18,901) (17,759) (22,160) (27,231) (19,749) (23,751)
Financing activities.... 61,613 (16,170) (2,500) (2,492) (3,039) (2,355) (1,986)
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ $ 845,804 $ 814,051 $ 802,556 $ 811,508 $ 807,612 $ 822,914 $ 843,725
Total long-term debt,
net of current
maturities(e).......... 917(f) 573,844 595,682 625,765 656,701 651,626 688,143
Total capital
(deficit).............. (69,420) 167,837 130,913 106,641 67,812 73,609 52,899
OPERATING DATA (AT END OF
PERIOD)(G):
Casino Square Footage... 120,000 120,000 120,000 130,110 132,317 132,317 133,111
Number of Hotel Rooms... 1,250 1,250 1,250 1,250 1,250 1,250 1,250
Hotel Occupancy Rate.... 95.5% 87.3 % 91.3 % 92.3 % 92.4% 93.8 % 92.0%
TABLE GAMES:
Total Atlantic City
table drop(h).......... $7,903,249 $7,219,192 $7,055,034 $6,835,572 $6,832,517 $5,131,243 $5,350,188
Atlantic City table drop
growth................. 3.1% (8.7)% (2.3)% (3.1)% 0.0% (1.3)% 4.3%
Taj Mahal table games
market share(i)........ 12.6% 16.4 % 15.3 % 16.2 % 17.1% 16.4 % 17.7%
Taj Mahal table games
fair share(j).......... 12.3% 12.7 % 13.3 % 14.5 % 14.2% 14.4 % 13.4%
Taj Mahal table games
efficiency(k).......... 102.1% 129.1 % 115.0 % 111.7 % 120.4% 113.9 % 132.1%
Taj Mahal table units... 167 166 159 163 159 161 150
Taj Mahal table
revenue................ $ 154,048 $ 186,644 $ 169,112 $ 173,432 $ 184,774 $ 132,019 $ 148,953
Taj Mahal table revenue
per unit per day
(actual dollars)....... 3,354 3,080 2,913 2,915 3,184 3,004 3,637
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------------- ----------------------
1990(a) 1991(b) 1992 1993 1994 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SLOTS:
Total Atlantic City
slot revenue(k)(l).... $1,724,309 $1,851,070 $2,113,829 $2,214,638 $2,297,280 $1,738,656 $1,971,442
Atlantic City slot
revenue growth........ 9.3% 7.4% 14.2% 4.8% 3.7% 1.7% 13.4%
Taj Mahal slot
revenue(l)............ $ 150,842 $ 197,383 $ 246,947 $ 264,504 $ 259,114 $ 200,213 $ 217,475
Taj Mahal slot market
share(i).............. 8.8% 10.7% 11.7% 11.9% 11.3% 11.5% 11.0%
Taj Mahal slot fair
share(j).............. 14.2% 13.0% 12.7% 13.1% 12.6% 12.3% 12.5%
Taj Mahal slot
efficiency(k)......... 62.0% 82.3% 92.1% 90.8% 89.7% 93.5% 88.0%
Taj Mahal slot units... 2,909 2,778 2,840 3,146 3,342 3,241 3,540
Taj Mahal slot revenue
per unit per day
(actual dollars)(l)... $ 189 $ 195 $ 238 $ 230 $ 213 $ 226 $ 225
</TABLE>
- --------
(a) The Taj Mahal was substantially completed and opened to the public on April
2, 1990.
(b) Taj Associates and Taj Funding completed the 1991 Taj Restructuring (as
defined) on October 4, 1991, which may affect the comparability of prior
periods.
(c) EBITDA represents income from operations before depreciation, amortization,
restructuring costs, the non-cash write-down of CRDA investments and a
nonrecurring cost of a litigation settlement. EBITDA should not be
construed as an alternative to net income or any other measure of
performance determined in accordance with generally accepted accounting
principles or as an indicator of Taj Associates' operating performance,
liquidity or cash flows generated by operating, investing and financing
activities. Management has included information concerning EBITDA, as
management understands that it is used by certain investors as one measure
of Taj Associates' historical ability to service its debt.
(d) For purposes of computing this ratio, earnings consist of loss before
income taxes and extraordinary items and fixed charges, adjusted to exclude
capitalized interest. Fixed charges consist of interest expense, including
amounts capitalized, partnership distribution requirements and the portion
of operating lease rental expense that is representative of the interest
factor (deemed to be one-third of operating lease rental expense).
(e) The years ended December 31, 1991, 1992, 1993, 1994 and the nine months
ended September 30, 1994 and 1995 include approximately $528,124, $550,140,
$580,464, $611,533, $606,509 and $643,135 of Bonds, net of discount of
approximately $201,334, $188,162, $172,417, $153,597, $158,622 and
$137,108, respectively, which is being accreted as additional interest
expense to maturity and results in an effective interest rate of
approximately 18.0%. See Note 2 of Notes to Consolidated Financial
Statements of Taj Associates.
(f) Long-term debt of $720,715 had been reclassified to current maturities as
of December 31, 1990.
(g) Atlantic City industry data has been compiled from information filed with
and published by the CCC and is unaudited.
(h) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(i) Market share represents the total Taj Mahal gaming revenues expressed as a
percentage of total Atlantic City gaming revenues.
(j) Fair share is the percentage of the total number of gaming units (table
games or slot machines) in the Taj Mahal to the total number of gaming
units in casinos in Atlantic City.
(k) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(l) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
22
<PAGE>
CORPORATE STRUCTURE AND ORGANIZATION
The Taj Mahal is currently beneficially owned by Taj Holding and Trump. Taj
Holding currently beneficially owns a 50% equity interest in Taj Associates,
the partnership that directly owns and operates the Taj Mahal, through its
ownership of (i) all of the outstanding capital stock of TM/GP, which owns a
49.995% equity interest in Taj Associates, and (ii) 50% of the outstanding
capital stock of TTMC, which owns a .01% equity interest in Taj Associates.
Trump currently beneficially owns the other 50% equity interest in Taj
Associates through his ownership of (i) all of the outstanding capital stock of
TTMI, which owns a 49.995% equity interest in Taj Associates, and (ii) 50% of
the outstanding capital stock of TTMC. Taj Associates, the guarantor of the Taj
Bonds, wholly owns Taj Funding, the issuer of the Taj Bonds. Upon consummation
of the Merger Transaction, THCR Holdings will indirectly wholly own Taj
Associates through its ownership of a 99% equity interest in AC Holdings and
all of the capital stock of Trump Plaza Holding, Inc. ("Plaza Holding Inc."),
which owns a 1% equity interest in AC Holdings. AC Holdings will wholly own Taj
Associates through its ownership of a 99% equity interest in Taj Associates and
all of the capital stock of TTMC, which owns a 1% equity interest in Taj
Associates.
THCR is the sole general partner and Trump is currently the sole 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, Plaza Associates, Plaza Funding, AC Holdings, Plaza Holding Inc.
and THCR Funding. Plaza Associates owns and operates Trump Plaza and is the
guarantor of the Plaza Notes. Plaza Funding is the issuer of the Plaza Notes
and currently owns a 1% equity interest in Plaza Associates which will be
transferred to TTMC in connection with the Merger Transaction. AC Holdings
currently owns a 99% equity interest in Plaza Associates, and Plaza Holding
Inc. owns a 1% equity interest in AC Holdings. THCR Funding, together with THCR
Holdings, are the co-obligors of the Senior Notes. In addition to its ownership
of the Indiana Riverboat, Trump Indiana has a 50% equity interest in Buffington
Harbor Riverboats, LLC ("BHR"), which will own, develop and operate all common
land-based and waterside operations in support of the Indiana Riverboat and
another operator's riverboat casino at Buffington Harbor.
Merger Sub, a wholly owned subsidiary of THCR, was formed for the purpose of
effecting the Merger and has not conducted any other business. THCR intends to
change the name of Trump Plaza Holding Associates to THCR Atlantic City
Holdings on or before the consummation of the Merger Transaction. AC Holdings
and its subsidiary, AC Funding, will be the issuers and co-obligors of the
Mortgage Notes, and AC Holdings will serve as the holding company through which
THCR Holdings will own Plaza Associates and Taj Associates. Plaza Associates
and Taj Associates will be guarantors of the Mortgage Notes.
To effect the Merger Transaction, the Amended and Restated Partnership
Agreement of THCR Holdings (the "THCR Holdings Partnership Agreement") will be
amended to allow THCR to use the proceeds from the THCR Stock Offering as
discussed herein and to add TM/GP and TTMI as limited partners. An amendment of
the THCR Holdings Partnership Agreement requires the approval of Trump, who
will be the sole limited partner at the time of amendment, and a majority of
the independent Directors of THCR. See "Description of the THCR Holdings
Partnership Agreement."
THCR, a Delaware corporation, was incorporated on March 28, 1995. Merger Sub,
a Delaware corporation, was incorporated on January 5, 1996. The principal
executive offices of THCR, THCR Holdings, AC Holdings, a New Jersey general
partnership, and Merger Sub are located at Mississippi Avenue and The
Boardwalk, Atlantic City, New Jersey 08401, and their telephone number is
(609) 441-6060.
Taj Holding, a Delaware corporation, was incorporated on December 18, 1990.
The principal executive offices of Taj Holding and TM/GP are located at 1000
The Boardwalk, Atlantic City, New Jersey 08401, and their telephone number is
(609) 449-5540.
23
<PAGE>
CURRENT OWNERSHIP STRUCTURE
[CHART OMITTED. GRAPHIC DEPICTS THE CURRENT OWNERSHIP STRUCTURE OF THCR AND TAJ
HOLDING AND THEIR RESPECTIVE SUBSIDIARIES]
24
<PAGE>
OWNERSHIP STRUCTURE AFTER THE MERGER TRANSACTION
[CHART OMITTED. GRAPHIC DEPICTS THE CURRENT OWNERSHIP STRUCTURE OF THCR AND ITS
SUBSIDIARIES AFTER THE MERGER TRANSACTION]
25
<PAGE>
RISK FACTORS
In deciding whether to approve the Merger Transaction or approve and adopt
the Merger Agreement, as applicable, and in the case of the holders of Taj
Holding Class A Common Stock, whether to elect Cash Consideration or Stock
Consideration, the stockholders of THCR and Taj Holding should carefully
evaluate the following risk factors and the information and financial
statements provided elsewhere in this Proxy Statement-Prospectus.
HIGH LEVERAGE AND FIXED CHARGES
Upon consummation of the Merger Transaction, THCR and its subsidiaries will
have a substantial amount of indebtedness on a consolidated basis. At December
31, 1995, after giving pro forma effect to the Merger Transaction, THCR's
consolidated indebtedness for borrowed money would have totaled approximately
$ , including $155 million aggregate principal amount of Senior Notes and
$1.18 billion aggregate principal amount of Mortgage Notes (collectively, the
"Notes"). See "Special Factors--Sources and Uses of Funds in the Merger
Transaction," and "Business of THCR--Certain Indebtedness of THCR." Assuming
that the Merger Transaction had been consummated on January 1, 1995, THCR's
consolidated pro forma earnings would have been insufficient to cover fixed
charges by $ million for the year ended December 31, 1995.
Interest on the Senior Notes is, and interest on the Mortgage Notes will be,
payable semiannually in cash. The ability of THCR Holdings and AC Holdings to
pay cash interest on the Senior Notes and the Mortgage Notes, respectively,
will be dependent upon the ability of THCR and its subsidiaries (in the case
of the Senior Notes) and AC Holdings and its subsidiaries (in the case of the
Mortgage Notes) to generate enough cash from operations sufficient for such
purposes and will be subject to the risks associated with refinancing and
repayment of indebtedness described below. See "--Holding Company Structure;
Risk in Refinancing and Repayment of Indebtedness; Need for Additional
Financing," "--Recent Results--Trump Plaza," and "--Recent Results--Taj
Mahal." In addition, under the terms of their indebtedness, the ability of
THCR Holdings and AC Holdings, to make distributions or other payments to
holders of their equity interests is and will be severely limited. In
addition, the terms of the Mortgage Notes will, under certain circumstances
and subject to certain limitations, require AC Holdings to make distributions
to THCR Holdings to enable THCR Holdings to make scheduled interest payments
on its Senior Notes. See "--Restrictions on Certain Activities."
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25.0
million. During 1994 and 1995, no amounts were borrowed under the Working
Capital Facility. Taj Associates anticipates either modifying the Working
Capital Facility or terminating the Working Capital Facility and replacing it
with a new $25.0 million facility.
The substantial consolidated indebtedness and fixed charges of THCR may
limit its ability to respond to changing business and economic conditions, to
fund capital expenditures for future expansion or otherwise, either through
cash flow or additional indebtedness, to absorb adverse operating results or
to maintain its facilities at an operating level which will continue to
attract patrons. Although management believes that the Merger Transaction will
allow THCR to realize certain cost savings, no assurance can be given as to
the amount that will be realized from these cost savings. Future operating
results are subject to significant business, economic, regulatory and
competitive uncertainties and contingencies, many of which are outside their
control. THCR may be required to reduce or delay planned capital expenditures,
sell assets, restructure debt or raise additional equity to meet principal
repayment and other obligations of it and its subsidiaries in later years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of THCR--Liquidity and Capital Resources" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
26
<PAGE>
Taj Associates--Liquidity and Capital Resources." There is no assurance that
any of these alternatives could be effected on satisfactory terms, if at all.
See "--Holding Company Structure; Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing." Furthermore, such alternatives
could impair THCR's competitive position, reduce cash flow and/or have a
material adverse effect on THCR.
HOLDING COMPANY STRUCTURE; RISK IN REFINANCING AND REPAYMENT OF INDEBTEDNESS;
NEED FOR ADDITIONAL FINANCING
THCR is a holding company, the principal asset of which is its general
partnership interest in THCR Holdings, and has no independent means of
generating revenue. As a holding company, THCR depends on distributions and
other permitted payments from THCR Holdings to meet its cash needs. In
addition, both THCR Holdings and AC Holdings are holding companies, the
principal assets of which are the shares of capital stock and partnership
interest of their respective subsidiaries. Dividends and distributions
received with respect to equity interests in subsidiaries of THCR Holdings and
AC Holdings are the sole source of funds which are available to THCR Holdings
and AC Holdings to meet their respective obligations, including the
obligations under the Senior Notes by THCR Holdings and the obligations under
the Mortgage Notes by AC Holdings. The payment of dividends and distributions
by THCR's subsidiaries including by THCR Holdings, however, is significantly
restricted by certain covenants contained in debt agreements and other
agreements to which such subsidiaries are subject and may be restricted by
other agreements entered into in the future and by applicable law. In
addition, the terms of the Mortgage Notes will, under certain circumstances
and subject to certain limitations, require AC holdings to make distributions
to THCR Holdings to enable THCR Holdings to make scheduled interest payments
on its Senior Notes. See "--Restrictions on Certain Activities" and
"Description of the THCR Holdings Partnership Agreement."
The ability of THCR Holdings and THCR Funding, and AC Holdings and AC
Funding to pay their respective indebtedness when due will depend upon the
ability of THCR and its subsidiaries (with respect to the Senior Notes) and AC
Holdings and its subsidiaries (with respect to the Mortgage Notes) to generate
cash from operations sufficient for such purpose or to refinance such
indebtedness on or before the date on which it becomes due. THCR management
does not currently anticipate being able to generate sufficient cash flow from
operations to repay a substantial portion of the principal amount of the
Senior Notes or Mortgage Notes. Thus, the repayment of the principal amount of
the Notes will likely depend primarily upon the ability to refinance the Notes
when due. The future operating performance and the ability to refinance the
Notes will be subject to the then prevailing economic conditions, industry
conditions and numerous other financial, business and other factors, many of
which are beyond the control of THCR. There can be no assurance that the
future operating performance of THCR and its subsidiaries will be sufficient
to meet these repayment obligations or that the general state of the economy,
the status of the capital markets generally or the receptiveness of the
capital markets to the gaming industry and to THCR will be conducive to
refinancing the Notes or other attempts to raise capital. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
THCR--Liquidity and Capital Resources" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Taj Associates--
Liquidity and Capital Resources."
The cost to THCR for the development of the Indiana Riverboat through the
commencement of its operations (expected early in the second quarter of 1996),
which includes the land, the vessel, gaming equipment, a pavilion for staging
and ticketing and restaurant facilities, berthing and support facilities and
parking facilities, is expected to be approximately $84 million. THCR
initially anticipated spending $59 million prior to the commencement of the
Indiana Riverboat's operations for the vessel, gaming equipment and initial
berthing and support facilities, and also anticipated spending an additional
$27 million in the second phase to be completed by mid-1997, which would
feature a pavilion for staging and ticketing and restaurant facilities,
berthing and support facilities and expanded parking. To facilitate the
Indiana Riverboat's operations from the opening day and to avoid disruptive
construction at the site for an additional year, THCR determined to accelerate
the second phase of the project, now expected to cost $25 million, and
complete both phases prior to commencing operations. THCR anticipates
obtaining the additional $25 million in financing to complete the accelerated
development of the Indiana Riverboat through the commencement of its
operations in the form of $5 million in additional vessel financing, $10
million in mortgage financing or from a working capital facility and $10
million in operating leases. Trump Indiana is seeking commitments for this
additional financing, although no
27
<PAGE>
commitments are currently in place. During its initial five-year license term,
an additional $69 million of funds (consisting of approximately $48 million
for construction of a hotel and other amenities and $21 million in
infrastructure improvements and other municipal uses) will be required to be
spent by Trump Indiana, which is expected to be funded with cash from
operations or additional borrowings. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations of THCR--Liquidity and
Capital Resources." THCR also contemplates obtaining an aggregate of
approximately $17.5 million of equipment financing in connection with the
acquisition of slot machines and related gaming equipment for Trump Plaza's
existing facilities, Trump World's Fair and Trump Plaza East. Plaza Associates
is seeking commitments for this additional financing, a portion of which is
currently in place. The failure of THCR to obtain all or a significant portion
of the financings discussed above may have a material adverse effect on THCR.
RESTRICTIONS ON CERTAIN ACTIVITIES
The Senior Note Indenture imposes restrictions on the activities of THCR
Holdings and its subsidiaries and the indenture pursuant to which the Mortgage
Notes will be issued (the "Mortgage Note Indenture") will impose restrictions
on the activities of AC Holdings and its subsidiaries. Generally, the
restrictions contained in these instruments relate to the incurrence of
additional indebtedness, the distribution of cash and/or property to partners,
the repayment or repurchase of pari passu or junior securities, the
maintenance of required net worth, investments, mergers and sales of assets
and the creation of liens. These restrictions could limit the ability of THCR
to respond to changing business and economic conditions. A failure to comply
with any of these obligations could also result in an event of default under
the Senior Note Indenture or the Mortgage Note Indenture, which could permit
acceleration of the Notes and acceleration of certain other indebtedness of
THCR under other instruments that may contain cross-acceleration or cross-
default provisions.
The activities of Trump are restricted by certain debt agreements under
which he is personally obligated. These agreements impose restrictions on
Trump and certain of his affiliates, relating to, among other things,
incurrence of additional indebtedness, the creation of liens, mergers and
sales of assets, investments, leases, issuance of equity interests, affiliate
transactions and capital expenditures. As a result, certain transactions in
which Trump may wish to engage involving his ownership interest in THCR or its
affiliates may require the prior consent of such lenders. See "--Control and
Involvement of Trump."
RECENT RESULTS
Trump Plaza. Plaza Associates had net losses of $5.3 million, $29.2 million,
$35.8 million (including an extraordinary loss of $38.2 million) and $8.9
million for the nine months ended September 30, 1994 and the years ended
December 31, 1991, 1992, and 1994, respectively, and net income of $0.4
million (including an extraordinary loss of $9.3 million) for the nine months
ended September 30, 1995 and $9.3 million for the year ended December 31, 1993
(including an extraordinary gain of $4.1 million). In 1991, Plaza Associates
began to experience liquidity problems, principally due to amortization
requirements of its long-term debt. On May 29, 1992, Plaza Associates and
Plaza Funding completed a restructuring (the "1992 Plaza Restructuring"), the
purpose of which was to improve the amortization schedule and extend the
maturity of Plaza Associates' indebtedness. In June 1993, Plaza Associates,
Plaza Funding and AC Holdings completed a refinancing, the purpose of which
was to enhance Plaza Associates' liquidity and to position Plaza Associates
for a subsequent deleveraging transaction. See "Business of THCR--The 1992
Plaza Restructuring." THCR management believes that the deterioration in
results experienced in 1990 and 1991 was attributable primarily to a recession
in the Northeast and increased industry competition, primarily due to the
opening of the Taj Mahal in April 1990, which had a disproportionate impact on
Trump Plaza as compared to certain other Atlantic City casinos due in part to
the common use of the "Trump" name. See "Business of THCR--Trump Plaza--Trump
Plaza Business Strategy."
Taj Mahal. Taj Associates had net losses of $31.3 million, $13.7 million,
$35.1 million, $22.5 million and $36.7 million for the nine months ended
September 30, 1994 and 1995 and the years ended December 31, 1992, 1993 and
1994, respectively. From the opening of the Taj Mahal in April 1990 through
the spring of 1991, cash
28
<PAGE>
generated from Taj Associates' operations was insufficient to cover its fixed
charges. As a result, Taj Associates failed to provide Taj Funding with
sufficient funds to meet its debt servicing needs. During 1991, Taj Funding,
Taj Associates and Taj Associates' then existing general partners (TTMI and
TTMC) restructured their existing indebtedness (the "1991 Taj Restructuring").
Pursuant to the terms of the 1991 Taj Restructuring, Taj Funding's 14% First
Mortgage Bonds, Series A, due 1998 (the "Old Taj Bonds") were exchanged for
the Taj Bonds and certain modifications were made to the terms of bank
borrowings and amounts owed to both Trump and his affiliates. In addition,
approximately 50% of the ownership interest in Taj Associates was transferred
indirectly to the holders of the Old Taj Bonds. See "Business of Taj Holding--
The 1991 Taj Restructuring."
TRUMP PLAZA EXPANSION AND THE TAJ MAHAL EXPANSION
Construction and Regulatory Approvals. The Trump Plaza Expansion is expected
to be completed early in the second quarter of 1996, and the Taj Mahal
Expansion, the plans for which are preliminary and subject to modification, is
expected to be completed in phases from the first quarter of 1997 through
1999. Construction projects, however, such as those contemplated by the Trump
Plaza Expansion and the Taj Mahal Expansion, can entail significant
development and construction risks including, but not limited to, labor
disputes, shortages of material and skilled labor, weather interference,
unforeseen engineering problems, environmental problems, geological problems,
construction, demolition, excavation, zoning or equipment problems and
unanticipated cost increases, any of which could give rise to delays or cost
overruns. There can be no assurance that Plaza Associates and Taj Associates
will receive the licenses and regulatory approvals necessary to undertake, in
the case of the Taj Mahal Expansion, and to complete, in the case of each of
the Trump Plaza Expansion and the Taj Mahal Expansion, their respective
expansion plans, or that such licenses and regulatory approvals will be
obtained within the anticipated time frames.
The Trump Plaza Expansion and the Taj Mahal Expansion will each require
various licenses and regulatory approvals, including the approval of the New
Jersey Casino Control Commission (the "CCC"). Furthermore, the New Jersey
Casino Control Act (the "Casino Control Act") requires that additional guest
rooms be put in service within a specified time period after any such casino
expansion. If Plaza Associates or Taj Associates completed any casino
expansion and subsequently did not complete the requisite number of additional
guest rooms within the specified time period, such party might have to close
all or a portion of the expanded casino in order to comply with regulatory
requirements, which could have a material adverse effect on THCR. In addition,
in order to operate the additional casino space contemplated by the Taj Mahal
Expansion, Taj Associates must obtain, among other regulatory approvals, the
approval of the CCC and determinations by the CCC that the Taj Mahal's
additional casino space, together with its current casino space, is a "single
room" under the Casino Control Act and that the operation of this additional
casino space by Taj Associates will not constitute undue economic
concentration of Atlantic City casino operations. Taj Associates will file a
petition with the CCC seeking such declaratory rulings. See "Regulatory
Matters--New Jersey Gaming Regulations--Casino Licensee" and "Regulatory
Matters--New Jersey Gaming Regulations--Approved Hotel Facilities."
Trump Plaza East. Plaza Associates has already begun development of Trump
Plaza East. If Plaza Associates is unable to finance the purchase price of
Trump Plaza East pursuant to the Trump Plaza East Purchase Option and its
leasehold interest therein is terminated, any amounts expended with respect to
Trump Plaza East, including payments under the Trump Plaza East Purchase
Option and the lease pursuant to which Plaza Associates leases Trump Plaza
East, and any improvements thereon, would inure to the benefit of the
unaffiliated third party that owns Trump Plaza East and not to Plaza
Associates and would increase the cost of demolition of any improvements for
which Plaza Associates would be liable. As of December 31, 1995, Plaza
Associates had capitalized approximately $ million in construction costs
related to Trump Plaza East. If the development of Trump Plaza East is not
successful, THCR would be required to write off the capitalized construction
costs associated with the project. Plaza Associates intends to exercise the
Trump Plaza East Purchase Option in connection with the Merger Transaction.
See "Special Factors--Related Merger Transactions" and "Certain Transactions."
29
<PAGE>
On October 30, 1995, Plaza Associates opened 150 of the rooms and suites at
Trump Plaza East. Plaza Associates intends to open the remainder of the rooms
and suites and the casino at Trump Plaza East in the first quarter of 1996,
although there can be no assurance that such openings will occur by such time.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into a sublease (the "Time
Warner Sublease") with Time Warner pursuant to which Time Warner subleased the
entire first floor of retail space at Trump Plaza East for a Warner Brothers
Studio Store which opened in July 1994. Rent under the Time Warner Sublease is
currently accruing and will not become due and payable to Plaza Associates
until the satisfaction of certain conditions designed to protect Time Warner
from the termination of the Time Warner Sublease by reason of the termination
of Plaza Associates' leasehold estate in Trump Plaza East or the foreclosure
of a certain mortgage and until Time Warner's unamortized construction costs
are less than accrued rent. No assurances can be made that such conditions
will be satisfied. In addition, Time Warner may terminate the Time Warner
Sublease at any time beginning two years after the commencement date in the
event that gross sales for the store do not meet certain threshold amounts or
at any time if Plaza Associates fails to operate a first class hotel on Trump
Plaza East. No assurances can be made that Trump Plaza East will continually
be operated as a first class hotel or that sales for the Warner Brothers
Studio Store will exceed the threshold amounts. See "Certain Transactions--
Plaza Associates--Trump Plaza East."
Trump World's Fair. The ongoing renovation of Trump World's Fair is
currently expected to be completed early in the second quarter of 1996,
although there can be no assurance that the project will be completed by such
time. Upon the completion of such renovation, THCR intends to operate Trump
World's Fair as a casino hotel. In order to operate the casino space in Trump
World's Fair, Plaza Associates must obtain all necessary regulatory approvals,
including approval of the CCC, which approval cannot be assured. Plaza
Associates has applied for a separate casino license with respect to Trump
World's Fair. The CCC was required to determine that the operation of the
casino by Plaza Associates will not result in undue economic concentration in
Atlantic City. On May 18, 1995, the CCC ruled that the operation of Trump
World's Fair by Plaza Associates will not result in undue economic
concentration. Although this determination is a required condition precedent
to the CCC's ultimate issuance of a casino license for Trump World's Fair, and
management believes that a casino license will ultimately be issued for Trump
World's Fair, there can be no assurance that the CCC will issue this casino
license or what conditions may be imposed, if any, with respect thereto. See
"Regulatory Matters--New Jersey Gaming Regulations--Casino Licensee" and
"Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities." Although construction at Trump World's Fair has commenced, if the
costs of developing, constructing, equipping and opening Trump World's Fair
exceed the proceeds allocated from the June 1995 Offerings for such
expenditures, Plaza Associates may be forced to rely on alternative methods of
financing, which could impair the competitive position of the Trump Plaza and
reduce Plaza Associates' cash flow. See "--High Leverage and Fixed Charges,"
"--Holding Company Structure; Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing" and "--Restrictions on Certain
Activities."
The Taj Mahal. It is expected that the Taj Mahal Expansion, the plans for
which are preliminary and subject to modification, will be principally funded
out of cash from the operations of the Taj Mahal and Trump Plaza. If the
operations of the Taj Mahal and Trump Plaza do not generate the anticipated
cash flow to fund the Taj Mahal Expansion, the ability to complete such
expansion will depend on the ability to obtain financing for such purpose.
There can be no assurance that Taj Associates and Plaza Associates will be
able to generate sufficient cash from operations or that financing could be
obtained on terms satisfactory to THCR, if at all. In addition, any
indebtedness incurred in connection with the Taj Mahal Expansion would be
subject to the limitations set forth in the Senior Note Indenture and the
Mortgage Note Indenture. See "--High Leverage and Fixed Charges," "--Holding
Company Structure; Risk in Refinancing and Repayment of Indebtedness; Need for
Additional Financing," "--Restrictions on Certain Activities" and "Business of
Taj Holding--Business Strategy--The Taj Mahal Expansion."
30
<PAGE>
THE INDIANA RIVERBOAT
New Venture Risk. The Indiana Riverboat is a start-up development. Trump
Indiana's operations are subject to all of the many risks inherent in the
establishment of a new business enterprise, including unanticipated
construction, permitting, licensing or operating problems with the riverboat
and land-based, berthing and support facilities, as well as the ability of
THCR to market and operate a new venture in a new gaming jurisdiction.
Although construction has begun on the Indiana Riverboat, there can be no
assurance that the Indiana Riverboat will become operational or that such
project will be completed on budget or on schedule. Furthermore, construction
projects, such as the Indiana Riverboat, entail significant risks. See "--
Considerations with Respect to the Acquisition or Development of Additional
Gaming Ventures."
Northern Indiana is a new gaming market. The success of gaming in a market
which has never supported gaming operations cannot be guaranteed or accurately
predicted. The number of patrons of a riverboat casino in a new gaming
jurisdiction like northern Indiana and the propensity of these patrons to
wager cannot be predicted with any degree of certainty and there can be no
assurance that THCR will be able to operate the Indiana Riverboat in a
profitable manner.
While THCR and its management have substantial experience in operating
gaming properties in New Jersey, THCR has never been involved in constructing
or operating riverboat casinos, and there is no operating history with respect
to THCR's proposed operation at Buffington Harbor, Indiana. THCR's future
operating results at Buffington Harbor will depend upon THCR's ability to
complete and open gaming facilities on schedule and several other factors over
which THCR will have little or no control, including, without limitation,
general economic conditions, gaming taxes, the availability of ancillary
facilities to support gaming visitors, competition, the availability of
adequately trained gaming employees and the ability to obtain and maintain the
necessary licenses and permits. There can be no assurance that THCR's
operations will prove successful or that THCR will be able to generate
sufficient revenues from such operations or attain and maintain profitable
operations. In addition, THCR is unable to predict whether seasonality will
have a material effect on the operations of the Indiana Riverboat.
Trump Indiana and The Majestic Star Casino, LLC, formerly Barden-Davis
Casinos, LLC ("Barden"), an entity beneficially owned by Don H. Barden, a
developer based in Detroit without significant gaming experience, are the two
holders of certificates of suitability for Buffington Harbor. Trump Indiana
and Barden formed BHR and have entered into an agreement (the "BHR Agreement")
relating to the joint ownership, development and operation of all common land-
based and waterside operations in support of each of Trump Indiana's and
Barden's separate riverboat casinos at Buffington Harbor. Trump Indiana and
Barden will each be equally responsible for the development and operating
expenses at such site and THCR will be dependent on the ability of Barden to
pay for its share of all future expenses. There can be no assurance that THCR
or Trump Indiana will be able to fund from operations or to finance on terms
satisfactory to THCR or Trump Indiana any such required expenditures or, if
available, such other indebtedness would be permitted under existing debt
instruments of THCR. Furthermore, there can be no assurance that Barden will
be able to fund its portion of such expenses. Additionally, if either Trump
Indiana or Barden causes, permits or suffers an event of default under the BHR
Agreement to continue for more than 270 days, including the failure to make a
capital contribution or to fulfill any other obligation thereunder within 30
days after written notice, the nondefaulting party will have the right to
acquire the defaulting party's interest in BHR for a purchase price of
$1,000,000.
THCR has capitalized, and will continue to capitalize, certain costs
associated with the expansion of its gaming operations in Indiana and other
jurisdictions. As of December 31, 1995, THCR and its predecessors had
capitalized approximately $ million in development and pre-opening costs
in connection with the Indiana Riverboat operation. THCR's policy is to
capitalize pre-opening costs, such as site identification and evaluation,
salaries and overhead and marketing, in addition to construction costs, based
primarily on its experience with new project developments. If the development
of the Indiana Riverboat or any other pending or future new venture is not
successful, THCR will be required to write off the capitalized costs. In
addition, THCR anticipates obtaining additional financing prior to the opening
of the Indiana Riverboat early in the second quarter of 1996,
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although no commitments are currently in place. See "Risk Factors--Holding
Company Structure; Risk in Refinancing and Repayment of Indebtedness; Need for
Additional Refinancing."
Environmental Risks. The Indiana Riverboat is located in an area on Lake
Michigan known as Buffington Harbor. Buffington Harbor had been the site of
industrial operations, which prior operations or activities have or may have
resulted in pollution or contamination of the environment. As the owner and
operator of the Indiana Riverboat, Trump Indiana and THCR could be held liable
under certain legal theories for the costs of cleaning up, as well as certain
damages resulting from, past or present spills, disposals or other releases of
hazardous or toxic substances or wastes on, in or from the site, regardless of
whether either party knew of, or was responsible for, the presence of such
substances or wastes at the site. Neither THCR nor Trump Indiana has a source
of indemnity for any such liability. However, THCR believes, based on third-
party engineering reports, that the costs of any remedial activities would not
be significant.
Maritime and Weather Considerations. Under the provisions of Title 46 of the
United States Code, the design, construction and operation of the Indiana
Riverboat are subject to regulation and approval by the U.S. Coast Guard.
Prior to the commencement of operations, a Certificate of Inspection and a
Certificate of Documentation must be obtained from the U.S. Coast Guard. As a
condition of the issuance of a Certificate of Inspection, the U.S. Coast Guard
may, among other things, require changes in the design or construction of the
Indiana Riverboat that may materially increase the cost of construction and/or
materially delay the completion of construction and the commencement of
operations. All shipboard employees of Trump Indiana employed on U.S. Coast
Guard regulated vessels, including those not involved with the actual
operation of the vessel, such as dealers, cocktail hostesses and security
personnel, may be subject to certain federal legislation relating to maritime
activity, which, among other things, exempts those employees from state limits
on workers' compensation awards. THCR expects that it will have adequate
insurance to cover employee claims.
The Indiana Riverboat is anticipated to be a cruising riverboat, which,
among other things, would require a U.S. Coast Guard hull inspection at five-
year intervals. Operating at Buffington Harbor will expose the Indiana
Riverboat to marine hazards such as unpredictable currents, floods or other
severe weather conditions and a heavy volume of maritime traffic. THCR
anticipates that adequate maritime insurance coverage will be obtained for the
Indiana Riverboat; however, the occurrence of a catastrophic loss in excess of
coverage would have a material adverse effect on THCR. Trump Indiana's
revenues will be derived from its riverboat and land-based facilities. A
riverboat could be lost from service due to casualty, mechanical failure,
extended or extraordinary maintenance, or inspection. The loss of a vessel
from service for an extended period of time could adversely affect Trump
Indiana's operations. Business activity at any location could also be
adversely affected by a flood or other severe weather conditions. Flooding in
particular, as well as other severe weather conditions, could make THCR's
vessel more difficult or impossible to board, or even result in a prolonged or
total loss of a gaming vessel, either of which could have a material adverse
effect on THCR. Although THCR expects to maintain insurance against casualty
losses resulting from severe weather, the insurance coverage maintained may
not adequately compensate THCR for losses, including loss of profits,
resulting from severe weather.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
and the Taj Mahal compete with each other and with the other casino hotels
located in Atlantic City, including the other casino hotel owned by Trump,
Trump's Castle Casino Resort ("Trump's Castle"). See "--Conflicts of
Interest." Trump Plaza and the Taj Mahal are located on The Boardwalk,
approximately 1.2 miles apart from each other. At present, there are 12 casino
hotels located in Atlantic City, including the Taj Mahal and Trump Plaza, all
of which compete for patrons. In addition, there are several sites on The
Boardwalk and in the Atlantic City Marina area on which casino hotels could be
built in the future and various applications for casino licenses have been
filed and announcements with respect thereto made from time to time (including
a proposal by Mirage Resorts, Inc.), although neither THCR nor Taj Holding is
aware of any current construction on such sites by third parties. No new
casino hotels have commenced operations in Atlantic City since 1990, although
several existing casino hotels have recently expanded or are in the process of
expanding their operations. While management of THCR
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and Taj Holding believe that the addition of hotel capacity would be
beneficial to the Atlantic City market generally, there can be no assurance
that such expansion would not be materially disadvantageous to either Trump
Plaza or the Taj Mahal. There also can be no assurance that the Atlantic City
development projects which are planned or underway will be completed.
Total Atlantic City gaming revenues have increased over the past four years,
although at varying rates. Although all 12 Atlantic City casinos reported
increases in gaming revenues in 1992 as compared to 1991, THCR and Taj Holding
believe that this was due, in part, to the depressed industry conditions in
1991. In 1993, nine casinos experienced increased gaming revenues compared to
1992 (including the Taj Mahal), while three casinos (including Trump Plaza)
experienced decreased revenues. In 1994, ten casinos experienced increased
gaming revenues compared to 1993 (including the Taj Mahal), while two casinos
(including Trump Plaza) experienced decreased revenues. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
In 1990, the Atlantic City casino industry experienced a significant
increase in room capacity and in available casino floor space, including the
rooms and floor space made available by the opening of the Taj Mahal. The
effects of such expansion were to increase competition and to contribute to a
decline in 1990 in gaming revenues per square foot of casino floor space. In
1990, the Atlantic City casino industry experienced a decline in gaming
revenues per square foot of 5.0%, which trend continued in 1991, although at
the reduced rate of 2.9%. In 1992, however, the Atlantic City casino industry
experienced an increase of 6.9% in gaming revenues per square foot from 1991.
Gaming revenues per square foot increased by 1.4% for 1993 (excluding poker
and race simulcast rooms, which were introduced for the first time in such
year), compared to 1992. In 1994, gaming revenues per square foot decreased
2.5% (or 4.5%, including square footage devoted to poker, keno and race
simulcasting). The 1994 decline was due, in part, to the increase in casino
floor space in Atlantic City as a result of expansion of a number of casinos
and to the severe weather conditions which affected the Northeast during the
winter of 1994. Between April 30, 1993 and September 30, 1995, many operators
in Atlantic City expanded their facilities in anticipation of and in
connection with the June 1993 legalization of simulcasting and poker,
increasing total gaming square footage by approximately 183,000 square feet
(23.6%) of which, approximately 73,000 square feet, is currently devoted to
poker, keno and race simulcasting. During this same period, 176 poker tables
and 5,967 slot machines were added. See "Atlantic City Market."
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In addition to competing with other
casino hotels in Atlantic City and elsewhere, by virtue of their proximity to
each other and the common aspects of certain of their respective marketing
efforts, including the common use of the "Trump" name, Trump Plaza and the Taj
Mahal compete directly with each other for gaming patrons. Although management
does not intend to operate Trump Plaza and the Taj Mahal to the competitive
detriment of each other, the effect may be that Trump Plaza and the Taj Mahal
will operate to the competitive detriment of each other.
THCR anticipates that the Indiana Riverboat will compete primarily with
riverboats and other casinos in the northern Indiana suburban and Chicago
metropolitan area and throughout portions of the states of Indiana, Illinois,
Michigan, Ohio and Wisconsin (the "Great Lakes Market"). In addition to
competing with Barden's riverboat at the shared Buffington Harbor site, the
Indiana Riverboat will compete with a riverboat in Hammond, Indiana, which is
being developed by the owner and operator of the Empress Riverboat Casino in
Joliet, Illinois,
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a riverboat in East Chicago, Indiana, which is being developed by Showboat,
Inc. and with the riverboat expected to be licensed in the nearby community of
Michigan City, Indiana. To a lesser degree, the Indiana Riverboat will compete
with the six additional riverboats expected to be licensed in the rest of
Indiana. At present there are four other riverboat casino operations in the
Chicago area (three of which operate two riverboats each, with each operator
limited to 1,200 gaming positions in the aggregate). In addition, a casino
opened during 1994 in Windsor, Ontario, across the river from Detroit, and
Detroit is considering several proposals for casinos in its downtown area.
Although THCR believes that there is sufficient demand in the market to
sustain the Indiana Riverboat, there can be no assurance to that effect. There
can be no assurance that either Indiana or Illinois, or both, will not
authorize additional gaming licenses, including for the Chicago metropolitan
area. See "--The Indiana Riverboat."
In addition, Trump Plaza and the Taj Mahal face, and the Indiana Riverboat
will face, competition from casino facilities in a number of states operated
by federally recognized Native American tribes. Pursuant to the Indian Gaming
Regulatory Act ("IGRA"), which was passed by Congress in 1988, any state which
permits casino style gaming (even if only for limited charity purposes) is
required to negotiate gaming compacts with federally recognized Native
American tribes. Under IGRA, Native American tribes enjoy comparative freedom
from regulation and taxation of gaming operations, which provides them with an
advantage over their competitors, including Trump Plaza, the Taj Mahal and the
Indiana Riverboat. See "Competition."
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans
to begin operating slot machines at race tracks in the State of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Plaza and the Taj Mahal could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast. In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at Lincoln
Greyhound Park and Newport Jai Alai, where poker and blackjack have been
offered for over two years. Currently, casino gaming, other than Native
American gaming, is not allowed in other areas of New Jersey or in
Connecticut, New York or Pennsylvania. On November 17, 1995, a proposal to
allow casino gaming in Bridgeport, Connecticut, was voted down by that state's
Senate. A New York State Assembly plan has the potential of legalizing non-
Native American gaming in portions of upstate New York. Essential to this plan
is a proposed New York State constitutional amendment that would legalize
gambling. To amend the New York Constitution, the next elected New York State
Legislature must repass a proposal legalizing gaming and a statewide
referendum, held no sooner than November 1997, must approve the constitutional
amendment. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, in the past, proposals have been introduced to legalize gaming
in other locations, including Philadelphia.
In addition, legislation has from time to time been introduced in the New
Jersey State Legislature relating to types of statewide legalized gaming, such
as video games with small wagers. To date, no such legislation, which may
require a state constitutional amendment, has been enacted. Legislation has
also been introduced on numerous occasions in recent years to expand riverboat
gaming in Illinois, including by authorizing new sites in the Chicago area
with which the Indiana Riverboat would compete and by otherwise modifying
existing regulations to decrease or eliminate certain restrictions such as
gaming position limitations. To date, no such legislation has been enacted.
THCR and Taj Holding are unable to predict whether any such legislation, in
New Jersey, Illinois or elsewhere, will be enacted or whether, if passed, it
would have a material adverse impact on THCR.
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THCR believes that competition in the gaming industry, particularly the
riverboat and dockside gaming industry, is based on the quality and location
of gaming facilities, the effectiveness of marketing efforts, and customer
service and satisfaction. Although management of THCR believes that the
location of the Indiana Riverboat will allow THCR to compete effectively with
other casinos in the geographic area surrounding its casino, THCR expects
competition in the casino gaming industry to be intense as more casinos are
opened and new entrants into the gaming industry become operational.
Furthermore, new or expanded operations by other persons can be expected to
increase competition for existing and future operations and could result in a
saturation of certain gaming markets.
CONFLICTS OF INTEREST
Trump is currently the beneficial owner of 100% of Trump's Castle, which
competes directly with the Taj Mahal and Trump Plaza, and Trump could, under
certain circumstances, have an incentive to operate Trump's Castle to the
competitive detriment of the Taj Mahal and Trump Plaza. Trump has certain
interests in the Merger Transaction that may be deemed to differ from
stockholders generally. See "--Interests of Certain Members of the Boards of
Directors of THCR and Taj Holding" and "Special Factors--Interests of Certain
Persons in the Merger Transaction."
Trump and TC/GP, Inc. ("TC/GP"), a corporation beneficially owned by Trump,
have entered into a services agreement (the "Trump's Castle Services
Agreement") with Trump's Castle Associates ("TCA"), the partnership that owns
and operates Trump's Castle, pursuant to which TC/GP has agreed to provide
marketing, advertising and promotional and other similar and related services
to Trump's Castle. Pursuant to the Trump's Castle Services Agreement, in
respect of any matter or matters involving employees, contractors,
entertainers, celebrities, vendors, patrons, marketing programs, promotions,
special events, or otherwise, Trump will, and will cause his affiliates to the
best of his ability and consistent with his fiduciary obligations to TCA,
Trump Plaza and the Taj Mahal to, act fairly and in a commercially reasonable
manner so that on an annual overall basis (x) neither Trump Plaza nor the Taj
Mahal shall realize a competitive advantage over Trump's Castle, by reason of
any activity, transaction or action engaged in by Trump or his affiliates and
(y) Trump's Castle shall not be discriminated against.
Trump is subject to certain loan agreements which contain covenants that
relate to his equity interests in THCR and Taj Associates. See "--Control and
Involvement of Trump." In connection with the Merger Transaction, Trump is
seeking to obtain from his personal creditors, among other things, releases of
liens on his direct and indirect equity interests in Taj Associates, which
releases are required to consummate the Merger Transaction. Bankers Trust, an
affiliate of BT Securities Corporation ("BT Securities"), which has rendered
financial advisory services to THCR and Taj Holding in the past, acted as co-
manager in the June 1995 Offerings, and is expected to serve as an underwriter
of the Offerings, is a significant creditor of Trump and will be receiving a
payment of $10 million in connection with the Merger Transaction in order to
release certain liens and guarantees. See "Special Factors--Related Merger
Transactions" and "Business of Taj Holding--Certain Indebtedness."
In connection with the Merger Transaction, Plaza Associates intends to
purchase Trump Plaza East from Boardwalk, Inc. ("Boardwalk"), a wholly owned
subsidiary of Midlantic National Bank ("Midlantic"). As a result of such
purchase, Trump will obtain a release of certain debt owed by him to
Midlantic, which debt was associated with Trump's original purchase of the
real property underlying Trump Plaza East.
Nicholas L. Ribis, the Chief Executive Officer of THCR and Taj Associates,
is also the Chief Executive Officer of TCA, the partnership that owns and
operates Trump's Castle. Messrs. Robert M. Pickus and John P. Burke, officers
of THCR, are each officers of TCA and Taj Associates. Mr. Burke is an officer
of TM/GP. In addition, Messrs. Trump, Ribis and Burke serve on one or more of
the governing bodies of THCR, Taj Holding, TCA and their affiliated entities.
Mr. Pickus serves on one or more of the governing bodies of Taj Holding and
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TCA. As a result of Trump's interests in three competing Atlantic City casino
hotels, the common chief executive officer and other common officers, a
conflict of interest may be deemed to exist, including by reason of such
persons' access to information and business opportunities possibly useful to
any or all of such casino hotels. Furthermore, Trump has agreed that he will
pursue, develop, control and conduct all new gaming activities through THCR.
Although no specific procedures have been devised for resolving conflicts of
interest confronting, or which may confront, Trump, such persons and all the
casinos affiliated with Trump, Messrs. Trump, Ribis, Pickus and Burke have
informed THCR and Taj Holding that they will not engage in any activity which
they reasonably expect will harm THCR, Taj Holding or their respective
affiliates or is otherwise inconsistent with their obligations as officers and
directors of THCR, Taj Holding or their affiliates. See "Certain
Transactions."
CONTROL AND INVOLVEMENT OF TRUMP
Upon consummation of the Merger Transaction, through his beneficial
ownership of THCR Class B Common Stock, Trump will control approximately % of
the total voting power of THCR (assuming a price of $ per share of THCR
Common Stock as Market Value in connection with the Merger and as the public
offering price in the THCR Stock Offering). THCR believes that the involvement
of Trump in the affairs of THCR is an important factor that will affect the
prospects of THCR. Following the Merger Transaction, Trump will continue to
pursue, develop, control and conduct all of his gaming business (except for
Trump's Castle) through THCR. See "--Conflicts of Interest."
Although Trump has no obligation to contribute funds to THCR or THCR
Holdings and is not providing any personal guarantees in connection with the
Merger Transaction, THCR management believes that Trump's financial condition
and general business success together with the public's perception of such
success may be relevant to the success of THCR due, in part, to the marquee
value of the "Trump" name. Trump is engaged, through various enterprises, in a
wide range of business activities. During 1989 through 1992, certain of
Trump's businesses, including businesses for which Trump supplied personal
guarantees, experienced financial difficulties that necessitated a
comprehensive financial restructuring of certain of his properties and
holdings, including Trump's interests in Trump Plaza, Trump's Castle and the
Taj Mahal, and his personal indebtedness. See "Management of THCR" and
"Management of Taj Holding." Since 1990, Trump has engaged in a series of
transactions designed to reduce his personal indebtedness. However, Trump will
continue to have a substantial amount of personal indebtedness following the
Merger Transaction, most of which has a scheduled maturity in 1998.
Trump will have ongoing requirements to make payments of principal and
interest on his outstanding indebtedness following the consummation of the
Merger Transaction. In addition, the agreements with respect to Trump's
indebtedness generally contain comprehensive covenants and events of default
which relate to the operations of certain of his affiliates. If such covenants
are breached or if events of default otherwise occur, either of which could
occur at any time, such indebtedness could be subject to acceleration by the
applicable lenders. Any such acceleration could have a material adverse effect
on Trump. Furthermore, a substantial portion of Trump's assets consist of real
property or interests in regulated enterprises, which may affect the liquidity
of such assets. Trump has advised THCR and Taj Holding that he is actively
pursuing all reasonable means of providing for the repayment or rescheduling
of such indebtedness. There can be no assurance that Trump will be successful
in repaying or rescheduling his indebtedness or that his assets will
appreciate sufficiently to provide a source of repayment for such
indebtedness. Trump's ability to repay his indebtedness is subject to
significant business, economic, regulatory and competitive uncertainties, many
of which are beyond his control. Any failure by Trump to repay or reschedule
his indebtedness or to otherwise maintain financial stability may have a
material adverse effect on THCR. Moreover, if the CCC at any time finds Trump
to be financially unstable under the Casino Control Act, the CCC is authorized
to take any necessary public action to protect the public interest, including
the suspension or revocation of the casino licenses of Plaza Associates and/or
Taj Associates. Any jurisdiction in which THCR may seek to conduct gaming
operations would likely have similar regulations. See "--Strict Regulation by
Gaming Authorities" and "Regulatory Matters."
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In order to consummate the Merger Transaction, Trump will need to obtain
certain consents and waivers from his creditors in addition to Bankers Trust,
which creditors have a security interest in his financial interest in Taj
Associates. The prior consent of such creditors is a condition to consummation
of the Merger Transaction.
The THCR Certificate of Incorporation and THCR By-Laws contain provisions
which may have the effect of delaying, deferring or preventing a change in
control of THCR. In addition, the Senior Note Indenture contains, and the
Mortgage Note Indenture will contain, provisions relating to certain changes
of control of THCR, THCR Holdings, and AC Holdings. Upon the occurrence of
such a change of control, the respective issuer would be obligated to make an
offer to purchase all of the respective Notes then outstanding at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest. There can be no assurance that funds necessary to effect such a
purchase would be available if such an event were to occur.
Because of the control of Trump as described above, the value of the THCR
Common Stock may be less than it would otherwise be absent such control.
RELIANCE ON KEY PERSONNEL
The ability of THCR and Taj Associates to operate successfully is dependent,
in part, upon the continued services of certain of its employees, including
Nicholas L. Ribis, the President and Chief Executive Officer of THCR, the
Chief Executive Officer of THCR Holdings and the Chief Executive Officer of
Taj Associates. Mr. Ribis' employment agreements with THCR and THCR Holdings
on the one hand and Taj Associates on the other will expire on June 7, 2000
and September 25, 1996, respectively (subject to earlier termination upon the
occurrence of certain events). There can be no assurance that a suitable
replacement for Mr. Ribis could be found in the event of a termination of his
employment. A shortage of skilled management-level employees currently exists
in the gaming industry which may make it difficult and expensive to attract
and retain qualified employees. In addition, Mr. Ribis and certain other
executives of THCR and Taj Holding currently allocate their time among THCR's
and Taj Associates' various operations as well as certain other enterprises
owned by Trump. Following the consummation of the Merger Transaction, Mr.
Ribis will devote approximately 75% of his professional time to the affairs of
THCR and its subsidiaries. See "Management of THCR" and "Management of Taj
Holding."
STRICT REGULATION BY GAMING AUTHORITIES
The ownership and operation of the gaming related businesses of Plaza
Associates and Taj Associates are subject to strict state regulation under the
Casino Control Act. Plaza Associates and Taj Associates and their various
officers and other qualifiers have received the licenses, permits and
authorizations required to operate Trump Plaza and the Taj Mahal,
respectively. Failure to maintain or obtain the requisite casino licenses
would have a material adverse effect on THCR and Taj Holding. On June 22,
1995, the CCC renewed Taj Associates' casino license through March 31, 1999
and renewed Plaza Associates' casino license through June 30, 1999. No
assurance can be given as to the term for which the CCC will renew these
licenses or as to what license conditions, if any, may be imposed by the CCC
in connection with any future renewals. The Merger Transaction is subject to
approval by the CCC. See "Regulatory Matters--New Jersey Gaming Regulation."
In January 1996, the Indiana Gaming Commission (the "IGC") extended Trump
Indiana's certificate of suitability constituting approval of the application
for a riverboat owner's license for a riverboat to be docked at Buffington
Harbor, on Lake Michigan in Indiana. The certificate of suitability is valid
until June 28, 1996, and may be further extended upon written application to
and approval of the IGC. A riverboat owner's license will only be issued upon
satisfaction of the conditions of the certificate of suitability and the
requirements of the gaming laws, which include completion of the Indiana
Riverboat's vessel, acquisition of necessary permits or approvals from
federal, state and local authorities and readiness to commence operations.
Pursuant to the terms of the certificate of suitability, Trump Indiana must
comply with certain other requirements imposed by the IGC, including a
requirement that Trump Indiana invest an aggregate of $153 million in the
Indiana Riverboat and certain related projects and certain economic
development projects and pay certain incentive fees based on
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percentages of gaming revenues and earnings to the City of Gary, Indiana.
Failure to comply with the foregoing conditions and/or failure to commence
riverboat excursions as may be required by the IGC may result in the
expiration of the certificate of suitability. There can be no assurance that
THCR and/or Trump Indiana will be able to comply with the terms of the
certificate of suitability, that it will be further extended if operations do
not commence by June 28, 1996 or that a riverboat owner's license for the
Indiana Riverboat will ultimately be granted. Further, the IGC may place
restrictions, conditions or requirements on the permanent riverboat owner's
license. If granted, such license would be for an initial term of five years
and renewable annually thereafter. With respect to certain land-based,
berthing and support facilities as currently planned, Trump Indiana is also
dependent on the ability of Barden to obtain the requisite licenses and fund
its portion of joint development and operating costs under the BHR Agreement.
In October 1994, the U.S. Attorney General's Office in Indiana notified the
IGC that a federal law passed in 1951, commonly known as the Johnson Act,
prohibits gaming vessels from cruising anywhere on the Great Lakes, including
portions of Lake Michigan falling within Indiana's borders and jurisdiction.
The IGC has requested further consideration on this matter by the Department
of Justice. Recently adopted state legislation and pending federal legislation
may also affect the foregoing. See "Regulatory Matters--Indiana Gaming
Regulations--Excursions."
Any jurisdiction in which THCR may seek to conduct gaming operations would
likely require THCR to apply for and obtain licenses and regulatory approvals
with respect to the construction, design and operational features of the
gaming facilities it intends to operate in that jurisdiction. The obtaining of
such licenses and approvals may be time consuming and expensive and cannot be
assured.
THCR believes that the availability of significant additional revenue
through taxation is one of the primary reasons that Indiana and other
jurisdictions have legalized gaming. THCR's current gaming operations are, and
any future gaming operations are likely to be, subject to significant taxes
and fees in addition to normal federal and state corporate income taxes, and
such taxes and fees are subject to increase at any time. Any material increase
in these taxes or fees would adversely affect THCR.
The Casino Control Act imposes substantial restrictions on the ownership of
securities of THCR and Taj Holding. A shareholder may be required to meet the
qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. Each institutional investor (as defined in
the Casino Control Act) seeking a waiver of qualification must execute a
certification that it has no intention of influencing or affecting the affairs
of the issuer, the casino licensee or its holding or intermediary companies
(except for voting at shareholder meetings), which certification will be
provided to the New Jersey Division of Gaming Enforcement and the CCC.
Pursuant to the provisions of the Casino Control Act, the THCR Certificate of
Incorporation provides that all securities of THCR are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC
pursuant to the provisions of the Casino Control Act, such holder shall (a)
dispose of his interest in THCR; (b) not receive any dividends or interest
upon any such securities; (c) not exercise, directly or through any trustee or
nominee, any right conferred by such securities; and (d) not receive any
remuneration in any form from the casino licensee for services rendered or
otherwise. See "Regulatory Matters--New Jersey Gaming Regulations."
Pursuant to IGC proposed rules, any person acquiring 5% or more of THCR
Common Stock (or for certain institutional investors, a greater percentage)
must be found suitable by the IGC. The IGC has the authority to require a
finding of suitability with respect to any stockholder regardless of the
percentage of ownership. In this regard, the THCR Certificate of Incorporation
provides that THCR may redeem any shares of THCR's capital stock held by any
person or entity whose holding of shares may cause the loss or non-
reinstatement of a governmental license held by THCR. Such redemption shall be
at the lesser of the price at which the stock was purchased or the market
price (as defined in the THCR Certificate of Incorporation). See "Regulatory
Matters--Indiana Gaming Regulations--Indiana Gaming Commission."
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CONSIDERATIONS WITH RESPECT TO THE ACQUISITION OR DEVELOPMENT OF ADDITIONAL
GAMING VENTURES
THCR's growth strategy includes the selective acquisition, development,
ownership and/or management of dockside, riverboat and/or land-based casinos
in emerging and established gaming jurisdictions. THCR's plans for development
and acquisition of gaming ventures in addition to Trump Plaza, the Indiana
Riverboat and the Taj Mahal are speculative at this time, as THCR has no
present plans to acquire or develop any other specific gaming venture. The
availability of new gaming opportunities is largely dependent on the legality
of gaming in various states, and gaming is currently prohibited throughout
most of the United States. Moreover, the recent expansion of the legalization
of gaming may not continue, and furthermore, the potential exists for the
repeal of gaming in certain jurisdictions where it is currently permitted.
Legislation relating to gaming has been introduced and failed to pass in the
legislatures in a number of states, including Connecticut and Florida. For
these and other reasons, no assurance can be given that attractive
opportunities to develop new operations will be available to THCR or that THCR
will be able to take advantage of any opportunity that does arise.
To engage in multiple projects or larger scale development activities, THCR
will need to obtain financing from third parties and may require additional
managerial resources. There can be no assurance that additional financing or
managerial talent will be available or, if available, that it would be on
terms satisfactory to THCR. Incurrence of such indebtedness would also be
subject to restrictions under debt instruments of THCR. See "--High Leverage
and Fixed Charges" and "--Restrictions on Certain Activities." In addition,
THCR would need to obtain additional sites and licenses to operate such gaming
facilities and competition for suitable sites and for licenses is usually
intense. No assurance can be given that THCR will be able to obtain desirable
sites or necessary licenses or successfully overcome the regulatory,
financial, business and other problems inherent in the construction and
operation of any new gaming venture.
Construction projects, such as those proposed in connection with the
development of new gaming ventures, including those currently proposed by
Plaza Associates, Trump Indiana and Taj Associates, entail significant risks,
including shortages of materials or skilled labor, unforeseen engineering,
environmental or geological problems, work stoppages, weather interference,
floods, unanticipated cost increases, the inability to commence operations as
scheduled and other problems. The number and scope of the licenses and
approvals required to complete the construction of any project, such as a
hotel and other destination resort facilities, are extensive, including,
without limitation, the approval of state and local land-use authorities and
the acquisition of building and zoning permits. Unexpected concessions
required by local, state or federal regulatory authorities could involve
significant additional costs and delay scheduled openings of facilities. There
can be no assurance that THCR will receive the licenses and approvals
necessary to undertake or complete any of its development plans, or that such
licenses and approvals will be obtained within the anticipated time frame.
LIMITATIONS ON LICENSE OF THE TRUMP NAME
Subject to certain restrictions, THCR has the exclusive right (except with
respect to the Taj Mahal (during the period prior to the consummation of the
Merger Transaction) and Trump's Castle) to use the "Trump" name and likeness
in connection with gaming and related activities pursuant to a trademark
license agreement between Trump and THCR (the "License Agreement"). See
"Business of THCR--Trademark/Licensing." THCR's rights under the License
Agreement are secured by a security interest in the names "Trump," "Donald
Trump" and "Donald J. Trump" (including variations thereon, the "Trump Names")
and related intellectual property rights (collectively, the "Marks") for use
in connection with casino services, pursuant to a security agreement (the
"Trademark Security Agreement"). If there were a default under the License
Agreement or the Trademark Security Agreement, THCR would have rights, subject
to the requirements of applicable state law, to enforce the rights and
remedies contained in the Trademark Security Agreement. In the event of a
foreclosure sale of the Marks, the net amount realized in such sale by THCR
might not yield the full amount of damages that THCR could sustain as a result
of the default. In addition, the existence of rights of others to the use of
the Trump Names, including pursuant to the existing security interests with
respect to trademarks associated with Trump's Castle as well as to any other
security interests in trademarks for non-gaming hotels, could adversely affect
the ability of THCR to realize the benefits of the Trademark Security
Agreement. THCR's right to repossess and
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dispose of the Marks upon a breach of the License Agreement may be
significantly impaired if the owner of the Marks were to become the subject of
a case under the United States Bankruptcy Code (the "Bankruptcy Code") prior
to THCR's having repossessed and disposed of the Marks. Under the Bankruptcy
Code, secured creditors, such as THCR, are automatically stayed from
repossessing or disposing of their collateral without bankruptcy court
approval. Moreover, the Bankruptcy Code permits a defaulting debtor to retain
and continue to use the collateral if the secured creditor is given "adequate
protection" of its interest in the collateral. Such adequate protection under
the Bankruptcy Code may take various forms, including the granting of a
replacement lien or other relief that will enable the secured creditor to
realize the "indubitable equivalent" of its interest in the collateral.
Accordingly, it is impossible to predict whether or when THCR would repossess
or dispose of the Marks, or whether or to what extent THCR would then be
compensated for any delay in payment or loss of value of the Marks through the
requirement of "adequate protection" if the owner of the Marks were to become
the subject of a bankruptcy or reorganization case. Furthermore, the License
Agreement could be rejected in connection with a bankruptcy of the licensor
if, in the business judgment of a trustee or the licensor, as debtor-in-
possession, rejection of the contract would benefit the licensor's estate. In
the event of such rejection, THCR could assert a claim for damages, secured by
THCR's lien on the Marks.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of AC Holdings under the Mortgage Notes, which will be
issued as part of the Merger Transaction, may be subject to review under state
or federal fraudulent transfer laws in the event of the bankruptcy or other
financial difficulty of AC Holdings. Under those laws, if a court in a lawsuit
by an unpaid creditor or representative of creditors of AC Holdings, such as a
trustee in bankruptcy, or AC Holdings as debtor in possession, were to find
that at the time AC Holdings incurred its obligations under the Mortgage
Notes, it (a) did so with actual intent to hinder, delay or defraud its
creditors, or (b) did not receive reasonably equivalent value or fair
consideration therefor, and either (i) was insolvent, (ii) was rendered
insolvent, (iii) was engaged in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital, or (iv)
intended to incur or believed that it would incur debts beyond its ability to
pay as such debts matured, such court could avoid AC Holdings' obligations
under the Mortgage Notes and direct the return of any amounts paid thereunder
to AC Holdings or to a fund for the benefit of its creditors.
Similarly, the obligations of Taj Associates or Plaza Associates (or any
other guarantor, each a "Guarantor") under its guarantee of the Mortgage
Notes, as well as the security interest granted by such Guarantor in its
assets to secure the Mortgage Notes and such guarantee, may be subject to
review under such laws in the event of the bankruptcy or other financial
difficulty of such Guarantor. In that event, if a court were to find that at
the time such guarantor incurred such obligations or granted such security
interest the factors set forth in either clause (a) or (b) in the foregoing
paragraph applied to such Guarantor, such court could avoid such Guarantor's
obligations under its guarantee, as well as the security interests securing
such guarantee, and direct the return of any amounts paid under such guarantee
to such Guarantor or to a fund for the benefit of its creditors.
Among other things, a court might conclude that a Guarantor did not receive
reasonably equivalent value or fair consideration for its guarantee to the
extent that the economic benefits realized by it in the Merger Transaction
(including the payment of its outstanding obligations) was less the aggregate
amount of its liability under its guarantee.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
will be required to pay its probable liability on its existing debts as they
become absolute and matured.
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INTERESTS OF CERTAIN MEMBERS OF THE BOARDS OF DIRECTORS OF THCR AND TAJ
HOLDING
In considering the recommendation of the Board of Directors of THCR and the
Board of Directors of Taj Holding with respect to the Merger Transaction and
the Merger Agreement, respectively, certain members thereof have certain
interests in the Merger Transaction in addition to those of stockholders
generally. Trump is the Chairman of the Board of Directors of THCR and Taj
Holding and currently is the beneficial owner of approximately 40% and 50% of
THCR and Taj Associates, respectively. Furthermore, in connection with the
Merger Transaction, certain debt obligations of Trump and of his affiliates
will be satisfied, certain guarantees of indebtedness by Trump and certain of
his affiliates will be released and Trump will be issued a warrant to purchase
shares of THCR Common Stock. See "Special Factors--Related Merger
Transactions," "Special Factors--Interests of Certain Persons in the Merger
Transaction" and "Business of Taj Holding--Certain Indebtedness."
LIMITATIONS INHERENT IN FAIRNESS OPINIONS
The fairness opinion of DLJ dated January 31, 1996 included as Annex B and
the summary thereof included in this Proxy-Statement Prospectus describes the
limitations on scope, factors considered and basis for the conclusions
reached. See "Special Factors--Opinions of the Financial Advisors." DLJ was
not asked to, and did not, express any opinion as to whether another
transaction with Taj Holding and its affiliates could be obtained on more
favorable terms to THCR than the Merger Transaction. The limitations contained
in the fairness opinion should be considered carefully and stockholders should
note that the fairness opinion does not constitute a recommendation on how
stockholders should vote on the proposals submitted at the THCR Special
Meeting or Taj Holding Special Meeting. Developments after January 31, 1996
may affect DLJ's fairness opinion.
The fairness opinion of Rothschild dated January 31, 1996 included as Annex
C and the summary thereof included in this Proxy Statement-Prospectus
describes the limitations on scope, factors considered and basis for the
conclusions reached. See "Special Factors--Opinions of the Financial
Advisors." Rothschild was not asked to, and did not, express any opinion as to
whether another transaction with THCR or its affiliates or any other entity
could be obtained on more favorable terms to the holders of Taj Holding Class
A Common Stock than the Merger Transaction. The limitations contained in the
fairness opinion should be considered carefully and stockholders should note
that the fairness opinion does not constitute a recommendation on how
stockholders should vote on the proposals submitted at the THCR Special
Meeting or Taj Holding Special Meeting. Rothschild was not asked to, and did
not, express any opinion as to whether the terms of the Merger are fair to the
holders of Taj Holding Class B Common Stock or the holder (Trump) of the Taj
Holding Class C Common Stock. Developments after January 31, 1996 may affect
Rothschild's fairness opinion. See "Special Factors--Background of the Merger
Transaction."
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following completion of the Merger Transaction there will be
shares of THCR Common Stock outstanding (assuming all of the holders of Taj
Holding elect Stock Consideration and a Market Value of $ per share in
connection with the Merger and as the public offering price in the THCR Stock
Offering) ( shares if the underwriters' over-allotment option with respect
to the THCR Stock Offering is exercised in full), but excluding (i) shares
of THCR Common Stock (subject to certain adjustments) issuable upon conversion
of Trump's and TTMI's limited partnership interests in THCR Holdings, (ii) an
additional shares of THCR Common Stock reserved for issuance pursuant to
the 1995 Stock Plan (as defined), (iii) 1.8 million shares of THCR Common
Stock reserved for issuance in connection with the warrant to be issued to
Trump, and (iv) the THCR Class B Common Stock, which shares are not entitled
to dividends or distributions and represent Trump's, and will represent
TTMI's, voting interest and become nonvoting to the extent of a conversion of
their interest in THCR Holdings. Of those shares outstanding, an aggregate of
shares sold in the THCR Stock Offering and issued in the Merger (
shares if the underwriters' over-allotment option with respect to the THCR
Stock Offering is exercised in full), will be freely tradeable without
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restriction or future registration under the Securities Act, unless purchased
by an "affiliate" (as defined in the Securities Act) of THCR, which shares
will be subject to resale limitations of Rule 144 promulgated under the
Securities Act ("Rule 144"). The remaining shares outstanding upon
completion of the Merger Transaction will not have been registered under the
Securities Act and are restricted securities within the meaning of Rule 144
("Restricted Shares"), except that such shares and the shares of THCR Common
Stock issuable upon conversion of limited partnership interests in THCR
Holdings, will have certain registration rights. See "Description of the THCR
Holdings Partnership Agreement--Exchange and Registration Rights." Restricted
Shares cannot be sold publicly in the absence of such registration, unless
sold pursuant to an exemption under the Securities Act, such as the exemption
provided by Rule 144. It is expected that THCR and certain stockholders will
agree not to sell or otherwise dispose of shares of, or securities convertible
into or exercisable or exchangeable for, THCR Common Stock for days after
the date of the THCR Stock Offering without the prior written consent of DLJ
as the lead underwriter of the THCR Stock Offering. Upon expiration of the
applicable lock-up agreement with the underwriters, the shares subject and
covered thereby will be eligible for sale subject to the restrictions
contained in the Securities Act and the rules and regulations promulgated
thereunder, including Rule 144. Sales of substantial amounts of THCR Common
Stock in the public market subsequent to the Merger Transaction, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the THCR Common Stock and could impair THCR's ability to raise
capital through the sale of equity securities.
EFFECT OF MERGER TRANSACTION ON HOLDERS OF THCR COMMON STOCK
In connection with the Merger Transaction, THCR will issue up to shares
of THCR Common Stock to holders of Taj Holding Class A Common Stock in the
Merger, 500,000 shares to First Fidelity in connection with the purchase of
the Specified Parcels, a warrant to Trump to purchase an aggregate of 1.8
million shares of THCR Common Stock, (i) 600,000 shares of which may be
purchased on or prior to the third anniversary of the issuance of the warrant
at $30.00 per share, (ii) 600,000 shares of which may be purchased on or prior
to the fourth anniversary of the issuance of the warrant at $35.00 per share,
and (iii) 600,000 shares of which may be purchased on or prior to the fifth
anniversary of the issuance of the warrant at $40.00 per share, and up to
shares of THCR Common Stock pursuant to the THCR Stock Offering (assuming a
price of $ per share of THCR Common Stock as the Market Value in connection
with the Merger and as the public offering price in the THCR Stock Offering,
and the underwriter's over-allotment option with respect to the THCR Stock
Offering is exercised in full). As a result of these issuances, the existing
THCR Common Stock holders' percentage of ownership of THCR could be diluted up
to %. Accordingly, the voting power of existing holders of THCR Common Stock
would be diluted by such amount.
TRADING MARKETS; POTENTIAL VOLATILITY OF MARKET PRICE
The THCR Common Stock began trading in June 1995, and since that time its
price has fluctuated substantially. The price at which the THCR Common Stock
will trade in the future will depend upon a number of factors, including,
without limitation, THCR's historical and anticipated operating results
(including the timing of the openings related to the various expansion
projects), overall Atlantic City gaming results and general market and
economic conditions, several of which factors are beyond the control of THCR.
In addition, factors such as quarterly fluctuations in THCR's financial and
operating results, announcements by THCR or others, and developments affecting
THCR, its customers, the Atlantic City market or the gaming industry
generally, could cause the market price of the THCR Common Stock to fluctuate
substantially. See "Market Price and Dividend Data--THCR."
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SPECIAL FACTORS
BACKGROUND OF THE MERGER TRANSACTION
From August 1993 through June 1994, representatives of Trump and Taj
Associates negotiated with representatives of Putnam Investment Management,
Inc. ("Putnam"), acting for certain affiliated funds which at the time
beneficially owned a substantial amount of Units and Taj Holding Class A
Common Stock, Prudential Securities Inc. ("Prudential"), and certain other
substantial holders of Units and Taj Holding Class A Common Stock to explore
the feasibility of a recapitalization of Taj Associates under which
substantially all of the indebtedness of Taj Associates and its affiliated
entities would be exchanged or refinanced and Trump would acquire all the
equity interests in Taj Holding not then owned by him.
These negotiations resulted on March 8, 1994 in the execution by Trump, Taj
Associates, Taj Funding and Taj Holding of a letter with Putnam (the "March 8
Letter") which set forth the parties' understanding of the discussions that
had taken place regarding the recapitalization proposal and which indicated
that those terms were generally satisfactory. The March 8 Letter provided for
a restructuring transaction that would have included (i) an exchange offer
with the holders of the Taj Bonds (the "Taj Bondholders") for an equivalent
principal amount of new bonds with an interest rate of 11 7/8% (with an
adjustment downwards if certain parent company financing were repaid), a cash
payment of $7.5 million to exchanging Taj Bondholders and an additional $15
million principal amount of new bonds to be issued to exchanging Taj
Bondholders, (ii) an acquisition by Trump of all the Taj Holding Class A
Common Stock for a cash price of $29.50 per share, (iii) the repayment of the
First Fidelity Loan, the NatWest Loan and the TTMI Note and (iv) an equity
financing that would raise between $115 and $125 million of proceeds which,
together with approximately $35 million of cash on hand, would be used to fund
the cash requirements for the transaction. Pursuant to the March 8 Letter, the
exchange offer would have required that a minimum of 90% of the principal
amount of Taj Bonds be tendered for exchange and that the maturity date for
the new bonds be set at ten years.
On March 22, 1994, at a meeting of the Board of Directors of Taj Holding at
which Jefferies & Company, Inc. ("Jefferies"), Taj Holding's financial advisor
at the time, and Andrews & Kurth L.L.P., special counsel to the Class B
Directors of Taj Holding (the "Special Counsel") were present, representatives
of Trump discussed with the Board of Directors of Taj Holding the background
and terms of the proposed recapitalization as provided in the March 8 Letter.
Jefferies also indicated its preliminary view that the merger consideration
was fair, from a financial point of view, to the holders of Taj Holding Class
A Common Stock. On March 26, 1994, Jefferies delivered a preliminary copy of
its report.
The Board of Directors of Taj Holding then met (with Jefferies present
telephonically) on March 28, 1994 to discuss the proposed recapitalization and
Jefferies' report thereon and requested certain additional analyses from
Jefferies, which were provided on March 29, 1994. On March 30, 1994, the Class
B Directors separately discussed the financial advisor's report (including
such additional analyses) with representatives of Jefferies and, later that
day, the entire Board of Directors of Taj Holding met telephonically to
discuss the proposed recapitalization and the financial advisor's report. At
the conclusion of such meeting, the Board of Directors of Taj Holding voted
unanimously to approve and recommend the proposed 1994 recapitalization.
During the summer of 1994, the parties determined not to proceed with the
proposed 1994 recapitalization, as Trump had been informed by several Taj
Bondholders, who held in excess of 15% of the outstanding principal amount of
the Taj Bonds, that they were not interested in pursuing the recapitalization
on the proposed terms. Thus, the parties believed that they would not be able
to achieve the 90% condition of the exchange offer.
On January 24, 1995, representatives of Taj Associates contacted the Special
Counsel to the Class B Directors of Taj Holding to indicate that they wished
to schedule a meeting of the Board of Directors of Taj Holding for the purpose
of discussing a proposal for a recapitalization of Taj Associates and its
affiliated entities in early February. On February 2, 1995, a meeting of the
Board of Directors of Taj Holding was held to discuss the proposed
recapitalization of Taj Associates and its affiliated entities, which would
include the contribution by Trump of Trump Indiana. The Board of Directors of
Taj Holding was presented with a proposed plan of
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recapitalization (the "February 2 Proposal") in which (i) each $1,000
principal amount of Taj Bonds would be exchanged for $750 principal amount of
new Taj Funding mortgage notes and twenty shares of common stock of TTMI, (ii)
all shares of Taj Holding Class B Common Stock associated with the exchanged
Taj Bonds would be redeemed at the required redemption price of $.50 per
share, (iii) in a merger transaction, each share of Taj Holding Class A Common
Stock (other than shares as to which appraisal rights are perfected) would be
converted into and represent the right to receive four shares of common stock
of TTMI, and each share of Taj Holding Class B Common Stock (other than shares
associated with any Taj Bonds exchanged in the exchange offer and any shares
as to which appraisal rights are perfected) would be converted into and
represent the right to receive $.50 in cash, (iv) Trump Indiana would become a
wholly owned subsidiary of TTMI and would guarantee new mortgage notes, and
(v) the NatWest Loan and the Taj Associates-First Fidelity Guarantee (as
defined) would be exchanged for new mortgage notes and new common stock on the
same basis as the Taj Bonds.
Without passing on the merits of the February 2 Proposal, the Board of
Directors of Taj Holding authorized the officers of Taj Holding to begin the
preparation of documentation relating to the February 2 Proposal, asked
Rothschild and BT Securities to provide certain additional information in
connection with the February 2 Proposal prior to the regularly scheduled board
meeting on February 9, 1995, and agreed to consider the retention of
Rothschild and BT Securities at such Board of Directors meeting. On February
9, 1995, the Board of Directors of Taj Holding held a meeting and approved the
retention of Rothschild and BT Securities to serve as financial advisors in
connection with a recapitalization plan based on the February 2 Proposal. On
February 13, 1995, Taj Holding, Taj Funding, Taj Associates, TTMI and TTMC
entered into an agreement with BT Securities and Rothschild, pursuant to which
BT Securities and Rothschild were retained as financial advisors in connection
with such recapitalization plan. Upon execution of the agreement, BT
Securities and Rothschild were paid $240,000 and $160,000, respectively. This
agreement with Rothschild and BT Securities was subsequently terminated. Trump
subsequently informed Taj Holding during the week of March 7, 1995 that he had
determined not to contribute Trump Indiana in connection with the transaction
contemplated by the February 2 Proposal, but instead to include the
contribution of Trump Indiana as part of a proposed recapitalization involving
Trump Plaza (which was accomplished in connection with the June 1995
Offerings).
On April 3, 1995, a meeting of the Board of Directors of Taj Holding was
held to discuss a proposed recapitalization of Taj Associates and its
affiliated entities which would not involve Trump Indiana. Rothschild and BT
Securities presented to the directors a proposed plan of recapitalization (the
"April 3 Proposal") in which (i) each $1,000 principal amount of Taj Bonds
would be exchanged for (a) $750 principal amount of new Taj Funding mortgage
notes and (b) twenty shares of new common stock of TTMI, (ii) all shares of
Taj Holding Class B Common Stock associated with the Taj Bonds would be
redeemed at the required redemption price of $.50 per share, (iii) in a merger
transaction, each share of Taj Holding Class A Common Stock (other than shares
as to which appraisal rights are perfected) would receive $12 in cash and each
share of Taj Holding Class B Common Stock (other than shares associated with
any Taj Bonds exchanged in the exchange offer and any shares as to which
appraisal rights are perfected) would be converted into and represent the
right to receive $.50 in cash, (iv) the NatWest Loan and the TTMI Note would
be exchanged for new mortgage notes and new common stock on the same basis as
the Taj Bonds and (v) Taj Associates would purchase the Taj Entertainment
Complex, the Steel Pier and a warehouse complex from Realty Corp. and the
associated Taj Associates-First Fidelity Guarantee would be released in
exchange for $22.5 million principal amount of new mortgage notes and 600,000
shares of new common stock.
The Board of Directors of Taj Holding was not asked to take and took no
further action with respect to the April 3 Proposal. At the July 13, 1995
meeting of the Board of Directors of Taj Holding, the Board invited
Rothschild, BT Securities and DLJ to discuss generally the desirability of
refinancing Taj Associates' indebtedness.
During the summer of 1995, members of management of Taj Holding approached
certain holders of Taj Holding Class A Common Stock about a potential
recapitalization transaction of Taj Associates, which could involve a merger
of the Taj Mahal with THCR. These holders indicated their general support for
such a transaction. At the September 27, 1995 meeting of the Board of
Directors of Taj Holding, at which DLJ, BT
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Securities and Rothschild were present, the Board discussed a proposal (the
"September 27 Proposal") which provided for a merger of Taj Holding with a
subsidiary of THCR with Taj Holding becoming a subsidiary of THCR, the payment
to the holders of Taj Holding Class A Common Stock (at such holders' option)
of $30.00 in cash or $30.00 in THCR Common Stock in the event shares of THCR
Common Stock are made available by THCR, the redemption of the Taj Bonds and
redemption of the Taj Holding Class B Common Stock, the contribution by Trump
of his interests in Taj Associates, the elimination of the First Fidelity
Loan, TTMI Note and NatWest Loan and the issuance of approximately $750
million of new mortgage notes by Taj Funding with a longer maturity and
greater covenant flexibility than the Taj Bonds.
At the September 27 meeting, the Board of Directors of Taj Holding approved
the execution of the Class A Agreement with certain holders of Taj Holding
Class A Common Stock pursuant to which such holders would agree to vote in
favor of the proposed merger. The Class A Agreement was entered into on
October 6, 1995 by Taj Associates, Taj Funding and Taj Holding and Putnam,
Prudential, Hamilton Partners, L.P., Grace Brothers, Ltd., SC Fundamental
Value Fund, L.P. and SC Fundamental Value BVI Ltd., the holders of
approximately 52% of the Taj Holding Class A Common Stock. These holders also
agreed not to dispose of their shares of Class A Common Stock except pursuant
to such recapitalization, other than through sales to third parties who agree
to be bound by the Class A Agreement. Taj Associates, Taj Funding and Taj
Holding paid $701,840 to these holders of Taj Holding Class A Common Stock and
agreed to pay them an additional $701,840 if the proposed recapitalization
does not occur prior to March 15, 1996. The Class A Agreement expires on
April 30, 1996. Neither Trump nor THCR is a party to the Class A Agreement. In
connection with the approval of the Class A Agreement by the Board of
Directors of Taj Holding, Trump agreed to reimburse the appropriate entity for
any and all fees paid to holders of Taj Holding Class A Common Stock pursuant
to the Class A Agreement in the event that Trump voted his shares in THCR
against, or, if the Board of Directors of THCR was requested to vote, and
Trump (as a director) voted against, or if such Board was not requested to
vote on, the transaction outlined in the September 27 Proposal.
At a meeting of the Board of Directors of THCR held on October 3, 1995,
representatives of management of THCR and Willkie Farr & Gallagher ("Willkie
Farr"), counsel to THCR in connection with the Merger Transaction, which firm
has historically (but not in connection with the negotiation of the Merger
Agreement and certain other matters related to the Merger Transaction) served
as counsel to Taj Associates and its affiliates, discussed with the Board of
Directors the transactions outlined in the September 27 Proposal and the Class
A Agreement.
In early October 1995, Special Counsel was retained to represent Taj Holding
in connection with the negotiation of the Merger Agreement, in addition to
representing the Class B Directors generally.
On November 6, 1995, representatives of Special Counsel met with
representatives of THCR and Willkie Farr to discuss the timing and mechanics
of effecting the proposed transaction referred to in the September 27
Proposal. Thereafter, representatives of THCR, Taj Holding, Willkie Farr and
Special Counsel commenced preparation of this Proxy Statement-Prospectus and
other documents related to the transactions outlined in the September 27
Proposal (the "Initial Transaction"), including the Merger Agreement. During
November and December 1995, and January and Feburary 1996, DLJ, BT Securities,
Rothschild and counsel to DLJ participated in sessions where drafts of this
Proxy Statement-Prospectus and drafts of the Merger Agreement were discussed.
On December 4, 1995, following receipt of a draft of the Proxy Statement-
Prospectus, the Class B Directors met telephonically with Special Counsel.
Special Counsel reviewed with the Class B Directors the proposed terms of the
Initial Transaction as described in such draft and updated the Class B
Directors on the status of discussions with representatives of THCR. The Class
B Directors then discussed the retention of a financial advisor, and
determined that, given Rothschild's knowledge of Taj Holding and Taj
Associates, its prior retention with respect to the February 2 proposal and
its expertise in such matters, it would be appropriate for Rothschild to be
retained by Taj Holding to serve as financial advisor in connection with the
Merger and to render a fairness opinion. Special Counsel discussed with the
Class B Directors certain changes in the Merger Agreement which Special
Counsel recommended, including a separate class vote of the holders of the Taj
Holding Class A
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Common Stock to approve the Merger, although such vote was not specifically
required by the Taj Holding Certificate of Incorporation. Subsequently,
Rothschild entered into a retention agreement with Taj Holding.
On December 8, 1995, Special Counsel met telephonically with Ropes & Gray,
counsel to the holders of Taj Holding Class A Common Stock who are parties to
the Class A Agreement. Such counsel confirmed that the Class A Agreement was
reached through arms-length negotiations and accurately represents the desires
of the parties thereto.
At a meeting of the Board of Directors of THCR held on December 11, 1995,
representatives of THCR, Willkie Farr, DLJ and BT Securities discussed with
the Board of Directors of THCR the Initial Transaction as described in the
draft of the Proxy Statement-Prospectus previously distributed to the Board of
Directors of THCR, including the contribution by Trump to THCR of his direct
and indirect equity interests in Taj Associates. Willkie Farr updated the
Board of Directors of THCR on the status of discussions with Special Counsel
to the Class B Directors of Taj Holding. The Board of Directors of THCR also
reviewed the approval process and the timing of the proposed Initial
Transaction. The Board of Directors of THCR determined that as a result of the
affiliated nature of the proposed transaction, the THCR Special Committee and
the Board of Directors of THCR each would separately review, analyze and vote
on the proposed Initial Transaction, and that an investment banking firm be
retained to render an opinion to the THCR Special Committee as to the fairness
of the consideration to be paid by THCR in the proposed Initial Transaction.
Following a presentation of the proposed Initial Transaction by DLJ, the Board
of Directors of THCR discussed (without Trump being present) the potential
benefits to THCR in connection with the proposed transaction.
On December 14, 1995, Special Counsel met telephonically with
representatives of Rothschild to discuss the timing for a written report and
the analyses to be used in the preparation of such report. Later that same
day, the Class B Directors again met telephonically with Special Counsel.
Special Counsel updated the Class B Directors on the status of the
transaction, including certain proposed changes thereto, and the status of
negotiations concerning various requested modifications to the Merger
Agreement. Special Counsel also reported to the Class B Directors regarding
the conversation with the counsel to the holders of Taj Holding Class A Common
Stock and the discussion with Rothschild.
On December 18, 1995, the Board of Directors of THCR (other than Trump),
Willkie Farr and management of THCR met telephonically to discuss the status
of the proposed Initial Transaction, the approval process to be employed, as
well as an update on negotiations with Taj Holding. The Board of Directors of
THCR discussed the retention of DLJ as financial advisor to THCR to, among
other things, render an opinion to the THCR Special Committee as to fairness
of the consideration to be paid by THCR in the Initial Transaction. The
Directors determined that given DLJ's knowledge of THCR and Taj Associates,
and its expertise in such matters, DLJ would be appropriate to serve as
financial advisor and to render a fairness opinion. Following this discussion,
the Board of Directors concluded that, in order to maximize procedural
fairness, the proposed Initial Transaction be submitted to a vote of all
unaffiliated stockholders of THCR.
On December 21, 1995, Rothschild presented to the Board of Directors of Taj
Holding its preliminary written report on the Merger. On December 21, 1995,
the Taj Holding Class B Directors met telephonically together with Special
Counsel to review generally the Rothschild Report, the latest draft of the
Merger Agreement and the status of the requested modifications to the Merger
Agreement. Later that day, at a telephonic meeting of the entire Board of
Directors of Taj Holding at which Rothschild, Special Counsel and Willkie Farr
were present, representatives of the Board of Directors of Taj Holding
discussed the terms of the proposed Merger as described in a draft Proxy
Statement-Prospectus distributed December 15, 1995. Rothschild described its
written report with respect to the Merger in detail and responded to questions
from members of the Board of Directors of Taj Holding with respect thereto.
On December 22, 1995, the Board of Directors of THCR (other than Trump),
Willkie Farr and management of THCR met telephonically to discuss and review
the proposed Initial Transaction and status of negotiations
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with Special Counsel to the Class B Directors of Taj Holding. On January 3,
1996, DLJ was engaged by THCR to act as THCR's exclusive financial advisor in
connection with the Initial Transaction.
On January 4, 1996, the THCR Special Committee met with DLJ, Willkie Farr
and the General Counsel of THCR to discuss the Initial Transaction. At such
meeting, DLJ presented its preliminary written report on the terms of the
Initial Transaction and its fairness analysis and responded to questions from
members of the THCR Special Committee. Following DLJ's presentation, the THCR
Special Committee requested certain additional information from DLJ and THCR,
which information was provided to the Special Committee during the period from
January 4 to January 8, 1996. Immediately following the meeting of the THCR
Special Committee, the Board of Directors of THCR met to discuss the status of
the proposed Initial Transaction and the DLJ's report with respect thereon.
On January 4, 1996, the Class B Directors held a meeting with
representatives of Rothschild and Special Counsel and discussed the status of
the Merger Agreement and an updated version of Rothschild's report with
respect to the Merger including certain additional analyses which had been
requested. Later that day, the entire Board of Directors met with Rothschild,
Special Counsel and Willkie Farr present, to discuss the Merger and an updated
version of Rothschild's report and to ask questions of Rothschild. In
addition, in light of the fact that Trump was to receive a warrant to purchase
shares of THCR Common Stock concurrent with the consummation of the Merger,
the Class B Directors requested Nicholas L. Ribis, Taj Holding's Vice
President, to request that THCR provide additional consideration to the
holders of Taj Holding Class A Common Stock. During the period through January
8, 1996, representatives of Taj Holding, Special Counsel, THCR and Willkie
Farr continued to negotiate the Merger Agreement and the terms of the Merger.
Among other things, it was agreed that the Merger would be subject to the
approval of the holders of the Taj Holding Class A Common Stock, Taj Holding
Class B Common Stock and Taj Holding Class C Common Stock, each voting as a
separate class. It was also agreed that (i) Taj Holding would be able to
furnish information to, and participate in negotiations with, certain persons
concerning an alternative proposal for the acquisition of Taj Holding, if the
Class B Directors, by a majority vote, determined in their good faith
judgement that such action would be appropriate in furtherance of the best
interests of stockholders, and (ii) the Merger Agreement could be terminated
by Taj Holding, acting through the Class B Directors, if the Class B Directors
shall have withdrawn or modified their approval or recommendation of the
Merger Agreement or the Merger in order to permit Taj Holding to execute an
agreement to effect a proposal for the acquisition of Taj Holding determined
by the Class B Directors to be more favorable to the Taj Holding stockholders
than the transactions contemplated by the Merger Agreement.
On January 8, 1996, the Class B Directors of Taj Holding held a telephonic
meeting, with Rothschild and Special Counsel present, to review the proposed
Merger. During the meeting, Rothschild delivered its written opinion that the
consideration to be received by the holders of Taj Holding Class A Common
Stock in connection with the Initial Transaction, is fair, from a financial
point of view, to the holders of Taj Holding Class A Common Stock. At the
conclusion of such meeting, the Class B Directors determined that the proposed
Merger is fair to, and in the best interests of, the holders of the Taj
Holding Class A Common Stock, and voted unanimously to approve the Merger and
recommend that stockholders vote to approve and adopt the Merger Agreement.
Later that day, the entire Board of Directors of Taj Holding held a telephonic
meeting, with Rothschild, Special Counsel and Willkie Farr present, to review
the proposed Merger. During the meeting, the Board of Directors of Taj Holding
was informed by Mr. Ribis, that, in response to the request made by the Class
B Directors at the previous meeting, THCR would not consider giving any
additional consideration to Taj Holding's stockholders. At the conclusion of
the meeting, the Board of Directors determined that the proposed Merger is
fair to, and in the best interests of, Taj Holding and the holders of Taj
Holding Class A Common Stock, and voted unanimously to approve the Merger and
recommend that Taj Holding's stockholders vote to approve and adopt the Merger
Agreement.
The Board of Directors of Taj Holding did not determine whether the terms of
the Merger are fair to, or in the best interests of, the holders of Taj
Holding Class B Common Stock or the holder (Trump) of Taj Holding
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Class C Common Stock. The Board of Directors of Taj Holding recognized that
the redemption price for the Taj Holding Class B Common Stock is established
by the Taj Holding Certificate of Incorporation at $0.50 per share and that
such stock must be redeemed in connection with the redemption of the Taj
Bonds, which is a condition to the Merger. The Taj Holding Board of Directors
also recognized that all the outstanding shares of Taj Holding Class C Common
Stock are beneficially owned by Trump, who is a director of Taj Holding and
has the ability to elect a majority of the members of the Board of Directors
of Taj Holding, and who had an opportunity to negotiate the terms of the
Initial Transaction on his own behalf as they relate to the Taj Holding Class
C Common Stock.
On January 8, 1996, the THCR Special Committee met telephonically with DLJ,
Willkie Farr and the General Counsel of THCR to further discuss DLJ's report
with respect to the Initial Transaction. During the meeting, DLJ delivered its
written opinion that the aggregate consideration to be paid by THCR pursuant
to the transactions contemplated by the Merger Agreement is fair to THCR from
a financial point of view. After discussing the opinion with DLJ and
considering the elements of the Initial Transaction, the THCR Special
Committee voted unanimously to approve the Initial Transaction. Immediately
following the THCR Special Committee meeting, the Board of Directors of THCR
met telephonically to discuss the Initial Transaction and DLJ's report with
respect to the Initial Transaction. At the conclusion of such meeting, the
THCR Board of Directors voted unanimously to approve and recommend the Initial
Transaction and the Merger Agreement.
Following the execution of the Merger Agreement on January 8, 1996, THCR,
together with its financial adviser, DLJ, continued to explore alternative
financing structures with respect to the Merger. In particular, they
considered the benefits to THCR of refinancing the Plaza Notes concurrently
with the acquisition of Taj Associates and related financings. DLJ presented
to THCR management a proposed modification to the terms of the Initial
Transaction pursuant to which a holding company would issue approximately
$1.18 billion of new mortgage notes secured by the assets of the Taj Mahal and
Trump Plaza. The proceeds of such issuance, together with the proceeds of the
Stock Offering and available cash, would be used, among other things, to
retire the Plaza Notes, purchase Trump Plaza East and satisfy Taj Associates'
obligations under the NatWest Loan.
Subsequent to the initial filing of this Proxy Statement-Prospectus with the
SEC on January 11, 1996, Willkie Farr informed Special Counsel of THCR's
desire to modify the terms of the Initial Transaction to include, among other
terms, the Debt Refinancing. On January 20, 1996, and then again on January
23, 1996, following discussions with Special Counsel, Willkie Farr distributed
revised drafts of this Proxy Statement-Prospectus and related documents with
respect to the Merger Transaction. During this period, the Class B Directors
discussed the proposed modifications with Special Counsel and representatives
of Taj Holding, and Special Counsel, THCR and Willkie Farr reviewed and
negotiated a proposed amendment to the Merger Agreement to take into account
the proposed modifications to the Initial Transaction. Rothschild agreed to
provide an updated report on the Merger taking into account the modifications
to the proposed Initial Transaction.
On January 24, 1996, the Class B Directors of Taj Holding held a telephonic
meeting, with Rothschild and Special Counsel present, to discuss the status
and proposed revised terms of the Initial Transaction, particularly in regard
to the Debt Refinancing.
On January 26, 1996, the Board of Directors of THCR, Willkie Farr and DLJ
met telephonically to discuss the proposed modifications to the Initial
Transaction, as well as the proposed amendment to the Merger Agreement. The
Board of Directors of THCR also discussed the status of the negotiations with
representatives of Taj Holding. During the meeting, DLJ was asked to provide
the THCR Special Committee with an updated report and opinion as to the
fairness of the Merger Transaction.
On January 26, 1996, the entire Board of Directors of Taj Holding held a
telephonic meeting, with Rothschild, Special Counsel and Willkie Farr present,
to discuss the proposed amendment to the Merger Agreement. Rothschild
presented a revised version of its written report on the Merger, which is
discussed below ("Rothschild Report") taking into account the proposed changes
to the transaction and the Board of Directors
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was given an opportunity to ask questions of Rothschild. Among other things,
it was agreed during the meeting that, in response to the Class B Directors'
request, the Merger would be subject to Taj Holding and THCR receiving one or
more solvency opinions, with respect to the Mortgage Note Offering and the Taj
Associates guarantee in respect thereof, from a nationally recognized
appraisal firm, in form and substance reasonable satisfactory to Taj Holding
and THCR.
The Board of Directors of Taj Holding held another telephonic meeting on
January 31, 1996, with Rothschild, Special Counsel and Willkie Farr present,
to review again the terms and conditions of the proposed modifications to the
Merger Agreement and the Merger Transaction. During the meeting, Rothschild
delivered its updated written opinion stating that the consideration to be
received by the holders of Taj Holding Class A Common Stock, in connection
with the Merger Transaction, is fair, from a financial point of view, to such
holders. Following the Rothschild presentation, the Board of Directors voted
unanimously to approve the amended Merger Agreement and the proposed changes
in the transaction.
On January 31, 1996, the THCR Special Committee held a meeting, with Willkie
Farr, the General Counsel of THCR and Senior Vice President of Corporate
Finance of THCR present, to discuss the Merger Transaction. At such meeting,
DLJ presented its written report on the terms of the Merger Transaction and
its fairness analysis, which is discussed below (the "DLJ Report"), and
responded to questions from members of the THCR Special Committee. DLJ
delivered its written opinion to the effect that the aggregate consideration
to be paid by THCR pursuant to the transactions contemplated by the Merger
Agreement, as amended, is fair, from a financial point of view, to THCR. After
discussing the opinion with DLJ and considering the elements of the Merger
Transaction, including the Debt Refinancing, the THCR Special Committee voted
unanimously to approve the Merger Transaction. Immediately following the THCR
Special Committee meeting, the Board of Directors of THCR met to discuss the
Merger Transaction and the DLJ Report. At the conclusion of such meeting, the
THCR Board of Directors voted unanimously to approve and recommend the Merger
Transaction and the Merger Agreement.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS; REASONS FOR THE MERGER TRANSACTION;
FAIRNESS OF THE MERGER TRANSACTION
Taj Holding. On January 8, 1996, the members of the Board of Directors of
Taj Holding unanimously determined that the Merger is fair to and in the best
interest of Taj Holding and the holders of Taj Holding Class A Common Stock
and recommended that such stockholders of Taj Holding approve and adopt the
Merger Agreement. Subsequently, on January 31, 1996, the Board of Directors
voted unanimously to approve the amended Merger Agreement and the proposed
changes to the transactions contemplated thereby. In determining to recommend
approval and adoption of the Merger Agreement, as amended, and the
transactions contemplated thereby and in approving the Merger Agreement, as
amended, the Board of Directors considered a number of factors, including but
not limited to the factors discussed below.
(a) In determining that the Merger is fair to, and in the best interest
of, Taj Holding and the holders of Taj Holding Class A Common Stock, and in
deciding to recommend that such Stockholders vote to approve and adopt the
Merger Agreement, the Board of Directors considered:
(i) discussions with Rothschild regarding generally, the financial
condition, results of operations and business of Taj Mahal, Taj
Holding's principal asset, which are summarized below under the caption
"--Opinions of the Financial Advisors,"
(ii) discussions with Rothschild with respect to the industry in
which Taj Holding operates, as well as the recent results of operations
of Taj Holding,
(iii) the oral and written presentations of Rothschild described
below under "--Opinion of Financial Advisor" and its written opinions
dated January 8 and January 31, 1996 to the effect that, as of the date
of such opinion and based upon the matters set forth therein, the
consideration to be received by the holders of the Taj Holding Class A
Common Stock, in connection with the Merger Transaction, is fair, to
such holders from a financial point of view,
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(iv) discussions with Rothschild regarding the proposed amendment to
the Merger Agreement taking into account the proposed changes in the
transaction, particularly in regard to the Debt Refinancing,
(v) the updated oral and written presentations of Rothschild,
described below under "Opinion of Financial Advisor" and its written
opinion dated January 31, 1996 to the effect that, as of the date of
such opinion and based upon the matters set forth therein, the
consideration to be received by the holders of the Taj Holding Class A
Common Stock, in connection with the Merger Transaction, is fair, from
a financial point of view, to such holders,
(vi) that the consummation of the Merger is conditioned upon the
affirmative vote of a majority of the outstanding shares of Taj Holding
Class A Common Stock, even though such right is not provided in the Taj
Holding Certificate of Incorporation,
(vii) that the consummation of the Merger is conditioned upon, among
other things, Taj Holding and THCR having received one or more solvency
opinions with respect to the Mortgage Note Offering and related
guarantees from a nationally recognized appraisal firm, in form and
substance reasonably satisfactory to Taj Holding and THCR,
(viii) that the Merger Consideration was the subject of arm's-length
negotiations between members of management of Taj Holding, on the one
hand, and certain significant holders of the Taj Holding Class A Common
Stock, on the other hand,
(ix) that the holders of approximately 52% of the Taj Holding Class A
Common Stock entered into the Class A Agreement pursuant to which they
agreed to vote in favor of the Merger,
(x) that, in order to retain the ability to achieve greater value for
the holders of Taj Holding Class A Common Stock, Taj Holding negotiated
the ability to furnish information to, and participate in negotiations
with, certain persons concerning alternative proposals for the
acquisition of Taj Holding, if the Class B Directors, by a majority
vote, determined in their good faith judgment that such action would be
appropriate in furtherance of the best interests of the stockholders.
It was further agreed that the Merger Agreement could be terminated by
Taj Holding, acting through the Class B Directors, if the Class B
Directors shall have withdrawn or modified their approval or
recommendation of the Merger Agreement or the Merger in order to permit
Taj Holding to execute an agreement to effect a proposal for the
acquisition of Taj Holding which the Class B Directors determined to be
more favorable to the Taj Holding stockholders than the transactions
contemplated by the Merger Agreement. The ability to ultimately
consummate such an alternative acquisition, however, would be subject
to the approval of the entire Board of Directors of Taj Holding and the
stockholders of Taj Holding, including Trump as the beneficial owner of
all the outstanding shares of Taj Holding Class C Common Stock.
(xi) the fact that the holders of the Taj Holding Class A Common
Stock will have the opportunity to elect to receive cash for their
shares and achieve immediate liquidity,
(xii) that, in any alternative transaction, the possibility exists
that Taj Associates could make the 14% Payment (none of which would be
payable to the holders of the Taj Holding Class A Common Stock),
thereby substantially diluting the value of the equity interest in Taj
Associates represented by the Taj Holding Class A Common Stock, and
(xiii) the fact that there currently is not, and historically there
has not been, an established trading market for the Taj Holding Class A
Common Stock.
(b) In deciding to recommend that the holders of Taj Holding Class B
Common Stock vote to approve and adopt the Merger Agreement, the Board of
Directors considered:
(i) that each share of Taj Holding Class B Common Stock trades as
part of a Unit and, therefore, that there is no separate trading market
for the Taj Holding Class B Common Stock,
(ii) that the Taj Holding Certificate of Incorporation requires
payment of the $.50 per share Taj upon the purchase, payment or
defeasance of the Taj Bonds with which such share trades, and
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(iii) that the consummation of the Merger is conditioned upon the
affirmative vote of a majority of the outstanding shares of Taj Holding
Class B Common Stock, even though such Taj Holding Class B Common Stock
would be redeemed prior to the Effective Time.
With respect to the Taj Holding Class A Common Stock, the factors
discussed above were considered by the Board of Directors of Taj Holding in
the following manner:
(a) The Board of Directors of Taj Holding considered as favorable to its
decision and placed special emphasis on the matters set forth in items
(a)(iii) through (x) above. The Board of Directors of Taj Holding relied
on, actively discussed and requested, received and considered additional
analyses regarding the presentation by Rothschild described herein under
"--Opinions of the Financial Advisors--Taj Holding--Opinion of Rothschild."
(b) The Board of Directors of Taj Holding considered as favorable to its
decision the fact that the holders of a majority of the Taj Holding Class A
Common Stock entered into the Class A Agreement and agreed to vote their
shares in favor of the Merger, and that all holders of the Taj Holding
Class A Common Stock will be given the right to vote on the Merger, even
though such right is not provided in the Taj Holding Certificate of
Incorporation.
(c) The Board of Directors of Taj Holding considered as favorable to its
decision the matters set forth in items (a)(i), (ii) and (iv) above. In
connection therewith, the Board of Directors of Taj Holding reviewed Taj
Holding's historical operating results, the forecasts utilized by
Rothschild in preparing the Rothschild Report, and presentations by Taj
Holding's management concerning the prospects for the Taj Mahal. In these
deliberations, the Board of Directors of Taj Holding recognized that, as a
result of the Merger the holders of Taj Holding Class A Common Stock
electing Cash Consideration would not have the ability to participate in
the future growth of Taj Holding.
(d) In considering the Rothschild Report, the Board of Directors of Taj
Holding considered the various projections prepared by management and
considered by Rothschild in arriving at their recommendation. See
"Additional Information."
With respect to the Taj Holding Class B Common Stock, the Board of Directors
gave equal weight to the factors discussed in items (b)(i) through (iii)
above.
The Board of Directors of Taj Holding did not determine whether the terms of
the Merger are fair to, or in the best interests of, the holders of Taj
Holding Class B Common Stock or the holder (Trump) of Taj Holding Class C
Common Stock. The Board of Directors of Taj Holding recognized that the
redemption price for the Taj Holding Class B Common Stock is established by
the Taj Holding Certificate of Incorporation at $0.50 per share and that such
stock must be redeemed in connection with the redemption of the Taj Bonds,
which is a condition to the Merger. The Taj Holding Board of Directors also
recognized that all the outstanding shares of Taj Holding Class C Common Stock
are beneficially owned by Trump, who is a director of Taj Holding and has the
ability to elect a majority of the members of the Board of Directors of Taj
Holding, and who had an opportunity to negotiate the terms of the Merger
Transaction on his own behalf as they relate to the Taj Holding Class C Common
Stock.
The Board of Directors of Taj Holding considered each of the factors listed
above during the course of its deliberations prior to approving the Merger
Agreement. The Board of Directors of Taj Holding evaluated the factors listed
above in light of its knowledge of the business and operations of the Taj
Mahal and its business judgment. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Board of
Directors of Taj Holding found it impracticable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors
considered in making its determinations.
The Board of Directors of Taj Holding believes that the Merger is
procedurally fair, because (i) the Board of Directors of Taj Holding retained
a financial advisor to render an opinion as to whether the consideration to be
paid in the Merger was fair from a financial point of view to the holders of
the Taj Holding Class A Common Stock, and Rothschild, the financial advisor so
retained, rendered such an opinion, (ii) of the availability to
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holders of Taj Holding Class A Common Stock of appraisal rights under the
DGCL, (iii) of the fact that the Merger will not be consummated unless the
conditions to the Merger are satisfied or waived, including a vote in favor of
the Merger by holders of a majority of the Taj Holding Class A Common Stock
and Taj Holding Class B Common Stock, each voting as a separate class, and
(iv) Taj Holding, in order to retain the ability to achieve greater value for
the holders of the Taj Holding, negotiated the ability to furnish information
to, and participate in negotiations with, persons concerning alternative
proposals for the acquisition of Taj Holding, if the Class B Directors by a
majority vote determine in their good faith judgment that such action is
appropriate in furtherance of the best interests of stockholders. It was
further agreed that the Merger Agreement could be terminated by Taj Holding,
acting through the Class B Directors, if the Class B Directors shall have
withdrawn or modified their approval or recommendation of the Merger Agreement
or the Merger in order to permit Taj Holding to execute an agreement to effect
a proposal for the acquisition of Taj Holding, which the Class B Directors
determined to be more favorable to the Taj Holding stockholders than the
transaction contemplated by the Merger Agreement. The ability to ultimately
consummate such an alternative acquisition, however, would be subject to the
approval of the entire Board of Directors of Taj Holdings and the stockholders
of Taj Holding, including Trump as the beneficial owner of all the outstanding
shares of Taj Holding Class C Common Stock.
TM/GP reasonably believes that the Merger is fair to the holders of Taj
Holding Class A Common Stock for the reasons identified by the Board of
Directors of Taj Holding.
A copy of the written opinion of Rothschild delivered to the Board of
Directors of Taj Holding, including the Class B Directors, which sets forth
the assumptions made, matters considered and limits of the review by
Rothschild in rendering its opinion, is attached to this Proxy Statement-
Prospectus as Annex C. Stockholders are urged to read this opinion in its
entirety. These materials are available for inspection and copying at the
principal executive offices of Taj Associates.
THCR. On January 31, 1996, the THCR Special Committee and the Board of
Directors of THCR each determined that the Merger Transaction was fair to, and
in the best interests of, THCR and unanimously approved the terms of the
Merger Transaction and the Merger Agreement, as amended. Accordingly, the
Board of Directors of THCR recommends that the stockholders of THCR vote for
approval of the Merger Transaction.
In making their respective determinations and recommendations concerning the
Merger Transaction, which determinations and recommendations are the product
of the business judgment of the respective members thereof, exercised in light
of their fiduciary duties to THCR and THCR's stockholders, the THCR Special
Committee and the Board of Directors of THCR considered a number of factors,
including but not limited to the following factors discussed below:
(a) Knowledge of THCR's and Taj 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 gaming markets outside of Atlantic City, and the
competitive positions of each of Trump Plaza and the Taj Mahal in the Atlantic
City market, all of which indicated that the acquisition of Taj Associates
would make a good strategic fit with THCR, and that the combination would
create a company that will be better positioned than either would be
separately to compete both in Atlantic City and for prime gaming licenses in
other jurisdictions.
(b) The potential for synergies from combining THCR with Taj Associates,
which the THCR Special Committee and the Board of Directors of THCR believe
would have a favorable impact on long-term value for THCR's stockholders.
(c) The Merger Agreement includes as a condition the consummation of the
THCR Stock Offering and the Mortgage Note Offering on terms acceptable to
THCR. A related factor in the considerations of the THCR Special Committee and
the Board of Directors of THCR was that the Merger Transaction includes the
refinancing of the Taj Bonds and the Plaza Notes with the Mortgage Notes which
will extend the maturity of Taj Associates' and Plaza Associates' debt and
provide financial flexibility thereby. Additionally, the Merger Agreement
includes as a condition to THCR's obligation to consummate the Merger that the
Market Value of THCR Common Stock equal $20.00 or more.
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(d) The Merger Transaction requires the approval of a majority of the
unaffiliated public stockholders of THCR through a separate class vote.
(e) Discussions with DLJ regarding the financial condition, results of
operations and business of the Taj Mahal, as well as the industry in which the
Taj Mahal and THCR operate; the discussions also included a review of the
recent results of the Taj Mahal.
(f) The oral presentations of DLJ described below under "--Opinions of the
Financial Advisors--THCR--Opinion of DLJ," DLJ's written opinion dated January
8, 1996, to the THCR Special Committee to the effect that, as of the date of
such opinion, and based upon the matters set forth therein, the aggregate
consideration to be paid by THCR pursuant to the transactions contemplated by
the Merger Agreement (prior to its amendment) is fair, from a financial point
of view, to THCR, and DLJ's written opinion, dated January 31, 1996, to the
THCR Special Committee to the effect that, as of the date of such opinion, and
based on the matters set forth therein, the aggregate consideration to be paid
by THCR pursuant to the transactions contemplated by the Merger Agreement, as
amended is fair, from a financial point of view, to THCR. Furthermore, the THCR
Special Committee was satisfied with the scope of the review and analysis
performed by DLJ and believed that DLJ had performed competently and
professionally.
(g) With respect to the purchase of the Specified Parcels from Realty Corp.,
that (i) the properties are integral to the Taj Associates Expansion, (ii) the
related $30 million guaranty of Taj Associates will be released, (iii) the
lease relating to the Specified Parcels will be terminated, thus eliminating
Taj Associates' approximately $3.3 million annual lease payment obligations
thereunder, and (iv) a recent appraisal indicating that the market value of the
Specified Parcels ranged from approximately $80 million to $95 million.
(h) The payment to Bankers Trust was required to obtain the consent of
Bankers Trust to the Merger and the release of Bankers Trust's liens on Trump's
direct and indirect equity interests in Taj Associates.
(i) That Trump beneficially owns a 50% equity interest in Taj Associates and,
through his ownership of the Taj Class C Common Stock, elects a majority of the
Directors of Taj Holding and thus controls Taj Holding; and that in the Merger
Transaction, Trump's beneficially equity interests in Taj Associates will be
contributed to AC Holdings and the Taj Holding Class Common Stock will be
canceled.
(j) The fact that Trump controls approximately 40% of the voting power of
THCR before the Merger Transaction and will control approximately the same
percentage following the consummation of the Merger Transaction. The THCR
Special Committee and the Board of Directors of THCR viewed this Trump's
continued significant holdings as a positive factor given that the association
of THCR with Trump is believed to enhance the status of THCR due to the
widespread recognition of the "Trump" name and its association with high
quality amenities and first class services.
(k) Certain risks associated with the proposed Merger Transaction, as set
forth under "Risk Factors."
The THCR Special Committee and the Board of Directors of THCR considered each
of the factors listed above during the course of their deliberations prior to
approving the Merger Transaction. In view of the wide variety of factors
considered, neither the THCR Special Committee nor the Board of Directors of
THCR found it practicable to quantify or otherwise attempt to assign relative
weights to the specific factors considered in making their determinations. The
THCR Special Committee and the Board of Directors of THCR believe that the
factors discussed above in paragraphs (a) through (g), (i) and (j) supported
their decision to approve the Merger Transaction and outweighed the risks
associated therewith referred to in paragraph (k).
Each of THCR, THCR Holdings, Trump, AC Holdings and Merger Sub reasonably
believes that the Merger is fair to the holders of Taj Holding Class A Common
Stock for the reasons identified by the Board of Directors of Taj Holding in
making its determination as to fairness.
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OPINIONS OF THE FINANCIAL ADVISORS
Taj Holding--Opinion of Rothschild. Rothschild has delivered its written
opinions, dated January 8 and January 31, 1996, that, from a financial point
of view, the consideration to be received by the holders of Taj Holding Class
A Common Stock, in connection with the Merger Transaction (as constituted as
of the above mentioned date), is fair to such holders.
The full text of the written opinion of Rothschild dated January 31, 1996
which sets forth the assumptions made, the matters considered and the review
undertaken with regard to such opinion, is attached as Annex C to this Proxy
Statement-Prospectus. Stockholders are urged to read the opinion in its
entirety. Rothschild's opinion is directed only to the fairness of the
consideration to be received by the holders of the Taj Holding Class A Common
Stock and does not constitute a recommendation to any holder of shares of Taj
Holding Class A Common Stock, Taj Holding Class B Common Stock, or Taj Holding
Class C Common Stock as to how the holder should vote. The summary of
Rothschild's opinion set forth in this Proxy Statement-Prospectus is qualified
in its entirety by reference to the full text of such opinion.
In arriving at its opinion, Rothschild (i) reviewed the proposed terms and
conditions of the Merger Transaction as set forth in the Merger Agreement as
amended, (ii) considered certain publicly available information relating to
Taj Holding, (iii) considered and reviewed certain other financial and
business information relating to Taj Holding and THCR, including financial
forecasts provided to Rothschild by Taj Holding, (iv) considered and reviewed
financial and business information including financial projections provided to
Rothschild by THCR and (v) met with Taj Holding's and THCR's managements to
discuss the businesses of Taj Holding and THCR, respectively. Rothschild also
considered certain financial and market information for THCR and compared that
data with similar data for other publicly-traded companies in businesses
similar to those of THCR. Rothschild also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria that it deemed relevant. Rothschild's analyses were not
adjusted for the dilution that would result from a possible 14% Payment.
Furthermore, Rothschild's analyses did not reflect the Taj Mahal Expansion
because without the Merger Transaction, or consent by the holders of the
Bonds, Taj Holding would be unable to finance such a program.
In addition, Rothschild did not make an independent evaluation or appraisal
of any of the assets of Taj Holding, but was furnished with an appraisal by
Appraisal Group International ("AGI") in March 1994 regarding the value of the
Taj Mahal and AGI's appraisal in December 1995 regarding various parcels of
land owned by Realty Corp. Rothschild was not requested to, and did not,
solicit third party offers to acquire all or any part of Taj Holding, nor, to
Rothschild's knowledge, has any interest in making such an offer been
presented by any third party, including in response to the public disclosure
regarding the Class A Agreement. Rothschild was also not asked to, and did
not, express any opinion as to whether another transaction with THCR or its
affiliates, or with any other entity, might provide more favorable terms to
the holders of Taj Holding Class A Common Stock than the Merger Transaction.
Rothschild's opinion was necessarily based solely upon information available
to it and business, market, economic and other conditions as they existed on,
and could be evaluated as of, the date of such opinion.
In connection with its review and the preparation of its written opinion,
Rothschild did not independently verify any of the foregoing information and
relied on such information being complete and accurate in all material
respects. Rothschild also relied upon certain projections furnished by Taj
Holding's management, which it assumed had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of Taj
Holding's management as to the future financial performance of Taj Holding. No
representation can be made with respect to the ability of Taj Associates to
achieve any projected results in the range of those projected by Taj Holding's
management. The projections prepared by Taj Holding's management reflect their
best available estimates and judgments at the time of preparation as to
possible ranges of results in the forecasted periods based upon varying
assumptions. The various forecasts present a wide range of possible results
which are subject to a number of uncertainties.
The following is a summary of the analyses that Rothschild utilized in
arriving at its opinion as to the fairness of the consideration to be received
by the holders of Taj Holding Class A Common Stock in connection
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with the Merger Transaction from a financial point of view, and that
Rothschild discussed with the Board of Directors of Taj Holdings at its
December 21, 1995 and January 4, 1996 meetings.
Valuation of Taj Holding. For purposes of its opinion as to the fairness of
the consideration to be received by holders of Taj Holding Class A Common
Stock in connection with the Merger Transaction from a financial point of
view, Rothschild employed three principal valuation methodologies: a publicly
traded comparable company analysis, a discounted cash flow analysis, and a
comparable transaction analysis. The methodologies used by Rothschild as
described to the Board of Directors of Taj Holding at its December 21, 1995
and January 4, 1996 meetings, are described below.
Publicly Traded Comparable Company Analysis. Rothschild reviewed the
financial, operating and market performance of the following group of seven
Atlantic City gaming companies with that of Taj Holding: Aztar Corporation,
Bally Entertainment Corporation, Hollywood Casino Corporation, Harrah's
Entertainment, Inc., Griffin Gaming & Entertainment, Inc., Showboat, Inc., and
THCR (the "Core Comparable Group"). Rothschild also reviewed and compared the
financial, operating and market performances of two other established
jurisdiction gaming companies: Circus Circus Enterprises, Inc. and Mirage
Resorts, Inc. Rothschild examined certain publicly available or estimated
financial data of the Core Comparable Group, including, but not limited to,
net revenues, EBITDA (earnings before interest, taxes, depreciation and
amortization), EBIT (earnings before interest and tax), net income available
to common, earnings per share, depreciation and amortization, interest
expense, and capital expenditures. Rothschild also examined and compared
various operating and credit ratios and certain capitalization data including,
but not limited to, leverage ratios, interest coverage, and net debt to
EBITDA. Rothschild also reviewed market data, including various trading
multiples such as market capitalization to EBITDA and EBIT and stock price to
earnings per share, equity market value to net cash flow (net income plus
depreciation and amortization). Market capitalization is defined as the market
value of a company's equity securities, plus preferred equity at liquidation
value (including redeemable), plus the face value of all debt, plus minority
interest, less cash and marketable securities. Taj Holding EBITDA and EBIT
multiples are pro forma for the elimination of lease payments made to Realty
Corp. and payments made under the Taj Services Agreement but before
consideration of potential operating synergies and other cost reductions.
The Core Comparable Group's market capitalization to latest twelve month
("LTM") EBITDA multiple ranged from 3.6x to 11.6x (with a mean and median of
approximately 7.0x) and 6.6x for Taj Holding. The Core Comparable Group's
market capitalization to estimated 1995 EBITDA multiple ranged from 4.2x to
7.5x (with a mean and median of approximately 6.0x and 6.5x, respectively) and
6.8x for Taj Holding. The Core Comparable Group's market capitalization to
estimated 1996 EBITDA multiple ranged from 3.9x to 6.7x (with a mean and
median of approximately 5.5x) and 6.0x for Taj Holding. The Core Comparable
Group's market capitalization to estimated 1995 EBIT multiple ranged from 5.4x
to 17.4x (with a mean and median, of approximately 11.0x and 9.0x,
respectively) and 9.9x for Taj Holding. The Core Comparable Group's market
capitalization to estimated 1995 revenues multiple ranged from 0.9x to 2.4x
(with a mean and median of approximately 1.5x) and 1.7x for Taj Holdings.
Rothschild drew no specific conclusion for this analysis but subjectively
factored its observations from this analysis into its qualitative assessment
of the relevant facts and circumstances. In addition, Rothschild considered
other financial data (including margins and growth rates) as well as certain
operating information such as fundamental gaming performance and efficiency
ratios, for the Core Comparable Group.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Rothschild estimated the present value of the future cash flows that Taj
Holding could be expected to produce over a five-year period from 1996 through
2000 under various assumptions and in accordance with Taj Holding's management
projections excluding any incremental benefits or costs associated with the
Merger Transaction or from an expansion of the Taj Mahal. Rothschild
determined the value for the Taj Holding Class A Common Stock by adding (i)
the present value (using discount rates ranging from 12.0% to 15.0%) of the
five-year unleveraged free cash flows of Taj Holding and (ii) the present
value of Taj Holding's 2000 terminal value, and subtracting (iii) the current
debt outstanding net of any excess cash available. The terminal values were
determined by multiplying 2000's projected EBITDA by a range of multiples
determined based on the Core Comparable Group, as contained in
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the Publicly Traded Comparable Company Analysis (ranging from 4.5 times to 5.5
times 2000's EBITDA). Rothschild drew no specific conclusion from this
analysis but subjectively factored its observations from this analysis into
its qualitative assessment of the relevant facts and circumstances.
Comparable Transaction Analysis. Rothschild reviewed selected acquisitions
in the gaming industry, including among others, Caesar's World Inc./ITT Corp.,
Sahara Resorts/Sahara Casino Partners, Hilton Hotels/Bally's Grand, and
Caesar's World/Caesar's New Jersey and considered various acquisition
multiples such as transaction value to EBITDA and EBIT, offer price to
earnings per share and equity offer value to net cash flow. Rothschild
reviewed the Caesars World transaction because it is the most recently
completed large gaming merger and acquisition transaction with significant
Atlantic City operations. The Caesars World transaction is not, however,
directly comparable to the Merger Transaction.
The Comparable Transactions' transaction value to LTM EBITDA multiple ranged
from 4.6x to 9.5x (with a mean, including the Caesars World transaction, of
approximately 6.0x, and 5.5x without the Caesars World transaction, and a
median of approximately 5.5x) and 6.6x for the Merger Transaction. Rothschild
drew no specific conclusion from this analysis but subjectively factored its
observations from this analysis into its qualitative assessment of the
relevant facts and circumstances.
Pro Forma Merger Analysis. Rothschild analyzed certain pro forma effects
resulting from the Merger Transaction. In conducting its analysis, Rothschild
relied upon certain assumptions described above and the financial projections
provided by the managements of THCR and Taj Holding. Rothschild also reviewed,
without independent verification, the estimates prepared by the respective
managements of THCR and Taj Holding of cost reductions achievable as a result
of the Merger Transaction. Rothschild also reviewed without independent
verification, the estimates prepared by the management of Taj Holding of the
projected effects of the Taj Mahal Expansion on operating results.
Additionally, using the financial information and projections provided to
Rothschild by Taj Holding's and THCR's respective managements, Rothschild
reviewed the accretion of or dilution to THCR's 1996 and 1997 pro forma
projected earnings per share resulting from the Merger Transaction;
specifically, the elimination of lease payments to Realty Corp. with respect
to the Specified Parcels, and to an unaffiliated third party with respect to
Trump Plaza East, and fees attributable to the Taj Services Agreement. This
analysis revealed that the Merger Transaction would be generally dilutive to
pro forma 1996 and 1997 earnings per share on the basis described. Rothschild
drew no specific conclusion from this analysis but subjectively factored its
observations from this analysis into its qualitative assessment of the
relevant facts and circumstances.
Other Factors. Rothschild considered such other factors as the fact that
there is no established trading market for the shares of Taj Holding Class A
Common Stock. However, Rothschild is aware of limited privately negotiated
transactions in shares of Taj Holding Class A Common Stock. Rothschild
considered and reviewed the financial terms of recent privately negotiated
block trades of shares of Taj Holding Class A Common Stock. Furthermore,
consideration was also given to the net book value and liquidation value of
Taj Holding.
In arriving at its written opinions dated January 8 and January 31, 1996 and
in discussing its opinion with the Board of Directors of Taj Holding
(including the Class B Directors), Rothschild performed certain financial
analyses, portions of which are summarized above. The summary set forth above
does not purport to be a complete description of Rothschild's analyses.
Rothschild believes that its analyses must be considered as a whole and that
selecting portions of its analyses could create an incomplete view of the
process underlying the opinion. In addition, Rothschild may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges
of valuations resulting from any particular analysis described above should
not be taken to be Rothschild's view of the actual value of Taj Holding. The
preparation of a fairness opinion is a complex process involving subjective
judgments and is not necessarily susceptible to partial analysis or summary
description. No company or transaction used in the publicly traded comparable
company analysis or the comparable transaction analysis summarized above is
identical to Taj Holding or the Merger Transaction. Accordingly, any such
analysis of the value of the consideration paid to holders of Taj Holding
Class A Common Stock involves complex
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considerations and judgments concerning differences in the potential financial
and operating characteristics of the comparable companies as well as other
factors relating to the trading and the acquisition values of the comparable
companies. These and other limitations, including potential regulatory
restrictions on gaming ownership, may detract from the usefulness of other
publicly traded comparable company multiples or multiples from prior gaming
acquisitions as valuation methodologies. In performing its analyses, Rothschild
made numerous assumptions with respect to industry performance, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Taj Holding and all of which are beyond the
control of Rothschild. The results of the analyses performed by Rothschild are
not necessarily indicative of actual values, which may be significantly more or
less favorable than suggested by such analyses. The analyses described above
were prepared solely as part of Rothschild's analysis of the fairness of the
consideration to the holders of Taj Holding Class A Common Stock. The analyses
do not purport to be appraisals or to reflect the prices at which Taj Holding
might actually be sold or the actual trading value of Taj Holding and its
affiliates' securities.
Rothschild is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers, acquisitions, restructurings, leveraged buy-outs, and
capital markets activities and in valuations for estate, corporate and other
purposes. The Board of Directors of Taj Holding selected Rothschild to act as
its financial advisor on the basis of Rothschild's reputation and Rothschild's
familiarity with Taj Holding and the gaming industry in general and its
experience in the restructuring of other public companies in similar types of
transactions. In February 1995, Rothschild was retained, together with BT
Securities, to act as financial advisor to Taj Holding and certain of its
affiliates in connection with a proposed restructuring pursuant to which
Rothschild received a $160,000 fee. Such retention has been terminated. In
addition, Rothschild has previously acted as financial advisor to the Committee
of Taj Bondholders of Taj Funding in connection with the 1991 Restructuring of
TTMC, Taj Funding, Taj Associates and TTMI for which it had received customary
compensation for such advisory activities and, during the preceding two years,
has performed investment banking and other financial advisory services for
entities affiliated with Trump for which customary compensation was received.
Rothschild and DLJ are parties to an engagement agreement, dated July 28, 1995,
with Trump Castle Associates ("Trump Castle") pursuant to which they were
retained to provide financial advisory services with respect to Trump Castle's
Midlantic term loan, 11 1/2% Senior Secured Notes due 2000, 11 3/4% Mortgage
Notes due 2003 and 13 7/8% Payment-in-Kind Notes due 2005. Although neither
Rothschild nor DLJ is currently providing any services to Trump Castle, in the
event that there is any acquisition, refinancing, repurchase, restructuring,
amendment or modification of any of the above-mentioned indebtedness, Trump's
Castle has agreed to pay to each of Rothschild and DLJ a fee of $750,000.
For rendering its opinion to the Board of Directors of Taj Holding, including
the Class B Directors, and evaluating the financial aspects of the Merger
Transaction, Rothschild has received a $300,000 fee and will be reimbursed for
its reasonable out-of-pocket expenses and indemnified against certain
liabilities, including liabilities arising under federal securities laws.
THCR--Opinion of DLJ. As part of its role as financial advisor to THCR, DLJ
was asked to render an opinion to the THCR Special Committee as to the fairness
to THCR of the aggregate consideration, as described below, to be paid by THCR
in the transactions contemplated by the Merger Agreement. DLJ delivered to the
THCR Special Committee its written opinions that, based upon, and subject to,
the assumptions, factors, limitations and other matters set forth in its
opinions, of January 8, 1996 and of January 31, 1996, the aggregate
consideration to be paid by THCR pursuant to the transactions contemplated by
the Merger Agreement (as described therein) is fair to THCR from a financial
point of view. The DLJ fairness opinion dated January 31, 1996 included as
Annex B to this Proxy Statement-Prospectus does not constitute a recommendation
to any holder as to how to vote on the Merger Transaction.
DLJ assumed, with the THCR Special Committee's consent, that both the
consideration to be paid and the consideration to be received by THCR pursuant
to the Merger Agreement and the transactions contemplated thereby is as set
forth in this paragraph. Not more than 4,550,000 (less the Reduced Amount (as
defined below)) shares of THCR Common Stock (or equivalents of such shares)
will be issued by THCR (excluding any shares
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of THCR Common Stock issued pursuant to the THCR Stock Offering), warrants to
purchase not more than 600,000, 600,000 and 600,000 shares of THCR Common
Stock at exercise prices not less than $30.00, $35.00 and $40.00 per share,
respectively, and which will have a maturity of three, four and five years,
respectively, will be issued by THCR, and not more than $60 million in cash
plus the Cash Consideration will be expended (exclusive of any transaction
fees and expenses). For purposes of DLJ's fairness opinion, the Reduced Amount
shall be equal to a number of shares of THCR Common Stock determined by
dividing (a) the Cash Consideration received by the holders of the Taj Holding
Class A Common Stock in the transactions contemplated by the Merger Agreement
by (b) $20.00. Upon consummation of the transactions contemplated by the
Merger Agreement, (i) THCR will receive additional general partnership
interests in THCR Holdings for contributing or causing its subsidiaries to
contribute its total direct and indirect beneficial ownership of Taj
Associates to subsidiaries of THCR Holdings in an amount calculated pursuant
to the THCR Holdings Partnership Agreement, (ii) THCR Holdings will be the
beneficial owner of 100% of the outstanding equity of Taj Associates free and
clear of any liens and encumbrances, except for the lien of the trustee on
behalf of the holders of the Senior Notes, (iii) immediately after giving
effect to the transactions contemplated by the Merger Agreement, THCR will own
the Specified Parcels free and clear of any liens and encumbrances, except for
the lien of the trustee on behalf of the holders of the Mortgage Notes, and
the lease between Taj Associates and Realty Corp. relating to the Specified
Parcels shall terminate and Taj Associates shall no longer be obligated to
make any payments to Realty Corp. and/or First Fidelity in connection with
such Specified Parcels and (iv) the Taj Services Agreement will be terminated.
DLJ assumed, with the THCR Special Committee's consent, that TTMC, Taj
Associates and Taj Funding will not have more than $800 million of net
indebtedness (i.e., aggregate face value of outstanding indebtedness
(including accrued cash interest and non-cash interest) less available cash
(excluding reasonable and customary amounts of cage or restricted cash)
collectively on their balance sheets immediately prior to the consummation of
the transactions contemplated by the Agreement. DLJ also assumed, with the
THCR Special Committee's consent, that for the purposes of its opinion, the
price of the THCR Common Stock will be no less than $20.00 per share (before
deducting any underwriting discounts or commissions).
THE FULL TEXT OF THE WRITTEN OPINION OF DLJ ADDRESSED TO THE THCR SPECIAL
COMMITTEE DATED JANUARY 31, 1996 IS ATTACHED HERETO AS ANNEX B. HOLDERS OF
THCR COMMON STOCK ARE URGED TO READ THE DLJ FAIRNESS OPINION IN ITS ENTIRETY
FOR THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE LIMITS OF THE REVIEW
MADE BY DLJ. THE FOLLOWING DISCUSSION OF THE DLJ FAIRNESS OPINION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ANNEX B.
DLJ did not make any recommendation as to the form or amount of
consideration to be paid by THCR pursuant to the transactions contemplated by
the Merger Agreement. Such consideration was determined by arm's-length
negotiations among THCR, Trump, Taj Holding and the other parties to the Class
A Agreement in which negotiations DLJ advised THCR management. DLJ's opinion
does not constitute an opinion as to the prices at which the THCR Common Stock
will actually trade at any time, including the Effective Time. No restrictions
or limitations were imposed by THCR or its affiliates upon DLJ with respect to
the investigations made or the procedures followed by DLJ in rendering its
opinion. DLJ was not requested to, and did not, solicit alternate transactions
with third parties.
In arriving at its opinion, DLJ reviewed a draft of the Merger Agreement and
a draft of this Proxy Statement-Prospectus. DLJ also reviewed financial and
other information that was publicly available or furnished to it by THCR and
Taj Associates, including discussions with their respective managements.
Included in the information provided to DLJ were certain financial projections
of THCR and Taj Associates prepared by management of THCR and Taj Associates,
respectively. In addition, DLJ compared certain financial and securities data
of Taj Associates with various other companies whose securities are traded in
the public markets, reviewed historical stock prices and trading volumes of
THCR Common Stock, reviewed prices and financial data implied by the
consideration paid in other business combinations and conducted such other
financial studies, analyses and investigations DLJ deemed appropriate for the
purposes of its opinion. DLJ also reviewed the draft pro forma combined
condensed financial information for THCR and Taj Associates and the
description of the business of each contained in the draft Proxy Statement-
Prospectus.
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In rendering its opinion, DLJ, with the THCR Special Committee's consent,
relied upon and assumed the accuracy, completeness and fairness of all of the
financial and other information that was available to it from public sources,
that was provided to it by THCR and Taj Associates or their respective
representatives or that was otherwise reviewed by DLJ. DLJ also, with the THCR
Special Committee's consent, assumed that the financial projections supplied
to it were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of THCR and Taj
Associates as to the future operating and financial performance of THCR and
Taj Associates. In particular, DLJ relied upon the estimates of the respective
management of THCR and Taj Associates of the operating synergies and other
cost reductions achievable as a result of the Merger Transaction. DLJ was not
asked to assume, and did not assume, any responsibility for making any
independent evaluation or appraisal of the assets or liabilities of THCR, Taj
Associates or the Specified Parcels or for making any independent verification
of any information reviewed by it, and DLJ did not independently verify any of
such information. DLJ relied as to all legal matters with respect to THCR, Taj
Holding and Taj Associates upon the advice of counsel to THCR.
DLJ's opinion is necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to it as
of, the date of its opinion. Although subsequent developments may affect its
opinion, DLJ does not have any obligation to update, revise or reaffirm its
opinion. DLJ expressed no opinion as to the fairness of the allocation of the
aggregate consideration to be paid by THCR among the parties receiving such
consideration, DLJ has assumed that each of the companies shall have all
appropriate licenses and permits upon consummation of the Merger Transaction,
including all gaming licenses to conduct its business as conducted or proposed
to be conducted.
The following is a summary of certain factors considered and principal
financial analyses performed by DLJ to arrive at its January 31, 1996 opinion
and does not purport to be a complete description of the
analyses performed by DLJ. DLJ performed certain procedures, including each of
the financial analyses described below, and reviewed with the management of
THCR and Taj Associates the assumptions on which such analysis were based and
other factors, including the current and projected financial results of such
companies.
General. DLJ reviewed the financial terms contained in a draft of the Merger
Agreement. DLJ assumed, with THCR's consent, that the price of the Common
Stock will be not less than $20 per share (before deducting any underwriting
fees and commissions). DLJ also reviewed (a) THCR's (i) Forms 10-Q for the
quarters ended June 30 and September 30, 1995 and (ii) prospectuses for the
June 1995 Stock Offering and the public offering of $155 million aggregate
principal amount of Senior Notes (the "June 1995 Note Offering" together with
the June 1995 Stock Offering, the "June 1995 Offerings"), (b) Taj Holding's
(i) Form 10-K for the year ended December 31, 1994, (ii) Forms 10-Q for the
quarters ended March 31, June 30 and September 31, 1995 and (iii) Form 8-K
filed October 18, 1995 and (c) Taj Associates' (i) Form 10-K for the year
ended December 31, 1994 and (ii) Forms 10-Q for the quarters ended March 31,
June 30 and September 30, 1995. DLJ also reviewed the historical trading
performance and trading volume of THCR Common Stock from the date of its
initial public offering to January 26, 1996. DLJ also made a comparison of the
historical trading performance of THCR Common Stock against (i) the Standard &
Poor's 400 Stock Index (ii) Bally Entertainment Corporation ("Bally
Entertainment") and (iii) against a constructed index of gaming companies
including Aztar Corporation, Griffin Gaming & Entertainment, Inc., Hollywood
Casino Corporation, MGM Grand, Inc., Mirage Resorts, Inc., Rio Hotel & Casino,
Inc., Showboat, Inc. and Stratosphere Corporation. DLJ also reviewed the
financial terms of a recent privately negotiated block trade of Taj Holding
Class A Common Stock.
Pro Forma Merger Analysis. DLJ analyzed certain pro forma effects resulting
from the Merger Transaction. In conducting its analysis, DLJ relied upon the
assumptions described above and the financial projections provided by the
managements of THCR and Taj Associates. DLJ also reviewed, without independent
verification, the estimates prepared by the respective managements of THCR and
Taj Associates of operating synergies and other costs reductions achievable by
combining the operations of THCR and Taj Associates. DLJ also reviewed,
without independent verification, the estimates prepared by the management of
Taj Associates of the projected effects of the Taj Mahal Expansion on
operating results. DLJ analyzed the pro forma effect of such
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operating synergies, other cost reductions, and the Taj Mahal Expansion on
earnings per share of THCR. Additionally, using the financial information and
projections (normalized for non-recurring items) provided to DLJ by Taj
Associates' and THCR's respective managements, DLJ reviewed the accretion of
or dilution to THCR's 1995 pro forma earnings per share and 1996 and 1997
projected earnings per share resulting from the Merger Transaction. DLJ's
analysis separately considered accretion/dilution (i) on an unadjusted basis,
(ii) giving effect to the synergies and other cost reductions estimated by
THCR's and Taj Associates' management, (iii) giving effect to the Taj Mahal
Expansion and (iv) giving effect to the Taj Mahal Expansion and the synergies
referred to in (ii) above. This analysis revealed that the Merger Transaction
would not have a meaningful effect on 1995 earnings per share in light of the
loss position and would be (a) dilutive to projected 1996 earnings per share
and 1997 projected earnings per share on the basis described in (i) and (ii)
above and (b) accretive to 1997 projected earnings per share on the basis
described in (iii) and (iv) above. DLJ also considered the effect on its
analysis of a 10% and a 25% negative variance between actual results and the
results projected by THCR's management. DLJ drew no specific conclusion from
this analysis but subjectively factored its observations from this analysis
into its qualitative assessment of the relevant facts and circumstances.
Analysis of Certain Other Publicly Traded Companies. To provide contextual
data and comparative market information, DLJ compared selected historical
earnings and operating and financial ratios for Taj Associates to
corresponding data and ratios of certain gaming companies whose securities are
publicly traded. In conducting its analysis DLJ compared the ratios implied by
the aggregate consideration to be paid by THCR in the transactions
contemplated by the Merger Agreement (with and without accounting for the
synergies and other costs reductions projected by THCR's and Taj Associates'
management) to the ratios implied from the market valuation of publicly-traded
companies selected by DLJ (the "Gaming Companies") based upon qualitative
factors which DLJ deemed relevant based upon its experience in the gaming
industry: Aztar Corporation, Bally Entertainment, Griffin Gaming &
Entertainment, Inc., Harrah's Entertainment, Inc., Hollywood Casino
Corporation, MGM Grand, Inc., Mirage Resorts, Inc., Rio Hotel & Casino, Inc.,
Showboat, Inc. and Stratosphere Corporation. DLJ also separately compared the
ratios implied by the aggregate consideration to be paid by THCR in the
transactions contemplated by the Merger Agreement to the ratios implied from
the market valuation of Bally Entertainment; this comparison was made because
of the concentration of Bally Entertainment's revenue base in the Atlantic
City market. Although DLJ used these companies for comparison purposes, none
of such companies, including but not limited to, Bally Entertainment, is
directly comparable to Taj Associates or THCR, respectively. Data and ratios
considered included: the ratio of enterprise value to latest twelve month
("LTM") revenues, LTM EBITDA, LTM EBIT, 1996 projected EBITDA, the ratio of
market price to 1995 projected net income, the ratio of market price to 1996
projected net income and the ratio of market price to book value. All
projected information for the Gaming Companies and Bally Entertainment was
obtained from Institutional Broker's Estimate Service, a third-party service
which summarizes the estimates made by analysts employed by several investment
banking firms and from the published reports of research analysts employed by
investment banking firms, including analysts employed by DLJ. Enterprise value
is defined as the sum of the face value of a company's debt plus the market
value of its equity securities less excess cash. DLJ made a subjective
assessment of the cash position of each company included in the Gaming
Companies for the purpose of making an estimate of excess cash. EBITDA is
earnings before interest, taxes, depreciation and amortization and was
selected for analysis by DLJ because it is a widely used estimate of cash
flows generated by operations. EBIT is earnings before interest and taxes and
was selected by DLJ because it is a measure of operating performance. The
ratio of enterprise value to LTM revenues ranged from 0.9x to 2.9x for the
Gaming Companies, was 1.8x for Bally Entertainment and was 1.7x for Taj
Associates (both with and without consideration of operating synergies and
other cost reductions). The ratio of enterprise value for the Gaming Companies
to LTM EBITDA ranged from 4.5x to 13.5x, was 6.9x for Bally Entertainment, was
6.8x for Taj Associates without giving effect to synergies and other cost
reductions and was 6.0x for Taj Associates after giving effect to operating
synergies and other cost reductions. The ratio of enterprise value for the
Gaming Companies to LTM EBIT ranged from 6.1x to 20.9x, was 9.8x for Bally
Entertainment, was 9.9x for Taj Associates without giving effect to synergies
and other cost reductions and was 8.3x for Taj Associates after giving effect
to operating synergies and other cost reductions. The ratio of enterprise
value to 1996 projected EBITDA ranged from 4.1x to 9.5x for the Gaming
Companies, was 5.8x for Bally Entertainment, was 5.8x for Taj Associates
without giving effect to synergies
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and other cost reductions and was 5.2x for Taj Associates after giving effect
to operating synergies and other cost reductions. The ratio of price to book
value for the Gaming Companies ranged from 0.9x to 4.4x, was 1.3x for Bally
Entertainment and was 2.2x for Taj Associates. DLJ also separately considered
the effects of the transaction costs associated with the Merger Transaction on
these ratios. DLJ drew no specific conclusion from this analysis but
subjectively factored its observations from this analysis into its qualitative
assessment of the relevant facts and circumstances.
Comparable Merger and Acquisition Analysis. DLJ reviewed the implied
valuation multiples of: (i) selected merger and acquisition transactions
including the majority of casino hotel company transactions completed since
1984 (the "Casino Resort Transactions"), (ii) selected single property merger
and acquisition transactions in the gaming industry since 1984 (the "Single
Property Transactions") and (iii) ITT's acquisition of Caesars World in 1995
(the "Caesars Transaction"). DLJ made the analysis referred to in (iii) above
because it is the most recent, completed, large gaming merger and acquisition
transaction with significant Atlantic City operations. Neither the Caesars
Transaction nor the transactions described in (i) and (ii) above are directly
comparable to the Merger or the Merger Transaction. DLJ compared the ratios
implied by the aggregate consideration to be paid by THCR in the transactions
contemplated by the Merger Agreement ("the Transaction") (with and without
accounting for the synergies and other cost reductions estimated by THCR's and
Taj Associates' respective managements) to the ratios implied by mean
(calculated excluding the high and low multiple) of the Casino Resort
Transactions, the mean (calculated excluding the high and low multiple) of the
Single Property Transactions and the Caesars Transaction. The ratio of
enterprise value implied by the consideration paid to LTM Revenues for the
mean of the Casino Resort Transactions was 1.6x, 1.4x for the mean of the
Single Property Transactions, 1.8x for the Caesars Transaction and 1.7x for
the Transaction (both with and without giving effect to synergies and other
cost reductions). The ratio of enterprise value implied by the consideration
paid to LTM EBITDA for the mean of the Casino Transactions was 8.7x, 8.4x for
the mean of the Single Property Transactions, 9.1x for the Caesars
Transaction, 6.8x in the Transaction without giving effect to synergies and
other cost reductions and 6.0x in the Transaction after giving effect to the
synergies and other cost reductions. The ratio of enterprise value implied by
the consideration paid to LTM EBIT was 12.2x for the mean of the Casino Resort
Transactions, 11.0x for the mean of the Single Property Transactions, 13.5x
the Caesars Transaction, 9.9x for the Transaction without giving effect to
synergies and other cost reductions and 8.3x for the Transaction after giving
effect to the synergies and other cost reductions. The multiple of equity
value to book value was also compared and was 2.9x for the Caesars Transaction
and 2.2x in the Transaction. DLJ also separately considered the effects of
transaction costs associated with the Merger Transaction on these ratios. DLJ
drew no specific conclusion from this analysis but subjectively factored its
observations from this analysis into its qualitative assessment of the
relevant facts and circumstances.
Discounted Cash Flow Valuation Analysis. DLJ performed a discounted cash
flow analysis of Taj Associates. In conducting its analysis, DLJ relied on
certain assumptions, financial projections and other information provided by
the managements of THCR and Taj Associates. DLJ preformed its analysis using
Taj Associates' management's estimates of future performance of the Taj Mahal
and the future results of operations of Taj Associates (including and
excluding the Taj Mahal Expansion). DLJ selected a range of terminal exit
multiples of 5.0 to 10.0 times EBITDA and a range of weighted average cost of
capital from 8% to 13% based upon its subjective judgments about, among other
things, the capital markets, Taj Associates prospects and the gaming industry.
The terminal exit multiple represents an estimate of the value of Taj
Associates earnings at the end of the five year period covered by Taj
Associates' management's projections. This analysis implied an enterprise
value of Taj Associates ranging from $1,417 million to $2,512 million and
$1,149 million to $1,897 million, with and without the Taj Mahal Expansion,
respectively. DLJ drew no specific conclusion from this analysis but
subjectively factored its observations from this analysis into its qualitative
assessment of the relevant facts and circumstances.
Contribution Analysis. DLJ reviewed the relative contribution to THCR after
the Merger Transaction of THCR, as a stand alone enterprise, and Taj
Associates, as a stand alone enterprise. DLJ relied upon estimates of 1995,
1996 and 1997 financial information provided by THCR's and Taj Associates'
respective managements.
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THCR and Taj Associates provided 45.4% and 54.6%, respectively, of the
combined enterprise value; these ratios would be 47.2% and 52.8%,
respectively, if the costs of the Merger and the THCR Stock Offering were
excluded. The projections made by Taj Associates' and THCR's management
reveal, over the three year period, that THCR would provide from 37.6% to
54.2% of combined revenues; from 34.6% to 49.4% of combined EBITDA and from
37.7% to 51.1% of combined EBIT. On a corresponding basis Taj Associates would
provide from 62.4% to 45.8% of combined revenues, from 65.4% to 50.6% of
combined EBITDA and from 62.3% to 48.9% of combined EBIT. Taj Associates will
contribute 55.0% of combined book value to THCR after the Merger Transaction.
DLJ drew no specific conclusion from this analysis but subjectively factored
its observations from this analysis into its qualitative assessment of the
relevant facts and circumstances.
The summary set forth above does not purport to be a complete description of
the analyses performed and factors considered by DLJ. The preparation of a
fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these
methods to the particular circumstances and, therefore, such an opinion is not
readily susceptible to summary description. Accordingly, notwithstanding the
separate factors summarized above, DLJ believes that its analysis must be
considered as a whole and that selecting portions of its analysis and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinions.
Furthermore, in arriving at its fairness opinion, DLJ did not attribute any
particular weight to any analysis, or factor considered by it, but rather made
subjective and qualitative judgments as to the significance and relevance of
each analysis and factor. In performing its analyses, DLJ made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
THCR selected DLJ as its financial advisor because DLJ is a nationally
recognized investment banking firm and the principals of DLJ have substantial
experience in transactions similar to the Merger, are familiar with THCR, Taj
Associates and their business and are familiar with the gaming industry. As
part of its investment banking business, DLJ is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions. In the ordinary course of business, DLJ actively trades the debt
and equity securities of THCR, Taj Associates and their respective
subsidiaries for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to the terms of an engagement letter, as amended, THCR has agreed
to pay DLJ a fee of $1,500,000 for rendering its fairness opinion. In
addition, THCR has agreed to pay DLJ $6,000,000 upon consummation of the
Merger. THCR has also agreed to reimburse DLJ for its out-of-pocket expenses
(including the reasonable fees and expenses of DLJ's counsel) incurred in
connection with its engagement (exclusive of expenses incurred in connection
with the Offerings), and to indemnify DLJ and certain of its related persons
against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws. The terms of the fee
arrangement with DLJ, which DLJ and THCR believe are customary in transactions
of this nature, were negotiated at arm's length between THCR and DLJ, and the
THCR Special Committee and the Board of Directors of THCR was made aware of
such arrangement, including the fact that a significant portion of the
aggregate fee payable to DLJ is contingent upon consummation of the Merger.
DLJ has been engaged to act as lead manager for the THCR Stock Offering and
the Mortgage Note Offering for which DLJ will receive customary fees. Over the
past two years, DLJ has rendered a variety of investment banking services to
Trump and his affiliated entities for which it has received or will receive
customary fees aggregating to $11.9 million (such amount includes fees for
acting as lead manager for the June 1995 Offerings and for financial advisory
services rendered in connection with the formation of THCR and excludes fees
for services rendered in connection with the Merger Transaction).
The DLJ Report may be copied and inspected at THCR's principal executive
offices.
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AGI APPRAISALS
In connection with a Taj Associates recapitalization proposal discussed in
1994, Taj Associates obtained an appraisal from AGI (the "AGI Report"), which
concluded that the going concern value of the Taj Mahal, as of March 18, 1994,
was approximately $1.1 billion.
In the opinion of AGI, the AGI Report, which is subject to certain
assumptions and qualifications, was prepared in conformity with the
regulations of the Office of Thrift Supervision of the U.S. Department of the
Treasury, the Uniform Standards of Professional Appraisal Practice, and the
Office of the Comptroller of the Currency's written appraisal guidelines.
In the course of its determination of the Taj Mahal's going concern value,
AGI reviewed data relating to the subject property, Atlantic County and
Atlantic City in general, the neighborhood of the site, the Atlantic City
casino/hotel market, the past operating history of casino/hotels similar to
the Taj Mahal, zoning, real estate taxes and assessments and the highest and
best use for the property. AGI opined that the going concern value of the Taj
Mahal, as of March 18, 1994, was approximately $1.1 billion. For purposes of
the AGI Report, going concern value was defined as the value created by a
proven property operation, with the subject property considered as a separate
entity to be valued with a specific business establishment, which, in the case
of the Taj Mahal, is as an operating casino/hotel facility.
In reaching its conclusion with respect to the going concern value of the
Taj Mahal, AGI considered the three generally recognized methods of valuing
real estate, namely, (i) the cost approach, in which all improvements to the
subject property are replaced as if new and any accrued depreciation is
deducted to arrive at a net improvement value, (ii) the sales comparison
approach, which is based upon a comparison of sales of similar properties,
taking into consideration their minor differences and major similarities, and
(iii) the capitalization of income approach, which converts the net operating
income attributable to the real estate, after all expenses, into a valuation
estimate. The capitalization of income approach capitalizes the income by an
appropriate method and rate as derived from a market study of similar
properties and/or competitive investments. Of the three valuation methods, AGI
selected the capitalization of income approach as the basis for arriving at a
going concern value because it provides the most reliable indication of value
for an income producing property. AGI's value conclusion is based solely on
the utilization of the capitalization of income approach.
AGI concluded that annuity capitalization, utilizing the discounted cash
flow technique, was the most appropriate method of capitalization. Such
technique was comprised of five steps: (i) projection of the investment
holding period in respect of the Taj Mahal, (ii) projection of annual casino
revenues for the Taj Mahal for each year of the holding period, (iii)
selection of a yield rate in order to discount to present value the projected
cash flow and eventual value of the property upon reversion, (iv) projection
of the reversionary, or residual, value of the property at the end of the
projection period and (v) calculation of the net present value of the Taj
Mahal to reflect its worth as an investment assuming (a) a required rate of
return, (b) the property achieving cash flows as projected and (c) a reversion
value of the property as projected.
In implementing steps (i) through (v) above, AGI first utilized a 10-year
holding period for the investment based on the conclusion that such amount of
time was long enough to model the Taj Mahal's performance but short enough to
reasonably estimate the expected income and expenses of the real estate. AGI
then determined future casino revenues for the Taj Mahal by analyzing
historical operating data, market share and revenue growth for the Taj Mahal
and for the gaming industry in Atlantic City in general.
Based on the foregoing, AGI projected income and expenses of the Taj Mahal
for the years 1994 through 2004. Based upon an assumed growth rate of 4.0% per
year, AGI projected that the Taj Mahal's total revenues would increase from
$518.0 million in 1994 to $766.8 million in 2004. Based upon, among other
things, the assumption that casino expense, the largest single expense
category for the Taj Mahal, would remain constant at 45.0% of gross revenues,
AGI projected that the Taj Mahal's gross operating profit would increase from
$159.7 million to $225.9 million, and cash flow before debt service would
increase from $123.9 million to $170.5 million, over the same period.
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Based on the fact that investors in real estate typically require a return
several hundred basis points above what can be achieved in the financial
markets, and that, in AGI's experience, return requirements for transactions
involving casino and hotel facilities have ranged from 600 to 800 basis points
above medium quality corporate bonds, AGI determined that an appropriate
discount rate for the Taj Mahal would be in the range of approximately 13.0%
to 16.0%. Based on the foregoing analysis, and taking into consideration the
higher risk associated with investments in similar casino/hotel properties and
AGI's cash flow projections for the Taj Mahal, AGI determined that, in the
case of the Taj Mahal, a 15.0% discount rate would be appropriate.
AGI then determined the reversionary value of the Taj Mahal by capitalizing
the projected 11th year (2004) cash flow of the Taj Mahal, which was $170.5
million, by a terminal rate of 10.0%. Such rate was selected based on the
range of terminal rates currently employed by the market (from 8.0% to 11.0%)
and taking into consideration the increased investment risks associated with a
casino/hotel. Utilizing the 10.0% terminal rate, and assuming sales costs of
3.0%, AGI concluded that the net sale value of the Taj Mahal in 2004, the
final year of the projections, would be approximately $1.65 billion.
AGI then applied the 15.0% discount rate to the projected cash flow of the
Taj Mahal for each year of the projected 10-year holding period, as well as to
the net sales proceeds assumed to be received from a sale of the Taj Mahal in
the eleventh year. Such calculation resulted in a total present worth for the
Taj Mahal equal to $1.105 billion. Based on this figure, AGI concluded that
the going concern value of the Taj Mahal as of March 18, 1994 was
approximately $1.1 billion.
The AGI Report assumed, among other things, that (i) Taj Associates holds
good and marketable title to the property on which the Taj Mahal is located,
(ii) information furnished to AGI by third parties is reliable, (iii) there
are no hidden or unapparent conditions of the property, subsoil or structures
that would render the property more or less valuable and (iv) there is full
compliance with all applicable federal, state and local environmental
regulations and laws and all applicable zoning and use regulations and
restrictions, unless otherwise stated, defined and considered in the AGI
Report.
An appraisal is an estimate or opinion of value and cannot be relied upon as
a precise measure of value of worth. The amount that Taj Associates might
realize from the sale of the Taj Mahal maybe more or less than its appraised
value. AGI did not solicit any offers or inquiries with respect to the Taj
Mahal from potential purchasers, and therefore, the AGI Report should not be
read to suggest that a buyer was, in fact, available or if one were available,
that it would be willing to pay the appraised value. Accordingly, no assurance
can be given as to the value which could be obtained from the sale of the Taj
Mahal. Additionally, whatever the value of the Taj Mahal may be in a sale
under the conditions assumed in the AGI Report, a sale under distress
conditions would likely result in a substantially lower price.
AGI has been engaged in the real estate appraisal business for approximately
40 years, maintaining offices in New York, New Jersey and Florida and
employing 10 full-time appraisers. AGI has prior experience in appraising
casino hotel properties in Atlantic City (including the Resorts Casino Hotel,
Trump Plaza and Trump's Castle) and numerous casinos in Las Vegas, Nevada and
in performing appraisals in conformity with regulations governing federal
savings institutions. AGI was selected by management on the basis of its
experience and expertise in evaluating income-producing properties, including
hotels and casino hotels.
The services performed by AGI were performed in accordance with the Code of
Professional Ethics and the Standards of Professional Practice of the
Appraisal Institute and the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation. AGI has no financial or other interest,
direct or indirect, present or prospective, in the Taj Mahal or a personal
interest or bias with respect to Taj Associates or any of its affiliates.
AGI's employment and compensation were not contingent upon the amount of the
valuation or on any action or event resulting from the analyses, opinions or
conclusions in, or the use of, the AGI Report. In consideration for its
services rendered to Taj Associates in connection with the AGI Report, AGI
received a fee from Taj Associates of approximately $50,000. During the past
six years, AGI has conducted a prior appraisal of the Taj Mahal for Taj
Associates as well as appraisals of six other properties owned or controlled
by Trump. AGI has
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performed appraisals of Trump Plaza for Plaza Associates, of Trump's Castle
for TCA, of Crystal Palace for The Trump Organization, of Trump Tower for the
Trump Organization, of The Plaza Hotel in New York City for Citibank, N.A. and
of Mar-A-Lago Club for Trump. AGI received an aggregate of approximately
$181,000 for performing such appraisals.
A copy of the AGI Report has been filed as an Exhibit to the Schedule 13E-3
(copies of which can be obtained from the Public Reference Section at the SEC
at prescribed rates). Holders of shares of Taj Holding Class A Common Stock
should read the AGI report in its entirety for a description of the matters
considered and procedures followed.
In December of 1995, AGI provided a report to Taj Associates which concluded
that the market value of the Specified Parcels was in the range of $80.2
million and $95.6 million.
PURPOSE AND STRUCTURE OF THE MERGER TRANSACTION
The purpose of the Merger Transaction is for THCR Holdings to acquire
beneficial ownership of 100% of the equity of Taj Associates for the reasons
described in "Special Factors--Background of the Merger Transaction" and
"Special Factors--Recommendations of the Board of Directors; Reasons for the
Merger Transaction; Fairness of the Merger Transaction." The Merger
Transaction will create one of the largest casino entertainment companies in
the United States by combining into one entity two "Four Star" Atlantic City
casino hotels, the Indiana Riverboat and the rights to any new Trump gaming
venture. The acquisition of the Taj Mahal will strengthen THCR's position as a
leader in the casino entertainment industry, and the combination of the Taj
Mahal with THCR's existing and planned operations will provide opportunities
for operational efficiencies, economies of scale and benefits from the talent,
expertise and experience of management at the operating entities.
The Merger will be effected by the merger of Merger Sub with and into Taj
Holding. Upon the consummation of the Merger Transaction, including the
contributions by Trump, TTMI and TM/GP, THCR Holdings will acquire beneficial
ownership of 100% of the equity of Taj Associates.
The Merger Transaction has been structured to ensure that THCR Holdings
acquires 100% of the equity of Taj Associates through a series of
substantially simultaneous transactions. The Merger Transaction is being
undertaken at this time based upon current market conditions and the recent
performance of Taj Associates and Plaza Associates, which contribute to the
feasibility of the Merger Transaction. Although Trump, Taj Holding and TM/GP
have in the past considered several recapitalization transactions, none of
such recapitalizations were implemented. See "Special Factors--Background of
the Merger Transaction." Other than certain variations of the current
structure, THCR, THCR Holdings, AC Holdings and Merger Sub did not consider
any alternatives to the Merger Transaction.
RELATED MERGER TRANSACTIONS
The Offerings. The consummation of the Mortgage Note Offering, the THCR
Stock Offering, the Plaza Note Purchase and Senior Note Consent Solicitation
will occur simultaneously with, and will be conditioned upon, the closing of
the Merger. There can be no assurance that the Mortgage Note Offering, the
THCR Stock Offering, the Plaza Note Purchase and Senior Note Consent
Solicitation will be able to be consummated on terms satisfactory to THCR. The
aggregate proceeds from the Offerings, together with available cash, will be
used to (i) pay cash to those holders of Taj Holding Class A Common Stock
electing to receive cash in the Merger ($40.5 million assuming all such
holders elect Cash Consideration); (ii) redeem the outstanding Taj Bonds at a
redemption price equal to 100% of the principal amount thereof (approximately
$780 million assuming a redemption date of March 31, 1996), plus accrued
interest to the date of redemption; (iii) redeem the outstanding shares of Taj
Holding Class B Common Stock, as required in connection with the Taj Bond
Redemption, at the redemption price of $.50 per share (approximately $400,000
in the aggregate); (iv) retire the outstanding Plaza Notes through purchases
and/or defeasance; (v) satisfy the indebtedness of Taj Associates under the
NatWest Loan (approximately $32 million) (see "Business of Taj Holding--
Certain Indebtedness--NatWest Loan"); (vi)
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purchase, for $50 million in cash and 500,000 shares of THCR Common Stock, the
Specified Parcels from Realty Corp.; (vii) purchase Trump Plaza East pursuant
to the Trump Plaza East Purchase Option ($28.0 million); (viii) pay to Bankers
Trust $10 million to obtain releases of the liens and guarantees that Bankers
Trust has in connection with certain of the Trump Indebtedness and (ix) pay
related fees and expenses.
The Mortgage Notes. AC Holdings intends to issue in an underwritten offering
up to $1,180,000,000 aggregate principal amount of Mortgage Notes with an
expected maturity of ten years. THCR and its financial advisors have not yet
determined the exact terms of the Mortgage Notes. The actual amounts raised
will depend upon a number of factors, including market conditions, and other
factors beyond the control of THCR's and AC Holdings' management. The Mortgage
Notes are likely to include a change of control provision and restrictive
covenants prohibiting or limiting, among other things, the sale of assets, the
making of acquisitions and other investments, capital expenditures, the
incurrence of additional debt and liens and the payment of dividends and
distributions, in addition to a minimum consolidated net worth requirement and
certain ratio coverage tests. Non-compliance could result in the acceleration
of such indebtedness. In addition, the terms of the Mortgage Notes will, under
certain circumstances and subject to certain limitations, require AC Holdings
to make distributions to THCR Holdings to enable THCR Holdings to make
scheduled interest payments on its Senior Notes.
Real Property Purchases. The Specified Parcels are currently leased by Taj
Associates from Realty Corp. for approximately $3.3 million per year. See
"Business of Taj Holding--Certain Indebtedness--First Fidelity Loan/Specified
Parcels." Realty Corp. has outstanding indebtedness of approximately $78
million owing to First Fidelity in respect of the First Fidelity Loan which is
due November 15, 1999. The First Fidelity Loan is currently secured by a
mortgage on the Specified Parcels, and Taj Associates has previously
guaranteed the repayment of the First Fidelity Loan up to a maximum of $30
million. Trump has also personally previously guaranteed (up to a maximum of
approximately $19.2 million), and pledged his direct and indirect equity
interests in Taj Associates as collateral for, the First Fidelity Loan. As
mortgagee, First Fidelity has the right to terminate the lease on the
Specified Parcels under certain circumstances. See "Business of Taj Holding--
Certain Indebtedness--First Fidelity Loan/Specified Parcels."
In order to secure future use of the Specified Parcels and eliminate all
future lease payments on the Specified Parcels, Taj Associates expects to
satisfy the First Fidelity Loan through the payment of $50 million in cash and
500,000 shares of THCR Common Stock and purchase the Specified Parcels from
Realty Corp. for a nominal amount by exercising a purchase option with respect
to the Specified Parcels. Upon consummation of the purchase of the Specified
Parcels, (i) the lease relating to the Specified Parcels will be terminated,
thus eliminating Taj Associate's rental obligations thereunder; (ii) the $30
million guaranty by Taj Associates of the First Fidelity Loan will be
released; and (iii) Trump's guaranty of such indebtedness will be released and
First Fidelity will relinquish its lien on Trump's direct and indirect equity
interest in Taj Associates. The Specified Parcels will be part of the
collateral securing the Mortgage Notes. See "Business of Taj Holding--Certain
Indebtedness--First Fidelity Loan/Specified Parcels."
Pursuant to the Trump Plaza East Purchase Option, Plaza Associates has the
right to purchase Trump Plaza East for a purchase price of $28.0 million
through December 31, 1996, increasing by $1.0 million annually thereafter
until expiration on June 30, 1998. Plaza Associates intends to exercise the
Trump Plaza East Purchase Option in connection with the Merger Transaction and
thereby eliminate approximately $3.1 million of annual lease payments
associated with Trump Plaza East. See "Business of THCR--Properties--Trump
Plaza East."
Consent and Release Payment. The Trump Indebtedness is currently secured
by, among other things, the TTMI Note, as well as a lien on Trump's direct and
indirect equity interests in Taj Associates. As part of the Merger
Transaction, Taj Associates will pay $10 million to Bankers Trust to obtain
the consent of Bankers Trust to the Merger Transaction and to obtain releases
of certain liens on Trump's direct and indirect equity interests in Taj
Associates and related guarantees, and the pledge of the TTMI Note, all of
which secure a portion of the Trump Indebtedness. See "Business of Taj
Holding--Certain Indebtedness--TTMI Note."
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Plaza Note Purchase; Consent Solicitations. As part of the Merger
Transaction, Plaza Associates and Plaza Funding intend to purchase and (to the
extent not purchased) defease the Plaza Notes. Any such retirement of Plaza
Notes will be conditioned upon, among other things, the concurrent
consummation of the other transactions contemplated by the Merger Transaction.
Plaza Associates and Plaza Funding also intend to solicit the consent of a
majority in aggregate principal amount of holders of the Plaza Notes to amend
certain provisions of the Plaza Note Indenture. Under the terms of the Plaza
Note Indenture, Plaza Associates and Plaza Funding have the right to retire
the Plaza Notes through defeasance by depositing in trust a sum sufficient to
provide for the redemption of the Plaza Notes on June 15, 1998 at 105% of
their principal amount, plus accrued interest.
To effect the Merger Transaction, THCR Holdings and THCR Funding, the
issuers of the Senior Notes, will solicit from the holders of the Senior Notes
the waiver of, and consent to modify, certain provisions of the Senior Note
Indenture. Consent of holders of a majority in aggregate principal amount of
outstanding Senior Notes is required in connection with the Senior Note
Consent Solicitation.
Trump Contribution and Consideration. In connection with the Merger
Transaction, Trump will contribute to AC Holdings (on behalf, and at the
direction, of THCR Holdings) his shares (consisting of 50% of the outstanding
capital stock) of TTMC, the holder of a .01% general partnership interest in
Taj Associates, and will cause TTMI to contribute to AC Holdings (on behalf,
and at the direction, of THCR Holdings) TTMI's 49.995% general partnership
interest in Taj Associates.
In addition, Trump will contribute to Taj Holding all of his shares of Taj
Holding Class C Common Stock, which will be canceled pursuant to the Merger
Agreement. The Taj Holding Class C Common Stock provides Trump with the
ability to elect a majority of the Board of Directors of, and thereby control,
Taj Holding. It also affords Trump separate class voting rights in certain
events, including in connection with the Merger. The Taj Services Agreement,
pursuant to which Trump has received or will receive approximately $1.7
million, $1.4 million and $1.6 million (less $575,000 which was paid annually
by Trump to First Fidelity to reduce the amount owed by Taj Associates under
the lease for the Specified Parcels) in respect of the years ended 1995, 1994
and 1993, respectively, as compensation for services rendered to Taj
Associates, will also be terminated in connection with the Merger Transaction.
In exchange for the contribution by Trump and TTMI to AC Holdings (on
behalf, and at the direction, of THCR Holdings), Trump's directly held limited
partnership interest in THCR Holdings will be modified and TTMI will receive a
limited partnership interest in THCR Holdings. As a result of the Merger
Transaction, Trump's aggregate beneficial ownership of limited partnership
interests in THCR Holdings will decrease from approximately 40% to
approximately %, of which an approximately % interest will be held
directly by TTMI (assuming a price of $ per share of THCR Common Stock as
the Market Value in connection with the Merger and as the public offering
price in the THCR Stock Offering).
Trump's current limited partnership interest in THCR Holdings represents his
economic interest in the assets and operations of THCR Holdings, and is
convertible, at Trump's option, into 6,666,667 shares of THCR Common Stock
(representing approximately 40% of the outstanding shares of THCR Common Stock
after giving effect to such conversion). Upon consummation of the Merger
Transaction (assuming a price of $ per share of THCR Common Stock as the
Market Value in connection with the Merger and as the public offering price in
the THCR Stock Offering), Trump's and TTMI's limited partnership interests in
THCR Holdings will be convertible into an aggregate of shares of THCR
Common Stock, representing approximately % of the then outstanding shares
of THCR Common Stock (after giving effect to such conversion). At the time
that TTMI becomes a limited partner of THCR Holdings, Trump will contribute
shares of THCR Class B Common Stock to TTMI. THCR Class B Common Stock
has voting power equivalent to the voting power of the THCR Common Stock into
which a THCR Class B Common Stockholder's limited partnership interest in THCR
Holdings is convertible. The THCR Class B Stock is not entitled to dividends
or distributions. Upon conversion of all or any portion of a holder's THCR
Holdings limited partnership interest into shares of THCR Common Stock, the
corresponding voting power of such holder's THCR Class B Common Stock (equal
in voting power
67
<PAGE>
to the number of shares of THCR Common Stock issued upon such conversion) will
be proportionately diminished.
Concurrent with the consummation of the Merger Transaction, THCR will issue
to Trump a warrant to purchase an aggregate of 1.8 million shares of THCR
Common Stock, (i) 600,000 shares of which may be purchased on or prior to the
third anniversary of the issuance of the warrant at $30.00 per share, (ii)
600,000 shares of which may be purchased on or prior to the fourth anniversary
of the issuance of the warrant at $35.00 per share and (iii) 600,000 shares of
which may be purchased on or prior to the fifth anniversary of the issuance of
the warrant at $40.00 per share. Upon consummation of the Merger Transaction,
with respect to the shares underlying the warrant to be issued to Trump, Trump
will be granted registration rights comparable to those he currently has with
respect to the shares of THCR Common Stock issuable upon conversion of his
limited partnership interest in THCR Holdings. See "Description of THCR
Holdings Partnership Agreement--Exchange and Registration Rights."
Trump, through TTMI, has the right to reduce the equity interest of the Taj
Holding Class A Common Stock in Taj Associates from 50% to 20% by causing Taj
Associates to make the 14% payment to the holders of the Taj Bonds in an
amount calculated to provide them with a cumulative return equal to
approximately 14% per annum. If the 14% Payment is made (which can occur only
if the Taj Bonds are retired, redeemed or paid in full), Trump would
beneficially own 80% of Taj Associates. Moreover, the 14% Payment is permitted
to be financed with Taj Associates' borrowings. In connection with the Merger
Transaction, TTMI will not exercise its right to cause Taj Associates to make
such payment and such right will terminate upon the redemption of the Taj
Bonds.
THCR Contribution and Consideration. In connection with the Merger
Transaction, THCR will cause TM/GP, which will be an indirect wholly owned
subsidiary of THCR after the Effective Time and which holds 49.995% general
partnership interest in Taj Associates, to contribute to AC Holdings (on
behalf, and at the direction, of THCR Holdings) its general partnership
interest in Taj Associates, and will cause Taj Holding to contribute to TM/GP
and will then cause TM/GP to contribute to AC Holdings (on behalf, and at the
direction, of THCR Holdings) its shares (consisting of 50% of the outstanding
capital stock) of TTMC (the holder of a .01% general partnership interest in
Taj Associates). As a result of the Merger Transaction, THCR's beneficial
equity interest in THCR Holdings will increase from approximately 60% to
approximately %, of which an approximately % interest will be held directly
by TM/GP (assuming a $ price per share of THCR Common Stock as the Market
Value in connection with the Merger and as the public offering price in the
THCR Stock Offering).
Redemption of the Taj Bonds and the Taj Holding Class B Common Stock. The
Taj Holding Class B Common Stock is essentially a nonparticipating stock
issued as part of a Unit in connection with the Taj Bonds that entitles the
holders thereof to elect the Class B Directors, to vote on matters presented
to the stockholders of Taj Holding and to separately approve certain matters.
The Taj Holding Certificate of Incorporation provides that the outstanding
shares of Taj Holding Class B Common Stock must be redeemed at such time as
the principal amount of Taj Bonds are redeemed, defeased or paid, at the
redemption price of $.50 per share. In connection with the Merger Transaction,
Taj Funding will redeem the outstanding Taj Bonds at a redemption price equal
to 100% of the principal amount thereof plus accrued interest to the date of
redemption and Taj Holding will cause each outstanding share of Taj Holding
Class B Common Stock to be redeemed at the redemption price of $.50 per share
in accordance with the provisions of the Taj Holding Certificate of
Incorporation.
68
<PAGE>
SOURCES AND USES OF FUNDS IN THE MERGER TRANSACTION
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming a March 31, 1996 consummation):
Anticipated Sources of Funds Anticipated Uses of Funds
<TABLE>
<CAPTION>
(DOLLARS IN
CASH SOURCES THOUSANDS)
- ------------ -----------
<S> <C>
THCR Stock Offering...... $ 140,000
Mortgage Note Offering... 1,180,000
Available Cash........... 46,947
---------
Total Cash Sources...... 1,366,947
---------
</TABLE>
<TABLE>
<S> <C>
(DOLLARS IN
CASH USES THOUSANDS)
- --------- -----------
Redeem Taj Bonds(/4/)....... $ 793,767
Purchase and defease Plaza
Notes(/5/)................. 377,790
Satisfy NatWest Loan........ 36,500
Exercise Trump Plaza East
Purchase Option............ 28,000
Cash Payment to First Fidel-
ity........................ 50,000
Cash Payment to Bankers
Trust...................... 10,000
Redeem Taj Holding Class B
Common Stock............... 390
Transaction Fees and Ex-
penses and Working
Capital.................... 70,500
Total Cash Uses ........... 1,366,947
-----------
</TABLE>
<TABLE>
<CAPTION>
NON-CASH SOURCES
- ----------------
<S> <C>
THCR Common Stock to be is-
sued to Holders of Taj Hold-
ing Class A Common
Stock(/1/).................. 40,500
THCR Common Stock Equivalents
to be issued to Trump(/2/).. 40,500
THCR Common Stock to be
issued to First
Fidelity(/3/)............... 10,000
----------
Total Non-Cash Sources...... 91,000
----------
Total Sources................ $1,457,947
==========
</TABLE>
<TABLE>
<S> <C>
NON-CASH USES
- -------------
Acquisition of Taj Holding
Class A Common Stock(/1/)... 40,500
Acquisition of Trump's Direct
and Indirect Equity Inter-
ests in Taj Associates...... 40,500
THCR Common Stock issued to
First Fidelity(/3/)......... 10,000
----------
Total Non-Cash Uses......... 91,000
----------
Total Uses................... $1,457,947
==========
</TABLE>
- --------
(/1/Assumes)all holders of Taj Holding Class A Common Stock elect Stock
Consideration.
(/2/Represents)the value of the shares of THCR Common Stock into which the
limited partnership interests in THCR Holdings to be issued to Trump and
TTMI in connection with the Merger Transaction will be convertible.
(/3/Assumes)a price of $20.00 per share of THCR Common Stock.
(/4/Includes)the Additional Amount (as defined). See "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Taj
Associates" through March 31, 1996.
(/5/Assumes)that 90% of the Plaza Notes are purchased and the remaining 10%
defeased.
CERTAIN EFFECTS OF THE MERGER TRANSACTION; OPERATIONS OF TAJ ASSOCIATES AFTER
THE MERGER TRANSACTION
Upon consummation of the Merger Transaction, THCR will wholly own Taj
Holding and TM/GP, and THCR Holdings will wholly own Taj Associates through
THCR Holdings' 99% ownership of AC Holdings and 100% ownership of Plaza
Holding Inc. AC Holdings will wholly own Taj Associates through its ownership
of a 99% equity interest in Taj Associates and all of the capital stock of
TTMC, which owns a 1% equity interest in Taj Associates. THCR Holdings will
then have a 100% interest in Taj Associates, including its net book value at
September 30, 1995 and net loss for the nine months ended September 30, 1995,
which were $52,899,000 and $(13,708,000), respectively, and THCR and Trump
will have an approximately % beneficial interest and an approximately %
beneficial interest in Taj Associates, respectively, through their direct and
indirect ownership of THCR Holdings. As of September 30, 1995, Trump's 50%
interest in Taj Associates' net book value and net loss for the nine months
ended September 30, 1995 amounted to $26,449,500 and $(6,854,000),
respectively, TM/GP's 49.995% interest in Taj Associates' net book value at
September 30, 1995 and net loss for the nine months ended September 30, 1995
amounted to $26,446,855 and $(6,853,350), respectively, and THCR, THCR
Holdings, Merger Sub and AC Holdings did not have any interest in Taj
Associates. Upon consummation of the Merger Transaction, THCR's approximately
% beneficial interest in Taj Associates' pro forma net book value as of
September 30, 1995 and pro forma net loss for the nine months ended September
30, 1995 will be $ and $ , respectively (including TM/GP's approximately
% interest), and Trump's
69
<PAGE>
approximately % beneficial interest in Taj Associates' pro forma net book
value as of September 30, 1995 and net income for the nine months ended
September 30, 1995 will be $ and $ , respectively (including TTMI's
approximately % interest). If all holders of Taj Holding Class A Common
Stock elect Stock Consideration (assuming a price of $ per share of THCR
Common Stock as the Market Value in connection with the Merger and as the
public offering price in the THCR Stock Offering), upon consummation of the
Merger Transaction (and assuming that the over-allotment option to be granted
in connection with the THCR Stock Offering is exercised in full), such holders
would hold approximately % of the outstanding shares of THCR Common Stock
and would share in Taj Associates' earnings and growth through their
investment in THCR. Holders of Taj Holding Class A Common Stock electing Cash
Consideration would not continue to share in such earnings and growth as such
holders would receive cash in the Merger.
Upon consummation of the Merger, the directors of Merger Sub will become the
directors of the Surviving Corporation. At the Effective Time, the directors
of TM/GP, other than Messrs. Trump, Ribis and Pickus, will resign as directors
of TM/GP. Taj Associates' current officers and management team will continue
to operate the Taj Mahal, and as a wholly owned subsidiary of THCR Holdings,
the officers of THCR, the managing general partner of THCR Holdings, will
oversee Taj Associates' management. It is expected that following the Merger
Transaction, the business and operations of Taj Associates will be continued
substantially as they are currently being conducted, other than undertaking
the Taj Mahal Expansion.
Following the consummation of the Merger Transaction, the registration under
the Exchange Act of the Taj Holding Class A Common Stock and Taj Holding Class
B Common Stock will be terminated and the Units will be delisted from the
Amex. This termination of registration under the Exchange Act would make the
provisions of the Exchange Act, such as the requirement to file periodic
reports with the SEC, no longer applicable to Taj Holding. Certain officers
and directors of Taj Holding and certain officers and employees of Taj
Associates have participated in negotiating the provisions of the Merger
Transaction. These employees have received no additional compensation for such
services.
INTERESTS OF CERTAIN PERSONS IN THE MERGER TRANSACTION
General. In considering the recommendation of the Board of Directors of THCR
and the Board of Directors of Taj Holding with respect to the Merger
Transaction, certain members thereof may be deemed to have certain interests
in the Merger Transaction in addition to those of stockholders generally. Of
the nine members of the Board of Directors of Taj Holding, two (Trump and
Nicholas L. Ribis) are also directors of THCR, and two (Robert M. Pickus and
John P. Burke) are executive officers of THCR and, therefore, may be deemed to
have a conflict with respect to the Merger Transaction, given that THCR is the
other party to the Merger Agreement and THCR Holdings will acquire 100% of the
equity of Taj Associates if the Merger Transaction is consummated. In
addition, Messrs. John K. Kelly, Harold First (each a director of Taj
Holding), Ribis and Trump are directors of Realty Corp. Furthermore, Mr.
Ribis, the Chief Executive Officer of Taj Associates and Vice President of Taj
Holding and TM/GP, is THCR's President, Chief Executive Officer and Chief
Financial Officer, Mr. Pickus, the Executive Vice President of Corporate and
Legal Affairs of Taj Associates, is THCR's Executive Vice President and
Secretary, and Mr. Burke, Vice President of TM/GP, is THCR's Senior Vice
President of Corporate Finance Corporate Treasurer. See "Management of THCR"
and "Management of Taj Holding."
In addition to Trump's position as the Chairman of the Board of THCR and Taj
Holding, he currently owns 50% of the equity of Taj Associates and
approximately 40% of THCR Holdings. In consideration for the contribution of
his interests in Taj Associates, Trump will receive certain consideration
which is different from the consideration to be received by the holders of Taj
Holding Class A Common Stock in the Merger. See "--Related Merger
Transactions."
To the best knowledge of THCR, THCR Holdings, Merger Sub, TM/GP and Taj
Holding, no director or officer of any of THCR, THCR Holdings, Merger Sub, AC
Holdings, TM/GP or Taj Holding beneficially owns
70
<PAGE>
any shares of Taj Holding Class A Common Stock or Taj Holding Class B Common
Stock, except as set forth in "Security Ownership of Certain Beneficial Owners
and Management of THCR" and "Security Ownership of Certain Beneficial Owners
and Management of Taj Holding."
Indemnification of Directors and Officers; Insurance. Pursuant to the Merger
Agreement, for a period of six years after the Effective Time, each of the
Surviving Corporation and TM/GP will, and THCR will cause each of the
Surviving Corporation and TM/GP to, provide to the former officers and
directors of Taj Holding (the "Taj Holding Indemnified Parties")
indemnification as provided in the THCR Certificate of Incorporation and THCR
By-Laws in effect as of the date of the Merger Agreement. In addition, THCR
has agreed, and has agreed to cause the Surviving Corporation and TM/GP to
agree, that until six years from the Effective Time, unless otherwise required
by law, the certificate of incorporation and by-laws of the Surviving
Corporation and TM/GP shall not be amended, repealed or modified to reduce or
limit the rights of indemnity afforded to the present and former directors,
officers and employees of Taj Holding and TM/GP (including, without
limitation, with respect to the Merger Transaction) or the ability of the
Surviving Corporation or TM/GP to indemnify such persons, nor to hinder, delay
or make more difficult the exercise of such rights of indemnity or the ability
to indemnify. The Merger Agreement further provides that for such six years
after the Effective Time, the Surviving Corporation and TM/GP shall, and THCR
shall cause the Surviving Corporation and TM/GP to, purchase and maintain in
effect directors' and officers' liability insurance policies covering the Taj
Holding Indemnified Parties on terms no less favorable than the terms of the
current insurance policies' coverage or, if such directors' and officers'
liability insurance is unavailable for an amount not greater than 150% of the
premium paid by Taj Holding (on an annualized basis) for directors' and
officers' liability insurance during the period from January 1, 1996 to the
Effective Time (the "Current D&O Premium"), the Surviving Corporation and
TM/GP shall obtain as much insurance as can be obtained for a premium not in
excess (on an annualized basis) of such amount. See "The Merger Agreement--
Indemnification and Insurance."
The Plaza Note Indenture prohibits Trump from creating a lien upon any of
his direct or indirect equity interests in Plaza Associates, Plaza Funding, AC
Holdings and Plaza Holding Inc. unless Trump also secures the Plaza Notes
equally and ratably thereby. Upon the retirement of the Plaza Notes pursuant
to the Plaza Note Purchase, Trump will no longer be subject to such
prohibition.
In connection with the Merger Transaction, Plaza Associates intends to
purchase Trump Plaza East from Boardwalk, a wholly owned subsidiary of
Midlantic. As a result of such purchase, Trump will obtain a release of
certain debt owed by him to Midlantic, which debt was associated with Trump's
original purchase of the real property underlying Trump Plaza East.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Holders of Taj Holding Class A Common Stock, holders of Taj Holding Class B
Common Stock and Taj Bonds and holders of Plaza Notes should consult their tax
advisers concerning the tax implications of the Merger Transaction and of the
ownership and disposition of their stock or debt interests under applicable
state, local, foreign income and other tax laws. The exchange of Taj Holding
Class A Common Stock for cash or THCR Common Stock in the Merger is
anticipated to be a taxable event for the holders thereof. The purchase of the
Plaza Notes will also be a taxable event for the holders thereof. Based upon
counsel's opinion, it is expected, however, that under current law, the
defeasance of the Plaza Notes will not cause the holders of such Plaza Notes
to recognize income, gain or loss. Rather, until the Plaza Notes are sold or
redeemed, the holders will be subject to federal taxation on the same amounts,
in the same manner and at the same times as would have been the case if the
defeasance had not occurred.
71
<PAGE>
ESTIMATED FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred in connection with
the Merger Transaction are approximately as follows:
<TABLE>
<S> <C>
Payment of Merger Consolidation............................... $
Advisory fees.................................................
Legal fees and expenses.......................................
Accounting fees and expenses..................................
SEC filing fees...............................................
Printing and mailing expenses.................................
Exchange Agent fees and expenses..............................
Appraisal fees................................................
Early retirement of Plaza Notes and associated prepayment pre-
mium.........................................................
Miscellaneous expenses........................................
----------
Total....................................................... $
==========
</TABLE>
GENERAL INFORMATION
This Proxy Statement-Prospectus is being furnished to the stockholders of
THCR in connection with the THCR Special Meeting and to the stockholders of
Taj Holding in connection with the Taj Holding Special Meeting. The THCR
Special Meeting will be held at 10:00 a.m. on March , 1996 at . The Taj
Holding Special Meeting will be held at 10:00 a.m. on March , 1996 at .
This Proxy Statement-Prospectus and the accompanying forms of proxy are first
being mailed to stockholders on or about February , 1996.
THE THCR SPECIAL MEETING
PURPOSE
At the THCR Special Meeting, holders of THCR Common Stock and THCR Class B
Common Stock will be asked to approve the Merger Transaction, which approval
will constitute approval and adoption of the Merger Agreement. The term
"Merger Transaction" shall exclude the Debt Refinancing for purposes of the
proposal to be submitted to the stockholders of THCR for approval at the THCR
Special Meeting. At the THCR Special Meeting, stockholders of THCR will also
consider and vote upon such other matters as may properly be brought before
the THCR Special Meeting.
THE BOARD OF DIRECTORS OF THCR HAS UNANIMOUSLY APPROVED THE TERMS OF THE
MERGER TRANSACTION AND THE MERGER AGREEMENT AND RECOMMENDS A VOTE FOR APPROVAL
OF THE MERGER TRANSACTION.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of THCR has fixed the close of business on
February , 1996 as the THCR Record Date for determining holders entitled to
notice of and to vote at the THCR Special Meeting. The proposed issuance of
shares of THCR Common Stock to be issued as part of the THCR Stock Offering
will occur after the THCR Record Date and such shares will not be entitled to
vote at the Special Meeting.
As of the THCR Record Date, there were 10,066,667 shares of THCR Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote per share and there were 1,000 shares of THCR Class B Common Stock issued
and outstanding (all of which were held by Trump), each of which entitles the
holder thereof to 6,666,667 votes per share. The voting power of the shares of
THCR Class B Common Stock held by Trump equals the voting power of the number
of shares of THCR Common Stock issuable upon the conversion of Trump's limited
partnership interest in THCR Holdings into THCR Common Stock. The THCR Class B
Common Stock is intended to provide Trump with a voting interest in THCR which
is proportionate to his equity interest in THCR Holdings' assets represented
by his limited partnership interest. THCR does not know of any matters other
than as described in the Notice of Special Meeting that are to come before the
THCR Special Meeting.
72
<PAGE>
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. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES WILL BE VOTED FOR
APPROVAL OF THE MERGER TRANSACTION. If any other matter or matters are
properly presented for action before the THCR Special Meeting, the persons
named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment,
unless such authorization is withheld. 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 THCR Special Meeting; however, mere attendance at the
THCR Special Meeting will not itself have the effect of revoking the proxy.
QUORUM
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 THCR Special Meeting.
Shares for which duly executed proxies have been received but with respect to
which holders of shares have abstained from voting are counted in determining
the shares present at the THCR Special Meeting.
REQUIRED VOTE
Approval of the Merger Transaction will require the affirmative vote of (i)
the holders of a majority of the outstanding shares of THCR Common Stock
(excluding directors and executive officers of THCR and their affiliates)
voting as a separate class (representing the approval of a majority of THCR's
unaffiliated stockholders); and (ii) the holders of shares representing a
majority of the outstanding voting power of THCR Common Stock and THCR Class B
Common Stock voting together as a single class.
As of the THCR Record Date, (i) directors and executive officers of THCR and
their affiliates had the power to vote shares representing approximately %
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 40% 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 Merger Transaction. Pursuant to an agreement with THCR
dated January 8, 1996, Trump has agreed to vote his shares of THCR Class B
Common Stock for approval of the Merger Transaction and at the THCR Special
Meeting, such shares will be voted accordingly.
For purposes of determining whether the Merger Transaction has received the
required number of votes for approval at the THCR Special Meeting, abstentions
will have the same effect as a negative vote. In instances where
recordholders, such as brokers, are prohibited from exercising discretionary
authority for beneficial owners who have not returned a proxy, those shares
will not be counted in determining the shares present at the meeting and
entitled to vote with respect to that matter and will have the same effect as
a negative vote.
SOLICITATION OF PROXIES
THCR will bear the costs of soliciting proxies from its stockholders. In
addition to the use of the mails, proxies may be solicited by the directors
and officers of THCR by personal interview, telephone or telegram. Such
directors and officers will not receive additional compensation for such
solicitation but may be reimbursed for 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.
73
<PAGE>
THE TAJ HOLDING SPECIAL MEETING
PURPOSE
At the Taj Holding Special Meeting, the holders of Taj Holding Class A
Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common
Stock will be asked to approve and adopt the Merger Agreement. At the Taj
Holding Special Meeting, stockholders of Taj Holding will also consider and
vote upon such other matters as may properly be brought before the Taj Holding
Special Meeting.
THE BOARD OF DIRECTORS OF TAJ HOLDING HAS UNANIMOUSLY APPROVED THE TERMS OF
THE MERGER AND RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of Taj Holding has fixed the close of business on
February , 1996 as the Taj Holding Record Date for determining the holders
entitled to notice of and to vote at the Taj Holding Special Meeting.
As of the Taj Holding Record Date, there were 1,350,000 shares of Taj
Holding Class A Common Stock, 780,242 shares of Taj Holding Class B Common
Stock and 1,350,000 shares of Taj Holding Class C Common Stock (all of which
were held by Trump) issued and outstanding, each of which entitles the holder
thereof to one vote per share. Taj Holding does not know of any other matters
other than as described in the Notice of Special Meeting that are to come
before the Taj Holding Special Meeting.
All shares of Taj Holding Class A Common Stock, Taj Holding Class B Common
Stock and Taj Holding Class C 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. IF NO INSTRUCTIONS
ARE INDICATED, SUCH SHARES WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT. If any other matter or matters are properly presented for
action before the Taj Holding Special Meeting, the persons named in the
enclosed form of proxy and acting thereunder will have the discretion to vote
on such matters in accordance with their best judgment, unless such
authorization is withheld. 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 Taj Holding, by signing and returning a later dated proxy, or by
voting in person at the Taj Holding Special Meeting; however, mere attendance
at the Taj Holding Special Meeting will not itself have the effect of revoking
the proxy.
QUORUM
The presence in person or by proxy of the holders of a majority of the
outstanding shares of each of the Taj Holding Class B Common Stock and Taj
Holding Class C Common Stock is necessary for the transaction of business at
the Taj Holding Special Meeting. Shares for which duly executed proxies have
been received but with respect to which holders of shares have abstained from
voting are counted in determining the shares present at the Taj Holding
Special Meeting.
REQUIRED VOTE
Approval and adoption of the Merger Agreement will require the affirmative
vote of the holders of a majority of the outstanding shares of each of the Taj
Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding
Class C Common Stock, each voting as a separate class.
As of the Taj Holding Record Date, (i) directors and executive officers of
Taj Holding and their affiliates had the power to vote shares representing
approximately % of the Taj Holding Class A Common Stock; (ii) directors and
executive officers of Taj Holding and their affiliates had the power to vote
shares representing approximately % of the Taj Holding Class B Common Stock;
and (iii) Trump had the power to vote 100% of the outstanding shares of Taj
Holding Class C Common Stock. All of such officers, directors and affiliates
74
<PAGE>
have indicated that they intend to vote their shares for approval and adoption
of the Merger Agreement. Trump has agreed to vote his shares of Taj Holding
Class C Common Stock for approval and adoption of the Merger Agreement and at
the Taj Holding Special Meeting, such shares will be voted accordingly.
Pursuant to the Class A Agreement, the holders of 701,840 shares of Taj
Holding Class A Common Stock (representing approximately 52% of the
outstanding shares of Taj Holding Class A Common Stock) agreed to vote in
favor of the Merger Agreement and at the Taj Holding Special Meeting, such
shares will be voted accordingly.
For purposes of determining whether the Merger Agreement has received the
required number of votes for approval at the Taj Holding Special Meeting,
abstentions will have the same effect as a negative vote. In instances where
recordholders, such as brokers, are prohibited from exercising discretionary
authority for beneficial owners who have not authorized the vote on a matter,
those shares will not be counted in determining the shares present at the
meeting and entitled to vote with respect to that matter and will have the
same effect as a negative vote.
SOLICITATION OF PROXIES
Taj Holding will bear the costs of soliciting proxies from its stockholders.
In addition to the use of the mails, proxies may be solicited by the directors
and officers of Taj Holding by personal interview, telephone or telegram. Such
directors and officers will not receive additional compensation for such
solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. Taj Holding 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 Taj Holding Class A Common Stock and Taj
Holding Class B Common Stock held of record by such persons, in which case Taj
Holding will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith.
ELECTION PROCEDURES
Each holder of Taj Holding Class A Common Stock will receive an Election
Form together with this Proxy Statement-Prospectus permitting each holder of
Taj Holding Class A Common Stock to elect to receive only Stock Consideration
or only Cash Consideration. Any holder of Taj Holding Class A Common Stock who
wishes to receive Cash Consideration must send the Election Form properly
completed to the Exchange Agent such that it is received by the Exchange Agent
on or before 5:00 p.m. on the Election Deadline. Holders of the Taj Holding
Class A Common Stock who (i) fail to complete properly the Election Form, (ii)
fail to send the Election Form to the Exchange Agent such that it is received
by the Exchange Agent prior to the Exchange Deadline or (iii) make no
election, shall be deemed to have elected to receive the Stock Consideration.
Any Election Form may be revoked prior to the Election Deadline by submitting
a new Election Form to the Exchange Agent.
HOLDERS OF TAJ HOLDING CLASS A COMMON STOCK AND TAJ HOLDING CLASS B COMMON
STOCK SHOULD NOT SEND THEIR STOCK CERTIFICATES WITH THEIR PROXY CARDS. HOLDERS
OF TAJ HOLDING CLASS A COMMON STOCK WHO WISH TO RECEIVE CASH CONSIDERATION
MUST SEND THE ELECTION FORM TO THE EXCHANGE AGENT ON OR BEFORE THE ELECTION
DEADLINE. SEE "THE MERGER AGREEMENT--ELECTION PROCEDURES."
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THE MERGER AGREEMENT
The following description of certain terms of the Merger 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 Merger Agreement, a copy
of which is attached hereto as Annex A and incorporated herein by reference.
Stockholders of THCR and Taj Holding are urged to read carefully the Merger
Agreement in its entirety.
THE MERGER
The Merger Agreement provides that, subject to the satisfaction or waiver of
the conditions to the Merger contained therein, Merger Sub will be merged with
and into Taj Holding, in accordance with the DGCL, whereupon the separate
existence of Merger Sub will cease and Taj Holding will become the Surviving
Corporation. At the Effective Time, the conversion of Taj Holding Class A
Common Stock and the conversion of shares of the Common Stock of Merger Sub
will be effected as described below. The current certificate of incorporation
and by-laws of Merger Sub will become the certificate of incorporation and by-
laws of the Surviving Corporation, except that the certificate of
incorporation of the Surviving Corporation will be amended to change the name
of Merger Sub to "Taj Mahal Holding Corp." The directors of Merger Sub
immediately prior to the Effective Time will become the directors of the
Surviving Corporation and the officers of Taj Holding immediately prior to the
Effective Time will become the officers of the Surviving Corporation, in each
case until their respective successors are duly elected and qualified.
CLOSING; EFFECTIVE TIME
The Merger Agreement provides that the closing of the Merger (the "Closing")
will take place as promptly as practicable (and in any event within two
business days) after satisfaction or waiver of certain terms and conditions,
including conditions to Closing, contained in the Merger Agreement. A soon as
practicable after the Closing, Taj Holding and Merger Sub will file, or cause
to be filed, a certificate of merger with the Secretary of State of the State
of Delaware (the "Certificate of Merger"). The Effective Time will be the time
such filing is accepted for filing by the Secretary of State of the State of
Delaware or at such other time as set forth in the Certificate of Merger.
TERMS OF THE MERGER
The Merger Agreement provides that, at the Effective Time, (i) each share of
Taj Holding Class A Common Stock outstanding immediately prior to the
Effective Time will, except as otherwise provided in the Merger Agreement, be
converted into and represent the right to receive, at the holder's election,
either $30.00 in cash or that number of fully paid nonassessable shares of
THCR Common Stock determined by dividing $30 by the Market Value; (ii) all
shares of Taj Holding Class C Common Stock outstanding immediately prior to
the Effective Time will be canceled; and (iii) each share of the Common Stock
of Merger Sub outstanding immediately prior to the Effective Time will be
converted into and represent the right to receive one fully paid and
nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation. "Market Value" is defined in the Merger Agreement as
the average of the high and low per share sales prices of the THCR Common
Stock during the 15 trading days immediately preceding the Effective Time or,
if THCR and Taj Holding mutually agree, during any such other period as agreed
under the Class A Agreement. Immediately prior to the Effective Time, Taj
Holding will cause each share of Taj Holding Class B Common Stock outstanding
prior to such time to be redeemed at $.50 per share in accordance with the
provisions of the Taj Holding Certificate of Incorporation and the Taj Bond
Indenture. Each share of Taj Holding Class A Common Stock held by Taj Holding
as treasury stock immediately prior to the Effective Time or owned by any
direct or indirect subsidiary of Taj Holding immediately prior to the
Effective Time will be canceled, and no conversion or payment will be made
with respect thereto.
ELECTION PROCEDURES
The Merger Agreement provides that, prior to the Effective Time, THCR and
Taj Holding will designate Continental Stock Transfer & Trust Company, or
another mutually acceptable bank or trust company,
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to act as the Exchange Agent. Taj Holding will, or will cause the Exchange
Agent to, send the Election Form, in form satisfactory to THCR, to each holder
of Taj Holding Class A Common Stock together with this Proxy Statement-
Prospectus. Each Election Form will permit each holder of Taj Holding Class A
Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions) to elect to receive either the Stock
Consideration or the Cash Consideration. Taj Holding will use its best efforts
to make available one or more Election Forms as may be reasonably requested by
all persons who become holders (or beneficial owners) of Taj Holding Class A
Common Stock between the record date established for purposes of the Taj
Holding Special Meeting and the Election Deadline.
Any holder of Taj Holding Class A Common Stock who wishes to receive Cash
Consideration in lieu of Stock Consideration must send the Election Form
properly completed to the Exchange Agent at the address set forth in the
Election Form on or before the Election Deadline. Holders of the Taj Holding
Class A Common Stock who (i) fail to complete properly the Election Form, (ii)
fail to send the Election Form to the Exchange Agent prior to the Election
Deadline or (iii) make no election, will be deemed to have elected to receive
the Stock Consideration.
Any Election Form may be revoked prior to the Election Deadline by
submitting a new Election Form to the Exchange Agent. In addition, all
Election Forms will automatically be deemed revoked if the Exchange Agent is
notified in writing by Taj Holding and THCR that the Merger has been abandoned
or the Merger Agreement has been terminated.
Subject to the terms of the Merger Agreement, the determination of the
Exchange Agent will be binding and conclusive as to whether or not the
Election Form has been properly or timely submitted or revoked. Neither the
Exchange Agent, Taj Holding, THCR nor Merger Sub will be under any obligation
to notify any person of any defect in an Election Form or the revocation
thereof.
SURRENDER AND PAYMENT; EXCHANGE FUND
The Merger Agreement provides that, as soon as practicable after the
Effective Time, THCR will instruct the Exchange Agent to mail to each holder
of a certificate or certificates evidencing shares of Taj Holding Class A
Common Stock (other than Dissenting Shares) (the "Taj Holding Certificates")
(i) a letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to the Taj Holding Certificates will
pass, only upon proper delivery of such Taj Holding Certificates to the
Exchange Agent) and (ii) instructions to effect the surrender of the Taj
Holding Certificates in exchange for Merger Consideration. Each holder of Taj
Holding Class A Common Stock, upon surrender to the Exchange Agent of such
holder's Taj Holding Certificates with the letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to
such instructions, will be given the amount to which such holder is entitled
to, pursuant to the Merger Agreement, of (i) certificates evidencing shares of
THCR Common Stock (the "THCR Certificates") as payment of the Stock
Consideration, (ii) cash as payment of the Cash Consideration (without any
interest accrued thereon), (iii) dividends or distributions declared or made
on the THCR Common Stock after the Effective Time and payable between the
Effective Time and the time of such surrender (the "THCR Dividends") and/or
(iv) cash for payment of fractional shares of THCR Common Stock (as described
below). Until so surrendered, each Taj Holding Certificate will after the
Effective Time represent for all purposes only the right to receive THCR
Certificates or cash, as the case may be. After the Effective Time, there will
be no further registration of transfers of Taj Holding Class A Common Stock.
THCR will establish reasonable procedures for the delivery of THCR
Certificates or cash, as the case may be, to holders of Taj Holding Class A
Common Stock whose Taj Holding Certificates have been lost, destroyed or
mutilated.
At the Closing, THCR will deposit in trust with the Exchange Agent, for the
benefit of the holders of Taj Holding Class A Common Stock, the appropriate
amount to which such holders are entitled, pursuant to the Merger Agreement,
of THCR Certificates for payment of the Stock Consideration, cash for payment
of the Cash Consideration, THCR Dividends, if any, and cash for payment of
fractional shares of THCR Common Stock (collectively, the "Exchange Fund").
The Exchange Agent will, pursuant to irrevocable instructions, make the
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payments to the holders of the Taj Holding Class A Common Stock as set forth
in the Merger Agreement. The Exchange Agent will not be entitled to vote or
exercise any rights of ownership with respect to the THCR Common Stock held by
it from time to time, except that it will hold all THCR Dividends paid or
distributed for the accounts of the persons entitled thereto.
If any delivery of the Merger Consideration is to be made to a person other
than the registered holder of the Taj Holding Certificates surrendered in
exchange therefor, it will be a condition to such delivery that the Taj
Holding Certificate so surrendered will be properly endorsed or be otherwise
in proper form for transfer and that the person requesting such delivery will
(i) pay to the Exchange Agent any transfer or other taxes required as a result
of delivery to a person other than the registered holder or (ii) establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
Any portion of the Exchange Fund that remains undistributed to the holders
of the Taj Holding Class A Common Stock for 180 days after the Effective Time
will be delivered to THCR upon demand. Any holder of Taj Holding Class A
Common Stock who has not complied with the exchange provisions of the Merger
Agreement within 180 days after the Effective Time will have no further claim
upon the Exchange Agent and will thereafter look only to THCR for conversion
or payment, as the case may be, of the Merger Consideration, THCR Dividends
and fractional shares of THCR Common Stock.
If a Taj Holding Certificate has not been surrendered prior to the date on
which any receipt of Merger Consideration, THCR Dividends or cash for payment
of fractional shares of THCR Common Stock would otherwise escheat to or become
the property of any governmental agency, such Taj Holding Certificate will, to
the extent permitted by applicable law, be deemed to be canceled and no money
or other property will be due to the holder thereof.
The Exchange Agent will invest cash in the Exchange Fund, as directed by
THCR, on a daily basis, provided that all such investments will be in
obligations of or guaranteed by the United States of America with remaining
maturities not exceeding 180 days, in commercial paper obligations receiving
the highest rating from either Moody's Investors Service, Inc. or Standard &
Poor's Ratings Group, or in certificates of deposit or banker's acceptances of
commercial banks with capital exceeding $500 million (collectively, "Permitted
Investments"). The maturities of Permitted Investments will be such as to
permit the Exchange Agent to make prompt payment to former stockholders of Taj
Holding entitled thereto as contemplated by the Merger Agreement. THCR will
promptly replenish the Exchange Fund to the extent of any losses incurred as a
result of Permitted Investments. Any interest and other income resulting from
such investments will be paid to THCR. If for any reason (including losses)
the Exchange Fund is inadequate to pay the amounts to which holders of Taj
Holding Class A Common Stock will be entitled under the Merger Agreement, THCR
will in any event be liable for payment thereof. The Exchange Fund will not be
used for any purpose not specifically provided for in the Merger Agreement.
DIVIDENDS; LIABILITY; NO FURTHER RIGHTS FOR HOLDERS ELECTING CASH
CONSIDERATION
No THCR Dividend will be paid to persons entitled to receive certificates
representing THCR Common Stock pursuant to the Merger Agreement until such
persons surrender their Taj Holding Certificates. Upon such surrender, THCR
Dividends will be paid to the person in whose name the THCR Certificate will
be issued. In no event will the person entitled to receive such dividends or
distributions be entitled to receive interest on such
dividends or distributions. Notwithstanding the foregoing, neither the
Exchange Agent nor any party to the Merger Agreement will be liable to a
holder of Taj Holding Class A Common Stock for any shares of THCR Common Stock
or dividends or distributions thereon delivered to a governmental agency
pursuant to any applicable escheat or similar laws.
Holders of Taj Holding Class A Common Stock who elect to receive the Cash
Consideration or who will receive cash for payment of fractional shares of
THCR Common Stock will, upon properly surrendering their Taj Holding
Certificates, be deemed to have been paid in full satisfaction of all rights
pertaining to the shares or fractions thereof exchanged for cash theretofore.
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FRACTIONAL SHARES
No fractional shares of THCR Common Stock will be issued in connection with
the Merger. In lieu of any such fractional share, each holder of THCR Common
Stock who would otherwise have been entitled to a fractional share of THCR
Common Stock upon surrender of certificates for exchange will be paid cash
(without interest) in an amount equal to the Market Value of such fractional
shares. As soon as practicable after the determination of the amount of cash
to be paid to former holders of Taj Holding Class A Common Stock in lieu of
any fractional interests, the Exchange Agent will make available such amounts
to such former holders.
DISSENTING SHARES
Notwithstanding any other provision of the Merger Agreement to the contrary,
shares of Taj Holding Class A Common Stock that are outstanding immediately
prior to the Effective Time and which are held by holders who have not voted
in favor of the Merger or consented thereto in writing and who will have
demanded properly in writing appraisal for such shares in accordance with
Section 262 of the DGCL and who have not withdrawn such demand or otherwise
have forfeited appraisal rights (collectively, the "Dissenting Shares") will
not be converted into or represent the right to receive the Merger
Consideration. Such holders will be entitled to receive payment of the
appraised value of such shares, except that all Dissenting Shares held by
holders who have failed to perfect or who effectively have withdrawn or lost
their rights to appraisal of such shares under such Section 262 will thereupon
be deemed to have been converted into and to have become exchangeable, as of
the Effective Time, for the right to receive, without any interest thereon,
the Stock Consideration, upon surrender of the Taj Holding Certificates
evidencing such shares.
Taj Holding will give THCR (i) prompt notice of any demands for appraisal
received by Taj Holding, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by Taj Holding and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. Taj Holding will not, except with the
prior written consent of THCR, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
CONDITIONS TO THE MERGER
The obligations of Taj Holding, THCR and Merger Sub to consummate the
transactions contemplated by the Merger Agreement are subject to the
fulfillment at or prior to the Effective Time 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 Merger Agreement will have been duly
approved and adopted by the affirmative vote of a majority of the outstanding
shares of (x) Taj Holding Class B Common Stock and Taj Holding Class C Common
Stock, each voting as a separate class, in accordance with the DGCL and the
Taj Holding Certificate of Incorporation, and (y) Taj Holding Class A Common
Stock, voting as a separate class; (ii) the Merger Transaction (other than the
Debt Refinancing) will have been duly approved 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
THCR Certificate of Incorporation, and (y) THCR Common Stock (other than
shares held by officers and directors of THCR and their affiliates), voting as
a separate class; (iii) all filings required to be made prior to the Effective
Time with, and all consents, approvals, permits and authorizations required to
be obtained prior to the Effective Time from, governmental and regulatory
authorities (including, without limitation, Gaming Authorities (as defined in
the Merger Agreement)) in connection with the execution and delivery of the
Merger Agreement and the consummation of the transactions contemplated thereby
by Taj Holding, THCR and Merger Sub 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 be 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 Merger
Agreement; provided, however, that the parties invoking this condition will
use their best efforts to have any such judgment, decree,
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injunction or order vacated; (v) the shares of THCR Common Stock to be issued
pursuant to the Merger will have been approved for listing on the NYSE,
subject to official notice of issuance; (vi) the waiting period applicable to
the consummation of the Merger under the HSR Act will have expired or been
terminated; and (vii) Taj Holding and THCR shall have received one or more
solvency opinions with respect to the Mortgage Note Offering and related
guarantees from a nationally recognized appraisal firm, in form and substance
reasonably satisfactory to Taj Holding and THCR.
The obligation of Taj Holding to consummate the transactions contemplated by
the Merger Agreement is also subject to the fulfillment at or prior to the
Effective Time of certain other 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 consent of certain of Taj Associates' creditors necessary to
consummate the Merger Transaction will have been obtained; (ii) assuming
consummation of the Merger Transaction, AC Holdings will have assumed the
indemnification and other obligations of the Surviving Corporation and TM/GP
set forth in the Merger Agreement with the understanding that any subsequent
action on the part of AC Holdings will not release AC Holdings of such
indemnification and other obligations; (iii) each of THCR and Merger Sub will
have performed in all material respects all of its respective obligations
under the Merger Agreement required to be performed by them at or prior to the
Effective Time; (iv) each of the representations and warranties of each of
THCR and Merger Sub contained in the Merger Agreement and in any certificate
or other writing delivered by THCR and Merger Sub pursuant thereto will be
true in all material respects at and as of the Effective Time, as if made at
and as of such time (except to the extent it relates to a particular date);
and (v) Taj Holding will have received a certificate from THCR and Merger Sub,
signed by an executive officer of THCR and Merger Sub, respectively, to the
effect set forth in clauses (iii) and (iv) of this paragraph.
The obligation of each of THCR and Merger Sub to consummate the transactions
contemplated by the Merger Agreement is also subject to the fulfillment at or
prior to the Effective Time 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 Market Value of the THCR Common Stock will be $20.00
or more; (ii) the Offerings, the Plaza Note Purchase and the Senior Note
Consent Solicitation will have been consummated on terms acceptable to THCR;
(iii) the purchase of the Specified Parcels will have been consummated on
terms acceptable to THCR, the obligations relating to the outstanding
indebtedness of Realty Corp. to First Fidelity will have been satisfied and
the releases of the liens and guarantees relating to such indebtedness will
have been obtained; (iv) the payment to Bankers Trust of $10 million
contemplated as part of the Merger Transaction will have been made and the
releases of the liens and guarantees that Bankers Trust has with respect to
Taj Associates (including Trump's direct and indirect ownership interest
therein) and with respect to the TTMI Note will have been obtained; (v) Trump
will have contributed, or caused to be contributed, to AC Holdings (on behalf,
and at the direction, of THCR Holdings) all of his direct and indirect
ownership interests in Taj Associates on terms acceptable to THCR; (vi) the
number of shares of Taj Holding Class A Common Stock for which written demand
for appraisal has been properly made pursuant Section 262 of the DGCL will
have not exceeded 5% of the total number of shares of Taj Holding Class A
Common Stock outstanding immediately prior to the Effective Time; (vii) the
Registration Statement containing this Proxy Statement-Prospectus will have
been declared effective and no stop order suspending effectiveness will have
been issued, no action, suit, proceeding or investigation by the SEC to
suspend the effectiveness thereof will have been initiated and be continuing,
and all necessary approvals under blue sky or other state securities laws, the
Securities Act or the Exchange Act relating to the issuance or trading of the
THCR Common Stock will have been received; (viii) the consent of certain of
Trump's creditors necessary to consummate the Merger Transaction will have
been obtained; (ix) Taj Holding will have performed in all material respects
all of its obligations under the Merger Agreement required to be performed by
it at or prior to the Effective Time; (x) each of the representations and
warranties of Taj Holding contained in the Merger Agreement and in any
certificate or other writing delivered by Taj Holding pursuant thereto will be
true in all material respects at and as of the Effective Time, as if made at
and as of such time (except to the extent it relates to a particular date);
and (xi) THCR and Merger Sub will have received a certificate signed by an
executive officer of Taj Holding to the effect set forth in clauses (ix) and
(x) of this paragraph.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
THCR, Merger Sub and Taj Holding 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, standing and similar corporate matters; (ii) capitalization; (iii)
subsidiaries; (iv) reports and other documents filed with 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
Merger Agreement and the transactions contemplated thereby; (vii) the absence
of any conflict with their respective certificates of incorporation and by-
laws 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) the
absence of any material untrue statements or omissions in the Registration
Statement containing this Proxy Statement-Prospectus and in the Schedule 13E-3
and the Registration Statements relating to the THCR Stock Offering and the
Mortgage Note Offering; (xiii) the inapplicability of Section 203 of the DGCL;
(xiv) the receipt of opinions from financial advisors; (xv) the absence of
brokerage or finder's fees, except those payable to Rothschild and DLJ; (xvi)
the existence of the Trump/Taj Holding Voting Agreement and the Trump/THCR
Voting Agreement; (xvii) the right of Taj Holding and Taj Funding to redeem
the Taj Bonds; and (xviii) the due authorization of, and lack of preemptive or
similar rights with respect to the shares of THCR Common Stock to be issued in
connection with the Merger.
CONDUCT PENDING THE MERGER
Pursuant to the terms of the Merger Agreement, from and after the date
thereof and until the Effective Time, Taj Holding will, and will cause each of
its subsidiaries to, conduct its business solely in the ordinary course
consistent with past practice and, without the prior written consent of THCR,
Taj Holding will not, and will cause each of its subsidiaries not to, except
as required or permitted pursuant to the terms of the Merger Agreement or as
contemplated in Taj Holding's previous filings with the SEC or by the terms of
the Merger Transaction, (i) make any material change in the conduct of its
businesses and operations or enter into any transaction other than in the
ordinary course of business consistent with past practice, or make any
investment other than a Permitted Investment (as such term is defined in the
Taj Bond Indenture); (ii) make any change in its certificate of incorporation
or by-laws, 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 its
capital stock, alter in any material respect the terms of any of its
outstanding securities, or make any change in its outstanding shares of
capital stock or in its 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; (iv) make any sale, assignment, transfer, abandonment
or other conveyance of any of its assets or any part thereof, except in the
ordinary course of business consistent with past practices; (v) subject any of
its 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 its
capital stock or declare, set aside or pay any dividends or other distribution
in respect of such shares; (vii) increase the compensation payable or to
become payable to its 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
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any director, executive officer or employee; (viii) take any other action that
would cause any of the representations and warranties made in the Merger
Agreement not to remain true and correct; or (ix) commit itself to do any of
the foregoing. In addition, from the date of the Merger Agreement through the
Effective Time, Taj Holding will not, and will cause its subsidiaries not to,
pay or declare any dividend or make any distribution with respect to any of
their equity interests except as contemplated in connection with the Merger
Transaction.
In addition, from and after the date of the Merger Agreement and until the
Effective Time, THCR will, and will cause each of its subsidiaries to, conduct
its business solely in the ordinary course consistent with past practice and,
without the prior written consent of Taj Holding, THCR will not, and will
cause each of its subsidiaries not to, except as required or permitted
pursuant to the terms of the Merger Agreement or as contemplated in THCR's
previous filings with the SEC or by the terms of the Merger Transaction, (i)
make any material change in the conduct of its 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 make any material change in its outstanding
shares of capital stock or in its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise; (iii) take any other
action that would cause any of the representations and warranties made in the
Merger Agreement not to remain true and correct; or (iv) commit itself to do
any of the foregoing.
OTHER COVENANTS
Pursuant to the terms of the Merger Agreement, each of THCR and Taj Holding
agreed (i) to prepare and file with the SEC this Proxy Statement-Prospectus
and to make all necessary filings with respect to the transactions
contemplated by the Merger under applicable state and federal securities laws;
(ii) to take all necessary actions to convene the THCR Special Meeting and the
Taj Holding Special Meeting, respectively; (iii) to deliver to each of their
respective stockholders this Proxy Statement-Prospectus and related proxy card
and, in the case of Taj Holding, the Election Form; (iv) to use reasonable
efforts to deliver to the other "comforts letters" of their respective
independent accountants, dated and delivered the date on which the
registration statement containing this Proxy Statement-Prospectus will become
effective; (v) to give the other access to information and personnel and to
keep, subject to certain exceptions, such information confidential; (vi) to
notify the other upon the occurrence of certain specified events; and (vii) 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 Merger, 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.
Taj Holding also agreed to cause (i) the redemption of the Taj Bonds
immediately after the Effective Time and (ii) Taj Associates' general counsel
to deliver to THCR at the Closing a certificate (satisfactory to counsel for
THCR) identifying all holders of Taj Holding Class A Common Stock who were, to
the best of his knowledge and after being advised by outside counsel,
affiliates (for purposes of Rule 145 under the Securities Act) of Taj Holding
at the time of the Taj Special Meeting. THCR also agreed to use its best
efforts to list on the NYSE, subject to official notice of issuance, the THCR
Common Stock to be issued pursuant to the Merger.
Subject to the terms and conditions of the Merger 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 Merger Agreement,
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 Merger Agreement (and, in such case, to proceed with the
transactions contemplated by the Merger Agreement as expeditiously as
possible), subject, however, to the appropriate vote of the respective
stockholders or stockholder, as the case may be, of Taj Holding, THCR and
Merger Sub.
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NO SOLICITATION
The Merger Agreement provides that subject to the fiduciary duties of the
Board of Directors of Taj Holding, as advised by its Special Counsel, neither
Taj Holding nor any of its subsidiaries will, directly or indirectly, take
(nor will Taj Holding authorize or permit its subsidiaries, 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 Merger 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 any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal. Taj Holding will promptly
communicate to the other parties to the Merger Agreement any solicitation by
or of Taj Holding 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.
Notwithstanding the paragraph above, pursuant to the Merger Agreement, Taj
Holding may, directly or indirectly, furnish information and access, in each
case in response to unsolicited requests therefor, to any person or entity
pursuant to appropriate confidentiality agreements, and may participate in
discussions and negotiate with such person or entity concerning any
Acquisition Proposal involving Taj Holding or any direct or indirect
subsidiary of Taj Holding, if the Taj Holding Class B Directors by a majority
vote determine in their good faith judgment that such action is appropriate in
furtherance of the best interests of stockholders.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that, for a period of six years from the
Effective Time, each of the Surviving Corporation and TM/GP will, and THCR
will cause the Surviving Corporation and TM/GP to, provide the Taj Holding
Indemnified Parties indemnification as set forth in the certificate of
incorporation and by-laws of THCR as in effect as of the date of the Merger
Agreement. THCR agreed, and caused the Surviving Corporation and TM/GP to
agree, that until six years from the Effective Time, unless otherwise required
by law, the certificate of incorporation and by-laws of the Surviving
Corporation and TM/GP will not be amended, repealed or modified to reduce or
limit the rights of indemnity afforded to the present and former directors,
officers and employees of Taj Holding and TM/GP (including, without
limitation, with respect to the transactions contemplated by the Merger
Agreement), or the ability of the Surviving Corporation or TM/GP to indemnify
them, nor to hinder, delay or make more difficult the exercise of such rights
of indemnity or the ability to indemnify. Should any claim or claims be made
against any present or former director, officer, employee or agent of Taj
Holding or TM/GP, arising from his services as such, within six years of the
Effective Time, the provisions of the Merger Agreement with respect to
indemnification and the certificate of incorporation and the by-laws of the
Surviving Corporation and TM/GP will continue in effect until the final
disposition of all such claims.
In the event the Surviving Corporation or TM/GP or any of their respective
successors or assigns (i) consolidates with or merges into any other person
and will not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation or TM/GP, as the case may be, will assume all of the obligations
set forth in the Merger Agreement. Upon consummation of the Merger
Transaction, AC Holdings will assume the indemnification and other obligations
of the Surviving Corporation and TM/GP. See "--Conditions to the Merger."
In addition, for a period of six years after the Effective Time, the
Surviving Corporation and TM/GP will, and THCR will cause the Surviving
Corporation and TM/GP to, purchase and maintain in effect directors' and
officers' liability insurance policies covering the Taj Holding Indemnified
Parties on terms no less favorable than the terms of the current insurance
policies coverage. Notwithstanding the foregoing, if the directors' and
officers' liability insurance referred to in this paragraph is unavailable for
the Current D&O Premium, the Surviving
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<PAGE>
Corporation and TM/GP will obtain as much insurance as can be obtained for a
premium not in excess (on an annualized basis) of the Current D&O Premium. In
the event any claim is made against present or former directors, officers or
employees of Taj Holding or TM/GP that is covered or potentially covered by
insurance, THCR agrees, and will cause the Surviving Corporation and TM/GP to
agree, to do nothing that would forfeit, jeopardize, restrict or limit the
insurance coverage available for that claim until the final disposition of
that claim unless otherwise required by law or their respective certificate of
incorporation or by-laws.
The provisions in the Merger Agreement regarding indemnification and
insurance are intended to be for the benefit of, and will be enforceable by,
the Taj Holding Indemnified Parties, their heirs and personal representatives
and will be binding on THCR and the Surviving Corporation and their respective
successors and assigns.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (whether before or after approval of the
Merger Agreement by the respective stockholders of Taj Holding or THCR) (i) by
joint written consent of Taj Holding and THCR; (ii) by Taj Holding if the
conditions to the obligation of Taj Holding to consummate the Merger have not
been satisfied or waived by Taj Holding at such time as such condition is no
longer capable of satisfaction; (iii) by THCR and Merger Sub if any of the
conditions to the obligations of THCR and Merger Sub to consummate the Merger
have not been satisfied or waived by THCR and Merger Sub at such time as such
condition is no longer capable of satisfaction; (iv) by Taj Holding, acting
through the Taj Holding Class B Directors, if the Taj Holding Class B
Directors shall have withdrawn or modified their approval or recommendation of
the Merger Agreement or the Merger in order to permit Taj Holding to execute
an agreement to effect an Acquisition Proposal determined by the Taj Holding
Class B Directors to be more favorable to the Taj Holding stockholders than
the transactions contemplated hereby; or (v) by either party if the Merger has
not been consummated on or before June 30, 1996; provided, however, that a
party may not terminate the Merger Agreement pursuant to this clause if the
failure of such party to fulfill any of its obligations under the Merger
Agreement will have been the reason that the Merger will not have been
consummated on or before said date.
In the event of termination of the Merger Agreement, there will be no
liability on the part of any party thereto (except for the willful breach of
the Merger Agreement); provided, however, that certain terms of the Merger
Agreement, including indemnification for brokerage fees, confidentiality and
the payment of fees and expenses will survive the termination.
FEES AND EXPENSES
The Merger Agreement provides that, whether or not the Merger is
consummated, all costs and expenses incurred in connection therewith and the
transactions contemplated thereby will be paid equally by Taj Holding and
THCR; provided, however, that all costs and expenses incurred in connection
with (i) printing, filing and distributing the Registration Statement filed
with the SEC in connection with the THCR Stock Offering and (ii) any filings
in connection with the HSR Act, will be borne solely by THCR.
AMENDMENT; WAIVER
The Merger Agreement provides that it may be amended by the parties thereto
by action of each of their respective Boards of Directors, at any time prior
to the Effective Time; provided, however, that any such amendment made after
the adoption of the Merger Agreement by the stockholders of Taj Holding or
THCR will not, without further approval of such stockholders (i) alter or
change the amount, kind or manner of payment of Merger Consideration, (ii)
alter or change any term of the certificate of incorporation of the Surviving
Corporation (except as otherwise provided in the Merger Agreement) or (iii)
change any other terms or conditions of the Merger Agreement, if any of such
changes, alone or in the aggregate, would materially and adversely affect the
stockholders of Taj Holding or THCR. Any amendment to the Merger Agreement
must be in writing signed by all the parties thereto.
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The Merger Agreement also provides that, at any time prior to the Effective
Time, Taj Holding, THCR and Merger Sub may, unless otherwise set forth in the
Merger Agreement, (i) extend the time for the performance of any agreement of
the other party or parties thereto, (ii) waive any accuracy 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 hereto 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 under the Merger Agreement will operate as a waiver thereof
nor will any single or partial exercise thereof preclude any other right,
power or privilege.
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL
The DGCL sets forth certain rights and remedies applicable to stockholders
of record of Taj Holding (each, a "Stockholder") who may object to the Merger.
These rights are available only to stockholders holding shares through the
Effective Date of the Merger (the "Dissenting Shares") if the Merger is
completed, provided that Stockholders comply with Section 262 of the DGCL.
Stockholders of THCR are not entitled to appraisal rights with respect to the
Merger. Set forth below is a summary of Stockholders' rights as provided by
Section 262 of the DGCL. A copy of Section 262 of the DGCL is attached to this
Proxy Statement-Prospectus as Annex D. The following discussion is not a
complete statement of the law relating to appraisal rights and is qualified in
its entirety by reference to Annex D. This discussion and Annex D should be
reviewed carefully by any holder who wishes to exercise statutory appraisal
rights or who wishes to preserve the right to do so, because the failure to
comply with the procedures set forth herein or therein will result in the loss
of such appraisal rights. Any Stockholder who contemplates the assertion of
appraisal rights is urged to consult his own counsel.
Under Section 262 of the DGCL, when a merger is to be submitted for approval
at a meeting of stockholders, not less than 20 days prior to the meeting, a
constituent corporation must notify each of the holders of its stock for which
appraisal rights are available that such appraisal rights are available and
include in each such notice a copy of Section 262. This Proxy Statement-
Prospectus shall constitute such notice to Stockholders.
Stockholders who desire to exercise their appraisal rights must satisfy all
of the following conditions. Any such Stockholder must be a stockholder of
record of Taj Holding from the date he makes a written demand for appraisal
(as described below) through the Effective Time and must continuously hold his
Dissenting Shares throughout the period between such dates. A written demand
for appraisal of the Dissenting Shares must be delivered to the Secretary of
Taj Holding before the taking of the vote of Stockholders on the Merger
Agreement. Such vote will take place at the Taj Holding Special Meeting. The
demand will be sufficient if it reasonably informs Taj Holding of the identity
of the Stockholder and that the Stockholder intends thereby to demand the
appraisal of his Dissenting Shares. This written demand for appraisal of
Dissenting Shares must be in addition to and separate from any proxy or vote
abstaining from or voting against the Merger Agreement. Although a Stockholder
must vote against, abstain from voting, or fail to vote on the Merger
Agreement to preserve his rights to appraisal, such vote against, failure to
vote, or abstention from voting will not, of itself, constitute a demand for
appraisal within the meaning of Section 262 of the DGCL.
Holders of Dissenting Shares electing to exercise their appraisal rights
under Section 262 of the DGCL must neither vote for approval of the Merger
Agreement nor consent thereto in writing. A Stockholder who signs and returns
a proxy card without expressly specifying a vote against approval of the
Merger Agreement or a direction to abstain, by checking the applicable box on
the proxy card enclosed herewith, will effectively have thereby waived such
Stockholder's appraisal rights as to those shares because, in the absence of
express instructions to the contrary, such Dissenting Shares will be voted in
favor of the Merger Agreement. Accordingly, a Stockholder who desires to
perfect his appraisal rights with respect to any Dissenting Shares must, as
one of the procedural steps involved in such perfection, either (i) refrain
from executing and returning a proxy card and from voting in person in favor
of the Merger Agreement or (ii) check either the "Against" or the "Abstain"
box next to the proposal on such card or affirmatively vote in person against
the Merger Agreement or register in person an abstention with respect thereto.
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<PAGE>
A demand for appraisal must be executed by or for the Stockholder, fully and
correctly, exactly as such Stockholder's name appears on the certificate or
certificates representing his Dissenting Shares. If the Dissenting Shares are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by all joint owners. An authorized agent,
including an agent for two or more joint owners, may execute the demand for
appraisal for a Stockholder; however, the agent must identify the record owner
and expressly disclose the fact that, in exercising the demand, such person is
acting as agent for the record owner. If a Stockholder holds Dissenting Shares
through a broker who in turn holds the shares through a central securities
depository nominee, a demand for appraisal of such Dissenting Shares must be
made by or on behalf of the depository nominee and must identify the
depository nominee as the holder of record.
A record owner, such as a broker, fiduciary or other nominee who holds
Dissenting Shares as a nominee for others, may exercise appraisal rights with
respect to the Dissenting Shares held for all or less than all beneficial
owners of Dissenting Shares as to which such person is the record owner. In
such case, the written demand must set forth the number of Dissenting Shares
covered by such demand. Where the number of Dissenting Shares is not expressly
stated, the demand will be presumed to cover all Dissenting Shares outstanding
in the name of such record owner. A person having a beneficial interest in
Dissenting Shares that are held of record in the name of another person must
act promptly to cause the record holder to follow the steps summarized herein
properly and in a timely manner to perfect whatever appraisal rights are
available.
A Stockholder who elects to exercise appraisal rights must mail or deliver
his written demand to: Nicholas F. Moles, Esq., Secretary, Taj Mahal Holding
Corp., c/o Trump Taj Mahal Casino Resort, 1000 The Boardwalk, Atlantic City,
NJ 08401.
The written demand for appraisal must specify the Stockholder's name and
mailing address, the number of Dissenting Shares owned, and a statement that
the Stockholder is thereby demanding appraisal of his Dissenting Shares.
Within ten days after the Effective Time, the Surviving Corporation will
provide notice of the Effective Time to all Stockholders who have complied
with Section 262 of the DGCL. Upon written request, the Surviving Corporation
will furnish each Stockholder who has complied with the requirements of
Section 262 of the DGCL a statement setting forth the aggregate number of
Dissenting Shares not voted in favor of the Merger Agreement with respect to
which demands for appraisal have been received and the aggregate number of
holders of such Dissenting Shares.
Within 120 days after the Effective Time, either the Surviving Corporation
or any Stockholder who has complied with the required conditions of Section
262 of the DGCL may file a petition in the Delaware Court of Chancery (the
"Chancery Court"), with a copy served on the Surviving Corporation in the case
of a petition filed by a Stockholder, demanding a determination of the fair
value of the Dissenting Shares of all dissenting Stockholders. There is no
present intent on the part of THCR to file an appraisal petition and
Stockholders seeking to exercise appraisal rights should not assume that the
Surviving Corporation will file such a petition or that the Surviving
Corporation will initiate any negotiations with respect to the fair value of
the Dissenting Shares. Accordingly, Stockholders who desire to have their
Dissenting Shares appraised should initiate any petitions necessary for the
perfection of their appraisal rights within the time periods and in the manner
prescribed in Section 262 of the DGCL. Within 120 days after the Effective
Time, any Stockholder who has theretofore complied with the applicable
provisions of Section 262 of the DGCL will be entitled, upon written request,
to receive from the Surviving Corporation a statement setting forth the
aggregate number of Dissenting Shares not voting in favor of the Merger
Agreement and with respect to which demands for appraisals were received by
Taj Holding and the number of holders of such Dissenting Shares. Such
statement must be mailed within 10 days after written request therefor has
been received by the Surviving Corporation. Within 20 days of the filing of a
petition by a Stockholder with the Chancery Court, or contemporaneous with the
filing of a petition by the Surviving Corporation, the Surviving Corporation
must file with the Chancery Court a verified list containing the names and
addresses of the Stockholders who have demanded payment for their Dissenting
Shares and with whom agreements as to the value of their Dissenting Shares
have not been reached.
If a petition for appraisal is timely filed, all Stockholders who have
complied with Section 262 of the DGCL will become entitled to such a
determination. The Chancery Court will hold a hearing on such petition through
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which it will determine which Stockholders are entitled to appraisal rights
and will appraise the Dissenting Shares owned by such Stockholders. The
Chancery Court may require Stockholders who have demanded an appraisal for the
Dissenting Shares and who hold such Dissenting Shares represented by
certificates to submit their certificates to the Register in Chancery for
notation thereon of the pendency of the appraisal proceedings; if any such
Stockholder fails to comply with such direction, the Chancery Court may
dismiss the proceedings as to such Stockholder. Where proceedings are not
dismissed, the appraisal will be based upon the Chancery Court's determination
of the fair value of such Dissenting Shares exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining fair value, the Chancery Court is to take into
account all relevant factors. In Weinberger v. UOP, Inc., decided in 1983, the
Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of
value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court" should be
considered and that "[f]air price obviously requires consideration of all
relevant factors involving the value of a company. . . ." The Delaware Supreme
Court stated that in making this determination of fair value, the court must
consider market value, asset value, dividends, earnings prospects, the nature
of the enterprise and any other facts which could be ascertained as of the
date of the merger which throw any light on future prospects of the merged
corporation. In Weinberger, the Delaware Supreme Court stated that "elements
of future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." Section 262 of the DGCL, however, provides
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger."
Stockholders considering seeking appraisal should recognize that the fair
value of the Dissenting Shares determined under Section 262 of the DGCL could
be more than, the same as or less than the consideration that Stockholders are
entitled to receive pursuant to the Merger Agreement if they do not seek
appraisal of their Dissenting Shares, and opinions of investment banking firms
as to fairness, from a financial point of view, are not opinions as to fair
value under Section 262 of the DGCL. The cost of the appraisal proceeding may
be determined by the Chancery Court and levied against the parties as the
Chancery Court deems equitable in the circumstances, including, if the
Chancery Court found equitable justification therefor, against the Surviving
Corporation or any affiliate thereof which may be a party to the proceeding.
Upon application of a dissenting Stockholder, the Chancery Court may order
that all or a portion of the expenses incurred by any dissenting Stockholder
in connection with the appraisal proceeding, including without limitation,
reasonable attorneys' fees and the fees and expenses of experts, be charged
pro rata against the value of all the Dissenting Shares entitled to appraisal.
In the absence of such a determination or assessment, each party bears its own
expenses.
Any Stockholder who has duly demanded appraisal in compliance with Section
262 of the DGCL will not, after the Effective Time, be entitled to vote his
Dissenting Shares for any purpose, subject to such demand or to receive
payment of dividends or other distributions on such Dissenting Shares, except
for dividends or distributions payable to Stockholders of record at a date
prior to the Effective Time.
At any time within 60 days after the Effective Time, any Stockholder shall
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger Agreement; after this period, the Stockholder may
withdraw such demand for appraisal only with the consent of the Surviving
Corporation. If no petition for appraisal is filed with the Chancery Court
within 120 days after the Effective Time, Stockholders' rights to appraisal
shall cease, and all Stockholders shall be entitled to receive only the
consideration provided in the Merger Agreement. Inasmuch as the Surviving
Corporation will have no obligation to file such a petition and THCR has no
present intention to do so, any Stockholder who desires such a petition to be
filed is advised to file it on a timely basis. Any Stockholder may withdraw
such Stockholder's demand for appraisal by delivering to the Surviving
Corporation a written withdrawal of such demand for appraisal and acceptance
of the Merger, except (i) that any such attempt to withdraw made more than 60
days after the Effective Time will require written approval of the Surviving
Corporation and (ii) that no appraisal proceeding in the Chancery Court shall
be dismissed as to any Stockholder without the approval of the Chancery Court,
and such approval may be conditioned upon such terms as the Chancery Court
deems just.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet of THCR as of September
30, 1995 and the Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1994 and for the nine months ended September 30,
1995 (the "Unaudited Pro Forma Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheets have been prepared
assuming the Merger Transaction had occurred on September 30, 1995. The
Unaudited Pro Forma Consolidated Statements of Operations have been prepared
assuming that the Merger Transaction had occurred on January 1, 1994.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and do not purport to present what the Balance Sheet would have
been had the Merger Transaction, in fact, occurred on September 30, 1995 or
what the respective results of operations for the year ended December 31, 1994
and the nine months ended September 30, 1995 would have been had the Merger
Transaction, in fact, occurred on January 1, 1994 or to project the respective
results of operations for any future period.
The Unaudited Pro Forma Consolidated Balance Sheet and Statements of
Operations of THCR give effect to (a) the consolidation of Taj Associates,
which will be an indirect subsidiary of THCR after the Merger Transaction, (b)
the redemption of the Taj Bonds and the Taj Holding Class B Common Stock and
the retirement of the Plaza Notes, (c) the Mortgage Note Offering, (d) the
THCR Stock Offering, (e) purchase accounting adjustments required by the
Merger, (f) the termination of the Taj Services Agreement, (g) the
cancellation of payments to Realty Corp. and First Fidelity in connection with
the acquisition of the Specified Parcels and (h) the payment to Bankers Trust
to obtain releases of liens that Bankers Trust has with respect to certain
equity interests in Taj Associates and related guarantees. The Unaudited
Consolidated Statements of Operation of THCR give effect to (i) the June 1995
Offerings which reflect the formation and initial financing of THCR and THCR
Holdings and the acquisition of Trump Plaza and Trump Indiana and (ii) the
Merger Transaction, including those transactions described in (a) through (h)
above. The adjustments referred to in (i) above are required because the
historical audited financial statements and the historical unaudited financial
statements for THCR, included herein, for all periods prior to June 12, 1995,
are those of its accounting predecessors and do not give effect to the initial
formation and financing of THCR. The accompanying unaudited financial
information assumes (x) that all holders of Taj Holding Class A Common Stock
elect to receive Stock Consideration in the Merger, (y) that the underwriters'
over-allotment option is not exercised in the THCR Stock Offering, and (z)
that the Market Value of THCR Common Stock in the Merger is $20.00. These
Unaudited Pro Forma Financial Statements assume that all holders of Taj
Holding Class A Common Stock elect to receive Stock Consideration in the
Merger.
The Merger is expected to be accounted for as a "purchase" for accounting
and reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this Proxy Statement-Prospectus and the information set forth in "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
THCR" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Taj Associates."
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MORTGAGE THCR OTHER
TAJ NOTE STOCK MERGER THCR
THCR ASSOCIATES OFFERING OFFERING TRANSACTIONS PRO FORMA
------------ ------------ ---------- -------- ------------ ----------
(HISTORICAL) (HISTORICAL)
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equiva- $ 23,357 $108,769 $1,180,000 (a) $132,000(j) $ (10,000)(k) $ 68,027
lents................. (780,243)(b) (9,000)(g)
(390)(c) (50,000)(l)
(377,790)(d) (500)(l)
(28,000)(e)
(33,209)(f)
(40,000)(g)
(36,500)(h)
(10,467)(i)
Restricted cash........ 24,225 24,225
Accounts receivable, 13,074 15,759 28,833
net...................
Inventories............ 2,598 6,950 9,548
Prepaid expenses and 5,497 5,175 10,672
other current assets..
-------- -------- ----------
Total current as- 68,751 136,653 141,305
sets.................
Property and Equipment, 399,922 694,602 28,000 (e) 9,000 (g) 1,332,112
net................... 43,475 (l)
40,500 (m)
40,500 (m)
76,113 (n)
Land rights............ 29,412 29,412
Cash restricted for fu- 71,750 71,750
ture construction.....
Note receivable........ 3,091 3,091
Deferred loan costs.... 20,171 40,000 (g) 49,855
(10,316)(d)
Other assets........... 6,318 12,470 18,788
-------- -------- ----------
Total assets.......... $599,415 $843,725 $1,646,313
======== ======== ==========
Current Liabilities:
Current maturities of
long-term debt........ $ 2,100 $ 868 (196)(h) $ 2,772
Accounts payable and
accrued expenses...... 31,946 5,880 37,826
Accrued interest pay- 17,743 27,441 (27,430)(f) 7,287
able.................. (10,467)(i)
Due to affiliates, 403 547 950
net...................
Other current liabili- 0 38,303 38,303
ties..................
-------- -------- ----------
Total current liabil-
ities................ 52,192 73,039 87,138
Other long-term liabili-
ties................... 29,644 (5,779)(f) (16,525)(l) 7,340
Taj Bonds, net of dis-
count.................. 643,135 (643,135)(b)
Plaza Mortgage Notes,
net of discount........ 326,543 (326,543)(d)
Long term debt, net of
discount and current
maturities............. 160,112 160,112
Mortgage Notes.......... 1,180,000 (a) 1,180,000
Other long term debt.... 45,008 (44,790)(h) 218
Deferred state income
taxes.................. 5,173 5,173
-------- -------- ----------
Total Liabilities..... 544,020 790,826 1,439,981
Minority interest....... 1,668 40,500 (m) 32,168
(10,000)(k)
Capital:
Common stock............ 101 70(j) 5 (l) 196
20 (m)
Contributed capital..... 52,327 123,765 131,930(j) 9,995 (l) 234,232
39,980 (m)
(123,765)(o)
Retained 1,299 (70,866) (137,108)(b) 76,113 (n) (60,264)
earnings/accumulated (61,563)(d) 123,765 (o)
(deficit).............. 8,486 (h)
(390)(c)
-------- -------- ----------
Total capital......... 53,727 52,899 174,164
-------- -------- ----------
Total Liabilities and
Capital............. $599,415 $843,725 $1,646,313
======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
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UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT, SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
THCR
(PARENT
CO. ONLY)
THCR TRUMP PRO FORMA THCR PRO FORMA
HOLDINGS AC HOLDINGS INDIANA ADJUSTMENTS PRO ADJUSTMENTS
(PARENT AND PLAZA AND OTHER FOR JUNE FORMA TAJ FOR MERGER
CO. ONLY) ASSOCIATES JURISDICTIONS OFFERINGS COMBINED ASSOCIATES TRANSACTIONS PRO FORMA
--------- ----------- ------------- ----------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $261,451 $261,451 $ 461,622 $ 723,073
Rooms................. 18,312 18,312 41,815 60,127
Food and Beverage..... 40,149 40,149 58,029 98,178
Other................. 8,408 8,408 17,894 26,302
------ -------- ------- -------- -------- --------- ----------
Gross Revenues........ 0 328,320 0 328,320 579,360 907,680
Less--Promotional
Allowances........... 33,257 33,257 62,178 95,435
------ -------- ------- -------- -------- --------- ----------
Net Revenues.......... 0 295,063 0 295,063 517,182 812,245
------ -------- ------- -------- -------- --------- ----------
Cost and Expenses:
Gaming................ 139,540 139,540 260,472 400,012
Rooms................. 2,715 2,715 15,662 18,377
Food and Beverage..... 17,050 17,050 25,035 42,085
General and 73,075 $ 25 73,100 99,629 $(2,725)(l) 166,640
Administrative....... 4,659 (p)
1,274 (p)
(1,353)(q)
(7,944)(r)
Depreciation and
Amortization.......... 15,653 15,653 39,750 373 (l) 60,285
4,509 (s)
Other................. 3,615 3,615 3,615
------ -------- ------- -------- -------- --------- ----------
0 251,648 25 251,673 440,548 691,014
------ -------- ------- -------- -------- --------- ----------
Income from
Operations............ 0 43,415 (25) 43,390 76,634 121,231
Interest Income........ 842 7 300 (t) 1,149 2,019 3,168
Interest Expense....... (49,061) (24,025)(u) (64,324) (115,311) (714)(v) (164,120)
9,777 (w) 16,229 (y)
(1,015)(x)
Other non-operating
expense............... (4,931) (3,192) (8,123) 3,120 (e) (5,003)
------ -------- ------- -------- -------- --------- ----------
Loss before state
income taxes, minority
interest and 0 (3,210) (36,658)
extraordinary loss.... (9,735) (27,908) (44,724)
Benefit for state
income taxes.......... (865) (865) (865)
------ -------- ------- -------- -------- --------- ----------
Loss before minority
interest and
extraordinary loss... 0 (8,870) (3,210) (27,043) (36,658) (43,589)
Minority interest...... 13,250 (z) 13,250
------ -------- ------- -------- -------- --------- ----------
Loss before
extraordinary loss.... 0 $ (8,870) $(3,210) $(27,043) $ (36,658) $ (30,609)
====== ======== ======= ======== ======== ========= ==========
Loss per share before
extraordinary loss... $(1.56)
==========
Weighted Average
Shares Outstanding
(bb)................. 19,633,333
==========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
90
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS EXCEPT, SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------
FROM INCEPTION (JUNE 12, 1995 NINE MONTHS ENDED
THROUGH SEPTEMBER 30, 1995) SEPTEMBER 30, 1995
--------------------------------------------- ------------------
TRUMP
INDIANA PLAZA HOLDING PRO FORMA THCR
THCR THCR HOLDINGS AND OTHER AND PLAZA ADJUSTMENTS FOR PRO FORMA TAJ
(PARENT CO. ONLY) (PARENT CO. ONLY) JURISDICTIONS ASSOCIATES JUNE OFFERINGS COMBINED ASSOCIATES
----------------- ----------------- ------------- ------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming............ $ 224,499 $ 224,499 $377,368
Rooms............. 14,671 14,671 33,035
Food and
Beverage......... 33,403 33,403 42,933
Other............. 7,187 7,187 11,479
------- ------- ----- --------- ---------- --------
Gross Revenues.. $ 0 $ 0 $ 0 279,760 279,760 464,815
Less-Promotional
Allowances....... 28,611 28,611 47,519
------- ------- ----- --------- ---------- --------
Net Revenues.... 0 0 0 251,149 251,149 417,296
------- ------- ----- --------- ---------- --------
Cost and Expenses:
Gaming............ 121,987 121,987 208,671
Rooms............. 1,741 1,741 11,500
Food and
Beverage......... 13,783 13,783 18,597
General and
Administrative... 1,202 1,371 393 51,073 54,039 73,717
Depreciation and
Amortization..... 11,792 11,792 32,407
Other............. 2,556 2,556
------- ------- ----- --------- ---------- --------
1,202 1,371 393 202,932 205,898 344,892
------- ------- ----- --------- ---------- --------
Income (loss) from
Operations....... (1,202) (1,371) (393) 48,217 45,251 72,404
Interest Income... 2,075 689 134 (t) 2,898 2,752
Interest Expense.. (7,572) (34,419) (10,745)(u) (48,321) (88,864)
4,878 (w)
(463)(x)
Other non-
operating........ (3,847) (3,847)
------- ------- ----- --------- ---------- --------
Income (loss) before
state income taxes,
minority interest
and extraordinary
loss............... (1,202) (6,868) (393) 10,640 (4,019) (13,708)
Provision for state
income taxes....... 993 993
------- ------- ----- --------- ---------- --------
Income (loss) before
minority interest
and extraordinary
loss............... (1,202) (6,868) (393) 9,647 (5,012) (13,708)
Minority Interest... (1,668)
------- ------- ----- --------- ---------- --------
Income (loss) before
extraordinary
loss............... $(1,202) $(6,868) $(393) $ 9,647 $ (6,680) $(13,708)
======= ======= ===== ========= ========== ========
Earnings per share
before
extraordinary
loss.............
Weighted Average
Shares
Outstanding
(bb).............
<CAPTION>
PRO FORMA
ADJUSTMENTS
FOR MERGER
TRANSACTION PRO FORMA
-------------- ------------
<S> <C> <C>
Revenues:
Gaming............ $ 601,867
Rooms............. 47,706
Food and
Beverage......... 76,336
Other............. 18,666
------------
Gross Revenues.. 744,575
Less-Promotional
Allowances....... 76,130
------------
Net Revenues.... 668,445
------------
Cost and Expenses:
Gaming............ 330,658
Rooms............. 13,241
Food and
Beverage......... 32,380
General and
Administrative... $(2,044)(l) 120,752
2,294 (p)
(1,296)(q)
(5,958)(r)
Depreciation and
Amortization..... 280 (l) 47,861
3,382 (s)
Other............. 2,556
------------
547,448
------------
Income (loss) from
Operations....... 120,997
Interest Income... 5,650
Interest Expense.. (122,215)
(536)(v)
15,506 (y)
Other non-
operating........ 2,340 (e) (1,507)
------------
Income (loss) before
state income taxes,
minority interest
and extraordinary
loss............... 2,925
Provision for state
income taxes....... (993)(aa)
------------
Income (loss) before
minority interest
and extraordinary
loss............... 2,925
Minority Interest... 323 (z) (1,345)
------------
Income (loss) before
extraordinary
loss............... $ 1,580
============
Earnings per share
before
extraordinary
loss............. $ .08
============
Weighted Average
Shares
Outstanding
(bb)............. 19,633,333
============
</TABLE>
See Notes to Unaudited Financial Information.
91
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $1,180,000 aggregate principal amount of
Mortgage Notes issued by AC Holdings and AC Funding. The market value
of the Mortgage Notes is assumed to be its face value with an interest
rate of 11%.
(b) To record the redemption of the Taj Bonds, at par, which had a face
value of $780,243 and a book value of $643,135 as of September 30,
1995, and an extraordinary loss of $137,498 which includes the
redemption of the Taj Holding Class B Common Stock (See Note c below).
(c) To record the payment of $.50 for the redemption of each of the 780,243
outstanding shares of Taj Holding Class B Common Stock as an
extraordinary loss.
(d) To record the redemption of the Plaza Notes which had a face value of
$330,000 and a book value of $326,543 as of September 30, 1995 for
$377,790, and related deferred loan costs resulting in an extraordinary
loss of $61,563. It is assumed that 90% of the outstanding Plaza Notes
will be repurchased and that an in-substance defeasance is made of the
remaining 10%.
(e) To record the payment of $28,000 in connection with exercise of the
Trump Plaza East Purchase Option and the effect of the termination of
the lease with an unaffiliated third party.
(f) To record the payment of accrued interest on the redemption of the Taj
Bonds as of September 30, 1995 (includes Additional Amount $ ).
(g) To record the payment of transaction expenses associated with the Note
Offering and the Merger Transaction.
(h) To record the satisfaction of indebtedness under the NatWest Loan which
had a book value of $44,986 for $36,500 and an extraordinary gain of
$8,486 resulting from such satisfaction.
(i) To record the payment of accrued interest on the retirement of the
Plaza Notes as of September 30, 1995.
(j) To record the net proceeds from the THCR Stock Offering of 7,000,000
shares at $20 per share. Assuming the underwriters' over-allotment
option is not exercised.
(k) To record the payment to Bankers Trust to obtain certain releases of
the liens that Bankers Trust has with respect to the Trump
Indebtedness.
(l) To record the purchase of the Specified Parcels and the release of the
Taj Associates--First Fidelity Guarantee, the elimination of the lease
payments on the Specified Parcels and the additional depreciation
associated with the purchase. The aggregate cost of acquiring the
Specified Parcels is $50,000 in cash and 500,000 shares of THCR Common
Stock valued at $10,000 (assumes $20 per share). Taj Associates had
accrued $16,525 with respect to its obligation under the Taj
Associates-First Fidelity Guaranty.
(m) To record the contribution by Trump to AC Holdings (on behalf of and at
the direction of THCR Holdings) of all of his direct and indirect
ownership interest in 50% of Taj Associates and the purchase of the Taj
Holding Class A Common Stock by THCR in the Merger. THCR will pay $30
for each of the 1,350 outstanding shares of Taj Holding Class A Common
Stock, which is payable at the option of the holder in cash or shares
of THCR Common Stock. It is assumed herein that all holders elect to
receive shares of THCR Common Stock.
(n) To record 50% of the historical negative book value of Taj Associates
and Taj Funding, as adjusted for the pro forma extraordinary loss on
the redemption of the Taj Bonds and the extraordinary gain resulting
from the satisfaction of indebtedness under the NatWest Loan, as a
result of the purchase of the Taj Holding Class A Common Stock by THCR.
92
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(o) To eliminate the capital deficit of Taj Associates as a result of the
purchase of the Taj Holding Class A Common Stock.
(p) To record $4,659 and $1,724 for the year ended December 31, 1994 and
the nine months ended September 30, 1995, respectively, of additional
general and administrative expenses relating to corporate overhead of
THCR Holdings and THCR, and $1,274 and $570, respectively of operating
expenses incurred at Trump Indiana prior to opening.
(q) To record the elimination of the fee resulting from the termination of
the Taj Services Agreement.
(r) To reflect the reduction of costs resulting from the consolidation of
departments and the reduction of personnel.
(s) To record the additional depreciation expense resulting from the
allocation of the purchase price to property and equipment. Amounts are
being allocated to land and buildings based upon their respective
percentages and are being depreciated over the remaining life of the
building.
(t) To record interest income on a $3,000 note receivable from Trump at
prime plus 1%.
(u) To record interest expense relating to the Senior Notes.
(v) To record interest expense on amounts obtained under the equipment and
vessel financing line. To date, THCR has obtained a commitment for
$15,000 and has obtained advances of $6,800 at a rate of 10.5%.
Although THCR expects to borrow an additional $25,000, no assurances
can be given that such financing will be available.
(w) To eliminate interest expense (including amortization of deferred
financing costs) on the PIK Notes which were redeemed with the proceeds
from the June 1995 Stock Offering.
(x) To reflect the amortization of deferred financing costs associated with
the issuance of Senior Notes.
93
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT, SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(y) To record adjustments to historical interest expense to give effect to
the Merger Transaction as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
<S> <C> <C>
Historical interest expense...................... $ 164,372 123,283
(i)Elimination of interest and discount
accretion or on redemption of the Taj Bonds
and the Plaza Notes......................... (141,403) (109,489)
(ii)Elimination of accretion on the Taj
Associates--First Fidelity Guarantee........ (2,047) (1,748)
(iii)Elimination of interest on the NatWest
Loan............................................ (4,299) (3,204)
(iv)Elimination of refinancing transaction
expenses........................................ (2,787) (1,352)
(v)Elimination of amortization of deferred
offering costs.................................. (1,792) (1,344)
(vi)Reflect Mortgage Note interest on new debt
issuance........................................ 129,800 97,350
(vii)Reflect amortization of deferred loan costs
on the Mortgage Notes........................... 6,299 4,281
--------- --------
Pro Forma Adjustment............................. $ (16,229) $(15,506)
========= ========
</TABLE>
(z) To record minority interest in the loss of THCR as the Merger
Transaction will result in minority interest on THCR's balance sheet
that exceeds the minority interest in the loss.
(aa) To record state income taxes. Under the provisions of the New Jersey
State Income Tax, taxes are assessed on each casino individually and
losses from related entities cannot be used to offset the taxable
income of another casino.
(bb) Weighted average number of shares include the number of shares
outstanding on September 30, 1995, shares awarded to the Chief
Executive Officer pursuant to the 1995 Stock Plan and the shares to be
issued in the Merger Transaction and the THCR Stock Offering.
94
<PAGE>
SELECTED HISTORICAL
FINANCIAL INFORMATION OF THCR
The following table sets forth certain historical consolidated financial
information of Plaza Associates and AC Holdings (predecessors of THCR) for each
of the five years ended December 31, 1990 through 1994 and for the nine-month
period ended September 30, 1994 and certain historical consolidated financial
information of THCR for the period from inception (June 12, 1995) to September
30, 1995 (unaudited) (See Note 1 below). The historical financial information
of AC Holdings and Plaza Associates as of December 31, 1993 and 1994 and for
the years ended December 31, 1992, 1993 and 1994 as set forth below has been
derived from the audited consolidated financial statements of Plaza Holding and
Plaza Associates included elsewhere in this Proxy Statement-Prospectus. The
historical financial information of AC Holdings and Plaza Associates as of
December 31, 1990, 1991 and 1992 and for the years ended December 31, 1990 and
1991 as set forth below has been derived from the audited consolidated
financial statements of AC Holdings and Plaza Associates not included in this
Proxy Statement-Prospectus.
The unaudited financial information as of September 30, 1994 and 1995 and the
periods then ended has been derived from the unaudited condensed consolidated
financial statements included elsewhere in this Proxy Statement-Prospectus and
in the opinion of management, includes all adjustments, consisting of only
normal, recurring adjustments, necessary to present fairly the financial
position, results of operations and changes in cash flows for the periods
presented. The results of these interim periods are not necessarily indicative
of the operating results for a full year. All financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations of THCR," "Unaudited Pro Forma Financial
Information" and the consolidated and condensed financial statements and the
related notes thereto included elsewhere in this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS FROM INCEPTION
ENDED JUNE 12, 1995 TO
SEPTEMBER SEPTEMBER 30, 1995
YEARS ENDED DECEMBER 31, 30, (NOTE 1)
------------------------------------------------ ----------- ------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- -------- -------- -------- ----------- ------------------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $276,932 $233,265 $265,448 $264,081 $261,451 $197,068 $101,634
Other.................. 87,286 66,411 73,270 69,203 66,869 50,128 25,738
Trump World's Fair..... -- 11,547 9,465 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Gross revenues......... 364,218 311,223 348,183 333,284 328,320 247,196 127,372
Promotional allowances. 44,281 31,539 34,865 32,793 33,257 25,130 14,071
-------- -------- -------- -------- -------- -------- --------
Net revenues........... 319,937 279,684 313,318 300,491 295,063 222,066 113,301
Costs and expenses:
Gaming................. 178,356 133,547 146,328 136,895 139,540 104,100 52,681
Other.................. 26,331 23,404 23,670 24,778 23,380 17,352 8,596
General and
administrative........ 76,057 69,631 75,459 71,624 73,075 53,933 23,799
Depreciation and
amortization.......... 16,725 16,193 15,842 17,554 15,653 11,734 5,091
Restructuring charges.. -- 943 5,177 -- -- -- --
Trump World's Fair..... 3,359 19,879 11,839 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total costs and
expenses.............. 300,828 263,597 278,315 250,851 251,648 187,119 90,167
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 19,109 16,087 35,003 49,640 43,415 34,947 23,134
-------- -------- -------- -------- -------- -------- --------
Interest expense, net... 33,128 33,363 31,356 39,889 48,219 36,051 16,816
Other non-operating
(income) expense(a).... (2,400) 14,818 1,462 3,873 4,931 4,724 2,198
Extraordinary (loss)
gain................... -- -- (38,205) 4,120 -- -- --
Provision (benefit) for
income taxes........... (1,028) (2,864) (233) 660 (865) (523) 1,153
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $(10,591) $(29,230) $(35,787) $ 9,338 $ (8,870) $ (5,305) $ 1,299
======== ======== ======== ======== ======== ======== ========
Net income per common
share(b)............... $.13
====
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 10,005 $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 22,159 $ 23,357
Property and equipment,
net.................... 316,595 306,834 300,266 293,141 298,354 296,300 399,922
Total assets............ 395,775 378,398 370,349 374,498 375,643 386,080 599,415
Total long-term debt,
net of current
maturities(c).......... 247,048 33,326 249,723 395,948 403,214 398,644 486,655
Preferred partnership
interest............... -- -- 58,092 -- -- -- --
Total capital (deficit). 83,273 54,043 11,362 (54,710) (63,580) (60,068) 53,727
</TABLE>
- ------------------
Note 1: THCR was incorporated on March 28, 1995 and conducted no operations
until the June 1995 Stock Offering and contributed the proceeds therefrom to
THCR Holdings in exchange for an approximately 60% general partnership
interest in THCR Holdings. At the consummation of the June 1995 Stock
Offering, Trump contributed his 100% beneficial interest in Plaza Funding, AC
Holdings and Plaza Associates, the owner and operator of Trump Plaza, to THCR
Holdings for an approximately 40% limited partnership interest in THCR
Holdings. In addition, Trump contributed to THCR Holdings all of his existing
interests and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana. The financial data
as of September 30, 1995 and for the period ended September 30, 1995 reflect
the operations of THCR from inception (June 12, 1995) to September 30, 1995.
95
<PAGE>
(a) Other non-operating (income) expense for the year ended December 31, 1990
includes income of $2.4 million resulting from the settlement of a lawsuit
relating to a boxing match. Other non-operating (income) expense for the
year ended December 31, 1991 includes a $10.9 million charge associated
with the rejection of the lease associated with the former Trump Regency
Hotel and $4.0 million of costs associated with certain litigation. Other
non-operating (income) expense for 1992 includes $1.5 million of costs
associated with certain litigation. Other non-operating (income) expense
for the years ended December 31, 1993 and 1994 and for the nine months
ended September 30, 1994 and 1995 includes $3.9, $4.9, 3.7 and 1.3 million,
respectively, of real estate taxes and leasing costs associated with Trump
Plaza East.
(b) Earnings per share is based upon weighted average shares outstanding,
shares and phantom stock units awarded to the President of THCR under the
1995 Stock Incentive 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.
(c) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
96
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THCR
GENERAL
Set forth below is a discussion and analysis of the financial condition and
results of operations of Plaza Associates, which THCR Holdings acquired in June
1995. Neither THCR nor any of its subsidiaries has any significant operating
history, other than Plaza Associates, although Trump Indiana has incurred
significant expenses relating to the development of the Indiana Riverboat. See
"--Liquidity and Capital Resources--Trump Indiana." The partnership agreement
governing THCR Holdings provides that all business activities of THCR must be
conducted through THCR Holdings or subsidiary partnerships or corporations.
RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
1994
Gaming revenues were $224,499,000 for the nine months ended September 30,
1995, an increase of $27,431,000 or 13.9% from gaming revenues of $197,068,000
for the comparable period in 1994. This increase in gaming revenues consisted
of an increase in both table games and slot revenues. While the first nine
months of 1994 were adversely affected by unfavorable winter weather,
construction and management turnover, management believes that the increase in
gaming revenues in 1995 is also due to an increased level of demand evident in
the Atlantic City market generally, as well as management's marketing and other
initiatives, the introduction of new slot machines and table games, the
addition of bill acceptors on slot machines, and an increase in casino floor
square footage.
Slot revenues were $152,318,000 for the nine months ended September 30, 1995,
an increase of $24,534,000 or 19.2% from slot revenues of $127,784,000 for the
comparable period in 1994. This increase was primarily due to an increase in
casino floor square footage and the introduction of new slot machines, as well
as management's marketing and other initiatives.
Table games revenues were $72,181,000 for the nine months ended September 30,
1995, an increase of $2,897,000 or 4.2% from table games revenues of
$69,284,000 for the comparable period in 1994. Table games drop (i.e., the
dollar value of chips purchased) increased by 5.0% for the nine months ended
September 30, 1995 from 1994.
Other revenues were $55,261,000 for the nine months ended September 30, 1995,
an increase of $5,133,000 or 10.2% from other revenues of $50,128,000 for the
comparable period in 1994. Other revenues include revenues from rooms, food,
beverage and miscellaneous items. The increase primarily reflects increases in
food and beverage revenues attendant to increased levels of gaming activity and
increased promotional expenses.
Promotional allowances were $28,611,000 for the nine months ended September
30, 1995, an increase of $3,481,000 or 13.9% from promotional allowances of
$25,130,000 for the comparable period in 1994. This increase is primarily
attributable to an increase in gaming activity during the nine months ended
September 30, 1995.
Gaming costs and expenses were $121,987,000 for the nine months ended
September 30, 1995, an increase of $17,887,000 or 17.2% from gaming costs and
expenses of $104,100,000 for the comparable period in 1994. This increase was
primarily due to increased promotional and operating expense and taxes
associated with increased levels of gaming revenues during the nine months
ended September 30, 1995.
General and administrative expenses were $51,073,000 for the nine months
ended September 30, 1995, a decrease of $3,855,000 or 7.0% from general and
administrative expenses of $54,928,000 for the comparable period in 1994. This
decrease is primarily the result of cost containment measures.
Income from operations was $48,217,000 for the nine months ended September
30, 1995, an increase of $14,265,000 or 42.0% from income from operations of
$33,952,000 for the comparable period in 1994.
97
<PAGE>
Other non-operating expense was $3,847,000 for the nine months ended
September 30, 1995, an increase of $118,000 from other non-operating expense of
$3,729,000 for the comparable period in 1994. This increase is attributable to
costs associated with Trump Plaza East.
The extraordinary loss of $9,250,000 for the nine months ended September 30,
1995 relates to the redemption and write-off of unamortized deferred financing
costs relating to the repurchase and redemption on June 12, 1995 of all of the
12 1/2% Pay-in-Kind Notes due 2003 of Plaza Holding (the "PIK Notes") and
related warrants to acquire PIK Notes (the "PIK Note Warrants").
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Gaming revenues were $261.5 million for the year ended December 31, 1994, a
decrease of $2.6 million or 1.0% from gaming revenues of $264.1 million in
1993, although gaming revenues increased for the industry generally in Atlantic
City for the year ended December 31, 1994 compared to the year ended December
31, 1993. This decrease in gaming revenues consisted of a reduction in both
table games and slot revenues. These results were impacted by a number of major
ice and snow storms throughout the northeastern United States, during the three
months ended March 31, 1994 which severely restricted travel in the region. Bad
weather also impacted the Atlantic City market's results for the three months
ended March 31, 1993; however, the weather during the comparable period in 1994
was much more severe. The decrease in gaming revenues was also due in part to
disruptions caused by an expansion of the casino floor which created operating
inefficiencies by temporarily disrupting the normal flow of patrons upon
entrance to the casino, as well as detracting from the overall appearance of
the casino floor. Also, in 1994 Trump Plaza experienced turnover of certain key
management positions which had a negative impact on operations. This negative
impact was mitigated by the end of 1994 as new management was hired and began
implementing new policies and marketing programs. See "Business of THCR--Trump
Plaza--Trump Plaza Business Strategy" and "Management of THCR--Employment
Agreements."
Slot revenues were $168.7 million for the year ended December 31, 1994, a
decrease of $1.8 million or 1.1% from slot revenues of $170.5 million in 1993.
This decrease was due in part to the sensitivity of slot revenues to certain of
the factors specified in the foregoing paragraph. Plaza Associates elected to
discontinue certain progressive slot programs, thereby reversing certain
accruals into revenue which had the effect of improving slot revenue by $0.6
million for the year ended December 31, 1994.
Table games revenues were $92.8 million for the year ended December 31, 1994,
a decrease of $0.8 million or 0.9% from table games revenues of $93.6 million
in 1993. This decrease was primarily due to a reduction in table games drop by
$26.7 million or 4.3% for the year ended December 31, 1994 from 1993, offset by
an increase in the table game hold percentage (the percentage of table drop
retained by Plaza Associates) to 15.5% for the year ended December 31, 1994
from 14.9% in 1993.
During the year ended December 31, 1994, gaming credit extended to customers
was approximately 17% of overall table play, a decrease of 1% from 1993. At
December 31, 1994, gaming receivables amounted to approximately $13.7 million,
a decrease of approximately $2.3 million from 1993, with allowances for
doubtful gaming receivables of approximately $8.5 million, a decrease of
approximately $1.9 million from 1993.
Other revenues were $66.9 million for the year ended December 31, 1994, a
decrease of $2.3 million or 3.3% from other revenues of $69.2 million in 1993.
This decrease in other revenues primarily reflects decreases in food and
beverage revenue resulting from changes in bus couponing.
Promotional allowances were $33.3 million for the year ended December 31,
1994, an increase of $0.5 million or 1.5% from $32.8 million in 1993. This
increase is attributable to increased marketing and promotional activities.
Gaming costs and expenses were $139.5 million for the year ended December 31,
1994, an increase of $2.6 million or 1.9% from gaming costs and expenses of
$136.9 million in 1993. This increase was primarily due to
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increased marketing costs instituted toward the end of 1994. These marketing
programs consisted of increased bus programs and direct marketing activities.
The increase in marketing costs was offset by decreased gaming taxes associated
with the decreased levels of gaming activity and revenues from 1993.
General and administrative expenses were $73.1 for the year ended December
31, 1994, an increase of $1.5 million or 2.1% from general and administrative
expenses of $71.6 million in 1993. This increase resulted primarily from $1.1
million in cash associated with donations to the New Jersey Casino Reinvestment
Development Authority (the "CRDA") for the year ended December 31, 1994.
Income from operations was $43.4 million for the year ended December 31,
1994, a decrease of $6.2 million or 12.5% from income from operations of $49.6
million for 1993.
Net interest expense was $48.2 million for the year ended December 31, 1994,
an increase of $8.3 million or 20.8% from net interest expense of $39.9 million
in 1993. This increase is primarily attributable to increased interest expenses
associated with the Plaza Mortgage Notes and the PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million in 1993. This
increase is directly attributable to twelve months of costs associated with
Trump Plaza East. See Note 6 to the accompanying Financial Statements of Plaza
Holding and Plaza Associates.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Gaming revenues were $264.1 million for the year ended December 31, 1993, a
decrease of $1.3 million or 0.5% from gaming revenues of $265.4 million for
1992. This decrease in gaming revenues consisted of a reduction in table games
revenues, which was partially offset by an increase in slot revenues. These
results were impacted by major snow storms during February and March, which
severely restricted travel in the region. The decrease in revenues was also
attributable, in part, to the revenues derived from "high roller" patrons from
the Far East during 1992, which did not recur in 1993, due in part to the
decision to de-emphasize marketing efforts directed at "high roller" patrons
from the Far East and also to the effects of the adverse economic conditions in
that region.
Slot revenues were $170.5 million for the year ended December 31, 1993, an
increase of $1.0 million or 0.6% from slot revenues of $169.5 million in 1992.
Plaza Associates elected to discontinue certain progressive slot jackpot
programs thereby reversing certain accruals into revenues which had the effect
of improving slot revenue by $4.1 million for the year ended December 31, 1992.
Excluding the aforementioned adjustment, slot revenues would have resulted in a
$5.0 million or 3.0% improvement over 1992. Plaza Associates believes that its
improvement in slot revenues reflects its intensified slot marketing efforts
directed towards patrons who tend to wager more per slot play and general
growth in the industry. See "Business of THCR--Trump Plaza--Trump Plaza
Business Strategy."
Table games revenues were $93.6 million for the year ended December 31, 1993,
a decrease of $2.3 million or 2.4% from table games revenues of $95.9 million
in 1992. This decrease was primarily due to a reduction in table games drop by
9.2% for the year ended December 31, 1993 from 1992, offset by an increase in
the table games hold percentage to 14.9% for the year ended December 31, 1993
from 13.9% in 1992. The reduction in table game drop was due to the large
dollar amounts wagered during 1992 by certain foreign customers.
During the year ended December 31, 1993, gaming credit extended to customers
was approximately 18.0% of overall table play, a decrease of 9.6% from 1992. At
December 31, 1993, gaming receivables amounted to approximately $16.0 million,
a decrease of approximately $4.5 million from 1992, with allowances for
doubtful gaming receivables of approximately $10.4 million, a decrease of
approximately $3.6 million from 1992.
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Other revenues were $69.2 million for the year ended December 31, 1993, a
decrease of $4.1 million or 5.6% from other revenues (excluding revenues from
the former Trump Regency Hotel, now known as Trump World's Fair, at such time
operated by Plaza Associates) of $73.3 million in 1992. The decrease in other
revenues primarily reflects a $2.1 million adjustment to the outstanding gaming
chip liability in 1992 (this amount had been offset in gaming cost and expenses
with a specific reserve provision for casino uncollectible accounts
receivable), as well as decreases in food and beverage revenues attendant to
reduced levels of gaming activity, and reduced promotional allowances.
Promotional allowances were $32.8 million for the year ended December 31,
1993, a decrease of $2.1 million or 5.9% from promotional allowances of $34.9
million in 1992. This decrease is primarily attributable to a reduction in
table gaming activity as well as Plaza Associates' focusing its marketing
efforts during the period towards patrons who tend to wager more frequently and
in larger denominations.
Gaming costs and expenses were $136.9 million for the year ended December 31,
1993, a decrease of $9.4 million, or 6.4% from gaming costs and expenses of
$146.3 million in 1992. This decrease was primarily due to a $4.8 million
decrease in gaming bad debt expense as well as decreased promotional and
operating expenses and taxes associated with decreased levels of gaming
activity and revenues.
Other costs and expenses were $24.8 million for the year ended December 31,
1993, an increase of $1.1 million or 4.7% from other costs and expenses of
$23.7 million in 1992.
General and administrative expenses were $71.6 million for the year ended
December 31, 1993, a decrease of $3.8 million or 5.1% from general and
administrative expenses of $75.5 million in 1992. This decrease resulted
primarily from a $2.4 million real estate tax charge resulting from a
reassessment by local authorities of prior years' property values incurred
during 1992 and overall cost reductions related to cost containment efforts.
Income from operations was $49.6 million for the year ended December 31,
1993, an increase of $7.0 million or 16.4% from income from operations
(excluding the operations of the former Trump Regency Hotel and before
restructuring costs) of $42.6 million for 1992. In addition to the items
described above, 1993 costs and expenses were lower as a result of the absence
of the costs and expenses associated with the 1992 Plaza Restructuring and the
former Trump Regency Hotel which were incurred in 1992.
Net interest expense was $39.9 million for the year ended December 31, 1993,
an increase of $8.5 million or 27.2% from net interest expense of $31.4 million
in 1992. This is attributable to the interest expense associated with the 1993
refinancing.
Other non-operating expenses were $3.9 million for the year ended December
31, 1993, an increase of $2.4 million or 164.9% from non-operating expense of
$1.5 million in 1992. This increase is directly attributable to costs
associated with Trump Plaza East. See Note 6 to the accompanying Financial
Statements of Plaza Holding and Plaza Associates.
In August 1990, Plaza Associates entered into a triple net lease with an
affiliate pursuant to which Plaza Associates began operating the former Trump
Regency Hotel as a non-casino hotel. During such period of operation, losses
attributable to the former Trump Regency Hotel aggregating approximately $14.1
million adversely affected the results of operations of Plaza Associates.
Pursuant to the 1992 Plaza Restructuring, Plaza Associates ceased operating the
former Trump Regency Hotel as of September 30, 1992. The offerings of the Plaza
Mortgage Notes, PIK Notes and PIK Note Warrants in connection with the 1993
refinancing resulted in an extraordinary gain of $4.1 million for the year
ended December 31, 1993, which reflects the excess of carrying value of the
former Trump Regency Hotel obligation over the amount of the settlement
payment, net of related prepaid expenses. The 1992 Plaza Restructuring resulted
in an extraordinary loss of $38.2 million for the year ended December 31, 1992,
which reflects a $32.8 million accounting adjustment to carry the bonds and
preferred stock issued in the 1992 Plaza Restructuring on Plaza Associates'
balance sheet at fair market value based upon then current rates of interest.
Plaza Associates also wrote off certain deferred financing charges and costs of
$5.4 million.
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LIQUIDITY AND CAPITAL RESOURCES
General. On June 12, 1995, THCR consummated the June 1995 Stock Offering of
10,000,000 shares of THCR Common Stock at the offering price of $14.00 per
share, resulting in aggregate gross proceeds to THCR of $140,000,000, and THCR
Holdings and THCR Funding consummated the June 1995 Note Offering. The
proceeds to THCR from the June 1995 Stock Offering were contributed by THCR to
THCR Holdings in return for an approximately 60% general partnership interest
in THCR Holdings. THCR Holdings, in turn, has used net proceeds from the June
1995 Offerings through September 30, 1995 for the following purposes: (a)
repurchase and redemption of the PIK Notes and PIK Note Warrants (including
accrued interest payable) for $86,209,000, (b) exercise of the option to
acquire Trump World's Fair (the "Trump World's Fair Purchase Option") for
$58,150,000, (c) construction costs at Trump Plaza East of $2,500,000 and (d)
construction and land acquisition costs of $23,772,000 for the Indiana
Riverboat. The balance of the proceeds will be used for the completion of the
construction at Trump Plaza, Trump Plaza East, Trump World's Fair and the
Indiana Riverboat, as well as for general corporate purposes.
Each of the Plaza Note Indenture and the Senior Note Indenture restricts the
ability of Plaza Associates, Trump Indiana and other subsidiaries of THCR
Holdings to make distributions to partners or pay dividends, as the case may
be, unless certain financial ratios are achieved. Further, given the rapidly
changing competitive environment and the risks associated with THCR's proposed
expansion plans, THCR's future operating results are highly conditional and
could fluctuate significantly. Moreover, as a condition to the June 1995 Note
Offering, THCR Holdings and THCR Funding entered into a Cash Collateral and
Disbursement Agreement (the "Cash Collateral Agreement") with First Bank
National Association in its respective capacities as Trustee and Disbursement
Agent (each as defined therein). The Cash Collateral Agreement called for
initial deposits to custodial accounts which are restricted in use for (a)
Trump Indiana for the ship and land projects, (b) Trump Plaza construction
projects, including the exercise of the Trump World's Fair Purchase Option and
construction projects at Trump Plaza East and Trump World's Fair and (c) the
first two interest payments on the Senior Notes. As of September 30, 1995,
$24,225,000 is restricted for the first two interest payments on the Senior
Notes and is reflected as restricted cash in THCR's condensed consolidated
balance sheets. The balance of funds restricted for Trump Indiana, Trump Plaza
East and Trump World's Fair is approximately $9,725,000, $12,650,000 and
$49,375,000, respectively, at September 30, 1995, and is reflected as cash
restricted for future construction as a non-current asset in THCR's balance
sheets. With these restricted funds, as well as cash flow from operating
activities, and the financings discussed above (some of which still remain to
be obtained), THCR management believes that sufficient funds will be available
to complete the projects that are currently in development. In addition, Plaza
Associates may be obligated to comply with certain proposed regulations of the
Occupational Safety and Health Administration ("OSHA"), if adopted. THCR is
unable to estimate the cost, if any, to Plaza Associates of such compliance.
See "Regulatory Matters--Other Laws and Regulations."
Trump Plaza, Trump World's Fair and Trump Plaza East. Cash flow from
operating activities is Plaza Associates' principal source of liquidity. For
the year ended December 31, 1994, and the nine-month period ended September
30, 1995 net cash from operating activities was $20.0 million and $32.4
million, respectively.
Capital expenditures of $86.6 million for the nine-month period ended
September 30, 1995 increased approximately $72.0 million from the comparable
period in 1994 and was primarily attributable to the purchase of Trump World's
Fair for $60.0 million and $2.2 million of related renovation expenditures.
Also, expenditures for renovation costs associated with Trump Plaza East were
$14.2 million for the nine months ended September 30, 1995 versus $5.9 million
for the comparable period in 1994. These expenditures were funded from cash
flows from operating activities. Capital expenditures of $20.5 million for the
year ended December 31, 1994 increased approximately $10.4 million from 1993
and were primarily attributable to the casino expansion, purchase of
additional slot machines, construction of the new baccarat pit for Trump Plaza
and refurbishing costs associated with Trump Plaza East. These expenditures
were financed from funds generated from operations. Capital expenditures for
1993 and 1992 were $10.1 million and $8.6 million, respectively. Previously,
Plaza Associates provided for significant capital expenditures which
concentrated on the renovation of the casino floor and certain restaurants,
hotel rooms and the hotel lobby. See "Business of THCR--Trump Plaza--
Facilities and Amenities."
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Plaza Associates has approximately $2.1 million of indebtedness maturing
through September 30, 1996. THCR management expects that this debt will be
repaid with cash from operating activities.
At September 30, 1995, THCR had combined working capital of $16.6 million,
which included a receivable from the CRDA for $4.2 million for reimbursable
improvements made to the Trump Plaza East. At December 31, 1994, Plaza
Associates had a combined working capital deficit totaling $7.1 million,
compared to a combined working capital deficit of $1.5 million at December 31,
1993. At September 30, 1995, Plaza Associates had a combined working capital
deficit totaling approximately $1.7 million, compared to a combined working
capital deficit of $7.1 million at December 31, 1994.
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of its hotel facilities at Trump Plaza
East. As part of the Trump Plaza Expansion, management has commenced the
expansion and renovation of rooms at Trump Plaza East, and on October 30, 1995,
opened 150 rooms and suites at Trump Plaza East. This opening of rooms and
suites was ahead of schedule and under the budget set for this part of the
expansion. THCR intends to open the remainder of the rooms and suites and the
casino at Trump Plaza East in the first quarter of 1996. There can be no
assurances that such openings will occur and, if so, that the completion of
such construction will be either under budget or ahead of schedule. Trump
World's Fair renovations are scheduled for completion at the end of the first
quarter or early in the second quarter of 1996. See "Risk Factors--High
Leverage and Fixed Charges," "--Trump Plaza Expansion and the Taj Mahal
Expansion," "--The Indiana Riverboat" and "--Considerations with Respect to the
Acquisition or Development of Additional Gaming Ventures."
As a result of the Trump Plaza Expansion, Plaza Associates will be permitted,
subject to certain conditions, to increase, and is in the process of
increasing, Trump Plaza's casino floor space to 90,000 square feet. Plaza
Associates petitioned the CCC to permit it to increase such space to 100,000
square feet pursuant to a statutory amendment which became effective January
25, 1995. In its May 18, 1995 declaratory rulings with respect to this
petition, the CCC determined, among other things, that the approved hotel
comprised of Trump Plaza's main tower and Trump Plaza East is permitted to
contain a maximum of 100,000 square feet of casino space. Plaza Associates
added to Trump Plaza approximately 9,000 square feet in April 1994, 1,000
square feet in July 1994, 3,000 square feet in December 1994 and 25,000 square
feet in June 1995. At September 30, 1995, the total casino square footage was
approximately 73,000 square feet.
Pursuant to the Trump Plaza East Purchase Option, which expires on June 30,
1998, Plaza Associates may purchase both the fee and leasehold interests
comprising Trump Plaza East. See "Certain Transactions--Plaza Associates--Trump
Plaza East." Until such time as the Trump Plaza East Purchase Option is
exercised or expires, Plaza Associates is obligated to pay the net expenses
associated with Trump Plaza East, including, without limitation, current real
estate taxes (approximately $1.2 million per year based upon current assessed
valuation) and annual lease payments of $3.1 million per year. Under the Trump
Plaza East Purchase Option, Plaza Associates has the right to acquire Trump
Plaza East for a purchase price of $28.0 million through December 31, 1996,
increasing by $1.0 million annually thereafter until expiration on June 30,
1998. In addition, Plaza Associates has the right of first offer upon any
proposed sale of all or any portion of the fee interest in Trump Plaza East
during the term of the Trump Plaza East Purchase Option (the "Right of First
Offer") . Under the terms of the Trump Plaza East Purchase Option, if Plaza
Associates defaults in making payments due under the Trump Plaza East Purchase
Option, Plaza Associates would be liable to the grantor of the Trump Plaza East
Purchase Option for the sum of (a) the present value of all remaining payments
to be made by Plaza Associates pursuant to the Trump Plaza East Purchase Option
during the term thereof and (b) the cost of demolition of all improvements then
located at Trump Plaza East, unless such improvements had been accepted in
writing by the grantor. See "Risk Factors--Trump Plaza Expansion and the
Taj Mahal Expansion." Plaza Associates intends to exercise the Trump Plaza East
Purchase Option in connection with the Merger Transaction.
THCR management believes that Plaza Associates' share of the net proceeds of
the June 1995 Offerings and equipment financings allocated to Trump Plaza East
and cash flow from operations should be sufficient to complete the planned
renovations of Trump Plaza and Trump Plaza East at a remaining cost, of
approximately
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$ million as contemplated by the Trump Plaza Expansion. THCR anticipates
incurring equipment financing for a portion of the gaming equipment at Trump
Plaza East. Commitments are currently in place with respect to some of such
financing, and THCR believes that it will be able to obtain the remainder of
such financing on customary terms acceptable to THCR, although there can be no
assurance given to that effect. Pursuant to the Right of First Offer, Plaza
Associates has ten days after receiving written notice from the grantor of the
proposed sale to commit to exercise the right to acquire Trump Plaza East at
the lesser of the proposed sale price and the applicable exercise price under
the Trump Plaza East Purchase Option. If Plaza Associates commits to exercise
the Right of First Offer, it has ten days from the date of the commitment to
deposit $3,000,000 with the grantor, to be credited towards the purchase price
or to be retained by the grantor if the closing, through no fault of the
grantor, does not occur within ninety days (or, subject to certain conditions,
120 days) of the date of the commitment. There can be no assurance that Plaza
Associates would have the liquidity necessary to exercise its Right of First
Offer on a timely basis should it be required.
Pursuant to the terms of the TPM Services Agreement, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of $1.0
million in equal monthly installments and reimburses TPM on a monthly basis for
all reasonable out-of-pocket expenses incurred by TPM in performing its
obligations under the TPM Services Agreement, up to certain amounts.
Approximately $1.3 million and $1.2 million of payments under the TPM Services
Agreement were charged to expense for the years ended December 31, 1994 and
1993, respectively, and approximately $1,012,000 and $961,000 were charged to
the nine-month periods ended September 30, 1995 and 1994, respectively.
Payments received under the TPM Services Agreement are currently pledged by TPM
to secure lease payments for a helicopter that TPM makes available to Plaza
Associates. Pending approval by the lessor of the helicopter, it is currently
contemplated that the stock of TPM will be transferred by Trump to THCR
Holdings, which will in turn assume the lease and related obligations, as well
as become entitled to all amounts payable under the TPM Services Agreement. See
"Certain Transactions."
Approximately $58 million of the net proceeds of the June 1995 Offerings was
used to exercise the Trump World's Fair Purchase Option. THCR believes that
Plaza Associates' share of the net proceeds of the June 1995 Offerings,
together with additional equipment financing, will be sufficient to fund the
additional approximately $51.6 million required to complete renovation of and
open Trump World's Fair early in the second quarter of 1996, although there can
be no assurance given to that effect. Associated with the openings of Trump
World's Fair and Trump Plaza East, management anticipates incurring
approximately $ of pre-opening costs, which will be expensed at the time of
such openings.
Trump Indiana. Pursuant to the terms of the certificate of suitability
originally issued to Trump Indiana on December 9, 1994, as extended, Trump
Indiana must comply with certain statutory and other requirements imposed by
the IGC. Failure to comply with the foregoing conditions and/or failure to
commence riverboat excursions by June 28, 1996, may result in the revocation of
the certificate of suitability. There can be no assurance that THCR and/or
Trump Indiana will be able to comply with the terms of the certificate of
suitability, or that a riverboat owner's license will ultimately be granted.
In addition to the approximately $84 million anticipated to be spent prior to
commencing the operations of the Indiana Riverboat early in the second quarter
of 1996, during its initial five-year license term, an additional $69 million
of funds (consisting of approximately $48 million for the construction of a
hotel and other amenities and $21 million for infrastructure improvements and
other municipal uses) will be required to be spent by Trump Indiana in
connection with the Indiana Riverboat facility and related commitments,
including commitments required in connection with the licensure process. The
sources of the initial $84 million include, and are anticipated to include: $34
million from the proceeds of the June 1995 Offerings, $20 million from vessel
financing, $10 million from slot machine financing, $10 million from a mortgage
on Trump Indiana's interest in the Buffington Harbor site or from a working
capital facility and $10 million from operating leases. Trump Indiana has
received commitments for $15 million in vessel financing. Trump Indiana is
seeking commitments
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for the additional financing required to commence the operations of the Indiana
Riverboat. The remaining $69 million required to be spent is expected to be
funded with cash from operations or additional borrowings. See "Risk Factors--
The Indiana Riverboat."
On August 30, 1995, Trump Indiana entered into a loan and security agreement
with debis Financial Services, Inc. ("dFS") pursuant to which dFS will provide,
subject to the terms and conditions thereof, $15 million in financing for the
gaming vessel, which is currently under construction. As of December 31, 1995,
dFS has provided Trump Indiana with approximately $6.8 million pursuant to such
agreement. Any other projects pursued by THCR in the future would require
additional funds. There can be no assurance that sufficient funds will be
available either from cash generated by operating activities or from additional
financing sources for such projects.
Trump Indiana and Barden entered into the BHR Agreement relating to the
formation of BHR. Pursuant to the BHR Agreement, BHR will own, develop and
operate all common land-based and waterside operations in support of each of
Trump Indiana's and Barden's separate riverboat casinos at Buffington Harbor.
Trump Indiana and Barden will each be equally responsible for the development
and operating expenses of BHR. Upon its formation, BHR was capitalized with the
contribution by Trump Indiana of ownership of the Buffington Harbor site and
the contribution by Barden of $6.75 million. Barden has subsequently
contributed approximately $14 million for construction costs to equal the costs
previously funded by Trump Indiana; thereafter, Trump Indiana and Barden will
share all of the development and operating expenses of BHR equally. There can
be no assurance that THCR or Trump Indiana will be able to fund from operations
or to finance on terms satisfactory to THCR or Trump Indiana any future
required expenditures or, if available, other such indebtedness would be
permitted under existing debt instruments of THCR. Furthermore, THCR will also
be dependent on the ability of Barden to pay for its share of the development
and operating expenses of BHR and there can be no assurance that Barden will be
able to fund such expenses. Associated with the opening of the Indiana
Riverboat, Management anticipates incurring $ of pre-opening costs, which
will be expensed at the time of such openings. See "Risk Factors--The Indiana
Riverboat."
THCR. THCR has no independent means of generating revenues and its sole
source of liquidity is distributions and other permitted payments from THCR
Holdings. As of December 31, 1995, THCR did not have any long or short-term
indebtedness, and is not anticipated to have any in the near future. THCR
Holdings has agreed that all expenses of THCR shall, to the maximum extent
practicable, be paid directly by THCR Holdings. Any other expenses paid
directly by THCR are required to be reimbursed promptly by THCR Holdings and
are deemed to be expenses of THCR Holdings.
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza occurring during the period from May through September.
Consequently, THCR's operating results during the two quarters ending in March
and December would not likely be as profitable as the two quarters ending in
June and September. THCR has no operating history in Indiana, and is unable to
predict seasonality with respect to the Indiana Riverboat.
INFLATION
There was no significant impact on Plaza Associates' operations as a result
of inflation during the first nine months of 1995, and during 1994, 1993 or
1992.
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BUSINESS OF THCR
THCR, through THCR Holdings and its subsidiaries, owns and operates Trump
Plaza, a luxury casino hotel located on The Boardwalk in Atlantic City and the
Indiana Riverboat, a gaming project currently under development at Buffington
Harbor on Lake Michigan. THCR management believes THCR benefits from the
following factors:
. THE "TRUMP" NAME. THCR capitalizes on the widespread recognition of the
"Trump" name and its association with high quality amenities and first
class service. To this end, THCR provides a broadly diversified gaming
and entertainment experience consistent with the "Trump" name and
reputation for quality, tailored to the gaming patron in each market.
THCR also benefits from the "Trump" name in connection with its efforts
to expand and to procure new gaming opportunities in the United States
and abroad.
. TRUMP PLAZA EXPANSION. THCR is currently enhancing further Trump Plaza's
position as an industry leader by increasing its gaming space and hotel
capacity while maintaining its commitment to first class customer
service. This strategy is designed to capitalize on Trump Plaza's
reputation for excellence, as well as to meet both existing demand and
the anticipated demand 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
Trump Plaza Expansion is expected to be completed early in the second
quarter of 1996 and to include the renovation and integration into Trump
Plaza of Trump Plaza East and Trump World's Fair, together with
additional casino space, retail operations and entertainment venues. On
October 30, 1995, THCR opened nearly 50% of the rooms and suites in Trump
Plaza East. This opening of 150 rooms and suites was ahead of schedule
and under the budget set for this part of the expansion. THCR intends to
open the remaining rooms and suites and the casino at Trump Plaza East in
the first quarter of 1996. Renovations are ongoing at Trump World's Fair
and THCR expects that the renovations at Trump World's Fair will be
completed early in the second quarter of 1996. Upon completion of the
Trump Plaza Expansion, Trump Plaza's casino floor space would be the
largest in Atlantic City, increasing from 75,000 square feet to an
aggregate of approximately 139,340 square feet of gaming space, housing a
total of approximately 4,300 slot machines and 142 table games. Trump
Plaza's hotel capacity would increase to a total of 1,404 guest rooms,
making Trump Plaza's guest room inventory the largest in Atlantic City.
. INDIANA RIVERBOAT. Trump Indiana has received site approval and a
certificate of suitability to develop a gaming project in Buffington
Harbor, on Lake Michigan, approximately 25 miles southeast of downtown
Chicago. Trump Indiana was the first recipient of a certificate of
suitability in Indiana and is one of 11 riverboat gaming projects
permitted under current Indiana law, and one of only five to be located
in northern Indiana. The Indiana Riverboat is currently on schedule to
open for business early in the second quarter of 1996. Trump Indiana and
Barden have entered into the BHR Agreement providing for the formation of
BHR, which will own, develop and operate all common land-based and
waterside operations in support of each of Trump Indiana's and Barden's
separate riverboat casinos at Buffington Harbor. The Indiana Riverboat is
planned to have approximately 37,000 square feet of gaming space and
feature 1,500 slot machines and 73 table games, and will be one of the
largest riverboat casinos in the United States. The Indiana Riverboat's
principal market will be the approximately 6.8 million people residing
within 50 miles of the Indiana Riverboat in the greater Chicago
metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of the site, respectively.
. NEW "TRUMP" GAMING VENTURES. THCR explores opportunities to establish
additional gaming operations, particularly in jurisdictions where the
legalization of casino gaming is relatively recent or is anticipated.
THCR management believes that Trump's involvement with THCR facilitates
THCR's expansion efforts, as THCR plans to capitalize on the "Trump" name
and what management believes to be its marquee value in seeking new
casino opportunities. THCR, through THCR Holdings and its
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subsidiaries, is the exclusive vehicle for new gaming ventures by Trump,
subject to the terms of certain agreements governing this relationship and
Trump's relationship with Trump's Castle. See "--Trademark/Licensing" and
"Management of THCR--Employment Agreements."
TRUMP PLAZA
THCR management believes that Trump Plaza's "Four Star" Mobil Travel Guide
rating and "Four Diamond" American Automobile Association rating reflect the
high quality amenities and services that Trump Plaza provides to its casino
patrons and hotel guests. These amenities and services include a broad
selection of dining choices, headline entertainment, deluxe accommodations,
tennis courts and swimming and health spa facilities.
Trump Plaza's management team commenced the Trump Plaza Expansion in 1995 and
has recently launched a variety of new initiatives designed to increase the
level of gaming activity generally at its casino and to attract casino patrons
who tend to wager more frequently and in larger denominations than the typical
Atlantic City patron. These initiatives include targeted marketing and
advertising campaigns directed to select groups of customers in the Boston-New
York-Washington, D.C. corridor, the introduction of new slot machines and table
games and the addition of bill acceptors on slot machines.
The Trump Plaza Expansion. THCR management believes that as a result of the
Trump Plaza Expansion and Trump Plaza's strategic location, Trump Plaza is well
positioned to become one of the premier host properties in Atlantic City. The
Trump Plaza Expansion is currently scheduled to be completed early in the
second quarter of 1996 and would increase Trump Plaza's prime central frontage
on The Boardwalk to nearly a quarter of a mile. THCR management also believes
that the construction of the new convention center and tourist corridor linking
the new convention center with The Boardwalk will enhance the desirability of
Atlantic City generally and, as a result of Trump Plaza's central location,
will benefit Trump Plaza in particular. In addition, THCR management expects to
be able to take advantage of recent gaming regulatory changes that will allow
casino space to be directly visible and accessible from The Boardwalk. Trump
Plaza's location on The Boardwalk at the end of the main highway into Atlantic
City makes it highly accessible for both "drive-in" and "walk-in" patrons.
THCR is in the process of renovating and integrating into Trump Plaza, Trump
World's Fair, located on The Boardwalk adjacent to the existing Atlantic City
Convention Center, which is next to Trump Plaza, at a remaining cost of $
million. Upon completion, Trump World's Fair would add 49,340 square feet of
casino floor space, approximately of which is directly accessible from The
Boardwalk, and 500 hotel rooms, connected with the current Trump Plaza's main
tower by an enclosed walkway overlooking The Boardwalk. Renovations are ongoing
at Trump World's Fair and THCR expects, although there can be no assurances,
that the renovations at Trump World's Fair will be completed early in the
second quarter of 1996.
Trump Plaza is also in the process of renovating and integrating into Trump
Plaza a hotel tower, Trump Plaza East, located adjacent to Trump Plaza's
existing facility, at a remaining cost of approximately $ million. On
October 30, 1995, THCR opened nearly 50% of the rooms and suites in Trump Plaza
East. This opening of 150 rooms and suites was ahead of schedule and under the
budget set for this part of the expansion. THCR intends to open the remaining
rooms and suites and the casino at Trump Plaza East in the first quarter of
1996. There can be no assurances that such openings will occur and, if so, that
the completion of such construction will be either under budget or ahead of
schedule. When completed, Trump Plaza East will have 15,000 square feet of
casino space and 349 hotel rooms. Trump Plaza currently leases Trump Plaza East
and intends to exercise its option to acquire it from an unaffiliated entity.
See "--Properties--Plaza Associates--Trump Plaza East" and "Certain
Transactions--Plaza Associates--Trump Plaza East." Trump Plaza East will be
reconfigured to provide a new entranceway to Trump Plaza directly off the
Atlantic City Expressway. Management believes the increased hotel capacity as a
result of the Trump Plaza Expansion will enable it better
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to meet demand and accommodate its casino guests, as well as to host additional
and larger conventions and corporate meetings. The following table details
plans for the Trump Plaza Expansion:
<TABLE>
<CAPTION>
TRUMP PLAZA TRUMP PLAZA TRUMP WORLD'S
FACILITY(/1/) EAST FAIR TOTAL
------------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Casino square footage......... 75,000 15,000 49,340 139,340
Slot machines................. 2,400 400 1,550 4,350
Table games................... 97 13 33 143
Hotel rooms................... 555 349(/2/) 500 1,404
</TABLE>
- --------
(1) Includes the 2,000 square foot area which will connect the existing
facility with Trump Plaza East, and the 75 slot machines to be included in
this area.
(2) Includes 150 rooms which were opened on October 30, 1995.
In July 1994, Time Warner opened its second largest Warner Brothers Studio
Store pursuant to a sublease of the entire first floor of retail space on The
Boardwalk at Trump Plaza East (approximately 17,000 square feet). THCR
management believes that the commitment of Time Warner at Trump Plaza East,
together with other nationally known retail, restaurant and entertainment
establishments expected to participate in the Trump Plaza Expansion, evidences
the continued growth of, and highlights Trump Plaza's favored place within, the
Atlantic City casino market.
FACILITIES AND AMENITIES
Trump Plaza. The casino in the existing facility of Trump Plaza currently
offers 97 table games and 2,400 slot machines. In addition to the casino, the
Main Tower consists of a 31-story tower with 555 guest rooms, including 62
suites. Trump Plaza's main tower also offers 10 restaurants, a 750-seat cabaret
theater, four cocktail lounges, 28,000 square feet of convention, ballroom and
meeting room space, a swimming pool, tennis courts and a health spa.
The entry level of Trump Plaza's main tower includes a cocktail lounge, two
gift shops, a deli, a coffee shop, an ice cream parlor and a buffet. The casino
level houses the casino, a fast food restaurant, an exclusive slot lounge for
high-end patrons and a new oceanfront baccarat gaming area. Upon completion, an
enclosed walkway will connect Trump Plaza at the casino level with the Atlantic
City Convention Center and with Trump World's Fair.
Trump Plaza's main tower guest rooms are located in a tower which affords
most guest rooms a view of the ocean. While rooms are of varying size, a
typical guest room consists of approximately 400 square feet. Trump Plaza also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites."
The Super Suites are located on the top two floors of the Main Tower and offer
luxurious accommodations and 24-hour butler and maid service. The Super Suites
and certain other suites are located on the "Club Level" which requires guests
to use a special elevator key for access, and contains a lounge area that
offers food and bar facilities.
Trump Plaza's main tower is connected by an enclosed pedestrian walkway to a
10-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off of the main highway
into Atlantic City.
Plaza Associates is in the process of renovating and integrating Trump Plaza
East into Trump Plaza, which is located directly adjacent to the Trump Plaza's
main tower. Trump Plaza East will be opened in stages beginning with the hotel
rooms, of which 150 were opened on October 30, 1995. This construction was
completed ahead of schedule and under the budget for this part of the
expansion. THCR intends to open the remaining rooms and suites and the casino
at Trump Plaza East in the first quarter of 1996. In addition, the hotel has
retail space fronting The Boardwalk. Trump has entered into a 10-year sublease
agreement with Time Warner pursuant to which Time Warner has subleased the
entire first floor of the retail space (approximately 17,000
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square feet) located at Trump Plaza East for a Warner Brothers Studio Store
which opened in July 1994. The second floor, directly connected to the Main
Tower, will house 15,000 square feet of distinctly themed casino floor space
with 400 slot machines and one pit of 13 table games.
Trump World's Fair. Upon completion of the renovation early in the second
quarter of 1996, Trump World's Fair will be connected to the Main Tower by an
enclosed walkway overlooking The Boardwalk and will add an additional 500 hotel
rooms to Trump Plaza. In addition, Trump World's Fair will be outfitted with
approximately 49,340 square feet of casino floor space housing approximately
1,550 slot machines and 33 table games. In addition to the casino, Trump
World's Fair will feature three restaurants, including a state-of-the-art
buffet, a cocktail lounge, convention, ballroom and meeting room space, a
swimming pool and a health spa. The enclosed walkway will run through a portion
of the Atlantic City Convention Center, which is located between Trump World's
Fair and the Main Tower. In this connection, Plaza Associates has acquired an
easement with regard to portions of the Atlantic City Convention Center. See
"--Properties--Trump World's Fair" and "Regulatory Matters--New Jersey Gaming
Regulations--Approved Hotel Facilities."
TRUMP PLAZA BUSINESS STRATEGY
General. A primary element of Trump Plaza's business strategy is to seek to
attract patrons who tend to wager more frequently and in larger denominations
than the typical Atlantic City gaming customer. Such high-end players typically
wager $5 or more per play in slots and $25 or more per play in table games. In
order to attract more high-end gaming patrons to Trump Plaza in a cost-
effective manner, Plaza Associates has refocused its marketing efforts.
Commencing in 1991, Plaza Associates substantially curtailed costly "junket"
marketing operations which involved attracting groups of patrons to the
facility on an entirely complimentary basis (e.g., by providing free air fare,
gifts and room accommodations). In the fall of 1992, Plaza Associates decided
to de-emphasize marketing efforts directed at "high roller" patrons from the
Far East, who tend to wager $50,000 or more per play in table games. Plaza
Associates determined that the potential benefit derived from these patrons did
not outweigh the high costs associated with attracting such players and the
resultant volatility in the results of operations of Trump Plaza. Revenues
derived from high roller patrons have declined since 1992, although management
believes that such revenue loss has not had a significant impact on
profitability for the reasons discussed above. In addition, this shift in
marketing strategy has allowed Plaza Associates to focus its efforts on
attracting the high-end players.
ATLANTIC CITY MARKETING STRATEGY
Trump Plaza. As the Trump Plaza Expansion is completed, Trump Plaza East will
be integrated into Trump Plaza and, together they will be operated as a single
casino hotel facility. Trump Plaza will continue the marketing strategies it
has found successful in the past, including targeting lucrative high-end drive-
in slot customers. The additional hotel rooms and gaming facilities at Trump
Plaza East will better enable Trump Plaza to accommodate the more profitable
weekend drive-in patron, who tends to wager more per play and per visit than
the typical walk-in or bus patron.
Trump World's Fair. Trump World's Fair will seek to attract the "middle
market" segment (primarily bus customers and boardwalk pedestrian traffic) by
offering high value food and entertainment attractions in a festive "World's
Fair" atmosphere. In addition, the first floor of Trump's World's Fair will
feature a Boardwalk level casino offering walk-in customers direct access from
The Boardwalk to approximately 575 slot machines. Trump World's Fair is
constructing a new bus terminal which will transfer bus customers directly to a
separate casino entertainment area via a dedicated foot wide escalator. The
separate casino entertainment area will contain a 500-seat buffet, an Oriental
Pavilion and a casino with approximately 550 slot machines. The new bus
terminal and dedicated casino facilities will allow Trump World's Fair to
efficiently serve a high volume of bus customers. A casino with approximately
420 slot machines and 33 table games along with additional restaurants will be
located on the second floor of Trump World's Fair. Moreover, with its prime
location adjoining the current Atlantic City Convention Center and near the new
Atlantic City convention center and its newly refurbished base of 500 rooms,
Trump World's Fair is ideally suited to attract convention visitor traffic.
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Gaming Environment. In recent years, there has been an industry trend towards
fewer table games and more slot machines. For the Atlantic City casino
industry, revenue from slot machines increased from 54.6% of the industry
gaming revenue in 1988 to 67.0% of the industry gaming revenue in 1994. Trump
Plaza experienced a similar increase, with slot revenue increasing from 51.2%
of gaming revenue in 1988 to 64.5% of gaming revenue in 1994. In response to
this trend, Trump Plaza has devoted more of its casino floor space to slot
machines. In April 1993, Trump Plaza removed 12 table games from the casino
floor and replaced them with 75 slot machines. Moreover, as part of its program
to attract high-end slot players, Plaza Associates created "Fifth Avenue
Slots," a separate high-end slot area that includes approximately 70 slot
machines (most of which provide for $5 or more per play), an exclusive lounge
for high-end patrons and other amenities.
Trump Plaza pursues a continuous preventative maintenance program that
emphasizes the casino, hotel rooms and public areas in Trump Plaza. These
programs are designed to maintain the attractiveness of Trump Plaza to its
gaming patrons. Trump Plaza continuously monitors the configuration of the
casino floor and the games it offers to patrons with a view towards making
changes and improvements. Trump Plaza's casino floor has clear, large signs for
the convenience of patrons. As new games have been approved by the CCC, Plaza
Associates has integrated such games into its casino operations to the extent
it deems appropriate.
"Comping" Strategy. In order to compete effectively with other Atlantic City
casino hotels, Plaza Associates offers complimentary drinks, meals, room
accommodations and/or travel arrangements to its patrons ("complimentaries" or
"comps"). Management monitors Trump Plaza's policy on complimentaries so as to
provide comps primarily to patrons with a demonstrated propensity to wager at
Trump Plaza.
Entertainment. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers headline
entertainment weekly during the summer and monthly during the off- season, and
also features other entertainment and revue shows.
Player Development/Casino Hosts. Plaza Associates currently employs gaming
representatives in New Jersey, New York and other states, as well as several
international representatives, to promote Trump Plaza to prospective gaming
patrons. Player development personnel host special events, offer incentives and
contact patrons directly in an effort to attract high-end table game patrons
from the United States, Canada and South America. Trump Plaza's casino hosts
assist patrons on the casino floor, make room and dinner reservations and
provide general assistance. They also solicit Trump Card (the frequent player
slot card) sign-ups in order to increase Plaza Associates marketing base.
Promotional Activities. The Trump Card constitutes a key element in Trump
Plaza's direct marketing program. Subject to regulatory constraints, the Trump
Card will be used in all of THCR's gaming facilities so as to build a national
database of gaming patrons. Slot machine players are encouraged to register for
and utilize their personalized Trump Card to earn various complimentaries based
upon their level of play. The Trump Card is inserted during play into a card
reader attached to the slot machine for use in computerized rating systems.
THCR's computer systems record data about the cardholders, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced.
Trump Plaza designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino game supervisors.
Promotional activities include the mailing of vouchers for complimentary slot
play. Trump Plaza also utilizes a special events calendar (e.g., birthday
parties, sweepstakes and special competitions) to promote its gaming
operations.
Plaza Associates 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 Plaza.
Bus Program. Trump Plaza has a bus program, which transports approximately
2,400 gaming patrons per day during the week and 3,500 per day on the weekends.
Trump Plaza's bus program offers incentives and
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discounts to certain scheduled and chartered bus customers. Trump Plaza's
Transportation Facility contains 13 bus bays and is connected by an enclosed
pedestrian walkway to Trump Plaza. The Transportation Facility provides patrons
with immediate access to the casino, and contains a comfortable lounge area for
patrons waiting for return buses.
Credit Policy. Historically, Trump Plaza has extended credit to certain
qualified patrons. For the years ended December 31, 1992, 1993 and 1994 and the
nine months ended September 30, 1995 credit play as a percentage of total
dollars wagered was approximately 28%, 18%, 17%, and 18%, respectively. As part
of Trump Plaza's new business strategy and in response to the general economic
downturn in the Northeast, Trump Plaza has imposed stricter standards on
applications for new or additional credit. Such stricter standards in the
extension of credit have contributed to the reduction of credit play as a
percentage of total dollars wagered and has led to improved quality of the
credit extended.
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza during the period from May through September, and with December
and January showing substantial decreases in activity. Revenues have been
significantly higher on Fridays, Saturdays, Sundays and holidays than on other
days.
EMPLOYEES AND LABOR RELATIONS
Plaza Associates has approximately 3,800 employees of whom approximately
1,100 are covered by collective bargaining agreements. THCR management believes
that its relationships with its employees are satisfactory. Certain of Plaza
Associates employees must be licensed under the Casino Control Act. See
"Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees." Plaza Funding has no employees.
In April 1993, the National Labor Relations Board (the "NLRB") found that
Plaza Associates had violated the National Labor Relations Act (the "NLRA") in
the context of a union organizing campaign by table game dealers of Plaza
Associates in association with the Sports Arena and Casino Employees Union
Local 137, a/w Laborers' International Union of North America, AFL-CIO ("Local
137"). In connection with such finding, Plaza Associates was ordered to refrain
from interfering with, restraining, or coercing employees in the exercise of
the rights guaranteed them by Section 7 of the NLRA, to notify its employees of
such rights and to hold an election by secret ballot among its employees
regarding whether they desire to be represented for collective bargaining by
Local 137. The election was held on May 20 and 21, 1994 and the vote, which has
been certified by the NLRB, was in favor of management and against
representation by Local 137.
INDIANA RIVERBOAT
The Indiana Riverboat is expected to feature an approximately 280-foot luxury
yacht containing approximately 37,000 square feet of gaming space with 1,500
slot machines, 73 table games and capacity of approximately 2,450 passengers
and 300 employees. The site adjacent to the Indiana Riverboat is anticipated to
include surface parking for approximately 3,000 automobiles and certain other
infrastructure improvements. The cost to THCR for the development of the
Indiana Riverboat, which includes the land, the vessel, gaming equipment, a
pavilion for staging and ticketing and restaurant facilities, berthing and
support facilities and parking facilities, is expected to be approximately $84
million through the planned opening early in the second quarter of 1996. THCR
initially anticipated spending $59 million prior to the commencement of the
Indiana Riverboat's operations for the vessel, gaming equipment and initial
berthing and support facilities, and also anticipated spending an additional
$27 million in the second phase to be completed by mid-1997, which would
feature a pavilion for staging and ticketing and restaurant facilities,
berthing and support facilities and expanded parking. To facilitate the Indiana
Riverboat's operations from the opening day and to avoid disruptive
construction at the site for an additional year, THCR determined to accelerate
the second phase of the project, now expected to cost $25 million, and complete
both phases prior to commencing operations. On August 30, 1995, Trump Indiana
entered into a loan and security agreement with dFS, pursuant to which dFS has
agreed,
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subject to the terms and conditions thereof, to provide $15 million in
financing for the gaming vessel which is substantially constructed. In
addition, THCR has further committed in the licensure process to construct a
hotel facility and other amenities (at an approximate cost of $48 million) and
to fund approximately $21 million of infrastructure improvements and other
municipal uses.
The Indiana Riverboat site is approximately 25 miles from downtown Chicago.
In addition, the cities of Indianapolis, Fort Wayne, Toledo and Grand Rapids
are each within a 175-mile radius of the Indiana Riverboat location. THCR
believes the Indiana Riverboat will benefit from (i) its location and size,
(ii) its strategy of developing, together with Barden, an array of
entertainment, retail and restaurant attractions, and coordinating cruise
schedules and (iii) the widespread recognition of the "Trump" name and what
management believes to be its reputation for quality. Gaming facilities in
Illinois are limited at present to 1,200 gaming positions under current
regulations in Illinois, which THCR believes will put Illinois properties at a
competitive disadvantage to larger facilities such as the Indiana Riverboat.
THCR expects to draw on these competitive advantages and to capitalize on its
experience in gaming activities in Atlantic City in order to create an
outstanding gaming and entertainment experience.
THCR expects to focus its marketing efforts for the Indiana Riverboat on the
middle market, which makes up the majority of the gaming population in the
Great Lakes Market. The middle market constitutes a broad segment of casino
patrons who come to a casino for exciting recreation and entertainment and who
typically wager less, on an individual basis, than high-end patrons. Through
the use of the "Trump" name and systematic marketing programs, THCR will seek
to attract drive-in customers to the facility. Casinos currently operating in
the Great Lakes Market have been achieving operating results which exceed
levels in other new gaming markets in terms of win per unit. THCR believes that
these operating levels indicate that the Great Lakes Market will be capable of
absorbing significant capacity expansion in the future.
Under current gaming laws in Indiana, all games typically available in
Atlantic City casinos will be permitted on the Indiana Riverboat. The riverboat
casinos in Indiana will be permitted to stay open 24 hours per day, 365 days
per year and to extend credit and accept credit charge cards, with no loss or
wagering limits. It is anticipated that the Indiana Riverboat would make
approximately six daily cruises of two to three hours in duration each. Indiana
gaming laws permit gambling while cruising and during each 30-minute period
during passenger embarkation and disembarkation. The foregoing may be subject
to the adoption of proposed amendments to applicable federal legislation and
clarification or interpretation of recently enacted state legislation. See
"Regulatory Matters--Indiana Gaming Regulations--Excursions."
THCR believes that competition in the gaming industry, particularly the
riverboat and dockside gaming industry, is based on the quality and location of
gaming facilities, the effectiveness of marketing efforts, and customer service
and satisfaction. Although management of THCR believes that the location of the
Indiana Riverboat will allow THCR to effectively compete with other casinos in
the geographic area surrounding its casino, THCR expects competition in the
casino gaming industry to be intense as more casinos are opened and new
entrants into the gaming industry become operational.
Barden and Trump Indiana are the holders of the certificates of suitability
in Buffington Harbor. Barden is an entity beneficially owned by Don H. Barden,
a developer based in Detroit without significant gaming experience. Pursuant to
the BHR Agreement, BHR will own, develop and operate all common land-based and
waterside operations in support of Trump Indiana's and Barden's separate
riverboat casinos at Buffington Harbor. Trump Indiana and Barden will each be
equally responsible for the development and the operating expenses of BHR. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of THCR--Liquidity and Capital Resources."
On June 30, 1995, Trump Indiana acquired, pursuant to the Agreement of Sale
with Lehigh Portland Cement Company ("Lehigh"), dated May 10, 1995,
approximately 88 acres of land at Buffington Harbor for $13.5 million (the
"Site Purchase Price"). Pursuant to the Harbor Lease Agreement between Lehigh
and BHR, Lehigh
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granted Trump Indiana and Barden a ten year lease for the initial use of the
harbor and certain of Lehigh's property adjacent to the Buffington Harbor site
for the docking of the Indiana Riverboat vessel and the Barden vessel. No lease
payments will be made to Lehigh during the first 30 months of the lease. In the
event that the use of this property continues beyond the initial 30-month
period, Lehigh will be entitled to receive a license fee in an amount equal to
$125,000 per month for each month either Trump Indiana or Barden uses Lehigh's
property during the remaining term of the lease.
In 1994, the City of Gary (the "City") commenced a legal proceeding in Lake
County Superior Court of Indiana captioned City Of Gary v. Lehigh Portland
Cement Company, et al., in which the City sought to exercise its eminent domain
power to acquire certain of Lehigh's property, including the Buffington Harbor
site, for the purpose of using the land as a gaming venture. On May 12, 1995,
the court ruled in favor of the City. Consummation of the condemnation process
is subject to additional conditions. However, on May 27, 1995, THCR entered
into a Memorandum of Understanding (the "MOU") with the City pursuant to which
the City agreed to take all necessary steps to dismiss the condemnation suit
following the closing of the Site Sale Agreement. This proceeding was dismissed
with prejudice in July 1995. THCR and Trump Indiana further agreed, among other
things, to (i) pay to the City $205,000 as reimbursement for certain costs and
expenses incurred by the City, and pay certain additional costs and expenses to
be incurred by the City in connection with the dismissal of its condemnation
suit; (ii) use best efforts to negotiate and complete by June 20, 1995 a long-
term ground lease pursuant to which the City would lease the Buffington Harbor
Site to Trump Indiana for a period of 99 years with rent at $1.00 per year (the
"Buffington Harbor Lease"), (iii) transfer title to the Buffington Harbor Site
to the City in consideration of $1.00 upon closing the Site Sale Agreement,
provided the Buffington Harbor Lease is then effective; (iv) use best efforts
to negotiate and complete by July 25, 1995 a development agreement with the
City in order to confirm Trump Indiana's undertakings to the City pursuant to
its certificate of suitability and (v) commence construction at the Buffington
Harbor site by the later of June 30, 1995 or such date on which all permits and
approvals necessary for the development and operation of the Buffington Harbor
site have been obtained, and use best efforts to commence gaming operations
within ninety (90) days of commencement of construction. To date, THCR and
Trump Indiana have complied with the terms of the MOU. On September 29, 1995,
Trump Indiana, Barden and the City entered into an agreement modifying the MOU
(the "Amended MOU"). The Amended MOU permits Trump Indiana and Barden to retain
ownership of the 88 acre parcel at Buffington Harbor to be utilized for their
riverboat operations.
On December 9, 1994, the IGC issued to Trump Indiana a certificate of
suitability for a riverboat owner's license for a riverboat to be docked in
Buffington Harbor, Indiana. The certificate of suitability constitutes approval
of the application of Trump Indiana for a riverboat owner's license. In January
1996, the IGC extended Trump Indiana's certificate of suitability until June
28, 1996. Pursuant to the terms of the certificate of suitability, during such
period, Trump Indiana must comply with certain statutory and other requirements
imposed by the IGC. In addition, as a condition to the certificate of
suitability, Trump Indiana has committed to invest $153 million in the Indiana
Riverboat and certain related projects and certain economic development
projects and to pay to the City a 1% of gross gaming revenue fee, intended to
be used by the City for security and public safety purposes, and an additional
fee ranging from (i) 2% to 4% of the gross gaming revenue depending on the
amount of gross gaming revenues generated or (ii) 2% to 18% of net income
before taxes depending on the amount of Trump Indiana's net income before
taxes, whichever is greater.
Failure to comply with the foregoing conditions and/or failure to commence
riverboat excursions by such time as required by the IGC could result in the
revocation of the certificate of suitability. There can be no assurance that
THCR and/or Trump Indiana will be able to comply with the terms of the
certificate of suitability, that it will be further extended if operations do
not commence by June 28, 1996 or that a riverboat owner's license will
ultimately be granted. The riverboat owner's license will only be issued upon
satisfaction of the conditions of the certificate of suitability and the
requirements of the gaming laws, which include the completion of the Indiana
Riverboat, acquisition of necessary permits or approvals from federal, state
and local authorities and readiness to commence operations. See "Regulatory
Matters--Indiana Gaming Regulations--Interim
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Compliance Requirements." If granted, such license would be for an initial term
of five years and renewable annually thereafter. With respect to certain land-
based facilities, THCR would also be dependent on the ability of Barden to
obtain the requisite licenses and fund its portion of joint construction costs.
Trump Indiana has entered into a Sales and Construction Agreement with
Atlantic Marine, Inc. ("AMI") for the purchase and construction of the Indiana
Riverboat vessel (the "Construction Agreement") for $24 million (the "Vessel
Contract Price"). Pursuant to the Construction Agreement, Trump Indiana paid
10% of the Vessel Contract Price to AMI and AMI ordered materials and commenced
construction of the vessel. The vessel will remain the property of AMI until
the Vessel Contract Price is paid in full. All risk of damage to or destruction
of the vessel and all liability to or for labor employed during its
construction will be the responsibility of AMI. Pursuant to the Construction
Agreement, AMI will not be responsible for (i) any negligent construction or
defects in the vessel after nine months from the date of acceptance of the
vessel by Trump Indiana upon completion of the construction or (ii) any
incidental or consequential damages.
Development of the Indiana Riverboat project will require THCR to (a) acquire
rights to traverse, use and/or improve certain parcels of property owned by
third parties, in order to gain direct, construction and emergency access to
the property, and (b) acquire access to water, sewer, gas, electric and other
necessary utility services which presently cannot provide service to the site
and which may require extension of existing utility service facilities across
existing rights of way and other property owned by third parties. There can be
no assurance that THCR will obtain the rights, utility services, licenses,
permits and approvals necessary to undertake or complete its development plans,
or that such rights, utility services, licenses, permits and approvals will be
obtained within the anticipated time frame. Before the Indiana Riverboat
becomes operational, additional definitive agreements must be negotiated and
executed, gaming facilities must be constructed and a number of further
conditions must be satisfied (including the licensing of THCR, Barden and their
respective employees and the receipt of all requisite permits). There can be no
assurance that the Indiana Riverboat will become operational. See "--Indiana
Riverboat," "Risk Factors--The Indiana Riverboat," "--Competition," and
"Regulatory Matters--Indiana Gaming Regulations."
THCR believes that competition in the gaming industry, particularly the
riverboat and dockside gaming industry, is based on the quality and location of
gaming facilities, the effectiveness of marketing efforts, and customer service
and satisfaction. Although management of THCR believes that the location of the
Indiana Riverboat will allow THCR to compete effectively with other casinos in
the geographic area surrounding its casino, THCR expects competition in the
casino gaming industry to be intense as more casinos are opened and new
entrants into the gaming industry become operational. See "Competition."
THCR has no operating history in Indiana and is unable to predict seasonality
with respect to the Indiana Riverboat.
PROPERTIES
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is currently subject to the liens of
the mortgages associated with the Plaza Notes (collectively, the "Plaza
Mortgages") and certain other liens and which will be subject to liens on the
mortgages associated with the Mortgage Notes. Upon its acquisition, Trump Plaza
East will also secure the Mortgage Notes.
Plaza Casino Parcel. The Main Tower is located on The Boardwalk in Atlantic
City, New Jersey, next to the existing Atlantic City Convention Center. It
occupies the entire city block (approximately 2.38 acres) bounded by The
Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the "Plaza
Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, one of which is
owned by Plaza Associates and three of which are leased to Plaza Associates
pursuant to three non-renewable ground leases, each of which
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expires on December 31, 2078 (each, a "Plaza Ground Lease"). Trump Seashore
Associates ("Trump Seashore"), Seashore Four Associates ("Seashore Four") and
Plaza Hotel Management Company (each, a "Plaza Ground Lessor") are the
owners/lessors under such respective Ground Leases (respectively, the "TSA
Lease," "SFA Lease" and "PHMC Lease"; the land which is subject to the Ground
Leases (which includes Additional Parcel 1, as defined) is referred to
collectively as the "Plaza Leasehold Tracts" and individually as a "Plaza
Leasehold Tract"). Trump Seashore Associates and Seashore Four Associates are
100% beneficially owned by Trump and are, therefore, affiliates of THCR.
The Plaza Ground Leases provide that each Plaza Ground Lessor may encumber
its fee estate with mortgage liens, but any such fee mortgage will not increase
the rent under the applicable Plaza Ground Lease and must be subordinate to
such Plaza Ground Lease. Accordingly, any default by a Plaza Ground Lessor
under any such fee mortgage will not result in a termination of the applicable
Plaza Ground Lease but would permit the fee mortgagee to bring a foreclosure
action and succeed to the interests of the Plaza Ground Lessor in the fee
estate, subject to Plaza Associates' leasehold estate under such Plaza Ground
Lease. Each Plaza Ground Lease also specifically provides that the Plaza Ground
Lessor may sell its interest in the applicable Plaza Leasehold Tract, but any
such sale would be made subject to Plaza Associates' interest in the applicable
Plaza Ground Lease.
On August 1, 1991, as security for indebtedness owed to a third party, Trump
Seashore transferred its interest in the TSA Lease to United States Trust
Company of New York ("UST"), as trustee for the benefit of such third party
creditor. The trust agreement among UST, Trump Seashore and such creditor
provides that the trust shall terminate on the earlier of (i) August 1, 2012 or
(ii) the date on which such third party creditor certifies to UST that all
principal, interest and other sums due and owing from Trump Seashore to such
third party creditor have been paid.
On September 20, 1995, Trump Seashore and its third party lender entered into
a mortgage note modification and extension agreement, pursuant to which Trump
Seashore and such third party lender extended the term of the indebtedness
described above, which matured in October 1993, to September 30, 1996, and
increased the interest rate to be paid on such indebtedness to one and one-half
percent in excess of the interest rate stated by such third party lender to be
its prime rate.
Each Plaza Ground Lease contains options pursuant to which Plaza Associates
may purchase the Plaza Leasehold Tract covered by such Plaza Ground Lease at
certain times during the term of such Plaza Ground Lease under certain
circumstances. The purchase price pursuant to each option is specified in the
applicable Plaza Ground Lease.
The Plaza Ground Leases are "net leases" pursuant to which Plaza Associates,
in addition to the payment of fixed rent, is responsible for all costs and
expenses with respect to the use, operation and ownership of the Plaza
Leasehold Tracts and the improvements now, or which may in the future be,
located thereon, including, but not limited to, all maintenance and repair
costs, insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Plaza Leasehold Tracts are owned by Plaza
Associates during the terms of the respective Plaza Ground Leases and upon the
expiration of the term of each Plaza Ground Lease (for whatever reason),
ownership of such improvements will vest in the Plaza Ground Lessor.
If a bankruptcy case is filed by or commenced against a Plaza Ground Lessor
under applicable bankruptcy law, the trustee in bankruptcy in a liquidation or
reorganization case under the applicable bankruptcy law, or a debtor-in-
possession in a reorganization case under the applicable bankruptcy law, has
the right, at its option, to assume or reject the Plaza Ground Lease of the
debtor-lessor (subject, in each case, to court approval). If the Plaza Ground
Lease is assumed, the rights and obligations of Plaza Associates thereunder,
and the rights of the trustee with respect to the Plaza Notes (the "Plaza Note
Trustee") as leasehold mortgagee under the Plaza Note Agreements, would
continue in full force and effect. If the Plaza Ground Lease is rejected, Plaza
Associates would have the right, at its election, either (i) to treat the Plaza
Ground Lease as terminated, or (ii) to continue in
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possession of the land and improvements under the Plaza Ground Lease for the
balance of the term thereof and at the rental set forth therein (with a right
to offset against such rent any damages caused by the Plaza Ground Lessor's
failure to thereafter perform its obligations under such Plaza Ground Lease).
The Plaza Note Agreements provide that if a Plaza Ground Lease is rejected,
Plaza Associates assigns to the Plaza Note Trustee its rights to elect whether
to treat the Plaza Ground Lease as terminated or to remain in possession of the
leased premises.
In the case of the Plaza Ground Leases, the rejection of a Plaza Ground Lease
by a trustee in bankruptcy or debtor-lessor (as debtor-in-possession) may
result in termination of any options to purchase the fee estate of the debtor-
lessor and the Plaza Note Trustee's option (as leasehold mortgagee as described
above), if the Plaza Ground Lease is terminated, to enter into a new lease
directly with the lessor. In addition, under an interpretation of New Jersey
law, it is possible that a court would regard such options as separate
contracts and, therefore, severable from the Plaza Ground Lease. In such event,
the trustee in bankruptcy or debtor-lessor (as debtor-in-possession) could
assume the Plaza Ground Lease, while rejecting some or all of such options
under the Ground Lease.
Parking Parcels. Plaza Associates owns a parcel of land (the "Plaza Garage
Parcel") located across the street from the Plaza Casino Parcel and along
Pacific Avenue in a portion of the block bounded by Pacific Avenue, Mississippi
Avenue, Atlantic Avenue and Missouri Avenue. Plaza Associates has constructed
on the Plaza Garage Parcel a 10-story parking garage capable of accommodating
approximately 2,650 cars and which includes offices and a bus transportation
center with bays accommodating up to 13 buses at one time. An enclosed
pedestrian walkway from the parking garage accesses Trump Plaza at the casino
level. Parking at the parking garage is available to Trump Plaza's guests, as
well as to the general public. One of the tracts comprising a portion of the
Plaza Garage Parcel is subject to a first mortgage on Plaza Associates' fee
interest in such tract. As of September 30, 1995, such mortgage secured
indebtedness had an approximate outstanding principal balance of $1.4 million.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land located
on the northwest corner of the intersection of Mississippi and Pacific Avenues
consisting of approximately 11,800 square feet ("Additional Parcel 1") and owns
another parcel on Mississippi Avenue adjacent to Additional Parcel 1 consisting
of approximately 5,750 square feet (the "Bordonaro Parcel"). In addition to the
Plaza Mortgages, the Bordonaro Parcel is encumbered by a first mortgage
securing indebtedness having an outstanding principal balance, as of September
30, 1995, of approximately $110,000. Additional Parcel 1 and the Bordonaro
Parcel are presently paved and used for surface parking.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases one parcel consisting of approximately 3,125
square feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for signage
and surface parking and are not encumbered by any mortgage liens other than
those of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1995, of approximately $ million and is encumbered by the Plaza
Mortgages.
Trump Plaza East. In connection with the Merger Transaction, Plaza Associates
intends to exercise the Trump Plaza East Purchase Option, a five-year option to
purchase the fee and leasehold interests comprising Trump Plaza East. In
October 1993, Plaza Associates assumed the leases associated with Trump Plaza
East. Until such time as the Trump Plaza East Purchase Option is exercised or
expires, Plaza Associates is obligated to pay the net expenses associated with
Trump Plaza East. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of THCR--Liquidity and Capital Resources"
and "Certain Transactions--Plaza Associates--Trump Plaza East." During the
years ended December 31, 1995 and 1994, Plaza Associates incurred approximately
$ million and $4.9 million, respectively, of such expenses. Under the Trump
Plaza
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East Purchase Option, Plaza Associates has the right to acquire the fee
interest in Trump Plaza East for a purchase price of $28.0 million through
December 31, 1996 increasing by $1.0 million annually thereafter until
expiration on June 30, 1998.
Plaza Associates currently intends to exercise the Trump Plaza East Purchase
Option in connection with the Merger Transaction. However, if Plaza Associates
does not exercise the Trump Plaza East Purchase Option in connection with the
Merger Transaction, up to $30.0 million of internally generated funds and/or
additional financing would be required to fund the acquisition pursuant to the
existing purchase option. There can be no assurance that such financing would
be available on attractive terms, if at all. In addition, the exercise of the
Trump Plaza East Purchase Option may require the consent of certain of Trump's
personal creditors, and there can be no assurance that such consent will be
obtained at the time Plaza Associates desires to exercise the Trump Plaza East
Purchase Option. The CCC has required that Plaza Associates exercise the Trump
Plaza East Purchase Option no later than July 1, 1996. Plaza Associates
intends to request that the CCC extend the July 1, 1996 deadline for
exercising the Trump Plaza East Purchase Option if not exercised in connection
with the Merger Transaction, although there can be no assurance that such
extension would be granted. Failure of THCR to acquire Trump Plaza East, to
obtain an extension of the July 1, 1996 deadline or to obtain an extension of
the existing lease of the premises beyond its current June 30, 1998 expiration
date would have a material adverse effect on THCR. See "Certain Transactions--
Plaza Associates--Trump Plaza East."
Plaza Associates has already begun development of Trump Plaza East. If Plaza
Associates is unable to finance the purchase price of Trump Plaza East
pursuant to the Trump Plaza East Purchase Option, any amounts expended with
respect to Trump Plaza East, including payments under the Trump Plaza East
Purchase Option and the lease pursuant to which Plaza Associates leases Trump
Plaza East, and any improvements thereon, would inure to the benefit of the
owner of Trump Plaza East and not to Plaza Associates and would increase the
cost of demolition of any improvements for which Plaza Associates would be
liable. As of December 31, 1995, Plaza Associates had capitalized
approximately $9.3 million in construction costs related to Trump Plaza East.
If the development of Trump Plaza East is not successful, the Company would be
required to write off the capitalized construction costs associated with the
project.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into the Time Warner Sublease
with Time Warner pursuant to which Time Warner subleased the entire first
floor of retail space for a new Warner Brothers Studio Store which opened in
July 1994. The Time Warner Sublease provides for a 10-year term which expires
on the last day of the month immediately preceding the tenth anniversary of
the commencement date and contains two 5-year renewal options exercisable by
Time Warner. Time Warner renovated the premises in connection with opening the
studio store. Rent under the Time Warner Sublease is currently accruing and
will not become due and payable to Plaza Associates until the satisfaction of
certain conditions designed to protect Time Warner from the termination of the
Time Warner Sublease by reason of the termination of Plaza Associates'
leasehold estate in Trump Plaza East or the foreclosure of a certain mortgage
and until Time Warner's unamortized construction costs are less than accrued
rent. No assurances can be made that such conditions will be satisfied. In
addition, Time Warner may terminate the Time Warner Sublease at any time after
two years after the commencement date in the event that gross sales for the
store do not meet certain threshold amounts or at any time if Plaza Associates
fails to operate a first class hotel on Trump Plaza East. See "Certain
Transactions--Plaza Associates--Trump Plaza East."
Trump World's Fair. Pursuant to an easement agreement with The New Jersey
Sports and Exposition Authority ("NJSEA"), Plaza Associates has an exclusive
easement over, in and through the portions of the Atlantic City Convention
Center to be used as the pedestrian walkway connecting the Main Tower and
Trump World's Fair. The easement is for a 25-year term and may be renewed at
the option of Plaza Associates for one additional 25-year period. In
consideration of the granting of the easement, Plaza Associates must pay to
NJSEA the sum of $2,000,000 annually, such annual payment to be adjusted every
five years to reflect changes in the consumer price index. Plaza Associates
will have the right to terminate the easement agreement at any time upon six
months' notice to NJSEA in consideration of a termination payment of
$1,000,000. See also "Certain
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Transactions--Plaza Associates--Trump World's Fair" and "Regulatory Matters--
New Jersey Gaming Regulations--Approved Hotel Facilities."
Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
Parcel, the Bordonaro Parcel and the Egg Harbor Parcel (all of such liens are
collectively called the "Existing Senior Plaza Mortgages") are all senior to
the liens of the Plaza Mortgages. The principal amount currently secured by
such Existing Senior Plaza Mortgages as of December 31, 1995 was, in the
aggregate, approximately $3.0 million.
Plaza Associates has financed or leased and from time to time will finance
or lease its acquisition of furniture, fixtures and equipment. The lien in
favor of any such lender or lessor may be superior to the liens of the Plaza
Mortgages.
Trump Tower. THCR has entered into a ten year lease with The Trump-Equitable
Fifth Avenue Company, a corporation wholly owned by Trump, dated as of July 1,
1995, for the lease of office space in The Trump Tower in New York City, which
THCR may use for its general, executive and administrative offices. The fixed
rent is $115,500 per year, paid in equal monthly installments, for the period
from July 1, 1995 to June 30, 2000 and will be $129,250 per year, paid in
equal monthly installments, for the period from July 1, 2000 to June 30, 2005.
In addition, THCR will pay as additional rent, a portion of the property taxes
due each year. THCR has the option to terminate this lease upon ninety days
written notice and payment of $32,312.50.
Indiana Riverboat. See "--Indiana Riverboat."
TRADEMARK/LICENSING
Pursuant to the License Agreement, Trump granted to THCR the world-wide
right and license to use the Marks in connection with casino and gaming
activities and related services and products. The license is exclusive,
subject to existing licenses of the Marks to the Taj Mahal (prior to the
Merger Transaction) and Trump's Castle. The License Agreement does not
restrict or restrain Trump from the right to use or further license the Trump
Names in connection with services and products other than casino services and
products.
The license is for a term of the later of: (i) 20 years; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
THCR; or (iii) such time as Trump ceases to be employed or retained pursuant
to an employment, management, consulting or similar services agreement with
THCR. Upon expiration of the term of the License, Trump will grant THCR a non-
exclusive license for a reasonable period of transition on terms to be
mutually agreed upon between Trump and THCR. Trump's obligations under the
License Agreement are secured by a security agreement, pursuant to which Trump
granted THCR a first priority security interest in the Marks for use in
connection with casino services, as well as related hotel, bar and restaurant
services. See "Risk Factors--Limitations on License of the Trump Name."
THE 1992 PLAZA RESTRUCTURING
In 1991, Trump Plaza experienced liquidity problems. THCR management
believes that those liquidity problems were attributable, in part, to an
overall deterioration in the Atlantic City gaming market, as indicated by
reduced rates of casino revenue growth for the industry for the two prior
years, aggravated by an economic recession in the Northeast. In addition,
increased casino gaming capacity in Atlantic City, due in part to the opening
of the Taj Mahal in April 1990, may also have contributed to Trump Plaza's
liquidity problems.
In order to alleviate its liquidity problem, pursuant to the 1992 Plaza
Restructuring, Plaza Associates and Plaza Funding restructured their
indebtedness through a prepackaged plan of reorganization under Chapter 11 of
the Bankruptcy Code.
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The purpose of the 1992 Plaza Restructuring was to improve the amortization
schedule and extend the maturity of Plaza Associates' indebtedness by (i)
eliminating the sinking fund requirement on Plaza Funding's 12 7/8% Mortgage
Bonds, due 1998 (the "Original Plaza Bonds"), (ii) extending the maturity of
such indebtedness from 1998 to 2002, (iii) lowering the interest rate from 12
7/8% per annum to 12% per annum, (iv) reducing the aggregate principal amount
of the indebtedness under the Original Plaza Bonds and certain other
indebtedness from $250 million to $225 million and (v) eliminating certain
other indebtedness by reconstituting such debt in part as new bonds (the
"Successor Plaza Bonds") and in part as Stock Units (as defined). The 1992
Plaza Restructuring was necessitated by the inability to either generate cash
flow or obtain additional financing sufficient to make the scheduled sinking
fund payment on the Original Plaza Bonds. In connection with the 1992 Plaza
Restructuring, each holder of $1,000 principal amount of Original Plaza Bonds
and such other indebtedness received (i) $900 principal amount of Successor
Plaza Bonds, (ii) 12 Stock Units, each representing one share of Common Stock
and one share of Preferred Stock of Plaza Funding (the "Stock Units") and (iii)
cash payments of approximately $58.65, reflecting accrued interest.
On May 29, 1992, Plaza Funding, which theretofore had no interest in Plaza
Associates, received a 50% beneficial interest in TP/GP, Inc. ("Trump Plaza
GP"), and Plaza Funding and Trump Plaza GP were admitted as partners of Plaza
Associates. Plaza Funding also issued approximately three million Stock Units
to holders of the Original Plaza Bonds and certain other indebtedness. Pursuant
to the terms of the Plaza Associates partnership agreement, Plaza Funding was
issued a preferred partnership interest, which provided Plaza Funding with
partnership distributions designed to pay dividends on, and the redemption
price of, the Stock Units. Trump Plaza GP became the managing general partner
of Plaza Associates, and, through its Board of Directors, managed the affairs
of Plaza Associates. Trump Plaza GP was subsequently merged with and into Plaza
Funding, which became the managing general partner of Plaza Associates.
The Successor Plaza Bonds and the Stock Units were redeemed in 1993 out of
the proceeds of a refinancing designed to enhance Trump Plaza's liquidity and
to position the Trump Plaza for a subsequent deleveraging transaction. The 1993
refinancing included (i) the sale by Plaza Funding of $330 million in aggregate
principal amount of Plaza Notes and (ii) the sale by Plaza Holding of $60
million aggregate principal amount of PIK Notes and PIK Note Warrants to
acquire an aggregate of $12 million in principal amount of additional PIK
Notes. Upon consummation of the refinancing, Plaza Funding held a 1% equity
interest in Plaza Associates and Plaza Holding held a 99% equity interest.
CERTAIN INDEBTEDNESS OF THCR
THCR Holdings and THCR Funding (the "THCR Obligors") are the issuers of $155
million principal amount of Senior Notes. The Senior Notes are the joint and
several obligations of the THCR Obligors. Interest on the Senior Notes is
payable semiannually in arrears.
The Senior Notes mature on June 15, 2005. The Senior Notes are not redeemable
prior to June 15, 2000, except pursuant to a Required Regulatory Redemption (as
defined in the Senior Note Indenture). Thereafter, the Senior Notes may be
redeemed at the option of the THCR Obligors, in whole or in part, at any time
on or after June 15, 2000 at the redemption prices set forth in the Senior Note
Indenture, together with accrued and unpaid interest to the date of redemption.
In addition, upon the occurrence of a Senior Note Change of Control (as defined
in the Senior Note Indenture), each holder of Senior Notes may require the THCR
Obligors to repurchase such holder's Senior Notes at 101% of the principal
amount thereof, together with accrued and unpaid interest to the date of
repurchase.
The obligations of the THCR Obligors under the Senior Note Indenture are
secured by (1) an assignment and pledge to the Trustee under the Senior Note
Indenture (the "Senior Note Trustee") of (a) 99% of the general partnership
interests in Plaza Associates, (b) 100% of the capital stock of Plaza Funding
(the holder of the remaining 1% general partnership interest in Plaza
Associates, which 1% is pledged exclusively for the benefit of the holders of
the Plaza Notes until the Plaza Note Purchase, at which time such interest will
be pledged for
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the exclusive benefit of the holders of the Senior Notes), (c) 100% of the
general partnership interests in AC Holdings, (d) 100% of the capital stock of
Plaza Holding Inc., (e) 100% of the capital stock of Trump Indiana, (f) 100% of
the capital stock of THCR Funding, (g) other equity interests issued from time
to time by THCR Holdings or any of its Subsidiaries (as defined in the Senior
Note Indenture), and (h) promissory notes issued by THCR Holdings or any of its
subsidiaries, excluding Unrestricted Subsidiaries, from time to time directly
owned or acquired by THCR Holdings; (2) certain remaining net proceeds from the
June 1995 Offerings; and (3) certain proceeds from time to time received,
receivable or otherwise distributed in respect of the assets described in
clauses (1) and (2) above (collectively, the "Senior Note Collateral"). The
security interests in the Senior Note Collateral are first priority security
interests and are exclusive except to the extent required by the Plaza Note
Indenture to equally and ratably secure the Plaza Notes with respect to any of
the direct or indirect equity interests in Plaza Associates, Plaza Funding, AC
Holdings and Plaza Holding Inc. Any equity interests in Subsidiaries of THCR
Holdings, which are acquired by THCR Holdings will be assigned and pledged to
the Senior Note Trustee and the security interests granted in such equity
interests will be exclusive, first priority security interests.
In addition to the Senior Notes, $330 million of the Plaza Notes currently
remain outstanding, which notes will be repurchased and/or defeased in
connection with the Merger Transaction. The Plaza Notes were issued by Plaza
Funding, with Plaza Associates providing a full and unconditional guaranty
thereof. The Plaza Notes mature in 2001 and bear interest semiannually in
arrears. The Plaza Notes are subject to redemption at any time on or after June
15, 1998, at the option of Plaza Funding or Plaza Associates, in whole or in
part, at the redemption prices set forth in the Plaza Note Indenture. In
addition, upon the occurrence of a Plaza Note Change of Control (as defined in
the Plaza Note Indenture), each holder of Plaza Notes may require Plaza Funding
or Plaza Associates to repurchase such holder's Plaza Notes at 101% of the
principal amount thereof, together with accrued and unpaid interest to the date
of repurchase.
Until the Plaza Note Purchase, Plaza Funding's and Plaza Associates'
obligations under the Plaza Note Indenture will be secured principally by (i)
the Plaza Note Mortgage encumbering substantially all of Plaza Associates'
assets (see "--Properties") and (ii) the pledge by Plaza Funding of its 1%
general partnership interest in Plaza Associates and, equally and ratably with
the Senior Notes to the extent required by the Plaza Note Indenture, by a
pledge of (x) THCR Holdings' 99% general partnership interest in AC Holdings,
(y) AC Holdings' 99% general partnership interest in Plaza Associates, and (z)
100% of the capital stock of Plaza Funding and Plaza Holding Inc. (the holder
of the remaining 1% of AC Holdings).
In addition to the foregoing, THCR's consolidated long-term indebtedness
includes approximately $ million of outstanding mortgage notes described
under "--Properties" as of December 31, 1995.
LEGAL PROCEEDINGS
General. Plaza Associates, its partners, certain members of its former
Executive Committee, and certain of its employees, have been involved in
various legal proceedings. In general, Plaza Associates has agreed to indemnify
such persons and entities against any and all losses, claims, damages, expenses
(including reasonable costs, disbursements and counsel fees) and liabilities
(including amounts paid or incurred in satisfaction of settlements, judgments,
fines and penalties) incurred by them in said legal proceedings. Such persons
and entities are vigorously defending the allegations against them and intend
to vigorously contest any future proceedings.
Trump Plaza East. From monies made available to it, the CRDA is required to
set aside $100 million for investment in hotel development projects in Atlantic
City undertaken by casino licensees which result in the construction or
rehabilitation of at least 200 hotel rooms by December 31, 1996. These
investments are to fund up to 35% of the cost to casino licensees of such
projects. See "Regulatory Matters--New Jersey Gaming Regulations--Investment
Alternative Tax Obligations." Plaza Associates made application for such
funding to the CRDA with respect to its proposed construction and
rehabilitation of the Trump Plaza East hotel rooms and related Boardwalk and
second level facilities, proposed demolition of an existing hotel expansion
structure attached thereto and development of an appurtenant public park,
roadway and parking area on the site thereof and proposed acquisition of the
entire project site.
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The CRDA, in rulings through January 10, 1995, approved the hotel development
project and, with respect to same, reserved to Plaza Associates the right to
take investment tax credits in an amount equal to 27% ($14.1 million) of $52.4
million of eligible estimated project development costs. In October 1994,
following a September 1994 CCC ruling authorizing same, Plaza Associates
advised the CRDA of its intention to, without affecting either the project
development costs or the tax credits, locate approximately 15,000 square feet
of casino space on the second floor of Trump Plaza East and was advised by the
CRDA that its proposed use of such space would not affect the approval of the
hotel development project.
As part of its approval and on the basis of its powers of eminent domain, the
CRDA, during 1994, initiated five condemnation proceedings in the Superior
Court of New Jersey, Atlantic County, to acquire certain small parcels of land
within the project site. The defendants in three of those matters, with respect
to parcels which impact only the public park and parking areas, Casino
Reinvestment Development Authority v. Banin, et al., Docket No. ATL-L-2676-94,
Casino Reinvestment Development Authority v. Sabatini, et al., Docket No.
ATL-L-2976-94, and Casino Reinvestment Development Authority v. Coking, et al.,
Docket No. ATL-L-2974-94, asserted numerous defenses to the condemnation
complaints and filed counterclaims against CRDA and third-party complaints
against Plaza Associates alleging, inter alia, an improper exercise of CRDA
power for private purposes and conspiracy between the CRDA and Plaza
Associates. After the filing of briefs and a hearing, a New Jersey Superior
Court judge issued an opinion that the Trump Plaza East acquisition and
renovation was not eligible for CRDA funding and, as a result, the CRDA could
not exercise its power of eminent domain because the project included casino
floor space. The court, by order dated April 18, 1995, dismissed the
condemnation complaints with prejudice. On April 17, the same judge dismissed
the counterclaims and third-party complaints without prejudice. Notices of
appeal were filed with the New Jersey Superior Court, Appellate Division on
April 21, 1995 by the CRDA and on April 24, 1995 by Plaza Associates. On May 1,
1995, the Casino Association of New Jersey on behalf of its members, 11 of the
12 Atlantic City casino hotels, filed a motion to intervene or, in the
alternative, for leave to appear as an amicus curiae. Briefs have been filed by
all parties and the matter now awaits the scheduling of oral arguments.
The completion of the planned renovations of Trump Plaza East is not
dependent upon the utilization of CRDA funding or upon the CRDA's acquisition
of the real estate subject to the condemnation proceedings. Plaza Associates
intends to pursue this appeal vigorously and believes it will be successful,
based in part on the March 29, 1995 opinion of the New Jersey Office of
Legislative Services ("OLS"), which serves as legal counsel to the New Jersey
State Legislature, that N.J.S.A. 5:12-173.8 empowered the CRDA to approve and
fund projects such as Trump Plaza East and, in part, on the fact that Section
173.8 expressly exempts hotel development projects from the statutory
limitation with respect to any CRDA investment or project which directly and
exclusively benefits the casino hotel or related facility.
In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July, 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component of
Trump Plaza East and the new roadway but invalidated the approval of the valet
parking lot and the public park because Plaza Associates lacked site control
with respect to the small parcels of land CRDA sought to condemn. Plaintiff
appealed the court's decision upholding the approval of the hotel renovation
and new roadway and Plaza Associates cross-appealed the court's decision
invalidating the approval of the public park and valet parking area. Plaza
Associates with- drew its cross-appeal and plaintiff's appeal is pending in the
Superior Court of New Jersey, Appellate Division, Docket No. A-1511-94-T1.
Plaza Associates received land-use approval for and has constructed the valet
parking area after deletion of the small parcels.
In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza Associates
filed its answer to the complaint denying the allegations of the complaint. The
land use approval involves certain minor amendments to the previously granted
site plan approvals for the hotel renovation
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component of Trump Plaza East and the new roadway. The amendments included
certain design changes with respect to the Trump Plaza East and certain design
changes to the roadway. The amendments did not require any variance relief and
the amendments fully complied with the Land Use Ordinance of the City of
Atlantic City. The plaintiffs allege the Atlantic City Planning Board acted in
an arbitrary and capricious manner in approving the amendments and further
argue that the chairperson of the Atlantic City Planning Board had a conflict
of interest in hearing the matter because of her status as an employee of the
CRDA, the entity that had approved certain funding for the project. The
plaintiffs have filed their brief in this matter and Plaza Associates has
filed its response brief. The matter is scheduled for oral argument on January
26, 1996. It is likely the court will rule on the matter on that date.
Penthouse Litigation. On April 3, 1989, BPHC Acquisition, Inc. and BPHC
Parking Corp. (collectively, "BPHC") filed a third-party complaint (the
"Complaint") against Plaza Associates and Trump. The Complaint arose in
connection with the action entitled Boardwalk Properties, Inc. and Penthouse
International Ltd. v. BPHC Acquisition, Inc. and BPHC Parking Corp., which was
instituted on March 20, 1989 in the New Jersey Superior Court, Chancery
Division, Atlantic County.
The suit arose in connection with the conditional sale by Boardwalk
Properties, Inc. ("BPI") (or, with respect to certain of the property, BPI's
agreement to sell) to Trump of BPI's fee and leasehold interests in (i) Trump
Plaza East, (ii) an approximately 4.2-acre parcel of land located on Atlantic
Avenue, diagonally across from Trump Plaza's parking garage (the "Columbus
Plaza Site") which was then owned by an entity in which 50% of the interests
were each owned by BPHC and BPI and (iii) an additional 1,462-square foot
parcel of land located within the area of Trump Plaza East (the "Bongiovanni
Site"). Prior to BPI entering into its agreement with Trump, BPI had entered
into agreements with BPHC which provided, among other things, for the sale to
BPHC of Trump Plaza East, as well as BPI's interest in the Columbus Plaza
Site, assuming that certain contingencies were satisfied by a certain date.
Additionally, by agreement between BPHC and BPI, in the event BPHC failed to
close on Trump Plaza East, BPHC would convey to BPI the Bongiovanni Site. Upon
BPHC's failure to close on Trump Plaza East, BPI entered into its agreement
with Trump pursuant to which it sold Trump Plaza East to Trump and instituted
a lawsuit against BPHC for specific performance to compel BPHC to transfer to
BPI, BPHC's interest in the Columbus Plaza Site and Bongiovanni Site, as
provided for in the various agreements between BPHC and BPI and in the
agreement between BPI and Trump.
The Complaint alleged that Plaza Associates and/or Trump engaged in the
following activities: civil conspiracy, violations of the New Jersey Antitrust
Act, violations of the New Jersey RICO statute, malicious interference with
contractual relations, malicious interference with prospective economic
advantage, inducement to breach a fiduciary duty and malicious abuse of
process. The relief sought in the Complaint included, among other things,
compensatory damages, punitive damages, treble damages, injunctive relief, the
revocation of all of Plaza Associates' and Trump's casino licenses, the
revocation of Plaza Associates' current Certificate of Partnership, the
revocation of any other licenses or permits issued to Plaza Associates and
Trump by the State of New Jersey, and a declaration voiding the conveyance by
BPI to Trump of BPI's interest in Trump Plaza East, as well as BPI's and/or
Trump's rights to obtain title to the Columbus Plaza Site.
On October 13, 1993, a final judgment as to Trump and Plaza Associates was
filed. That judgment dismissed each and every claim against Trump and Plaza
Associates. The case remained open as to final resolution of all claims
between BPI and BPHC. Following the entry of a subsequent judgment as to those
claims, BPHC and BPI have settled all claims between them. BPHC is pursuing
its appeal as to Trump and Plaza Associates but only as to its money damages
claims of interference with contract and prospective economic advantage and of
inducing BPI to breach its fiduciary duty to BPHC. All other claims raised in
BPHC's complaint as to Trump and Plaza Associates and dismissed by the October
13, 1993 judgment have been finally determined in favor of Trump and Plaza
Associates. All briefs due in connection with BPHC's appeal have been filed.
No argument date has been set.
Other Litigation. Various legal proceedings are now pending against Plaza
Associates. THCR considers all such proceedings to be ordinary litigation
incident to the character of its business and not material to its
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business or financial condition. The majority of such claims are covered by
liability insurance (subject to applicable deductibles), and THCR believes that
the resolution of these claims, to the extent not covered by insurance, will
not, individually or in the aggregate, have a material adverse effect on the
financial condition or results of operations of THCR.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. THCR believes that the final outcome of these proceedings will
not, either individually or in the aggregate, have a material adverse effect on
THCR or on the ability of Plaza Associates to otherwise retain or renew any
casino or other licenses required under the Casino Control Act for the
operation of Trump Plaza. At this juncture the prospects of a favorable outcome
in actions described above cannot be assessed. Plaza Associates intend to
vigorously contest the allegations made against it.
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SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES
Taj Holding has no business operations and serves as a holding company for an
investment in 50% of Taj Associates. Therefore, historical financial
information is not presented below. The audited consolidated financial
statements of Taj Holding as of December 31, 1993 and 1994 and for the years
ended December 31, 1992, 1993 and 1994 are included elsewhere in this Proxy
Statement-Prospectus.
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1990 through 1994 and for the nine-month periods ended September 30, 1994 and
1995 (unaudited). The historical financial information of Taj Associates as of
December 31, 1993 and 1994, and for the years ended December 31, 1992, 1993 and
1994 as set forth below has been derived from the audited consolidated
financial statements of Taj Associates included elsewhere in this Proxy
Statement-Prospectus. The historical financial information of Taj Associates as
of December 31, 1990, 1991 and 1992, and for the years ended December 31, 1990
and 1991 as set forth below has been derived from the audited consolidated
financial statements of Taj Associates not included in this Proxy Statement-
Prospectus.
The unaudited financial information as of September 30, 1994 and 1995, and
the nine months then ended has been derived from the unaudited condensed
consolidated financial statements included elsewhere in this Proxy Statement-
Prospectus and in the opinion of management, includes all adjustments,
consisting of only normal, recurring adjustments, necessary to present fairly
the financial position, results of operations and changes in cash flows for the
periods presented. The results of these interim periods are not necessarily
indicative of the operating results for a full year. All financial information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Taj Associates," "Unaudited
Pro Forma Financial Information" and the consolidated and condensed financial
statements and related notes thereto included elsewhere in this Proxy
Statement-Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ------------------
1990(A) 1991 1992 1993 1994 1994 1995
--------- --------- --------- --------- --------- -------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $ 300,902 $ 380,997 $ 414,045 $ 442,064 $ 461,622 $345,329 $377,368
Other.................. 107,239 111,251 116,958 113,291 117,738 90,011 87,447
--------- --------- --------- --------- --------- -------- --------
Gross Revenues........ 408,141 492,248 531,003 555,355 579,360 435,340 464,815
Promotional
allowances............ 51,443 53,935 61,250 56,444 62,178 48,802 47,519
--------- --------- --------- --------- --------- -------- --------
Net Revenues.......... 356,698 438,313 469,753 498,911 517,182 386,538 417,296
Costs and Expenses:
Gaming................. 164,838 204,513 227,394 237,566 260,472 196,412 208,671
Other.................. 36,613 39,181 39,125 40,605 40,697 29,633 30,097
General and
Administrative........ 92,886 100,191 98,819 99,424 99,629 77,359 73,717
Depreciation and
Amortization.......... 44,647 36,202 36,388 36,858 39,750 28,944 32,407
Restructuring costs.... 41,003 26,398 -- -- -- -- --
--------- --------- --------- --------- --------- -------- --------
Income (loss) from
Operations............. (23,289) 31,828 68,027 84,458 76,634 54,190 72,404
--------- --------- --------- --------- --------- -------- --------
Net interest expense.... (82,105) (100,683) (103,126) (106,997) (113,292) (85,512) (86,112)
Extraordinary gain(b)... -- 259,618 -- -- -- -- --
Net Income (loss)....... (124,269) 188,513 (35,099) (22,539) (36,658) (31,322) (13,708)
Balance Sheet Data (at
end of period):
Cash and cash
equivalents........... $ 22,480 $ 22,535 $ 34,062 $ 58,044 $ 61,196 $ 76,502 $108,769
Property and equipment-
net................... 797,821 766,135 742,129 722,834 706,785 710,007 694,602
Total assets........... 845,804 814,051 802,556 811,508 807,612 822,914 843,725
Total long-term
debt(c)............... 917 573,844 595,682 625,765 656,701 651,626 688,143
Total capital
(deficit)............. (69,420) 167,837 130,913 106,641 67,812 73,609 52,899
</TABLE>
- --------
(a) Operations commenced on April 2, 1990. Results of operations for 1990 are
not necessarily indicative of the operating results for a full year.
(b) The extraordinary gain of $259,618 for the year ended December 31, 1991
reflects a $204,276 accounting adjustment to carry the old Bonds at fair
market value based on current interest rates at the date of issuance
(effective rate of approximately 18%), and $20,000 related to settlement of
the subcontractors' note payable, with the balance representing a discharge
of accrued interest on indebtedness.
(c) Long-term debt of $720,175 as of December 31, 1990 had been classified as a
current liability.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF TAJ ASSOCIATES
GENERAL
Taj Holding has no business operations and serves as a holding company for an
investment in 50% of Taj Associates. Therefore, the following is a discussion
of the results of operations of Taj Associates.
RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
1994
Net revenues were approximately $417.3 million for the nine months ended
September 30, 1995, an increase of $30.8 million or 8.0% from net revenues of
$386.5 million for the comparable period in 1994. This increase was primarily
due to an increase in gaming revenues.
Gaming revenues comprise the major component of net revenues and consist of
win from table games, poker, slot machines, horserace simulcasting and keno.
Total gaming revenues were $377.4 million for the nine months ended September
30, 1995, an increase of $32.1 million or 9.3% from total gaming revenues of
$345.3 million for the comparable period in 1994. These revenues represent a
market share of 13.4% of the Atlantic City gaming market in each of the nine
months ended September 30, 1995 and 1994, based on figures filed with the CCC.
Table game win was approximately $148.8 million for the nine months ended
September 30, 1995, an increase of $16.8 million or 12.7% from table game win
of $132.0 million for the comparable period in 1994. Dollars wagered at table
games was $866.6 million for the nine months ended September 30, 1995, an
increase of $30.3 million or 3.6% from dollars wagered at table games from
$836.3 million for the comparable period in 1994. Table win percentage was
17.2% for the nine months ended September 30, 1995, an increase from 15.8% in
1994. Table win percentage, which represents the percentage of dollars wagered
retained by Taj Associates, tends to be fairly constant over the long term, but
may vary significantly in the short term, due to large wagers by "high
rollers." The win percentage for the nine months ended September 30, 1995 is
significantly above Taj Associates' and the industry's historical win
percentage, and it is likely that Taj Associates' win percentage will decrease
in the future. During the twelve months ending December 31, 1994 and 1993, Taj
Associates' win percentage was approximately 16.4% and 16.3% respectively,
while the Atlantic City average was approximately 15.8% and 15.6% respectively.
Slot win was $212.9 million for the nine months ended September 30, 1995, an
increase of $13.8 million or 6.9% from slot win of $199.1 million for the
comparable period in 1994. Dollars wagered in slot machines was $2.55 billion
for the nine months ended September 30, 1995, an increase of $286.3 million or
12.6% from dollars wagered in slot machines of $2.26 billion for the comparable
period in 1994. This increase was offset by a decrease in slot win percentage
to 8.3% for the nine months ended September 30, 1995, from 8.8% for the
comparable period in 1994. The increase in slot machine wagering and the
reduced slot win percentage is consistent with the industry trend in Atlantic
City in recent years.
In addition to table game and slot revenues, Taj Associates'
Keno/Poker/Simulcasting operations generated approximately $13.3 million in
poker revenues, $1.0 million of simulcasting revenue and $1.3 million of keno
revenue for the nine months ended September 30, 1995, compared to $12.3 million
of poker revenue, $1.1 million of simulcasting revenue and $0.9 million of keno
revenue for the corresponding period in 1994. Keno operations commenced June
15, 1994.
Increases in gaming revenues during the first three quarters of 1995 over the
comparable period of 1994 were attributable primarily to (i) the increase in
dollars wagered on slots relative to the depressed 1994 levels caused by severe
winter weather during the first three months of the year, (ii) the increase in
dollars wagered on table games and the improved win percentage, both of which
were substantially attributable to international high level players and (iii)
the general growth of the Atlantic City market.
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Nongaming revenues consist primarily of room, food, beverage and
entertainment. For the nine months ended September 30, 1995 and 1994, these
revenues totaled $87.4 million and $90.0 million, respectively. Room revenue of
approximately $33.0 million in 1995 was the result of an occupancy rate of
92.0% and an average room rate of $105.28. In 1994, room revenue of $32.2
million was the result of an occupancy rate of 93.9% and an average room rate
of $100.45.
In the food and beverage outlets, Taj Associates generated revenues of
approximately $42.9 million and $44.1 million during the first nine months of
1995 and 1994, respectively. The approximately $1.2 million
decrease is primarily attributable to a 1.0% decrease in the number of persons
served and a decrease in the average food check to $11.56 in 1995 from $11.62
in 1994. The decrease in food and beverage revenue reflects both fewer
complimentaries offered to patrons (which are recorded both as revenue and as a
promotional allowance) and reduced food prices designed to stimulate cash
sales.
The decrease in other revenue of approximately $2.3 million was primarily
attributable to a decrease in entertainment revenue of approximately $1.8
million resulting from fewer events and an increased emphasis on promoter
sponsored entertainment events in 1995 versus events sponsored by Taj
Associates in 1994.
Promotional allowances were $47.5 million for the nine months ended September
30, 1995, a decrease of $1.3 million from promotional allowances of $48.8
million for the comparable period in 1994. Promotional allowances were 10.2% of
gross revenues in 1995 compared to 11.2% in 1994, reflecting Taj Associates'
efforts to increase control over complimentaries while increasing gaming
revenues.
Gaming expenses increased approximately $12.3 million or 6.2% for the nine
months ended September 30, 1995 from the comparable period in 1994, primarily
due to increased marketing/promotional costs associated with increased gaming
revenues. Both room and food and beverage expenses remained generally constant.
General and administrative expenses decreased primarily due to the
nonrecurrence of costs for settlement of litigation which were incurred during
1994. Costs for settlement of litigation for the nine months ended September
30, 1995 decreased by approximately $3.7 million or 100% to $0 from the
comparable period of 1994. Depreciation expense increased in 1995 compared to
1994 due to increased capital expenditures on replacement furniture, fixtures
and equipment and the shorter lives associated therewith.
Total operating expenses as a percentage of net revenue decreased to 82.6%
for the nine months ended September 30, 1995 compared to 86.0% for the
comparable period in 1994.
The $2.0 million or 2.3% increase in interest expense is attributable to (i)
the increased amount of principal outstanding resulting from the issuance of
Taj Bonds to satisfy the Additional Amount (as defined in the Taj Bond
Indenture) and (ii) the increased accretion of the discount on the Taj Bonds as
they approach maturity. These amounts were partially offset by a decrease in
costs incurred for uncompleted refinancing efforts during the period.
As a result of the foregoing factors, income from operations was $72.4
million for the nine months ended September 30, 1995, an increase of $18.2
million or 33.6% from income from operations of $54.2 million for the
comparable period of 1994.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Net revenues were $517.2 million for the year ended December 31, 1994, an
increase of $18.3 million or 3.7% from net revenues of $498.9 million for the
year ended December 31, 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines, horserace simulcasting
and keno, were approximately $461.6 million in 1994, an increase of $19.5
million or 4.4% from gaming revenues of $442.1 million in 1993. The increase in
gaming revenues occurred while the overall Atlantic City gaming industry
experienced an increase in gaming revenue of 3.9%. These revenues represent a
market share of the Atlantic City market of approximately 13.5% in each of 1994
and 1993, based on figures filed with the CCC.
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Table game win was approximately $184.7 million for the year ended December
31, 1994, an increase of $11.3 million or 6.5% from table game win of $173.4
million in 1993. Dollars wagered at table games was $1,125.0 million in 1994,
an increase of $63.0 million or 5.9% from dollars wagered at table games of
$1,062.0 million in 1993. Table win percentage (i.e., percentage of dollars
wagered that were retained by Taj Associates) increased to 16.4% in 1994 from
16.3% in 1993.
For the year ended December 31, 1994, slot win was approximately $257.9
million, a decrease of $2.4 million or 0.9% from slot win of $260.3 million in
1993. The decrease was largely due to a decrease in the slot
win percentage. Slot win percentages were 8.8% in 1994 and 9.3% in 1993.
Dollars wagered at slot machines were $2,940.1 million in 1994, an increase of
$82.2 million or 2.9% from the dollars wagered at slot machines of $2,857.9
million in 1993. The decrease in slot win percentage and the increase in slot
machine wagering is consistent with the industry trend in Atlantic City in
recent years.
In addition to table game and slot revenues, Taj Associates' newly opened
Keno room and expanded Poker/Simulcasting operations generated approximately
$16.3 million of revenues from poker, $1.4 million of revenues from
simulcasting and $1.3 million of revenues from Keno in 1994 compared to
approximately $7.5 million in poker revenue and $0.8 million in simulcasting
revenue for the year ended December 31, 1993. Poker/Simulcasting operations
commenced in June 1993 while Keno operations commenced on June 15, 1994.
Nongaming revenues consist primarily of room, food, beverage and
entertainment revenues. Nongaming revenues were $117.7 million for the year
ended December 31, 1994, an increase of $4.4 million or 3.9% from nongaming
revenues of $113.3 million in 1993. This increase was attributable primarily
to an increase in food and beverage revenue of approximately $2.1 million or
3.8%, and an increase in room revenue of approximately $1.2 million or 2.9%.
Food and beverage revenue and room revenue was $58.0 million and $41.8
million, respectively, for the fiscal year ended December 31, 1994, an
increase from food and beverage revenue and room revenue of $56.0 million and
$40.7 million, respectively, in 1993. The increase in food and beverage
revenue was partially attributable to the increase of the average food check
to $11.68 in 1994 from $10.82 in 1993 and the increased banquet functions
associated with gaming promotions. Room occupancy was 92.4% and 92.5% and the
average room rate was $99.19 and $96.38 for the years ended December 31, 1994
and 1993, respectively.
Promotional allowances were $62.2 million in 1994, an increase of $5.8
million from promotional allowances of $56.4 million in 1993. Promotional
allowances were 10.7% of gross revenues in 1994 compared to 10.2% of gross
revenues in 1993, reflecting the more aggressive marketing posture necessary
in order to maintain or achieve increases in gaming revenues comparable to
1993.
Gaming expenses were $260.5 million in 1994, an increase of $22.9 million or
9.6% from gaming expenses of $237.6 million in 1993, primarily due to
increased marketing promotional costs directed at slot machine and table game
play and operating expenses associated with the new or expanded games of
poker, simulcasting and keno.
During the year ended December 31, 1994, room expenses increased slightly
and food and beverage expenses decreased slightly over the comparable period
in 1993, reflecting continuing cost controls in this area. General and
administrative expenses increased slightly, primarily due to costs associated
with a settlement of outstanding litigation, offset by decreases in real
property taxes resulting from settlement of appeals. Costs for settlement of
litigation were approximately $3.7 million in 1994, an increase of $3.7
million or 100% from 1993. Real property taxes were $12.2 million in 1994, a
decrease of approximately $4.9 million or 28.7% from real property taxes of
$17.1 million for 1993. Were it not for these items, costs in this category
would have increased approximately $2.0 million over the comparable period of
1993. Depreciation expense increased in 1994 compared to 1993 due to increased
capital expenditures on replacement furniture, fixtures and equipment and the
shorter lives associated therewith.
Total operating expenses as a percentage of net revenue increased to 85.2%
in 1994 from 83.1% in 1993.
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Interest expense was $115.3 million in 1994, an increase of $6.9 million from
interest expense of $108.4 million in 1993. The increase is attributable to the
increased amount of principal outstanding resulting from the issuance of the
Taj Bonds to satisfy the Additional Amount (as defined), the increased
accretion of discount on the Taj Bonds as they approach maturity and
professional fees incurred during the first six months of 1994 related to the
proposed recapitalization, which was not consummated.
As a result of the foregoing factors, income from operations was $76.6
million in 1994, a decrease of $7.9 million or 9.3% from income from operations
of $84.5 million in 1993.
Taj Associates experienced a net loss of $36.7 million for 1994 as compared
to a net loss of $22.5 million for 1993.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1992
Net revenues for the year ended December 31, 1993 totaled $498.9 million, an
increase of $29.1 million or 6.2% from net revenues of $469.8 million in 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines and horserace
simulcasting were approximately $442.1 million in 1993, an increase of $28.1
million or 6.8% from gaming revenues of $414.0 million in 1992. These revenues
represented a market share in the Atlantic City gaming market of 13.5% in 1993
and 12.9% in 1992, based on figures filed with the CCC. The increase in Taj
Associates' gaming revenues and market share occurred while the overall
Atlantic City gaming industry experienced an increase in gaming revenue of only
2.9%. Management believes the increase in gaming revenues was attributable
primarily to Taj Associates' expanded slot marketing efforts, increased table
game win percentage (i.e., percentage of dollars wagered that were retained by
Taj Associates) and the addition of poker and horserace simulcasting
operations.
Table game win was approximately $173.4 million in 1993, an increase of $4.3
million or 2.6% from table game win of $169.1 million in 1992. Although dollars
wagered at table games decreased by $5.6 million or 0.5% in 1993, to $1,062.0
million in 1993 from $1,067.6 million in 1992, the decrease was offset by an
increase in table win percentage (i.e., percentage of dollars wagered that were
retained by Taj Associates) of 16.3% in 1993 from 15.8% in 1992.
Slot win was approximately $260.3 million for the year ended December 31,
1993, an increase of $15.4 million or 6.3% from slot win of $244.9 million in
1992. The increase was largely due to an increase in dollars wagered. Slot win
percentages were 9.3% in 1993 and 9.8% in 1992. The decrease in table wagering
compared to the increase in slot machine wagering and the reduced slot win
percentage is consistent with industry activity in 1993 and with the industry
trend in recent years.
In addition to table game and slot revenues, Taj Associates' poker and
horserace simulcasting operations, which opened June 29, 1993, generated $7.5
million of revenues from poker and $0.8 million of revenues from simulcasting
for the year ended December 31, 1993.
Nongaming revenues were approximately $113.3 million for the year ended
December 31, 1993, a decrease of $3.7 million or 3.2% from nongaming revenues
of $117.0 million in 1992. This decrease in revenue was attributable primarily
to a decrease in food and beverage revenue of approximately $3.5 million or
5.9%, and a slight decrease in room revenue of $0.3 million or 0.7%.
Food and beverage revenue was $56.0 million for the year ended December 31,
1993, a decrease of $3.5 million from food and beverage revenue of $59.5
million in 1992. The decline in the food and beverage revenue was primarily
attributable to management's decision to reduce the use of promotional coupons
in certain food outlets to increase profitability. Accordingly, the number of
persons served decreased approximately 10.4% in 1993 while the average food
check increased to $10.82 in 1993 from $10.60 in 1992.
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Room revenue, room occupancy and average room rate were approximately $40.7
million, 92.5% and $96.38, respectively, compared to $41.0 million, 91.2% and
$98.32, respectively in 1992. The reduced room rate in 1993 was part of the
continuation of various marketing plans initially implemented in 1992 to
increase occupancy and enhance gaming activity.
Promotional allowances were $56.4 million in 1993, compared to $61.3 million
in 1992. Promotional allowances were 10.2% of gross revenues in 1993 compared
to 11.5% of gross revenues in 1992, reflecting the reduction in promotional
food coupons discussed above.
Gaming expenses were $237.6 million in 1993, an increase of approximately
$10.2 million or 4.5% from gaming expenses of $227.4 million in 1992, primarily
due to increased marketing promotional costs directed at slot machine play and
operating expenses associated with the addition of poker and simulcasting.
During the
year ended 1993, room expenses increased slightly over the comparable period in
1992. The decrease in food and beverage expenses were volume related, but did
not decrease proportionately to the decrease in sales because of the continued
increase in the cost of labor, food and beverage expenses which were not fully
passed on to patrons through increased prices. General and administrative
expenses increased slightly, by approximately $0.6 million or 0.6%, primarily
due to increased costs required to support the expanded operations.
Total operating expenses as a percentage of net revenue declined to 83.1% in
1993 compared to 85.5% in 1992.
Interest expense was $108.4 million in 1993, an increase of $4.4 million from
interest expense of $104.0 million in 1992. The increase was primarily
attributable to the increased accretion of discount on the Taj Bonds, and the
portion of interest on the Taj Bonds payable in the form of additional
principal amounts of the Taj Bonds.
Income from operations was $84.5 million for 1993, an increase of $16.5
million or 24.1% from income from operations of $68.0 million in 1992,
primarily as a result of continuing efforts to maintain cost controls.
Taj Associates experienced a net loss of $22.5 million for the year ended
December 31, 1993 as compared to a net loss of $35.1 million for 1992.
LIQUIDITY AND CAPITAL RESOURCES
TAJ ASSOCIATES
Working Capital. Cash flow from operations provides Taj Associates with its
ability to meet debt service obligations and capital expenditure programs along
with adequate operating liquidity. Cash flow from operating activities for the
nine months ending September 30, 1995 was $73.3 million compared with $40.6
million in 1994, due primarily to the increase in gaming revenues. Cash flow
from operating activities for the twelve months ended December 31, 1994 was
$33.4 million compared with $48.6 million in 1993, which is attributable
primarily to the decrease in income from operations. Cash flow from operating
activities for the twelve months ended December 31, 1992 was $31.8 million
compared with $48.6 million in 1993. Working capital at September 30, 1995
increased by $22.9 million to approximately $63.6 million from approximately
$40.7 million at December 31, 1994. From December 31, 1993 to December 31, 1994
working capital grew by $11.7 million, from a working capital surplus of
approximately $29.0 million at December 31, 1993 to a working capital surplus
of approximately $40.7 million at December 31, 1994. From December 31, 1992 to
December 31, 1993, working capital grew by $18.5 million, to approximately
$29.0 million at December 31, 1993 from approximately $10.5 million at December
31, 1992. These improvements are the result of increases in cash, casino
receivables, inventories, or credits toward future property taxes.
Pursuant to the terms of the Taj Reorganization Plan and the Taj Bond
Indenture, Taj Associates was permitted to obtain a $25 million working capital
facility, a $50 million senior line of credit (the "Senior Line of Credit") and
a $25 million standby letter of credit (the "Standby Letter of Credit") secured
by certain assets of Taj Associates, including the Taj Mahal, on a basis senior
to the lien of the mortgage securing the Taj Bonds.
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On November 14, 1991, Taj Associates entered into a working capital facility
(the "Working Capital Facility") provided by Foothill Capital Corporation
("Foothill"). The Working Capital Facility permits borrowings of up to $25
million. Obligations under the Working Capital Facility are secured by a
mortgage on the assets of Taj Associates senior to the lien of mortgage
securing the Taj Bonds. In September 1994, Taj Associates extended the maturity
of the Working Capital Facility from 1996 to November 1999, in consideration of
the modification of certain of the terms thereof. Interest for borrowings under
the Working Capital Facility accrues at the rate of prime plus 3% (11.75% at
September 30, 1995) with a minimum interest rate of 0.666% per month, and is
payable monthly. Amounts borrowed under the Working Capital Facility must be
repaid by November 14, 1999. The Working Capital Facility also provides for
fees applicable to the commitment, maintenance, and unused portions of the
Working Capital Facility. During 1993, 1994 and 1995, there were no borrowings
under the Working Capital Facility. To date, Taj Associates has not sought to
obtain the Senior Line of Credit or the Standby Letter of Credit and there can
be no assurances as to whether and on what terms Taj Associates could obtain
the Senior Line of Credit or the Standby Letter of Credit. Taj Associates
anticipates either modifying the Working Capital Facility or terminating the
Working Capital Facility and replacing it with a new facility. In either case,
Taj Associates anticipates that such working capital facility will rank pari
passu with the Mortgage Notes.
Capital Expenditures. Capital expenditures during the nine months ended
September 30, 1995 totaled approximately $19.5 million compared to $15.7
million for the comparable period in 1994. Capital expenditures totaled
approximately $12.1 million, $16.8 million and $23.0 million for the years
ended 1992, 1993 and 1994, respectively. Major capital expenditures for 1992
included an on-site food storeroom, restaurant and room renovations, casino
floor reconfiguration and continuing construction of the Taj Entertainment
Complex. Major capital expenditures for 1993 included parking garage upgrades,
restaurant and room renovations, carpet replacement, and ongoing casino floor
reconfiguration, including additional slot machines, completion of the Taj
Entertainment Complex and modification of existing space to accommodate the new
games of race simulcasting and poker. Major capital expenditures for 1994
included the expansion of the poker room, the addition of the game of keno to
the casino floor, relocation of the lobby cocktail lounge, construction of a
new slot player's club, continued casino floor reconfiguration, purchase of new
slot machines and hotel room renovations.
Taj Associates' capital budget for fiscal 1995 totaled approximately $26.0
million which was financed by cash flow from operations and includes provision
for hotel tower and room renovations, carpet replacement, ongoing casino floor
reconfiguration including 1,300 replacement slot machines, new telephone
reservation equipment and limousines. Taj Associates may be obligated to expend
up to $30 million in improvements to the Steel Pier in order to maintain its
Coastal Area Facilities Review Act ("CAFRA") Permit, which is a condition to
its casino license. In March 1993, Taj Associates obtained a modification of
its CAFRA Permit providing for the extension of the required commencement and
completion dates of these improvements for one year based upon an interim use
of the Steel Pier for an amusement park. Taj Associates received an additional
one-year extension, in March 1995, of the required commencement and completion
dates of the improvements based upon the same interim use of the Steel Pier for
an amusement park pursuant to a sublease with an amusement park operator. Taj
Associates is currently seeking further modification of its obligations under
the CAFRA Permit. See "Business of Taj Holding--Properties--Steel Pier." In
addition, Taj Associates may be obligated to comply with certain proposed
regulations of the OSHA, if adopted. Taj Associates is unable to estimate the
cost, if any, to Taj Associates of such compliance. See "Regulatory Matters--
Other Laws and Regulations."
Taj Associates' capital expenditures historically included a component to
expand the facility as well as maintain its first class operation.
Historically, amounts necessary to maintain the first class nature of the
facility were approximately $9.7 million, $6.4 million and $19.2 million for
the years ended 1992, 1993 and 1994, respectively. The capital budget for 1995
included approximately $24.0 million to maintain Taj Associates' facilities.
Debt Service. As a result of the consummation of the Taj Reorganization Plan
on October 4, 1991, Taj Associates' liquidity problem was alleviated. The
improvement in liquidity was accomplished through a lowering
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of the interest rate on certain of Taj Associates' long-term indebtedness,
including its Old Taj Bonds and, in the case of the Taj Bonds, the deferral of
the due date of a portion of accrued interest thereon through the issuance from
time to time of additional Taj Bonds. The effect of this debt restructuring was
to reduce the minimum cash interest expense on its long-term indebtedness,
although total interest expense (inclusive of pay-in-kind interest) increased
as a result of the 1991 Taj Restructuring.
Taj Associates remains a highly leveraged enterprise with total borrowings at
September 30, 1995 in the amount of $826.1 million. Net of the unamortized
discount on the Taj Bonds in the amount of $137.1 million and current
maturities of $0.9 million, the net long term indebtedness is approximately
$688.1 million. At September 30, 1995, after giving effect to the Merger
Transaction, on a pro forma basis, Taj Associates' total borrowings would have
been $ . Upon consummation of the Merger Transaction, substantially all of
the indebtedness of Taj Associates will be retired, refinanced or restructured.
Interest on the Taj Bonds must be paid in cash at the rate of 9.375% payable
semi-annually on May 15 and November 15 (the "Mandatory Cash Interest Amount").
Effective May 15, 1992 and annually thereafter, in addition to this Mandatory
Cash Interest Amount, an additional amount of interest in cash or additional
Taj Bonds or a combination thereof is payable equal to the difference between
11.35% of the outstanding principal amount of the Taj Bonds and the sum of the
Mandatory Cash Interest Amount payable on that date and the immediately
preceding November 15 (the "Additional Amount"). To the extent that there is
excess available cash flow ("EACF") of Taj Associates for the immediately
preceding calendar year, Taj Funding will pay the Additional Amount in cash up
to 10.28% and the balance thereof may be paid at the option of Taj Associates
in cash or additional Units, provided that an equivalent amount of cash is used
to purchase or redeem Units. Additional Taj Bonds issued on October 4, 1991
amounted to approximately $7.2 million. For the period from the issuance of the
Taj Bonds, October 4, 1991 through December 31, 1992, there was no EACF. The
Additional Amounts due for the period from October 4, 1991 through May 15, 1992
and for the period from May 15, 1992 to May 15, 1993 of approximately $8.8
million and $14.6 million, respectively, were paid entirely in Bonds. Taj
Associates satisfied the Additional Amount due May 15, 1994 in the amount of
approximately $14.9 million through the issuance of approximately $12.2 million
in Taj Bonds and the payment of the approximately $2.6 million balance in cash.
Taj Funding satisfied the Additional Amount due May 15, 1995 through the
issuance of approximately $15.1 million in Taj Bonds. Taj Holding satisfied its
cash interest obligations due in 1995 (including the Mandatory Cash Interest
Amount) with cash flow from operations.
Interest expense for the years ended December 31, 1992, 1993 and 1994 and the
nine months ended September 30, 1994 and 1995 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------
1992 1993 1994 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Minimum cash interest expense:
Taj Bonds........................ $ 68,946 $ 70,070 $ 71,300 $ 53,368 $ 54,330
Bank loans....................... 4,341 4,765 4,299 3,217 3,204
Working Capital Facility......... 791 180 415 325 235
Other, including refinancing
costs........................... 845 1,097 3,409 3,401 1,413
-------- -------- -------- -------- --------
74,923 76,112 79,423 60,311 59,182
-------- -------- -------- -------- --------
Additional Amount................. 14,435 14,759 15,021 11,243 11,445
-------- -------- -------- -------- --------
Accretion of discount:
Taj Bonds........................ 13,172 15,745 18,820 13,795 16,489
Guarantee of Affiliate Debt...... 1,519 1,763 2,047 1,506 1,748
-------- -------- -------- -------- --------
14,691 17,508 20,867 15,301 18,237
-------- -------- -------- -------- --------
Total interest expense............ $104,049 $108,379 $115,311 $ 86,855 $88,864
======== ======== ======== ======== ========
</TABLE>
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Following the consummation of the Merger Transaction, the Taj Mahal plans to
undertake an expansion plan of its existing operations, which plans are
preliminary and subject to modification. It is currently expected that the
expansion will be funded principally out of cash from the operations of the
Taj Mahal and Trump Plaza and will be completed in phases from the first
quarter of 1997 through 1999. The Taj Mahal Expansion involves the
construction of two new hotel towers adjacent to the Taj Mahal's existing
hotel tower, each containing in excess of 640 rooms, an approximately 2,200
space expansion of the Taj Mahal's existing self-parking facilities,
conversion of the Mark Etess Arena into a new 60,000 square foot circus-themed
casino with 2,500 slot machines, and construction of a new arena on a surface
parking area located adjacent to the Taj Mahal.
The following table summarizes the different phases of the Taj Mahal
Expansion with their associated capital costs.
<TABLE>
<CAPTION>
PROJECT
PROJECT COST
------- -------------
(IN MILLIONS)
<S> <C>
Parking facility, approximately 2,200 spaces................ $ 26.0
New Arena................................................... $ 15.0
Circus Casino............................................... $ 53.3
First hotel tower, 640 rooms................................ $ 76.0
Second hotel tower, 640 rooms(/1/).......................... $ 83.6
------
Total................................................... $253.9
======
</TABLE>
- --------
(/1/Construction)on the second hotel tower is to start after the completion
and opening of the first tower.
In addition, the Taj Mahal is contemplating adding several new nationally
recognized themed restaurants, including the Rainforest Cafe and the All-Star
Cafe. Construction costs for each of the three themed restaurants will be the
obligation of the lessees. The lease for the Rainforest Cafe will require Taj
Associates to contribute $2.5 million towards construction after the project
is completed and the restaurant opens for business.
TAJ HOLDING
Taj Holding's sole source of liquidity is from distributions from Taj
Associates. As of September 30, 1995, Taj Holding did not have any long or
short-term indebtedness, and is not anticipated to have any in the near
future.
The Taj Associates partnership agreement (the "Taj Partnership Agreement")
currently provides that Taj Associates shall make distributions (i) at the
direction of TM/GP and (ii) to each partner to enable such partner to pay its
taxes arising out of its interest in the partnership ("Tax Distributions"). In
addition, the Taj Partnership Agreement requires Taj Associates to distribute
to TM/GP ("Expense Distributions") amounts necessary to permit TM/GP or Taj
Holding (a) to make payments (generally for indemnification of officers and
directors) that TM/GP or Taj Holding are required to make pursuant to the
terms of TM/GP's Certificate of Incorporation and the Taj Holding Certificate
of Incorporation, (b) to pay fees to Directors (including fees for serving on
a committee), (c) to pay all other expenses of TM/GP and Taj Holding, and (d)
to permit Taj Holding to redeem the Taj Holding Class B Common Stock when
required to make such a redemption pursuant to the terms of the Taj Holding
Certificate of Incorporation. It is anticipated that the Taj Partnership
Agreement will be amended in connection with the Merger Transaction in certain
technical respects.
For the years ended December 31, 1992, 1993, 1994, and the nine months ended
September 30, 1995, Taj Holding received distributions from Taj Associates of
approximately $1.8 million, $1.7 million, $2.2 million, and $1.2 million,
respectively.
The Taj Bond Indenture prohibits Taj Associates from making any
distributions other than Tax Distributions and Expense Distributions during
such time as the Taj Bonds are outstanding.
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The Taj Holding Certificate of Incorporation requires Taj Holding to redeem
each outstanding share of Taj Holding Class B Common Stock at a redemption
price of $.50 per share (adjusted to reflect stock splits, combinations and
dividends since the original date of issuance) at such time as the principal
amount of Bonds with respect to which such share was issued is redeemed,
defeased, or paid in full.
Pursuant to the Stock Issuance Agreement, dated as of October 4, 1991 (the
"Stock Issuance Agreement"), Taj Holding has agreed to issue and deliver to Taj
Funding such number of additional shares of Taj Holding Class B Common Stock as
Taj Funding may request to enable Taj Funding to pay interest on the Taj Bonds
in the form of additional Units in accordance with the terms of the Taj Bond
Indenture. In accordance with the Stock Issuance Agreement, Taj Holding issued
an additional 8,844 shares of Taj Holding Class B Common Stock on May 15, 1992,
14,579 additional shares of Taj Holding Class B Common Stock on May 15, 1993,
12,249 shares of Taj Holding Class B Common Stock on May 15, 1994 and 15,112
shares of Taj Holding Class B Common Stock on May 15, 1995.
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at the Taj Mahal occurring during the period from May through September.
Consequently, Taj Associates' operating results during the two quarters ending
in March and December would not likely be as profitable as the two quarters
ending in June and September.
INFLATION
There was no significant impact on Taj Associates' operations as a result of
inflation during the first nine months of 1995, and during 1994, 1993 or 1992.
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BUSINESS OF TAJ HOLDING
Taj Holding has no business operations and serves as a holding company for an
investment in 50% of Taj Associates.
GENERAL
Taj Associates owns and operates the Taj Mahal, a luxury casino hotel located
on The Boardwalk in Atlantic City. The Taj Mahal is currently the largest
casino hotel facility in Atlantic City, and has ranked first among all Atlantic
City casinos in terms of total gaming revenues, table revenues and slot
revenues since it commenced operations in 1990. The Taj Mahal capitalizes on
the widespread recognition and marquee status of the "Trump" name and its
association with high quality amenities and first class service as evidenced by
its "Four Star" Mobil Travel Guide rating. Management believes that the breadth
and diversity of the Taj Mahal's casino, entertainment and convention
facilities and its status as a "must see" attraction will enable the Taj Mahal
to benefit from the expected continued growth of the Atlantic City market.
The Taj Mahal currently features Atlantic City's largest casino, with
120,000-square-feet of gaming space, 162 table games and 3,550 slot machines.
In addition, the Taj Mahal has a 12,000-square-foot poker, keno and race
simulcasting room with 64 poker tables, which was added in 1993 and expanded in
1994. The casino's offerings include blackjack, progressive blackjack craps,
roulette, baccarat, mini baccarat red dog, sic-bo, pai gow, pai gow poker,
Caribbean stud poker big six mini big six and let it ride. In December 1995,
the Taj Mahal opened an Asian themed table game area which offers 16 popular
Asian table games catering to the Taj Mahal's growing Asian clientele. In
addition, as a special bonus to high-end players, Taj Associates offers three
clubs for the exclusive use of select customers: the Maharajah Club for table
game players, the Presidents Club for high-end slot players, and the Bengal
Club for other preferred slot players.
The Taj Mahal consists of a 42-story hotel tower and contiguous low-rise
structure, sited on approximately 17 acres of land. The Taj Mahal has 1,250
guest rooms (including 242 suites), 15 restaurants, six lounges, parking for
approximately 4,600 cars, an 18-bay bus terminal and approximately 65,000-
square-feet of ballroom, meeting room and pre-function area space. The Taj
Mahal is currently contemplating adding several new themed restaurants to be
owned and operated by nationally recognized restaurant operators, including the
Rainforest Cafe and the All-Star Cafe. In addition, the Taj Mahal features the
Taj Entertainment Complex, a 20,000-square-foot multi-purpose entertainment
complex known as the Xanadu Theater with seating capacity for approximately
1,200 people, which can be used as a theater, concert hall, boxing arena or
exhibition hall, and the Mark Etess Arena, which comprises an approximately
63,000-square foot exhibition hall facility. The Xanadu Theater and the Mark
Etess Arena have allowed the Taj Mahal to offer longer running, more
established productions that cater to the tastes of the Taj Mahal's high-end
international guests, and has afforded the Taj Mahal more flexibility in the
use of its facilities for sporting and other headline programs. The Taj Mahal
regularly engages well-known musicians and entertainment personalities and will
continue to emphasize weekend marquee events such as Broadway revues, high
visibility sporting events, international festivals and contemporary concerts
to maximize casino traffic and to maintain the highest level of glamour and
excitement at the Taj Mahal.
Management believes that the Taj Mahal's 1,250-room capacity and vast casino,
entertainment, convention and exhibition space, including the Mark Etess Arena,
make it a highly attractive convention facility and destination resort facility
at which visitors may stay for extended periods. In addition to its normal
advertising, Taj Associates actively promotes the Taj Mahal with various local
chambers of commerce, travel agencies which specialize in convention travel and
various corporate travel departments in order to attract convention business.
BUSINESS STRATEGY
General. In recent years, under the direction of Trump and the management
team led by Nicholas L. Ribis, its Chief Executive Officer, Taj Associates has
completed construction of the Taj Entertainment Complex, reconfigured and
expanded the casino floor to provide race simulcasting, poker wagering and the
recently introduced game of keno, opened an Asian themed table game area and
increased the number of poker tables
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and slot machines. Taj Associates continually monitors operations to adapt to
and anticipate industry trends. Since 1994, the Taj Mahal has embarked on a
strategy to renovate all of its hotel guest rooms and corridors by April 1996
and to replace all of its existing slot machines by the middle of 1996 with
new, more efficient machines with bill collectors. A primary element of the Taj
Mahal's business strategy is to attract patrons who tend to wager more
frequently and in larger denominations than the typical Atlantic City gaming
customer ("high-end players"). Such high-end players typically wager $5 or more
per play in slots and $100 or more per play in table games. As a result of
these and other initiatives, Taj Associates has had strong recent operating
results, with net revenues for the nine months ended September 30, 1995
approximately 8% higher than the period in 1994. In addition, slot revenues
also increased in the nine months ended September 30, 1995, a 6.9% increase
over the comparable period in 1994. The Taj Mahal's total gaming revenues
represent a 13.4% share of the Atlantic City gaming market in the nine months
ended September 30, 1995 and 1994, resulting in part from Atlantic City's
highest table game efficiency and win per unit per day during such time.
The Taj Mahal Expansion. Following the consummation of the Merger
Transaction, THCR plans to undertake an expansion plan at the Taj Mahal to meet
both existing demand and the increase in demand that management anticipates
will result from the increased number of rooms and infrastructure improvements
that are currently being implemented to enhance further the "vacation
destination appeal" of Atlantic City. It is currently expected that the Taj
Mahal Expansion will be funded principally out of the cash from operations of
the Taj Mahal and Trump Plaza and will be completed in phases from the first
quarter of 1997 through 1999. The Taj Mahal Expansion, the plans for which are
preliminary and subject to modification, involves the construction of an
approximately 2,200 space expansion of the Taj Mahal's existing self-parking
facilities and a new arena on a surface parking area located adjacent to the
Taj Mahal, each scheduled to be completed in the first quarter of 1997; the
conversion of the current site of the Mark Etess Arena into a new 60,000-square
foot circus-themed casino with 2,500 slot machines, scheduled to be completed
in 1997; and the construction of two new hotel towers adjacent to the Taj
Mahal's existing hotel tower, each consisting of an excess of 640 rooms, the
first of which is scheduled to be completed in 1997, and the second of which is
scheduled to begin construction following the completion of the first tower and
be completed in 1999. See "Risk Factors--Trump Plaza Expansion and The Taj
Mahal Expansion--The Taj Mahal."
Gaming Environment. The Taj Mahal's management continues to capitalize on the
Taj Mahal's status as the largest facility in Atlantic City and a "must see"
attraction, while maintaining the attractiveness of the property and providing
a comfortable gaming experience. In 1994, the Taj Mahal completed a major
redecoration of the hotel lobby, a casino floor expansion and a
reconfiguration, as well as the addition of a new mid-level player slot club.
The casino floor expansion and reconfiguration accommodated the addition of
keno, an additional 4 poker tables and 163 slot machines. Taj Holding
management believes that this renovation represents a significant improvement
by creating an uninterrupted view from the lobby to the casino floor.
Approximately 2,050 new slot machines were placed in service during 1994 and
1995 to replace older models. Taj Holding management anticipates that it will
continue to replace all older slot machines early in 1996. In addition, in June
1993, the Taj Mahal completed a 10,000-square foot poker and simulcast area
(which was subsequently enlarged to 12,000 square feet), which features 61
poker tables in the largest poker room in Atlantic City. For the year ended
December 31, 1994, the Taj Mahal captured approximately 40.7% of the total
Atlantic City poker revenues.
Taj Holding management continuously monitors the configuration of the casino
floor and the games it offers to patrons with a view towards making changes and
improvements. For example, the Taj Mahal's casino floor has clear, large signs
for the convenience of patrons. Additionally, as new games have been approved
by the CCC, management has integrated such games to the extent it deems
appropriate. In 1994, the Taj Mahal introduced the newly-approved games of keno
and caribbean stud poker and in 1995 introduced the game of pai gow.
Entertainment. Taj Holding believes headline entertainment, as well as other
entertainment and revue shows, is an effective means of attracting and
retaining gaming patrons. The August 1993 completion of the Xanadu Theater has
allowed the Taj Mahal to offer longer running, more established productions
that cater to
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the tastes of the Taj Mahal's high-end international guests. The additional
theater has also afforded the Taj Mahal more flexibility in the use of its
larger entertainment arena for sporting and other headline programs. The Taj
Mahal regularly engages well-known musicians and entertainment personalities
and will continue to emphasize weekend "marquee" events such as Broadway
revues, high visibility sporting events, festivals and contemporary concerts to
maintain the highest level of glamour and excitement. Mid-week uses for the
facilities include convention events and casino marketing sweepstakes. The Taj
Mahal also includes the Mark Etess Arena, which comprises an approximately
63,000 square-foot exhibition hall facility.
"Comping" Strategy. In order to compete effectively with other casino hotels,
the Taj Mahal offers complimentaries. In 1991 and 1992, the Taj Mahal increased
promotional activities and complimentaries to its targeted patrons in response
to a difficult economic environment and increased capacity in the Atlantic City
market. Currently, the policy at the Taj Mahal is to focus promotional
activities, including complimentaries, on middle and upper middle market "drive
in" patrons who visit Atlantic City frequently and have proven to be the most
profitable market segment.
Additionally, as a result of increased regulatory flexibility, Taj Associates
has implemented a cash comping policy to high-end players in order to compete
with similar practices in Las Vegas and to attract international business.
Player Development. Taj Associates employs sales representatives as a means
of attracting high-end slot and table gaming patrons to the property. Taj
Associates currently employs numerous gaming representatives in New Jersey, New
York and other states, as well as several international representatives, to
host special events, offer incentives and contact patrons directly in the
United States, Canada and South America. In addition, targeted marketing to
international clientele will be continued and expanded through new sales
representatives in Latin America, Mexico, Europe, the Far East and the Middle
East.
As a special bonus to high-end players, Taj Associates offers three clubs for
the exclusive use of select customers: the Maharajah Club for table game
players, the Presidents Club for high-end slot players, and the Bengal Club for
other preferred slot players.
The casino hosts assist patrons on the casino floor, make room and dinner
reservations and provide general assistance. They also solicit Trump Card (the
frequent player card) sign-ups in order to increase the Taj Mahal's marketing
base.
Taj Associates also plans to continue the development of its slot and coin
programs through direct mail and targeted marketing campaigns emphasizing the
high-end player. "Motorcoach Marketing," the Taj Mahal's customer bus-in
program, has been an important component of player development and will
continue to focus on tailoring its player base and maintaining a low-cost
package.
Promotional Activities. The Trump Card, a player identification card,
constitutes a key element in the Taj Mahal's direct marketing program. Both
table and slot machine players are encouraged to register for and utilize their
personalized Trump Card to earn various complimentaries and incentives based on
their level of play. The Trump Card is inserted during play into a card reader
attached to the table or slot machine for use in computerized rating systems.
These computer systems record data about the cardholder, including playing
preferences, frequency and denomination of play and the amount of gaming
revenues produced. Sales and management personnel are able to monitor the
identity and location of the cardholder and the frequency and denomination of
such cardholder's play. They can also use this information to provide attentive
service to the cardholder while the patron is on the casino floor.
The Taj Mahal designs promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino games supervisor.
Promotional activities at the Taj Mahal include the mailing of vouchers for
complimentary slot play and utilization of a special events calendar (e.g.,
birthday parties, sweepstakes and special competitions) to promote its gaming
operations.
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The Taj Mahal conducts slot machine and table game tournaments in which cash
prizes are offered to a select group of players invited to participate in the
tournament based upon their tendency to play. Special events such as "Slot
Sweepstakes" and "bingo" are designed to increase mid-week business and will
continue to be emphasized throughout 1996. Players at these tournaments tend to
play at their own expense during "off-hours" of the tournament. At times,
tournament players are also offered special dining and entertainment privileges
that encourage them to remain at the Taj Mahal.
Credit Policy. Historically, the Taj Mahal has extended credit on a
discretionary basis to certain qualified patrons. For the years ended December
31, 1992, 1993 and 1994 and the nine months ended September 30, 1995, the Taj
Mahal's credit play as a percentage of total dollars wagered was approximately
26.0%, 23.5%, 22.8% and 22.9%, respectively. Since 1991, the Taj Mahal has
successfully attracted high-end table game patrons through its "junket"
marketing operations and has undertaken a marketing effort aimed at high-end
international table game patrons, which increased credit play as a percentage
of total dollars in 1991 and early 1992. Since the initial success of these
marketing efforts, the Taj Mahal has been more selective in its extension of
credit, thereby decreasing credit play as a percentage of gaming revenues in
1992, 1993 and 1994.
PROPERTIES
Taj Associates owns and leases several parcels of land in Atlantic City, New
Jersey, each of which is used in connection with the operation of the Taj Mahal
and each of which is encumbered by the Amended Mortgage securing the Taj Bonds
the mortgage securing the First Fidelity Loan, and the mortgage securing the
$25 million Working Capital Facility. Upon consummation of the Merger
Transaction, these parcels of land will secure the Mortgage Notes. All of the
following properties (other than certain property underlying the casino parcel,
which is owned by Taj Associates) comprise the Specified Parcels.
The Casino Parcel. The land comprising the site upon which the Taj Mahal is
located consists of approximately 17 acres, which are bounded by The Boardwalk
to the south, Maryland Avenue to the east, Pennsylvania Avenue to the west and
which extends to the north towards Pacific Avenue for approximately three-
quarters of a city block on the western portion of the site and two-thirds of a
city block on the eastern portion of the site. Construction was substantially
completed and the Taj Mahal was opened to the public on April 2, 1990.
Taj Entertainment Complex. The Taj Entertainment Complex is situated on a
parcel of land leased from Realty Corp. and features a 20,000 square foot
multi-purpose entertainment complex known as the Xanadu Theater with seating
capacity for approximately 1,200 people, which can be used as a theater,
concert hall, boxing arena or exhibition hall.
Steel Pier. Taj Associates leases the Steel Pier from Realty Corp. A
condition imposed on Taj Associates' CAFRA Permit (which, in turn, is a
condition of Taj Associates' casino license) initially required that Taj
Associates begin construction of certain improvements on the Steel Pier by
October 1992, which improvements were to be completed within 18 months of
commencement. Taj Associates initially proposed a concept to improve the Steel
Pier, the estimated cost of which improvements was $30 million. Such concept
was approved by the New Jersey Department of Environmental Protection
("NJDEP"), the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA Permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel
Pier for one year based upon an interim use of the Steel Pier for an amusement
park. Taj Associates received an additional one-year extension, in March 1995,
of the required commencement and completion dates of the improvements of the
Steel Pier based upon the same interim use of the Steel Pier as an amusement
park pursuant to a sublease ("Pier Sublease") with an amusement pier operator
("Pier Subtenant"). The Pier Sublease provides for a five-year lease term
through December 31, 1999. However, Taj Associates may terminate the Pier
Sublease after December 31 of each year if written notice of termination is
given to the Pier Subtenant on or before September 1 of such year. Taj
Associates is currently seeking further modification to its obligations under
the CAFRA Permit.
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Office and Warehouse Space. Taj Associates owns an office building located on
South Pennsylvania Avenue adjacent to the Taj Mahal. In addition, Taj
Associates, in April 1991, purchased for approximately $1.7 million certain
facilities of Trump's Castle Associates which are presently used for office
space which it leases to a commercial tenant.
Taj Associates has entered into a lease with The Trump-Equitable Fifth Avenue
Co., a corporation wholly owned by Trump, for the lease of office space in The
Trump Tower in New York City, which Taj Associates uses as a marketing office.
The monthly payments under the lease had been $1,000, and the premises were
leased at such rent for four months in 1992, the full twelve months in 1993 and
1994 and eight months in 1995. On September 1, 1995, the lease was renewed for
a term of five years with an option for Taj Associates to cancel the lease on
September 1 of each year, upon six months' notice and payment of six months'
rent. Under the renewed lease, the monthly payments are $2,184.
Parking. The Taj Mahal provides parking for approximately 4,600 cars of which
3,600 spaces are located in indoor parking garages and 1,000 spaces are located
on land leased to Taj Associates by Realty Corp. In addition, Taj Associates
entered into a lease agreement with Trump's Castle Associates to share its
employee parking facilities. In connection with the Taj Mahal Expansion, Taj
Associates will expand its self-parking facilities by 2,200 spaces.
SEASONALITY
The gaming industry in Atlantic City traditionally has been seasonal, with
its strongest performance occurring from May through September, and with
December and January showing substantial decreases in activity. Revenues have
been significantly higher on Fridays, Saturdays, Sundays and holidays than on
other days.
EMPLOYEES AND LABOR RELATIONS
Taj Associates has approximately 6,100 employees for the operation of the Taj
Mahal, of whom approximately 1,850 employees are covered by collective
bargaining agreements. Taj Associates believes that its relationships with its
employees are satisfactory and that its staffing levels are sufficient to
provide superior service. Since opening in April 1990, during which time some
collective bargaining agreements with various unions have expired prior to the
execution of new agreements, the business of Taj Associates has not been
interrupted due to any labor disputes. The collective bargaining agreement with
HERE Local 54, which covers substantially all of Taj Associates' hotel and
restaurant employees, was renegotiated in September 1994 and will expire on
September 14, 1999.
Certain Taj Associates employees must be licensed under the Casino Control
Act. See "Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees."
THE 1991 TAJ RESTRUCTURING
During 1990 and 1991, Taj Associates experienced liquidity problems. Taj
Holding believes that these problems were attributable, in part, to an overall
deterioration in the Atlantic City gaming market, as indicated by reduced rates
of casino revenue growth for the industry for the two prior years, aggravated
by an economic recession in the Northeast and the Persian Gulf War, as well as
the risks inherent in the establishment of a new business enterprise.
Comparatively, excessive casino gaming capacity in Atlantic City may also have
contributed to Taj Associates' liquidity problems.
As a result of Taj Associates' liquidity problems, Taj Funding failed to make
its November 15, 1990 and May 15, 1991 interest payments on its Old Taj Bonds,
resulting in an event of default under the indenture with respect to such Old
Taj Bonds. During 1990 and 1991, Taj Associates also failed to pay certain
principal and interest installments on certain indebtedness due under its loan
with NatWest.
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In order to alleviate its liquidity problems, during 1991, TTMC, Taj Funding,
Taj Associates and TTMI (together, the "Debtors") restructured their
indebtedness through the 1991 Taj Restructuring, which was a "prepackaged" plan
of reorganization under Chapter 11 of the Bankruptcy Code. At the time, the
Debtors believed that there was no alternative to their liquidity problems
other than filing petitions under the Bankruptcy Code. Taj Associates had been
unable to obtain additional financing, and Taj Funding was restricted from
amending the payment terms of the Old Taj Bonds outside of a case under the
Bankruptcy Code without the unanimous consent of the holders thereof. The
purpose of the 1991 Taj Restructuring was to improve the amortization schedule
and extend the maturity of Taj Associates' indebtedness by reducing and
deferring the Debtors' annual debt service requirements by (i) restructuring
Taj Associates' and affiliated entities' long-term indebtedness to NatWest,
First Fidelity and Bankers Trust, and (ii) issuing the Taj Bonds with an
overall lower rate of interest as compared with Taj Funding's Old Taj Bonds.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of the Old Taj Bonds a general partnership
interest representing 49.995% of the equity of Taj Associates. Such holders in
turn contributed such partnership interest to Taj Holding. Taj Funding and Taj
Holding also issued the Units to the holders of the Old Taj Bonds. As part of
the 1991 Taj Restructuring, TM/GP, which has no other assets, received a
49.995% partnership interest in Taj Associates from Taj Holding. Trump also
contributed to Taj Holding a 50% ownership interest in TTMC, which owns a .01%
interest in Taj Associates, in exchange for the Taj Holding Class C Common
Stock, as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of Taj
Holding Class A Common Stock and 729,458 shares of Taj Holding Class B Common
Stock to the holders of the Old Taj Bonds and 1,350,000 shares of Taj Holding
Class C Common Stock to Trump. In accordance with the terms of the Taj Bond
Indenture, a portion of the interest on the Taj Bonds may be paid in additional
Taj Bonds. At May 15, 1992, 1993, 1994 and 1995, 8,844 Units comprised of
$8,844,000 of Taj Bonds and 8,844 shares of Taj Holding Class B Common Stock,
14,579 Units comprised of $14,579,000 of Taj Bonds and 14,579 shares of Taj
Holding Class B Common Stock, 12,249 Units comprised of $12,249,000 of Taj
Bonds and 12,249 shares of Taj Holding Class B Common Stock, and 15,112 Units
comprised of $15,112,000 of Taj Bonds and 15,112 shares of Taj Holding Class B
Common Stock, respectively, were issued in lieu of the payment of a portion of
the cash interest on the outstanding Taj Bonds.
Currently, the holders of Taj Holding Class B Common Stock are entitled to
elect four of the nine members of Taj Holding's Board of Directors and Trump,
as holder of the Taj Holding Class C Common Stock, is entitled to elect the
remaining five directors. The Taj Holding Class A Common Stock has no voting
rights until such time as the Taj Bonds are redeemed, defeased or paid in full.
However, except upon Taj Holding's liquidation, only the Taj Holding Class A
Common Stock is entitled to distributions and dividends, if any, made by Taj
Holding. The Taj Holding Class B Common Stock must be redeemed at a price of
$.50 per share when the Taj Bonds with which they were issued, are paid,
redeemed or defeased.
CERTAIN INDEBTEDNESS
Set forth below is a summary of certain debt instruments to which affiliates
of Taj Holding are parties prior to the Merger Transaction.
TAJ BONDS
In connection with the 1991 Taj Restructuring, Taj Funding and Taj Holding
issued Units, each of which was comprised of $1,000 principal amount of Taj
Bonds and one share of Taj Holding Class B Common Stock. Pursuant to the Taj
Bond Indenture, Taj Funding may issue up to $860 million of Taj Bonds. On
October 4, 1991, at the time the Units were issued, the principal amount of Taj
Bonds issued was $729,458,000.
Terms. As of September 30, 1995, the principal amount of Taj Bonds issued was
$780,242,000. The Bonds have a stated maturity date of November 15, 1999. The
Taj Bonds bear interest at 11.35% per annum.
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Interest on the Taj Bonds is due semi-annually on each November 15 and May 15.
Interest on the Taj Bonds must be paid in cash on each interest payment date at
a rate of 9.375% per annum, and, in addition, effective May 15, 1992, and
annually thereafter, an additional amount of interest in cash or additional Taj
Bonds or a combination thereof, is payable in an amount to increase the
interest paid to 11.35% per annum.
Guarantee. The obligations of Taj Funding to pay the principal of, premium,
if any, and interest on the Taj Bonds are guaranteed by Taj Associates.
Security. The Taj Bonds are secured by an assignment by Taj Funding to the
trustee under the Taj Bond Indenture (the "Taj Bond Trustee") of a promissory
note, dated as of October 4, 1991, issued by Taj Associates to Taj Funding (the
"Taj Bond Partnership Note"), with payment terms substantially similar to the
payment terms of the Taj Bonds, which is in turn secured by a mortgage as
amended by an amendment, dated as of October 4, 1991, by Taj Associates as
mortgagor and Taj Funding as mortgagee, securing payment of the Taj Bond
Partnership Note (the "Amended Mortgage"), which has been assigned to the Taj
Bond Trustee and encumbers Taj Associates' interest in the Taj Mahal and
substantially all of the other assets of Taj Associates, excluding certain
furniture, furnishings, fixtures, machinery and equipment which is subject to
the lien of the NatWest Loan. In addition, the Taj Bond Partnership Note is
secured by a second, subordinated lien on all the real estate owned by Realty
Corp. Moreover, Taj Associates has acquired an option to purchase the real
estate owned by Realty Corp., and such option has been assigned to the Taj Bond
Trustee as security for the Taj Bonds.
Covenants. The Taj Bond Indenture contains certain restrictive covenants
which restrict, among other things, the activities of Taj Funding and Taj
Associates; the ability of Taj Associates to enter into certain leases; the
incurrence of additional debt (including a covenant limiting payments on long-
term debt); the creation of liens; the payment of dividends and distributions
on and repurchases of capital stock and partnership interests and other
restricted payments; consolidations, mergers and conveyances and transfers of
property and assets; transactions with affiliates; investments of Taj Funding
and Taj Associates; and the waiver of stay extension and usury laws.
Treatment Under the Merger Transaction. The principal and accrued and unpaid
interest on the outstanding Taj Bonds will be paid in full in connection with
the Merger Transaction. Concurrently with the retirement of the Taj Bonds, the
outstanding shares of Taj Holding Class B Common Stock will be redeemed in
accordance with their terms, at a redemption price of $.50 per share.
NATWEST LOAN
On November 3, 1989, Taj Associates entered into the NatWest Loan, which
provided financing of $50,000,000 for certain items of furniture, fixtures and
equipment installed in the Taj Mahal. On October 4, 1991, in connection with
the 1991 Taj Restructuring, the NatWest Loan was amended in order to, among
other things, modify the interest rate and other payment terms.
Terms. As of September 30, 1995, the outstanding principal amount of the
NatWest Loan was $44,986,000, and the interest rate was 9.375% per annum.
Principal and interest on the NatWest Loan are payable as follows:
(i) on the last business day of each month until the earlier of the last
business day of October 1999 or the date the NatWest Loan, together with
all interest thereon, is paid in full, the sum of $416,667, to be applied
first in respect of accrued interest on the NatWest Loan and thereafter, to
the extent available, in reduction of the principal of the NatWest Loan;
provided, however, up to $525,000 of such payments received by NatWest in
any year shall be paid to either First Fidelity or Bankers Trust for
application by First Fidelity in payment of obligations of Taj Associates
to First Fidelity, and by Bankers Trust on behalf of Taj Associates on
behalf of TTMI in payment of interest on the TTMI Note. Such amounts paid
by NatWest shall not have been applied by NatWest in payment of the
principal of, interest on or any other sums due in respect of the NatWest
Loan or otherwise payable to NatWest;
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(ii) on May 15 of each year (if any of the principal of or interest on
the NatWest Loan is then outstanding), commencing on May 15, 1992, to and
including May 15, 1999, an amount (the "EACF Payment") equal to 16.5% (or,
if the First Fidelity Loan shall have been paid in full on or prior to any
such May 15, 20%) of Excess Available Cash Flow (as defined in the Taj Bond
Indenture) for the preceding calendar year in excess of the Additional
Amount (as defined in the Taj Bond Indenture) payable on such May 15 (such
remaining Excess Available Cash Flow, the "Remaining EACF Amount"), if any,
to be applied first in reduction of then accrued but unpaid interest on,
and then to principal of the NatWest Loan; and
(iii) on November 15, 1999, the outstanding principal of and all accrued
but unpaid interest on the NatWest Loan.
Security. The NatWest Loan is secured by a first priority lien on the
furniture, fixtures and equipment acquired with the proceeds of the NatWest
Loan plus any after-acquired furniture, fixtures and equipment that replaces
such property, or of the same type; provided, however, that the NatWest Loan
may be subordinated to a lien to secure purchase money financing of such after-
acquired property which does not exceed 50% of the purchase price of such
after-acquired property.
Remedies upon Events of Default. Upon the occurrence of an event of default
under the NatWest Loan, including, without limitation, the sale of any real
estate owned by Realty Corp. for less than the release price set forth in First
Fidelity Loan (as defined below) without the prior written consent of NatWest,
NatWest may accelerate any and all indebtedness outstanding under the NatWest
Loan.
Treatment Under the Merger Transaction. Taj Associates intends to satisfy the
NatWest Loan in connection with the Merger Transaction.
FIRST FIDELITY LOAN/SPECIFIED PARCELS
On November 22, 1988, First Fidelity, Realty Corp. and Trump, as guarantor,
entered into the First Fidelity Loan in the aggregate principal amount of
$75,000,000. Pursuant to an amendment to the First Fidelity Loan, effective as
of October 4, 1991, the rate of interest payable was modified, the dates of
payment of principal and interest were deferred and accrued interest in the
amount of $1,773,750 was capitalized. As of September 30, 1995, the principal
amount outstanding on the First Fidelity Loan was approximately $78 million.
Unpaid principal and accrued interest on the First Fidelity Loan is due and
payable on November 15, 1999, unless otherwise extended in connection with the
extension of the maturity of the Taj Bonds.
Taj Associates currently leases the Specified Parcels from Realty Corp., a
corporation wholly owned by Trump, pursuant to an Amended and Restated Lease
Agreement, dated as of October 4, 1991 (the "Specified Parcels Lease").
Pursuant to the Specified Parcels Lease, Taj Associates is obligated to pay
Realty Corp. $3.3 million plus 3.5% of the Remaining EACF Amount per year. Such
annual payment, however, is reduced by (i) all of the Base Fees (as defined
therein) and the first $75,000 of the Incentive Fees (as defined therein)
payable to Trump pursuant to the Taj Services Agreement and assigned by Trump
to First Fidelity (which amounts were $575,000 in 1995) and (ii) the portion of
monies payable by Taj Associates to NatWest to be remitted to First Fidelity
(which amounts were $525,000 in 1995). The Specified Parcels Lease expires on
December 31, 2023, however, the lease may be terminated prior to such date
following a foreclosure or similar proceeding on the Specified Parcels by First
Fidelity, the holder of a first mortgage lien on the Specified Parcels which
secures the First Fidelity Loan (the "First Fidelity Mortgage") or any other
mortgagee thereof.
The Specified Parcels Lease provides that, upon payment of the First Fidelity
Loan, and upon discharge of the First Fidelity Mortgage, Taj Associates may
purchase the Specified Parcels for ten dollars. Payment of the First Fidelity
Loan is guaranteed by a guarantee (limited to any deficiency in the amount owed
under the First Fidelity Loan when due, up to a maximum of $30 million) by Taj
Associates (the "Taj Associates-First Fidelity
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Guarantee"), a personal guarantee by Trump (pursuant to which First Fidelity
has agreed to forbear from asserting any personal claim with respect thereto in
excess of approximately $19.2 million) (the "Trump-First Fidelity Guarantee")
and limited recourse guarantees by TTMC (the "TTMC-First Fidelity Guarantee")
and TTMI (as amended, the "TTMI-First Fidelity Guarantee" and, together with
the Trump-First Fidelity Guarantee and the TTMC-First Fidelity Guarantee, the
"Other First Fidelity Guarantees"). The Other First Fidelity Guarantees are
secured by pledges by Trump of 62.5% of his Taj Holding Class C Common Stock,
TTMC Common Stock and TTMI Common Stock and all of his shares of Realty Corp.
Common Stock, and pledges by TTMI and TTMC of 62.5% and 31.25%, respectively,
of their equity and financial interests as general partners in Taj Associates
(all such interests pledged to First Fidelity as security for the Other First
Fidelity Guarantees are referred to herein as the "Other First Fidelity
Guarantee Collateral"). First Fidelity's recourse under the TTMC-First Fidelity
Guarantee and the TTMI-First Fidelity Guarantee is limited to the collateral
pledged by TTMC and TTMI, respectively.
Upon the satisfaction in full of the obligations due under the First Fidelity
Loan at a negotiated amount of $50 million and 500,000 shares of THCR Common
Stock, Taj Associates will purchase the Specified Parcels from Realty Corp. In
connection therewith, First Fidelity will (i) release and discharge Realty
Corp. from the First Fidelity Loan and release its lien on the Specified
Parcels, (ii) release Taj Associates from the Taj Associates-First Fidelity
Guarantee, (iii) release each of Trump, TTMC and TTMI from their respective
obligations under the Other First Fidelity Guarantees and (iv) release its lien
on the Other First Fidelity Guarantee Collateral. In addition, the purchase of
the Specified Parcels will eliminate Taj Associates' current obligations under
the Specified Parcels Lease and the termination rights with respect to the
Specified Parcels Lease, thereby facilitating the Taj Mahal Expansion by
securing the future use of the Specified Parcels by Taj Associates. The holders
of the Mortgage Notes will have a security interest in the Specified Parcels.
TTMI NOTE
On April 30, 1990, Trump loaned $25 million to Taj Associates on an unsecured
basis, in exchange for a note payable to Trump (the "Old Taj Associates Note").
The Old Taj Associates Note was pledged to certain lenders to Trump, including
Bankers Trust, as security for certain of Trump's personal indebtedness. On
October 4, 1991, in connection with the 1991 Taj Restructuring and in order to
facilitate the reorganization of Taj Associates and certain of its affiliates,
the Old Taj Associates Note was canceled and, in lieu thereof, TTMI, a
corporation wholly owned by Trump which was formed for the purpose of holding a
general partnership interest in Taj Associates, executed the TTMI Note, a
promissory note payable to Trump in the principal amount of $27,188,000. At
such time, in order to secure the Trump Indebtedness, Trump pledged to certain
lenders, including Bankers Trust, his right, title and interest in the TTMI
Note. As additional security for the Trump Indebtedness, Trump pledged to
Bankers Trust all of his shares of Taj Holding Class C Common Stock, TTMC
Common Stock and TTMI Common Stock, which pledges are subordinate, in part, to
the liens of First Fidelity in such collateral. In addition, TTMI and TTMC have
each guaranteed the repayment of the Trump Indebtedness, which limited recourse
guarantees are secured by pledges by TTMI and TTMC to Bankers Trust of 100% and
50%, respectively, of their equity and financial interests as general partners
in Taj Associates, which pledges are subordinate, in part, to the liens of
First Fidelity in such collateral.
In connection with the Merger Transaction, Bankers Trust will receive $10
million from Taj Associates in respect of certain of the Trump Indebtedness.
Upon such payment, Bankers Trust will release (i) its lien on the TTMI Note,
(ii) its liens on the remaining collateral pledged by Trump to Bankers Trust
and (iii) TTMI and TTMC from their respective obligations as guarantors of
certain of Trump's personal indebtedness and the liens securing such
obligations.
WORKING CAPITAL FACILITY
Background and Terms. On November 14, 1991, Taj Associates entered into the
Working Capital Facility with Foothill in the amount of $25,000,000, which is
secured by a lien on Taj Associates' assets senior to the lien of the Taj Bond
Mortgage securing the Taj Bonds. On September 1, 1994, Taj Associates and
Foothill
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extended the maturity of the Working Capital Facility to November 13, 1999, in
consideration of modifications of the terms thereof. Borrowings under the
Working Capital Facility bear interest at a rate equal to the prime lending
rate plus 3%, with a minimum of 0.666% per month. The agreement further
provides for a .75% annual fee and a .50% unused line fee. As of December 31,
1995, no amounts were outstanding under the Working Capital Facility.
Events of Default. The occurrence of any of the following events constitute
an event of default under the Working Capital Facility: (i) failure to pay
principal, interest, fees, charges or reimbursements due to Foothill, when due
and payable or when declared due and payable; (ii) failure or neglect to
perform certain duties and covenants under the agreement; (iii) any material
portion of Taj Associates' assets is attached, seized, subjected to a writ or
distress warrant, levied upon, or comes into the possession of any judicial
officer or assignee and such attachment or writ is not dismissed within 60
days; (iv) an insolvency proceeding is commenced by Taj Associates; (v) an
insolvency proceeding is commenced against Taj Associates, and is not dismissed
within 60 days; (vi) Taj Associates is enjoined, restrained, or in any way
prevented by certain governmental agencies from continuing to conduct all or
any material part of its business affairs; (vii) Taj Associates fails to pay
certain liens, levies or assessments on the payment date thereof; (viii)
certain judgments or claims in excess of $500,000 become a lien or encumbrance
upon a material portion of Taj Associates' assets; (ix) Taj Associates defaults
in payments owing to NatWest or the Taj Bond Trustee; (x) Taj Associates makes
unauthorized payments on debt subordinated to the Working Capital Facility;
(xi) misrepresentations are made by Taj Associates to Foothill in any warranty,
representation, certificate, or report; (xii) certain ERISA violations which
could have a material adverse effect on the financial condition of Taj
Associates; or (xiii) Taj Associates incurs or enters into a commitment to
incur any indebtedness which is secured by Taj Associates assets subject to the
Working Capital Facility.
Remedies upon Event of Default. Upon the occurrence of an event of default,
Foothill may, at its election, without notice of its election and without
demand, do any one or more of the following: (i) declare all obligations
immediately due and payable; (ii) cease advancing money or extending credit;
(iii) terminate the Working Capital Facility without affecting Foothill's
rights and security interest in Taj Associates assets; (iv) settle disputes and
claims directly with certain Taj Associates debtors; (v) make such payments and
perform such acts as Foothill deems necessary to protect its security
interests; (vi) set off amounts owed under the Working Capital Facility by
other Taj Associates accounts or deposits held by Foothill; (vii) prepare for
sale and sell, after giving proper notice, Taj Associates assets securing the
Working Capital Facility in a commercially reasonable manner; (viii) exercise
its rights under certain mortgage and assignment documents between Taj
Associates and Foothill; (ix) credit bid and purchase at any public sale
subject to the provisions of the Casino Control Act; (x) any deficiency which
exists after disposition of Taj Associates assets securing the Working Capital
Facility will be paid immediately by Taj Associates; any excess will be
returned to Taj Associates, without interest.
Treatment under the Merger Transaction. Taj Associates anticipates either
modifying the Working Capital Facility or terminating the Working Capital
Facility and replacing it with a new facility. In either case, Taj Associates
anticipates that such working capital facility will rank pari passu with the
Mortgage Notes.
LEGAL PROCEEDINGS
General. Taj Holding, TM/GP, TTMI and TTMC are not parties to any material
legal proceedings. Taj Associates, its partners, certain members of the former
Executive Committee, Taj Funding, TTMI and certain of their employees are or
were involved in various legal proceedings, some of which are described below.
Taj Associates and Taj Funding have agreed to indemnify such persons and
entities against any and all losses, claims, damages, expenses (including
reasonable costs, disbursements and counsel fees) and liabilities (including
amounts paid or incurred in satisfaction of settlements, judgments, fines and
penalties) incurred by them in said legal proceedings. Such persons and
entities are vigorously defending the allegations against them and intend to
vigorously contest any future proceedings.
Bondholder Litigation. Between June 1990 and October 1990 six purported class
actions were commenced on behalf of the holders of Taj Funding's Old Taj Bonds,
which were outstanding prior to the consummation of
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the Plan, and the publicly traded bonds of Trump's Castle and Trump Plaza. In
December 1990 all six cases were consolidated in the United States District
Court for the District of New Jersey. On February 8, 1991, the plaintiffs in
the consolidated action filed an amended and consolidated complaint with
respect to the Taj Mahal. This complaint named as defendants Donald J. Trump,
Robert S. Trump, Harvey I. Freeman, Taj Associates, Taj Funding, TTMI, The
Trump Organization and Merrill Lynch, Pierce, Fenner & Smith, Inc., and
purported to be brought on behalf of those who either purchased Old Bonds or
who would be deprived of interest on the Old Bonds pursuant to the Plan. The
complaint alleged violations of Sections 11 and 12 of the Securities Act and
Section 10(b) and Rule 10b-5 of the Exchange Act against all defendants and
breach of fiduciary duty and common law false advertising against various
defendants and sought compensatory damages in an unspecified amount. Taj
Associates and the other defendants moved to dismiss the amended and
consolidated complaint on or about January 28, 1992. On June 2, 1992 the Court
granted the defendants' motion to dismiss. Plaintiffs thereafter appealed the
dismissal of the consolidated action. On October 14, 1993, the United States
Court of Appeals for the Third Circuit affirmed the District Court's dismissal
of the amended complaint. On March 7, 1994, the U.S. Supreme Court denied the
plaintiffs' petition for a writ of certiorari.
Atlantic City Lease Agreement. The City of Atlantic City is currently
disputing Taj Associates' termination of a lease agreement relating to employee
parking. On March 29, 1990, Taj Associates entered into a lease agreement with
the City of Atlantic City pursuant to which Taj Associates leased a parcel of
land containing approximately 1,300 spaces for employee intercept parking at a
cost of approximately $1 million. In addition, Taj Associates has expended in
excess of $1.4 million in improving the site. The permit under which the lease
is operated was issued by NJDEP on December 20, 1989 for five years and
contains several conditions, one of which required Taj Associates to find
another location "off-island" for employee parking by April 2, 1992. NJDEP
extended this condition for two successive one-year periods through April 2,
1994. On November 14, 1994, as a result of the non-renewal of the permit, Taj
Associates notified the City that the lease agreement had become inoperative
and was therefore being canceled as of December 20, 1994. Taj Associates
subsequently obtained "off-island" parking with Trump's Castle Associates
sufficient to meet its employee parking requirements. The City has indicated in
a letter to Taj Associates that it contests the cancellation of the lease
agreement and claims certain extensions to the permit apply, to which Taj
Associates does not agree.
Other Litigation. Various legal proceedings are now pending against Taj
Associates. Taj Holding considers all such proceedings to be ordinary
litigation incident to the character of its business. The majority of such
claims are covered by liability insurance (subject to applicable deductibles),
and Taj Holding believes that the resolution of these claims, to the extent not
covered by insurance, will not, individually or in the aggregate, have a
material adverse effect on the financial condition or results of operations of
Taj Holding.
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ATLANTIC CITY MARKET
The Atlantic City gaming market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.75 billion in gaming
revenues in 1995, an approximately 9.3% increase over 1994 gaming revenues of
approximately $3.43 billion. From 1989 to 1995, total gaming revenues in
Atlantic City have increased %, while hotel rooms increased only slightly
during that period. Occupancy levels in Atlantic City increased to historic
highs in 1995, reaching %, up from 83% in 1989. Although total visitor volume
to Atlantic City remained relatively constant in 1995, the volume of bus
customers dropped to 8.8 million in 1995, continuing a decline from 13.1
million in 1989. The volume of customers traveling by other means to Atlantic
City has grown from million in 1989 to million in 1995.
Total Atlantic City slot revenues increased 12.0% in 1995, continuing a solid
trend of increases over the past six years. From 1989 through 1995, slot
revenue growth in Atlantic City has averaged 8.8% per year. Total table revenue
increased 4.5% in 1995, while table game revenue from 1989 to 1995 has
decreased on average 1.6% per year. Management believes the slow growth in
table revenue is primarily attributable to two factors. First, the slot product
has been significantly improved over the last five years. Dollar bill
acceptors, new slot machines, video poker and blackjack and other improvements
have increased the popularity of slot play among a wider universe of casino
patrons. Casino operators in Atlantic City have added slot machines in favor of
table games due to increased public acceptance of slot play and due to slot
machines' comparatively higher profitability as a result of lower labor and
support costs. Since 1990, the number of slot machines in Atlantic City has
increased 39.9%, while the number of table games has decreased by 14.1%. Slot
revenues increased from 58% of total casino revenues in 1990 to 69% in 1995.
The second reason for historic slow growth in table revenue is that table game
players are typically higher end players and are more likely to be interested
in overnight stays and other amenities. During peak season and weekends, room
availability in Atlantic City is currently inadequate to meet demand, making it
difficult for casino operators to aggressively promote table play.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
Both THCR management and Taj Holding management believe that this relatively
slow growth is partially attributable to two key factors. First, 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.
Secondly, 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.
Despite lower overall growth rates than the Las Vegas market, both THCR
management and Taj Holding management believe 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 $ billion of gaming revenues produced by the
19 largest casino hotels on the Las Vegas Strip, even though the Atlantic City
casino hotels have less than one-quarter the number of hotel rooms of the Las
Vegas Strip casino hotels. Win per unit figures in Atlantic City are at a
significant premium to Las Vegas win per unit performance, primarily due to the
constrained supply of gaming positions in Atlantic City compared to Las Vegas.
The regulatory environment in Atlantic City has improved recently. Most
significantly, 24-hour gaming has been approved, poker and keno have been added
and regulatory burdens have been reduced. In particular,
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Bill A61 was passed in January of 1995, which has eliminated duplicative
regulatory oversight and channeled operator's funds from regulatory support
into CRDA uses. Administrative costs of regulation will be reduced while
increasing funds available for new development.
In addition to the planned casino expansions, major infrastructure
improvements have begun. The CRDA is currently overseeing the development of
the "tourist corridor" that will link the new convention center with The
Boardwalk and will, when completed, feature an entertainment and retail
complex. The tourist corridor is scheduled to be completed in conjunction with
the completion of the new convention center.
Trump Plaza is adjacent to the existing Atlantic City Convention Center and
will also be one of the closest casino hotels to the new convention center,
which as currently planned would hold approximately 500,000 square feet of
exhibit and pre-function space, 45 meeting rooms, food-service facilities and a
1,600-car underground parking garage. The Taj Mahal is approximately 1.5 miles
from the site of the new convention center. When completed, the new
approximately $290 million convention center would be the largest exhibition
space between New York City and Washington, D.C. It will be located at the base
of the Atlantic City Expressway and is currently planned to open in January
1997. The State of New Jersey is also implementing an approximately $125
million capital plan to upgrade and expand the Atlantic City International
Airport.
Both THCR management and Taj Holding management believe that recent gaming
regulatory reforms will serve to permit future reductions in operating expenses
of casinos in Atlantic City and to increase the funds available for additional
infrastructure development through the CRDA. Due principally to an improved
regulatory environment, general improvement of economic conditions in 1993 and
1994 and high occupancy rates, significant investment in the Atlantic City
market has been initiated and/or announced. Bally recently bought a Boardwalk
lot for $7.5 million, the Sands just completed a major renovation, and in
December of 1994, approval by the CRDA was given to TropWorld to add 626 hotel
rooms and the Grand for 295 rooms (both of which are under construction) and
the Taj Mahal for 1,280 rooms and a 1,500 space parking garage. Overall,
various casinos in the market have applied to the CRDA for funding to construct
3,400 new hotel rooms. Both THCR management and Taj Holding management believe
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."
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COMPETITION
Competition in the Atlantic City casino hotel market is intense. Trump Plaza
and the Taj Mahal compete with each other and with the other casino hotels
located in Atlantic City, including the other casino hotel owned by Trump,
Trump's Castle. See "Risk Factors--Conflicts of Interest." Trump Plaza and the
Taj Mahal are located on The Boardwalk, approximately 1.2 miles apart from each
other. At present, there are 12 casino hotels located in Atlantic City,
including the Taj Mahal and Trump Plaza, all of which compete for patrons. In
addition, there are several sites on The Boardwalk and in the Atlantic City
Marina area on which casino hotels could be built in the future and various
applications for casino licenses have been filed and announcements with respect
thereto made from time to time (including a proposal by Mirage Resorts, Inc.),
although neither THCR nor Taj Holding is aware of any current construction on
such sites by third parties. No new casino hotels have commenced operations in
Atlantic City since 1990, although several existing casino hotels have recently
expanded or are in the process of expanding their operations. While management
of THCR and Taj Holding believe that the addition of hotel capacity would be
beneficial to the Atlantic City market generally, there can be no assurance
that such expansion would not be materially disadvantageous to either Trump
Plaza or the Taj Mahal. There also can be no assurance that the Atlantic City
development projects which are planned or underway will be completed.
Trump Plaza and the Taj Mahal also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, Trump Plaza and the Taj Mahal face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In addition to competing with other casino
hotels in Atlantic City and elsewhere, by virtue of their proximity to each
other and the common aspects of certain of their respective marketing efforts,
including the common use of the "Trump" name, Trump Plaza and the Taj Mahal
compete directly with each other for gaming patrons. Although management does
not intend to operate Trump Plaza and the Taj Mahal to the competitive
detriment of each other, the effect may be that Trump Plaza and the Taj Mahal
will operate to the competitive detriment of each other.
THCR anticipates that the Indiana Riverboat will compete primarily with
riverboats and other casinos in the northern Indiana suburban and Chicago
metropolitan area and throughout the Great Lakes Market. In addition to
competing with Barden's riverboat at the Buffington Harbor site, the Indiana
Riverboat will compete with a riverboat in Hammond, Indiana, which is being
developed by the owner and operator of the Empress Riverboat Casino in Joliet,
Illinois, a riverboat in East Chicago, Indiana, which is being developed by
Showboat, Inc. and with the riverboat expected to be licensed in the nearby
community of Michigan City, Indiana. To a lesser degree, the Indiana Riverboat
will compete with the six additional riverboats expected to be licensed in the
rest of Indiana. At present there are four other riverboat casino operations in
the Chicago area (three of which operate two riverboats each, with each
operator limited to 1,200 gaming positions in the aggregate). In addition, a
casino opened during 1994 in Windsor, Ontario, across the river from Detroit,
and Detroit is considering several proposals for casinos in its downtown area.
Although THCR believes that there is sufficient demand in the market to sustain
the Indiana Riverboat, there can be no assurance to that effect. There can be
no assurance that either Indiana or Illinois, or both, will not authorize
additional gaming licenses, including for the Chicago metropolitan area. See
"Risk Factors--The Indiana Riverboat."
In addition, Trump Plaza and the Taj Mahal face, and the Indiana Riverboat
will face, competition from casino facilities in a number of states operated by
federally recognized Native American tribes. Pursuant to IGRA, any state which
permits casino style gaming (even if only for limited charity purposes) is
required to
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negotiate gaming contracts with federally recognized Native American tribes.
Under IGRA, Native American tribes enjoy comparative freedom from regulation
and taxation of gaming operations, which provides them with an advantage over
their competitors, including Trump Plaza, the Taj Mahal and the Indiana
Riverboat.
In 1991, the Mashantucket Pequot Nation opened a casino facility in Ledyard,
Connecticut, located in the far eastern portion of such state, an approximately
three-hour drive from New York City and an approximately two and one-half hour
drive from Boston, which currently offers 24-hour gaming and contains over
3,100 slot machines. The Mashantucket Pequot Nation has announced various
expansion plans, including its intention to build another casino in Ledyard
together with hotels, restaurants and a theme park. In addition, the Mohegan
Nation has commenced construction of a casino resort to be located 10 miles
from the Ledyard casino. The Mohegan Nation resort will be built and managed by
Sun International, an entity headed by a South African investor, is scheduled
to be as large as the Ledyard casino and is scheduled to open in October 1996.
There can be no assurance that any continued expansion of gaming operations by
the Mashantucket Pequot Nation or that any commencement of gaming operations by
the Mohegan Nation would not have a materially adverse impact on Trump Plaza's
or the Taj Mahal's operations.
A group in New Jersey calling itself the "Ramapough Indians" has applied to
the U.S. Department of the Interior to be Federally recognized as a Native
American tribe, which recognition would permit it to require the State of New
Jersey to negotiate a gaming compact under IGRA. In 1993, the Bureau of Indian
Affairs denied the Ramapough Indians Federal recognition. The Ramapough
Indians' appeal of this decision has also been denied. Similarly, a group in
Cumberland County, New Jersey calling itself the "Nanticoke Lenni Lenape" tribe
has filed a notice of intent with the Bureau of Indian Affairs seeking formal
Federal recognition as a Native American tribe. Also, it has been reported that
a Sussex County, New Jersey businessman has offered to donate land he owns
there to the Oklahoma-based Lenape/Delaware Indian Nation which originated in
New Jersey and already has Federal recognition but does not have a reservation
in New Jersey. The Lenape/Delaware Indian Nation has signed an agreement with
the town of Wildwood, New Jersey to open a casino; however, the plan requires
federal and state approval in order to proceed. In July 1993, the Oneida Nation
opened a casino featuring 24-hour table gaming and electronic gaming systems,
but without slot machines, near Syracuse, New York, and has announced an
intention to open expanded gaming facilities. Representatives of the St. Regis
Mohawk Nation signed a gaming compact with New York State officials for the
opening of a casino, without slot machines, in the northern portion of the
state close to the Canadian border. The St. Regis Mohawks have also announced
their intent to open a casino at the Monticello Race Track in the Catskill
Mountains region of New York, however, any Indian gaming operation in the
Catskills is subject to the approval of the Governor of New York. The
Narragansett Nation of Rhode Island, which has Federal recognition, is
negotiating a casino gaming compact with Rhode Island. The Aquinnah Wampanoags
Tribe is seeking to open a casino in New Bedford, Massachusetts. Other Native
American nations are seeking Federal recognition, land and negotiation of
gaming compacts in New York, Pennsylvania, Connecticut and other states near
Atlantic City.
The Pokagon Band of Potawatomi Indians of southern Michigan and northern
Indiana has been federally recognized as an Indian tribe. In September 1995,
the Pokagon Band of Potawatomi Indians signed a gaming compact with the
governor of Michigan to build a land-based casino in southwestern Michigan and
also entered into an agreement with Harrah's Entertainment, Inc. to develop and
manage the casino.
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans to
begin operating slot machines at race tracks in the state of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Plaza and the Taj Mahal could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast.
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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.
In addition, legislation has from time to time been introduced in the New
Jersey State Legislature relating to types of statewide legalized gaming, such
as video games with small wagers. To date, no such legislation, which may
require a state constitutional amendment, has been enacted. Legislation has
also been introduced on numerous occasions in recent years to expand riverboat
gaming in Illinois, including by authorizing new sites in the Chicago area with
which the Indiana Riverboat would compete and by otherwise modifying existing
regulations to decrease or eliminate certain restrictions such as gaming
position limitations. To date, no such legislation has been enacted. THCR and
Taj Holding are unable to predict whether any such legislation, in New Jersey,
Illinois or elsewhere, will be enacted or whether, if passed, it would have a
material adverse impact on THCR.
THCR believes that competition in the gaming industry, particularly the
riverboat and dockside gaming industry, is based on the quality and location of
gaming facilities, the effectiveness of marketing efforts, and customer service
and satisfaction. Although management of THCR believes that the location of the
Indiana Riverboat will allow THCR to compete effectively with other casinos in
the geographic area surrounding its casino, THCR expects competition in the
casino gaming industry to be intense as more casinos are opened and new
entrants into the gaming industry become operational. Furthermore, new or
expanded operations by other persons can be expected to increase competition
for existing and future operations and could result in a saturation of certain
gaming markets.
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REGULATORY MATTERS
ANTITRUST REGULATIONS
The Merger 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 Merger 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 , 1996, THCR and Taj Holding filed Notification and Report
forms under the HSR Act with the FTC and the Antitrust Division. On ,
1996, the FTC and the Antitrust Division granted early termination of the
waiting period under the HSR Act with respect to the Merger effective
immediately. At any time before or after consummation of the Merger,
notwithstanding that early termination of the waiting period under the HSR Act
has been granted, the Antitrust Division of the FTC could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of THCR or Taj Holding. Private parties may
also seek to take legal action under the antitrust laws under certain
circumstances.
Based on information available to them, THCR and Taj Holding believe that the
Merger can be effected in compliance with the federal antitrust laws. However,
there can be no assurance that a challenge to the consummation of the Merger on
antitrust grounds will not be made or that, if such a challenge were made, THCR
and Taj Holding would prevail or would not be required to accept certain
adverse conditions in order to consummate the Merger.
GAMING LAWS--GENERAL
The following is only a summary of the applicable provisions of the Casino
Control Act of the State of New Jersey, the Riverboat Gambling Act of the State
of Indiana, and certain other laws and regulations. It does not purport to be a
full description thereof and is qualified in its entirety by reference to the
New Jersey Casino Control Act, the Indiana Riverboat Gambling Act and such
other laws and regulations.
Each of THCR and Taj Holding believes that it and its respective affiliates
are in material compliance with all applicable laws, rules and regulations
discussed below.
NEW JERSEY GAMING REGULATIONS
In general, the Casino Control Act and its implementing regulations contain
detailed provisions concerning, among other things: the granting and renewal of
casino licenses; the suitability of the approved hotel facility, and the amount
of authorized casino space and gaming units permitted therein; the
qualification of natural persons and entities related to the casino licensee;
the licensing of certain employees and vendors of casino licensees; rules of
the games; the selling and redeeming of gaming chips; the granting and duration
of credit and the enforceability of gaming debts; management control
procedures, accounting and cash control methods and reports to gaming agencies;
security standards; the manufacture and distribution of gaming equipment; the
simulcasting of horse races by casino licensees; equal employment opportunities
for employees of casino operators, contractors of casino facilities and others;
and advertising, entertainment and alcoholic beverages.
Casino Control Commission. The ownership and operation of casino/hotel
facilities in Atlantic City are the subject of strict state regulation under
the Casino Control Act. The CCC is empowered to regulate a wide spectrum of
gaming and non-gaming related activities and to approve the form of ownership
and financial structure of not only a casino licensee, but also its entity
qualifiers and intermediary and holding companies and any other related entity
required to be qualified ("CCC Regulations").
Operating Licenses. Taj Associates was issued its initial casino license in
April 1990. On June 22, 1995, the CCC renewed Taj Associates' casino license
through March 31, 1999. Plaza Associates was issued its initial
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casino license on May 14, 1984. On June 22, 1995, the CCC renewed Plaza
Associates' casino license through June 30, 1999. Management believes that a
casino license will ultimately be issued for Trump World's Fair, although there
can be no assurance that the CCC will issue this casino license or what
conditions may be imposed, if any, with respect thereto.
Casino Licensee. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion
with regard to the issuance, renewal, revocation and suspension of such
licenses and approvals, which are non-transferable. The qualification criteria
with respect to the holder of a casino license include its financial stability,
integrity and responsibility; the integrity and adequacy of its financial
resources which bear any relation to the casino project; its good character,
honesty and integrity; and the sufficiency of its business ability and casino
experience to establish the likelihood of a successful, efficient casino
operation. The casino licenses currently held by Taj Associates and Plaza
Associates are renewable for periods of up to four years. The CCC may reopen
licensing hearings at any time, and must reopen a licensing hearing at the
request of the Division of Gaming Enforcement (the "Division").
Each casino license entitles the holder to operate one casino, which must
consist of a "single room." Further, no person may be the holder of a casino
license if the holding of such license will result in undue economic
concentration in Atlantic City casino operations by that person. On May 17,
1995, the CCC adopted a regulation defining the criteria for determining undue
economic concentration which codifies the content of existing CCC precedent
with respect to the subject. In April 1995, Plaza Associates petitioned the CCC
for certain approvals. In its May 18, 1995 declaratory rulings with respect to
such petition, the CCC, among other things, (i) determined that Trump World's
Fair is an approved hotel permitted to contain a maximum of 60,000 square feet
of casino space, that the 40,000 square feet of casino space therein is a
"single room" and that its operation by Plaza Associates would not result in
undue economic concentration in Atlantic City casino operations; (ii) approved
the operation of Trump World's Fair by Plaza Associates under a separate casino
license subject to an application for and the issuance of such license and
approved the proposed easement agreements with respect to the proposed enclosed
Atlantic City Convention Center walkway; (iii) approved in concept the proposed
physical connection and integrated operation by Plaza Associates of the main
tower, Trump Plaza East and Trump World's Fair; and (iv) determined that the
approved hotel comprised of the main tower and Trump Plaza East is permitted to
contain a maximum of 100,000 square feet of casino space. In addition, on
December 13, 1995, Plaza Associates received CCC authorization for 49,340
square feet of casino space at Trump World's Fair. A separate Plaza Associates
casino license with respect to Trump World's Fair would have a renewable term
of one year for each of its first three years and thereafter be renewable for
periods of up to four years. Plaza Associates has made application for such
separate casino license with respect to Trump World's Fair but there can be no
assurance that the CCC will issue this casino license or what conditions may be
imposed, if any, with respect thereto. In addition, Taj Associates will be
required to obtain a prior determination from the CCC that the operation of the
additional casino space created by the Taj Mahal Expansion will not constitute
undue economic concentration of Atlantic City casino operations, and that such
casino space, together with the Taj Mahal's existing casino space, is a "single
room" under the Casino Control Act. See "Risk Factors--Trump Plaza Expansion
and the Taj Mahal Expansion."
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a superior
first-class facility; and to pay, exchange, refinance or extend debts which
will mature or become due and payable during the license term. The CCC is
required to review and approve a transaction such as the Merger Transaction
with regard to the financial stability standards.
In the event a licensee fails to demonstrate financial stability, the CCC may
take such action as it deems necessary to fulfill the purposes of the Casino
Control Act and protect the public interest, including: issuing conditional
licenses, approvals or determinations; establishing an appropriate cure period;
imposing reporting requirements; placing restrictions on the transfer of cash
or the assumption of liabilities; requiring reasonable
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reserves or trust accounts; denying licensure; or appointing a conservator.
See "--New Jersey Gaming Regulations--Conservatorship."
THCR and Taj Holding believe that, upon consummation of the Merger
Transaction, Taj Associates and Plaza Associates will each have, and will each
continue to have, adequate financial resources to meet the financial stability
requirements of the CCC for the foreseeable future. Taj Associates and Plaza
Associates plan to petition the CCC to approve the transactions contemplated
by the Merger Transaction. It is a condition to the consummation of the Merger
that the Merger Transaction is approved by the CCC.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control or elect a majority of the board of directors of the licensee (other
than a banking or other licensed lending institution which makes a loan or
holds a mortgage or other lien acquired in the ordinary course of business)
and any lender, underwriter, agent or employee of the licensee or other person
whom the CCC may consider appropriate, obtains and maintains qualification
approval from the CCC. Qualification approval means that such person must, but
for residence, individually meet the qualification requirements as a casino
key employee. Pursuant to a condition of its casino license, payments by Plaza
Associates to or for the benefit of any related entity or partner, with
certain exceptions, are subject to prior CCC approval; and, if Plaza
Associates' cash position falls below $5.0 million for three consecutive
business days, Plaza Associates must present to the CCC and the Division
evidence as to why it should not obtain a working capital facility in an
appropriate amount.
Control Persons. An entity qualifier or intermediary or holding company,
such as Taj Holding, TM/GP, AC Holdings, Plaza Holding Inc., Plaza Funding,
THCR Holdings, THCR Funding or THCR is required to register with the CCC and
meet the same basic standards for approval as a casino licensee; provided,
however, that the CCC, with the concurrence of the Director of the Division,
may waive compliance by a publicly-traded corporate holding company with the
requirement that an officer, director, lender, underwriter, agent or employee
thereof, or person directly or indirectly holding a beneficial interest or
ownership of the securities thereof individually qualify for approval under
casino key employee standards so long as the CCC and the Director of the
Division are, and remain, satisfied that such officer, director, lender,
underwriter, agent or employee is not significantly involved in the activities
of the casino licensee, or that such security holder does not have the ability
to control the publicly-traded corporate holding company or elect one or more
of its directors. Persons holding five percent or more of the equity
securities of such holding company are presumed to have the ability to control
the company or elect one or more of its directors and will unless this
presumption is rebutted, be required to individually qualify. Equity
securities are defined as any voting stock or any security similar to or
convertible into or carrying a right to acquire any security having a direct
or indirect participation in the profits of the issuer.
Financial Sources. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bear any relation to any
casino project, including holders of publicly-traded securities of an entity
which holds a casino license or is an entity qualifier, subsidiary or holding
company of a casino licensee (a "Regulated Company"), to qualify as financial
sources. In the past, the CCC has waived the qualification requirement for
holders of less than 15% of a series of publicly-traded mortgage bonds so long
as the bonds remained widely distributed and freely traded in the public
market and the holder had no ability to control the casino licensee. Taj
Associates will petition the CCC for a determination that the Mortgage Notes
will be widely distributed and freely traded in the public market. There can
be no assurance, however, that the CCC will grant such a petition, will
determine that the holders of Mortgage Notes have no ability to control Taj
Associates as a casino licensee or will continue the practice of granting such
waivers and, in any event, the CCC may require holders of less than 15% of a
series of debt to qualify as financial sources even if not active in the
management of the issuer or casino licensee.
Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of Federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended;
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any collective investment trust organized by banks under Part Nine of the Rules
of the Comptroller of the Currency; any closed end investment trust; any
chartered or licensed life insurance company or property and casualty insurance
company; any banking and other chartered or licensed lending institution; any
investment advisor registered under the Investment Advisers Act of 1940, as
amended; and such other persons as the CCC may determine for reasons consistent
with the policies of the Casino Control Act.
An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of publicly-
traded securities, in the absence of a prima facie showing by the Division that
there is any cause to believe that the holder may be found unqualified, on the
basis of CCC findings that: (i) its holdings were purchased for investment
purposes only and, upon request by the CCC, it files a certified statement to
the effect that it has no intention of influencing or affecting the affairs of
the issuer, the casino licensee or its holding or intermediary companies;
provided, however, that the Institutional Investor will be permitted to vote on
matters put to the vote of the outstanding security holders; and (ii) if (x)
the securities are debt securities of a casino licensee's holding or
intermediary companies or another subsidiary company of the casino licensee's
holding or intermediary companies which is related in any way to the financing
of the casino licensee and represent either (A) 20% or less of the total
outstanding debt of the company, or (B) 50% or less of any issue of outstanding
debt of the company, (y) the securities are equity securities and represent
less than 10% of the equity securities of a casino licensee's holding or
intermediary companies, or (z) the securities so held exceed such percentages,
upon a showing of good cause. There can be no assurance, however, that the CCC
will make such findings or grant such waiver and, in any event, an
Institutional Investor may be required to produce for the CCC or the Antitrust
Division upon request, any document or information which bears any relation to
such debt or equity securities.
Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of, and no intention of influencing or affecting the
affairs of the issuer, the casino licensee or any affiliate; and (iv) if the
holder subsequently determines to influence or affect the affairs of the
issuer, the casino licensee or any affiliate, it shall provide not less than 30
days' prior notice of such intent and shall file with the CCC an application
for qualification before taking any such action. If an Institutional Investor
changes its investment intent, or if the CCC finds reasonable cause to believe
that it may be found unqualified, the Institutional Investor may take no action
with respect to the security holdings, other than to divest itself of such
holdings, until it has applied for interim casino authorization and has
executed a trust agreement pursuant to such an application. See "--New Jersey
Gaming Regulations--Interim Casino Authorization."
Declaratory Rulings. Taj Associates and Plaza Associates will petition the
CCC for declaratory rulings approving the Merger Transaction and determining,
among other things, that after consummation thereof, Taj Associates and Plaza
Associates will continue to satisfy the CCC's financial stability requirements;
Trump will continue to demonstrate his financial stability; the Regulated
Companies and natural person qualifiers are qualified; the certificates of
incorporation and partnership agreements of the Regulated Companies contain
required provisions with respect to the transfer of securities and
qualification of security holders under the Casino Control Act; the Mortgage
Notes are publicly traded securities and that CCC approval of the issuance or
subsequent transfer of the securities is not required; that the individual
holders of the Mortgage Notes need not be qualified as financial sources, and
their qualification may be waived by the CCC and that qualification of the
holders of THCR Common Stock be waived by the CCC.
Ownership and Transfer of Securities. The Casino Control Act imposes certain
restrictions upon the issuance, ownership and transfer of securities of a
Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures,
security agreements, notes and warrants. Currently, each of TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, certain other entities that own the
Taj Holding Class A Common Stock or the Taj Holding Class B Common Stock, Plaza
Funding, AC
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Holdings, Plaza Holding Inc., Plaza Associates, THCR Holdings, THCR Funding and
THCR are deemed to be a Regulated Company, and instruments evidencing a
beneficial ownership or creditor interest therein, including a partnership
interest, are deemed to be the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not qualified under the
Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the holder
(i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities, or (ii) to receive any dividends or interest upon
such securities or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act and
CCC Regulations require that the corporate charter or partnership agreement of
a Regulated Company establish a right in the CCC of prior approval with regard
to transfers of securities, shares and other interests and an absolute right in
the Regulated Company to repurchase at the market price or the purchase price,
whichever is the lesser, any such security, share or other interest in the
event that the CCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC,
such holder shall dispose of such securities.
Interim Casino Authorization. Interim casino authorization is a process which
permits a person who enters into a contract to obtain property relating to a
casino operation or who obtains publicly-traded securities relating to a casino
licensee to close on the contract or own the securities until plenary licensure
or qualification. During the period of interim casino authorization, the
property relating to the casino operation or the securities is held in trust.
Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already licensed
or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to publicly
traded securities, the closing or settlement date in the contract at issue may
not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed trust
agreement in a form approved by the CCC. If, after the report of the Division
and a hearing by the CCC, the CCC grants interim authorization, the property
will be subject to a trust. If the CCC denies interim authorization, the
contract may not close or settle until the CCC makes a determination on the
qualifications of the applicant. If the CCC denies qualification, the contract
will be terminated for all purposes and there will be no liability on the part
of the transferor.
If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC or,
in the alternative, within 120 days after the CCC determines that qualification
is required, the person whose qualification is required must divest such
securities as the CCC may require in order to remove the need to qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
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When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to sell,
assign, convey or otherwise dispose of the property subject to the trust to
such persons who are licensed or qualified or shall themselves obtain interim
casino authorization.
Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the
casino hotel or receive any return on its investment or debt security holdings;
and (ii) after disposition, if any, of the securities by the trustee, proceeds
distributed to the unqualified holder may not exceed the lower of their actual
cost to the unqualified holder or their value calculated as if the investment
had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit a licensee, such as Taj
Associates and Plaza Associates, to increase its casino space if the licensee
agrees to add a prescribed number of qualifying sleeping units within two years
after the commencement of gaming operations in the additional casino space.
However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed. See "Risk Factors--Trump Plaza Expansion and The Taj Mahal
Expansion."
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines that such persons do not have the ability to exercise
significant control over the building or the operation of the casino therein.
Agreements to lease an approved hotel building or the land under the building
must be for a durational term exceeding 30 years, must concern 100% of the
entire approved hotel building or the land upon which it is located and must
include a buy-out provision conferring upon the lessee the absolute right to
purchase the lessor's entire interest for a fixed sum in the event that the
lessor is found by the CCC to be unsuitable.
In its May 18, 1995 declaratory rulings with respect to the proposed enclosed
Atlantic City Convention Center walkway to Trump World's Fair, the CCC, among
other things, approved the proposed easement agreements with respect to such
walkway and determined, with the concurrence of the Attorney General, that no
CCC license is required to grant the easement and that the easements satisfy
the durational term requirement and need not concern 100% of the entire
approved hotel building or include such a buy-out provision. See "Business of
THCR--Properties--Trump World's Fair."
Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall: (i) provide for the
complete management of the casino; (ii) provide for the unrestricted power to
direct the casino operations; and (iii) provide for a term long enough to
ensure the reasonable continuity, stability and independence and management of
the casino.
License Fees. The CCC is authorized to establish annual fees for the renewal
of casino licenses. The renewal fee is based upon the cost of maintaining
control and regulatory activities prescribed by the Casino Control Act, and may
not be less than $200,000 for a four-year casino license. Additionally, casino
licensees are subject to potential assessments to fund any annual operating
deficits incurred by the CCC or the Division. There is also an annual license
fee of $500 for each slot machine maintained for use or in use in any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual tax
of 8% on its gross casino revenues. For the years ended December 31, 1992, 1993
and 1994 and for the nine months ended September 30,
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1995, Plaza Associates' gross revenue tax was approximately $21.0 million,
$21.3 million, $21.0 million and $18.1 million, respectively, and its license,
investigations and other fees and assessments totaled approximately $4.7
million, $4.0 million, $4.2 million and $3.2 million, respectively. For the
years ended December 31, 1992, 1993 and 1994 and for the nine months ended
September 30, 1995, Taj Associates' gross revenue tax was approximately $33.0
million, $35.4 million, $36.7 million and $30.3 million, respectively, and its
license, investigations and other fees and assessments totaled approximately
$5.3 million, $5.2 million, $5.2 million and $3.8 million, respectively.
Investment Alternative Tax Obligations. An investment alternative tax imposed
on the gross casino revenues of each licensee in the amount of 2.5% is due and
payable on the last day of April following the end of the calendar year. A
licensee is obligated to pay the investment alternative tax for a period of 30
years. Estimated payments of the investment alternative tax obligation must be
made quarterly in an amount equal to 1.25% of estimated gross revenues for the
preceding three-month period. Investment tax credits may be obtained by making
qualified investments or by the purchase of bonds issued by the CRDA. CRDA
bonds may have terms as long as fifty years and bear interest at below market
rates, resulting in a value lower than the face value of such CRDA bonds.
For the first ten years of its tax obligation, the licensee is entitled to an
investment tax credit against the investment alternative tax in an amount equal
to twice the purchase price of bonds issued to the licensee by the CRDA.
Thereafter, the licensee is (i) entitled to an investment tax credit in an
amount equal to twice the purchase price of such bonds or twice the amount of
its investments authorized in lieu of such bond investments or made in projects
designated as eligible by the CRDA and (ii) has the option of entering into a
contract with the CRDA to have its tax credit comprised of direct investments
in approved eligible projects which may not comprise more than 50% of its
eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is required to set aside
$100 million for investment in hotel development projects in Atlantic City
undertaken by a licensee which result in the construction or rehabilitation of
at least 200 hotel rooms by December 31, 1996. These monies will be held to
fund up to 35% of the cost to casino licensees of expanding their hotel
facilities to provide additional hotel rooms, a portion of which will be
required to be available upon the opening of the new Atlantic City convention
center and dedicated to convention events. The CRDA has determined at this time
that eligible casino licensees will receive up to 27% of the cost of additional
hotel rooms out of these monies set aside and may, in the future, increase the
percentage to no greater than 35%.
Minimum Casino Parking Charges. As of July 1, 1993, each casino licensee was
required to pay the New Jersey State Treasurer a $1.50 charge for every use of
a parking space for the purpose of parking, garaging or storing motor vehicles
in a parking facility owned or leased by a casino licensee or by any person on
behalf of a casino licensee. This amount is paid into a special fund
established and held by the New Jersey State Treasurer for the exclusive use of
the CRDA. Plaza Associates and Taj Associates currently charge their respective
parking patrons $2.00 in order to make their required payments to the New
Jersey State Treasurer and cover related expenses. Amounts in the special fund
will be expended by the CRDA for eligible projects in the corridor region of
Atlantic City related to improving the highways, roads, infrastructure, traffic
regulation and public safety of Atlantic City or otherwise necessary or useful
to the economic development and redevelopment of Atlantic City in this regard.
Atlantic City Fund. On each October 31 during the years 1996 through 2003,
each casino licensee shall pay into an account established in the CRDA and
known as the Atlantic City Fund, its proportional share of an amount related to
the amount by which annual operating expenses of the CCC and the Antitrust
Division are less than a certain fixed sum. Additionally, a portion of the
investment alternative tax obligation of each casino license for the years 1994
through 1998 allocated for projects in Northern New Jersey shall be paid into
and credited to the Atlantic City Fund. Amounts in the Atlantic City Fund will
be expended by the CRDA for economic development projects of a revenue
producing nature that foster the redevelopment of Atlantic City other than the
construction and renovation of casino hotels.
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Conservatorship. If, at any time, it is determined that TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, Plaza Associates, Plaza Funding,
Plaza Holding Inc., AC Holdings, THCR, THCR Holdings, THCR Funding or any
other entity qualifier has violated the Casino Control Act or that any of such
entities cannot meet the qualification requirements of the Casino Control Act,
such entity could be subject to fines or the suspension or revocation of its
license or qualification. If Taj Associates' or Plaza Associates' license is
suspended for a period in excess of 120 days or is revoked, or if the CCC
fails or refuses to renew such casino license, the CCC could appoint a
conservator to operate and dispose of Taj Associates' or Plaza Associates'
casino hotel facilities. A conservator would be vested with title to all
property of Taj Associates or Plaza Associates relating to the casino and the
approved hotel subject to valid liens and/or encumbrances. The conservator
would be required to act under the direct supervision of the CCC and would be
charged with the duty of conserving, preserving and, if permitted, continuing
the operation of the casino hotel. During the period of the conservatorship, a
former or suspended casino licensee is entitled to a fair rate of return out
of net earnings, if any, on the property retained by the conservator. The CCC
may also discontinue any conservatorship action and direct the conservator to
take such steps as are necessary to effect an orderly transfer of the property
of a former or suspended casino licensee. It would be the obligation of the
conservator to continue the debt service payments on the Taj Associates Note,
but no assurance can be given that the conservator would have sufficient funds
available to do so.
Qualification of Employees. Certain employees of Taj Associates and Plaza
Associates must be licensed by or registered with the CCC, depending on the
nature of the position held. Casino employees are subject to more stringent
requirements than non-casino employees and must meet applicable standards
pertaining to financial stability, integrity and responsibility, good
character, honesty and integrity, business ability and casino experience and
New Jersey residency. These requirements have resulted in significant
competition among Atlantic City casino operators for the services of qualified
employees.
Gaming Credit. Taj Associates' and Plaza Associates' casino games are
conducted on a credit as well as cash basis. Gaming debts arising in Atlantic
City in accordance with applicable regulations are enforceable in the courts
of the State of New Jersey. The extension of gaming credit is subject to
regulations that detail procedures which casinos must follow when granting
gaming credit and recording counter checks which have been exchanged, redeemed
or consolidated.
Control Procedures. Gaming at the Taj Mahal and Trump Plaza is conducted by
trained and supervised personnel. Taj Associates and Plaza Associates employ
extensive security and internal controls. Security checks are made to
determine, among other matters, that job applicants for key positions have had
no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video camera to monitor the
casino floor and money counting areas. The count of moneys from gaming also is
observed daily by representatives of the CCC.
INDIANA GAMING REGULATIONS
Indiana Gaming Commission. The ownership and operation of riverboat gaming
operations in Indiana are subject to strict state regulation under the
Riverboat Gambling Act and the administrative rules promulgated thereunder.
The IGC is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Riverboat Gambling Act and has
jurisdiction and supervision over all riverboat gaming operations in Indiana,
as well as all persons on riverboats where gaming operations are conducted.
The IGC is empowered to regulate a wide variety of gaming and non-gaming
related activities, including the licensing of suppliers to, and employees at,
riverboat gaming operations and to approve the form of ownership and financial
structure of not only riverboat owner and supplier licensees, but also their
entity qualifiers, and intermediary and holding companies. Indiana is a new
gaming jurisdiction and the emerging regulatory framework is not yet complete.
The IGC has adopted certain final rules and has published others in proposed
or draft form which are proceeding through the review and final adoption
process. The IGC also has indicated its intent to publish additional proposed
rules in the future. The IGC has broad rulemaking power, and it is impossible
to predict what effect, if any, the amendment of existing rules or the
finalization of currently new rules might have on the
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operations of the Indiana Riverboat or THCR. The following reflects both
adopted and proposed regulations. Further, the Indiana General Assembly has the
power to promulgate new laws and implement amendments to the Riverboat Gambling
Act, which could materially affect the operation or economic viability of the
gaming industry in Indiana.
Certificate of Suitability. On December 9, 1994, the IGC ordered that a
"Certificate of Suitability" for a riverboat owner's license for a riverboat to
be docked in Buffington Harbor, Indiana be issued to Trump Indiana. The
certificate of suitability constitutes approval of the application of Trump
Indiana for a riverboat owner's license. The IGC extended Trump Indiana's
certificate of suitability until June 28, 1996. Pursuant to the terms of the
certificate of suitability, during such period, Trump Indiana must comply with
certain statutory and other requirements imposed by the IGC. In addition, as a
condition to the certificate of suitability, Trump Indiana has committed to
invest $153 million in the Indiana Riverboat and certain related projects and
to pay certain incentive fees to the City of Gary, Indiana. Failure to comply
with the foregoing conditions and/or failure to commence riverboat excursions
as required by the IGC may result in revocation of the certificate of
suitability. There can be no assurance that THCR and/or Trump Indiana will be
able to comply with the terms of the certificate of suitability, that it will
be further extended if operations do not commence as required by the IGC or
that a riverboat owner's license for the Indiana Riverboat will ultimately be
granted or subsequently renewed.
Riverboat Owner's License. No one may operate a riverboat gaming operation in
Indiana without holding a riverboat owner's license. The certificate of
suitability received by Trump Indiana on December 9, 1994 and most recently
extended through June 28, 1996, means that Trump Indiana received a written
document issued by the Executive Director of the IGC that indicates that Trump
Indiana has been chosen for licensure if Trump Indiana meets certain
requirements within the interim compliance period as established by the IGC.
The interim compliance period is the period of time between the issuance of the
certificate of suitability and the issuance of a permanent riverboat owner's
license or the notice of denial thereof.
Interim Compliance Requirements. Interim compliance requires, among other
things: obtaining a permit to develop the riverboat gaming operation from the
United States Army Corps of Engineers, which permit was obtained on October 10,
1995; obtaining a valid certificate of inspection from the United States Coast
Guard for the vessel on which the riverboat gaming operation will be conducted;
applying for and receiving the appropriate permits or certificates from the
Indiana Alcoholic Beverage Commission, Indiana Fire Marshall, and other
appropriate local, state and federal agencies which issue permits including,
but not limited to, health permits, building permits and zoning permits;
closing the financing necessary to complete the development of the gaming
operation; posting a bond in compliance with the applicable law; obtaining the
insurance deemed necessary by the IGC; receiving licensure for electronic
gaming devices and other gaming equipment under applicable law; submitting an
emergency response plan in compliance with applicable laws; and taking any
other action that the IGC deems necessary for compliance under Indiana gaming
laws. Further, the IGC may place restrictions, conditions or requirements on
the permanent riverboat owner's license. An owner's initial license expires
five years after the effective date of the license, and unless the owner's
license is terminated, expires or is revoked, the owner's license may be
renewed annually by the IGC upon satisfaction of certain conditions contained
in the Riverboat Gambling Act.
Transfer of Riverboat Owner's License. Pursuant to IGC proposed rules, an
ownership interest in a riverboat owner's license shall not be transferred
unless the transfer complies with applicable law, and no riverboat gaming
operation may operate unless the appropriate licenses and approvals are
obtained from the IGC. Under current Indiana law, a maximum of 11 owner's
licenses may be in effect at any time. No person or entity may simultaneously
own an interest in more than two riverboat owner's licenses. A person or entity
may simultaneously own up to 100% in one riverboat owner's license and no more
than 10% in a second riverboat owner's license.
A riverboat owner's licensee must possess a level of skill, experience, or
knowledge necessary to conduct a riverboat gaming operation that will have a
positive economic impact on the host site, as well as the entire State
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of Indiana. Additional representative, but not exclusive, qualification
criteria with respect to the holder of a riverboat owner's license include
character, reputation, financial integrity, the facilities or proposed
facilities for the conduct of riverboat gaming including related non-gaming
projects such as hotel development, and the good faith affirmative action plan
to recruit, train and upgrade minorities and women in all employment
classifications. The IGC shall require persons holding owner's licenses to
adopt policies concerning the preferential hiring of residents of the city in
which the riverboat docks for riverboat jobs. The IGC has broad discretion in
regard to the issuance, renewal, revocation, and suspension of licenses and
approvals, and the IGC is empowered to regulate a wide variety of gaming and
non-gaming related activities, including the licensing of suppliers to, and
employees at, riverboat gaming operations, and to approve the form of ownership
and financial structure of not only riverboat owner and supplier licensees, but
also their subsidiaries and affiliates.
A riverboat owner's licensee or any other person may not lease, hypothecate,
borrow money against or loan money against a riverboat owner's license. An
ownership interest in a riverboat owner's licensee may only be transferred in
accordance with the regulations promulgated under the Riverboat Gambling Act.
An applicant for the approval of a transfer of a riverboat owner's license must
comply with application procedures prescribed by the IGC, present evidence that
it meets or possesses the standards, qualifications and other criteria under
Indiana gaming laws that it meets all requirements for a riverboat owner's
license, and pay an investigative fee in the amount of $50,000 with the
application. If the IGC denies the application to transfer an ownership
interest, it shall issue notice of denial to the applicant, and, unless,
specifically stated to the contrary, a notice of denial of an application for
transfer shall not constitute a finding that the applicant is not suitable for
licensure. A person who is served with notice of denial under this rule may
request an administrative hearing.
Control Persons and Operational Matters. The IGC has implemented strict
regulations with respect to the suitability of riverboat license owners, their
key personnel and their employees similar to the CCC regulations and precedent.
The IGC utilizes a "class-based" licensing structure that subjects all
individuals associated with Trump Indiana to varying degrees of background
investigations. Likewise, comprehensive security measures, including video
surveillance by both random and fixed cameras, are required in the casino and
money counting areas. Additionally, the IGC has delineated procedures for the
reconciliation of the daily revenues and tax remittance to the state as further
detailed below.
Tax. Under Indiana gaming law, a tax is imposed on admissions to gaming
excursions at a rate of three dollars for each person admitted to the gaming
excursion. This admission tax is imposed upon the license owner conducting the
gaming excursion on a per-person basis without regard to the actual fee paid by
the person using the ticket, with the exception that no tax shall be paid by
admittees who are actual and necessary officials, employees of the licensee or
other persons actually working on the riverboat. The IGC may suspend or revoke
the license of a riverboat owner's licensee that does not submit the payment or
the tax return form regarding admission tax within the required time
established by the IGC.
A tax is imposed on the adjusted gross receipts received from gaming
authorized under the Riverboat Gambling Act at a rate of 20% of the amount of
the adjusted gross receipts. Adjusted gross receipts is defined as the total of
all cash and property (including checks received by a licensee), whether
collected or not, received by a licensee from gaming operations less the total
of all cash paid out as winnings to patrons including a provision for
uncollectible gaming receivables as is further set forth in the Riverboat
Gambling Act. The IGC may, from time to time, impose other fees and assessments
on riverboat owner licensees. In addition, all use, excise and retail taxes
apply to sales aboard riverboats.
Excursions. Generally, gaming may not be conducted while a riverboat is
docked, other than during the 30-minute periods for passenger embarkation and
disembarkation. The Riverboat Gambling Act, as originally enacted, provided an
exception if weather conditions or water conditions present a danger to the
riverboat and authorized the IGC to adopt rules to provide other exceptions. In
October 1994, the U.S. Attorney General's Office in Indiana notified the IGC
that a Federal law commonly known as the Johnson Act prohibits gaming
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vessels from cruising anywhere on the Great Lakes, including portions of Lake
Michigan falling within Indiana's borders and jurisdiction. Since that time,
the IGC has requested further consideration on this matter by the Department of
Justice, although no response has been provided to date. On May 9, 1995, the
House of Representatives approved H.R. 1361, which includes a provision
exempting vessels beginning a voyage in Indiana, and remaining within the
territorial jurisdiction of Indiana, from certain provisions of the Johnson
Act. There can be no assurance that H.R. 1361 will be enacted into law.
Further, it is uncertain whether any such legislation, as enacted, will exempt
vessels operating on Lake Michigan from all aspects of the Johnson Act or will
address all concerns raised by the Department of Justice. In addition, the
Indiana General Assembly has passed Senate Enrolled Act No. 572 and House
Enrolled Act No. 1722, each of which have become law. Both Senate Enrolled Act
No. 572 and House Enrolled Act No. 1722 include amendments which prevent the
Commission from adopting rules permitting gaming operations to take place while
a riverboat is docked. However, Senate Enrolled Act No. 572 includes an express
provision in the statute allowing gaming operations to take place while a
riverboat is docked if a determination is made in writing that a condition
exists that would cause a violation of Federal law if a riverboat were to
cruise. This same provision was not included in House Enrolled Act No. 1722. On
May 15, 1995, the IGC adopted a resolution acknowledging the nonconforming
provisions of Senate Enrolled Act No. 572 and House Enrolled Act No. 1722, and
adopted a resolution to the effect that the IGC would give effect to the
provisions of Senate Enrolled Act No. 572. Although the IGC has determined to
give effect to favorable provisions of Senate Enrolled Act No. 572, there can
be no assurance that commencement of gaming operations by Trump Indiana while
the riverboat is docked would not be subject to challenge as a violation of
Indiana law, or that commencement of gaming operations by Trump Indiana while
cruising on Lake Michigan would not be subject to challenge as a violation of
the Johnson Act.
Restricted Contracts. Under proposed IGC rules, no riverboat licensee or
riverboat license applicant may enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods or services rendered or received as determined at the time the contract
is executed. Any contract entered into by a riverboat licensee or riverboat
license applicant that exceeds the total dollar amount of $50,000 shall be a
written contract. A riverboat license applicant means an applicant for a
riverboat owner's license that has been issued a certificate of suitability.
Pursuant to IGC proposed rules, riverboat licensees and riverboat license
applicants must submit an internal control procedure regarding purchasing
transactions which must contain provisions regarding ethical standards,
compliance with state and federal laws, and prohibitions on the acceptance of
gifts and gratuities by purchasing and contracting personnel from suppliers of
goods or services. The proposed rules also require any riverboat licensee or
applicant to submit any contract, transaction, or series of transactions
greater than $500,000 in any 12-month period to the IGC within 10 days of the
execution, and to submit a summary of all contracts or transactions greater
than $50,000 in any 12-month period on a quarterly basis. The proposed rules
provide that contracts submitted to the IGC are not submitted for approval by
IGC, but grant the IGC authority to cancel or terminate any contract not in
compliance with Indiana law and the IGC rules.
Finance. Pursuant to IGC proposed rules, any person (other than an
institutional investor) acquiring 5% or more of any class of voting securities
of a publicly traded corporation that owns a riverboat owner's license or 5% or
more of the beneficial interest in a riverboat licensee, directly or
indirectly, through any class of the voting securities of any holding or
intermediary company of a riverboat licensee shall apply to the IGC for finding
of suitability within 45 days after acquiring the securities. Each
institutional investor who, and individually or in association with others,
acquires, directly or indirectly, 5% or more of any class of voting securities
of a publicly-traded corporation that owns a riverboat owner's license or 5% or
more of the beneficial interest in a riverboat licensee through any class of
the voting securities of any holding or intermediary company of a riverboat
licensee shall notify the IGC within 10 days after the institutional investor
acquires the securities and shall provide additional information and may be
subject to a finding of suitability as required by the IGC.
Under Indiana gaming laws, an institutional investor who would otherwise be
subject to a suitability finding shall, within 45 days after acquiring the
interests, submit the following information: a description of the
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institutional investor's business and a statement as to why the institutional
investor satisfies the definitional requirements of an institutional investor
under Indiana gaming rule requirements; a certification made under oath that
the voting securities were acquired and are held for investment purposes only
and were acquired and are held in the ordinary course of business as an
institutional investor; the name, address, telephone number, social security
number or federal tax identification number of each person who has the power to
direct or control the institutional investor's exercise of its voting rights as
a holder of voting securities of the riverboat licensee; the name of each
person who beneficially owns 5% or more of the institutional investor's voting
securities or equivalent; a list of the institutional investor's affiliates; a
list of all securities of the riverboat licensee that are or were beneficially
owned by the institutional investor or its affiliates within the preceding one
year; a disclosure of all criminal and regulatory sanctions imposed during the
preceding ten years; a copy of any filing made under 16 U.S.C. 18(a); and any
other additional information the IGC may request to insure compliance with
Indiana gaming laws.
Each institutional investor who, individually or in association with others,
acquires, directly or indirectly, the beneficial ownership of 15% or more of
any class of voting securities of a publicly-traded corporation that owns a
riverboat owner's license or 15% or more of the beneficial interest in a
riverboat licensee through any class of voting securities of any holding
company or intermediary company of a riverboat licensee shall apply to the IGC
for a finding of suitability within 45 days after acquiring the securities.
The THCR Certificate of Incorporation provides that THCR may redeem any
shares of the THCR's capital stock held by any person or entity whose holding
of shares may cause the loss or nonreinstatement of a governmental license held
by THCR. As defined in the THCR Certificate of Incorporation, such redemption
shall be at the lesser of the market price of the stock or the price at which
the stock was purchased.
Under Indiana gaming laws, an institutional investor means any of the
following: a retirement fund administered by a public agency for the exclusive
benefit of federal, state, or local public employees; an investment company
registered under the Investment Company Act of 1940; a collective investment
trust organized by banks under Part 9 of the Rules of the Comptroller of the
Currency; a closed end investment trust; a chartered or licensed life insurance
company or property and casualty insurance company; a banking, chartered or
licensed lending institution; an investment adviser registered under the
Investment Advisers Act of 1940; and other entity the IGC determines
constitutes an institutional investor. The IGC may in the future promulgate
regulations with respect to the qualification of other financial backers,
mortgagees, bond holders, holders of indentures, or other financial
contributors.
Minority and Women Business Participation. Indiana gaming laws provide that
the opportunity for full minority and women's business enterprise participation
in the riverboat industry in Indiana is essential to social and economic parity
for minority and women business persons. The IGC has the power to review
compliance with the goals of participation by minority and women business
persons and impose appropriate conditions on licensees to insure that goals for
such business enterprises are met.
Under Indiana gaming laws, a riverboat licensee or a riverboat license
applicant shall designate certain minimum percentages of the value of its
contracts for goods and services to be expended with minority business
enterprises and women's business enterprises such that 10% of the dollar value
of the riverboat licensee's or the riverboat license applicant's contracts be
expended with minority business enterprises and 5% of the dollar value of the
riverboat licensee's or the riverboat license applicant's contracts be expended
with women's business enterprises. Expenditures with minority and women
business enterprises are not mutually exclusive.
IGC Action. All licensees subject to the jurisdiction of the IGC have a
continuing duty to maintain suitability for licensure. The IGC may initiate an
investigation or disciplinary action or both against a licensee about whom the
commission has reason to believe is not maintaining suitability for licensure,
is not complying with licensure conditions, and/or is not complying with
Indiana gaming laws or regulations. The IGC may suspend, revoke, restrict, or
place conditions on the license of a licensee; require the removal of a
licensee or an employee of a licensee; impose a civil penalty or take any other
action deemed necessary by the IGC to insure compliance with Indiana gaming
laws.
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CLEAN WATER REGULATIONS
Operation of the Indiana Riverboat must be in conformance with state and
federal clean water requirements, including the Federal Water Pollution Control
Act and the Oil Pollution Act of 1990 ("OPA"). OPA establishes an extensive
regulatory and liability regime for the protection and cleanup of the
environment from oil spills and affects all owners and operators whose vessels
operate in United States waters, which include the Great Lakes. OPA requires
vessel owners and operators to establish and maintain with the U.S. Coast Guard
evidence of financial responsibility sufficient to meet their potential
liabilities under OPA. U.S. Coast Guard regulations also implement the
financial responsibility requirements of Comprehensive Environmental Response,
Compensation and Liability Act by requiring evidence of financial
responsibility in an amount of $300 per gross ton, in addition to any required
under OPA. THCR and Trump Indiana are in the process of obtaining insurance
coverage and a Certificate of Financial Responsibility as required by OPA. THCR
and Trump Indiana expect that the insurance coverage obtained will be adequate
to protect against liability that may arise under OPA. However, in the case of
a catastrophic spill or a spill in a sensitive environment, there can be no
assurance that such occurrence would not result in liability in excess of the
insurance coverage.
OTHER LAWS AND REGULATIONS
The U.S. Department of the Treasury has adopted regulations pursuant to which
a casino is required to file a report of each deposit, withdrawal, exchange of
currency, gambling tokens or chips, or other payments or transfers by, through
or to such casino which involves a transaction in currency of more than $10,000
per patron, per gaming day. Such reports are required to be made on forms
prescribed by the Secretary of the Treasury and are filed with the Commissioner
of the Internal Revenue Service (the "Service"). In addition, THCR and Taj
Associates are each required to maintain detailed records (including the names,
addresses, social security numbers and other information with respect to its
gaming customers) dealing with, among other items, the deposit and withdrawal
of funds and the maintenance of a line of credit.
In the past, the Service had taken the position that gaming winnings from
table games by nonresident aliens were subject to a 30% withholding tax. The
Service, however, subsequently adopted a practice of not collecting such tax.
Recently enacted legislation exempts from withholding tax table game winnings
by nonresident aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively feasible.
As the result of an audit conducted by the U.S. Department of Treasury,
Office of Financial Enforcement, Plaza Associates was alleged to have failed to
timely file the "Currency Transaction Report by Casino" in connection with 65
individual currency transactions in excess of $10,000 during the period from
October 31, 1986 to December 10, 1988. Plaza Associates paid a fine of $292,500
in connection with these violations. Plaza Associates has revised its internal
control procedures to ensure continued compliance with these regulations. From
1992 through 1995, the Service conducted an audit of "Currency Transaction
Reports by Casino" filed by Taj Associates for the period from April 2, 1990
through December 31, 1991. The U.S. Department of Treasury has received a
report detailing the audit as well as the response of Taj Associates. Taj
Associates is awaiting comments from the U.S. Department of Treasury as to any
potential violations.
The Indiana Riverboat site is located near, or adjacent to and may include
protected wetlands which may subject THCR to obligations or liabilities in
connection with wetlands mitigation or protection. See "Risk Factors--The
Indiana Riverboat."
On April 5, 1994, OSHA proposed a regulation that would require, inter alia,
that employers who permit smoking in workplaces establish designated smoking
areas, permit smoking only in such areas, and assure that designated smoking
areas be enclosed, exhausted directly to the outside, and maintained under
negative pressure sufficient to contain tobacco smoke within the designated
area. Plaza Associates has estimated construction costs to build enclosed,
exhausted, negative-pressure smoking rooms in Trump Plaza to be $1.5 million
for its casino and $2.5 million for its restaurants. Plaza Associates has also
estimated construction costs to provide negative-
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pressure exhaust systems for Trump Plaza hotel rooms to be $1,500 per room;
however, management believes that it is highly unlikely that the regulation, if
promulgated, would require hotel rooms to be equipped with exhaust systems if
smoking is prohibited in the rooms during housekeeping and maintenance
activities. If the regulation is promulgated and is applicable to Trump Plaza
hotel rooms, the number of rooms that would be affected is not known at this
time. Taj Associates is unable to estimate the cost, if any, of compliance with
these proposed regulations and is unable to determine if the cost, if any, of
such compliance would have a material adverse effect on Taj Associates.
THCR and Taj Associates are subject to other federal, state and local
regulations and, on a periodic basis, must obtain various licenses and permits,
including those required to sell alcoholic beverages in the State of New Jersey
as well as in other jurisdictions. Management of THCR and Taj Holding believe
all required licenses and permits necessary to conduct business of THCR and Taj
Associates have been obtained for operations in the State of New Jersey.
THCR expects to be subject to similar rigorous regulatory standards in each
other jurisdiction in which it seeks to conduct gaming operations. There can be
no assurance that regulations adopted, permits required or taxes imposed, by
other jurisdictions will permit profitable operations by THCR in those
jurisdictions.
In addition, the federal Merchant Marine Act, 1936 and the federal Shipping
Act, 1916 and the applicable regulations thereunder contain provisions designed
to prevent persons who are not citizens of the United States, as defined
therein, from beneficially owning more than 25% of the capital stock of any
entity operating a vessel on the Great Lakes.
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MANAGEMENT OF THCR
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of THCR's
directors and executive officers:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald J. Trump......... Chairman of the Board
Nicholas L. Ribis....... President, Chief Executive Officer, Chief Financial Officer and Director
Robert M. Pickus........ Executive Vice President and Secretary
John P. Burke........... Senior Vice President of Corporate Finance and Corporate Treasurer
Wallace B. Askins....... Director
Don M. Thomas........... Director
Peter M. Ryan........... Director
</TABLE>
Donald J. Trump--Mr. Trump, 49 years old, has been Chairman of the Board of
THCR and THCR Funding since their formation in 1995. Mr. Trump is also Chairman
of the Board of Directors, President and Treasurer of Plaza Funding and the
managing general partner of Plaza Associates. Trump was a 50% shareholder,
Chairman of the Board of Directors, President and Treasurer of Trump Plaza GP
and the managing general partner of Plaza Associates prior to its merger into
Plaza Funding in June 1993. Trump was Chairman of the Executive Committee and
President of Plaza Associates from May 1986 to May 1992 and was a general
partner of Plaza Associates until June 1993. Trump has been a director and
President of Plaza Holding Inc. since February 1993 and was a partner in AC
Holdings from February 1993 until June 1995. Trump has been Chairman of the
Board of Directors of AC Funding since its formation in January 1996. Trump has
been Chairman of the Board and a Class C Director of Taj Holding and TM/GP
since October 1991; President and Treasurer of Taj Holding since March 4, 1991;
Chairman of the Board of Directors, President and Treasurer of Taj Funding and
TTMI since June 1988; sole director, President and Treasurer of TTMC since
March 1991; Chairman of the Executive Committee of Taj Associates from June
1988 to October 1991; and President and Director of Realty Corp. since May
1986. Trump has been Chairman of the Board of Partner Representatives of TCA,
the partnership that owns Trump's Castle, since May 1992; and was Chairman of
the Executive Committee of TCA from June 1985 to May 1992. In addition, Trump
is the managing general partner of TCA. Trump is also the President of The
Trump Organization, which has been in the business, through its affiliates and
subsidiaries, of acquiring, developing and managing real estate properties for
more than the past five years. Trump was a member of the Board of Directors of
Alexander's Inc. from 1987 to March 1992. Mr. Trump's business address is c/o
The Trump Organization, 725 Fifth Avenue, New York, NY, 10022.
Nicholas L. Ribis--Mr. Ribis, 51 years old, has been President, Chief
Executive Officer, Chief Financial Officer, and a director of THCR, THCR
Holdings and THCR Funding since their formation in 1995. Mr. Ribis has been the
Chief Executive Officer of Plaza Associates since February 1991, was President
from April 1994 to February 1995, and was a member of the Executive Committee
of Plaza Associates from April 1991 to May 29, 1992 and was a director and Vice
President of Trump Plaza GP from May 1992 until its merger into Plaza Funding
in June 1993. Mr. Ribis has been Vice President of Plaza Funding since February
1995 and Vice President of Plaza Holding Inc. since February 1995. Mr. Ribis
has served as a director of Plaza Holding Inc. since June 1993 and of Plaza
Funding since July 1993. Mr. Ribis has been Chief Executive Officer, President
and director of AC Funding since its formation in January 1996. Mr. Ribis has
been a Class C Director and Vice President of TM/GP and Taj Holding since
October 1991; Chief Executive Officer of Taj Associates since February 1991;
Vice President of Taj Funding since September 1991; Vice President of TTMI
since February 1991 and Secretary of TTMI since September 1991; Director of
Realty Corp. since October 1991; and a member of the Executive Committee of Taj
Associates from April 1991 to October 1991. He has also been Chief Executive
Officer of TCA since March 1991; member of the Executive Committee of TCA from
April 1991 to May 1992; member of the Board of Partner Representatives of TCA
since May 1992; and has served as the Vice President and Assistant Secretary of
Trump's Castle Hotel & Casino, Inc. an entity beneficially owned by Trump,
since December 1993 and January 1991, respectively. Mr. Ribis has served as
Vice President of TC/GP, Inc. since December 1993 and had served as Secretary
of TC/GP, Inc. from November 1991 to may 1992. Mr. Ribis
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has been Vice President of Trump Corp. since September 1991. From January 1993
to January 1995 Mr. Ribis served as the Chairman of the Casino Association of
New Jersey and has been a member of the Board of Trustees of the CRDA since
October 1993. From January 1980 to January 1991, Mr. Ribis was Senior Partner
in, and from February 1991 to December 1995 was Counsel to, the law firm of
Ribis, Graham & Curtin, which serves as New Jersey legal counsel to all of the
above-named companies and certain of their affiliated entities. Mr. Ribis'
business address is c/o Trump Hotels & Casino Resorts, Inc., 725 Fifth Avenue,
New York, NY 10022.
Robert M. Pickus--Mr. Pickus, 41 years old, has been Executive Vice President
and Secretary of THCR since its formation in 1995. He has also been the
Executive Vice President of Corporate and Legal Affairs of Plaza Associates
since February 1995. From December 1993 to February 1995, Mr. Pickus was the
Senior Vice President and General Counsel of Plaza Associates and, since April
1994, he has been the Vice President and Assistant Secretary of Plaza Funding
and Assistant Secretary of Plaza Holding Inc. Mr. Pickus has been Secretary and
Director of AC Funding since its formation in January 1996. Mr. Pickus has been
the Executive Vice President of Corporate and Legal Affairs of Taj Associates
since February 1995, and a Class C Director of Taj Holding and TM/GP since
November 1995. He was the Senior Vice President and Secretary of Trump's Castle
Funding, Inc. from June 1988 to December 1993 and General Counsel of TCA from
June 1985 to December 1993. Mr. Pickus was also Secretary of Trump's Castle
Hotel & Casino, Inc., an entity beneficially owned by Trump, from October 1991
until December 1993. Mr. Pickus has been the Executive Vice President of
Corporate and Legal Affairs of TCA Associates since February 1995 and a member
of the Board of Partner Representatives of TCA since October 1995. Mr. Pickus'
business address is c/o Trump Hotel & Casino Resorts, Inc., Mississippi Avenue
and the Boardwalk, Atlantic City NJ, 08401.
John P. Burke--Mr. Burke, 48 years old, has been Senior Vice President of
Corporate Finance of THCR, THCR Holdings and THCR Funding since January 1996,
and has been the Corporate Treasurer of THCR, THCR Holdings and THCR Funding
since their formation in 1995. He has also been Corporate Treasurer of Plaza
Associates and Taj Associates since October 1991. Mr. Burke has been Treasurer
of AC Funding since its formation in January 1996. Mr. Burke has been a Class C
Director of TM/GP and Taj Holding and Vice President of TM/GP since October
1991. Mr. Burke has been the Corporate Treasurer of TCA since October 1991, the
Vice President of TCA, Trump's Castle Funding, Inc., TC/GP, Inc. and Trump's
Castle Hotel & Casino, Inc. since December 1993, and the Vice President-Finance
of The Trump Organization since September 1990. Mr. Burke was an Executive Vice
President and Chief Administrative Officer of Imperial Corporation of America
from April 1989 through September 1990. Mr. Burke's business address is c/o
Trump Hotels & Casino Resorts, Inc., 725 Fifth Avenue, New York, NY 10022.
Wallace B. Askins--Mr. Askins, 64 years old, has been a director of THCR
since June 1995. He has also been a director of Plaza Funding and Plaza Holding
Inc. since April 11, 1994, and has been a partner representative of the Board
of Partner Representatives of TCA since May 1992. Mr. Askins served as a
director of TC/GP, Inc. from May 1992 to December 1993. From 1987 to November
1992, Mr. Askins served as Executive Vice President, Chief Financial Officer
and as a director of Armco Inc. Mr. Askins also serves as a director of
EnviroSource, Inc. Mr. Askins' address is 20 Shadowbrook Lane, Morristown, NJ
07960.
Don M. Thomas--Mr. Thomas, 64 years old, has been a director of THCR since
June 1995. He has also been the Senior Vice President of Corporate Affairs of
the Pepsi-Cola Bottling Co. of New York since January 1985. Mr. Thomas was the
Acting Chairman, and a Commissioner, of the CRDA from 1985 through 1987, and a
Commissioner of the CCC from 1980 through 1984. From 1974 through 1980, Mr.
Thomas served as Vice President, General Counsel of the National Urban League.
From 1966 through 1974, Mr. Thomas served in various capacities with Chrysler
Corporation rising to the level of President-Auto Dealerships. Mr. Thomas was
an attorney with American Airlines from 1957 through 1966. Mr. Thomas was a
director of Trump Plaza GP until its merger into Plaza Funding in June 1993 and
has been a director of Plaza Funding and Plaza Holding Inc. since June 1993.
Mr. Thomas is an attorney licensed to practice law in the State of New York.
Mr. Thomas' business address is c/o Pepsi-Cola Bottling Co., 46-00 5th Street,
Long Island City, NY 11101.
Peter M. Ryan--Mr. Ryan, 58 years old, has been a director of THCR since June
1995. He has also been the President of each of The Marlin Group, LLC and The
Brookwood Carrington Fund, LLC, real estate financial advisory groups, since
January 1995. Prior to that, Mr. Ryan was the Senior Vice President of The
Chase
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Manhattan Bank for more than five years. Mr. Ryan has been a director of the
Childrens Hospital FTD since October 1995. Mr. Ryan's business address is c/o
The Marlin Group, 101 Park Avenue, Suite 2506, New York, NY 10178.
The officers of THCR serve at the pleasure of the Board of Directors of THCR.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
Trump and Nicholas L. Ribis served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties filed
their petition for reorganization under Chapter 11 of the Bankruptcy Code on
July 17, 1991. The Second Amended Joint Plan of Reorganization of such parties
was confirmed on August 28, 1991, and was declared effective on October 4,
1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus also served
as Executive Committee members, officers and/or directors of TCA and its
affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
May 5, 1992, and was declared effective on May 29, 1992. Trump, Nicholas L.
Ribis and John P. Burke served as either executive officers and/or directors of
Plaza Associates and its affiliated entities when such parties filed their
petition for reorganization under Chapter 11 of the Bankruptcy Code in March
1992. The First Amended Joint Plan of Reorganization of such parties was
confirmed on April 30, 1992, and was declared effective on May 29, 1992. Trump
was a partner of Plaza Operating Partners Ltd. when it filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on November 2, 1992. The
plan of reorganization for Plaza Operating Partners Ltd. was confirmed on
December 11, 1992 and declared effective in January 1993.
THCR is the general partner of THCR Holdings. As the managing general partner
of THCR Holdings, THCR will generally have the exclusive rights,
responsibilities and discretion in the management and control of THCR Holdings.
Upon consummation of the Merger Transaction, TM/GP will also be a general
partner of THCR Holdings. See "Special Factors--Related Merger Transactions"
and "Description of THCR Holdings Partnership Agreement."
MANAGEMENT OF TRUMP PLAZA
Plaza Funding is, and until the consummation of the Merger Transaction will
remain, the managing general partner of Plaza Associates. The Board of
Directors of each of Plaza Funding and Plaza Holding Inc. consists of Messrs.
Trump, Ribis, Wallace B. Askins and Don M. Thomas. The Plaza Note Indenture
requires that two directors of each of Plaza Funding and Plaza Holding Inc. be
persons who would qualify as "Independent Directors" as such term is defined by
the American Stock Exchange, Inc. (the "Independent Directors"). Following
consummation of the Merger Transaction, AC Holdings will be the managing
general partner of Plaza Associates.
Set forth below, are the names, ages, positions and offices held with Plaza
Funding and Plaza Associates and a brief account of the business experience
during the past five years of each of the executive officers of Plaza Funding
and Plaza Associates other than those who are also directors or executive
officers of THCR.
Barry J. Cregan--Mr. Cregan, 41 years old, has been Chief Operating Officer
of Plaza Associates since September 19, 1994 and President since March 1995.
Since February 21, 1995, Mr. Cregan has been Vice President of Plaza Funding
and Plaza Holding Inc. Prior to accepting these positions at Trump Plaza, Mr.
Cregan was President of The Plaza Hotel in New York for approximately three
years. Prior to joining The Plaza Hotel, he was Vice President of Hotel
Operations at Trump's Castle in Atlantic City. In addition, Mr. Cregan has
worked for Hilton and Hyatt in executive capacities as well as working in Las
Vegas and Atlantic City in executive capacities. Mr. Cregan's business address
is c/o Trump Plaza Hotel & Casino, Mississippi Avenue and The Boardwalk,
Atlantic City, NJ 08401.
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Francis X. McCarthy, Jr.--Mr. McCarthy, 42 years old, was Vice President of
Finance and Accounting of Trump Plaza GP from October 1992 until June 1993, the
date of Trump Plaza GP's merger into Plaza Funding, was Senior Vice President
of Finance and Administration of Plaza Associates from August 1990 to June 1994
and has been Executive Vice President of Finance and Administration since June
1994; Chief Accounting Officer of Plaza Funding since May 1992; Vice President
and Chief Financial Officer of Plaza Funding since July 1992 and Assistant
Treasurer of Plaza Funding since March 1991. Mr. McCarthy previously served in
a variety of financial positions for Greate Bay Hotel and Casino, Inc. from
June 1980 through August 1990. Mr. McCarthy's business address is c/o Trump
Plaza Hotel and Casino, Mississippi Avenue and The Boardwalk, Atlantic City,
NJ, 08401.
Fred A. Buro--Mr. Buro, 38 years old, has been the Senior Vice President of
Marketing of Plaza Associates since May 1994. Mr. Buro previously served as the
President of Casino Resources, Inc., a casino marketing, management and
development organization from 1991 through 1994. Prior to that, Mr. Buro served
from 1984 through 1991 as the President of a professional services consulting
firm. Mr. Buro's business address is c/o Trump Plaza Hotel and Casino,
Mississippi Avenue and The Boardwalk, Atlantic City, NJ 08401.
James A. Rigot--Mr. Rigot, 43 years old, has been Executive Vice President of
Casino Operations of Plaza Associates since November 1994. Mr. Rigot served as
Vice President of Casino Operations of TropWorld Casino and Entertainment
Resort from July 1989 through November 1994. From January 1989 through July
1989, Mr. Rigot was Assistant Casino Manager of Resorts Casino Hotel. Mr.
Rigot's business address is c/o Trump Plaza Hotel and Casino, Mississippi
Avenue and The Boardwalk, Atlantic City, NJ 08401.
Kevin S. Smith--Mr. Smith, 38 years old, has been the Vice President, General
Counsel of Plaza Associates since February 1995. Mr. Smith was previously
associated with Cooper Perskie April Niedelman Wagenheim & Levenson, an
Atlantic City law firm specializing in trial litigation. From 1989 until
February 1992, Mr. Smith handled criminal trial litigation for the State of New
Jersey, Department of Public Defender, assigned to the Cape May and Atlantic
County Conflict Unit. Mr. Smith's business address is c/o Trump Plaza Hotel and
Casino, Mississippi Avenue and The Boardwalk, Atlantic City, NJ 08401.
Patrick J. O'Malley--Mr. O'Malley, 41 years old, has been the Executive Vice
President of Hotel Operations of Plaza Associates since September 1995. Prior
to joining Trump Plaza, from September 1994 until September 1995, Mr. O'Malley
was President of the Plaza Hotel in New York City. From December 1989 until
September 1994, Mr. O'Malley was the Vice President of Finance of the Plaza
Hotel in New York City. Prior to joining the Plaza Hotel in New York City, from
1986 to 1989, Mr. O'Malley was a Regional Financial Controller for the Four
Seasons Hotel and Resorts, Ltd. From 1979 to 1986, Mr. O'Malley worked in the
Middle East and Europe as Hotel Controller for Marriot International Hotels.
Mr. O'Malley's business address is c/o Trump Plaza Hotel and Casino,
Mississippi Avenue and The Boardwalk, Atlantic City, NJ 08401.
All of the persons listed above are citizens of the United States and have
been qualified or licensed by the CCC.
EXECUTIVE COMPENSATION
General. Because THCR was formed in 1995, there was no salary or bonus paid
to, deferred or accrued for the benefit of, THCR's Chief Executive Officer or
any of the four remaining most highly compensated executive officers (whose
annual salary and bonus exceeded $100,000 for the year ended December 31, 1995
(collectively, the "Executive Group")) by THCR or THCR Holdings prior to or
during the fiscal year ended December 31, 1994. Similarly, no member of the
Executive Group received any other annual compensation, restricted stock
awards, stock options, stock appreciation rights ("SARs"), long-term incentive
performance ("LTIP") payouts or other compensation from THCR or THCR Holdings
prior to or for the fiscal year ended December 31, 1994. All cash compensation
paid to the Executive Group in respect of services provided to THCR since its
inception was paid and will continue to be paid by THCR Holdings in accordance
with the THCR Holdings Partnership Agreement. See "Description of the THCR
Holdings Partnership Agreement."
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1995 Stock Incentive Plan. The Board of Directors of THCR adopted the 1995
Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which, directors,
employees and consultants of THCR and certain of its subsidiaries and
affiliates who have been selected as participants are eligible to receive
awards of various forms of equity-based incentive compensation, including stock
options, stock appreciation rights, stock bonuses, restricted stock awards,
performance units and phantom stock, and awards consisting of combinations of
such incentives. The 1995 Stock Plan is administered by the Stock Incentive
Plan Committee of the Board of Directors of THCR (the "Stock Incentive Plan
Committee"). Subject to the provisions of the 1995 Stock Plan, the Stock
Incentive Plan Committee has sole discretionary authority to interpret the 1995
Stock Plan and to determine the type of awards to grant, when, if and to whom
awards are granted, the number of shares covered by each award and the terms
and conditions of the award.
Options granted under the 1995 Stock Plan may be "incentive stock options"
("ISOs"), within the meaning of Section 422 of the Code, or nonqualified stock
options ("NQSOs"). The vesting, exercisability and exercise price of the
options are determined by the Stock Incentive Plan Committee when the options
are granted, subject to a minimum price in the case of ISOs of the Fair Market
Value (as defined in the 1995 Stock Plan) of the Common Stock on the date of
grant and a minimum price in the case of NQSOs of the par value of THCR Common
Stock. In the discretion of the Stock Incentive Plan Committee, the option
exercise price may be paid in cash or in shares of THCR Common Stock or other
property having a fair market value on the date of exercise equal to the option
exercise price, or by delivering to THCR a copy of irrevocable instructions to
a stockbroker to deliver promptly to THCR an amount of sale or loan proceeds
sufficient to pay the exercise price. Except as provided by the Stock Incentive
Plan Committee in an underlying stock option agreement, in the event of a
Change of Control (as defined in the 1995 Stock Plan or in the stock option
agreement), all options subject to such agreement will be fully exercisable.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant SARs,
either alone or in connection with an option. An SAR entitles its holder to be
paid an amount equal to the fair market value of THCR Common Stock subject to
the SAR on the date of exercise of the SAR, less the exercise price of the
related stock option in the case of an SAR granted in connection with a stock
option, or the fair market value of one share of stock on the date the SAR was
granted, in the case of an SAR granted independent of an option. Shares of THCR
Common Stock covered by a restricted stock award are issued to the recipient at
the time the award is granted, but are subject to forfeiture in the event
continued employment and/or other restrictions and conditions established by
the Stock Incentive Plan Committee at the time the award is granted are not
satisfied. Unless otherwise determined by the Stock Incentive Plan Committee, a
recipient of a restricted stock award has the same rights as an owner of THCR
Common Stock, including the right to receive cash dividends and to vote the
shares. A performance unit or phantom stock award provides for the future
payment of cash or the issuance of shares of THCR Common Stock to the recipient
if continued employment and/or other performance objectives established by the
Stock Incentive Plan Committee at the time of grant are attained. The 1995
Stock Plan also provides that performance unit and phantom stock awards may be
settled in cash, in the discretion of the Stock Incentive Plan Committee and if
indicated in the applicable award agreement, on each date on which shares of
THCR Common Stock covered by the awards would otherwise have been delivered or
become unrestricted, in an amount equal to the fair market value of such shares
on such date. Except as provided in a particular award agreement, in the event
of a Change in Control (as defined in the 1995 Stock Plan), notwithstanding any
vesting schedule with respect to an award of options, SARs, phantom stock units
or restricted stock, such options or SAR will become immediately exercisable
with respect to the shares subject to such option or SAR, and restrictions with
respect to such phantom stock units or shares of restricted stock will
immediately expire. In addition, payment will be made as determined by the
Stock Incentive Plan Committee with respect to performance units. The 1995
Stock Plan also provides for the grant of unrestricted stock bonus awards.
THCR has reserved 1,000,000 shares of THCR Common Stock for issuance under
the 1995 Stock Plan, provided, however, that in the event of changes in the
outstanding stock or the capital structure of THCR, adjustments will be made by
the Stock Incentive Plan Committee as to (i) the number, price or kind of a
share of
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stock or other consideration subject to outstanding awards and (ii) the maximum
number of shares of stock subject to all awards under the 1995 Stock Plan.
In 1995, the Stock Incentive Plan Committee granted to Nicholas L. Ribis,
under the 1995 Stock Plan: (a) a stock bonus award of 66,667 shares of THCR
Common Stock, which was fully vested when issued, (b) a phantom stock unit
award of 66,666 units, entitling Mr. Ribis to receive 66,666 shares of THCR
Common Stock on June 12, 1997, subject to certain conditions, and (c) an award
of NQSOs entitling Mr. Ribis to purchase 133,333 shares of the THCR Common
Stock, subject to certain conditions (including vesting at a rate of 20% per
year over a five-year period). The options have an exercise price of $14.00 per
share.
Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of
THCR, for each of the last three completed fiscal years. Compensation accrued
during one year and paid in another is recorded under the year of accrual.
Because THCR was formed in 1995, compensation for the years ended December 31,
1994 and 1993 reflect solely the compensation paid or accrued to these
individuals as executive officers of Plaza Associates. Compensation for the
year ended December 31, 1995 includes compensation paid or accrued to these
individuals as executive officers of THCR and Plaza Associates.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION(/1/) YEAR SALARY BONUS COMPENSATION(/2/) AWARDS($) OPTIONS(#) COMPENSATION
------------------ ---- -------- -------- ----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump......... 1995 $583,333 $ -- $ -- -- -- $1,321,000(/3/)
Chairman of the 1994 -- -- -- -- -- 1,288,000(/3/)(/4/)
Board 1993 -- -- -- -- -- 1,247,000(/3/)
Nicholas L. Ribis(/5/).. 1995 $812,555 $933,338 $ -- 933,324(/6/) 133,333 $ --
Chief Executive Officer 1994 572,917 250,000 280,407 -- -- --
1993 225,000 250,000 380,500 -- -- --
Robert M. Pickus........ 1995 $126,987 $ 65,000 $ -- -- -- $ 4,004(/7/)
Executive Vice President 1994 163,759 32,500 -- -- -- 3,291(/7/)
and Secretary 1993 5,808 -- -- -- -- --
John P. Burke........... 1995 $ 50,000 $ 38,333 $ -- -- -- $ --
Senior Vice President of 1994 50,000 -- -- -- -- --
Corporate Finance and 1993 45,903 20,000 -- -- -- --
Corporate Treasurer
</TABLE>
- --------
(1) All the executive officers in this table are also executive officers of Taj
Holding; the compensation from this entity is not included in this table.
See "Management of Taj Holding--Executive Compensation."
(2) Represents the dollar value of annual compensation not properly categorized
as salary or bonus, including amounts reimbursed for income taxes and
directors' fees. Following SEC rules, perquisites and other personal
benefits are not included in this table because the aggregate amount of
that compensation is less than the lesser of $50,000 or 10% of the total of
salary and bonus for each member of the Executive Group.
(3) The amounts listed represent amounts paid by Plaza Associates to TPM, a
corporation beneficially owned by Trump, for services provided under the
TPM Services Agreement (as defined). Payments received by TPM under the TPM
Services Agreement are currently pledged by TPM to secure lease payments
for a helicopter that TPM makes available to Plaza Associates. See "Certain
Transactions--Plaza Associates--TPM Services Agreement." Trump is not an
employee of Plaza Associates and receives no compensation from Plaza
Associates other than pursuant to the TPM Services Agreement.
(4) In addition to the amount listed as payment under the TPM Services
Agreement, during 1994, Plaza Associates paid to Trump an aggregate of
$1,572,000 under a construction service agreement and as a commission to
secure a retail lease at Trump Plaza. See Note 8 to Consolidated Financial
Statements of AC Holdings and Plaza Associates.
(5) Mr. Ribis devotes a majority of his time to the affairs of THCR. See "--
Employment Agreements."
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(6) As of December 31, 1995, Mr. Ribis held 66,666 phantom stock units issued
pursuant to the Stock Incentive Plan. These units had a value as of
December 31, 1995 of $1,433,319. These phantom stock units were issued to
Mr. Ribis in connection with his employment agreement with THCR. Each
phantom stock unit entitles Mr. Ribis to one share of THCR Common Stock on
the vesting date of the phantom stock unit. All of the phantom stock units
are scheduled to vest on June 12, 1997. Vesting will accelerate in the
event of Mr. Ribis' termination of employment with THCR (i) because of his
death or disability, (ii) by THCR without cause, or (iii) voluntarily by
Mr. Ribis under circumstances which constitute a constructive termination.
Alternatively, the phantom stock units may expire prior to June 12, 1997 in
the event Mr. Ribis voluntarily terminates his employment with THCR under
circumstances which do not constitute constructive termination or if he is
terminated by THCR with cause. Dividend equivalents with respect to the
phantom stock units will be credited to a bookkeeping account on behalf of
Mr. Ribis and will be paid out in cash at the time the phantom stock units
vest or will expire along with the phantom stock units.
(7) Represents vested and unvested contributions made by Plaza Associates to
Trump Plaza Hotel and Casino Retirement Savings Plan. Funds accumulated for
an employee under this plan consisting of a certain percentage of the
employee's compensation plus Plaza Associates' employer matching
contributions equaling 50% of the participant's contributions, are retained
until termination of employment, attainment of age 59 1/2 or financial
hardship, at which time the employee may withdraw his or her vested funds.
The following table sets forth options granted to Mr. Ribis in 1995. No other
member of the Executive Group received stock options in 1995. THCR did not
issue any stock appreciation rights in 1995. This table also sets forth the
hypothetical gains that would exist for the options at the end of their ten-
year terms at assumed annual rates of stock appreciation of 5% and 10%. The
actual future value of the options will depend on the market value of the THCR
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------ ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ------------------ --------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nicholas L. Ribis....... 133,333 100% $14.00 June 12, 2005 $1,173,060 $2,960,580
</TABLE>
The following table sets forth the number of shares covered by options held
by Mr. Ribis and the value of the options as of December 31, 1995. Mr. Ribis
was the only member of the Executive Group who held options in 1995. None of
these options were exercisable in 1995.
FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END ($)
-------------------------- --------------------------
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
---- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Nicholas L. Ribis........ N/A 133,333 N/A $2,866,660
</TABLE>
EMPLOYMENT AGREEMENTS
Trump serves as the Chairman of the Board of THCR pursuant to the Executive
Agreement dated as of June 12, 1995, among Trump, THCR and THCR Holdings (the
"Executive Agreement") . In consideration for Trump's services under the Trump
Executive Agreement, Trump receives a salary of $1 million per year. Pursuant
to the terms of the Trump Executive Agreement, Trump provides to THCR, from
time to time, when reasonably requested, marketing, advertising, professional
and other similar and related services with respect to the operation and
business of THCR. The Trump Executive Agreement continues in effect (i) for an
initial term of five years, and (ii) thereafter, for a three-year rolling term
until either Trump or THCR provides notice to the other of its election not to
continue extending the term, in which case the term of the Trump Executive
Agreement will end three years from the date such notice is given. The Trump
Executive Agreement also provides that Trump may devote time and effort to the
Taj Mahal and Trump's Castle and, subject to the terms of the Contribution
Agreement (as defined), to other business matters, and that the Trump Executive
Agreement will not be construed to restrict Trump from operating the Taj Mahal
and Trump's Castle in a commercially reasonable manner and/or having an
interest therein or conducting any other activity not prohibited under the
Contribution Agreement. See "Risk Factors--Conflicts of Interest" and
"Description of the THCR Holdings Partnership Agreement."
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<PAGE>
Plaza Associates had an employment agreement with Nicholas L. Ribis (the
"Ribis Plaza Agreement") pursuant to which Mr. Ribis acted as Chief Executive
Officer of Plaza Associates. The Ribis Plaza Agreement provided for an annual
salary of $550,000 with annual increases of 10% on each anniversary. Mr. Ribis
received a $250,000 signing bonus. Pursuant to the terms of the Ribis Plaza
Agreement, in the event Plaza Associates engaged in an offering of common
shares to the public, Plaza Associates and Mr. Ribis would agree to negotiate
new compensation arrangements to include equity participation for Mr. Ribis. As
a result of the June 1995 Offerings, THCR and THCR Holdings entered into a
revised employment agreement with Mr. Ribis (the "Revised Ribis Plaza
Agreement") to replace the Ribis Plaza Agreement, pursuant to which he agreed
to serve as President and Chief Executive Officer of THCR and Chief Executive
Officer of THCR Holdings. The term of the Revised Ribis Plaza Agreement is five
years and Mr. Ribis is required to devote the majority of his professional time
to the affairs of THCR, as measured on a quarterly basis, based on a 40-hour
work week. Under the Revised Ribis Plaza Agreement, Mr. Ribis's annual salary
is $998,250, which is 50% of the aggregate current annual base salary
($1,996,500) that Mr. Ribis receives as Chief Executive Officer of THCR
($998,250), Taj Mahal ($499,125) and Trump's Castle ($499,125). Following the
consummation of the Merger Transaction, Mr. Ribis will devote 75% of his
professional time to the operations of THCR, Plaza Associates and Taj
Associates, and his annual salary will be $1,497,375 per year with respect to
his services to these entities. See "Management of Taj Holding--Employment
Agreements." Mr. Ribis will continue to receive $499,125 per year with respect
to his services to Trump's Castle. In 1995, the Stock Incentive Plan Committee
granted to Mr. Ribis, under the 1995 Stock Plan: (a) a stock bonus award of
66,667 shares of THCR Common Stock, which was fully vested when issued, (b) a
phantom stock unit award of 66,666 units, entitling him to receive 66,666
shares of THCR Common Stock on June 12, 1997, subject to certain conditions,
and (c) an award of NQSOs entitling Mr. Ribis to purchase 133,333 shares of the
THCR Common Stock at an exercise price of $14.00 per share. The options will
vest at the rate of 20% per year over a five-year period, and be subject to
certain other conditions. In the event Mr. Ribis's employment is terminated by
THCR other than for "cause" or if he incurs a "constructive termination without
cause" (as each term is defined in the Revised Ribis Plaza Agreement), Mr.
Ribis will receive a severance payment equal to one year's base salary, and the
phantom stock units and options will become fully vested. The phantom stock
units will also automatically vest upon the death or disability of Mr. Ribis.
The Revised Ribis Plaza Agreement also provides for up to an aggregate of $2.0
million of loans to Mr. Ribis to be used by him to pay his income tax liability
in connection with stock options, phantom stock units and stock bonus awards,
which loans will be forgiven, including both principal and interest, in the
event of a "Change of Control" (as defined in the Revised Ribis Plaza
Agreement). The Revised Ribis Plaza Agreement also provides certain demand and
piggyback registration rights for THCR Common Stock issued pursuant to the
foregoing.
Mr. Ribis is also Chief Executive Officer of Taj Associates and TCA, the
partnerships that own the Taj Mahal and Trump's Castle, and receives
compensation from such entities for such services as set forth above. Pursuant
to the Revised Ribis Agreement, he is required to devote the majority of his
time to the affairs of THCR, and following the consummation of the Merger
Transaction, Mr. Ribis will devote approximately 75% of his professional time
to THCR. All other executive officers of Plaza Associates, except Messrs. Burke
and Pickus, devote substantially all of their time to the business of Plaza
Associates.
THCR Holdings has an employment agreement with Robert M. Pickus (the "Pickus
Agreement") pursuant to which he serves as Executive Vice President and General
Counsel. The Pickus Agreement, which expires on July 9, 1998 if not extended,
provides for annual compensation of $275,000 plus bonus. Employment may be
terminated only for "cause" (as defined in the Pickus Agreement), which
includes revocation of Mr. Pickus' casino key employee license by the CCC and
conviction of a crime. Upon termination for cause, Mr. Pickus will receive only
compensation earned to the date of termination.
COMPENSATION OF DIRECTORS
Directors of THCR who are also employees or consultants of THCR and its
affiliates receive no directors fees. Non-employee directors are paid an annual
directors fee of $50,000, plus $2,000 per meeting attended plus
170
<PAGE>
reasonable out-of-pocket expenses incurred in attending these meetings,
provided that directors currently serving on the Board of Directors of Plaza
Funding or Plaza Holding Inc. receive no additional compensation. All such
fees are reimbursed to THCR by THCR Holdings in accordance with the THCR
Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
THCR has an Executive Committee, an Audit Committee, a Special Committee, a
Stock Incentive Plan Committee and a Compensation Committee. The Executive
Committee is composed of Messrs. Trump and Ribis. The Audit Committee and the
Special Committee are composed of Messrs. Askins, Ryan and Thomas, each of
whom is an independent director of THCR. The Stock Incentive Plan Committee is
composed of Messrs. Trump, Askins, Ryan and Thomas. The Compensation Committee
is composed of Messrs. Trump, Ribis, Askins and Thomas. The Special Committee
was established pursuant to the THCR By-Laws and the THCR Holdings Partnership
Agreement and is empowered to vote on any matters which require approval of a
majority of the independent directors of THCR, including affiliated
transactions. See "Description of the THCR Holdings Partnership Agreement."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Trump and certain affiliates have engaged in certain related party
transactions. See "Certain Transactions."
In general, the compensation of executive officers of THCR is determined by
the Compensation Committee of the Board of Directors of THCR. No officer or
employee of THCR, other than Messrs. Trump and Ribis, who serves on the Board
of Directors of THCR, participated in the deliberations of the Board of
Directors of THCR concerning executive compensation.
The SEC requires issuers to disclose the existence of any other corporation
in which both (i) an executive officer of the registrant serves on the board
of directors and/or compensation committee, and (ii) a director of the
registrant serves as an executive officer. Messrs. Ribis, Pickus and Burke,
executive officers of THCR, have served on the board of directors of other
entities in which members of the Board of Directors of THCR (namely, Messrs.
Trump and Ribis) served and continue to serve as executive officers.
Management believes that such relationships have not affected the compensation
decisions made by the Board of Directors of THCR in the last fiscal year.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
the managing general partner of Plaza Associates, of which Messrs. Trump and
Ribis are executive officers. Messrs. Trump and Ribis also serve on the Board
of Directors of Plaza Holding Inc., of which Messrs. Trump, Ribis and Burke
are also executive officers. Trump is not compensated by such entities for
serving as an executive officer, however, he has entered into a personal
services agreement with Plaza Associates and THCR. Messrs. Ribis and Burke are
not compensated by the foregoing entities, however, they are compensated by
Plaza Associates for their service as executive officers.
Messrs. Ribis, Pickus and Burke serve on the Board of Directors of Taj
Holding, which holds an indirect equity interest in Taj Associates, the
partnership that owns the Taj Mahal, of which Messrs. Trump and Ribis are
executive officers. Such persons also serve on the Board of Directors of
TM/GP, the managing general partner of Taj Associates, of which Messrs. Trump
and Ribis are executive officers. Mr. Ribis is compensated by Taj Associates
for his services as its Chief Executive Officer. See "Management of Taj
Holding--Employment Agreements."
Mr. Ribis also serves on the Board of Directors of Realty Corp., which
leases certain real property to Taj Associates, of which Trump is an executive
officer. Trump, however, does not receive any compensation for serving as an
executive officer of Realty Corp. Mr. Ribis receives compensation from TCA for
acting as its Chief Executive Officer. See "Management of Taj Holding--
Employment Agreements."
171
<PAGE>
MANAGEMENT OF TAJ HOLDING
GENERAL
All decisions affecting the business and affairs of Taj Associates, including
the operation of the Taj Mahal, are determined currently by TM/GP, the managing
general partner of Taj Associates. Upon consummation of the Merger Transaction,
Taj Associates will be managed by AC Holdings which will be its managing
general partner and the governance procedures described in the following
paragraphs will no longer be applicable.
Pursuant to the Taj Holding Certificate of Incorporation, the certificate of
incorporation of TM/GP and the DGCL, the terms of the transactions relating to
the Merger, to the extent they contemplate action by TM/GP or Taj Associates,
must be approved by (i) the entire Board of Directors of Taj Holding, (ii) the
holders of Taj Holding Class B Common Stock and Taj Holding Class C Common
Stock, each voting as a separate class, (iii) the Class B Directors of TM/GP
(which are the same as the Class B Directors of Taj Holding), (iv) the entire
Board of Directors of TM/GP (which consists of the Class B Directors and Class
C Directors of Taj Holding), (v) the holders of the Class B Common Stock of
TM/GP, par value $.01 per share (the "TM/GP Class B Common Stock"), and (vi)
the stockholders of TM/GP. Taj Holding is the sole holder of TM/GP's capital
stock which consists solely of TM/GP Class B Common Stock and Class C Common
Stock, par value $.01 per share (the "TM/GP Class C Common Stock"). Pursuant to
the Taj Holding Certificate of Incorporation, the Class B Directors of Taj
Holding and the Class C Directors of Taj Holding vote the TM/GP Class B Common
Stock and the TM/GP Class C Common Stock, respectively.
The Board of Directors of TM/GP is comprised of nine directors, consisting of
four TM/GP Class B Directors and five TM/GP Class C Directors. The TM/GP Class
C Directors are elected indirectly by Trump and the TM/GP Class B Directors are
elected indirectly by the holders of the Taj Bonds. Trump, Nicholas L. Ribis,
Steven R. Busch, Robert M. Pickus and John P. Burke currently serve as the
TM/GP Class C Directors, and Harold First, John K. Kelly, Robert J. McGuire and
Roy E. Posner currently serve as the TM/GP Class B Directors. Trump serves as
Chairman of the Board, President and Treasurer of TM/GP. Nicholas L. Ribis and
John P. Burke serve as Vice Presidents of TM/GP, and Nicholas F. Moles serves
as Secretary of TM/GP. The officers of TM/GP serve at the pleasure of the Board
of Directors of TM/GP.
The Board of Directors of Taj Holding consists of the same four TM/GP Class B
Directors and five TM/GP Class C Directors. The holders of the Taj Holding
Class B Common Stock elect the four Class B Directors of Taj Holding, who,
pursuant to the Taj Holding Certificate of Incorporation are required to vote
the TM/GP Class B Common Stock to elect themselves as the four Class B
Directors of TM/GP. Similarly, Trump, the holder of the Taj Holding Class C
Common Stock, elects the five Class C Directors of Taj Holding, who, pursuant
to the Taj Holding Certificate of Incorporation are required to vote the TM/GP
Class C Common Stock to elect themselves as the five Class C Directors of
TM/GP. Any change in the composition of the Board of Directors of Taj Holding
will result in a concomitant change in the Board of Directors of TM/GP. The
Board of Directors of Taj Holding does not have a nominating or compensation
committee or any committees performing similar functions. Trump serves as
Chairman of the Board, President and Treasurer of Taj Holding. Nicholas L.
Ribis serves as Taj Holding's Vice President and Nicholas F. Moles serves as
Taj Holding's Secretary. The officers of Taj Holding serve at the pleasure of
the Board of Directors of Taj Holding.
Both Taj Holding and TM/GP have an Audit Committee on which one Class C
Director, John P. Burke, serves with two Class B Directors, Harold First and
Robert J. McGuire.
Upon consummation of the Merger, and until successors are duly elected or
appointed, (i) Messrs. Trump, Ribis, and Pickus, the current directors of
Merger Sub, will become the directors of the Surviving Corporation, and (ii)
the current officers of Taj Holding will become the officers of the Surviving
Corporation. According to the terms of the Taj Holding Certificate of
Incorporation, the Class B Directors of Taj Holding are required to resign upon
redemption of the Taj Bonds. In addition, upon the consummation of the Merger
Transaction, the existing directors of TM/GP, other than Messrs. Trump, Ribis
and Pickus, will resign.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of Taj
Holding's directors and executive officers and a key employee of Taj
Associates:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald J. Trump......... Chairman of the Board (Class C), President and Treasurer
Nicholas L. Ribis....... Vice President and Director (Class C)
R. Bruce McKee.......... Assistant Treasurer
Nicholas F. Moles....... Secretary
Robert M. Pickus........ Director (Class C)
John P. Burke........... Director (Class C)
Steven R. Busch......... Director (Class C)
Harold First............ Director (Class B)
John K. Kelly........... Director (Class B)
Robert J. McGuire....... Director (Class B)
Roy E. Posner........... Director (Class B)
Nicholas J. Niglio...... Senior Vice President, Casino Marketing of Taj Associates
</TABLE>
Set forth below are the names, ages, positions and offices held with Taj
Holding and a brief account of the business experience during the past five
years of each of the executive officers and directors of Taj Holding and
certain key employees of Taj Associates. Each of such persons is a citizen of
the United States and has been approved and/or licensed by the CCC. With
respect to Messrs. Trump, Ribis, Pickus and Burke, please see the information
set forth in "Management of THCR".
R. Bruce McKee--Mr. McKee, 50 years old, has been acting Chief Operating
Officer of Taj Associates since October 1995; Senior Vice President, Finance of
Taj Associates since July 1993; Vice President, Finance of Taj Associates from
September 1990 through June 1993; Assistant Treasurer of Taj Funding, TM/GP,
Taj Holding, Realty Corp., TTMC and TTMI since October 1991; Vice President of
Finance of Elsinore Shore Associates, the owner and operator of the Atlantis
Casino Hotel, Atlantic City, from April 1984 to September 1990; and Treasurer
of Elsinore Finance Corp., Elsinore of Atlantic City and Elsub Corp. from June
1986 to September 1990. The Atlantis Casino Hotel now constitutes the portion
of Trump Plaza known as Trump World's Fair. Mr. McKee's business address is c/o
Trump Taj Mahal Casino Resort 1000 The Boardwalk, Atlantic City, New Jersey
08401
Nicholas F. Moles--Mr. Moles, 42 years old, has been Assistant Secretary of
Taj Holding and TM/GP from October 1991 to February 1995; Secretary of Taj
Holding and TM/GP since February 1995; Senior Vice President, Law and General
Counsel of Taj Associates since June 1993; Assistant Secretary of Taj Funding
since October 1991 and Assistant Secretary of TTMI since January 1989. From May
1986 to May 1988, Mr. Moles was General Counsel of Plaza Associates and was
Vice President and General Counsel of Plaza Associates from May 1988 to
December 1988. Mr. Moles was Vice President and General Counsel of Elsinore
Shore Associates from May 1985 to May 1986 and was Director and Assistant
Secretary of Elsinore Finance Corporation from November 1985 to May 1986. Mr.
Moles' business address is c/o Trump Taj Mahal Casino Resort 1000 The
Boardwalk, Atlantic City, New Jersey 08401.
Steven R. Busch--Mr. Busch, 49 years old, has been a Class C Director of
TM/GP and Taj Holding since January 1995. Since May 1994, Mr. Busch has been an
independent economic and financial consultant. From March 1989 to April 1994,
Mr. Busch was an Executive Vice President of Shearson Lehman Brothers Inc. and
Senior Vice President & Senior Credit Officer, Boston Safe Deposit and Trust
Company (an affiliate of Shearson Lehman Brothers Inc). Mr. Busch's address is
135 East 71st Street, New York, New York 10021.
Larry W. Clark--Mr. Clark, 50 years old, has been Executive Vice President,
Casino Operations of Taj Associates since November 1991; Senior Vice President,
Casino Operations of Taj Associates from May 1991 to November 1991; Vice
President, Casino Administration of Taj Associates from April 1991 to May 1991
and
173
<PAGE>
from January 1990 to November 1990; Vice President, Casino Operations, Dunes
Hotel & Country Club from November 1990 to April 1991, and was Director of
Casino Marketing and Vice President, Casino Operations, Showboat Hotel & Casino
from November 1988 to January 1990. Mr. Clark's business address is 1000 The
Boardwalk, Atlantic City, New Jersey 08401.
Rudy E. Prieto--Mr. Prieto, 51 years old, has been Executive Vice President,
Operations of Taj Associates since December 1995. Prior to joining the Taj
Mahal, Mr. Prieto was Executive Vice President and Chief Operating Officer for
Elsinore Corporation from May 1995 to November 1995; Senior Vice President in
charge of the development of the Mojave Valley Resort for Elsinore Corporation
from April 1994 to April 1995 and Executive Vice President and Assistant
General Manager for the Tropicana Resort and Casino from May 1988 to October
1994. Mr. Prieto's business address is c/o Trump Taj Mahal Casino Resort, 1000
The Boardwalk, Atlantic City, New Jersey 08401.
Walter Kohlross--Mr. Kohlross, 54 years old, has been Senior Vice President,
Marketing and Food & Beverage of Taj Associates since June 1992; Vice
President, Hotel Operations of Taj Associates from June 1991 to June 1992 and
was Vice President, Food & Beverage of Taj Associates from 1988 to June 1991.
Mr. Kohlross' business address is c/o Trump Taj Mahal Casino Resort, 1000 The
Boardwalk, Atlantic City, New Jersey 08401.
Richard D. Kline--Mr. Kline, 50 years old, has been Senior Vice President,
Hotel Operations of Taj Associates since September 1994; Vice President, Hotel
Operations of Taj Associates from June 1993 to September 1994, and was Vice
President, Property Management of Taj Associates from March 1992 to June 1993.
From 1966 to 1992, Mr. Kline held a variety of command and staff positions in
the United States Army, and retired with the rank of Colonel. Mr. Kline's
business address is c/o Trump Taj Mahal Casino Resort, 1000 The Boardwalk,
Atlantic City, New Jersey 08401.
Harold First--Mr. First, 59 years old, has been a Class B Director of TM/GP
and Taj Holding since October 1991. Mr. First was a Director of Trans World
Airlines, Inc. from December 1990 through January 1993; Director of ACF
Industries, Inc. from February 1991 through December 1992; Vice Chairman of the
Board of Directors of American Property Investors, Inc., the general partner of
American Real Estate Partners, L.P. from March 1991 through December 1992;
Member of Board of Directors of Realty Corp. since October 1991; Member of
Supervisory Board of Directors of Memorex Telex N.V. since February 1992;
member of Board of Directors of Cadus Pharmaceutical Corporation since April
1995; member of Board of Directors of Tel-Save Holdings, Inc. since September
1995; and Chief Financial Officer of Icahn Holding Corporation and related
entities from December 1990 through December 1992. Since January 1993, Mr.
First has been employed as an independent financial consultant. Mr. First's
business address is c/o KPMG Peat Marwick, LLP, 345 Park Avenue, New York, New
York 10154.
John K. Kelly--Mr. Kelly, 46 years old, has been a Class B Director of TM/GP,
Taj Holding and Realty Corp. since October 1991. Mr. Kelly has been Senior Vice
President/General Counsel of Ocean Federal Savings Bank, a federally chartered
mutual savings bank, since April 1988. Mr. Kelly's business address is c/o
Ocean Federal Savings Bank, 74 Brick Boulevard, Brick, New Jersey 08723.
Robert J. McGuire--Mr. McGuire, 59 years old, has been a Class B Director of
TM/GP and Taj Holding since October 1991. Mr. McGuire has been President of
Kroll Associates, a management consulting firm, since 1989, Director of
Emigrant Savings Bank since 1988 and a Director of GTI Holding Corp. since
1989. Mr. McGuire's business address is c/o Kroll Associates, 900 Third Avenue,
New York, New York 10022.
Roy E. Posner--Mr. Posner, 62 years old, has been a Class B Director of TM/GP
and Taj Holding since October 1991. Mr. Posner has been Senior Vice President
and Chief Financial Officer of the Loews Corporation since 1986, and is a
member of the Board of Directors of Bulova Systems and Instruments Corp. Mr.
Posner's business address is c/o Loews Corporation, 667 Madison Avenue, 7th
Floor, New York, New York 10021.
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<PAGE>
Nicholas J. Niglio--Mr. Niglio, 49 years old, has been Senior Vice President,
Casino Marketing of Taj Associates since October 31, 1995. From February 6,
1995 to October 31, 1995, Mr. Niglio was Vice President, International
Marketing of Taj Associates. Prior to joining Taj Associates, Mr Niglio was
Executive Vice President of International Marketing/Player Development for TCA,
the partnership that owns and operates Trump's Castle from October 1993 until
February 1995. Prior to that, Mr. Niglio served as Senior Vice President of
Eastern Operations of Caesars World Marketing Corporation for three years.
Prior to that he served as Vice President--Casino Manager at Caesars Atlantic
City for three years. Mr. Niglio's business address is c/o Trump Taj Mahal
Casino Resort, 1000 The Boardwalk, Atlantic City, New Jersey 08401.
All persons listed above are citizens of the United States and have been
qualified or licensed by the CCC.
Trump, Nicholas L. Ribis, John P. Burke, R. Bruce McKee, Nicholas F. Moles,
Larry W. Clark and Walter Kohlross served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties filed
their petition for reorganization under Chapter 11 of the Bankruptcy Code on
July 17, 1991. The Second Amended Joint Plan of Reorganization of such parties
was confirmed on August 28, 1991, and was declared effective on October 4,
1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus served as
Executive Committee members, officers and/or directors of TCA and its
affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on May
5, 1992, and was declared effective on May 29, 1992. Trump, Nicholas L. Ribis
and John P. Burke served as either executive officers and/or directors of Plaza
Associates and its affiliated entities when such parties filed their petition
for reorganization under Chapter 11 of the Bankruptcy Code in March 1992. The
First Amended Joint Plan of Reorganization of such parties was confirmed on
April 30, 1992, and was declared effective on May 29, 1992. Trump was a partner
of Plaza Operating Partners Ltd. when it filed a petition for reorganization
under Chapter 11 of the Bankruptcy Code on November 2, 1992. The plan of
reorganization for Plaza Operating Partners Ltd. was confirmed on December 11,
1992 and declared effective in January 1993.
EXECUTIVE COMPENSATION
Taj Holding does not pay any cash compensation to its executive officers for
serving as such and Taj Holding does not offer its executive officers stock-
based compensation plans, long-term incentive plans or defined benefit pension
plans. The executive officers of Taj Holding, other than Trump, are also
employees of Taj Associates and are compensated by Taj Associates. Directors
are also compensated for serving on Taj Holding's Board of Directors. See "--
Compensation of Directors" below. Mr. Ribis, as a Class C Director of TM/GP,
participates in decisions relating to bonuses paid by Taj Associates, but
abstains from decisions relating to his own bonus.
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<PAGE>
The following table sets forth information for each of the last three
completed fiscal years regarding compensation paid to or accrued by (i) the
President of Taj Holding and (ii) each of the next four highest paid executive
officers of Taj Holding and/or Taj Associates, whose salary and bonus exceeded
$100,000 for the year ended December 31, 1995, including one additional
individual who would have been among the next four highest paid executive
officers but for the fact that his employment was terminated in 1995.
Compensation accrued during one year and paid in another is recorded under the
year of accrual. Information relating to long-term compensation is inapplicable
and has therefore been omitted from the table.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(/2/) COMPENSATION
------------------ ---- ---------- -------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Donald J. Trump(/1/).... 1995 $ -- $ -- $ -- $1,626,000(/3/)
Chairman of the Board, 1994 -- -- -- 1,353,000(/3/)
President and Treasurer 1993 -- -- -- 1,566,000(/3/)
of Taj Holding
Nicholas L. Ribis(/5/).. 1995 $ 543,081 $ -- $ -- $ --
Vice President of Taj 1994 580,083 -- -- --
Holding 1993 299,253 250,000 164,997 --
and Chief Executive
Officer
of Taj Associates
R. Bruce McKee ......... 1995 $ 188,862 $292,756 $ -- $ 3,567(/4/)
Acting Chief Operating 1994 172,703 94,500 -- 3,250(/4/)
Officer, 1993 130,539 49,500 -- 2,468(/4/)
Chief Financial Officer
and
Senior Vice President
of Finance
of Taj Associates
Larry W. Clark ......... 1995 $ 276,611 $124,200 $ -- $ 3,696(/4/)
Executive Vice 1994 261,554 97,500 -- 4,620(/4/)
President 1993 263,521 97,500 -- 4,375(/4/)
Casino Operations of
Taj Associates
Nicholas J. Niglio(/6/). 1995 $ 228,792 $100,236 $ -- $ 3,696(/4/)
Senior Vice President 1994 -- -- -- --
Casino Marketing 1993 -- -- -- --
of Taj Associates
Dennis C. Gomes(/7/).... 1995 $1,321,270 $ -- $ -- $ --
1994 1,541,614 -- -- --
1993 1,070,988 860,000 -- --
</TABLE>
- --------
(1) Mr. Trump performs functions similar to those of a chief executive officer.
(2) Represents the dollar value of annual compensation not properly categorized
as salary or bonus, including amounts reimbursed for income taxes and
directors' fees. Following SEC rules, perquisites and other personal
benefits are not included in this table unless the aggregate amount of that
compensation is the lesser of either $50,000 or 10% of the total of salary
and bonus for such executive officers.
(3) The amounts listed represent amounts paid to Trump pursuant to the Taj
Services Agreement. See "Certain Transactions--Taj Holding and Affiliates--
Taj Services Agreement." Trump is not an employee of Taj Associates and
receives no compensation from Taj Associates other than pursuant to the Taj
Services Agreement. Mr. Trump is also an executive officer of THCR; the
compensation from this entity is not included in this table. See
"Management of THCR--Executive Compensation--Summary Compensation Table."
(4) Represents vested and unvested contributions made by Taj Associates to the
Trump Taj Mahal Retirement Savings Plan. Funds accumulated for an employee
under this plan consisting of a certain percentage of the employee's
compensation plus Taj Associates' employer matching contributions equaling
50% of the participants' contributions, are retained until termination of
employment, attainment of age 59 1/2 or financial hardship, at which time
the employee may withdraw his or her vested funds.
(5) Mr. Ribis devotes approximately one quarter of his professional time to the
affairs of Taj Associates, and upon consummation of the Merger Transaction
he will devote 75% of his time to the operations of THCR, Plaza Associates
and Taj Associates. Mr. Ribis is also an executive officer of THCR and
Plaza Associates; the compensation from these entities is not included in
this table. See "Management of THCR--Executive Compensation--Summary
Compensation Table."
(6) Mr. Niglio's employment with Taj Associates commenced on February 6, 1995.
(7) Former Vice President of Taj Holding, director of Taj Holding and TM/GP and
former Chief Operating Officer of Taj Associates. Mr. Gomes's employment
was terminated on October 3, 1995.
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EMPLOYMENT AGREEMENTS
Taj Associates has an employment agreement with Nicholas L. Ribis (the "Ribis
Taj Agreement") pursuant to which Mr. Ribis acts as Chief Executive Officer of
Taj Associates. Mr. Ribis received a $250,000 signing bonus. Pursuant to the
terms of the Ribis Taj Agreement, in the event that Taj Associates, or any
entity which acquires substantially all of Taj Associates, proposes to engage
in an offering of common shares to the public, Taj Associates and Mr. Ribis
will negotiate new compensation arrangements to include equity participation
for Mr. Ribis. Taj Associates may at any time terminate Mr. Ribis's employment
for "cause" (as such term is defined in the Ribis Taj Agreement). The Ribis Taj
Agreement expires on September 25, 1996. Taj Associates and Mr. Ribis expect to
amend the Ribis Taj Agreement, effective as of June 12, 1995, pursuant to
which, among other things, Mr. Ribis's annual salary will change from $550,000
(with annual increases of 10% on each anniversary) to $499,125. Mr. Ribis acts
as President, Chief Executive Officer and Chief Financial Officer of THCR and
THCR Holdings, the Chief Executive Officer of TCA and Plaza Associates, the
partnerships that own Trump's Castle and Trump Plaza, and receives additional
compensation from such entities. Mr. Ribis devotes approximately one quarter of
his professional time to the affairs of Taj Associates. Following the
consummation of the Merger Transaction, Mr. Ribis will devote 75% of his
professional time to the operations of THCR, Plaza Associates and Taj
Associates. See "Management of THCR--Employment Agreements."
Taj Associates has an employment agreement with R. Bruce McKee pursuant to
which he serves as Senior Vice President, Chief Financial Officer of Taj
Associates. The agreement, which expires on September 30, 1997, provides for an
annual salary of $175,000, a guaranteed bonus of $25,000 and is terminable by
Mr. McKee on each anniversary date of the agreement. Mr. McKee will further be
considered for additional bonus compensation at Taj Associates sole discretion.
Factors considered by Taj Associates in the awarding of all discretionary
bonuses generally are the attainment by Taj Associates of budgeted or
forecasted goals and the individual's perceived contribution to the attainment
of such goals.
Taj Associates has an employment agreement with Larry W. Clark pursuant to
which he serves as Executive Vice President, Casino Operations of Taj
Associates. The agreement, which expires on November 30, 1997, provides for an
annual salary of $300,000 and, in addition, a minimum guaranteed bonus of at
least $97,500 per annum.
Taj Associates has an employment agreement with Nicholas J. Niglio which was
assigned to Taj Associates by TCA on February 6, 1995, pursuant to which he
serves as Senior Vice President, Casino Marketing of Taj Associates. The
agreement, which expires on December 31, 1996, provides for an annual salary of
$250,000 and, an annual bonus at the sole discretion of management of Taj
Associates. Mr. Niglio previously served as Executive Vice President of TCA.
Taj Associates may terminate the employment agreements of Messrs. Clark,
McKee and Niglio in its sole discretion, without cause. If Mr. Clark's
employment agreement is terminated, Taj Associates would be obligated to pay
Mr. Clark the greater of one year's salary or his salary for the number of
months remaining in the agreement, each at his then current salary. If Mr.
McKee's employment agreement is terminated, Taj Associates would be obligated
to pay Mr. McKee an amount equal to one year's then current salary. If Mr.
Niglio's employment agreement is terminated, Taj Associates would be obligated
to pay Mr. Niglio the lesser of three month's salary or his salary for the
number of months remaining in the agreement, each at his then current salary.
Taj Associates entered into a severance agreement with Nicholas F. Moles (the
"Moles Agreement") on August 11, 1994. The Moles Agreement provides that upon
Mr. Moles' termination other than for "cause" (as defined in the Moles
Agreement), loss of his casino key employee license from the CCC or voluntary
resignation, Taj Associates will pay Mr. Moles a severance payment equal to the
amount of his salary at its then current rate for the period of one year.
Taj Associates had an employment agreement with Dennis C. Gomes, pursuant to
which Mr. Gomes served as President and Chief Operating Officer of Taj
Associates. The agreement, provided for an annual salary of $1,500,000, and
annual increases of 10% on each anniversary. Mr. Gomes received a signing bonus
of $600,000. On September 19, 1995, pursuant to the terms of the employment
agreement, Mr. Gomes terminated his employment agreement as President and Chief
Operating Officer of Taj Associates and continued to serve in that position as
an employee-at-will. On October 3, 1995, the Board of Directors of TM/GP
terminated Mr. Gomes
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<PAGE>
from his position as President and Chief Operating Officer of Taj Associates
and Vice President of Taj Holding. On that same date, Trump, the holder of the
Taj Holding Class C Common Stock terminated Mr. Gomes as a Class C Director of
TM/GP and Taj Holding. Mr. Gomes did not receive any severance compensation in
connection with his termination.
COMPENSATION OF DIRECTORS
The directors of Taj Holding are compensated as follows: (i) each Class B
Director is paid $60,000 per year plus $4,000 for each meeting of the Board of
Directors attended; provided, however, that the total fees received by any
Class B Director in any single calendar year may not exceed $90,000 except
under unusual circumstances not anticipated to occur; (ii) Trump is not paid
any fee for serving as a Class C Director; and (iii) each Class C Director
other than Trump is paid a fee of $30,000 per year plus $2,000 for each meeting
of the Board of Directors attended (which meeting fee was waived for a portion
of 1994 and 1995 for all Class C Directors who are employees of Taj Holding and
its affiliates); provided, however, that the total fees received by any Class C
Director in any single calendar year may not exceed $45,000, except under
unusual circumstances not anticipated to occur. All directors receive
reasonable expenses of attendance for each meeting attended. In addition,
members of the TM/GP Audit Committee are compensated as follows: each member
selected by the Class B Directors receives $2,000 per meeting attended and each
member selected by the Class C Directors receives $1,000 per meeting attended.
A total of $384,000 and $175,000 in directors' fees and committee fees was paid
to the Class B Directors and Class C Directors, respectively, in the fiscal
year ended December 31, 1994.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Trump and certain affiliates have engaged in certain related party
transactions. See "Certain Transactions."
In general, the compensation of executive officers of Taj Associates is
determined by the Board of Directors of Taj Holding and TM/GP. No officer or
employee of Taj Associates other than Mr. Ribis who serves on the Board of
Directors of Taj Holding and TM/GP, participated in the deliberations
concerning executive compensation.
The SEC requires registrants to disclose the existence of any other
corporation in which both (i) an executive officer of the registrant serves on
the board of directors and/or compensation committee, and (ii) a director of
the registrant serves as an executive officer. Mr. Ribis, an executive officer
of Taj Associates, is a member of the Board of Directors of other entities in
which members of the Board of Directors of TM/GP, the managing general partner
of Taj Associates (namely, Messrs. Trump, Ribis and Burke), are executive
officers. Messrs. Trump and Ribis, executive officers of Taj Holding, are
members of the Board of Directors of other entities in which members of the
Board of Directors of Taj Holding (namely, Messrs. Trump, Ribis and Burke) are
executive officers. Mr. Ribis, an executive officer of Taj Funding and TTMI,
serves on the Board of Directors of other entities in which the sole Director
of Taj Funding and TTMI (namely, Trump) serves as an executive officer. In
addition, Trump or entities owned by him receive management or services fees
pursuant to fixed formulas provided for in agreements with Taj Associates,
Plaza Associates, THCR and TCA, of which Mr. Ribis is a director or a director
of the managing general partner.
Mr. Ribis serves on the Board of Directors of Taj Holding, which is the 100%
beneficial owner of TM/GP, of which Trump is an executive officer. Messrs.
Trump and Ribis serve on the Board of Directors of TM/GP, which is the managing
general partner of Taj Associates, of which Messrs. Ribis and Burke are
executive officers. Trump, however, does not receive any compensation for
serving as an executive officer of TM/GP or Taj Holding. Messrs. Trump and
Ribis also serve on the Board of Directors of Realty Corp., which leases
certain real property to Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Messrs. Trump and Ribis, however, do not receive any
compensation for serving as executive officers of Realty Corp. Trump is also a
director of TTMI, TTMC and Taj Funding; Mr. Ribis serves as an executive
officer of one or more of such entities; however, he does not receive any
compensation for serving in such capacities.
Messrs. Trump and Ribis serve on the Board of Directors of Plaza Funding,
Inc., the managing general partner of Plaza Associates, of which Messrs. Trump
and Ribis are executive officers. Messrs. Trump and Ribis also serve
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<PAGE>
on the Board of Directors of Plaza Holding, Inc., of which Messrs. Trump, Ribis
and Burke are also executive officers. Trump is not compensated by such
entities for serving as an executive officer; however, he has entered into a
personal services agreement with Plaza Associates and THCR. Messrs. Ribis and
Burke are not compensated by the foregoing entities; however, they are
compensated by Plaza Associates for their service as executive officers.
Trump serves on the Board of Directors of THCR and TC/GP, Inc., of which
Messrs. Ribis and Burke are executive officers. Trump is not compensated by
such entities for serving as an executive officer; however, a corporation
controlled by him has entered into a services agreement with TCA. Messrs. Ribis
and Burke are not compensated by the foregoing entities; however, they are
compensated by TCA for their service as executive officers.
CERTAIN TRANSACTIONS
Payments to affiliates in connection with any such transactions are governed
by the provisions of the Plaza Mortgage Note Indenture and the Senior Note
Indenture, and may also be governed by the provisions of the Taj Note
Indenture, which provisions generally require that such transactions be on
terms as favorable as would be obtainable from an unaffiliated party, and
require the approval of a majority of the independent directors of THCR for
certain affiliated transactions.
THCR
Trump entered into the Trump Executive Agreement, the Contribution Agreement
and the License Agreement in June 1995, and is currently the sole limited
partner of THCR Holdings. See "Management of THCR--Employment Agreements" and
"Business of THCR--Trademark/Licensing." See "Description of the THCR Holdings
Partnership Agreement." The only cash compensation paid to Trump in connection
with his services to THCR is pursuant to the Trump Executive Agreement, other
than payments paid to TPM under the TPM Services Agreement, which payments are
currently pledged by TPM to secure lease payments for a Super Puma helicopter
that TPM makes available to Plaza Associates. See "--Plaza Associates--TPM
Services Agreement."
Upon consummation of the June 1995 Offerings, Trump contributed to the
capital of Trump Indiana and other jurisdiction subsidiaries payments made by
him relating to expenditures for the development of Trump Indiana and other
gaming ventures. As of June 12, 1995 these advances totaled approximately $4.4
million. Of these amounts, approximately $3.0 million was used to fund expenses
related to the development of Trump Indiana. In order to fund such expenses,
THCR Holdings lent to Trump $3.0 million and Trump issued to THCR Holdings a
five-year promissory note bearing interest at a fixed rate of prime rate, plus
1%, payable annually. The promissory note will be automatically canceled in the
event that at any time during the periods set forth below, the THCR Common
Stock trades on the New York Stock Exchange, or any other applicable national
exchange or over-the-counter market, at a price per share equal to or greater
than the prices set forth below (subject to adjustment in certain
circumstances) for any ten trading days during any 15 consecutive trading day
period:
<TABLE>
<S> <C>
If on or prior to June 12, 1997 ...................................... $25.00
If on or prior to June 12, 1998 ...................................... $27.50
If on or prior to June 12, 1999 ...................................... $30.00
If on or prior to June 12, 2000 ...................................... $32.50
</TABLE>
THCR has entered into a ten year lease with The Trump-Equitable Fifth Avenue
Company, a corporation wholly owned by Trump, dated as of July 1, 1995, for the
lease of office space in The Trump Tower in New York City, which THCR may use
for its general executive and administrative offices. The fixed rent is
$115,500 per year, paid in equal monthly installments, for the period from July
1, 1995 to June 30, 2000 and will be $129,250 per year, paid in equal monthly
installments, for the period from July 1, 2000 to June 30, 2005. In addition,
THCR will pay as additional rent, a portion of the property taxes due each
year. THCR has the option to terminate this lease upon ninety days written
notice and payment of $32,312.50.
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<PAGE>
In connection with the Merger Transaction, Trump and THCR entered into an
agreement, dated January 8, 1996, pursuant to which Trump agreed to take the
actions contemplated to be taken by Trump in connection with the Merger
Transaction, including to vote, or cause to be voted, all shares of THCR Common
Stock and THCR Class B Common Stock beneficially owned by Trump in favor of the
approval of the Merger Transaction. THCR agreed to use reasonable efforts to
fulfill, and cause to be fulfilled, those obligations owed to Trump in
connection with the Merger Transaction.
Mr. Ribis, the President, Chief Executive Officer and Chief Financial Officer
of THCR, was Counsel to the law firm of Ribis, Graham and Curtin, which serves
as New Jersey Counsel to THCR, THCR Holdings and its subsidiaries, Taj
Holdings, Taj Associates, and certain of their affiliated entities until
December 1995.
PLAZA ASSOCIATES
Plaza Associates has joint property insurance coverage with TCA, Taj
Associates and other entities affiliated with Trump for which the annual
premium paid by Plaza Associates was approximately $1.4 million for the twelve
months ended May 1996.
Plaza Associates leased from Taj Associates certain office facilities located
in Pleasantville, New Jersey. In 1993 and 1992, lease payments by Plaza
Associates to Taj Associates totaled approximately $30,000 and $138,000,
respectively. Such lease terminated on March 19, 1993, and Plaza Associates
vacated the premises. Through February 1, 1993, Plaza Associates also leased
from Trump approximately 120 parking spaces at Trump Plaza East for
approximately $5.50 per parking space per day, with payments under such
arrangement for the years ended December 31, 1993 and December 31, 1992
totaling $21,000 and $227,000, respectively.
Plaza Associates also leased portions of its warehouse facility located in
Egg Harbor Township, New Jersey to TCA until January 31, 1994; lease payments
by TCA to Plaza Associates totaled $6,000, $15,000 and $14,000 in 1994, 1993
and 1992, respectively.
Seashore Four is the fee owner of a parcel of land constituting a portion of
the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to the
SFA Lease. Seashore Four was assigned the lessor's interest in the existing SFA
Lease in connection with its acquisition of fee title to such parcel from a
non-affiliated third party in November 1983. The SFA Lease was entered into by
Plaza Associates with such third party on an arm's-length basis. Plaza
Associates recorded rental expenses of approximately $788,000, $900,000 and
$900,000 in 1995, 1994 and 1993, respectively, concerning rent owed to Seashore
Four.
Trump Seashore is the fee owner of a parcel of land constituting a portion of
the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to the
TSA Lease. In July 1988, Trump Seashore exercised a $10 million option to
purchase the fee title to such parcel from a non-affiliated third party. In
connection therewith, Trump Seashore was assigned the lessors' interest in the
Trump Seashore Lease, which interest has, however, been transferred to UST. See
"Business of THCR--Properties." Plaza Associates made rental payments to Trump
Seashore of approximately $750,000, $1.0 million and $1.0 million in 1995, 1994
and 1993, respectively.
Trump World's Fair. In June 1989, Trump Crystal Tower Associates Limited
Partnership ("Trump Crystal"), a New Jersey limited partnership wholly owned by
Trump, acquired from Elsinore Shore Associates all of the assets constituting
the former Atlantis Casino Hotel ("Atlantis"), which is located on The
Boardwalk adjacent to the Atlantic City Convention Center on the opposite side
from Trump Plaza and is otherwise referred to herein as Trump World's Fair.
Prior to such acquisition, all of the Atlantis' gaming operations were
discontinued. The facility was renamed the Trump Regency Hotel and, in August
1990, pursuant to a triple net lease with an affiliate of Plaza Associates,
leased to Plaza Associates, which operated it solely as a non-casino hotel.
During such period of operation, losses attributable to the former Trump
Regency Hotel aggregating approximately $14.1 million adversely affected the
results of operations of Plaza Associates. Pursuant to the 1992 Plaza
Restructuring, Plaza Associates ceased operating the former Trump Regency Hotel
as of September 30, 1992. As part of the 1992 Plaza Restructuring, the triple-
net lease was terminated and Plaza Associates issued to Chemical Bank
("Chemical"), the assignee of rents payable under such lease, a promissory note
in the original principal amount of $17.5 million (the "Regency Note"). At such
time, title to the former Trump Regency Hotel
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<PAGE>
was transferred by Trump to ACFH Inc. ("ACFH"), a wholly owned subsidiary of
Chemical. From that time until June 12, 1995, the former Trump Regency Hotel
was operated on behalf of ACFH as a non-casino hotel by Sovereign Management, a
third party unaffiliated with THCR, Trump or their respective affiliates.
Pursuant to an agreement between Trump Crystal, and ACFH, Trump Crystal granted
ACFH a non-exclusive license to use the "Trump" name in connection with such
property. Plaza Associates repaid the Regency Note with a portion of the
proceeds from the sale of the Plaza Mortgage Notes and PIK Notes.
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical and ACFH. The Original Chemical
Option Agreement granted to Trump an option to purchase (i) the former Trump
Regency Hotel (including the land, improvements and personal property used in
the operation of the hotel) and (ii) certain promissory notes (including a
personal promissory note of Trump payable to Chemical for $35.9 million (the
"Trump Note")) made by Trump and/or certain of his affiliates and payable to
Chemical (the "Chemical Notes") which are secured by certain real estate assets
located in New York, unrelated to Plaza Associates, including the Trump Note
which was made by Trump on July 20, 1987. As of September 30, 1995, the
aggregate amount owed by Trump and his affiliates under the Chemical Notes
(none of which constitutes an obligation of Plaza Associates) was approximately
$65.8 million. In connection with exercise of the Trump World's Fair Purchase
Option, as discussed below, the Trump Note was canceled.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $80 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option by
January 5, 1994. In addition, the Original Chemical Option Agreement provided
for an expiration of the option on May 8, 1994, subject to an extension until
June 30, 1994 upon payment of an additional $250,000 on or before May 8, 1994.
The Original Chemical Option Agreement did not allocate the purchase price
among the assets subject to the option or permit the option to be exercised for
some, but not all, of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Plaza Associates was to make the initial $1 million payment, and, in
consideration of such payment to be made by Plaza Associates, Trump agreed with
Plaza Associates that, if Trump was able to acquire the former Trump Regency
Hotel pursuant to the exercise of the option, he would make it available for
the sole benefit of Plaza Associates on a basis consistent with Plaza
Associates' contractual obligations and requirements. Trump further agreed that
Plaza Associates would not be required to pay any additional consideration to
Trump in connection with any assignment to Plaza Associates of the option to
purchase the former Trump Regency Hotel. On January 5, 1994, Plaza Associates
obtained the approval of the CCC to make the $1 million payment, and the
payment was made on that date.
On June 16, 1994, Trump, Chemical and ACFH amended and restated the Original
Chemical Option Agreement (the "First Amended Chemical Option Agreement"). The
First Amended Chemical Option Agreement provided for an extension of the
expiration of the option through September 30, 1994, upon payment of $250,000.
Such payment was made on June 27, 1994. The First Amended Chemical Option
Agreement provided for a $60 million option price for the former Trump Regency
Hotel and the Trump Note, and a separate $20 million option price for the other
Chemical Notes. On August 30, 1994, Trump, Chemical and ACFH entered into an
amendment to the First Amended Chemical Option Agreement (the "Second Amended
Chemical Option Agreement"). The Second Amended Chemical Option Agreement
provided for an extension of the expiration of the option through March 31,
1995 upon the payment of $50,000 a month for the period October through
December 1994, and $150,000 a month for the period January through March 1995.
Plaza Associates received the approval of the CCC and has made such payments.
On March 6, 1995, Trump, Chemical and ACFH entered into an amendment to the
Second Amended Chemical Option Agreement (the "Third Amended Chemical Option
Agreement") or the Trump World's Fair Purchase Option. On June 12, 1995, Trump
exercised the Trump World's Fair Purchase Option for $58,150,000 ($60 million
less $1,850,000 in option payments which were available as of that date to
offset the original exercise price), and title to Trump World's Fair was
transferred via directed deed from ACFH to Plaza Associates. In connection with
the exercise of the Trump World's Fair Purchase Option, the Trump Note was
canceled. THCR is currently in the process of renovating and integrating Trump
World's Fair into Trump Plaza. See "Business of THCR--Trump Plaza--The Trump
Plaza Expansion."
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<PAGE>
Trump Plaza East. In 1993, Plaza Associates received the approval of the CCC,
subject to certain conditions, for the expansion of its hotel facilities at
Trump Plaza East. On June 24, 1993, in connection with the 1993 refinancing of
Trump Plaza, (i) Trump transferred title to Trump Plaza East to Missouri
Boardwalk, Inc. ("Boardwalk"), a wholly owned subsidiary of Midlantic National
Bank ("Midlantic"), in exchange for a reduction in indebtedness to Midlantic in
an amount equal to the sum of fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease (as
defined), (ii) Boardwalk leased Trump Plaza East to Trump (the "Trump Plaza
East Lease") for a term of five years, which expires on June 30, 1998, during
which time Trump was obligated to pay Boardwalk $260,000 per month in lease
payments, and (iii) Plaza Associates acquired the Trump Plaza East Purchase
Option. In October 1993, Plaza Associates assumed the Trump Plaza East Lease
and related expenses. In addition, Plaza Associates has the Right of First
Offer upon any proposed sale of all or any portion of the fee interest in Trump
Plaza East during the term of the Trump Plaza East Purchase Option. Pursuant to
the Right of First Offer, Plaza Associates has ten days after receiving written
notice from the grantor of the proposed sale to commit to exercise the Right of
First Offer. If Plaza Associates commits to exercise the Right of First Offer,
it has ten days from the date of commitment to deposit $3,000,000 with the
grantor, to be credited towards the purchase price or to be retained by the
grantor if the closing, through no fault of the grantor, does not occur within
90 days (or, subject to certain conditions, 120 days) of the date of the
commitment. If Plaza Associates determines not to timely exercise the Right of
First Offer, the grantor thereof may sell Trump Plaza East to a third party,
subject, however, to the Trump Plaza East Purchase Option and the lease
associated with Trump Plaza East. Trump, individually, also has been granted by
such lender the Right of First Offer upon a proposed sale of all or any portion
of Trump Plaza East during the term of the Trump Plaza East Purchase Option.
Trump has agreed with Plaza Associates that his Right of First Offer will be
subject to Plaza Associates' prior exercise of its Right of First Offer (with
any decision of Plaza Associates requiring the approval of the independent
directors of Plaza Funding, acting as the managing general partner of Plaza
Associates). Acquisition of Trump Plaza East by Plaza Associates would under
certain circumstances (provided there are no events of default under the Trump
Plaza East Lease or the Trump Plaza East Purchase Option and provided that
certain other events had not theretofore or do not thereafter occur) discharge
Trump's obligation to Midlantic in full.
TPM Services Agreement. On June 24, 1993, Plaza Associates and TPM entered
into an agreement (the "TPM Services Agreement") which amended and restated an
earlier services agreement. Pursuant to the TPM Services Agreement, TPM is
required to provide to Plaza Associates, from time to time when reasonably
requested, consulting services on a non-exclusive basis, relating to marketing,
advertising, promotional and other similar and related services (the "TPM
Services") with respect to the business and operations of Plaza Associates. In
addition, the TPM Services Agreement contains a non-exclusive "license" of the
"Trump" name. TPM is not required to devote any prescribed amount of time to
the performance of its duties. In consideration for the TPM Services, Plaza
Associates pays TPM an annual fee of $1.0 million in equal monthly
installments. In addition to such annual fee, Plaza Associates reimburses TPM
on a monthly basis for all reasonable out-of-pocket expenses incurred by TPM in
performing its obligations under the TPM Services Agreement. Plaza Associates
paid TPM $1,321,000, $1,288,000 and $1,247,000 in 1995, 1994 and 1993,
respectively, for the TPM Services. Pursuant to the TPM Services Agreement,
Plaza Associates will agree to hold TPM, its officers, directors and employees
harmless from and against any loss arising out of or in connection with the
performance of the TPM Services and to hold Trump harmless from and against any
loss arising out of the license of the "Trump" name. The TPM Services Agreement
provides that its term is coextensive with the period during which any Plaza
Notes remain outstanding.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to Plaza
Associates. Pending approval by the lessor of the helicopter, it is currently
contemplated that the stock of TPM will be transferred by Trump to THCR
Holdings, which will in turn assume the lease and related obligations, as well
as become entitled to all amounts payable under the TPM Services Agreement.
Indemnification Agreements. In addition to the indemnification provisions in
THCR's and its subsidiaries' employment agreements (see "Management of THCR--
Employment Agreements"), certain former and current
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Directors of Plaza Funding entered into separate indemnification agreements in
May 1992 with Plaza Associates pursuant to which such persons are afforded the
full benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates has also entered into an
Indemnification Trust Agreement in November 1992 (the "Trust Agreement") with
Midlantic National Bank (the "Indemnification Trustee") pursuant to which the
sum of $100,000 was deposited by Plaza Associates with the Indemnification
Trustee for the benefit of the Directors of Plaza Funding and certain former
Directors of Trump Plaza GP to provide a source for indemnification for such
persons if Plaza Associates, Plaza Funding or Trump Plaza GP, as the case may
be, fails to immediately honor a demand for indemnification by such persons.
The indemnification agreements with the directors of Plaza Funding and
Directors of Trump Plaza GP were amended in June 1993 to provide, among other
things, that Plaza Associates would maintain directors' and officers' insurance
covering such persons during the ten-year term (subject to extension) of the
Indemnification Agreements; provided, however, that if such insurance would not
be available on a commercially practicable basis, Plaza Associates could, in
lieu of obtaining such insurance, annually deposit an amount in the
Indemnification Trust Fund equal to $500,000 for the benefit of such directors;
provided, however, that deposits relating to the failure to obtain such
insurance shall not exceed $2.5 million.
TAJ HOLDING AND AFFILIATES
On January 8, 1996, as an inducement for Taj Holding, THCR and Merger Sub to
enter into the Merger Agreement, Trump agreed to vote, or cause to be voted,
all shares of Taj Holding Class C Common Stock beneficially owned by Trump in
favor of the approval and adoption of the Merger Agreement.
During the fiscal years ended December 31, 1993, 1994 and 1995, Taj
Associates reimbursed Taj Holding $1,733,000, $2,171,000 and $1,554,000,
respectively, for all amounts necessary to permit TM/GP or Taj Holding (a) to
make payments that TM/GP or Taj Holding was required to make pursuant to the
terms of the TM/GP Certificate of Incorporation and the Taj Holding Certificate
of Incorporation (generally for indemnification of officers and directors), (b)
to pay fees to directors (including fees for serving on a committee), (c) to
pay all other expenses of TM/GP and Taj Holding and (d) to permit Taj Holding
to redeem the Taj Holding Class B Common Stock when required to make such
redemption pursuant to the terms of the Taj Holding Certificate of
Incorporation. Taj Holding did not engage in any other transactions with its
affiliates during the fiscal years ended December 31, 1993, 1994 and 1995.
Taj Funding has not engaged in any transactions with its affiliates, except
for the loan of funds made to Taj Associates in exchange for an intercompany
note secured by a mortgage. Both the note and the mortgage were amended in 1991
pursuant to the 1991 Taj Restructuring.
Taj Associates has entered into a lease with The Trump-Equitable Fifth Avenue
Co., a corporation wholly owned by Trump, for the lease of office space in The
Trump Tower in New York City, which Taj Associates uses as a marketing office.
The monthly payments under the lease had been $1,000, and the premises were
leased at such rent for four months in 1992, the full twelve months in 1993 and
1994 and eight months in 1995. On September 1, 1995, the lease was renewed for
a term of five years with an option for Taj Associates to cancel the lease on
September 1 of each year, upon six months' notice and payment of six months'
rent. Under the renewed lease, the monthly payments are $2,184.
Taj Associates currently leases the Specified Parcels from Realty Corp.,
consisting of land adjacent to the site of the Taj Mahal, which is being used
primarily for a bus terminal, surface parking and the Taj Entertainment
Complex, as well as the Steel Pier, and a warehouse complex. During 1993, 1994
and 1995, lease obligations to Realty Corp. for these facilities were
approximately $3.3 million per year. Upon consummation of the Merger
Transaction, Taj Associates will purchase the Specified Parcels from Realty
Corp. See "The Merger Transaction."
In April 1991, Taj Associates purchased from TCA for $1,687,000 two adjacent
parcels of land on the Pleasantville-Egg Harbor Township border, constituting
approximately 10 acres. The first parcel contains two
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buildings, certain fleet maintenance facilities and an office building and
warehouse facility, portions of which were leased to Trump Plaza Associates.
The lease expired in March 1993 and Trump Plaza Associates has vacated. Taj
Associates currently leases the space to a commercial tenant. The second parcel
is unimproved.
In December 1994, Taj Associates entered into a one-year agreement with TCA
pursuant to which TCA leases to Taj Associates 300 parking spaces (500 parking
spaces during the months of May to September) at a rate of 50 cents per space
per day, to be used for employee parking. The agreement expired in December
1995, however, TCA and Taj Associates are currently negotiating an extension of
the agreement and have agreed to continue the lease on a month-by-month basis.
Taj Associates engages in various transactions with Trump Plaza and Trump's
Castle. These transactions are charged at cost or normal selling price in the
case of retail items and include certain shared payroll costs as well as
complimentary services offered to customers. Expenses incurred by Taj
Associates payable to TCA for the years ended December 31, 1993, 1994 and 1995
were approximately $1,100,000, $1,167,000, and $1,072,000, respectively, of
which all but $69,000, $30,000, and $164,000, respectively, was paid or offset
against amounts owed to Taj Associates by TCA. Expenses incurred by Taj
Associates payable to the Plaza Associates for the years ended December 31,
1993, 1994 and 1995 were approximately $83,000, $149,000 and $445,000,
respectively, all of which were offset against amounts owed to Taj Associates
by Plaza Associates, with exception of $167,000 at December 31, 1995.
On October 4, 1991, Taj Associates entered into the Taj Associates-First
Fidelity Guarantee to guarantee performance by Realty Corp. of its obligations
under the First Fidelity Loan. The Taj Associates-First Fidelity Guarantee is
limited to any deficiency in the amount owed under the First Fidelity Loan when
due, up to a maximum of $30 million. In connection with the purchase of the
Specified Parcels, First Fidelity will, among other things, release Taj
Associates from the Taj Associates-First Fidelity Guarantee. See "Business of
Taj Holding--Certain Indebtedness--First Fidelity Loan/Specified Parcels."
During 1992 and prior years, Taj Associates had an arrangement with the Trump
Shuttle, Inc. (the "Trump Shuttle"), which at the time was beneficially owned
by Trump, for the provision of airline services to Atlantic City on behalf of
Taj Associates patrons. During 1992, Taj Associates incurred $29,000 in charges
from the Trump Shuttle, all of which was paid.
Taj Services Agreement. Taj Associates and Trump have entered into the Taj
Services Agreement, which became effective in April 1991, and which provides
that Trump will render to Taj Associates marketing, advertising, promotional
and related services with respect to the business operations of Taj Associates
through December 31, 1999. In consideration for the services to be rendered,
Taj Associates pays an annual fee (the "Annual Fee") equal to 1 1/2% of Taj
Associates' earnings before interest, taxes and depreciation less capital
expenditures for such year, with a minimum base fee of $500,000 per annum. The
base fee is payable monthly with the balance due April 15 of the following
year. During 1993, 1994 and 1995, Trump earned approximately $1.6 million, $1.4
million and $1.7 million, respectively, in respect of the Annual Fee, including
amounts paid to a third party pursuant to an assignment agreement. In addition
to the Annual Fee, Taj Associates reimburses Trump on a monthly basis for all
reasonable out-of-pocket expenses up to certain aggregate amounts incurred by
Trump in performing his obligations under the Taj Services Agreement. During
1993, 1994 and 1995, Taj Associates reimbursed Trump $232,000, $224,000 and
$276,000, respectively, for expenses pursuant to the Taj Services Agreement, of
which $127,000, $148,000 and $174,000, respectively, was incurred to an
affiliate for air transportation. Taj Associates has agreed to indemnify Trump
from and against any licensing fees arising out of his performance of the Taj
Services Agreement, and against any liability arising out of his performance of
the Taj Services Agreement, other than that due to his gross negligence or
willful misconduct. In connection with the Merger, the Taj Services Agreement
will be terminated.
Taj License Agreement. On April 1, 1991, in connection with the Taj Services
Agreement, Taj Associates and Trump entered into an Amended and Restated
License Agreement (the "Taj License Agreement") which amended and restated an
earlier license agreement between the parties. Pursuant to the Taj License
Agreement,
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Taj Associates has the non-exclusive right to use the name and likeness of
Trump, and the exclusive right to use the name and related marks and designs
of the Trump Taj Mahal Casino Resort (collectively, the "Taj Marks"), in its
advertising, marketing and promotional activities through December 31, 1999.
All uses by Taj Associates of the names, marks, licenses and designs under the
Taj License Agreement are subject to the prior written approval of Trump.
Trump has agreed to indemnify Taj Associates against any liability for
trademark or copyright infringement (in connection with the use by Taj
Associated of the Taj Marks in accordance with the Taj License Agreement)
arising solely be reason of any license agreement or other agreement entered
into by Trump with respect to the Taj Marks. Taj Associates has collaterally
assigned its right under the Taj License Agreement to the Taj Bond Trustee.
Indemnification Agreements. In addition to the indemnification provisions in
Taj Associates employment agreements (see "Management of Taj Holdings--
Employment Agreements"), the Merger Agreement provides for indemnification of
any present or former director, officer, employee or agent of Taj Holding and
TM/GP, arising from his services as such, within six years of the Effective
Time. See "The Merger Agreement--Indemnification and Insurance."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THCR
The following table sets forth, as of December 31, 1995 (without giving
effect to the transactions contemplated by the Merger Transaction), certain
information regarding the beneficial ownership of 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 members of the
officers and directors of THCR, such information is based solely on a review
of Schedules 13G filed with the SEC.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------------
NAME NUMBER PERCENT
- ---- ------------ ----------
<S> <C> <C>
Donald J. Trump.................................... 6,666,917(/1/) 39.8%
Nicholas L. Ribis.................................. 66,667(/2/) *
John P. Burke...................................... 300(/3/) *
Robert M. Pickus................................... 200 *
Wallace B. Askins.................................. 3,000 *
Don M. Thomas...................................... 200 *
Peter M. Ryan...................................... -- --
Hellman, Jordan Management Co., Inc................ 882,700 8.8
The Capital Group Companies, Inc................... 1,064,000(/5/) 10.6
State Street Research & Management Company......... 1,193,600(/6/) 11.9
Oppenheimer Group, Inc............................. 1,227,200(/7/) 12.2
All officers and directors of THCR (7 persons)..... 6,737,284 40.2
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated.
- --------
* Less than 1%.
(1) These shares include 6,666,667 shares of THCR Common Stock, into which
Trump's limited partnership interest in THCR Holdings is convertible,
subject to certain adjustments. See "Description of the THCR Holdings
Partnership Agreement." These shares do not include 300 shares of THCR
Common Stock held by his wife, Mrs. Marla M. Trump, of which shares Trump
disclaims beneficial ownership. Trump is also the beneficial owner of the
outstanding shares of the THCR Class B Common Stock (1,000 shares). The
THCR Class B Common Stock has voting power equivalent to the voting power
of the THCR Common Stock into which Trump's limited partnership interest
is convertible. Upon conversion of all or any portion of the THCR Holdings
limited partnership interest into shares of THCR Common Stock, the
corresponding voting power of the THCR Class B Common Stock will be
proportionately diminished. See "Description of THCR Capital Stock."
(2) Represents the vested portion of a stock bonus awarded to the President of
THCR pursuant to the 1995 Stock Plan. See "Management of THCR--Executive
Compensation." These shares do not include 3,081 shares and 2,739 shares
held by Mr. Ribis as custodian for his son, Nicholas L. Ribis, Jr., and
his daughter, Alexandria Ribis, respectively, of which shares Mr. Ribis
disclaims beneficial ownership.
(3) Mr. Burke shares voting and dispositive power of 100 of these shares with
his wife. The number in the table does not include 100 shares beneficially
owned solely by his wife, of which shares Mr. Burke disclaims beneficial
ownership.
(4) 75 State Street, Suite 2420, Boston, Massachusetts 02109. Hellman, Jordan
Management Co., Inc. ("Hellman") is an investment adviser has sole
dispositive power over all of these shares and sole voting power over
817,700 of these shares. Hellman's clients have the power to revoke
Hellman's dispositive power upon thirty-days written notice.
(5) 333 South Hope Street, Los Angeles, California 90071. The Capital Group
Companies, Inc. ("Capital Group") has sole dispositive power over these
shares and sole voting power over 256,000 of these shares. These shares
include 410,000 and 654,000 shares beneficially owned by Capital Research
and Management Company ("Capital Research") and Capital Guardian Trust
Company ("Capital Guardian"), respectively. Capital Group is the parent
holding company of Capital Research and Capital Guardian. Capital Group,
Capital Research and Capital Guardian disclaim beneficial ownership of
these shares.
(6) One Financial Center, 30th Floor, Boston, Massachusetts 02111. State
Street Research and Management Company ("State Street") is an investment
adviser and disclaims beneficial ownership of these shares. Metropolitan
Life Insurance Company, One Madison Avenue, New York, New York 10010, is
the parent holding company of State Street.
(7) Oppenheimer Tower, World Financial Center, New York, New York 10281.
Oppenheimer Group, Inc. ("Oppenheimer") has shared voting and dispositive
power over these shares. These shares include 1,029,300 shares
beneficially owned by Oppenheimer Capital, an investment adviser, of which
Oppenheimer is the parent holding company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF TAJ HOLDING
Taj Holding Class A Common Stock and Taj Holding Class B Common Stock. The
following tables set forth, as of December 31, 1995 (without giving effect to
the Merger Transaction), certain information regarding the beneficial
ownership of the Taj Holding Class A Common Stock and Class B Common Stock by
each person who is known to Taj Holding to own beneficially more than 5% of
Taj Holding Class A Common Stock and Taj Holding Class B Common Stock. Such
information is based, in part, upon information provided by certain of the
stockholders identified below. Such information is based solely on information
provided to Taj Holding by such persons. As of December 31, 1995, no directors
or executive officers of Taj Holding beneficially owned any shares of Taj
Holding Class A Common Stock or Taj Holding Class B Common Stock.
BENEFICIAL OWNERSHIP OF TAJ HOLDING CLASS A COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------
NAME NUMBER PERCENT
- ---- ----------- ----------
<S> <C> <C>
Prudential Securities, Inc.(/1/)(/6/).................... 381,840 28.3
Putnam Investment Management, Inc.(/2/)(/6/)............. 135,000 10.0
Internationale Nederlander (U.S.) Capital
Corporation(/3/)(/6/)................................... 110,000 8.2
Grace Brothers Ltd.(/4/)(/6/)............................ 95,000 7.0
SC Fundamental Value Fund, L.P./ SC Fundamental Value BVI
Ltd.(/5/)(/6/).......................................... 90,000 6.7
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated.
- --------
(1) 48 Par La Ville Road, Suite 463, Hamilton MH11, Bermuda.
(2) One Seaport Plaza, New York, NY 08401.
(3) 135 East 57th Street, New York, NY 10022
(4) 950 Third Avenue, New York, NY 10022.
(5) 512 Fifth Avenue, New York, NY 10022
(6) Party to, or bound by, the Class A Agreement. See "Special Factors--
Background to the Merger Transaction."
BENEFICIAL OWNERSHIP OF TAJ HOLDING CLASS B COMMON STOCK
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------
NAME NUMBER PERCENT
---- ----------- ----------
<S> <C> <C>
Kemper Financial Services, Inc.(/1/)................... 112,152 14.7%
Putnam Investment Management, Inc.(/2/)................ 101,148 13.9%
</TABLE>
- --------
(1) 120 South LaSalle Street, Chicago, IL 60603. Kemper Financial Services,
Inc., a wholly owned subsidiary of Kemper Financial Companies, Inc.,
serves as an investment advisor to certain mutual funds and various other
managed accounts, including those which hold Taj Holding Class B Common
Stock. As a result, Kemper Financial Services, Inc. shares with such
mutual funds and managed accounts voting and dispositive power over the
shares of Taj Holding Class B Common Stock held by those entities.
(2) One Post Office Square, Boston, MA 02109. Putnam Investment Management,
Inc. serves as an investment advisor to Putnam Funds, and as a result
shares with each Putnam Fund voting and dispositive power over the shares
of Taj Holding Class B Common Stock held by Putnam Funds. Marsh & McLennan
Companies, Inc. and Putnam Investments, Inc. are deemed to control Putnam
Investment Management, Inc., and are each therefore deemed to beneficially
own Putnam Investment Management, Inc.'s shares of Taj Holding Class B
Common Stock reported above. Marsh & McLennan Companies, Inc. is the
controlling shareholder of Putnam Investment Management, Inc.
Except as otherwise noted above, Taj Holding believes the beneficial holders
listed above have sole voting and investment power regarding the shares of Taj
Holding Class A Common Stock and Taj Holding Class B Common Stock shown as
being beneficially owned by them.
Taj Holding Class C Common Stock. Trump, a Class C Director of Taj Holding,
owns 100% of the outstanding shares of Taj Holding Class C Common Stock.
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DESCRIPTION OF THCR CAPITAL STOCK
The following summary description of the capital stock of THCR does not
purport to be complete and is qualified in its entirety by reference to the
THCR Certificate of Incorporation and the THCR By-Laws, copies of which are
filed as exhibits to this Registration Statement of which this Proxy
Statement-Prospectus is a part.
GENERAL
The authorized capital stock of THCR consists of (i) 50,000,000 shares of
THCR Common Stock, of which 10,066,667 shares are currently issued and
outstanding, (ii) 1,000 shares of THCR Class B Common Stock, all of which are
currently issued and outstanding, and (iii) 1,000,000 shares of Preferred
Stock, par value $1.00 per share (the "THCR Preferred Stock"), none of which
are issued and outstanding. Upon consummation of the Merger Transaction
(assuming all of the holders of Taj Holding Class A Common Stock elect Stock
Consideration and assuming a price of $ per share of THCR Common Stock as
the Market Value in connection with the Merger and as the public offering
price in the THCR Stock Offering), there will be shares of THCR Common
Stock outstanding.
THCR COMMON STOCK AND THCR CLASS B COMMON STOCK
Holders of THCR Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Subject to the rights of the holders of the THCR Class B Common
Stock described below, holders of a majority of the shares of THCR Common
Stock entitled to vote in any election of directors and may elect all of the
directors standing for election. Holders of THCR Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the THCR Board
of Directors out of funds legally available therefor. Upon the liquidation,
dissolution or winding up of THCR, the holders of THCR Common Stock and THCR
Class B Common Stock will share ratably, out of the assets of THCR legally
available for distribution to its stockholders, to the extent of their par
value, $.01 per share. After such payment is made, the holders of the THCR
Common Stock will be entitled to participate ratably in all of the remaining
assets of THCR available for distribution. Holders of THCR Common Stock have
no subscription, redemption or conversion rights. 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. All the outstanding shares of THCR Common Stock are, and the shares of
THCR Common Stock to be issued in connection with the Merger Transaction, when
issued and paid for will be, fully paid and non-assessable. The rights,
preferences and privileges of holders of THCR Common Stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any
series of THCR Preferred Stock that THCR may designate and issue in the
future.
Trump currently is the beneficial owner of all 1,000 outstanding shares of
THCR Class B Common Stock. The THCR Class B Common Stock votes together with
the THCR Common Stock as a single class on all matters submitted to
stockholders of THCR for a vote or in respect of which consents are solicited
(other than in connection with certain amendments of the THCR Certificate of
Incorporation described below). The number of votes represented by the THCR
Class B Common Stock held by any holder equals the number of shares of THCR
Common Stock issuable to the holder upon the conversion of such holder's
partnership interest in THCR Holdings into THCR Common Stock. Upon such
conversion, the corresponding voting power of shares of THCR Class B Common
Stock (equal in voting power to the number of shares of THCR Common Stock
issued upon such conversion) will be proportionately diminished. The THCR
Class B Common Stock provides Trump with a voting interest in THCR which is
proportionate to his equity interest in THCR Holdings' assets represented by
his limited partnership interest. Except for the right to receive par value
upon liquidation, the THCR Class B Common Stock has no right to receive any
dividend or other distribution in respect of the equity of THCR. In addition,
the THCR Certificate of Incorporation provides that the THCR Class B Common
Stock is not entitled to a separate class vote on any matters submitted to the
stockholders of THCR for their approval, except for any amendment of the terms
of the THCR Class B Common Stock, which require (x) the affirmative vote of
the THCR Class B Common Stock, voting as a separate class, and (y) the
affirmative vote of a majority of the shares
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<PAGE>
of THCR Common Stock held by persons who are not beneficial owners of THCR
Class B Common Stock, voting as a separate class.
In accordance with the requirements of the Casino Control Act and the
Indiana Riverboat Gambling Act, the THCR Certificate of Incorporation provides
that all securities of THCR are held subject to the condition that, if a
holder thereof is found to be disqualified, such holder shall: (a) dispose of
his interest in THCR; (b) not receive any dividends or interest upon any such
securities; (c) not exercise, directly or indirectly or through any trustee or
nominee, any right conferred by such securities; and (d) not receive any
remuneration in any form from the casino license for services rendered or
otherwise. The THCR Certificate of Incorporation further provides that THCR
may redeem any shares of THCR's capital stock held by any person or entity
whose holding of shares may cause the loss or non-reinstatement of a
governmental license held by THCR. Such redemption shall be at the lesser of
fair market value (as defined in the THCR Certificate of Incorporation), or
the purchase price of such capital stock. The THCR Certificate of
Incorporation may also contain other provisions required by the gaming laws of
other jurisdictions.
The Transfer Agent for the THCR Common Stock is Continental Stock Transfer &
Trust Company, Jersey City, New Jersey.
THCR PREFERRED STOCK
THCR's Board of Directors may, without further action by THCR's
stockholders, issue THCR Preferred Stock in one or more series and fix the
rights, preferences, privileges, qualifications, limitations and restrictions
of the THCR Preferred Stock including dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of
shares constituting any series or the designation of such series. The issuance
of THCR Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of THCR without further action by the
stockholders and may adversely affect the voting and other rights of the
holders of THCR Common Stock. At present, THCR has no plans to issue any of
the THCR Preferred Stock.
PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS
The THCR Certificate of Incorporation and the THCR By-Laws contain
provisions that could have anti- takeover effects. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors of THCR and in the policies formulated
by the Board of Directors of THCR and to discourage certain types of
transactions which may involve an actual or threatened change of control of
THCR. The provisions are designed to reduce the vulnerability of THCR to an
unsolicited proposal for a takeover of THCR that does not contemplate the
acquisition of all of its outstanding shares or an unsolicited proposal for
the restructuring or sale of all or part of THCR. The provisions are also
intended to discourage certain tactics that may be used in proxy fights. The
Board of Directors of THCR believes that, as a general rule, such takeover
proposals would not be in the best interest of THCR and its stockholders. Set
forth below is a description of such provisions in the THCR Certificate of
Incorporation and the THCR By-Laws. The Board of Directors of THCR has no
current plans to formulate or effect additional measures that could have an
anti-takeover effect.
The THCR Certificate of Incorporation provides that directors, other than
those, if any, elected by the holders of THCR Preferred Stock, can be removed
from office only for cause and only by the affirmative vote of the holders of
at least 66 2/3% of the combined voting power of the then outstanding shares
of capital stock entitled to vote thereon ("THCR Voting Stock"). Pursuant to
the By-Laws, newly created directorships resulting from any increase in the
authorized number of directors and any vacancies on the Board of Directors of
THCR may be filled by the affirmative vote of a majority of the remaining
directors.
Except as otherwise provided for with respect to the rights of the holders
of THCR Preferred Stock, the THCR Certificate of Incorporation provides that
the whole Board of Directors of THCR will consist of that number of directors
determined from time to time by the Board of Directors of THCR.
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The THCR By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors of
THCR or a committee thereof, of candidates for election as directors and with
regard to certain other matters to be brought before an annual meeting of
stockholders of THCR. In general, notice must be received by THCR not later
than 10 days after the public announcement of the meeting date and must
contain certain specified information concerning the matters to be brought
before the meeting and the stockholder submitting the proposal.
In addition, the THCR Certificate of Incorporation provides that whenever
any vote of THCR Voting Stock is required by law to amend, alter, repeal or
rescind any provision thereof, then, in addition to any affirmative vote
required by law or any required vote of the holders of THCR Preferred Stock,
the affirmative vote of at least a majority of the combined voting power of
the then-outstanding shares of THCR Voting Stock and approval by at least a
majority of the then-authorized number of directors of THCR is required to
amend certain provisions of the THCR Certificate of Incorporation; provided,
however, that if any such amendment, alteration, repeal, or rescission (a
"THCR Change") relates to those provisions or to removal of directors, such
THCR Change must also be approved by the affirmative vote of the holders of at
least 66 2/3% of the combined voting power of the then-outstanding shares of
THCR Voting Stock, voting together as a single class and, if at the time there
exist one or more THCR Related Persons (as defined), such THCR Change must
also be approved by the affirmative vote of the holders of at least a majority
of the combined voting power of the Disinterested Shares (defined in the THCR
Certificate of Incorporation as, to any THCR Related Person, shares of THCR
Voting Stock that are beneficially owned and owned of record by stockholders
other than such THCR Related Person). A "THCR Related Person" means any
person, entity or group which beneficially owns 10% or more of the outstanding
voting stock of THCR, provided, however, that Trump and his affiliates are not
deemed to be a THCR Related Person.
The THCR Certificate of Incorporation provides that the vote(s) required by
the immediately preceding provision shall not be required if such THCR Change
has been first approved by at least two-thirds of the then- authorized number
of directors of THCR and, if at the time there exist one or more THCR Related
Persons, by a majority of the THCR Continuing Directors (as defined with
respect to any THCR Related Person to be any member of the Board of Directors
of THCR who (i) is unaffiliated with and is not the THCR Related Person and
(ii) became a member of the Board of Directors of THCR prior to the time that
the THCR Related Person became a THCR Related Person, and any successor of a
THCR Continuing Director who is recommended to succeed a THCR Continuing
Director by a majority of THCR Continuing Directors then on the Board of
Directors of THCR).
The THCR Certificate of Incorporation provides that the THCR By-Laws may be
adopted, altered, amended or repealed by the stockholders of THCR or by a
majority vote of the entire Board of Directors of THCR.
The THCR Certificate of Incorporation provides that, except as otherwise
provided for with respect to the rights of the holders of THCR Preferred
Stock, no action that is required or permitted to be taken by the stockholders
of THCR at any annual or special meeting of stockholders may be effected by
written consent of stockholders in lieu of a meeting of stockholders, unless
the action to be effected by written consent of stockholders and the taking of
such action by such written consent have expressly been approved in advance by
the Board of Directors of THCR and, if such action involves a "business
combination" within the meaning of Section 203 of the DGCL, such written
consent shall have expressly been approved in advance by the affirmative vote
of at least a majority of the THCR Continuing Directors then in office.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
THCR is subject to the provisions of Section 203 of the DGCL. Section 203 of
the DGCL prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder.
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Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% of the corporation's voting stock. Neither Trump nor any of his affiliates
is deemed to be an "interested stockholder" for purposes of Section 203 of the
DGCL.
The THCR Certificate of Incorporation contains certain provisions permitted
under the DGCL relating to the liability of directors. The provisions
eliminate a director's liability for monetary damages for a breach of
fiduciary duty, except in certain circumstances involving wrongful acts, such
as the breach of a director's duty of loyalty or acts or omissions which
involve intentional misconduct or a knowing violation of law. Furthermore, the
THCR Certificate of Incorporation and the THCR By-Laws contain provisions to
indemnify THCR's directors and officers to the fullest extent permitted by the
DGCL, including payment in advance of a final disposition of a director's or
officer's expenses and attorneys' fees incurred in defending any action, suit
or proceeding. THCR believes that these provisions assist THCR in attracting
and retaining qualified individuals to serve as directors.
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DESCRIPTION OF THE THCR HOLDINGS PARTNERSHIP AGREEMENT
The following summary of the Amended and Restated Agreement of Limited
Partnership of THCR Holdings (the "THCR Holdings Partnership Agreement"), and
the description of certain provisions set forth elsewhere in this Proxy
Statement-Prospectus is qualified in its entirety by reference to such
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Proxy Statement-Prospectus is a part. THCR Holdings
was formed in 1995 under the Delaware Revised Uniform Limited Partnership Act,
as amended (the "Delaware RULPA").
DISTRIBUTIONS AND ALLOCATIONS OF PROFITS AND LOSSES
THCR Holdings makes any required distributions to each partner of THCR
Holdings (each, a "Partner") for taxes ("Tax Amounts") in one or more payments
from time to time during each year, but in no event later than March 1 of the
year immediately following such year, in an aggregate cash sum equal to such
Partner's percentage interest in Tax Amounts in respect of such year. In
general, Tax Amounts for any year are the product of the highest marginal tax
rate applicable to any of the Partners (subject to certain limitations) and
THCR Holdings' taxable income for such year. The THCR Holdings Partnership
Agreement provides that after making the required tax distributions,
additional distributions will be made from time to time as determined by a
majority of the Board of Directors of THCR, but in any case pro rata in
accordance with the Partners' percentage interests. THCR Holdings' ability to
make distributions (including tax distributions) are subject to, among other
things, limitations set forth in the Senior Note Indenture. See "Risk
Factors--Restrictions on Certain Activities."
Profits and losses for tax purposes are generally allocated among the
partners in accordance with their percentage interests, subject to compliance
with the provisions of Section 704(b) and 704(c) of the Code and the Treasury
Regulations thereunder governing special allocations of certain partnership
items, including the "ceiling rule" set forth in Treasury Regulations Section
1.704-3 (which are not be subject to cure by special allocation except as
specifically provided in the THCR Holdings Partnership Agreement).
THCR Holdings has agreed that all expenses of THCR shall, to the maximum
extent practicable, be paid directly by THCR Holdings. Any other expenses paid
directly by THCR are required to be reimbursed promptly by THCR Holdings and
are deemed to be expenses of THCR Holdings.
MANAGEMENT
As the sole general partner of THCR Holdings, THCR generally has the
exclusive rights, responsibilities and discretion in the management and
control of THCR Holdings. The limited partners of THCR Holdings (the "Limited
Partners") have no authority, as Limited Partners, to transact business or
take any acts on behalf of, or make any decision for, THCR Holdings. Trump,
however, has the right to control the management of Plaza Associates. In
connection with the Merger Transaction, the THCR Holdings Partnership
Agreement will be amended to give Trump the right to control the resolution of
tax matters affecting or relating to Taj Associates in respect of periods
ending on or prior to the date on which Taj Holding acquired its interest in
Taj Associates, including requiring THCR Holdings, AC Holdings and Taj
Associates to adjust the tax basis of assets held by Taj Associates in
connection with the resolution of such tax matters to the extent such basis
adjustments shall not reduce THCR's share of federal income tax depreciation
and cost recovery deductions in respect of assets held by Taj Associates as of
the date of the Merger and contributions of the interests in Taj Associates to
AC Holdings (on behalf, and at the direction, of THCR Holdings).
The THCR Holdings Partnership Agreement provides that THCR shall not,
without the consent of a majority-in-interest of the Limited Partners,
undertake actions relating to any of the following during such time as the
Limited Partners own more than 10% of the outstanding partnership interests in
THCR Holdings: the
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dissolution of THCR Holdings under the Delaware RULPA, the institution of any
proceedings for bankruptcy on behalf of THCR Holdings, the making of a general
assignment for the benefit of creditors or the appointment of a custodian,
receiver or trustee for all or any part of the assets of THCR Holdings.
TRANSFERABILITY OF INTERESTS
The THCR Holdings Partnership Agreement provides that THCR may not withdraw
as general partner of THCR Holdings, or transfer without the consent of a
majority-in-interest of the Limited Partners (other than THCR), so long as the
Limited Partners hold at least a 10% interest in THCR Holdings; provided,
however, that such consent right shall not apply to a determination by THCR or
THCR Holdings to enter into a merger, sale, consolidation, combination or
similar transaction. A Limited Partner may transfer all or any portion of his
interests in THCR Holdings, provided that (i) THCR including a majority of the
Special Committee (as defined) consents to such transfer, which consent may
not be unreasonably withheld or delayed, except no such consent is required
for (a) a transfer of Partnership interests described below under "Exchange
and Registration Rights," (b) a transfer to a Permitted Holder (which term
includes the spouse and other descendants of such Limited Partner (including
any related trusts controlled by, and established and maintained for the sole
benefit of, such Limited Partner or such spouse or descendant) and the estate
of any of the foregoing), or (c) a transfer upon foreclosure on an interest of
a Limited Partner pursuant to certain permitted liens, and (ii) such transfer
does not violate certain other restrictions on transfer contained in the THCR
Holdings Partnership Agreement. No transferee is admitted as a substitute
Limited Partner of THCR Holdings having the rights of a Limited Partner
without the consent of THCR, including a majority of the Special Committee.
ADDITIONAL CAPITAL CONTRIBUTIONS; ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS
No Partner is required under the terms of the THCR Holdings Partnership
Agreement to make additional capital contributions to THCR Holdings, except as
described below in connection with the issuance of additional partnership
interests.
The THCR Holdings Partnership Agreement provides that no additional
Partnership interests will be issued, except in the case of (i) an additional
partnership interest to THCR in exchange for a contribution of value from THCR
and (ii) an additional limited partnership interest to Trump or his Permitted
Holders in exchange for a contribution of value from Trump or his Permitted
Holders (as defined in the THCR Holdings Partnership Agreement), as determined
by a majority of the Special Committee. The Special Committee is composed of
directors who are not officers or employees of THCR and who are not affiliates
of Trump or any of his affiliates.
The THCR Holdings Partnership Agreement currently provides that THCR will
not issue additional debt or equity securities, unless the proceeds of such
issuance are contributed to THCR Holdings and that it will not issue any
additional shares of THCR Class B Common Stock, except to Trump or his
Permitted Holders. In connection with, and in light of the structure necessary
to consummate the Merger Transaction, the THCR Holdings Partnership Agreement
will be amended to provide that THCR may contribute to AC Holdings the
indirect interests in Taj Associates that THCR acquires in the Merger and the
proceeds from the THCR Stock Offering rather than make such contributions
directly to contribute the proceeds from THCR Holdings. Furthermore, the THCR
Holdings Partnership Agreement will be amended to provide that THCR Holdings
may issue limited partnership interests to TTMI and TM/GP in exchange for the
contribution of their respective 49.995% equity interest in Taj Associates.
EXCHANGE AND REGISTRATION RIGHTS
THCR entered into an exchange and registration rights agreement (the
"Exchange Rights Agreement") with Trump, pursuant to which, among other
things: (i) Trump and his permitted successors and assigns are able to
exchange all or any portion of their interest in THCR Holdings for THCR Common
Stock and (ii) a majority of the Special Committee has the right to require
any holder of a limited partnership interest (other than Trump and
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his Permitted Holders) to exchange their Partnership interests for THCR Common
Stock. The number of shares of THCR Common Stock issuable upon exchange of
limited partnership interests are adjusted from time to time to reflect stock
dividends, stock splits, reverse stock splits, reclassifications and
recapitalizations.
The exchange of limited partnership interests for shares of THCR Common
Stock under the Exchange Rights Agreement is subject to (i) the expiration or
termination of the applicable waiting period, if any, under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and (ii) the
satisfaction of certain other conditions contained in the Exchange Rights
Agreement.
The Exchange Rights Agreement provides that, upon a transfer of limited
partnership interests in THCR Holdings, the transferee will obtain the
benefits of, and be subject to, all of the provisions of the Exchange Rights
Agreement.
The Exchange Rights Agreement contains certain registration rights under the
Securities Act in favor of the holders of the THCR Common Stock issuable upon
the exchange of limited partnership interests. The holders of securities
representing a majority of the THCR Common Stock issuable upon the exchange of
limited partnership interests shall have the right to require THCR, at THCR's
expense (other than with respect to underwriting discounts, commissions and
fees attributable to the sale of any such Common Stock), subject to certain
limitations, to file two registration statements relating to the resale to the
public of all or a portion of their THCR Common Stock.
In addition, in the event THCR proposes to register any of its THCR Common
Stock pursuant to a registration statement under the Securities Act (other
than on Forms S-4 or S-8 or other similar successor forms), such holders may,
by giving written notice to THCR, request that THCR, at THCR's expense (other
than with respect to underwriting discounts, commissions and fees attributable
to the sale of any such THCR Common Stock), include in such registered
offering all or any part of their THCR Common Stock. THCR is required to
include the securities covered by such notice or notices in such registered
offering unless THCR determines for any reason not to proceed with the
underlying offering of its equity securities or, in the case of an
underwritten offering, if the managing underwriter determines that the amount
of THCR Common Stock requested to be included in such registration exceeds the
amount which can be sold in such offering without adversely affecting the
distribution of the securities being offered.
In connection with the Merger Transaction, the Exchange Rights Agreement
will be amended to, among other things, extend to TTMI registration rights
with respect to the shares of THCR Common Stock into which its limited
partnership interests will be convertible.
TAX MATTERS PARTNER
Pursuant to the THCR Holdings Partnership Agreement, THCR is the tax matters
partner of THCR Holdings and, as such, has authority to make tax elections
under the Code on behalf of THCR Holdings, subject to certain notice and
consultation rights in favor of the Limited Partners.
TERM
The term of the THCR Holdings Partnership Agreement continues until December
31, 2035, or until sooner dissolved upon (i) the dissolution, bankruptcy or
termination of THCR, (ii) the election of THCR and a majority-in-interest of
the Limited Partners, (iii) the sale or other disposition of all or
substantially all the assets of THCR Holdings (but in the event of such sale
or transfer, such time of dissolution may be extended, at the option of THCR,
until the receipt of substantially all of the proceeds thereof, or a
determination by THCR that no material additional proceeds will likely be
received), or (iv) the entry of a decree of judicial dissolution of THCR
Holdings pursuant to the provisions of the Delaware RULPA, which decree is
final and not subject to approval; provided, however, the Limited Partners may
elect to continue THCR Holdings. An election to continue THCR Holdings must be
unanimous unless the Delaware RULPA permits such election pursuant to the vote
of a lesser percentage in interest of the Limited Partners, in which event
such election may be by such lesser percentage in
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interest as is permitted in the Delaware RULPA, but in no event shall such
election be by a vote of less than a majority-in-interest of the Limited
Partners.
CONTRIBUTION AGREEMENT
Trump received his limited partnership interest in THCR Holdings in exchange
for a contribution of, among other things, all of his beneficial interest in
Plaza Associates and all of his other existing interests and rights to gaming
activities in both emerging and established jurisdictions, including Trump
Indiana, but excluding the Taj Mahal and Trump's Castle. Such contribution was
made pursuant to the terms of the Contribution Agreement between Trump and
THCR Holdings. Under the Contribution Agreement, Trump agreed to pursue,
develop and conduct all new casino and gaming opportunities only on behalf of
THCR. Trump further agreed not to engage in certain actions in connection with
casino and gaming activities, including, without limitation, casino hotels,
and related services and products. For purposes of this grant and without
limiting its application with respect to other properties, any hotel with
gaming conducted on its premises will be considered a casino hotel and any
business or activity engaged in by Trump and located in Nevada, Atlantic City
(other than the Taj Mahal (prior to the Merger Transaction) and Trump's
Castle) or within one mile of a casino will be presumed to be an activity to
which these restrictions will apply. Such a presumption may be rebutted by a
vote of the majority of the Special Committee. The agreement to offer new
gaming opportunities to THCR is for a term of the later of (i) June 12, 2015,
(ii) such time as Trump and his affiliates no longer hold a 15% or greater
voting interest in THCR or (iii) such time as Trump ceases to be employed or
retained pursuant to an employment, management, consulting or similar services
agreement with THCR. Trump may generally continue to engage in business as
currently conducted or proposed to be conducted at the Taj Mahal (prior to the
Merger Transaction) and Trump's Castle. For as long as Trump owns beneficially
20% or more of the voting power of THCR and no other holder owns more voting
power of THCR, or such shorter period ending on the date on which no Plaza
Notes remain outstanding, to the extent required under the Plaza Note
Indenture, Trump shall retain the right (x) to designate for election a
majority of the Board of Directors of Plaza Funding and its successors and
assigns and any other managing general partner of Plaza Associates and (y) to
control the management of Plaza Associates. See "Risk Factors--Conflicts of
Interest" and "--Control and Involvement of Trump."
INDEMNIFICATION
THCR Holdings indemnifies and hold harmless each Partner and its affiliates,
and all officers, directors, employees and agents of such Partner and its
affiliates (individually, an "Indemnitee") from and against any and all
losses, claims, demands, costs, damages, liabilities, joint and several,
expenses of any nature (including attorneys' fees and disbursements),
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved, as a party or otherwise, relating to the operations
of THCR Holdings, including, without limitation, liabilities under the Federal
and state securities laws, regardless of whether the Indemnitee continues to
be a Partner, an affiliate of a Partner, or an officer, director, employee, or
agent of a Partner or an affiliate of a Partner at the time any such liability
or expense is paid or incurred, but only if the act or omission giving rise to
such proceeding does not constitute gross negligence or willful misconduct;
provided, however, that such indemnification or agreement to hold harmless,
will be recoverable only out of assets of THCR Holdings and not from the
Partners. The indemnification provided by the THCR Holdings Partnership
Agreement is in addition to any other rights to which an Indemnitee may be
entitled under any agreement, as a matter of law or equity, or otherwise, both
as to action in the Indemnitee's capacity as a Partner, an affiliate of a
Partner, or as an officer, director, employee or agent of a Partner or an
affiliate of a Partner and as to any action in another capacity, and will
continue, with respect to actions relating to the operations of THCR Holdings,
as to an Indemnitee who has ceased to serve in such capacity and will inure to
the benefit of the heirs, successors, assigns and administrators of the
Indemnitee. No Indemnitee may be denied indemnification in whole or in part
under the THCR Holdings Partnership Agreement by reason of the fact that the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was approved in accordance with the
THCR Holdings Partnership Agreement. No officer, employee or agent of THCR
Holdings has any liability to THCR Holdings or any of its partners for
monetary damages for action taken, or any failure to take any action, in such
capacity, with certain exceptions.
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CERTAIN REGULATORY MATTERS
The THCR Holdings Partnership Agreement provides that it is subject to the
provisions of the Casino Control Act and the Indiana Riverboat Gambling Act.
The THCR Holdings Partnership Agreement further provides that THCR Holdings may
redeem the partnership interest held by any person or entity whose holding of
such interest may cause the loss or non-reinstatement of any governmental
license or permit of THCR Holdings or any of its subsidiaries. Such redemption
will be on the terms set forth in the THCR Holdings Partnership Agreement.
OTHER
The THCR Holdings Partnership Agreement provides that, unless a majority-in-
interest of the Limited Partners otherwise consents, all business activities of
THCR must be conducted through THCR Holdings or its subsidiaries.
THCR Holdings is authorized to enter into transactions with partners or their
affiliates, as long as the terms of such transactions are fair and reasonable,
and no less favorable to THCR Holdings than would be obtained from an
unaffiliated third party.
Except for certain technical amendments, the THCR Holdings Partnership
Agreement may only be amended by THCR, upon the approval of a majority of the
Special Committee with the consent of a majority-in interest of the Limited
Partners.
Except for Trump's agreement to conduct all new gaming activities through
THCR as described above and under "--Contribution Agreement" and "Management of
THCR--Employment Agreements," the THCR Holdings Partnership Agreement provides
that any Limited Partner may engage in other business activities outside THCR
Holdings, including business activities that directly compete with THCR
Holdings; provided, however, that no such other activities discriminate against
THCR Holdings. See "Risk Factors--Conflicts of Interest" and "--Control and
Involvement of Trump."
THCR Holdings has agreed to indemnify Trump in the event of the non-payment
by THCR Holdings of certain liabilities assumed by THCR Holdings in connection
with its formation.
The THCR Holdings Partnership Agreement also provides that no additional
compensation shall be paid directly or indirectly to Trump under the Trump
Executive Agreement or otherwise, unless approved by the Special Committee.
Other than the TPM Services Agreement and notwithstanding the foregoing, THCR
(including each of its subsidiaries) may not enter into any management,
services, consulting, or similar agreements with Trump or any of his
affiliates, except for employment agreements in the ordinary course of business
consistent with industry practice and approved by the Special Committee.
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COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Merger Transaction, holders of Taj Holding Class A
Common Stock who elect Stock Consideration will become holders of THCR Common
Stock. The following is a summary of material differences between the rights of
holders of Taj Holding Class A Common Stock and the rights of holders of THCR
Common Stock. As each of Taj Holding and THCR is organized under the laws of
Delaware, these differences arise principally from provisions of the charter
and by-laws of each of Taj Holding and THCR.
The following does not purport to be complete statements of the rights of
holders of Taj Holding Class A Common Stock under the Taj Holding Certificate
of Incorporation and the Taj Holding By-Laws as compared with the rights of
holders of THCR Common Stock under the THCR Certificate of Incorporation and
THCR By-Laws. These summaries are qualified in their entirety by reference to
the DGCL and governing corporate instruments of Taj Holding and THCR. The terms
of THCR's capital stock are described in greater detail under "Description of
THCR Capital Stock." Copies of the charter and by-laws for each of Taj Holding
and THCR are available for inspection at their respective principal executive
offices. In addition, the THCR Certificate of Incorporation and the THCR By-
Laws are filed as exhibits to the registration statement to which this Proxy
Statement-Prospectus is a part, and copies will be sent to holders of Taj
Holding Class A Common Stock upon request.
VOTING RIGHTS
Prior to the redemption of the Taj Bonds, the Taj Holding Class A Common
Stock has no voting rights, except as otherwise provided by law. After the Taj
Bond Redemption, the Taj Holding Class A Common Stock and the Taj Holding Class
C Common Stock will each be entitled to one vote per share and will vote on all
matters on which stockholders are entitled to vote as a single class. In
electing directors, the Taj Holding Certificate of Incorporation provides for
cumulative voting rights, that is (i) each holder of Taj Holding Class A Common
Stock or Taj Holding Class C Common Stock will have that number of votes that
such holder would be entitled to cast for the election of directors with
respect to such holder's series of stock multiplied by the number of directors
to be elected and (ii) such holder may cast all of such votes for a single
nominee.
Holders of THCR Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Subject to the rights of the holders of THCR Class B Common
Stock described below, holders of a majority of the shares of THCR Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. The THCR Certificate of Incorporation provides that THCR
Class B Common Stock is not entitled to a separate class vote on any matters
submitted to the stockholders of THCR for their approval, except for any
amendment of the terms of the THCR Class B Common Stock, which requires (x) the
affirmative vote of the THCR Class B Common Stock, voting as a separate class,
and (y) the affirmative vote of a majority of the shares of THCR Common Stock
held by persons who are not beneficial owners of the THCR Class B Common Stock,
voting as a separate class.
ISSUANCE OF PREFERRED STOCK
Pursuant to the Taj Holding Certificate of Incorporation, the Board of
Directors may issue one or more series of preferred stock with such rights and
privileges relating to dividends, redemption, liquidation, conversion and
voting as it may determined by resolution; provided, however, that the
designation of any class of preferred stock may not limit the voting rights of
any class of common stock without the consent of the holders of such class.
The THCR Certificate of Incorporation provides that the Board of Directors
may, without further action by the stockholders, issue preferred stock in one
or more series and fix the rights, preferences, privileges, qualifications,
limitations and restrictions of the preferred stock including dividend rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series or the designation of such
series. Accordingly, the issuance of THCR Preferred Stock may have the effect
of delaying,
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deferring or preventing a change in control of THCR without further action by
the stockholders and may adversely affect the voting and other rights of the
holders of THCR Common Stock.
STOCKHOLDERS' MEETINGS
Special Meetings. The Board of Directors may call a special meeting of
stockholders. In addition, the Taj Holding By-Laws provide that special
meetings of any class of common stock shall be called by the Secretary upon
receipt of a request of at least 10% of the outstanding shares of such class.
The THCR Certificate of Incorporation provides that special meetings of
stockholders may be called by the Board of Directors or the President and shall
be called by the President or the Secretary at the request in writing of a
director or a majority of the voting stock issued and outstanding.
Actions Without a Meeting. The Taj Holding By-Laws allow for any action
required or permitted at any annual or special meeting of stockholders to be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action to be taken, is signed by the
holders of at least majority of each class of outstanding stock entitled to
vote thereon.
The THCR Certificate of Incorporation, provides that, unless provided for or
fixed for a series of preferred stock, no action that is required or permitted
to be taken by the stockholders at an annual or special meeting may be effected
by written consent in lieu of a meeting, unless the action to be effected by
written consent and the taking of such action by written consent have expressly
been approved in advance by the Board of Directors, and if such matter involves
a "business combination" as defined in Section 203 of the DGCL, such written
consent shall have expressly been approved in advance by the affirmative vote
of at least a majority of the THCR Continuing Directors.
BUSINESS COMBINATIONS
Prior to the Taj Bond Redemption, a merger, consolidation or business
combination with or into any other entity must be approved by a majority of the
shares of the Taj Holding Class B Common Stock. The Taj Holding Certificate of
Incorporation, however, does not afford holders of Taj Holding Class A Common
Stock such right, before or after the Taj Bond Redemption.
Both Taj Holding and THCR are subject to the provisions of Section 203 of the
DGCL. Section 203 prohibits a publicly held Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years did own, 15% of the corporation's voting stock. Pursuant to the THCR
Certificate of Incorporation, neither Trump nor any of his affiliates are
deemed to be an "interested stockholder" for purposes of Section 203 of the
DGCL.
Holders of Taj Holding Class A Common Stock and holders of THCR Common Stock
have no preemptive or appraisal rights, except as provided under the DGCL.
CHANGE OF CONTROL
The Taj Holding Certificate of Incorporation precludes Trump and his
affiliates prior to the Taj Bond Redemption from acquiring beneficial ownership
of Taj Holding Class A Common Stock, except to satisfy a warrant given to
certain class action plaintiffs in connection with the settlement of their
claims. After the Taj Bond Redemption there are no further restrictions on
beneficial acquisitions of Taj Holding Class A Common Stock by Trump or its
affiliates if all the payments made in connection with the Taj Bonds were made
in full.
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The THCR Certificate of Incorporation does not preclude Trump or his
affiliates from acquiring THCR Common Stock. In addition, Trump is the
beneficial owner of all 1000 outstanding shares of THCR Class B Common Stock,
which votes together with the THCR Common Stock as a single class on all
matters submitted to stockholders of THCR for a vote or in respect of which
consents are solicited (other than in connection with certain amendments to the
terms of the THCR Class B Common Stock described above). The number of votes
represented by the THCR Class B Common Stock held by any holder equals the
number of shares of THCR Common Stock issuable to the holder upon the
conversion of such holder's partnership interest in THCR Holdings into THCR
Common Stock. Upon such conversion, the corresponding voting power of shares of
THCR Class B Common Stock (equal in voting power to the number of shares of
THCR Common Stock issued upon such conversion) will be proportionately
diminished.
BOARD OF DIRECTORS
General. The Taj Holding Certificate of Incorporation does not authorize the
Board of Directors to change the authorized number of directors and provides
that the number of directors shall be nine. Prior to the Taj Bond Redemption,
the Board of Directors is divided into two classes, the Taj Holding Class B
Directors (elected by the holders of the Taj Holding Class B Common Stock) and
the Taj Holding Class C Directors (elected by the holders of Taj Holding Class
C Common Stock). After the Taj Bond Redemption, all but one of the Taj Holding
Class B Directors shall resign and the Board of Directors shall consist of nine
unclassified directors. After the Taj Bond Redemption, the Taj Holding
directors will be elected by the holders of Taj Holding Class A Common Stock
and Taj Holding Class C Common Stock, voting as a single class. The Taj Holding
Certificate of Incorporation further provides that, after the Taj Bond
Redemption, directors will be elected by the affirmative vote of a plurality of
the votes cast thereon.
Except as otherwise provided for with respect to the rights of the holders of
THCR Preferred Stock, the THCR Certificate of Incorporation and THCR By-Laws
provide that the Board of Directors will consist of that number of directors
determined from time to time by it, not to exceed fifteen. In addition, the
THCR By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board or a committee
thereof, of candidates for election as directors and with regard to certain
other matters to be brought before an annual meeting of stockholders. In
general, notice must be received by THCR not later than 10 days after the
public announcement of the meeting date and must contain certain specified
information concerning the matters to be brought before the meeting and the
stockholder submitting the proposal.
Removal of Directors. The Taj Holding By-Laws provide that a director may be
removed from office, with or without cause, by a majority vote of the holders
of the class of stock that elected such director. Any vacancies in the Board of
Directors as the result of the resignation of a director are filled by the
then-remaining directors of the same class.
The THCR Certificate of Incorporation provides that directors, other than
those, if any, elected by the holders of THCR Preferred Stock, can be removed
from office only for cause and only by the affirmative vote of the holders of
at least 66 2/3% of the THCR Voting Stock. Pursuant to the THCR By-Laws, newly
created directorships resulting from any increase in the authorized number of
directors and any vacancies on the Board of Directors may be filled by the
affirmative vote of a majority of the remaining directors.
INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS
Both the Taj Holding Certificate of Incorporation and the THCR Certificate of
Incorporation provide that each of their officers, directors, employees or
agents shall be indemnified to the fullest extent permitted under Delaware law.
The charters also provide that directors are not liable to Taj Holding and
THCR, respectively, or to each of their stockholders, for monetary damages for
breach of fiduciary duty, except if such director (i) is liable under Delaware
law or (ii) is liable by reason that such director (a) breached the director's
duty of loyalty, (b) did not act in good faith, (c) acted in a manner involving
intentional misconduct or a knowing violation of law or (d) derived an improper
personal benefit.
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AMENDMENT OF CERTIFICATE OF INCORPORATION AND BY-LAWS
Certificate of Incorporation. Prior to the Taj Bond Redemption, any amendment
to the Taj Holding Certificate of Incorporation must be approved by a majority
of the holders of Taj Holding Class B Common Stock. Thereafter, any amendment
requires a majority vote of the Taj Holding Class A Common Stock and Taj
Holding Class C Common Stock voting as a single class.
The THCR Certificate of Incorporation provides that whenever any vote of THCR
Voting Stock is required by law to amend, alter, repeal or rescind any
provision thereof, then, in addition to any affirmative vote required by law or
any required vote of the holders of THCR Preferred Stock, the affirmative vote
of at least a majority of the combined voting power of the then-outstanding
shares of THCR Voting Stock and approval by at least a majority of the then-
authorized number of directors is required to amend certain provisions of the
THCR Certificate of Incorporation; provided, however, that if a THCR Change
relates to those provisions or to removal of directors, such THCR Change must
also be approved by the affirmative vote of the holders of at least 66 2/3% of
the combined voting power of the then-outstanding shares of THCR Voting Stock,
voting together as a single class and, if at the time there exist one or more
THCR Related Persons, such THCR Change must also be approved by the affirmative
vote of the holders of at least a majority of the combined voting power of the
Disinterested Shares.
The THCR Certificate of Incorporation further provides that the vote(s)
required by the immediately preceding provision shall not be required if such
THCR Change has been first approved by at least two-thirds of the then-
authorized number of directors of THCR and, if at the time there exist one or
more THCR Related Persons, by a majority of the THCR Continuing Directors.
By-Laws. Taj Holding By-Laws prohibits the Board of Directors from amending
the Taj Holding By-Laws, but provides that the holders of every class of stock
of Taj Holding entitled to vote thereon may amend the Taj Holding By-Laws;
provided that under certain circumstances prior to the Taj Bond Redemption, the
holders of Taj Holding Class B Common Stock have the exclusive power to amend
the Taj Holding By-Laws. In addition, the Taj Holding Certificate of
Incorporation, provides that prior to the Taj Bond Redemption, any amendment to
the By-Laws must be approved by a majority of the holders of Taj Holding Class
B Common Stock.
The THCR Certificate of Incorporation provides that the THCR By-Laws may be
adopted, altered, amended or repealed by the vote of a majority of the
stockholders of THCR or by a majority vote of the entire Board of Directors.
DISQUALIFICATION OF STOCKHOLDERS
In accordance with the requirements of the Casino Control Act, the Taj
Holding Certificate of Incorporation provides that all of its securities are
held subject to the condition that, if a holder thereof is found to be
disqualified, such holder shall: (a) dispose of his interest in Taj Holding;
(b) not receive any dividends or interest upon any such securities; (c) not
exercise, directly or indirectly or through any trustee or nominee, any right
conferred by such securities; and (d) not receive any remuneration in any form
from the casino license for services rendered or otherwise. The Taj Holding
Certificate of Incorporation further provides that Taj Holding may redeem any
shares of capital stock held by any person or entity whose holding of shares
may cause the loss or non-reinstatement of a governmental license held by Taj
Holding. The redemption shall be at par value per share thereof.
The THCR Certificate of Incorporation has similar provisions, but in addition
to any terms required by the Casino Control Act, stockholders are also subject
to the Indiana Riverboat Gambling Act and gaming laws of other jurisdictions
with authority over the business affairs of THCR. Pursuant to the THCR
Certificate of Incorporation, in the case of a mandatory redemption of any
shares of capital stock held by any person or entity whose holding of shares
may cause the loss or non-reinstatement of a governmental license, the
redemption shall be at the lesser of fair market value, as defined in the THCR
Certificate of Incorporation, or such holder's purchase price of such capital
stock.
200
<PAGE>
MARKET PRICE AND DIVIDEND DATA
THCR
The THCR Common Stock is listed on the NYSE under the symbol "DJT." The
initial public offering price of the THCR Common Stock was $14.00 per share.
The following table reflects the high and low sales prices of the THCR Common
Stock as reported by the NYSE.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
----
First quarter............................................... N/A N/A
Second quarter (from June 7, 1995).......................... $14 $11 5/8
Third quarter............................................... $19 3/4 $13
Fourth quarter.............................................. $21 5/8 $14
1996
----
First quarter (through January 31, 1996).................... $22 3/8 $19
</TABLE>
The reported closing sale price of the THCR Common Stock on the NYSE on
January 8, 1996, the last full day of trading prior to the announcement of the
Merger Transaction, was $ 21 3/4. As of January 31, 1996 there were
approximately 211 holders of record of THCR Common Stock.
Trump is the sole beneficial owner of all 1,000 outstanding shares of THCR
Class B Common Stock. No established trading market exists for the THCR Class B
Common Stock, and no shares of THCR Class B Common Stock have been transferred
since their issuance to Trump. The THCR Class B Common Stock has no right to
receive any dividend or other distribution with respect to the equity of THCR.
THCR has never paid a dividend and does not anticipate paying one in the
foreseeable future. The payment of any future dividends will be at the
discretion of the THCR Board of Directors and will depend upon, among other
things, THCR's, financial condition and capital needs, legal restrictions on
the payment of dividends, contractual restrictions in financing agreements and
on other factors deemed pertinent by the THCR Board of Directors. See "Risk
Factors--Restrictions on Certain Activities." It is the current policy of the
THCR Board of Directors to retain earnings, if any, for use in its
subsidiaries' operations (except as set forth in the THCR Holdings Partnership
Agreement) and THCR otherwise has no current intention of paying dividends to
the holders of THCR Common Stock. In addition, the Plaza Mortgage Note
Indenture and the Senior Note Indenture contains, and the Mortgage Note
Indenture will contain, certain covenants, including, without limitation,
covenants with respect to limitations on the payment of dividends, which
limitations would limit THCR's ability to obtain funds from THCR Holdings with
which to pay dividends. Pursuant to these indentures, there are restrictions on
the payment of dividends unless, among other things, (i) no default or event of
default has occurred and is continuing under the indenture, (ii) certain
entities meet certain consolidated financial ratios and (iii) the total amount
of the dividends does not exceed certain amounts specified in the indentures.
See "Business of THCR--Certain Indebtedness of THCR" and "Description of the
THCR Holdings Partnership Agreement."
TAJ HOLDING
As of January 31, 1996, the Taj Holding Class A Common Stock was held by 372
holders of record. The Taj Holding Class A Common Stock is not listed on any
national securities exchange nor quoted in the over-the-counter market, no
established "bid" and "ask" price is available and there is currently no
established trading market for the Taj Holding Class A Common Stock. Hamilton
Partners, L.P. has informed Taj Holding that on December 28, 1995 it sold all
of its 385,736 shares of Taj Holding Class A Common Stock to Prudential
Securities, Inc. Taj Holding is not aware of any other recent transfers of Taj
Holding Class A Common Stock.
201
<PAGE>
Taj Holding has never paid a dividend to its stockholders, and in the event
that the Merger Transaction is not consummated, Taj Holding does not anticipate
paying a dividend in the foreseeable future. The payment of any future
dividends will be determined by the Taj Holding Board of Directors in light of
conditions then existing, including, the financial condition of Taj Holding,
restrictions in financing agreements, business conditions and other factors.
See "Risk Factors--Restrictions on Certain Activities." The ability of Taj
Holding to make distributions is restricted by the Bond Indenture, which
contains restrictions on the ability of Taj Associates to make distributions to
its partners.
Each share of Taj Holding Class B Common Stock trades, together with $1,000
principal amount of Taj Bonds, as a Unit. The Taj Holding Class B Common Stock
may not trade separately from the Unit. The Unit is traded on the Amex under
the symbol "TAJA.A." The following table reflects the high and low sales prices
of the Units expressed per $100 principal amount of Taj Bonds, as reported by
the Amex.
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
1993
- ----
First quarter................................................. $ 91 $80 5/8
Second quarter................................................ $ 95 1/2 $86
Third quarter................................................. $100 $94 1/8
Fourth quarter................................................ $104 $97 5/8
1994
- ----
First quarter................................................. $105 1/2 $99
Second quarter................................................ $100 $79 3/4
Third quarter................................................. $ 80 1/2 $65
Fourth quarter................................................ $ 69 3/8 $61 3/8
1995
- ----
First quarter................................................. $ 76 1/2 $66
Second quarter................................................ $ 83 $71
Third quarter................................................. $ 89 3/4 $79
Fourth quarter................................................ $ 96 1/2 $85
1996
- ----
First quarter (through January 31, 1996)...................... $ 99 3/4 $96 1/8
</TABLE>
The reported closing sale price of the Units (expressed per $100 of principal
amount of Bonds) on the Amex on January 8, 1996 the last full day of trading
prior to the initial announcement of the Merger, was $98. As of January 31,
1996, there were 780,242 Units outstanding (corresponding to 780,242 shares of
Taj Holding Class B Common Stock and $780,242,000 aggregate principal amount of
Taj Bonds) held by approximately 450 record holders.
All the shares of Taj Holding Class C Common Stock are beneficially owned by
Trump. No established trading market exists for the Taj Holding Class C Common
Stock, and no shares of Taj Holding Class C Common Stock have been transferred
since their issuance to Trump.
The Taj Holding Certificate of Incorporation provides that holders of Taj
Holding Class B Common Stock and Taj Holding Class C Common Stock are not
entitled to the payment of dividends. However, if a stock distribution or stock
dividend or other reclassification of the Taj Holding Class A Common Stock
occurs, an equivalent distribution, stock dividend or other reclassification of
the Taj Holding Class C Common Stock will be made such that the total number of
issued and outstanding shares of Taj Holding Class C Common Stock is the same
as the total number of issued and outstanding shares of Taj Holding Class A
Common Stock.
202
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Federal income tax consequences of the Merger and the Debt Refinancing
are complex. The following summary does not discuss all aspects of United
States federal income taxation that may be relevant to a particular holder of
Taj Holding Class A Common Stock, Plaza Notes, or Taj Holding Class B Common
Stock and Taj Bonds in light of such holder's particular circumstances and
income tax situation. The following discussion assumes that the holders of Taj
Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Bonds,
and the Plaza Notes (collectively, the "Securities") have held such assets as
capital assets (generally assets held for investment) under the Internal
Revenue Code of 1986, as amended (the "Code"). Each holder should consult such
holder's tax adviser as to the specific tax consequences to the holder of the
Merger and/or the Debt Refinancing, including the application and effect of
state, local, foreign and other tax laws.
THE MERGER
The Merger is anticipated to be a taxable event for holders of Taj Holding
Class A Common Stock. A holder will recognize a capital gain or loss equal to
the difference between the holder's adjusted basis in the Taj Holding Class A
Common Stock and the amount of Merger Consideration received in exchange for
such stock. Such gain or loss will be a long-term capital gain or loss if the
holding period for such stock exceeded one year. If the holder of Taj Holding
Class A Common Stock elects to receive Stock Consideration, the holder's
initial basis in the THCR Common Stock received will be equal to its fair
market value and the holding period in the THCR Common Stock will begin on the
day following the date of receipt of the THCR Common Stock.
REDEMPTION OF THE BONDS
The redemption of the Taj Bonds will be taxable for federal income tax
purposes. A holder will recognize a capital gain or loss measured by the
difference between the redemption price of the Taj Bonds and the holder's
adjusted issue price of the Taj Bonds, which will be a long-term capital gain
or loss if the holding period for the Taj Bonds is in excess of one year.
Holders who purchased Taj Bonds for a purchase price that was less than the
Taj Bonds' stated redemption price at maturity may realize ordinary income upon
the redemption of the Taj Bonds. The Code generally requires holders of "market
discount bonds" to treat as ordinary income any gain realized on the
disposition of such bonds to the extent of the market discount accrued during
the holder's period of ownership (as determined in accordance with the method
chosen by the holder under the Code). A "market discount bond" is a debt
obligation purchased at or after the original issue at a price below the stated
redemption price at maturity. In the case of a bond, such as the Taj Bonds,
with original issue discount ("OID"), the stated redemption price at maturity
is treated as equal to its adjusted issue price. The accrued market discount
generally equals a ratable portion of the bond's market discount determined by
the number of days the taxpayer has held the bond at the time of disposition
and expressed as a percentage of the number of days from the date of purchase
to the bond's maturity date. A holder of a market discount bond may elect to
include market discount in income as it accrues and, thus, will avoid
recognizing market discount at disposition.
To the extent a portion of the redemption price of the Taj Bonds represents
accrued and unpaid interest, a holder of a Taj Bond will (i) increase the
adjusted issue price of the Taj Bond by the amount of the redemption payment
that constitutes accrued OID and (ii) report as ordinary income the portion of
the payment, if any, that represents "qualified stated interest," as defined in
the Code, in accordance with the holder's method of accounting.
REDEMPTION OF THE TAJ HOLDING CLASS B COMMON STOCK
The redemption of the Taj Holding Class B Common Stock will be taxable under
the Code. Each holder will recognize a capital gain or loss equal to the
difference between the amount of the holder's adjusted basis in the Taj Holding
Class B Common Stock and the cash redemption amount received for the stock.
Such gain or loss will be a long-term capital gain or loss if the holding
period exceeds one year.
203
<PAGE>
PURCHASE AND/OR DEFEASANCE OF PLAZA NOTES
The purchase of the Plaza Notes will be a taxable event for the holders
thereof. Subject to the market discount rules discussed above, a holder will
recognize a capital gain or loss measured by the difference between the
purchase price of the Plaza Notes and the holder's adjusted issue price of the
Plaza Notes, which gain or loss will be a long-term capital gain or loss if the
holding period for the Plaza Notes is in excess of one year.
Based on counsel's opinion, it is expected, however, that, under current law,
the defeasance of Plaza Notes will not cause the holders of such Plaza Notes to
recognize income, gain or loss. Rather, until the Plaza Notes are sold or
redeemed, the holders will be subject to federal taxation on the same amounts,
in the same manner and at the same times as would have been the case if the
defeasance had not occurred.
BACKUP WITHHOLDING
Holders of the Securities may be subject to backup withholding at the rate of
31% with respect to reportable payments of (i) interest or OID accrued with
respect to the Taj Bonds and/or the Plaza Notes (ii) Merger Consideration
received in exchange for the Taj Holding Class A Common Stock or (iii) the cash
proceeds received in connection with the redemption of the Taj Bonds or the Taj
Holding Class B Common Stock, or the purchase of the Plaza Notes. A holder will
be exempt from backup withholding if the holder is a corporation or comes
within certain other exempt categories and, when required, demonstrates that
fact, or provides a correct taxpayer identification number, certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. Amounts paid as backup
withholding do not constitute an additional tax and are allowable as a credit
against the holder's federal income tax liability. Holders of Securities should
consult their tax advisers as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
204
<PAGE>
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships and foreign
trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisers to determine
the impact of federal, state and local income tax laws on an investment in
THCR, including any reporting requirements, as well as the tax treatment of
such an investment under their home country laws.
In general, Non-U.S. Shareholders will be subject to regular United States
federal income tax with respect to their investment in THCR if such investment
is "effectively connected" with the Non-U.S. Shareholder's conduct of a trade
or business in the United States. A corporate Non-U.S. Shareholder that
receives income or gain from the sale or disposition of THCR Common Stock that
is (or is treated as) effectively connected with the conduct of a United States
trade or business may also be subject to the branch profits tax under Section
884 of the Code, which is payable in addition to regular United States
corporate income tax. The following discussion will apply to Non-U.S.
Shareholders whose investment in THCR is not so effectively connected. THCR
expects to withhold United States federal income tax, as described below, on
the gross amount of any distributions paid to a Non-U.S. Shareholder unless (i)
a lower treaty rate applies and the required form evidencing eligibility for
that reduced rate is filed with THCR or (ii) the Non-U.S. Shareholder files an
IRS Form 4224 with THCR, claiming that the distribution is "effectively
connected" income.
DIVIDENDS
Generally, dividends paid by THCR will be subject to a United States
withholding tax equal to 30% of the gross amount of the distribution unless
such tax is reduced or eliminated by an applicable tax treaty. A distribution
of cash in excess of THCR's earnings and profits will be treated first as a
return of capital that will reduce a Non-U.S. Shareholder's basis in its shares
of THCR's stock (but not below zero) and then as gain from the disposition of
such shares, the tax treatment of which is described under the rules discussed
below with respect to dispositions of shares. A Non-U.S. Shareholder will have
to file refund claims to obtain a refund of tax withheld on distributions in
excess of the dividend portion of any distribution.
GAIN ON DISPOSITION
A Non-U.S. Shareholder will generally not be subject to United States federal
income tax on gain recognized on a sale or other disposition of THCR Common
Stock unless (i) as noted above, the gain is effectively connected with the
conduct of a trade or business within the United States by the Non-U.S.
Shareholder, (ii) in the case of a Non-U.S. Shareholder who is a nonresident
alien individual and holds the Common Stock as a capital asset, such holder is
present in the United States for 183 or more days in the taxable year and
certain other requirements are met or (iii) the Non-U.S. Shareholder is subject
to tax under the United States real property holding company rules discussed
below.
THCR may be, or may subsequently become, a United States real property
holding company for United States federal income tax purposes because of its
ownership of substantial real estate assets in the United States. If THCR were
to be treated as a United States real property holding Company, then a Non-U.S.
Shareholder who holds, directly or indirectly, more than 5% of the THCR Common
Stock will be subject to United States Federal income taxation on any gain
realized from the sale or exchange of such stock, unless an exemption is
provided under an applicable treaty.
FEDERAL ESTATE TAXES
THCR Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for United States federal estate tax
purposes) of the United States at the date of death will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
205
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary United States Treasury regulations, United States information
reporting requirements and backup withholding tax will generally not apply to
dividends paid on THCR Common Stock to a Non-U.S. Shareholder at an address
outside the United States. Payments by a United States office of a broker of
the proceeds of a sale of THCR Common Stock is subject to both backup
withholding at a rate of 31% and information reporting unless the holder
certifies its Non-U.S. Shareholder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements (but not
backup withholding) will also apply to payments of the proceeds of sales of
THCR Common Stock by foreign offices of United States brokers or foreign
brokers with certain types of relationships to the United States, unless the
broker has documentary evidence in its records that the holder is a Non-U.S.
Shareholder and certain other conditions are met, or the holder otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules will be refunded or
credited against the Non-U.S. Shareholder's United States federal income tax
liability, provided that the required information is furnished to the Internal
Revenue Service.
These information reporting and backup withholding rules are under review by
the United States Treasury and their application to THCR Common Stock could be
changed by future regulations.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders of THCR wishing to include proposals in the proxy material for
the next Annual Meeting of THCR must submit the same in writing so as to be
received at the executive offices of THCR on or before , 1996. Such
proposals must also meet the other requirements of the rules of the SEC
relating to stockholders' proposals and the requirements set forth in the THCR
Certificate of Incorporation and THCR By- Laws.
Stockholders of Taj Holding wishing to include proposals in the proxy
material for the next Annual Meeting of Taj Holding (assuming the Merger is not
consummated prior to such meeting, which will not be held if the Merger is
consummated prior to the scheduled date for such Annual Meeting) must submit
the same in writing so as to be received at the executive offices of Taj
Holding on or before , 1996. Such proposals must also meet the other
requirements of the rules of the SEC relating to stockholders' proposals and
the requirements set forth in the Taj Holding Certificate of Incorporation and
Taj Holding By-Laws.
206
<PAGE>
LEGAL MATTERS
Certain legal matters, including certain tax matters, in connection with the
securities offered hereby are being passed upon for THCR by Willkie Farr &
Gallagher, New York, New York.
The statements as to matters of law and legal conclusions concerning New
Jersey gaming laws included under the captions "Risk Factors--Strict Regulation
by Gaming Authorities," and "Regulatory Matters" (other than the subcaptions
"Antitrust Regulations" and "Other Laws and Regulations") have been prepared by
Sterns & Weinroth, Trenton, New Jersey, gaming counsel for THCR and Taj
Holding. Sterns & Weinroth offers no opinion and does not purport to opine on
the application of federal securities laws and regulations or the securities
laws and regulations of any state with respect to the securities offered
hereby.
The statements as to matters of law and legal conclusions concerning Indiana
gaming laws included under the captions "Risk Factors--Strict Regulation by
Gaming Authorities" and "Regulatory Matters" (other than the subcaptions
"Antitrust Regulations" and "Other Laws and Regulations") have been prepared by
Tabbert Hahn & Zanetis, P.C., Indianapolis, Indiana, gaming counsel for THCR.
Tabbert Hahn & Zanetis, P.C. offers no opinion and does not purport to opine on
the application of federal securities laws and regulations or the securities
laws and regulations of any state with respect to the securities offered
hereby.
EXPERTS
The audited financial statements of Trump Hotels & Casino Resorts, Inc.,
Trump Plaza Holding Associates and Trump Plaza Associates, Trump Taj Mahal
Associates and Subsidiary, and Taj Mahal Holding Corp. and Subsidiary included
in this Proxy Statement-Prospectus and elsewhere in the Registration Statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
207
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Hotels & Casino Resorts, Inc.
Report of Independent Public Accountants................................ F-3
Balance Sheet as of March 29, 1995...................................... F-4
Notes to Balance Sheet.................................................. F-5
Trump Plaza Holding Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ F-9
Consolidated Balance Sheets as of December 31, 1993 and 1994............ F-10
Consolidated Statements of Operations for the years ended December 31,
1992, 1993
and 1994............................................................... F-11
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1992, 1993
and 1994............................................................... F-12
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-13
Notes to Consolidated Financial Statements.............................. F-14
Trump Hotels & Casino Resorts, Inc.
Condensed Consolidated Balance Sheet as of September 30, 1995
(unaudited)............................................................ F-25
Condensed Consolidated Statement of Operation for the period from
Inception (June 12, 1995) to September 30, 1995 (unaudited)............ F-26
Condensed Consolidated Statement of Capital (Deficit) for the period
from Inception (June 12, 1995) to September 30, 1995 (unaudited)....... F-27
Condensed Consolidated Statement of Cash Flows for the period from
Inception (June 12, 1995) to September 30, 1995 (unaudited)............ F-28
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-29
Trump Plaza Holding Associates and Trump Plaza Associates
Condensed Consolidated Balance Sheets as of December 31, 1994 and
September 30, 1995 (unaudited)......................................... F-35
Condensed Consolidated Statements of Operations for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-36
Condensed Consolidated Statement of Capital (Deficit) for the Nine
Months Ended September 30, 1995 (unaudited)............................ F-37
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-38
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-39
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-42
Consolidated Balance Sheets as of December 31, 1993 and 1994............ F-43
Consolidated Statements of Operations for the years ended December 31,
1992, 1993 and 1994.................................................... F-44
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1992, 1993
and 1994............................................................... F-45
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-46
Notes to Consolidated Financial Statements.............................. F-47
Taj Mahal Holding Corp. and Subsidiary
Report of Independent Public Accountants................................ F-56
Consolidated Balance Sheets as of December 31, 1993 and 1994............ F-57
Consolidated Statements of Operations for the years ended December 31,
1992, 1993 and 1994.................................................... F-58
Consolidated Statements of Stockholders' Equity for the years ended De-
cember 31, 1992, 1993
and 1994............................................................... F-59
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993 and 1994.................................................... F-60
Notes to Consolidated Financial Statements.............................. F-61
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Taj Mahal Associates and Subsidiary
Condensed Consolidated Balance Sheet as of December 31, 1994 and Septem-
ber 30, 1995 (unaudited)............................................... F-64
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-65
Condensed Consolidated Statement of Capital (Deficit) for the nine
months ended September 30, 1995 (unaudited)............................ F-66
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-67
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-68
Taj Mahal Holding Corp. and Subsidiary
Condensed Consolidated Balance Sheet as of December 31, 1994 and Septem-
ber 30, 1995 (unaudited)............................................... F-72
Condensed Consolidated Statements of Operations for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-73
Condensed Consolidated Statements of Stockholders' Equity for the nine
months ended
September 30, 1995 (unaudited)......................................... F-74
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 1994 and 1995 (unaudited).......................... F-75
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-76
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited the accompanying balance sheet of Trump Hotels & Casino
Resorts, Inc. (a Delaware Corporation) as of March 29, 1995 (parent company
only). This balance sheet is the responsibility of the management of Trump
Hotels & Casino Resorts, Inc. Our responsibility is to express an opinion on
this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Trump Hotels & Casino Resorts,
Inc. as of March 29, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
May 5, 1995 (except with respect
to the matter discussed in Note
5, as to which the date is
January 31, 1996)
F-3
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
BALANCE SHEET
MARCH 29, 1995
(PARENT COMPANY ONLY)
ASSETS
<TABLE>
<S> <C>
Cash...................................................................... $101
Investment in Trump Hotels & Casino Resorts Holdings, L.P................. 199
----
Total Assets............................................................ $300
====
LIABILITIES AND SHAREHOLDER'S EQUITY
Commitments and Contingencies
Common Stock, $.01 par value, 1,000 shares authorized, 100 shares issued
and outstanding.......................................................... $300
----
Total Shareholder's Equity.............................................. 300
----
Total Liabilities and Shareholder's Equity.............................. $300
====
</TABLE>
The accompanying notes to balance sheet are an integral part of this balance
sheet.
F-4
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO BALANCE SHEET
MARCH 29, 1995
(1) ORGANIZATION AND OPERATIONS
The accompanying balance sheet is that of Trump Hotels & Casino Resorts, Inc.
("THCR") (parent company only). Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") is owned 99% by THCR as general partner and 1% by Donald J.
Trump ("Trump") as a limited partner and Trump Hotels & Casino Resorts Funding,
Inc. ("THCR Funding") is a wholly owned subsidiary of THCR Holdings.
THCR was formed on March 29, 1995 to own and operate the Trump Plaza Hotel
and Casino ("Trump Plaza"), a luxury casino hotel located on The Boardwalk in
Atlantic City, New Jersey, and a riverboat gaming facility currently under
development at Buffington Harbor, Indiana (the "Indiana Riverboat"). THCR,
through THCR Holdings and its subsidiaries, intends to be the exclusive vehicle
through which Trump will engage in new gaming activities in emerging or
established gaming jurisdictions.
THCR Holdings and THCR Funding were formed on March 29, 1995 to raise funds
through the issuance and sale of debt securities for the benefit of Trump Plaza
and the Indiana Riverboat. As of March 29, 1995, they had no assets or
operations other than their initial capitalization.
As of March 29, 1995, all of THCR's common stock (the "THCR Common Stock")
was owned by Donald J. Trump and it had no assets or operations other than its
initial capitalization and its investment in THCR Holdings. Upon consummation
of the proposed public offerings (Note 2), THCR Holdings will beneficially own
100% of Trump Plaza and the Indiana Riverboat, as well as Trump's interests in
other gaming jurisdictions. As of March 29, 1995, each of these operations and
interests was beneficially owned by Trump. Upon consummation of the proposed
public offerings (Note 2), Trump will own an interest in these operations
through a limited partnership interest in THCR Holdings as well as THCR's Class
B Common Stock (the "THCR Class B Common Stock").
The operating companies that will be owned by THCR and THCR Holdings will
have a substantial amount of indebtedness. The ability of these entities to
service such debt will be entirely dependent upon their ability to generate
cash flow from operations. Other than Trump Plaza, each of the potential gaming
operations is in the development stage and has had limited or no site
construction. THCR's proposed operations in these jurisdictions are subject to
all of the many risks inherent in the establishment of a new business
enterprise, including unanticipated construction, permitting, licensing or
operating problems associated with the facilities as well as the ability of
THCR to market a new venture in a new gaming jurisdiction. In addition, gaming
operations in all jurisdictions are subject to strict regulatory licensing and
operating controls, as well as commitments for taxes, licensing fees and
investment obligations. Failure to maintain or obtain the requisite casino
licenses would have a material adverse effect on THCR. For additional
information, see the "Risk Factors" section of the Proxy Statement-Prospectus.
(2) STOCK INCENTIVE PLAN
In connection with the June 1995 Offerings, the Board of Directors of THCR
(the "Board of Directors") will adopt the 1995 Stock Incentive Plan (the "1995
Stock Plan"). Pursuant to the 1995 Stock Plan, directors, employees and
consultants of THCR and certain of its subsidiaries and affiliates who have
been selected as participants are eligible to receive awards of various forms
of equity-based incentive compensation, including stock options, stock
appreciation rights, stock bonuses, restricted stock awards, performance units
and phantom stock, and awards consisting of combinations of such incentives.
The 1995 Stock Plan is administered by a committee appointed by the Board of
Directors (the "Stock Incentive Plan Committee"). Subject to the provisions of
the 1995 Stock Plan, the Stock Incentive Plan Committee has sole discretionary
authority to interpret the 1995 Stock Plan and to determine the type of awards
to grant, when, if and to whom awards are granted, the number of shares covered
by each award and the terms and conditions of the award.
F-5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
MARCH 29, 1995
Options granted under the 1995 Stock Plan may be "incentive stock options"
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code, or
nonqualified stock options ("NQSOs"). The exercise price of the options is
determined by the Stock Incentive Plan Committee when the options are granted,
subject to a minimum price in the case of ISOs of the Fair Market Value (as
defined in the 1995 Stock Plan) of the THCR Common Stock on the date of grant
and a minimum price in the case of NQSOs of the par value of the THCR Common
Stock. In the discretion of the Stock Incentive Plan Committee, the option
exercise price may be paid in cash or in shares of THCR Common Stock or other
property having a fair market value on the date of exercise equal to the
option exercise price, or by delivering to THCR a copy of irrevocable
instructions to a stockholder to deliver promptly to THCR an amount of sale or
loan proceeds sufficient to pay the exercise price. If provided by the Stock
Incentive Plan Committee in an underlying stock option agreement, in the event
of a Change of Control (as defined in the 1995 Stock Plan), all options
subject to such agreement will be fully exercisable.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant
stock appreciation rights ("SARs"). An SAR granted as an alternative or a
supplement to a related stock option will entitle its holder to be paid an
amount equal to the fair market value of the THCR Common Stock subject to the
SAR on the date of exercise of the SAR, less the exercise price of the related
stock option or such other price as the Stock Incentive Plan Committee may
determine at the time of the grant of the SAR (which may not be less than the
lowest price which the Stock Incentive Plan Committee may determine under the
1995 Stock Plan for such stock option). Shares of THCR Common Stock covered by
a restricted stock award will be issued to the recipient at the time the award
is granted, but will be subject to forfeiture in the event continued
employment and/or restrictions and conditions established by the Stock
Incentive Plan Committee at the time the award is granted are not satisfied.
Unless otherwise determined by the Stock Incentive Plan Committee, a recipient
of a restricted stock award will have the same rights as an owner of THCR
Common Stock, including the right to receive cash dividends and to vote the
shares. A performance unit or phantom stock award will provide for the future
payment of cash or the issuance of shares of THCR Common Stock to the
recipient if continued employment and/or other performance objectives
established by the Stock Incentive Plan Committee at the time of grant are
attained. The 1995 Stock Plan also provides for the grant of stock bonus
awards, restricted stock awards and performance unit awards, which may be
settled in cash, in the discretion of the Stock Incentive Plan Committee and
if indicated in the applicable award agreement, on each date on which shares
of THCR Common Stock covered by the awards would otherwise have been delivered
or become unrestricted, in an amount equal to the fair market value of such
shares on such date.
THCR has reserved 1,000,000 shares of THCR Common Stock for issuance under
the 1995 Stock Plan.
In connection with the June 1995 Offerings, the Stock Incentive Plan
Committee intends to grant the following awards to Nicholas L. Ribis under the
1995 Stock Plan: (a) a Stock bonus award of 66,667 shares of THCR Common
Stock, which will be fully vested when issued, (b) a phantom stock unit award
of 66,666 units, entitling Mr. Ribis to receive 66,666 shares of THCR Common
Stock two years following such award, subject to certain conditions and (c) an
award of NQSOs entitling Mr. Ribis to purchase 133,333 shares of THCR Common
Stock, subject to certain conditions (including vesting at a rate of 20% per
year over a five-year period). The options will have an exercise price equal
to the price at which THCR Common Stock is sold to the public in the
Offerings.
(3) EMPLOYMENT ARRANGEMENTS
Trump will serve as the Chairman of the Board of Directors of THCR pursuant
to an Executive Agreement to be entered into between Trump and THCR Holdings
upon consummation of the June 1995 Offerings (the "Trump Executive
Agreement"). In consideration for Trump's services under the Trump Executive
Agreement, which has no fixed term, Trump will receive a salary of $1 million
per year.
F-6
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
MARCH 29, 1995
Plaza Associates currently has an employment agreement with Nicholas L. Ribis
pursuant to which Mr. Ribis acts as Chief Executive Officer of Plaza
Associates. The agreement, which expires on September 25, 1996, provides for an
annual salary of $550,000 with annual increases of 10% on each anniversary. Mr.
Ribis' current annual salary under the agreement is $605,000. Mr. Ribis
received a $250,000 signing bonus. THCR Holdings intends to enter into a
revised employment agreement with Mr. Ribis to replace the existing agreement,
pursuant to which he will agree to serve as chief executive officer of THCR and
THCR Holdings. The term of the employment agreement will be for five years and
Mr Ribis will be required to devote the majority of his professional time to
the affairs of THCR. Mr. Ribis' annual salary will be $907,500.
(4) SUBSEQUENT EVENTS
On June 12, 1995 three newly formed entities owned by Trump--Trump Hotels &
Casino Resorts, Inc. ("THCR"), Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") and Trump Hotels & Casino Resorts Funding, Inc.--completed
the offering and sale of $155,000,000 of Senior Secured Notes and $140,000,000
of equity, the June 1995 Offerings.
In connection with the June 1995 Offerings, Trump contributed all of his
beneficial interest in Plaza Associates (consisting of all of the outstanding
capital stock of Plaza Funding, a 99% equity interest in AC Holdings and all of
the outstanding capital stock of Trump Plaza Holding, Inc.) to THCR Holdings.
Trump also contributed all of his existing interests and rights to new gaming
activities in both emerging and established gaming jurisdictions to THCR
Holdings.
The net proceeds of the June 1995 Offerings were used to repurchase or redeem
the PIK Notes and PIK Note Warrants (Note 3), finance the expansion of Trump
Plaza (Notes 6 and 8) as well as to fund casino development costs in certain
jurisdictions outside of Atlantic City.
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by Amendment to Agreement and Plan of Merger, dated as of January 31,
1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with and
into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding (the "Taj Holding
Class A Common Stock") will be converted into the right to receive, at each
holder's election, either (a) $30.00 in cash or (b) that number of shares of
THCR Common Stock as shall have a market value equal to $30.00. The Merger
Agreement also contemplates the following transactions occurring in connection
with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) (the "THCR Stock Offering") and the consummation of the
offering by Trump Plaza Holding Associates ("AC Holdings") and its wholly
owned subsidiary THCR Atlantic City Funding, Inc. of up to $1,180,000,000
aggregate principal amount of mortgage notes, the aggregate proceeds of
which will be used, together with available cash, to (i) pay cash to those
holders of Taj Holding Class A Common Stock electing to receive cash in the
Merger, (ii) redeem Trump Taj Mahal Funding, Inc.'s ("Taj Funding")
outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Taj Bonds"),
(iii) redeem the outstanding shares of Class B Common Stock, par value $.01
per share, of Taj Holding as required in connection with the redemption of
the Taj Bonds, (iv) retire, by purchasing and/or defeasing, the outstanding
10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding, Inc., (v) satisfy
the indebtedness of Trump Taj Mahal Associates ("Taj Associates"), the owner
and operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal"), under
its loan agreement with National Westminster Bank USA, (vi) purchase certain
real property used in the operation of the Taj Mahal that is currently
leased from a corporation wholly owned by Trump, (vii)
F-7
<PAGE>
purchase certain real property used in the operation of Trump Plaza Hotel
and Casino that is currently leased from an unaffiliated third party, (viii)
make a payment to Bankers Trust to obtain releases of the liens
that Bankers Trust has with respect to Taj Associates and related
guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of THCR and Taj Holding; (ii) the risk in
refinancing and repayment of indebtedness and the need for additional
financing; (iii) the restrictions imposed on certain activities by certain debt
instruments; (iv) the recent results of Trump Plaza and the Taj Mahal; and (v)
risks associated with the Trump Plaza Expansion, the Taj Mahal Expansion and
the Indiana Riverboat. There can be no assurance that the Trump Plaza Expansion
or the Taj Mahal Expansion will be completed or that the Indiana Riverboat or
any other gaming venture, will open or that any of THCR's or the Taj Mahal's
operations will be successful. See "Risk Factors" included elsewhere in this
Proxy Statement-Prospectus for a discussion of these and other factors.
F-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Holding Associates and
Trump Plaza Associates:
We have audited the accompanying consolidated balance sheets of Trump Plaza
Holding Associates (a New Jersey general partnership) and Trump Plaza
Associates (a New Jersey general partnership) as of December 31, 1993 and 1994,
and the related consolidated statements of operations, capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1994.
These consolidated financial statements are the responsibility of the
management of Trump Plaza Holding Associates and Trump Plaza Associates. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Plaza Holding Associates
and Trump Plaza Associates as of December 31, 1993 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
February 18, 1995 (except with
respect to the matters discussed
in Note 10, as to which the date
is January 31, 1996)
F-9
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1994
<TABLE>
<CAPTION>
1993 1994
ASSETS ------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................... $ 14,393,000 $ 11,144,000
Trade receivables, net of allowances for
doubtful accounts of $10,616,000 and
$8,493,000, respectively...................... 6,759,000 6,685,000
Accounts receivable, other..................... 198,000 112,000
Inventories.................................... 3,566,000 3,657,000
Prepaid expenses and other current assets...... 2,701,000 4,280,000
------------- -------------
Total current assets......................... 27,617,000 25,878,000
------------- -------------
Property and Equipment (Notes 4, 6 and 8):
Land and land improvements..................... 35,613,000 36,463,000
Buildings and building improvements............ 295,617,000 297,573,000
Furniture, fixtures and equipment.............. 78,173,000 84,709,000
Leasehold improvements......................... 2,404,000 2,404,000
Construction in progress....................... 3,784,000 14,864,000
------------- -------------
415,591,000 436,013,000
Less--Accumulated depreciation and amortiza-
tion.......................................... (122,450,000) (137,659,000)
------------- -------------
Net property and equipment................... 293,141,000 298,354,000
------------- -------------
Land Rights, net of accumulated amortization of
$3,410,000 and $3,780,000, respectively......... 30,058,000 29,688,000
------------- -------------
Other Assets:
Deferred bond issuance costs, net of
accumulated amortization of $1,088,000 and
$3,270,000, respectively (Note 3)............. 16,254,000 14,125,000
Other Assets................................... 7,428,000 7,598,000
------------- -------------
Total other assets........................... 23,682,000 21,723,000
------------- -------------
Total assets................................. $ 374,498,000 $ 375,643,000
============= =============
LIABILITIES AND CAPITAL
Current Liabilities:
Current maturities of long-term debt (Note 3).. $ 1,633,000 $ 2,969,000
Accounts payable............................... 6,309,000 9,156,000
Accrued payroll................................ 5,806,000 4,026,000
Accrued interest payable (Note 3).............. 1,829,000 1,871,000
Due to affiliates, net (Note 8)................ 97,000 206,000
Other accrued expenses......................... 7,109,000 8,998,000
Other current liabilities...................... 5,330,000 4,602,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 974,000 --
------------- -------------
Total current liabilities.................... 29,087,000 31,828,000
------------- -------------
Non-Current Liabilities:
Long-term debt, net of current maturities (Note
3)............................................ 395,948,000 403,214,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 2,949,000 3,822,000
Deferred state income taxes.................... 1,224,000 359,000
------------- -------------
Total non-current liabilities................ 400,121,000 407,395,000
------------- -------------
Total liabilities............................ 429,208,000 439,223,000
------------- -------------
Commitments and Contingencies (Notes 4 and 6).... -- --
Capital (Deficit):
Partner's Deficit.............................. (78,772,000) (78,772,000)
Retained Earnings.............................. 24,062,000 15,192,000
------------- -------------
Total Capital (Deficit)...................... (54,710,000) (63,580,000)
------------- -------------
Total liabilities and capital................ $ 374,498,000 $ 375,643,000
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-10
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Gaming............................. $265,448,000 $264,081,000 $261,451,000
Rooms.............................. 18,369,000 18,324,000 18,312,000
Food and Beverage.................. 43,889,000 41,941,000 40,149,000
Other.............................. 11,012,000 8,938,000 8,408,000
Trump Regency...................... 9,465,000 -- --
------------ ------------ ------------
Gross Revenues................... 348,183,000 333,284,000 328,320,000
Less-Promotional allowances........ 34,865,000 32,793,000 33,257,000
------------ ------------ ------------
Net Revenues..................... 313,318,000 300,491,000 295,063,000
------------ ------------ ------------
Costs and expenses:
Gaming............................. 146,328,000 136,895,000 139,540,000
Rooms.............................. 2,614,000 2,831,000 2,715,000
Food and Beverage.................. 18,103,000 18,093,000 17,050,000
General and Administrative......... 75,459,000 71,624,000 73,075,000
Depreciation and Amortization...... 15,842,000 17,554,000 15,653,000
Restructuring costs................ 5,177,000 -- --
Trump Regency...................... 11,839,000 -- --
Other.............................. 2,953,000 3,854,000 3,615,000
------------ ------------ ------------
278,315,000 250,851,000 251,648,000
------------ ------------ ------------
Income from operations........... 35,003,000 49,640,000 43,415,000
------------ ------------ ------------
Non-operating income (expense):
Interest income.................... 487,000 546,000 842,000
Interest expense (Note 3).......... (31,843,000) (40,435,000) (49,061,000)
Other non-operating expense (Note
5)................................ (1,462,000) (3,873,000) (4,931,000)
------------ ------------ ------------
Non-operating expense, net....... (32,818,000) (43,762,000) (53,150,000)
------------ ------------ ------------
Income (loss) before state income
taxes and extraordinary items... 2,185,000 5,878,000 (9,735,000)
Provision (benefit) for state income
taxes............................... (233,000) 660,000 (865,000)
------------ ------------ ------------
Income (loss) before extraordinary
items............................... 2,418,000 5,218,000 (8,870,000)
Extraordinary gain (loss) (Note 5)... (38,205,000) 4,120,000 --
------------ ------------ ------------
Net income (loss).................... $(35,787,000) $ 9,338,000 $ (8,870,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-11
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1991........... $ 40,502,000 $ 13,541,000 $ 54,043,000
Net Loss............................. -- (35,787,000) (35,787,000)
Preferred Plaza Associates Interest
Distribution, Net................... (43,864,000) 36,970,000 (6,894,000)
------------ ------------ ------------
Balance, December 31, 1992........... (3,362,000) 14,724,000 11,362,000
Net Income........................... -- 9,338,000 9,338,000
Preferred Plaza Associates Interest
Distribution........................ (6,317,000) -- (6,317,000)
Distribution to Donald J. Trump to
repay certain personal indebtedness. (52,500,000) -- (52,500,000)
Distribution to Donald J. Trump to
redeem Trump Plaza Funding, Inc.
Preferred Stock Units............... (35,000,000) -- (35,000,000)
Conversion of Preferred Plaza Associ-
ates Interest into General Plaza As-
sociates Interest................... 18,407,000 -- 18,407,000
------------ ------------ ------------
Balance, December 31, 1993........... (78,772,000) 24,062,000 (54,710,000)
Net Loss............................. -- (8,870,000) (8,870,000)
------------ ------------ ------------
Balance, December 31, 1994........... $(78,772,000) $ 15,192,000 $(63,580,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-12
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
1992 1993 1994
------------- ------------- ------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net Income (loss)................... $ (35,787,000) $ 9,338,000 $ (8,870,000)
Adjustments to reconcile net income
(loss) to net cash flows provided
by operating activities:
Noncash charges:
Extraordinary loss (gain)........ 38,205,000 (4,120,000) --
Depreciation and amortization of
property and equipment.......... 15,211,000 17,177,000 15,276,000
Accretion of discount on
indebtedness.................... -- 862,000 1,916,000
Amortization of other assets..... 631,000 377,000 377,000
Provision for losses on
receivables..................... 4,675,000 90,000 396,000
Deferred state income taxes...... (233,000) 729,000 (865,000)
Utilization of CRDA credits and
donations....................... 1,358,000 -- 1,062,000
Valuation allowance of CRDA
investments..................... 645,000 1,047,000 394,000
------------- ------------- ------------
24,705,000 25,500,000 9,686,000
Decrease (increase) in
receivables..................... 99,000 823,000 (236,000)
Increase in inventories.......... (167,000) (498,000) (91,000)
Increase in prepaid expenses and
other current assets............ (580,000) (199,000) (1,385,000)
(Increase) decrease in other
assets.......................... (828,000) 2,530,000 1,504,000
Increase in amounts due to
affiliates...................... 374,000 188,000 109,000
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities....... 2,588,000 (6,524,000) 10,464,000
Decrease in distribution payable
to Trump Plaza Funding, Inc..... -- -- (101,000)
------------- ------------- ------------
Net cash flows provided by
operating activities............ $ 26,191,000 $21,820,000 $19,950,000
------------- ------------- ------------
Cash flows from investing
activities:
Purchases of property and
equipment........................ $ (8,643,000) $ (10,052,000) $(20,489,000)
Purchases of CRDA investments..... (1,853,000) (2,823,000) (2,525,000)
Cash refund of CRDA deposits...... -- 196,000 1,323,000
------------- ------------- ------------
Net cash flows used in investing
activities....................... (10,496,000) (12,679,000) (21,691,000)
------------- ------------- ------------
Cash flows from financing
activities:
Deferred financing costs.......... -- (17,342,000) --
Distributions to Donald J. Trump.. -- (87,500,000) --
Distributions to Plaza Funding.... -- (40,000,000) --
Preferred Plaza Associates
Interest Distribution............ (2,324,000) (6,282,000) --
Borrowings........................ 251,575,000 386,147,000 375,000
Payments and current maturities of
long-term debt................... (256,618,000) (248,573,000) (1,883,000)
------------- ------------- ------------
Net cash flows used in financing
activities....................... (7,367,000) (13,550,000) (1,508,000)
------------- ------------- ------------
Net increase (decrease) in cash
and cash equivalents........... 8,328,000 (4,409,000) (3,249,000)
Cash and cash equivalents at
beginning of year.................. 10,474,000 18,802,000 14,393,000
------------- ------------- ------------
Cash and cash equivalents at end of
year............................... $ 18,802,000 $ 14,393,000 $ 11,144,000
============= ============= ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-13
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
The accompanying financial statements include those of Trump Plaza Holding
Associates ("AC Holdings"), a New Jersey general partnership, and its 99% owned
subsidiary, Trump Plaza Associates ("Plaza Associates"), a New Jersey general
partnership, which owns and operates Trump Plaza Hotel and Casino ("Trump
Plaza") located in Atlantic City, New Jersey. Trump Plaza Funding, Inc. ("Plaza
Funding"), a New Jersey corporation, owns the remaining 1% interest in Plaza
Associates. AC Holdings' sole source of liquidity is distributions in respect
of its interest in Plaza Associates.
All significant intercompany balances and transactions have been eliminated
in the accompanying consolidated financial statements. The minority interest in
Plaza Associates has not been separately reflected in the consolidated
financial statements of AC Holdings since it is not material.
Plaza Funding was incorporated on March 14, 1986 and was originally formed
solely to raise funds through the issuance and sale of its debt securities for
the benefit of Plaza Associates. As part of a Prepackaged Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code consummated on
May 29, 1992, Plaza Funding became a partner of Plaza Associates and issued
approximately three million Stock Units, each comprised of one share of
Preferred Stock and one share of Common Stock of Plaza Funding. On June 25,
1993, the Stock Units were redeemed with a portion of the proceeds of Plaza
Funding's 10 7/8% Mortgage Notes due 2001 (the "Plaza Notes") as well as AC
Holdings' Stock Units.
AC Holdings was formed in February, 1993 for the purpose of raising funds for
Plaza Associates. On June 25, 1993, AC Holdings completed the sale of 12,000
Units (the "Units"), each Unit consisting of $5,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one PIK Note Warrant (the
"PIK Note Warrant") to acquire $1,000 principal amount of PIK Notes. The PIK
Notes and the PIK Note Warrants are separately transferable. AC Holdings has no
other assets or business other than its 99% equity interest in Plaza
Associates.
Plaza Associates was organized in June 1982. Prior to the date of the
consummation of the Offerings, Plaza Associates three partners were TP/GP Inc.
("Trump Plaza/GP"), the managing general partner of Plaza Associates, Plaza
Funding and Donald J. Trump ("Trump"). On June 25, 1993, Trump contributed his
interest in Trump Plaza/GP to Plaza Funding and Trump Plaza/GP merged with and
into Plaza Funding. Plaza Funding then became the managing general partner of
Plaza Associates. In addition, Trump contributed his interest in Plaza
Associates to AC Holdings, and Plaza Funding and Plaza Holding, each of which
are wholly owned by Trump, became the sole partners of Plaza Associates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GAMING REVENUES AND PROMOTIONAL ALLOWANCES
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. The retail value
of accommodations, food, beverage and other services provided to customers
without charge is included in gross revenue and deducted as promotional
allowances. The estimated departmental costs of providing such promotional
allowance are included in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
(IN THOUSANDS)
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
Rooms.......................................... $ 4,804 $ 4,190 $ 4,311
Food and Beverage.............................. 14,982 14,726 15,373
Other.......................................... 3,884 3,688 4,169
-------- -------- --------
$ 23,670 $ 22,604 $ 23,853
======== ======== ========
</TABLE>
F-14
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1992 and 1994, certain Progressive Slot Jackpot Programs were
discontinued which resulted in $4,100,000 and $585,000, respectively, of
related accruals being taken into income.
INVENTORIES
Inventories of provisions and supplies are carried at the lower of cost
(weighted average) or market.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost and is depreciated on the straight-
line method using rates based on the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and building improvements........................... 40 years
Furniture, fixtures and equipment............................. 3-10 years
Leasehold improvements........................................ 10-40 years
</TABLE>
Interest associated with borrowings used to finance construction projects has
been capitalized and is being amortized over the estimated useful lives of the
assets.
LAND RIGHTS
Land rights represent the fair value of such rights, at the time of
contribution to Plaza Associates by the Trump Plaza Corporation, an affiliate
of Plaza Associates. These rights are being amortized over the period of the
underlying operating leases which extend through 2078.
INCOME TAXES
Plaza Funding, Plaza Holding and Plaza Associates adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"), effective January 1, 1993. Adoption of this new standard did not
have a significant impact on the respective statements of financial condition
or results of operations. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method deferred tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The accompanying consolidated financial statements of Plaza Holding and Plaza
Associates do not include a provision for Federal income taxes since any income
or losses allocated to its partners are reportable for Federal income tax
purposes by the partners.
Under the New Jersey Casino Control Commission regulations, Plaza Associates
is required to file a New Jersey corporation business tax return. Accordingly,
a provision (benefit) for state income taxes has been reflected in the
accompanying consolidated financial statements of AC Holdings and Plaza
Associates.
Plaza Associates deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
F-15
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Plaza Funding, AC Holdings and
Plaza Associates consider all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The following
supplemental disclosures are made to the statements of cash flows.
<TABLE>
<CAPTION>
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash paid during the year for interest.. $25,310,000 $41,118,000 $36,538,000
=========== =========== ===========
Cash paid for state and Federal income
taxes.................................. $ -- $ 81,000 $ --
=========== =========== ===========
Issuance of debt in exchange for accrued
interest............................... $ -- $ 3,562,000 $ 8,194,000
=========== =========== ===========
</TABLE>
(3) LONG-TERM DEBT
Long-term debt consists of the following:
AC HOLDINGS AND PLAZA ASSOCIATES:
<TABLE>
<S> <C> <C>
PLAZA ASSOCIATES:
Plaza Associates Note (10 7/8% Mortgage Notes,
due 2001
net of unamortized discount of $4,141,000 and
$3,766,000, respectively) (A)................. $325,859,000 $326,234,000
Mortgage notes payable (C)..................... 6,410,000 5,494,000
Other notes payable............................ 1,060,000 468,000
------------ ------------
333,329,000 332,196,000
Less--Current maturities....................... 1,633,000 2,969,000
------------ ------------
331,696,000 329,227,000
AC HOLDINGS:
PIK Notes (12 1/2% Notes, due 2003 net of dis-
count of $11,310,000 and $9,769,000, respec-
tively) (B)................................... 64,252,000 73,987,000
------------ ------------
$395,948,000 $403,214,000
============ ============
</TABLE>
- ---------------------
(A) On June 25, 1993 Plaza Funding issued $330,000,000 principal amount of 10
7/8% Mortgage Notes, due 2001, net of discount of $4,313,000. Net proceeds
of the offering were used to redeem all of Plaza Funding's outstanding
$225,000,000 principal amount 12% Mortgage Bonds, due 2002 and together
with other funds (see (B) Pay-In-Kind Notes) to redeem all of Plaza
Funding's Stock Units, comprised of $75,000,000 liquidation preference
participating cumulative redeemable Preferred Stock with associated shares
of Common Stock, to repay $17,500,000 principal amount 9.14% Regency Note
due 2003, to make a portion of a distribution to Trump to pay certain
personal indebtedness, and to pay transaction expenses.
The Plaza Notes mature on June 15, 2001 and are redeemable at any time on
or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates, in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Plaza Notes bear interest at the stated rate of 10 7/8% per annum from the
date of issuance, payable semi-annually on each June 15 and December 15,
commencing December 15, 1993 and are secured by substantially all of Plaza
Associates assets. The accompanying consolidated financial statements
reflect interest expense at the effective interest rate of 11.12% per
annum.
F-16
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25.0 million of indebtedness to finance the expansion of its
facilities, which indebtedness may be secured by a lien on the hotel
facilities of Plaza Associates ("Trump Plaza East") (see Note 6
Commitments And Contingencies) senior to the liens of one of the Plaza
Mortgages (the "Plaza Note Mortgage") and another of the Plaza Mortgages
(the "Plaza Guarantee Mortgage") thereon. The Plaza Notes represent the
senior indebtedness of Plaza Funding. The note from Plaza Associates to
Plaza Funding in the same principal amount of the Plaza Notes (the "Plaza
Associates Note") and the guarantee of the Plaza Notes (the "Plaza
Guarantee") rank pari passu in right of payment with all existing and
future senior indebtedness of Plaza Associates.
The Plaza Notes, the Plaza Associates Note, the Plaza Note Mortgage, the
Plaza Guarantee and the Plaza Guarantee Mortgage are non-recourse to the
partners of Plaza Associates, to the shareholders of Plaza Funding and to
all other persons and entities (other than Plaza Funding and Plaza
Associates), including Trump. Upon an event of default, holders of the
Plaza Notes would have recourse only to the assets of Plaza Funding and
Plaza Associates.
(B) On June 25, 1993 AC Holdings issued $60,000,000 principal amount of 12 1/2%
PIK Notes, due 2003, together with PIK Note Warrants to acquire an
additional $12,000,000 of PIK Notes at no additional cost. The PIK Note
Warrants are exercisable following the earlier of certain triggering events
or June 15, 1996.
The PIK Notes mature on June 15, 2003 and bear interest at the rate of 12
1/2% per annum from the date of issuance, payable semi-annually on each
June 15 and December 15, commencing December 15, 1993. At the option of AC
Holdings, interest is payable in whole or in part, in cash or, in lieu of
cash, through the issuance of additional PIK Notes valued at 100% of their
principal amount. The ability of Plaza Holding to pay interest in cash on
the PIK Notes is entirely dependent on the ability of Plaza Associates to
distribute available cash, as defined, to AC Holdings for such purpose.
As of December 31, 1994 Plaza Associates has elected to issue in lieu of
cash a total of $11,756,000 in PIK Notes to satisfy its semi-annual PIK
Note interest obligation.
The PIK Notes are structurally subordinate to Plaza Funding's Mortgage
Notes and any other indebtedness of Plaza Associates and are secured by a
pledge of AC Holdings' 99% equity interest in Plaza Associates. The
indenture to which the PIK Notes were issued (the "PIK Note Indenture")
contains covenants prohibiting AC Holdings from incurring additional
indebtedness and engaging in other activities, and other covenants
restricting the activities of Plaza Associates substantially similar to
those set forth in the Plaza Note Indenture. The PIK Notes and the PIK
Note Warrants are non-recourse to the Partners of AC Holdings, including
Trump, and to all other persons and entities (other than Plaza Holding).
Upon an event of default, holders of PIK Notes or PIK Note Warrants will
have recourse only to the assets of Plaza Holding which consist solely of
its equity interest in Plaza Associates.
(C) Interest on these notes is payable with interest rates ranging from 10.0%
to 11.0%. The notes are due at various dates between 1995 and 1998 and are
secured by real property.
F-17
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The aggregate maturities of long-term debt in each of the years subsequent
to 1994 are:
<TABLE>
<S> <C>
1995......................................................... $ 2,969,000
1996......................................................... 548,000
1997......................................................... 2,012,000
1998......................................................... 433,000
1999......................................................... --
Thereafter................................................... 400,221,000
------------
$406,183,000
============
</TABLE>
(4) LEASES
Plaza Associates leases property (primarily land), certain parking space, and
various equipment under operating leases. Rent expense for the years ended
December 31, 1992, 1993, and 1994 was $4,361,000, $4,338,000 and $3,613,000,
respectively, of which $2,127,000, $2,513,000 and $1,900,000, respectively,
relates to affiliates of Plaza Associates.
Future minimum lease payments under the noncancelable operating leases are
as follows:
<TABLE>
<CAPTION>
AMOUNTS
RELATING TO
TOTAL AFFILIATES
------------ ------------
<S> <C> <C>
1995............................................ $ 6,445,000 $ 2,125,000
1996............................................ 6,670,000 2,350,000
1997............................................ 6,670,000 2,350,000
1998............................................ 5,110,000 2,350,000
1999............................................ 3,550,000 2,350,000
Thereafter...................................... 270,633,000 191,250,000
------------ ------------
$299,078,000 $202,775,000
============ ============
</TABLE>
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms. At December 31, 1994, the aggregate
option price for these leases was approximately $58,000,000.
In October 1993, Plaza Associates assumed the lease of Trump Plaza East to
Donald J. Trump ("Trump") (the "Trump Plaza East Lease") and related expenses
which are included in the above lease commitment amounts. In connection with
the offering and sale of Common Stock of Trump Hotels & Casino Resorts, Inc.
("THCR") for gross proceeds of $150 million and 140 million of Senior Secured
Notes (the "June 1995 Offerings"), Plaza Associates acquired a five-year option
to purchase Trump Plaza East. See Note 6--"Commitments and Contingencies Future
Expansion."
(5) EXTRAORDINARY GAIN (LOSS) AND NON-OPERATING EXPENSE
The excess of the carrying value of a note obligation over the amount of the
settlement payment net of related prepaid expenses in the amount of $4,120,000
has been reported as an extraordinary gain for the year ended December 31,
1993.
The extraordinary loss for the year ended December 31, 1992 consists of the
effect of stating the PIK Notes and Plaza Funding's Preferred Stock issued at
fair value as compared to the carrying value of these securities and the write
off of certain deferred financing charges and costs.
F-18
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Non-operating expense in 1992 included $1,462,000 of legal expenses relating
to litigation associated with Trump Plaza East. In 1993 and 1994 these costs
include costs associated with Trump Plaza East (see Note 6 --Commitments and
Contingencies Future Expansion), net of miscellaneous non-operating credits.
(6) COMMITMENTS AND CONTINGENCIES
CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates is
required to maintain certain licenses.
In April 1993, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates license to operate Trump Plaza. This license must be renewed in June
1995, is not transferable and will include a review of the financial stability
of Plaza Associates. Upon revocation, suspension for more than 120 days, or
failure to renew the casino license, the Casino Control Act provides for the
mandatory appointment of a conservator to take possession of the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
LEGAL PROCEEDINGS
Plaza Associates, its Partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, Plaza Associates has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties )
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against Plaza Associates. Plaza
Associates considers all such proceedings to be ordinary litigation incident to
the character of its business. Plaza Associates believes that the resolution of
these claims will not, individually or in the aggregate, have a material
adverse effect on its financial condition or results of operations.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. Plaza Associates believes that the final outcome of these
proceedings will not, either individually or in the aggregate, have a material
adverse effect on its financial condition, results of operations or on the
ability of Plaza Associates to otherwise retain or renew any casino or other
licenses required under the Casino Control Act for the operation of Trump
Plaza.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
commencing twelve months after the date of opening of Trump Plaza in May 1984,
and continuing for a period of twenty-five years thereafter, must either obtain
investment tax credits (as defined in the Casino Control Act), in an amount
equivalent to 1.25% of its gross casino revenues, or pay an alternative tax of
2.5% of its gross casino revenues, (as defined in the Casino Control Act).
Investment tax credits may be obtained by making qualified investments or by
the purchase of bonds at below market interest rates from the Casino
Reinvestment Development Authority ("CRDA"). Plaza Associates is required to
make quarterly deposits with the CRDA based on 1.25% of its
F-19
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
gross revenue. For the years ended December 31, 1992, 1993 and 1994, Plaza
Associates charged to operations $645,000, $1,047,000 and $838,000,
respectively, to give effect to the below market interest rates associated with
CRDA bonds that have either been issued or are expected to be issued from funds
deposited.
In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $1,519,000 in deposits made by Plaza Associates for site
improvements. Such deposits are being capitalized as part of property and
equipment as funds are appropriated by the CRDA.
CONCENTRATIONS OF CREDIT RISKS
In accordance with casino industry practice, Plaza Associates extends credit
to a limited number of casino patrons, after extensive background checks and
investigations of credit worthiness. At December 31, 1994 approximately 28% of
Plaza Associates casino receivables (before allowances) were from customers
whose primary residence is outside the United States, with no significant
concentration in any one foreign country.
TRUMP PLAZA EAST
In 1993, Plaza Associates received the approval of the CCC, subject to
certain conditions, for the expansion of Trump Plaza East. On June 24, 1993,
Trump transferred title of Trump Plaza East to a lender in exchange for a
reduction in indebtedness to such lender in an amount equal to the sum of the
fair market value of Trump Plaza East and all rent payments to be made to such
lender by Trump under Trump Plaza East Lease. At that time, the lender leased
Trump Plaza East to Trump for a term of five years, which expires on June 30,
1998, during which time Trump is obligated to pay the lender $260,000 per month
in lease payments. In October 1993, Plaza Associates assumed the Trump Plaza
East Lease and related expenses.
On June 25, 1993, Plaza Associates acquired a five-year option to purchase
Trump Plaza East (the "Trump Plaza East Purchase Option"). In addition, Plaza
Associates has a right of first refusal (the "Right of First Offer") upon any
proposed sale of all or any portion of Trump Plaza East during the term of the
Trump Plaza East Purchase Option. Until such time as the Trump Plaza East
Purchase Option is exercised or expires, Plaza Associates will be obligated,
from and after the date it entered into the Trump Plaza East Purchase Option,
to pay the net expenses associated with Trump Plaza East. During 1994, Plaza
Associates incurred $4.9 million of such expenses. The CCC has required that
Plaza Associates exercise the Trump Plaza East Purchase Option or its Right of
First Offer no later than July 1, 1996. Plaza Associates has petitioned the CCC
to extend such date to July 1, 1996; however, no assurance can be given that
such waiver will be granted or that any condition imposed by the CCC would be
acceptable to Plaza Associates. If Plaza Associates defaults in making payments
due under the Trump Plaza East Purchase Option, Plaza Associates would be
liable to the lender for the sum of (a) the present value of all remaining
payments to be made by Plaza Associates pursuant to the Trump Plaza East
Purchase Option during the term thereof and (b) the cost of demolition of all
improvements then located on Trump Plaza East. In order for Plaza Associates to
exercise the Trump Plaza East Purchase Option it would be required to pay $27.0
million through June 30, 1995, increasing by $1.0 million annually thereafter
until expiration on June 30, 1998. If Plaza Associates is unable to exercise
the option, it would be required to expense any capitalized costs associated
with Trump Plaza East.
As of December 31, 1994, Plaza Associates had capitalized approximately $11.7
million in construction costs related to Trump Plaza East including a $1
million consulting fee paid to Trump (Note 8). Plaza Associates might have to
close all or a portion of the expanded casino in order to comply with
regulatory requirements, which could have a material adverse effect on the
results of operations and financial condition of the Plaza Associates. Plaza
Associates ability to acquire Trump Plaza East pursuant to the Trump Plaza
F-20
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
East Purchase Option is dependent upon its ability to obtain financing to
acquire the property. The ability to incur such indebtedness is restricted by
the Plaza Note Indenture and the PIK Note Indenture and requires the consent of
certain of Trump's personal creditors. Plaza Associates ability to develop
Trump Plaza East is dependent upon its ability to use existing cash on hand and
generate cash flow from operations sufficient to fund development costs. No
assurance can be given that such cash on hand will be available to Plaza
Associates for such purposes or that it will be able to generate sufficient
cash flow from operations. In addition, exercise of the Trump Plaza East
Purchase Option or the Right of First Offer requires the consent of certain of
Trump's personal creditors, and there can be no assurance that such consent
will be obtained at the time Plaza Associates desires to exercise the Trump
Plaza East Purchase Option or such right.
The accompanying consolidated financial statements do not include any
adjustments that may be necessary should Plaza Associates be unable to exercise
the Trump Plaza East Purchase Option.
(7) EMPLOYEE BENEFIT PLANS
Plaza Associates has a retirement savings plan (the "Plan") for its nonunion
employees under Section 401(k) of the Internal Revenue Code. Employees are
eligible to contribute up to 15% of their earnings to the Plan and Plaza
Associates will match 50% of an eligible employee's contributions up to a
maximum of 4% of the employee's earnings. Plaza Associates recorded charges of
$699,000, $765,000 and $848,000 for matching contributions for the years ended
December 31, 1992, 1993 and 1994, respectively.
Plaza Associates provides no other material post-retirement or post-
employment benefits.
(8) TRANSACTIONS WITH AFFILIATES
DUE TO/FROM AFFILIATES
Amounts due to affiliates was $97,000 and $206,000 as of December 31, 1993
and 1994, respectively. Plaza Associates leases warehouse facility space to
Trump's Castle Associates. Lease payments of $14,000, $15,000 and $6,000 were
received from Trump's Castle Associates in 1992, 1993 and 1994, respectively.
Plaza Associates leased office space from Trump Taj Mahal Associates, which
terminated on March 19, 1993. Lease payments of $138,000 and $30,000 were paid
to Trump Taj Mahal Associates in 1992 and 1993, respectively.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1992, 1993 and
1994, Plaza Associates paid $900,000, $900,000 and $900,000, respectively, to
Seashore Four Associates, and paid $1,000,000, $1,000,000 and $1,000,000 in
1992, 1993 and 1994, respectively, to Trump Seashore Associates.
SERVICES AGREEMENT
Pursuant to the terms of a Services Agreement with Trump Plaza Management
Corp. ("TPM"), a corporation beneficially owned by Donald J. Trump, in
consideration for services provided, Plaza Associates pays TPM each year an
annual fee of $1.0 million in equal monthly installments, and reimburses TPM on
a monthly basis for all reasonable out-of-pocket expenses incurred by TPM in
performing its obligations under the Services Agreement, up to certain amounts.
Under this Services Agreement, approximately $708,000, $1.2 million and $1.3
million was charged to expense for the years ended December 31, 1992, 1993, and
1994, respectively.
F-21
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
TRUMP PLAZA WEST OPTION
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical Bank ("Chemical") and ACFH Inc.
("ACFH") a wholly owned subsidiary of Chemical. The Original Chemical Option
Agreement granted to Trump an option to purchase (i) the Trump Regency Hotel
(including the land, improvements and personal property used in the operation
of the hotel) ("Trump World's Fair") and (ii) certain promissory notes made by
Trump and/or certain of his affiliates and payable to Chemical (the "Chemical
Notes") which are secured by certain real estate assets located in New York,
unrelated to Plaza Associates.
The aggregate purchase price payable for the assets subject to the Original
Chemical Option Agreement was $60 million. Under the terms of the Original
Chemical Option Agreement, $1 million was required to be paid for the option by
January 5, 1994. In addition, the Original Chemical Option Agreement provided
for an expiration of the option on May 6, 1994, subject to an extension until
June 30, 1994 upon payment of an additional $250,000 on or prior to May 6,
1994. The Original Chemical Option Agreement did not allocate the purchase
price among the assets subject to the option or permit the option to be
exercised for some, but not all of such assets.
In connection with the execution of the Original Chemical Option Agreement,
Trump agreed with Plaza Associates that, if Trump is able to acquire Trump
World's Fair pursuant to the exercise of the option, he would make Trump
World's Fair available for the sole benefit of Plaza Associates on a basis
consistent with Plaza Associates contractual obligations and requirements.
Trump further agreed that Plaza Associates would not be required to pay any
additional consideration to Trump in connection with any assignment of the
option to purchase Trump World's Fair. On January 5, 1994, Plaza Associates
obtained the approval of the CCC to make the $1 million payment, which was made
on that date.
On June 16, 1994, Trump, Chemical and ACFH entered into, amended and restated
the Original Chemical Option Agreement, (the "First Amended Chemical Option
Agreement"). The First Amended Chemical Option Agreement provided for an
extension of the expiration of the Option through September 30, 1994, upon
payment of $250,000. Such payment was made on June 27, 1994. The First Amended
Chemical Option Agreement also provided for a $60 million option price for
Trump World's Fair and one of the Chemical Notes. On August 30, 1994, Trump,
Chemical and ACFH entered into an amendment to the First Amended Chemical
Option Agreement (the "Second Amended Chemical Option Agreement"). The Second
Amended Chemical Option Agreement provides for an extension of the expiration
of the option through March 31, 1995 upon the payment of $50,000 a month for
the period October through December 1994, and $150,000 a month for the period
January through March 1995. Plaza Associates received the approval of the CCC
and has made such payments.
As of December 31, 1994, $1,550,000, representing option payments, is
included in other assets in the accompanying consolidated balance sheet. If the
option is exercised, these amounts are available to offset the $60 million
option price.
OTHER PAYMENTS TO DONALD J. TRUMP
During 1994, Plaza Associates paid to Trump $1,000,000 under a Construction
Management Service Agreement. The payment was made for construction management
services rendered by Trump with respect to Trump Plaza East. This payment was
approved prior to disbursement by the CCC and has been classified in
construction in process in the accompanying consolidated balance sheet as of
December 31, 1994.
F-22
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During 1994, Plaza Associates also paid Trump a commission of approximately
$572,000 for securing a retail lease at Trump Plaza. The commission has been
capitalized and is being amortized to expense over the 10-year term of the
lease.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of Plaza Funding,
AC Holdings and Plaza Associates approximates fair value, as follows: (a) cash
and cash equivalents, accrued interest receivables and payables are based on
the short term nature of these financial instruments, (b) CRDA bonds and
deposits are based on the allowances to give effect to the below market
interest rates.
The estimated fair values of other financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
----------------------------
CARRYING AMOUNT FAIR VALUE
--------------- ------------
<S> <C> <C>
12 1/2% PIK Notes............................. $ 73,987,000 $ 51,791,000
10 7/8% Mortgage Notes........................ $326,234,000 $247,122,000
</TABLE>
The fair values of the PIK and Mortgage Notes are based on quoted market
prices obtained by Plaza Associates from its investment advisor.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
(10) SUBSEQUENT EVENTS
On June 12, 1995 three newly formed entities owned by Trump--Trump Hotels &
Casino Resorts, Inc. ("THCR"), Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") and Trump Hotels & Casino Resorts Funding, Inc.--completed
the offering and sale of $155,000,000 of Senior Secured Notes and $140,000,000
of equity, the June 1995 Offerings.
In connection with the June 1995 Offerings, Trump contributed all of his
beneficial interest in Plaza Associates (consisting of all of the outstanding
capital stock of Plaza Funding, a 99% equity interest in AC Holdings and all of
the outstanding capital stock of Trump Plaza Holding, Inc.) to THCR Holdings.
Trump also contributed all of his existing interests and rights to new gaming
activities in both emerging and established gaming jurisdictions to THCR
Holdings.
The net proceeds of the June 1995 Offerings were used to repurchase or redeem
the PIK Notes and PIK Note Warrants (Note 3), finance the expansion of Trump
Plaza (Notes 6 and 8) as well as to fund casino development costs in certain
jurisdictions outside of Atlantic City.
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by Amendment to Agreement and Plan of Merger, dated as of January 31,
1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with and
into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding ("Taj Holding Class A
Common Stock") will be converted into the right to receive, at each holder's
election, either (a) $30.00 in cash or (b) that number of shares of Common
Stock of THCR ("THCR Common Stock") as shall have a market value equal to
$30.00. The Merger Agreement also contemplates the following transactions
occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) (the "THCR Stock
F-23
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Offering") and the consummation of the offering by AC Holdings and its
wholly owned subsidiary THCR Atlantic City Funding, Inc. of up to
$1,180,000,000 aggregate principal amount of mortgage notes, the aggregate
proceeds of which will be used, to (i) pay cash to those holders of Taj
Holding Class A Common Stock electing to receive cash in the Merger, (ii)
redeem Trump Taj Mahal Funding, Inc.'s ("Taj Funding") outstanding 11.35%
Mortgage Bonds, Series A due 1999 (the "Taj Bonds"), (iii) redeem the
outstanding shares of Class B Common Stock, par value $.01 per share, of Taj
Holding as required in connection with the redemption of the Taj Bonds, (iv)
retire, by purchasing and/ or defeasing, the outstanding 10 7/8% Mortgage
Notes due 2001 of Plaza Funding, (v) satisfy the indebtedness of Trump Taj
Mahal Associates ("Taj Associates"), the owner and operator of the Trump Taj
Mahal Casino Resort (the "Taj Mahal"), under its loan agreement with
National Westminster Bank USA, (vi) purchase certain real property used in
the operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust to obtain releases of the
liens that Bankers Trust has with respect to Taj Associates and related
guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of THCR and Taj Holding; (ii) the risk in
refinancing and repayment of indebtedness and the need for additional
financing; (iii) the restrictions imposed on certain activities by certain debt
instruments; (iv) the recent results of Trump Plaza and the Taj Mahal; and (v)
risks associated with the Trump Plaza Expansion, the Taj Mahal Expansion and
the Indiana Riverboat. There can be no assurance that the Trump Plaza Expansion
or the Taj Mahal Expansion will be completed or that the Indiana Riverboat or
any other gaming venture, will open or that any of THCR's or the Taj Mahal's
operations will be successful. See "Risk Factors" included elsewhere in this
Proxy Statement-Prospectus for a discussion of these and other factors.
F-24
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
-------------
ASSETS
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 23,357
Restricted cash................................................ 24,225
Receivables, net............................................... 13,074
Inventories.................................................... 2,598
Other current assets........................................... 5,497
--------
Total current assets......................................... 68,751
PROPERTY AND EQUIPMENT, NET...................................... 399,922
LAND RIGHTS...................................................... 29,412
CASH RESTRICTED FOR FUTURE CONSTRUCTION.......................... 71,750
NOTE RECEIVABLE.................................................. 3,091
DEFERRED LOAN COSTS, NET......................................... 9,855
OTHER ASSETS..................................................... 16,634
--------
Total Assets................................................. $599,415
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt........................... $ 2,100
Accounts payable and accrued expenses.......................... 31,946
Accrued interest payable....................................... 17,743
Due to affiliates, net......................................... 403
--------
Total Current Liabilities.................................... 52,192
LONG-TERM DEBT, net of discount and current maturities........... 486,655
DEFERRED INCOME TAXES PAYABLE.................................... 5,173
--------
Total Liabilities............................................ 544,020
--------
MINORITY INTEREST................................................ 1,668
STOCKHOLDERS' EQUITY:
Common Stock $.01 par value 50,000,000 shares authorized,
10,066,667 issued and
outstanding..................................................... 101
Class B Common Stock $.01 par value, 1,000 shares authorized, is-
sued and outstanding............................................ -
Additional Paid in Capital....................................... 52,327
Retained Earnings................................................ 1,299
--------
Total Stockholders' Equity................................... 53,727
--------
Total Liabilities and Stockholders' Equity................... $599,415
========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-25
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) TO SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION TO
SEPTEMBER 30, 1995
------------------
<S> <C>
REVENUES:
Gaming..................................................... $ 101,634
Rooms...................................................... 6,995
Food and Beverage.......................................... 14,866
Other...................................................... 3,877
-----------
Gross Revenues........................................... 127,372
Less--Promotional allowances............................... 14,071
-----------
Net Revenues............................................... 113,301
-----------
COSTS AND EXPENSES:
Gaming..................................................... 52,681
Rooms...................................................... 783
Food and Beverage.......................................... 6,654
General and Administrative................................. 23,799
Depreciation and Amortization.............................. 5,091
Other...................................................... 1,159
-----------
90,167
-----------
Income from operations................................... 23,134
-----------
NON-OPERATING INCOME AND (EXPENSES):
Interest income............................................ 2,361
Interest expense........................................... (19,177)
Other non-operating expense................................ (2,198)
-----------
(19,014)
-----------
Income before provision for state income taxes............... 4,120
PROVISION FOR STATE INCOME TAXES............................. 1,153
-----------
Income before Minority Interest.............................. $ 2,967
-----------
MINORITY INTEREST............................................ 1,668
-----------
NET INCOME................................................... $ 1,299
===========
Earnings per share........................................... $ .13
===========
Weighted average shares...................................... 10,161,561
===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-26
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) TO SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------ ADDITIONAL
CLASS B PAID IN RETAINED
COMMON COMMON AMOUNT CAPITAL EARNINGS TOTAL
---------- ------- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 12, 1995.. 1,000 $-- $(75,543) $ -- $(75,543)
Proceeds from issuance
of Common Stock........ 10,000,000 100 126,748 -- 126,848
Issuance of Stock Grant
Award.................. 66,667 1 933 -- 934
Accretion of Phantom
Stock Units............ -- 189 189
Net Income.............. -- -- -- 1,299 1,299
---------- ----- ---- -------- ------ --------
Balance, September 30,
1995................... 10,066,667 1,000 $101 $ 52,327 $1,299 $ 53,727
========== ===== ==== ======== ====== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-27
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) TO SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
TO SEPTEMBER 30,
1995
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................... $ 1,299
Adjustments to reconcile net income to net cash flows from
operating activities--
Noncash charges--
Depreciation and amortization.............................. 5,091
Issuance of stock grant awards and phantom stock units..... 1,122
Minority interest in net income............................ 1,668
Accretion of discounts on mortgage notes................... 127
Provisions for losses on receivables....................... 236
Utilization of CRDA credits and donations.................. 211
Valuation allowance of CRDA investments.................... (739)
Deferred income taxes...................................... 1,153
--------
10,168
Increase in receivables.................................... (6,015)
Decrease in inventories.................................... 826
Increase in advances from affiliates....................... 492
Decrease in other current assets........................... 6,193
Decrease in other assets................................... 5,742
Decrease in accounts payable and accrued expenses.......... (2,802)
Decrease in accrued interest payable....................... (4,289)
--------
Net cash flows provided by operating activities........... 10,315
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net...................... (102,555)
Restricted cash for short-term operating needs............... (24,225)
Cash restricted for future construction...................... (71,750)
--------
Net cash flows used in investing activities............... (198,530)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net................................ 126,848
Issuance of Senior Secured Notes, net........................ 144,849
Retirement of PIK Notes...................................... (81,746)
Issuance of note receivable.................................. (3,000)
Payment of current maturities of long-term debt.............. (3,565)
--------
Net cash flows provided by financing activities........... 183,386
--------
Net decrease in cash and cash equivalents..................... (4,829)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................ 28,186
--------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1995............... $ 23,357
========
CASH INTEREST PAID............................................ $ 22,848
========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-28
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND OPERATIONS
Trump Hotels & Casino Resorts, Inc. ("THCR"), which commenced operations on
June 12, 1995, was formed on March 28, 1995 to own and operate the Trump Plaza
Hotel and Casino ("Trump Plaza"), a luxury casino hotel located on The
Boardwalk in Atlantic City, New Jersey. In addition, THCR, through Trump
Indiana, Inc. ("Trump Indiana"), a wholly owned subsidiary of Trump Hotels &
Casino Resorts Holdings, L.P. ("THCR Holdings"), is in the process of
developing a riverboat gaming facility at Buffington Harbor, Indiana (the
"Indiana Riverboat"). THCR, through THCR Holdings and its subsidiaries, will be
the exclusive vehicle through which Donald J. Trump ("Trump") will engage in
new gaming activities in emerging or established gaming jurisdictions.
THCR Holdings and its wholly owned subsidiary, Trump Hotels & Casino Resorts
Funding, Inc. ("THCR Funding"), were formed on March 28, 1995 to raise funds
through the issuance and sale of debt securities for the benefit of Trump Plaza
and Trump Indiana. THCR Holdings is owned approximately 60.2% by THCR, as
general partner and approximately 39.8% by Trump, as limited partner. THCR
Holdings beneficially owns 100% of Trump Plaza and Trump Indiana, as well as
interests in other gaming jurisdictions.
All significant intercompany balances and transactions have been eliminated
in the accompanying condensed consolidated financial statements.
The accompanying condensed financial statements have been prepared without
audit. In the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position, the
results of operations and cash flows for the periods presented, have been made.
The accompanying condensed financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally included in
financial statements prepared in conformity with generally accepted accounting
principles have been condensed or omitted. These condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included elsewhere in this Proxy Statement/Prospectus.
The accounting policies followed by THCR are substantially the same as those
followed by Trump Plaza Funding, Inc. ("Plaza Funding") and Trump Plaza
Associates ("Plaza Associates").
The casino industry in Atlantic City is seasonal in nature; therefore,
results of operations for the period ended September 30, 1995 are not
necessarily indicative of the operating results for a full year.
(2) PUBLIC OFFERINGS
On June 12, 1995, THCR completed a public offering of 10,000,000 shares of
its common stock, par value $.01 per share (the "THCR Common Stock"), at $14.00
per share (the "June 1995 Stock Offering") for gross proceeds of $140,000,000.
Concurrently with the June 1995 Stock Offering, THCR Holdings, together with
its subsidiary, THCR Funding, issued 15 1/2% Senior Notes due 2005 (the "Senior
Notes") for gross proceeds of $155,000,000 (the "June 1995 Note Offering" and,
together with the June 1995 Stock Offering, the "June 1995 Offerings"). THCR
contributed the gross proceeds of the June 1995 Stock Offering to THCR
Holdings. The net proceeds from the June 1995 Offerings were used for the
following purposes: (a) repurchase
F-29
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
and redemption of the 12 1/2% Pay-in-Kind Notes due 2003 ("PIK Notes") of Trump
Plaza Holding Associates ("AC Holdings") (including accrued interest payable)
of $86,209,000, (b) exercise of an option to purchase the Trump Plaza Regency
Hotel ("Trump World's Fair") for $58,150,000, (c) construction costs at a hotel
located adjacent to Trump Plaza's existing facility ("Trump Plaza East") for
$2,500,000 and (d) construction and land acquisition costs of $23,772,000 for
the Indiana Riverboat. The balance of the proceeds will be used for the
completion of the construction at Trump Plaza, the Trump Plaza East, the Trump
World's Fair and the Indiana Riverboat.
Prior to the June 1995 Offerings, Trump was the sole stockholder of THCR and
sole beneficial owner of THCR Holdings. Concurrent with the June 1995
Offerings, Trump contributed to THCR Holdings all of his beneficial interest in
Plaza Associates, which consisted of all of the outstanding capital stock of
Plaza Funding, a 99% equity interest in AC Holdings and all of the outstanding
capital stock of Trump Plaza Holding, Inc. ("Plaza Holding Inc."), which owns
the remaining 1% equity interest in AC Holdings. Trump also contributed all of
his existing interests and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana but excluding his
interests in the Trump Taj Mahal Casino Resort and Trump's Castle Casino Resort
(together, the "Other Trump Casinos"), to THCR Holdings.
The proceeds of the June 1995 Stock Offering were contributed by THCR to THCR
Holdings in exchange for an approximate 60.2% general partnership interest in
THCR Holdings. THCR Holdings' partnership agreement provides that all business
activities of THCR must be conducted through THCR Holdings or its subsidiary
partnerships or corporations. As the sole general partner of THCR Holdings,
THCR will have the exclusive rights, responsibilities and discretion in the
management and control of THCR Holdings (although Trump has retained certain
rights to control the management of Plaza Associates to the extent required by
the Mortgage Note Indenture pursuant to which the Plaza Mortgage Notes (as
defined) were issued).
In exchange for Trump's contributions to THCR Holdings as described above,
Trump received an approximately 39.8% limited partnership interest in THCR
Holdings.
Trump's limited partnership interest in THCR Holdings represents his economic
interest in the assets and operations of THCR Holdings. Accordingly, such
limited partnership interest is convertible at Trump's option into 6,666,667
shares of THCR Common Stock (subject to certain adjustments) representing
approximately 39.8% of the outstanding shares of THCR Common Stock.
Trump received shares of Class B Common Stock of THCR, par value $.01 per
share (the "THCR Class B Common Stock"). The THCR Class B Common Stock votes
together with the Common Stock as a single class on all matters submitted to
stockholders of THCR for a vote or in respect of which consents are solicited
(other than in connection with certain amendments to THCR's Amended and
Restated Certificate of Incorporation). The number of votes represented by the
THCR Class B Common Stock held by any holder is equal to the number of shares
of THCR Common Stock issuable to the holder upon conversion of such holder's
partnership interest in THCR Holdings into THCR Common Stock. Upon such
conversion, the corresponding voting power of shares of THCR Class B Common
Stock provides Trump with a voting interest in THCR which is proportionate to
his equity interest in THCR Holdings' assets represented by his limited
partnership interest. Except for the right to receive par value upon
liquidation, the THCR Class B Common Stock has no right to receive any dividend
or other distribution in respect of the equity of THCR. In addition, Trump has
agreed to waive (except as set forth under the Amended and Restated Certificate
of Incorporation of THCR) state law rights to vote the THCR Class B Common
Stock as a separate class in the event of merger or sale of substantial assets.
F-30
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(3) BASIS OF PRESENTATION
PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements of THCR reflect
the contributed entities' assets and liabilities on the carryover basis of
accounting as of June 12, 1995, the date of such contribution as such entities
were under common control. Trump's approximately 39.8% economic interest in
THCR Holdings is accounted for as a minority interest in THCR's financial
statements.
The accompanying statements of operations reflect the operations for the
three-month period ended September 30, 1995 and the period from inception
through September 30, 1995. THCR did not have any operations from the period of
its formation, March 28, 1995, through the date of the Offerings.
INCOME TAXES
Federal income taxes are provided based on THCR's income, subject to Federal
income tax.
Under the New Jersey Casino Control Commission (the "CCC") regulations, Plaza
Associates is required to file a New Jersey Corporate Business Tax Return.
Accordingly, a provision for state income taxes has been reflected in the
accompanying condensed statements of operations of THCR.
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents (including shares to be granted to
the President, Chief Executive Officer and Chief Financial Officer of THCR
under a phantom stock unit award (see Note 5). The shares of THCR Class B
Common Stock owned by Trump have no economic interest and, therefore, are not
considered in the calculation of weighted average shares outstanding.
(4) LONG-TERM DEBT
On June 12, 1995, THCR Holdings and THCR Funding issued $155,000,000
principal amount of the Senior Notes. The Senior Notes are redeemable in cash
at the option of THCR Holdings and THCR Funding, in whole or in part, at any
time on or after June 15, 2000 at redemption prices, as defined. The Senior
Notes bear interest at the stated rate of 15 1/2% per annum, payable semi-
annually in arrears on June 15 and December 15 of each year, commencing
December 15, 1995, and are secured by substantially all of the assets of THCR
Holdings. Costs associated with the issuance of the debt total approximately
$10,151,000. These costs have been deferred and are being amortized over the
life of the Senior Notes.
On June 25, 1993, Plaza Funding issued $330,000,000 principal amount of 10
7/8% Mortgage Notes due 2001 (the "Plaza Notes"), net of discount of
$4,313,000. At September 30, 1995, the Plaza Notes were $326,543,000, net of
discount of $3,457,000.
Plaza Associates has other notes payable of $7,212,000 at September 30, 1995,
including $2,100,000 in current maturities. Interest on these notes is payable
monthly and these notes have various maturity dates.
(5) STOCK INCENTIVE PLAN
In connection with the June 1995 Offerings, the Board of Directors of THCR
(the "Board of Directors") adopted the 1995 Stock Incentive Plan (the "1995
Stock Plan"). Pursuant to the 1995 Stock Plan, directors,
F-31
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
employees and consultants of THCR and certain of its subsidiaries and
affiliates who have been selected as participants are eligible to receive
awards of various forms of equity-based incentive compensation, including stock
options, stock appreciation rights, stock bonuses, restricted stock awards,
performance units and phantom stock, and awards consisting of combinations of
such incentives. The 1995 Stock Plan is administered by a committee appointed
by the Board of Directors (the "Stock Incentive Plan Committee").
Options granted under the 1995 Stock Plan may be incentive stock options
("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options ("NQSOs"). The
vesting, exercisability and exercise price of the options are determined by the
Committee when the options are granted, subject to a minimum price, in the case
of ISOs, of the Fair Market Value (as defined in the 1995 Stock Plan) of THCR
Common Stock on the date of the grant and a minimum price, in the case of
NQSOs, of the par value of THCR Common Stock.
The 1995 Stock Plan permits the Stock Incentive Plan Committee to grant stock
appreciation rights ("SARs") either alone or in connection with an option. An
SAR granted as an alternative or a supplement to a related stock option will
entitle its holder to be paid an amount equal to the fair market value of THCR
Common Stock subject to the SAR on the date of exercise of the SAR, less the
exercise price of the related stock option or such other price as the Stock
Incentive Plan Committee may determine at the time of the grant of the SAR
(which may not be less than the lowest price which the Stock Incentive Plan
Committee may determine under the 1995 Stock Plan for such stock option).
The 1995 Stock Plan also provides that phantom stock and performance unit
awards may be settled in cash, at the discretion of the Stock Incentive Plan
Committee and if indicated in the applicable award agreement, on each date on
which shares of THCR Common Stock covered by the awards would otherwise have
been delivered or become unrestricted, in an amount equal to the fair market
value of the shares on such date.
Subject to adjustment in the event of changes in the outstanding stock or the
capital structure of THCR, THCR has reserved 1,000,000 shares of THCR Common
Stock for issuance under the 1995 Stock Plan.
In connection with the June 1995 Offerings, the Stock Incentive Plan
Committee granted to the President, Chief Executive Officer and Chief Financial
Officer of THCR a stock bonus award of 66,667 shares of THCR Common Stock under
the 1995 Stock Plan, which was fully vested upon issuance. Compensation expense
of approximately $933,000 associated with the stock bonus award is reflected in
the accompanying statement of operations of THCR. A phantom stock unit award
was also issued to the President, Chief executive Officer and Chief Financial
Officer of THCR.
This award entitles the President, Chief Executive Officer and Chief
Financial Officer of THCR to receive 66,666 shares of THCR Common Stock two
years following such award, subject to certain conditions. The compensation
expense associated with the phantom stock award is approximately $933,000 and
this amount is being amortized over the two-year vesting period and was
approximately $189,000 for the period from inception to September 30, 1995. The
President, Chief Executive Officer and Chief Financial Officer of THCR also
received an award of NQSOs for the purchase of 133,333 shares of THCR Common
Stock, subject to certain conditions (including vesting at a rate of 20% per
year over a five-year period). The options have an exercise price of $14.00 per
share.
(6) CERTAIN TRANSACTIONS WITH COMPANY EXECUTIVE
EXECUTIVE AGREEMENT
Trump serves as the Chairman of the Board of Directors pursuant to an
Executive Agreement entered into between Trump, THCR and THCR Holdings (the
"Trump Executive Agreement"). In consideration
F-32
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
for Trump's services under the Trump Executive Agreement, Trump receives a
salary of $1,000,000 per year, payable in equal monthly installments.
NOTE RECEIVABLE
Prior to consummation of the June 1995 Offerings, Trump incurred $3,000,000
relating to expenditures for the development of Trump Indiana and other gaming
ventures. Concurrently with the June 1995 Offerings, THCR Holdings loaned Trump
$3,000,000 and Trump issued to THCR Holdings a five-year promissory note (the
"Trump Note") bearing interest at a fixed rate of 10% per annum, payable
annually. The Trump Note will be automatically canceled in the event that at
any time during the period defined in the Trump Note, the THCR Common Stock
trades at a price per share equal to or greater than the prices set forth in
the Trump Note (subject to adjustment in certain circumstances). During the
period from inception to September 30, 1995, the trading price of the THCR
Common Stock did not reach the defined prices.
(7) EMPLOYMENT AGREEMENT
Nicholas L. Ribis ("Ribis"), the President, Chief Executive Officer and Chief
Financial Officer of THCR entered into a five-year employment agreement (the
"Revised Ribis Agreement") with THCR and THCR Holdings on June 12, 1995.
Pursuant to the Revised Ribis Agreement, Ribis shall be employed as the
President and Chief Executive Officer of THCR and Chief Executive Officer of
THCR Holdings and shall receive a base salary of $907,500, annually.
(8) COMMITMENTS AND CONTINGENCIES
As a condition to the June 1995 Note Offering, THCR Holdings and THCR Funding
entered into a Cash Collateral and Disbursement Agreement (the "Cash Collateral
Agreement") with First Bank National Association in its respective capacities
as Trustee and Disbursement Agent (each as defined therein). The Cash
Collateral Agreement called for initial deposits to custodial accounts which
are restricted in use for (a) Trump Indiana for the ship and land projects, (b)
Trump Plaza construction projects, including the exercise of the option to
purchase the Trump World's Fair (the "Trump World's Fair Purchase Option") and
construction projects at the Trump Plaza East and the Trump World's Fair and
(c) the first two interest payments on the Senior Notes. As of September 30,
1995, $24,225,000 is restricted for the first two interest payments on the
Senior Notes and is reflected as Restricted Cash in the accompanying condensed
balance sheets. The balance of funds restricted for Trump Indiana, the Trump
Plaza East and the Trump World's Fair are approximately $9,725,000, $12,650,000
and $49,375,000, respectively, at September 30, 1995, and are reflected as Cash
Restricted for future construction as a non-current asset in the accompanying
balance sheets.
(9) CASINO LICENSE RENEWAL:
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates is
required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission (the "CCC") renewed
Plaza Associates' license to operate Trump Plaza. This license must be renewed
in June 1999, is not transferable and such renewal of the license will include
a review of the financial stability of Plaza Associates. Upon revocation,
suspension for more than 120 days or if the CCC fails or refuses to renew such
casino license, the Casino Control Act allows for the appointment of a
conservator to take possession of the hotel and casino's business and property,
subject to all valid liens, claims and encumbrances.
F-33
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(10) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
entered into the Agreement and Plan of Merger, as amended by Amendment to
Agreement and Plan of Merger, dated as of January 31, 1996 (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into Taj Holding
(the "Merger"). The Merger Agreement provides that each outstanding share of
Class A Common Stock of Taj Holding ("Taj Holding Class A Common Stock") will
be converted into the right to receive, at each holder's election, either (a)
$30.00 in cash or (b) that number of shares of THCR Common Stock as shall have
a market value equal to $30.00. The Merger Agreement also contemplates the
following transactions occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) (the "THCR Stock Offering") and the consummation of the
offering by AC Holdings and its wholly owned subsidiary THCR Atlantic City
Funding, Inc. of up to $1,180,000,000 aggregate principal amount of mortgage
notes, the aggregate proceeds of which will be used, together with available
cash, to (i) pay cash to those holders of Taj Holding Class A Common Stock
electing to receive cash in the Merger, (ii) redeem Trump Taj Mahal Funding,
Inc's ("Taj Funding") outstanding 11.35% Mortgage Bonds, Series A due 1999
(the "Taj Bonds"), (iii) redeem the outstanding shares of Class B Common
Stock, par value $.01 per share, of Taj Holding as required in connection
with the redemption of the Taj Bonds, (iv) retire, by purchasing and/or
defeasing, the outstanding Plaza Notes, (v) satisfy the indebtedness of
Trump Taj Mahal Associates ("Taj Associates"), the owner and operator of the
Trump Taj Mahal Casino Resort (the "Taj Mahal"), under its loan agreement
with National Westminster Bank USA, (vi) purchase certain real property used
in the operation of the Taj Mahal that is currently leased from a
corporation wholly owned by Trump, (vii) purchase certain real property used
in the operation of Trump Plaza that is currently leased from an
unaffiliated third party, (viii) make a payment to Bankers Trust to obtain
releases of the liens that Bankers Trust has with respect to Taj Associates
and related guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
F-34
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................... $ 11,144 $ 20,079
Receivables, net.................................. 6,797 12,321
Inventories....................................... 2,477 2,598
Advances to affiliates, net....................... -- 403
Other current assets.............................. 4,280 4,765
-------- --------
Total current assets............................ 24,698 40,166
PROPERTY AND EQUIPMENT, net......................... 298,354 376,116
LAND RIGHTS......................................... 29,688 29,412
OTHER ASSETS........................................ 22,903 16,634
-------- --------
Total Assets.................................... $375,643 $462,328
======== ========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt.............. $ 2,969 $ 2,100
Accounts payable and accrued expenses............. 26,782 29,255
Accrued interest payable.......................... 1,871 10,469
Due to affiliate, net............................. 206 --
-------- --------
Total Current Liabilities....................... 31,828 41,824
LONG-TERM DEBT, net of discount and current maturi-
ties............................................... 403,214 331,655
DISTRIBUTION PAYABLE TO TRUMP PLAZA FUNDING, INC.... 3,822 3,822
DEFERRED STATE INCOME TAXES......................... 359 1,351
-------- --------
Total Liabilities............................... 439,223 378,652
-------- --------
CAPITAL:
Partners' Equity (Deficit)........................ (78,772) 68,087
Retained Earnings................................. 15,192 15,589
-------- --------
Total Capital (Deficit)......................... (63,580) 83,676
-------- --------
Total Liabilities and Capital................... $375,643 $462,328
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-35
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
------------------
1994 1995
-------- --------
<S> <C> <C>
Revenues:
Gaming.................................................... $197,068 $224,499
Rooms..................................................... 14,014 14,671
Food and Beverage......................................... 29,556 33,403
Other..................................................... 6,558 7,187
-------- --------
Gross Revenues.......................................... 247,196 279,760
Less-Promotional Allowances............................... 25,130 28,611
Net Revenues............................................ 222,066 251,149
-------- --------
COSTS AND EXPENSES:
Gaming.................................................... 104,100 121,987
Rooms..................................................... 2,064 1,741
Food and Beverage......................................... 12,501 13,783
General and Administrative................................ 54,928 51,073
Depreciation and Amortization............................. 11,734 11,792
Other..................................................... 2,787 2,556
-------- --------
Total Costs and Expenses.................................... 188,114 202,932
-------- --------
Income from operations.................................. 33,952 48,217
-------- --------
NON-OPERATING EXPENSE (NET):
Interest income........................................... 520 689
Interest expense.......................................... (36,571) (34,419)
Other non-operating expense............................... (3,729) (3,847)
-------- --------
(39,780) (37,577)
-------- --------
</TABLE>
<TABLE>
<S> <C> <C>
Income (loss) before provision (benefit) for state income
taxes and extraordinary loss.................................. (5,828) 10,640
PROVISION (BENEFIT) FOR STATE INCOME TAXES..................... (523) 993
------- ------
Income before extraordinary items.............................. (5,305) 9,647
Extraordinary Loss............................................. -- (9,250)
------- ------
Net Income (Loss).............................................. $(5,305) $ 397
======= ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-36
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
--------- -------- --------
<S> <C> <C> <C>
Balance, December 31, 1994........................ $(78,772) $15,192 $(63,580)
Net Income........................................ -- 397 397
Contributed Capital--Trump Hotels & Casino Resorts
Holdings, L.P.................................... 146,859 -- 146,859
-------- ------- --------
Balance, September 30, 1995....................... $ 68,087 $15,589 $ 83,676
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-37
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................ $(5,305) $ 397
Adjustments to reconcile net income (loss) to net cash flows
provided by operating activities--
Noncash charges--
Extraordinary Loss......................................... -- 9,250
Depreciation and amortization.............................. 11,734 11,792
Accretion of discounts on indebtedness..................... 1,412 1,021
Provisions for losses on receivables....................... 357 734
Deferred state income taxes................................ (523) 992
Utilization of CRDA credits and donations.................. 995 445
Valuation allowance of CRDA investments.................... 227 (790)
------- -------
8,897 23,841
Increase in receivables.................................... (437) (6,258)
Decrease in inventories.................................... 10 382
(Increase) decrease in advances to affiliates.............. 375 (609)
Increase in other current assets........................... (2,420) (485)
Decrease in other assets................................... 329 4,470
Increase in accounts payable and accrued expenses.......... 1,961 8,298
Increase in accrued interest payable....................... 11,102 2,773
------- -------
Net cash flows provided by operating activities........... 19,817 32,412
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net...................... (14,611) (86,612)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred partnership interest distribution.................. (233) --
Additional borrowings........................................ 4,348 1,928
Payments of debt............................................. (1,555) (3,906)
Redemption of PIK Notes...................................... -- (81,746)
Contributed Capital-Trump Hotels & Casino Resorts Holdings,
L.P. ....................................................... -- 146,859
------- -------
Net cash flows provided by financing activities........... 2,560 63,135
------- -------
Net increase in cash and cash equivalents..................... 7,766 8,935
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................ 14,393 11,144
------- -------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30,.................... $22,159 $20,079
======= =======
CASH INTEREST PAID............................................ $18,445 $22,848
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-38
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed financial statements include those of Trump Plaza
Funding, Inc. ("Plaza Funding"), a New Jersey corporation as well as those of
Trump Plaza Holding Associates ("AC Holdings"), a New Jersey General
Partnership, and its 99% owned subsidiary, Trump Plaza Associates, ("Plaza
Associates") a New Jersey General Partnership, which owns and operates the
Trump Plaza Hotel and Casino located in Atlantic City, New Jersey. Plaza
Funding owns the remaining 1% interest in, and is the managing general partner
of, Plaza Associates. AC Holdings' sole source of liquidity is distributions in
respect of its interest in Plaza Associates.
All significant intercompany balances and transactions have been eliminated
in the condensed consolidated financial statements of AC Holdings.
The accompanying condensed financial statements have been prepared by Plaza
Funding, Plaza Holding and Plaza Associates without audit. In the opinion of
Plaza Funding, AC Holdings and Plaza Associates, all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position, the results of operations and cash flows for the periods presented,
have been made. Certain prior year amounts have been reclassified to conform
with the current period presentation.
The accompanying condensed financial statements have been prepared by Plaza
Funding, AC Holdings and Plaza Associates pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain information and
note disclosures normally included in financial statements prepared in
conformity with generally accepted accounting principles have been condensed or
omitted. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto included elsewhere in this
Proxy Statement/Prospectus.
The casino industry in Atlantic City is seasonal in nature; therefore,
results of operations for the nine months ended September 30, 1995 are not
necessarily indicative of the operating results for a full year.
(2) PUBLIC OFFERINGS
On June 12, 1995, Trump Hotels & Casino Resorts, Inc., ("THCR") completed a
public offering of 10,000,000 shares of common stock at $14.00 per share (the
"June 1995 Stock Offering") for gross proceeds of $140,000,000. Concurrently
with the June 1995 Stock Offering, Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") together with its subsidiary, Trump Hotels & Casino Resorts
Funding, Inc. ("THCR Funding") issued 15 1/2% Senior Secured Notes (the "Senior
Notes") for gross proceeds of $155,000,000 (the "June 1995 Note Offering" and,
together with the June 1995 Stock Offering, the "June 1995 Offerings"). From
the proceeds from the June 1995 Stock Offering, THCR contributed approximately
$126,848,000 to THCR Holdings. THCR Holdings subsequently contributed
$146,859,000 to AC Holdings.
Prior to the June 1995 Offerings, Donald J. Trump ("Trump") was the sole
owner of THCR Holdings. Concurrent with the June 1995 Offerings, Trump
contributed to THCR Holdings all of his beneficial interest in Plaza Associates
(consisting of all of the outstanding capital stock of Plaza Funding, a 99%
equity interest in AC Holdings and all of the outstanding capital stock of
Trump Plaza Holding, Inc. ("Plaza Holding, Inc.") which owns the remaining 1%
equity interest in AC Holdings). Trump also contributed to THCR Holdings all of
his existing interest and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana but excluding his
interests in the Trump Taj Mahal Casino Resort and Trump's Castle Casino Resort
(together, the "Other Trump Casinos").
F-39
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
1994 30, 1995
------------ ---------
<S> <C> <C>
Plaza Funding:
10 7/8% Mortgage Notes, due 2001 net of
unamortized discount of $3,766,000 and
$3,457,000, respectively (A)............... $326,234,000 $326,543,000
============ ============
Plaza Associates:
Partnership Note (10 7/8% Mortgage Notes,
due 2001 net of unamortized discount of
$3,766,000 and $3,457,000, respectively)
(A)........................................ $326,234,000 $326,543,000
Mortgage notes payable...................... 5,494,000 3,055,000
Other notes payable......................... 468,000 4,157,000
------------ ------------
332,196,000 333,755,000
Less--Current maturities.................. 2,969,000 2,100,000
------------ ------------
329,227,000 331,655,000
AC Holdings:
PIK Notes (12 1/2% Notes due 2003 net of
discount of $9,769,000) (B)................ 73,987,000 --
------------ ------------
$403,214,000 $331,655,000
============ ============
</TABLE>
(A) On June 25, 1993, Plaza Funding issued $330,000,000 principal amount of 10
7/8% Mortgage Notes, due 2001 (the "Plaza Notes"), net of discount of
$4,313,000, and loaned the proceeds to Plaza Associates.
(B) On June 25, 1993 AC Holdings issued $60,000,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "PIK Notes"), together with Warrants to
acquire an additional $12,000,000 of PIK Notes at no additional cost (the
"PIK Note Warrants"). The PIK Note Warrants were exercised prior to June
12, 1995 and the PIK Notes were repurchased and redeemed on June 12, 1995
from the amounts contributed to Plaza Holding by THCR Holdings (See Note
2). Such repurchase and redemption resulted in the recognition of an
extraordinary loss of $9,250,000 relating to the redemption and the write-
off of unamortized deferred financing costs.
(4) CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act") Plaza Associates is
required to maintain certain licenses.
In June 1995, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates' license to operate Trump Plaza. This license must be renewed in
June 1999, is not transferable, and such renewal of the license will include a
review of the financial stability of Plaza Associates. Upon revocation,
suspension for more than 120 days, or if the CCC fails or refuses to renew such
casino license, the Casino Control Act allows for the appointment of a
conservator to take possession of the hotel and casino's business and property,
subject to all valid liens, claims and encumbrances.
F-40
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(5) TRUMP REGENCY OPTION
On June 12, 1995, Trump exercised its option to purchase the Trump Regency
("Trump World's Fair"). The option price of $60,000,000 was funded with
$58,150,000 from the capital contributed by THCR Holdings (see Note 2), and
$1,850,000 of previous deposits made by Plaza Associates. Plaza Associates
received the property via directed deed.
(6) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
entered into the Agreement and Plan of Merger, as amended by Amendment to
Agreement and Plan of Merger, dated as of January 31, 1996 (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into Taj Holding
(the "Merger"). The Merger Agreement provides that each outstanding share of
Class A Common Stock of Taj Holding ("Taj Holding Class A Common Stock") will
be converted into the right to receive, at each holder's election, either (a)
$30.00 in cash or (b) that number of shares of THCR Common Stock as shall have
a market value equal to $30.00. The Merger Agreement also contemplates the
following transactions occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (and an amount to be issued pursuant to the underwriters' over-
allotment option) (the "THCR Stock Offering") and the consummation of the
offering by AC Holdings and its wholly owned subsidiary THCR Atlantic City
Funding, Inc. of up to $1,180,000,000 aggregate principal amount of mortgage
notes, the aggregate proceeds of which will be used, together with available
cash, to (i) pay cash to those holders of Taj Holding Class A Common Stock
electing to receive cash in the Merger, (ii) redeem Trump Taj Mahal Funding,
Inc's ("Taj Funding") outstanding 11.35% Mortgage Bonds, Series A due 1999
(the "Taj Bonds"), (iii) redeem the outstanding shares of Class B Common
Stock, par value $.01 per share, of Taj Holding as required in connection
with the redemption of the Taj Bonds, (iv) retire, by purchasing and/or
defeasing, the outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza
Funding, Inc., (v) satisfy the indebtedness of Trump Taj Mahal Associates
("Taj Associates"), the owner and operator of the Trump Taj Mahal Casino
Resort (the "Taj Mahal"), under its loan agreement with National Westminster
Bank USA, (vi) purchase certain real property used in the operation of the
Taj Mahal that is currently leased from a corporation wholly owned by Trump,
(vii) purchase certain real property used in the operation of Trump Plaza
that is currently leased from an unaffiliated third party, (viii) make a
payment to Bankers Trust to obtain releases of the liens that
Bankers Trust has with respect to Taj Associates and related guarantees, and
(ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger and contributed to THCR by Trump.
F-41
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited the accompanying consolidated balance sheets of Trump Taj
Mahal Associates (a New Jersey general partnership) and Subsidiary as of
December 31, 1993 and 1994, and the related consolidated statements of
operations, capital (deficit) and cash flows for each of the three years in the
period ended December 31, 1994. These consolidated financial statements are the
responsibility of Trump Taj Mahal Associates management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Taj Mahal Associates and
Subsidiary as of December 31, 1993 and 1994 and the result of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New
Jersey
March 22, 1995 (except
with respect to the
matter discussed in Note
10, as to which the date
is January 31, 1996
F-42
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments.............................. $ 58,044 $ 61,196
Receivables, net of allowance of $4,346 and $4,059 for
doubtful accounts..................................... 13,034 15,443
Inventory.............................................. 4,685 6,431
Prepaid expenses and other current assets.............. 3,986 7,806
--------- ---------
Total Current Assets................................. 79,749 90,876
--------- ---------
PROPERTY AND EQUIPMENT (Notes 1, 2, and 5):
Land................................................... 37,291 37,843
Building............................................... 646,653 656,702
Furniture, fixtures and equipment...................... 148,401 160,372
Leasehold improvements................................. 30,971 31,243
--------- ---------
863,316 886,160
Less: Accumulated depreciation and amortization...... (140,482) (179,375)
--------- ---------
722,834 706,785
--------- ---------
OTHER ASSETS............................................. 8,925 9,951
--------- ---------
Total Assets......................................... $ 811,508 $ 807,612
========= =========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Long-term debt due currently (Note 2).................. $ 805 $ 743
Accounts payable....................................... 3,934 3,256
Accrued interest payable............................... 11,460 8,977
Due to affiliates, net (Note 3)........................ 490 109
Other current liabilities (Note 4)..................... 34,100 37,102
--------- ---------
Total Current Liabilities............................ 50,789 50,187
--------- ---------
OTHER LIABILITIES (Notes 2 and 3)........................ 28,313 32,912
--------- ---------
LONG-TERM DEBT NET OF UNAMORTIZED DISCOUNT OF $172,417
AND $153,597 (Note 2)................................... 625,765 656,701
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 5)
CAPITAL:
Contributed capital.................................... 123,765 123,765
Accumulated deficit.................................... (17,124) (55,953)
--------- ---------
Total Capital........................................ 106,641 67,812
--------- ---------
Total Liabilities and Capital........................ $ 811,508 $ 807,612
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-43
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES (Note 1):
Gaming...................................... $ 414,045 $ 442,064 $ 461,622
Rooms....................................... 41,044 40,682 41,815
Food and beverage........................... 59,456 55,953 58,029
Other....................................... 16,458 16,656 17,894
--------- --------- ---------
Gross revenues............................ 531,003 555,355 579,360
Less--Promotional allowances (Note 1)....... 61,250 56,444 62,178
--------- --------- ---------
Net revenues.............................. 469,753 498,911 517,182
--------- --------- ---------
COST AND EXPENSES:
Gaming...................................... 227,394 237,566 260,472
Rooms....................................... 15,216 15,525 15,662
Food and beverage........................... 23,909 25,080 25,035
General and administrative.................. 98,819 99,424 99,629
Depreciation and amortization............... 36,388 36,858 39,750
--------- --------- ---------
401,726 414,453 440,548
--------- --------- ---------
Income from operations........................ 68,027 84,458 76,634
Interest income............................... 923 1,382 2,019
Interest expense.............................. (104,049) (108,379) (115,311)
--------- --------- ---------
Net loss...................................... $ (35,099) $ (22,539) $ (36,658)
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-44
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
CONTRIBUTED SURPLUS CAPITAL
CAPITAL (DEFICIT) (DEFICIT)
----------- ----------- ---------
<S> <C> <C> <C>
Balance, January 1, 1992..................... $123,765 $ 44,072 $167,837
Net loss..................................... -- (35,099) (35,099)
Partnership distribution (Note 6)............ -- (1,825) (1,825)
-------- -------- --------
Balance, December 31, 1992................... 123,765 7,148 130,913
Net loss..................................... -- (22,539) (22,539)
Partnership distribution (Note 6)............ -- (1,733) (1,733)
-------- -------- --------
Balance, December 31, 1993................... 123,765 (17,124) 106,641
Net loss..................................... -- (36,658) (36,658)
Partnership distribution (Note 6)............ -- (2,171) (2,171)
-------- -------- --------
Balance, December 31, 1994................... $123,765 $(55,953) $ 67,812
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-45
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1992 1993 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(35,099) $(22,539) $(36,658)
Adjustments to reconcile net loss to net cash
flows provided by
operating activities--
Depreciation and amortization.................. 36,388 36,858 39,750
Charges related to lease guarantee............. 1,519 1,763 2,047
Accretion of discount on Bond indebtedness..... 13,172 15,745 18,820
Other adjustments to reduce the carrying value
of non-current
assets........................................ 2,563 2,764 2,134
Utilization of CRDA credits.................... -- -- 1,500
Provision for doubtful accounts................ 6,197 3,472 2,974
-------- -------- --------
24,740 38,063 30,567
Changes in operating assets and liabilities:
Receivables, net............................... (3,349) (2,281) (5,383)
Inventory...................................... (6) (1,612) (1,746)
Other current assets........................... (655) (39) (3,552)
Other assets................................... (225) (766) (392)
Due to affiliates, net......................... 186 98 (381)
Accounts payable............................... 1,717 (2,225) (678)
Accrued interest payable....................... 14,611 14,900 12,537
Other liabilities.............................. (5,233) 2,496 2,450
-------- -------- --------
Net cash flows provided by operating
activities................................... 31,786 48,634 33,422
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (12,111) (16,752) (23,030)
Investment in CRDA obligations.................. (5,648) (5,408) (4,201)
-------- -------- --------
Net cash flows used in investing activities... (17,759) (22,160) (27,231)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings........................ 8,000 -- --
Repayments of borrowings........................ (8,675) (759) (868)
Partnership distribution........................ (1,825) (1,733) (2,171)
-------- -------- --------
Net cash flows used in financing activities... (2,500) (2,492) (3,039)
-------- -------- --------
NET INCREASE IN CASH AND CASH INVESTMENTS........ 11,527 23,982 3,152
CASH AND CASH INVESTMENTS BEGINNING OF YEAR...... 22,535 34,062 58,044
-------- -------- --------
CASH AND CASH INVESTMENTS END OF YEAR............ $ 34,062 $ 58,044 $ 61,196
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest.......... $ 74,778 $ 75,972 $ 79,121
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
Issuance of PIK bonds in lieu of cash interest.. $ 8,844 $ 14,579 $ 12,249
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-46
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump Taj
Mahal Associates ("Taj Associates"), and its wholly owned subsidiary, Trump Taj
Mahal Funding, Inc. ("Taj Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Associates was formed on June 23, 1988 as a New Jersey limited
partnership. Taj Associates was converted to a general partnership in December
1990. The current partners and their respective ownership interests are Trump
Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("TTMC"),
.01%, and TM/GP Corporation ("TM/GP"), the managing general partner, and a
wholly owned subsidiary of Taj Mahal Holding Corp. ("Taj Holding"), 49.995%.
Taj Associates was formed for the purpose of acquiring, constructing and
operating the Trump Taj Mahal Casino Resort (the "Taj Mahal"), an Atlantic City
hotel, casino and convention center complex. On April 2, 1990, Taj Associates
opened the Taj Mahal to the public.
Taj Funding was incorporated on June 3, 1988 for the purpose of raising funds
through the issuance of its 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Taj Bonds"), the proceeds of which were loaned to Taj Associates for
construction of the Taj Mahal. During 1991, as a result of a plan of
reorganization (the "1991 Taj Restructuring"), the Old Taj Bonds were
subsequently exchanged for the Taj Funding's 11.35% Mortgage Bonds, Series A,
due 1999 (the "Taj Bonds"). Since Taj Funding has no business operations, its
ability to repay the principal and interest on the Taj Bonds is completely
dependent on the operations of Taj Associates.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Revenues from hotel and other
services are recognized at the time the related service is performed.
Promotional Allowances
Gross revenues includes the retail value of complimentary rooms, food,
beverages, and other services furnished to patrons. The retail value of these
promotional allowances is deducted from gross revenues to arrive at net
revenues. The cost of promotional allowances is charged to operations.
Promotional allowances consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1992 1993 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms................................................ $23,692 $23,079 $25,562
Food and Beverage.................................... 34,403 30,734 32,581
Other................................................ 3,155 2,631 4,035
------- ------- -------
$61,250 $56,444 $62,178
======= ======= =======
</TABLE>
F-47
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The accompanying financial statements do not include a provision for Federal
income taxes of Taj Associates, since any income or losses allocated to the
partners are reportable for Federal income tax purposes by the partners.
Under the New Jersey Casino Control Commission regulations, Taj Associates is
required to file a New Jersey corporation business tax return.
Inventories
Inventories are carried at cost on a weighted average basis.
Property and Equipment
Property and equipment is recorded at cost and is depreciated on the
straight-line method over the estimated useful lives of assets. Estimated
useful lives range from three to seven years for furniture, fixtures and
equipment and 40 years for buildings and building improvements. Leasehold
improvements are amortized over the term of the related lease commencing in the
period these assets are placed in service.
The interest expense associated with borrowings used to fund the purchase and
construction of the Taj Mahal has been capitalized and is being amortized over
the estimated useful life of the facility.
Cash and Cash Investments
Cash and cash investments include hotel and casino funds, funds on deposit
with banks and temporary investments having a maturity of three months or less.
(2) LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Bonds (a)............................... $ 752,881 $ 765,130
Unamortized discount................................... (172,417) (153,597)
--------- ---------
Net.................................................... 580,464 611,533
Bank term loan (b)..................................... 45,314 45,138
Other.................................................. 792 773
--------- ---------
Total................................................ 626,570 657,444
Less: Current portion................................ (805) (743)
--------- ---------
$ 625,765 $ 656,701
========= =========
</TABLE>
- ---------------------
(a) Taj Funding's Bonds bear interest of 11.35% and are due November 15, 1999.
Each Taj Bond, together with one share of Taj Holding's Class B redeemable
common stock, par value $.01 per share, trade together as a unit
("Units"), and may not be transferred separately. Interest on the Taj
Bonds is due semi-annually on each November 15 and May 15. Interest on the
Taj Bonds must be paid in cash on each interest payment date at the rate
of 9.375% per annum (the "Mandatory Cash Interest Amount"). In addition to
the Mandatory Cash Interest Amount, effective May 15, 1992 and annually
thereafter, an additional amount of interest (the "Additional Amount") in
cash or additional Taj Bonds or a combination thereof, is payable equal to
the difference between 11.35% of the outstanding principal amount of the
Taj Bonds and the Mandatory Cash Interest Amount previously paid. To the
extent that
F-48
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
there is excess available cash flow ("EACF") of Taj Associates, as defined
in the related indenture, for the immediately preceding calendar year, Taj
Funding will pay the Additional Amount in cash up to 10.28% and the balance
thereof may be paid at the option of Taj Funding in cash or additional
Units, provided that an equivalent amount of cash is used to purchase or
redeem Units. Additional Taj Bonds issued on October 4, 1991 amounted to
approximately $7,208,000. For the period from the issuance of the Taj Bonds,
October 4, 1991, through December 31, 1992, there was no EACF. Accordingly,
Taj Funding paid the Additional Amounts on May 15, 1993 and May 15, 1992
through the issuance of approximately $14,579,000 and $8,844,000,
respectively, in additional Taj Bonds. Of the $14,870,000 Additional Amount
due May 15, 1994, $2,621,000 was paid in cash and the $12,249,000 balance in
Taj Bonds. Of the $15,111,000 Additional Amount due May 15, 1995, Taj
Associates expects to satisfy the obligation through the issuance of Taj
Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Taj Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principle and interest by Taj Associates and are collateralized by
substantially all Taj Associates property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code", the Taj Bonds
when issued were stated at the present value of amounts to be paid,
determined at current interest rates (effective rate of approximately 18%).
The effective interest rate of the Taj Bonds was determined based on the
trading price of the Taj Bonds for a specific period. Stating the debt at
its approximate present value resulted in a reduction of approximately
$204,276,000 in the carrying amount of the Taj Bonds. This gain is being
offset by increased interest costs over the period of the Taj Bonds to
accrete such bonds to their face value at maturity. At December 31, 1994,
the unaccreted balance of this discount approximated $153,597,000. The
current interest rates of other borrowings approximated their stated
interest rates as of the effective date. The accretion amounted to
approximately $13,172,000 in 1992, $15,745,000 in 1993 and $18,820,000 in
1994, and is included in interest expense.
(b) On November 3, 1989, Taj Associates entered into a loan agreement with
National Westminster Bank, U.S.A. (the "NatWest Loan") which provided
financing up to $50,000,000 for certain items of furniture, fixtures and
equipment installed in the Taj Mahal. The terms of the NatWest Loan were
modified in 1991 as part of the 1991 Taj Restructuring. The restructured
NatWest Loan bears interest at 9 3/8% per annum. Principal and interest is
payable monthly in the fixed amount of $373,000 to be applied first to
accrued interest and the balance to the extent available, to principal,
through maturity, November 15, 1999. Additionally, on May 15 of each year
(May 15, 1992 through May 15, 1999), to the extent principal is still
outstanding, NatWest will receive 16.5% of the EACF of the preceding
calendar year in excess of the Additional Amount, to be applied first to
accrued but unpaid interest, and then to principal.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus
any after acquired furniture, fixtures and equipment that replaces such
property, or of the same type, provided, however, that the NatWest Loan may
be subordinated to a lien to secure purchase money financing of such after
acquired property up to 50% of the value of such after acquired property.
In November 1991, Taj Associates obtained a working capital line of credit
in the amount of $25,000,000 with a maturity of five years. In September
1994, Taj Associates extended the maturity to November 1999, in
consideration of modifications of the terms of the facility. Interest on
advances under the line are at prime plus 3% with a minimum of 0.666% per
month. The Agreement provides for a 3/4% annual fee and a 1/2% unused line
fee and contains various covenants. During 1993 and 1994, no amounts were
outstanding under the line. During 1992, $8,000,000 was drawn under the
line and repaid.
F-49
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Aggregate annual maturities of long-term debt at accreted value are as
follows:
<TABLE>
<S> <C>
1995............................ $ 743,000
1996............................ 423,000
1997............................ 233,000
1998............................ 256,000
1999............................ 809,386,000
Thereafter...................... 0
</TABLE>
(3) TRANSACTIONS WITH AFFILIATES
Taj Associates has engaged in certain transactions with Trump and entities
that are wholly or partially owned by Trump. Amounts owed to (receivable from)
at December 31 are as follows:
<TABLE>
<CAPTION>
1993 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Donald J. Trump (a)......................................... $ 537 $ 253
Trump Taj Mahal Realty Corp. ("Realty Corp.") (b)........... -- --
Trump's Castle Associates (c)............................... 69 30
Trump Plaza Associates (c).................................. (73) (131)
Helicopter Air Services (d)................................. (43) (43)
------ -------
$ 490 $ 109
====== =======
</TABLE>
- ---------------------
(a) Taj Associates has entered into a Services Agreement (the "Services
Agreement"), which provides that Trump will render to Taj Associates
marketing, advertising, promotional and related services with respect to
the business operations of Taj Associates. In consideration for the
services to be rendered, Taj Associates will pay an annual fee equal to
1.5% of Taj Associates earnings before interest, taxes and depreciation, as
defined, less capital expenditures and partnership distributions for such
year, with a minimum base fee of $500,000. The services fee is payable
monthly through November 15, 1999, although the agreement provides for
earlier termination under certain events. Portions of the fee have been
assigned to First Fidelity Bank in connection with the Loan to Realty Corp.
which has been guaranteed by Trump. For the years ended December 31, 1992,
1993 and 1994, Taj Associates incurred $1,319,000, $1,566,000 and
$1,353,000, respectively, under the Services Agreement. In addition, during
1993 and 1994, Taj Associates reimbursed Mr. Trump $232,000 and $224,000,
respectively, for expenses pursuant to the Services Agreement, of which
$127,000 and $149,000, respectively, was incurred to an affiliate for air
transportation.
(b) The term of the lease between Taj Associates and Realty Corp. is through
2023 and provides for base rentals payable by Taj Associates, prior to the
time that the NatWest Loan is paid in full, of $2,725,000 per year, plus 3
1/2% of the EACF in excess of the Additional Amount and, upon payment in
full of the NatWest loan, increasing to include the payments to which
NatWest is otherwise entitled under the amended NatWest Agreement (Note 3).
The amended lease was assigned by Realty to First Fidelity Bank ("First
Fidelity"). The first $3,300,000 received by First Fidelity each year will
be applied to the interest due on the Realty Corp. loan (the "Loan"). Any
additional sums paid will also reduce Taj Associates guarantee (see below)
and the principal amount of the Loan. The Loan is secured by a first
mortgage lien on the underlying parcels owned by Realty Corp.
Pursuant to a limited subordinated guarantee Taj Associates will, under
certain circumstances, reimburse First Fidelity for any deficiency in the
amount owed to First Fidelity upon maturity of the Loan, up to a
F-50
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
maximum of $30,000,000, provided that First Fidelity first pursues its
first mortgage lien on the parcels, and provided further that the Taj Bonds
have been paid in full. Inasmuch as Taj Associates lease payments are
Realty Corp's sole source of funds to satisfy the Loan and the amount of
the Loan exceeds the estimated fair market value of the land by more than
$30,000,000, Taj Associates recorded the present value of the maximum
guarantee amount as of October 4, 1991. Discounted at 15%, a reasonable
incremental cost of capital, the obligation amounted to approximately
$9,103,000. This obligation is being accreted as interest expense over the
life of the Taj Bonds and is included in Other Liabilities in the
accompanying consolidated balance sheets. The accretion amounted to
approximately $1,519,000, $1,763,000, and $2,047,000 for the years ended
December 31, 1992, 1993 and 1994, respectively.
(c) Taj Associates engages in various transactions with the two other Atlantic
City hotel/casinos owned by Trump. These transactions are charged at cost
or normal selling price in the case of retail items and include the
utilization of fleet maintenance and limousine services, certain shared
professional fees and payroll costs as well as complimentary services
offered to customers. During 1992, Taj Associates incurred approximately
$622,000 and $93,000 of costs for these services from Trump's Castle Casino
Resort ("Trump's Castle") and Trump Plaza, respectively. In addition, Taj
Associates charged $67,000 and $309,000 to Trump's Castle and Trump Plaza,
respectively, for similar services. During 1993, Taj Associates incurred
approximately $1,100,000 and $83,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $256,000 and $255,000 to Trump's Castle and Trump Plaza,
respectively, for similar services. During 1994, Taj Associates incurred
approximately $1,167,000 and $149,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $235,000 and $361,000 to Trump's Castle and Trump Plaza,
respectively, for similar services.
(d) Helicopter Air Services and the Trump Shuttle, Inc. (the "Trump Shuttle")
provided aircraft charters and travel services to certain patrons of the
Taj Mahal on behalf of Taj Associates. For the years ended December 31,
1992, 1993 and 1994, Taj Associates incurred no charges from Helicopter Air
Services. During 1992, Taj Associates incurred charges of $29,000 from
Trump Shuttle.
(4) OTHER CURRENT LIABILITIES
The components of other current liabilities at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1993 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payroll and related costs................................... $11,381 $14,806
Self-insurance reserves..................................... 4,879 4,626
Advertising/Marketing costs................................. 2,387 3,242
Advance deposits............................................ 1,046 3,022
Unredeemed chip liability................................... 3,056 2,725
Accrued taxes............................................... 2,912 912
Progressive jackpot reserves................................ 2,206 582
Other....................................................... 6,233 7,187
------- -------
$34,100 $37,102
======= =======
</TABLE>
F-51
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) COMMITMENTS AND CONTINGENCIES
LEASES AND EMPLOYMENT AGREEMENTS
Taj Associates has entered into employment agreements with certain key
employees and lease agreements for land, office and warehouse space under
noncancellable operating leases expiring at various dates through 2023. At
December 31, 1994, minimum commitments under these arrangements are as follows:
<TABLE>
<S> <C>
1995............................................................. $ 8,186,000
1996............................................................. $ 6,174,000
1997............................................................. $ 4,637,000
1998............................................................. $ 2,750,000
1999............................................................. $ 2,725,000
Thereafter....................................................... $65,400,000
</TABLE>
Rent expense was approximately $4,942,000, $4,520,000 and $5,027,000 for the
years ended December 31, 1992, 1993 and 1994, respectively.
Taj Associates leases the pier extending from the Taj Mahal 1,000 feet into
the Atlantic Ocean (the "Steel Pier") from Realty Corp. A condition imposed on
Taj Associates Coastal Area Facilities Review Act ("CAFRA") permit (which, in
turn, is a condition of Taj Associates casino license) initially required that
Taj Associates begin construction of certain improvements on the Steel Pier
which were to be completed within 18 months of commencement. Taj Associates
initially proposed a concept to improve the Steel Pier, the estimated cost of
which was $30,000,000. Such concept was approved by the New Jersey Department
of Environmental Protection, the agency which administers CAFRA. In March 1993,
Taj Associates obtained a modification of its CAFRA permit providing for the
extension of the required commencement and completion dates of the improvements
to the Steel Pier for one year based upon an interim use of the Steel Pier for
an amusement park. In March 1994 and 1995, Taj Associates received an
additional one-year extension of the required commencement and completion dates
of the improvements of the Steel Pier based upon the same interim use of the
Steel Pier as an amusement park.
EMPLOYEE BENEFIT PLAN
Effective January 1, 1989, Taj Associates established the Taj Mahal
Retirement Savings Plan ("the Benefit Plan") for its employees over 21 years of
age who are not covered by a collective bargaining agreement. The Benefit Plan
is structured to qualify for favorable tax treatment under Section 401(k) of
the Internal Revenue Code and allows eligible participants to contribute up to
15% of their salary (certain limits apply, as defined) to the Benefit Plan with
a matching Partnership contribution of 50% of the first 4% of such employee
salary contribution. The funds are invested by a Benefit Plan trustee. Taj
Associates contributions for the years ended December 31, 1992, 1993 and 1994
were $841,000, $870,000 and $938,000, respectively.
CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by the
New Jersey Casino Control Commission (the "CCC"). Taj Associates' casino
license must be renewed periodically, is not transferable, is dependent upon
the financial stability of Taj Associates and can be revoked at anytime. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license due to Taj Associates financial condition or for any other reason, the
Casino Control Act (the "Casino Control Act") provides that the CCC may appoint
a conservator to take possession of and title to the hotel and casino's
business and property,
F-52
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
subject to all valid liens, claims and encumbrances. On March 22, 1995, the CCC
extended Taj Associates' casino license through June 30, 1995 in order to
consolidate Taj Associates license renewal proceedings with Trump's Castle and
the Taj Mahal (the "Other Trump Casinos"), at which time the CCC will conduct a
plenary hearing for renewal of Taj Associates' casino license for a period of
up to four years as provided by law.
LEGAL PROCEEDINGS
Taj Associates, its partners, certain of its employees and Taj Funding are
involved in various legal proceedings incurred in the normal course of
business. In the opinion of management of Taj Associates, the expected
disposition of these proceedings would not have a material adverse affect on
Taj Associates or TTMI's financial condition or results of operations.
INVESTMENT OBLIGATION
The Casino Control Act requires Taj Associates to make qualified investments,
as defined, in New Jersey, or pay an investment alternative tax to the New
Jersey Casino Reinvestment Development Authority ("CRDA"). Commencing in 1991,
and for a period of thirty years thereafter, Taj Associates must either obtain
investment tax credits, as defined, in an amount equivalent to 1.25% of its
gross casino revenues or pay an alternative tax of 2.5% of its gross casino
revenues, as defined. Investment tax credits may be obtained by making
qualified investments, by depositing funds which may be converted to bonds by
the CRDA or by donating previously deposited funds in exchange for future
credits against tax liability. Taj Associates intends to satisfy its investment
obligation primarily by depositing funds and donations of funds deposited.
During 1994, Taj Associates contributed $9,500,000 of previous CRDA deposits,
the carrying value of which was $4,750,000. Of the carrying value, $3,250,000
will become a leasehold improvement upon completion of the improvements during
1995, and $1,500,000 was a donation of previously deposited funds, which became
a credit utilized in 1994 as a reduction of current year obligations. The
deposits and bonds traditionally bear interest at below-market interest rates;
accordingly, Taj Associates has reduced its carrying value of the deposits by
50% and charged operations approximately $2,563,000, $2,764,000 and $2,134,000
in 1992, 1993 and 1994, respectively. Taj Associates is required to satisfy its
obligations to the CRDA through deposits on a quarterly basis. If such deposits
are converted to bonds by the CRDA, such bonds will be accounted for under SFAS
No. 115.
(6) PARTNERSHIP DISTRIBUTION
Taj Associates is obligated to reimburse Taj Holding for its operating
expenses which consist of directors and officers liability insurance, board of
director fees and expenses, and administrative expenses. Total expenses for the
years ended December 31, 1992, 1993 and 1994 approximated $1,825,000,
$1,733,000 and $2,171,000, respectively.
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of Taj Funding and
Taj Associates approximates fair value, as follows: (a) cash and cash
equivalents and accrued interest payable are based on the short term nature of
the financial instruments; and, (b) CRDA deposits are based on the valuation
allowances to give effect to the below market interest rates.
F-53
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The estimated fair values of the other financial instruments are as follows
(Note 3):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1993 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
11.35% Mortgage Bonds (a)
Carrying Amount......................................... $580,464 $611,533
Fair Value.............................................. 761,350 512,638
</TABLE>
- ---------------------
(a) The fair value of the Taj Bonds is based on quoted market prices as of
December 31, 1993 and 1994.
There are no quoted market prices for the Taj Associates-NatWest Loan and
other debt and a reasonable estimate of their value could not be made
without incurring excessive costs.
(8) FINANCIAL INFORMATION--TAJ FUNDING
Financial information relating to Taj Funding as of and for the years ended
December 31, 1993 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
Total Assets (including Mortgage Note Receivable of $752,881
and $765,130 and related interest receivable).............. $771,018 $783,562
======== ========
Total Liabilities and Capital (including Mortgage Bonds pay-
able of $752,881 and $765,130 and related interest pay-
able)...................................................... $771,018 $783,562
======== ========
Interest Income............................................. $ 84,829 $ 86,322
======== ========
Interest Expense............................................ $ 84,829 $ 86,322
======== ========
Net Income.................................................. $ -- $ --
======== ========
</TABLE>
(9) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1992
- ----
Net Revenues............................. $104,274 $118,110 $135,203 $112,166
Income from Operations................... 8,134 18,229 25,802 15,862
Net Income (Loss)........................ (17,049) (7,251) 159 (10,958)
1993
- ----
Net Revenues............................. $110,382 $126,364 $141,597 $120,568
Income from Operations................... 13,014 23,181 30,812 17,451
Net Income (Loss)........................ (13,003) (3,192) 4,212 (10,556)
1994
- ----
Net Revenues............................. $111,297 $127,254 $147,987 $130,644
Income from Operations................... 7,902 14,980 31,308 22,444
Net Income (Loss)........................ (20,761) (13,847) 3,286 (5,336)
</TABLE>
F-54
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) SUBSEQUENT EVENT
On January 8, 1996, Trump Hotels & Casino Resorts Inc. ("THCR"), Taj Holding
and THCR Merger Corp. ("Merger Sub") entered into the Agreement and Plan of
Merger, as amended by Amendment to Agreement and Plan of Merger, dated as of
January 31, 1996 (the "Merger Agreement"), pursuant to which Merger Sub will
merge with and into Taj Holding (the "Merger"). The Merger Agreement provides
that each outstanding share of Class A Common Stock of Taj Holding ("Taj
Holding Class A Common Stock") will be converted into the right to receive, at
each holder's election, either (a) $30.00 in cash or (b) that number of shares
of Common Stock of THCR ("THCR Common Stock") as shall have a market value
equal to $30.00. The Merger Agreement also contemplates the following
transactions occurring in connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (the "THCR Stock Offering") and the consummation of the
offering by Trump Plaza Holding Associates, ("AC Holdings") and its wholly
owned subsidiary THCR Atlantic City Funding, Inc. of up to $1,180,000,000
aggregate principal amount of mortgage notes, the aggregate proceeds of
which will be used, together with available cash, to (i) pay cash to those
holders of Taj Holding Class A Common Stock electing to receive cash in the
Merger, (ii) redeem the Taj Bonds, (iii) redeem the outstanding shares of
Class B Common Stock, par value $.01 per share, of Taj Holding as required
in connection with the redemption of the Taj Bonds, (iv) retire, by
purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due 2001
of Trump Plaza Funding, Inc., (v) satisfy the indebtedness of Taj Associates
under the NatWest Loan, (vi) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza Hotel and Casino that is currently leased from an
unaffiliated third party, (viii) make a payment to Bankers Trust to obtain
releases of the liens that Bankers Trust has with respect to Taj Associates
and related guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of THCR and Taj Holding; (ii) the risk in
refinancing and repayment of indebtedness and the need for additional
financing; (iii) the restrictions imposed on certain activities by certain debt
instruments; (iv) the recent results of Trump Plaza and the Taj Mahal; and (v)
risks associated with the Trump Plaza Expansion, the Taj Mahal Expansion and
the Indiana Riverboat. There can be no assurance that the Trump Plaza Expansion
or the Taj Mahal Expansion will be completed or that the Indiana Riverboat or
any other gaming venture, will open or that any of THCR's or the Taj Mahal's
operations will be successful. See "Risk Factors" included elsewhere in this
Proxy Statement-Prospectus for a discussion of these and other factors.
F-55
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Taj Mahal Holding Corp.
and Subsidiary
We have audited the accompanying consolidated balance sheets of Taj Mahal
Holding Corp. (a Delaware corporation) and Subsidiary as of December 31, 1993
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the management
of Taj Mahal Holding Corp. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit also 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 Taj Mahal Holding Corp. and
Subsidiary as of December 31, 1993 and 1994 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Roseland, New Jersey
March 22, 1995 (except with respect to the
matter discussed in Note 3, as to which the
date is January 31, 1996)
F-56
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
ASSETS (NOTE 2)
Cash................................................. $ 100 $ 100
---------- ----------
Total Assets..................................... $ 100 $ 100
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Class B Common Stock; $.01 par value; 860,000 shares
authorized, 752,881 and 765,130 issued and outstand-
ing as of December 31, 1993 and 1994, respectively.. $ 20 $ 20
STOCKHOLDERS' EQUITY (NOTE 1)
Class A Common Stock; $.01 par value; 10,000,000
shares authorized, 1,350,000 issued and outstanding. $ 40 $ 40
Class C Common Stock; $.01 par value; 10,000,000
shares authorized, 1,350,000 issued and outstanding. 40 40
Additional paid in capital........................... 3,558,000 5,729,000
Accumulated deficit.................................. (3,558,000) (5,729,000)
---------- ----------
Total Stockholders' Equity....................... 80 80
---------- ----------
Total Liabilities and Stockholders' Equity....... $ 100 $ 100
========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-57
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenue................................. $ -- $ -- $ --
Expenses (Note 2)--
Director fees, insurance and adminis-
trative expenses....................... 1,825,000 1,733,000 2,171,000
----------- ----------- -----------
Net loss................................ $(1,825,000) $(1,733,000) $(2,171,000)
=========== =========== ===========
Net loss per common share (Note 2)...... $ (1.35) $ (1.28) $ (1.61)
=========== =========== ===========
Weighted average number of shares out-
standing............................... 1,350,000 1,350,000 1,350,000
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-58
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------
CLASS A CLASS B CLASS C
---------------- ---------------- ----------------
ADDITIONAL
NUMBER NUMBER NUMBER PAID IN ACCUMULATED
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ --------- ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... 1,350,000 $40 738,302 $20 1,350,000 $40 $1,825,000 $(1,825,000) $ 100
Additional issuance of
common stock in connec-
tion with the Partner-
ship's interest pay-
ment................... -- -- 14,579 -- -- -- -- -- --
Distribution from the
Partnership for operat-
ing expenses........... -- -- -- -- -- -- 1,733,000 -- 1,733,000
Net loss................ -- -- -- -- -- -- -- (1,733,000) (1,733,000)
--------- --- ------- --- --------- --- ---------- ----------- ----------
Balance, December 31,
1993................... 1,350,000 40 752,881 20 1,350,000 40 3,558,000 (3,558,000) 100
Additional issuance of
common stock in connec-
tion with the Partner-
ship's interest pay-
ment................... -- -- 12,249 -- -- -- -- -- --
Distribution from the
Partnership for operat-
ing expenses........... -- -- -- -- -- -- 2,171,000 -- 2,171,000
Net loss................ -- -- -- -- -- -- -- (2,171,000) (2,171,000)
--------- --- ------- --- --------- --- ---------- ----------- ----------
Balance, December 31,
1994................... 1,350,000 $40 765,130 $20 1,350,000 $40 $5,729,000 $(5,729,000) $ 100
========= === ======= === ========= === ========== =========== ==========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-59
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss............................... $(1,825,000) $(1,733,000) $(2,171,000)
Cash Flows from Financing Activities:
Partnership distribution............... 1,825,000 1,733,000 2,171,000
Net Change in Cash and Cash Investments. -- -- --
Cash at Beginning of Period............. 100 100 100
----------- ----------- -----------
Cash at End of Period................... $ 100 $ 100 $ 100
=========== =========== ===========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these consolidated financial statements.
F-60
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BACKGROUND
The accompanying consolidated financial statements include those of Taj Mahal
Holding Corp. ("Taj Holding") and its wholly owned subsidiary, TM/GP
Corporation, ("TM/GP"), the managing general partner of Trump Taj Mahal
Associates, a New Jersey general partnership ("Taj Associates") which operates
the Trump Taj Mahal Casino Resort. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Holding was organized on December 18, 1990 as a Delaware corporation
wholly owned by Donald J. Trump ("Trump"). Prior to January 1, 1992, Taj
Holding had no activity. As described below, Taj Holding was formed for the
purpose of consummating a plan of reorganization (the "1991 Taj Restructuring")
involving Taj Associates and Trump Taj Mahal Funding, Inc. ("Taj Funding"), a
New Jersey corporation that raised funds for Taj Associates. Prior to the
consummation of the 1991 Taj Restructuring, both Taj Associates and Taj Funding
were owned by Trump and affiliated entities.
Taj Holding and its subsidiary have no business operations other than its
investment in Taj Associates. As a result, its ability to pay operating
expenses and dividends is completely dependent on the operations of Taj
Associates.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of Taj Funding's 14% First Mortgage Bonds,
Series A, Due 1998 (the "Old Taj Bonds"), a general partnership interest
representing 49.995% of the equity of Taj Associates. Such holders in turn
contributed such partnership interest to Taj Holding. Taj Funding also issued
new 11.35% Mortgage Bonds, Series A, Due 1999 (the "Taj Bonds") in exchange for
the Old Taj Bonds. Each $1,000 principal amount of Taj Bonds trades as a unit
with one share of Class B Common Stock (the "Taj Holding Class B Common Stock")
of Taj Holding, as described below.
TM/GP, which has no other assets, received a 49.995% partnership interest in
Taj Associates from Taj Holding. Trump also contributed to Taj Holding a 50%
ownership interest in The Trump Taj Mahal Corporation, a Delaware Corporation,
which owns a .01% interest in Taj Associates, in exchange for the Class C
Common Stock (the "Taj Holding Class C Common Stock"), as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of its
Class A Common Stock (the "Taj Holding Class A Common Stock") and 729,458
shares of the Taj Holding Class B Common Stock to the holders of the Old Taj
Bonds and 1,350,000 shares of the Taj Holding Class C Common Stock to Trump.
Notwithstanding their par value, the various classes of common stock are
recorded at stated value, which represents the value assigned to the shares of
Taj Holding which were issued in connection with the consummation of the 1991
Taj Restructuring.
In accordance with the terms of the indenture pursuant to which the Taj Bonds
were issued (the "Mortgage Note Indenture"), a portion of the interest on the
Taj Bonds may be paid in cash or in additional Taj Bonds (the "Additional
Amount"). On May 15, 1992, 8,844 units comprised of $8,844,000 of Taj Bonds and
8,844 shares of Taj Holding Class B Common Stock were issued by Taj Funding as
payment of the Additional Amount. On May 15, 1993, 14,579 units comprised of
Taj Bonds in the aggregate amount of approximately $14,579,000 and 14,579
shares of Taj Holding Class B Common Stock were issued as payment of the
Additional Amount. On May 15, 1994, 12,249 units comprised of Taj Bonds in the
aggregate principle amount of approximately $12,249,000 and 12,249 shares of
Taj Holding Class B Common Stock were issued together with $2,621,000 in cash
as payment of the Additional Amount.
Currently, the holders of Taj Holding Class B Common Stock are entitled to
elect four of the nine members of Taj Holding's Board of Directors and Trump,
as holder of Taj Holding Class C Common Stock, is entitled to elect the
remaining five directors. The Taj Holding Class A Common Stock has no voting
rights
F-61
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
during the time any of Taj Holding Class B Common Stock is outstanding.
However, upon Taj Holding's liquidation, all three classes of Taj Holding's
common stock share ratably in the assets of Taj Holding to the extent of their
par value, with the Taj Holding Class A Common Stock entitled to the residual.
The Taj Holding Class B Common Stock must be redeemed at a price of $.50 per
share when the Taj Bonds, with which they were issued, are paid, redeemed or
purchased and canceled.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN TAJ ASSOCIATES
Taj Holding accounts for its investment in Taj Associates using the equity
method of accounting. Under this method, Taj Holding reports as equity income
50% of Taj Associates' earnings, if any, from October 4, 1991. In addition, the
difference between Taj Holding's equity in the underlying identifiable assets
of Taj Associates as of October 4, 1991 ($91,703,000) and the cost basis of its
investment in Taj Associates is being amortized into income over 40 years.
For the period from October 4, 1991 to December 31, 1994, Taj Associates
incurred a net loss of $109,851,000. Taj Holding's equity in this loss
($54,926,000) less amortization of the difference between the underlying
identifiable assets of Taj Associates and the cost basis of its investment in
Taj Associates, for the period from October 4, 1991 to December 31, 1994,
$7,451,000, will not be reflected in Taj Holding's financial statements until
such time as Taj Associates generates earnings sufficient to offset the
accumulated net loss. Taj Holding is not committed to providing future
financial support to Taj Associates.
INCOME TAXES
Taj Holding will record Federal income taxes based on its allocable share of
Taj Associates' earnings. The payment of any such taxes will be reimbursed by
Taj Associates. Under New Jersey Casino Control Commission regulations, Taj
Associates is required to file a consolidated New Jersey corporation business
tax return and pay all state taxes attributable to its earnings.
OPERATING EXPENSES
Expenses of Taj Holding consist of directors and officers liability
insurance, board of director fees and expenses, and administrative expenses.
Taj Holding is entitled to full reimbursement of such expenses by Taj
Associates . Total expenses for the years ended December 31, 1994, 1993 and
1992 approximated $2,171,000, $1,733,000 and $1,825,000, respectively, all of
which were reimbursed by Taj Associates.
TAJ HOLDING CLASS B COMMON STOCK
As the redemption of the Taj Holding Class B Common Stock is outside of the
control of Taj Holding, the Taj Holding Class B Common Stock is not shown as a
component of Stockholders' Equity. Accretion of the Taj Holding Class B Common
Stock to redemption value and the value of the additional Taj Holding Class B
Common Stock issued in connection with the additional Taj Bonds (Note 1) are
not material.
EARNINGS PER SHARE
For the calculation of net loss per share, Taj Holding Class A Common Stock
was used since it is the only Class of participating stock. Net loss per share
is determined by dividing the net loss by the weighted average number of shares
of Taj Holding Class A Common Stock outstanding.
F-62
<PAGE>
TAJ MAHAL HOLDING CORP. AND TM/GP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) SUBSEQUENT EVENT
On January 8, 1996, Trump Hotels & Casino Resorts, Inc. ("THCR"), Taj Holding
and THCR Merger Corp. ("Merger Sub") entered into the Agreement and Plan of
Merger, as amended by Amendment to Agreement and Plan of Merger, dated as of
January 31, 1996 (the "Merger Agreement"), pursuant to which Merger Sub will
merge with and into Taj Holding (the "Merger"). The Merger Agreement provides
that each outstanding share of Taj Holding Class A Common Stock will be
converted into the right to receive, at each holder's election, either (a)
$30.00 in cash or (b) that number of shares of Common Stock of THCR ("THCR
Common Stock") as shall have a market value equal to $30.00. The Merger
Agreement also contemplates the following transactions occurring in connection
with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (the "THCR Stock Offering") and the consummation of the
offering by Trump Plaza Holding Associates ("AC Holdings") and its wholly
owned subsidiary THCR Atlantic City Funding, Inc. of up to $1,180,000,000
aggregate principal amount of mortgage notes, the aggregate proceeds of
which will be used, together with available cash, to (i) pay cash to those
holders of Taj Holding Class A Common Stock electing to receive cash in the
Merger, (ii) redeem the Taj Bonds, (iii) redeem the outstanding shares of
Taj Holding Class B Common Stock as required in connection with the
redemption of the Taj Bonds, (iv) retire, by purchasing and/or defeasing,
the outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding,
Inc., (v) satisfy the indebtedness of Taj Associates, under the NatWest
Loan, (vi) purchase certain real property used in the operation of the Taj
Mahal that is currently leased from a corporation wholly owned by Trump,
(vii) purchase certain real property used in the operation of Trump Plaza
Hotel and Casino that is currently leased from an unaffiliated third party,
(viii) make a payment to Bankers Trust to obtain releases of the liens that
Bankers Trust has with respect to Taj Associates and related guarantees, and
(ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
Existing and prospective investors should consider among other things, (i)
the high leverage and fixed charges of THCR and Taj Holding; (ii) the risk in
refinancing and repayment of indebtedness and the need for additional
financing; (iii) the restrictions imposed on certain activities by certain debt
instruments; (iv) the recent results of Trump Plaza and the Taj Mahal; and (v)
risks associated with the Trump Plaza Expansion, the Taj Mahal Expansion and
the Indiana Riverboat. There can be no assurance that the Trump Plaza Expansion
or the Taj Mahal Expansion will be completed or that the Indiana Riverboat or
any other gaming venture, will open or that any of THCR's or the Taj Mahal's
operations will be successful. See "Risk Factors" included elsewhere in this
Proxy Statement-Prospectus for a discussion of these and other factors.
F-63
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash investments......................... $ 61,196 $108,769
Receivables, net of allowance of $5,354 and $4,059
for doubtful accounts............................ 15,443 15,759
Inventory......................................... 6,431 6,950
Prepaid expenses and other current assets......... 7,806 5,175
-------- --------
Total Current Assets............................ 90,876 136,653
======== ========
Property and Equipment:
Land.............................................. 37,843 37,843
Building ......................................... 656,702 663,284
Furniture, fixtures and equipment................. 160,372 170,047
Leasehold improvements............................ 31,243 31,253
-------- --------
886,160 902,427
Less: Accumulated depreciation and amortization. (179,375) (207,825)
-------- --------
706,785 694,602
-------- --------
Other Assets........................................ 9,951 12,470
-------- --------
Total Assets...................................... $807,612 $843,725
======== ========
LIABILITIES AND CAPITAL
Current Liabilities:
Long-term debt due currently...................... $ 743 $ 868
Accounts payable.................................. 3,256 5,880
Accrued interest payable.......................... 8,977 27,441
Due to affiliates, net............................ 109 547
Other current liabilities......................... 37,102 38,303
-------- --------
Total Current Liabilities....................... 50,187 73,039
-------- --------
Other long term liabilities......................... 32,912 29,644
-------- --------
Long-term debt net of unamortized discount of
$153,597 and $137,108.............................. 656,701 688,143
-------- --------
Commitments and Contingencies
Capital:
Contributed capital............................... 123,765 123,765
Accumulated deficit............................... (55,953) (70,866)
-------- --------
Total Capital................................... 67,812 52,899
-------- --------
Total Liabilities and Capital................... $807,612 $843,725
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-64
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED SEPTEMBER
30,
------------------
1994 1995
-------- --------
<S> <C> <C>
REVENUES:
Gaming................................................... $345,329 $377,368
Rooms.................................................... 32,159 33,035
Food and beverage........................................ 44,110 42,933
Other.................................................... 13,742 11,479
-------- --------
Gross revenues......................................... 435,340 464,815
Less--Promotional allowances............................. 48,802 47,519
-------- --------
Net revenues........................................... 386,538 417,296
COST AND EXPENSES:
Gaming................................................... 196,412 208,671
Rooms.................................................... 11,491 11,500
Food and beverage........................................ 18,142 18,597
General and administrative............................... 77,359 73,717
Depreciation and amortization............................ 28,944 32,407
-------- --------
332,348 344,892
-------- --------
Income from operations..................................... 54,190 72,404
Interest income............................................ 1,343 2,752
Interest expense........................................... (86,855) (88,864)
-------- --------
Net loss................................................... $(31,322) $(13,708)
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-65
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL (DEFICIT)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ACCUMULATED
CONTRIBUTED SURPLUS TOTAL
CAPITAL (DEFICIT) CAPITAL
----------- ----------- -------
<S> <C> <C> <C>
Balance, December 31, 1994..................... $123,765 $(55,953) $67,812
Net loss for the nine months ended
September 30, 1995............................ -- (13,708) (13,708)
-------- -------- -------
Partnership distribution....................... -- (1,205) (1,205)
-------- -------- -------
Balance, September 30, 1995.................... $123,765 $(70,866) $52,899
======== ======== =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-66
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30,
------------------
1994 1995
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. $(31,322) $(13,708)
Adjustments to reconcile net loss
to net cash flows provided by operating activities--
Depreciation and amortization............................ 28,944 32,407
Charges related to lease guarantee....................... 1,506 1,748
Accretion of discount on Bond indebtedness................ 13,795 16,489
Other adjustments to reduce the carrying value
of non current assets.................................... 2,148 2,315
Provision for doubtful accounts........................... 1,809 3,825
-------- --------
16,880 43,076
Changes in operating assets and liabilities:
Receivables, net......................................... (1,688) (4,141)
Inventory................................................ (1,883) (519)
Other current assets..................................... (673) 2,114
Other assets............................................. (654) (204)
Due to affiliates, net................................... (451) 438
Accounts payable......................................... 2,251 2,624
Accrued interest payable................................. 26,693 29,909
Other liabilities........................................ 87 13
-------- --------
Net cash flows provided by operating activities......... 40,562 73,310
-------- --------
Cash Flows from Investing Activities:
Purchase of property and equipment........................ (15,749) (19,477)
Investment in CRDA obligation............................. (4,000) (4,274)
-------- --------
Net cash flows used in investing activities............. (19,749) (23,751)
-------- --------
Cash Flows from Financing Activities:
Repayments of borrowings.................................. (645) (781)
Partnership distribution.................................. (1,710) (1,205)
-------- --------
Net cash flows used in financing activities............. (2,355) (1,986)
-------- --------
Net Increase (Decrease) in Cash and Cash Investments........ 18,458 47,573
Cash and Cash Investments Beginning of Period............... 58,044 61,196
======== ========
Cash and Cash Investments End of Period..................... $ 76,502 $108,769
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest.................... $ 42,074 $ 40,718
======== ========
Supplemental Disclosure of Non-Cash Transactions:
Issuance of PIK bonds in lieu of cash interest............ $ 12,249 $ 15,112
======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-67
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND OPERATIONS
The accompanying consolidated financial statements include those of Trump Taj
Mahal Associates ("Taj Associates"), and its wholly owned subsidiary, Trump Taj
Mahal Funding, Inc. ("Taj Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.
Taj Associates was formed on June 23, 1988, as a New Jersey limited
partnership. Taj Associates was converted to a general partnership in December,
1990. The current partners and their respective ownership interests are Trump
Taj Mahal, Inc. ("TTMI"), 49.995%, The Trump Taj Mahal Corporation ("TTMC"),
.01%, and TM/GP Corporation ("TM/GP"), the managing general partner, and a
wholly owned subsidiary of Taj Mahal Holding Corp. ("Taj Holding"), 49.995%.
The accompanying financial statements have been prepared by Taj Associates
and Taj Funding without audit. In the opinion of Taj Associates and Taj
Funding, all adjustments, consisting of only normal recurring adjustments,
necessary to present fairly the financial position, results of operations and
changes in cash flows for the periods presented, have been made.
The accompanying financial statements have been prepared by Taj Associates
and Taj Funding pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Accordingly, certain information and note
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in Taj Associates and Taj Funding's
December 31, 1994 Annual Report on Form 10-K.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
The casino industry in Atlantic City is seasonal in nature. Therefore,
results of operations for the three and nine months ended September 30, 1995
and 1994 are not necessarily indicative of the operating results for a full
year.
(2) BORROWINGS
Long term debt consists of bank debt and outstanding bonds. Taj Funding's
first bonds bear interest at the rate of 11.35% and are due November 15, 1999
(the "Taj Bonds"). Each $1,000 principal amount of Taj Bonds, together with one
share of Class B Common Stock of Taj Holding ("Taj Holding Class B Common
Stock"), trade together as a Unit, and may not be transferred separately.
Interest on the Taj Bonds is due semi-annually on each November 15 and May 15.
Interest on the Taj Bonds must be paid in cash on each interest payment date at
the rate of 9.375% per annum (the "Mandatory Cash Interest Amount"). In
addition to the Mandatory Cash Interest Amount, effective May 15, 1992 and
annually thereafter, an additional amount of interest (the "Additional Amount")
in cash or additional Taj Bonds or a combination thereof, is payable equal to
the difference between 11.35% of the outstanding principal amount of the Taj
Bonds and the Mandatory Cash Interest Amount previously paid. To the extent
that there is excess available cash flow ("EACF") of Taj Associates, as defined
in the Indenture governing the Taj Bonds, for the immediately preceding
calendar year, Taj Funding will pay the Additional Amount in cash up to 10.28%
and the balance thereof may be paid at the option of Taj Funding in cash or
additional Units, provided that an equivalent amount of cash is used to
purchase or redeem Units. Additional Taj Bonds issued on October 4, 1991
amounted to approximately $7,208,000. For the period from the issuance of the
Taj Bonds, October 4, 1991 through December 31, 1992, there was no EACF.
Accordingly, Taj Funding paid the Additional Amounts
F-68
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES, AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
on May 15, 1993 and May 15, 1992 through the issuance of approximately
$14,579,000 and $8,844,000, respectively, in additional Taj Bonds. Of the
$14,870,000 Additional Amount due May 15, 1994, $2,621,000 was paid in cash and
the $12,249,000 balance in Taj Bonds. Of the $15,112,000 Additional Amount due
May 15, 1995, Taj Funding satisfied the entire obligation through the issuance
of Taj Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Taj Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principle and interest by Taj Associates and are collateralized by
substantially all Taj Associates' property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization Under the Bankruptcy Code", the Taj Bonds when
issued were stated at the present value of amounts to be paid, determined at
current interest rates (effective rate of approximately 18%). The effective
interest rate of the Taj Bonds was determined based on the trading price of the
Taj Bonds for a specific period. Stating the debt at its approximate present
value resulted in a reduction of approximately $204,276,000 in the carrying
amount of the Taj Bonds. This gain is being offset by increased interest costs
over the period of the Taj Bonds to accrete such Taj Bonds to their face value
at maturity. At September 30, 1995, the unaccreted balance of this discount was
approximately $137,108,000. The current interest rates of other borrowings
approximated their stated interest rates as of the effective date.
Taj Associates also has a loan agreement (the "NatWest Loan") with National
Westminster Bank, U.S.A. ("NatWest") which provided financing up to $50,000,000
for certain items of furniture, fixtures and equipment installed in the Trump
Taj Mahal Casino Resort. The NatWest Loan bears interest at 9 3/8% per annum.
Principal and interest is payable monthly in the fixed amount of $373,000 to be
applied first to accrued interest and the balance to the extent available, to
principal, through maturity, November 15, 1999. Additionally, on May 15 of each
year while principal is still outstanding, NatWest will receive 16.5% of the
EACF of the preceding calendar year in excess of the Additional Amount, to be
applied first to accrued but unpaid interest, and then to principal.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus any
after acquired furniture, fixtures and equipment that replaces such property,
or of the same type, provided however, that the NatWest Loan may be
subordinated to a lien to secure purchase money financing of such after
acquired property up to 50% of the value of such after acquired property.
In November 1991,Taj Associates obtained a working capital line of credit in
the amount of $25,000,000 with a maturity of five years. In September 1994, Taj
Associates extended the maturity to November 1999, in consideration for
modifications of the terms of the facility. Interest on advances under the line
are at prime plus 3% with a minimum of 7% per annum. The agreement provides for
a 3/4% annual fee and a 1/2% unused line fee and contains various covenants.
During 1995 and 1994, no amounts were outstanding under the line.
(3) CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by the
New Jersey Casino Control Commission (the "CCC"). The Taj Associates' casino
license must be renewed periodically, is not transferable, is dependent upon
the financial stability of the Partnership and can be revoked at anytime. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license due to Taj Associates' financial condition or for any other reason, the
Casino Control Act (the "Casino Control Act") provides that the CCC may appoint
a conservator to take possession of and title to the hotel and casino's
business and property, subject to all valid liens, claims and encumbrances. On
June 22, 1995, the CCC renewed Taj Associates casino license for four years,
through March 31, 1999.
F-69
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES, AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(4) LEGAL PROCEEDINGS
Taj Associates, its Partners, certain of its employees and Taj Funding are
involved in various legal proceedings incurred in the normal course of
business. In the opinion of management of Taj Associates, the expected
disposition of these proceedings would not have a material adverse effect on
the Taj Associates' or Taj Funding's financial condition or results of
operations.
(5) PARTNERSHIP DISTRIBUTION
Taj Associates is obligated to reimburse Taj Holding for its operating
expenses which consist of directors and officers liability insurance, board of
director fees and expenses, and administrative expenses. Total expenses for the
nine months ended September 30, 1995 and 1994 approximated $1,205,000 and
$1,710,000, respectively.
(6) FINANCIAL INFORMATION TAJ FUNDING
Financial information relating to Taj Funding is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 1994 30, 1995
--------- -----------
(UNAUDITED)
<S> <C> <C>
Total Assets (including Mortgage Note
Receivable of $765,130 and $780,242
in addition to related interest receivable)....... $ 783,562 $813,472
Total Liabilities and Capital (including
Mortgage Bonds payable of $765,130 and
$780,242 and in addition to related interest pay-
able)............................................. $ 783,562 813,472
<CAPTION>
1994 1995
Three months ending September 30: --------- -----------
<S> <C> <C>
Interest Income.................................... $ 21,711 $ 22,140
Interest Expense................................... $ 21,711 $ 22,140
Net Income......................................... $ -- $ --
Nine months ending September 30:
Interest Income.................................... $ 64,611 $ 65,775
Interest Expense................................... $ 64,611 $ 65,775
Net Income......................................... $ -- $ --
</TABLE>
(7) SUBSEQUENT EVENTS
On January 8, 1996, THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
entered into the Agreement and Plan of Merger, as amended by Amendment to
Agreement and Plan of Merger, dated as of January 31, 1996 (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into Taj Holding
(the "Merger"). The Merger Agreement provides that each outstanding share of
Taj Holding Class A Common Stock will be converted into the right to receive,
at each holder's election, either (a) $30.00 in cash or (b) that number of
shares of THCR Common Stock or shall have a market value equal to $30.00. The
Merger Agreement also contemplates the following transactions occurring in
connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (the "THCR Stock Offering") and the consummation of the
offering by Trump Plaza Holding Associates ("AC Holdings") and its wholly
owned subsidiary THCR Atlantic City Funding, Inc. of up to $1,180,000,000
aggregate principal amount of mortgage notes, the aggregate proceeds of
which will be used, together with available cash, to (i) pay cash to those
holders of Taj Holding Class A Common Stock
F-70
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES, AND TRUMP TAJ MAHAL FUNDING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
electing to receive cash in the Merger, (ii) redeem the Taj Bonds, (iii)
redeem the outstanding shares of Taj Holding Class B Common Stock as
required in connection with the redemption of the Taj Bonds, (iv) retire, by
purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due 2001
of Trump Plaza Funding, Inc., (v) satisfy the indebtedness of Taj Associates
under the NatWest Loan, (vi) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza Hotel and Casino that is currently leased from an
unaffiliated third party, (viii) make a payment to Bankers Trust to obtain
releases of the liens that Bankers Trust has with respect to Taj Associates
and related guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to THCR Holdings of all of his direct and
indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
F-71
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER
31, 30,
----------- -----------
1994 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash................................................ $ 100 $ 100
----------- -----------
Total Assets.................................... $ 100 $ 100
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Class B Common Stock; $.01 par value; 860,000 shares
authorized, 765,130 and 780,242 issued and out-
standing as of December 31, 1994 and September 30,
1995, respectively................................. $ 20 $ 20
STOCKHOLDERS' EQUITY (NOTE 1)
Class A Common Stock; $.01 par value; 10,000,000
shares authorized, 1,350,000 issued and outstand-
ing................................................ $ 40 $ 40
Class C Common Stock; $.01 par value; 10,000,000
shares authorized, 1,350,000 issued and outstand-
ing................................................ 40 40
Additional paid in capital.......................... 5,729,000 6,934,000
Accumulated deficit................................. (5,729,000) (6,934,000)
----------- -----------
Total Stockholders' Equity...................... $ 80 $ 80
----------- -----------
Total Liabilities and Stockholders' Equity...... $ 100 $ 100
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-72
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
Revenue.............................................. $ -- $ --
Expenses (Note 2)--
Director fees, insurance and administrative ex-
penses.............................................. 1,710,000 1,205,000
----------- -----------
Net loss............................................. $(1,710,000) $(1,205,000)
=========== ===========
Net loss per common share (Note 2)................... $ (1.27) $ (.89)
=========== ===========
Weighted average number of shares outstanding........ 1,350,000 1,350,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-73
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
CLASS A CLASS B CLASS C
---------------- ---------------- ----------------
ADDITIONAL
NUMBER NUMBER NUMBER PAID IN ACCUMULATED
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ --------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 1,350,000 $40 765,130 $20 1,350,000 $40 $5,729,000 $(5,729,000) $ 100
Additional issuance of
common stock in connec-
tion with the Partner-
ship's interest
payment................ -- -- 15,112 -- -- -- -- -- --
Distribution from the
Partnership for operat-
ing expenses........... -- -- -- -- -- -- 1,205,000 -- 1,205,000
Net loss................ -- -- -- -- -- -- -- (1,205,000) (1,205,000)
--------- --- ------- --- --------- --- ---------- ----------- -----------
Balance, September 30,
1995................... 1,350,000 $40 780,242 $20 1,350,000 $40 $6,934,000 $(6,934,000) $ 100
========= === ======= === ========= === ========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-74
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................... $(1,710,000) $(1,205,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Partnership distribution........................... 1,710,000 1,205,000
----------- -----------
NET CHANGE IN CASH -- --
CASH AT BEGINNING OF PERIOD 100 100
----------- -----------
CASH AT END OF PERIOD $ 100 $ 100
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
condensed consolidated financial statements.
F-75
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND BACKGROUND
The accompanying consolidated financial statements include those of Taj Mahal
Holding Corp. ("Taj Holding") and its wholly owned subsidiary, TM/GP
Corporation ("TM/GP"), the managing general partner of Trump Taj Mahal
Associates, a New Jersey general partnership ("Taj Associates") which operates
the Trump Taj Mahal Casino Resort (the "Taj Mahal"). All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
Taj Holding was organized on December 18, 1990 as a Delaware corporation
wholly owned by Donald J. Trump ("Trump"). Prior to January 1, 1992, Taj
Holding had no activity. As described below, Taj Holding was formed for the
purpose of consummating a plan of reorganization (the "1991 Taj Restructuring")
involving Taj Associates and Trump Taj Mahal Funding, Inc. ("Taj Funding"), a
New Jersey corporation which restructured the indebtedness of Taj Associates.
Prior to the 1991 Taj Restructuring, both Taj Associates and Taj Funding were
owned by Trump and affiliated entities.
Taj Holding and its subsidiaries have no business operations other than their
investment in Taj Associates. As a result, their ability to pay operating
expenses and dividends is completely dependent on the operations of Taj
Associates.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, the Taj
Associates issued to the holders of Taj Funding's 14% First Mortgage Bonds,
Series A, Due 1998 (the "Old Taj Bonds"), a general partnership interest
representing 49.995% of the equity of Taj Associates. Such holders in turn
contributed such partnership interest to Taj Holding. Taj Funding also issued
new 11.35% Mortgage Bonds, Series A, Due 1999 (the "Taj Bonds") in exchange for
the Old Taj Bonds. Each $1,000 principal amount of Taj Bonds trades as a unit
with one share of Class B Common Stock (the "Taj Holding Class B Common Stock")
of Taj Holding, as described below.
TM/GP, which has no other assets, received a 49.995% partnership interest in
Taj Associates from Taj Holding. Trump also contributed to Taj Holding a 50%
ownership interest in The Trump Taj Mahal Corporation, a Delaware corporation,
which owns a .01% interest in the Partnership, in exchange for the Class C
Common Stock (the "Taj Holding Class C Common Stock"), as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of its
Class A Common Stock (the "Taj Holding Class A Common Stock") and 729,458
shares of its Taj Holding Class B Common Stock to the holders of the Old Taj
Bonds and 1,350,000 shares of its Taj Holding Class C Common Stock to Trump.
Notwithstanding their par value, the various classes of common stock are
recorded at stated value, which represents the value assigned to the shares of
Taj Holding which were issued in connection with the 1991 Taj Restructuring .
In accordance with the terms of the indenture pursuant to which the Bonds
were issued, a portion of the interest on the Taj Bonds may be paid in cash or
in additional Taj Bonds (the "Additional Amount"). On May 15, 1992, 8,844 units
comprised of Taj Bonds in the aggregate amount of $8,844,000 and 8,844 shares
of Taj Holding Class B Common Stock were issued by Taj Funding as payment of
the Additional Amount. On May 15, 1993, 14,579 units comprised of Taj Bonds in
the aggregate amount of approximately $14,579,000 and 14,579 shares of Taj
Holding Class B Common Stock were issued as payment of the Additional Amount.
On May 15, 1994, 12,249 units comprised of Taj Bonds in the aggregate principal
amount of approximately $12,249,000 and 12,249 shares of Taj Holding Class B
Common Stock were issued together with $2,621,000 in cash as payment of the
Additional Amount. On May 15, 1995, 15,112 units comprised of Taj Bonds in the
aggregate principal amount of approximately $15,112,000 and 15,112 shares of
Taj Holding Class B Common Stock were issued as payment of the Additional
Amount.
F-76
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Currently, the holders of the Taj Holding Class B Common Stock are entitled
to elect four of the nine members of Taj Holding's Board of Directors and
Trump, as holder of the Taj Holding Class C Common Stock is entitled to elect
the remaining five directors. The Taj Holding Class A Common Stock has no
voting rights during the time any of the Taj Holding Class B Common Stock is
outstanding. However, upon Taj Holding's liquidation, all three classes of Taj
Holding's common stock share ratably in the assets of Taj Holding to the extent
of their par value, with the Taj Holding Class A Common Stock entitled to the
residual. The Taj Holding Class B Common Stock must be redeemed at a price of
$.50 per share when the Bonds, with which they were issued, are paid, redeemed
or purchased and canceled.
The accompanying financial statements have been prepared by Taj Holding
without audit. In the opinion of Taj Holding, all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position, results of operations and changes in cash flows for the periods
presented, have been made.
The accompanying financial statements have been prepared by Taj Holding
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC"). Accordingly, certain information and note disclosures normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in Taj Holding's December 31, 1994 Annual Report on Form
10-K.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN THE PARTNERSHIP
Taj Holding accounts for its investment in Taj Associates using the equity
method of accounting. Under this method, Taj Holding reports as equity income
50% of Taj Associates' earnings, if any, from October 4, 1991. In addition, the
difference between Taj Holding's equity in the underlying identifiable assets
of the Taj Associates as of October 4, 1991 ($91,703,000) and the cost basis of
its investment in Taj Associates is being amortized into income over 40 years.
For the period from October 4, 1991 to September 30, 1995, Taj Associates
incurred a net loss of $123,559,000. Taj Holding's equity in this loss
($61,779,500) less amortization of the difference between the underlying
identifiable assets of Taj Associates and the cost basis of its investment in
Taj Associates, for the period from October 4, 1991 to September 30, 1995,
($9,170,000), will not be reflected in Taj Holding's financial statements until
such time as Taj Associate generates earnings sufficient to offset the
accumulated net loss.
INCOME TAXES
Taj Holding will record Federal income taxes based on its allocable share of
Taj Associates earnings. The payment of any such taxes will be reimbursed by
Taj Associates. Under New Jersey Casino Control Commission regulations, Taj
Associates is required to file a consolidated New Jersey corporation business
tax return and pay all state taxes attributable to its earnings.
OPERATING EXPENSES
Expenses of Taj Holding consist of directors and officers liability
insurance, board of director fees and expenses, and administrative expenses.
Taj Holding is entitled to full reimbursement of such expense by Taj
F-77
<PAGE>
TAJ MAHAL HOLDING CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Associates. Total expenses for the nine months ended September 30, 1995 and
1994 approximated $1,205,000 and $1,710,000, respectively, all of which were
reimbursed by Taj Associates.
EARNING PER SHARE
For the calculation of net loss per share, Taj Holding Class A Common Stock
was used since it is the only class of participating stock. Net loss per share
is determined by dividing the net loss by the weighted average number of shares
of Taj Holding Class A Common Stock outstanding.
(3) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Holding and THCR Merger Corp. ("Merger Sub")
entered into the Agreement and Plan of Merger, as amended by Amendment to
Agreement and Plan of Merger, dated as of January 31, 1996 (the "Merger
Agreement"), pursuant to which Merger Sub will merge with and into Taj Holding
(the "Merger"). The Merger Agreement provides that each outstanding share of
Taj Holding Class A Common Stock will be converted into the right to receive,
at each holder's election, either (a) $30.00 in cash or (b) that number of
shares of THCR Common Stock as shall have a market value equal to $30.00. The
Merger Agreement also contemplates the following transactions occurring in
connection with the Merger:
(a) the consummation of the offering by THCR of up to $140,000,000 of THCR
Common Stock (the "THCR Stock Offering") and the consummation of the
offering by Trump Plaza Holding Associates ("AC Holdings") and its wholly
owned subsidiary THCR Atlantic City Funding, Inc. of up to $1,180,000,000
aggregate principal amount of mortgage notes, the aggregate proceeds of
which will be used, together with available cash of Taj Associates, to (i)
pay cash to those holders of Taj Holding Class A Common Stock electing to
receive cash in the Merger, (ii) redeem the Taj Bonds, (iii) redeem the
outstanding shares of Taj Holding Class B Common Stock as required in
connection with the redemption of the Taj Bonds, (iv) retire, by purchasing
and/or defeasing, the outstanding 10 7/8% Mortgage Notes due 2001 of Trump
Plaza Funding, Inc., (v) satisfy the indebtedness of Taj Associates, the
owner and operator of the Taj Mahal, under its loan agreement with National
Westminster Bank USA, (vi) purchase certain real property used in the
operation of the Taj Mahal that is currently leased from a corporation
wholly owned by Trump, (vii) purchase certain real property used in the
operation of Trump Plaza Hotel and Casino that is currently leased from an
unaffiliated third party, (viii) make a payment to Bankers Trust to obtain
releases of the liens that Bankers Trust has with respect to Taj Associates
and related guarantees, and (ix) pay related fees and expenses;
(b) the contribution by Trump to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all of its indirect ownership interests in
Taj Associates acquired in the Merger.
F-78
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRUMP HOTELS & CASINO RESORTS, INC.
TAJ MAHAL HOLDING CORP.
AND
THCR MERGER CORP.
-------------------------
DATED AS OF JANUARY 8, 1996
-------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS *
<TABLE>
<C> <S> <C>
ARTICLE I DEFINITIONS.................................................... A-2
Section 1.01. Definitions............................................ A-2
ARTICLE II THE MERGER.................................................... A-6
Section 2.01. The Merger............................................. A-6
Section 2.02. Conversion of Outstanding Shares; Redemption........... A-7
Section 2.03. Certificate of Incorporation........................... A-7
Section 2.04. By-Laws................................................ A-7
Section 2.05. Directors and Officers................................. A-7
Section 2.06. Exchange Agent......................................... A-7
Section 2.07. Election Procedures.................................... A-8
Section 2.08. Taj Holding Class A Common Stock Exchange Procedures... A-8
Section 2.09. Dividends; Liability................................... A-9
No Further Rights For Holders Electing Cash
Section 2.10. Consideration......................................... A-9
Section 2.11. No Fractional Shares................................... A-10
Section 2.12. Dissenting Shares...................................... A-10
ARTICILE III REPRESENTATIONS AND WARRANTIES OF TAJ HOLDING............... A-10
Section 3.01. Corporate Organization................................. A-10
Section 3.02. Capitalization......................................... A-10
Section 3.03. Subsidiaries........................................... A-11
Section 3.04. Financial Statements; SEC Reports...................... A-11
Section 3.05. Absence of Certain Changes or Events................... A-11
Section 3.06. Authorization and Validity of Agreements; Opinion of
Financial Advisor..................................... A-11
Section 3.07. No Conflict or Violation............................... A-12
Section 3.08. Consents and Approvals................................. A-12
Section 3.09. Litigation............................................. A-13
Section 3.10. Taxes.................................................. A-13
Section 3.11. Contracts and Leases................................... A-13
Section 3.12. Joint Proxy Statement.................................. A-13
Section 3.13. Takeover Provisoins Inapplicable....................... A-13
Section 3.14. Brokerage/Finder's Fees................................ A-13
Section 3.15. Bond Redemption; Taj Funding Offering.................. A-13
Section 3.16. THCR Offering.......................................... A-14
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THCR....................... A-14
Section 4.01. Corporate Organization................................. A-14
Section 4.02. Capitalization......................................... A-14
Section 4.03. Subsidiaries........................................... A-14
Section 4.04. Financial Statements; SEC Reports...................... A-14
Section 4.05. Absence of Certain Changes or Events................... A-15
Authorization and Validity of Agreements; Opionion of
Section 4.06. Financial Advisor..................................... A-15
Section 4.07. No Conflict or Violation............................... A-15
Section 4.08. Consents and Approvals................................. A-16
Section 4.09. Litigation............................................. A-16
Section 4.10. Taxes.................................................. A-16
Section 4.11. Contracts and Leases................................... A-16
</TABLE>
- --------
* The Table of Contents is not part of this Merger Agreement.
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 4.12. THCR Registration Statement............................ A-16
Section 4.13. Takeover Provisions Inapplicable....................... A-17
Section 4.14. Brokerage/Finder's Fees................................ A-17
Section 4.15. TAJ Funding Offering................................... A-17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................... A-17
Section 5.01. Corporate Organization; Subsidiaries................... A-17
Section 5.02. Capitalization......................................... A-17
Section 5.03. Authorization and Validity of Agreements............... A-17
ARTICLE VI COVENANTS OF TAJ HOLDING....................................... A-18
Section 6.01. Conduct Pending Merger................................. A-18
Section 6.02. Joint Proxy Statement.................................. A-18
Section 6.03. Stockholders Meeting................................... A-19
Section 6.04. Compliance With the Securities Act..................... A-19
Section 6.05. No Solicitation........................................ A-19
Section 6.06. Dividend Prohibition................................... A-19
Section 6.07. Letters of Accountants................................. A-19
ARTICLE VII COVENANTS OF THCR............................................. A-19
Section 7.01. Conduct Pending the Merger............................. A-19
Section 7.02. Joint Proxy Statement.................................. A-20
Section 7.03. Stockholders Meeting................................... A-20
Section 7.04. Indemnification and Insurance.......................... A-20
Section 7.05. Letters of Accountants................................. A-21
ARTICLE VIII OTHER AGREEMENTS............................................. A-21
Section 8.01. Stock Exchange Listing................................. A-21
Section 8.02. Additional Agreements; Consents and Permits............ A-21
Section 8.03. Registration of Securities............................. A-21
Section 8.04. Access to Information; Confidentiality................. A-22
Section 8.05. Notification of Certain Matters........................ A-22
Section 8.06. HSR Act................................................ A-23
Section 8.07. Bond Redemption........................................ A-23
ARTICLE IX CONDITIONS TO THE MERGER....................................... A-23
Section 9.01. Conditions to the Obligations of Each Party............ A-23
Section 9.02. Conditions to the Obligation of TAJ Holding............ A-24
Section 9.03. Conditions to the Obligations of THCR and Merger Sub... A-24
ARTICLE X TERMINATION..................................................... A-25
Section 10.01. Termination............................................ A-25
Section 10.02. Effect of Termination.................................. A-25
ARTICLE XI MISCELLANEOUS.................................................. A-26
Section 11.01. Notices................................................ A-26
Section 11.02. Survival............................................... A-26
Section 11.03. Amendment.............................................. A-26
Section 11.04. Waiver................................................. A-27
Section 11.05. Successors and Assigns................................. A-27
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
Section 11.06. Governing Law.......................................... A-27
Section 11.07. Gaming Laws............................................ A-27
Section 11.08. Integration............................................ A-27
Section 11.09. Third Party Beneficiaries.............................. A-27
Section 11.10. Specific Performance................................... A-27
Section 11.11. Remedies Cumulative.................................... A-27
Section 11.12. Publicity.............................................. A-27
Section 11.13. Fees & Expenses........................................ A-27
Section 11.14. Headings; Counterparts; Effectiveness.................. A-28
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 8, 1996 (the "Merger
Agreement"), by and among TRUMP HOTELS & CASINO RESORTS, INC., a Delaware
corporation ("THCR"), TAJ MAHAL HOLDING CORP., a Delaware corporation ("Taj
Holding"), and THCR MERGER CORP., a Delaware corporation and a wholly owned
subsidiary of THCR ("Merger Sub").
WHEREAS, Taj Holding and certain of its affiliates and THCR and certain of
its affiliates desire to effect the Merger Transaction, which includes (a) the
merger of Merger Sub with and into Taj Holding upon the terms and subject to
the conditions set forth herein (the "Merger"); (b) consummation of the
offering by THCR (the "THCR Offering") of up to $140,000,000 of Common Stock
of THCR, par value $.01 per share ("THCR Common Stock"), and the offering by
Trump Taj Mahal Funding, Inc. ("Taj Funding") or its affiliate of up to
$750,000,000 aggregate principal amount of debt securities (the "Taj Funding
Offering"), the aggregate net proceeds of which will be used, together with
available cash of Trump Taj Mahal Associates ("Taj Associates"), to, among
other things, (i) pay cash, pursuant to this Merger Agreement, to those
holders of Class A Common Stock of Taj Holding, par value $.01 per share (the
"Taj Holding Class A Common Stock"), electing to receive cash in the Merger,
(ii) redeem (the "Bond Redemption") Taj Funding's outstanding 11.35% Mortgage
Bonds, Series A due 1999 (the "Bonds"), (iii) redeem the outstanding shares of
Class B Common Stock of Taj Holding, par value $.01 per share (the "Taj
Holding Class B Common Stock"), as required in connection with the Bond
Redemption, (iv) purchase certain real property (collectively, the "Specified
Parcels") that is currently leased by Taj Associates, the owner and operator
of the Trump Taj Mahal Casino Resort (the "Taj Mahal"), from Trump Taj Mahal
Realty Corp. ("Realty Corp."), a corporation wholly owned by Donald J. Trump
("Trump"), and (v) make a payment to Bankers Trust Company ("Bankers Trust")
to obtain releases of the Liens (defined below) and guarantees that Bankers
Trust has with respect to Taj Associates; (c) the contribution by Trump to
Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of THCR ("THCR
Holdings"), and Taj Mahal Holdings LLC ("Taj Holdings LLC") of all of his
direct and indirect ownership interests in Taj Associates; and (d) the
contribution by THCR to THCR Holdings and Taj Holdings LLC of all its indirect
ownership interests in Taj Associates acquired in the Merger;
WHEREAS, THCR and Trump have agreed that (a) in exchange for their
contributions to THCR Holdings and Taj Holdings LLC, THCR's and Trump's
beneficial equity interests in THCR Holdings will be adjusted pursuant to the
terms of the Amended and Restated Agreement of Limited Partnership of THCR
Holdings (the "Partnership Agreement"), and (b) as part of the Merger
Transaction, THCR will issue to Trump a warrant to purchase 1.8 million shares
of THCR Common Stock, one-third of which may be purchased on or prior to (i)
the third anniversary of the issuance of the warrant at $30 per share, (ii)
the fourth anniversary of the issuance of the warrant at $35 per share and
(iii) the fifth anniversary of the issuance of the warrant at $40 per share
(the Merger and the related transactions discussed above are collectively
referred to as the "Merger Transaction");
WHEREAS, pursuant to the Class A Voting Agreement (defined below), the
holders of approximately 52% of the outstanding shares of Taj Holding Class A
Common Stock have agreed to vote in favor of the Merger;
WHEREAS, pursuant to the Trump THCR Voting Agreement (defined below) Trump
has agreed to vote all of the shares in THCR beneficially owned by him in
favor of the Merger Transaction, and pursuant to the Trump Taj Voting
Agreement (defined below) Trump has agreed to vote all of the shares
beneficially owned by him in Taj Holding in favor of the Merger Agreement;
WHEREAS, the THCR Special Committee of the Board of Directors of THCR
(defined below), and the Taj Holding Class B Directors (defined below) and the
Board of Directors of Taj Holding, have received the DLJ Fairness Opinion and
the Rothschild Fairness Opinion (each defined below), respectively;
WHEREAS, the THCR Special Committee and the Board of Directors of THCR have
determined that the Merger Transaction is consistent with and in furtherance
of the long-term business strategy of THCR;
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WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj
Holding have determined that the Merger is consistent with and in furtherance
of the long-term business strategy of Taj Holding;
WHEREAS, the THCR Special Committee and the Board of Directors of THCR have
determined that the Merger Transaction is fair to, and in the best interests
of, THCR;
WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj
Holding based on, among other things, the advice of the financial advisor to
Taj Holding and existence of the Class A Voting Agreement (defined below),
have determined that the Merger is fair to, and in the best interests of, Taj
Holding and the holders of Taj Holding Class A Common Stock;
WHEREAS, the THCR Special Committee and the Board of Directors of THCR have
approved the Merger Transaction and this Merger Agreement;
WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj
Holding have approved the Merger and this Merger Agreement; and
WHEREAS, the Board of Directors of Merger Sub has approved this Merger
Agreement and THCR, as the sole stockholder of Merger Sub, has approved and
adopted this Merger Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Merger 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
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).
"Bankers Trust" shall have the meaning set forth in the Recitals.
"Bond Indenture" shall mean the Amended and Restated Indenture, dated as of
October 4, 1991, among Taj Funding, as issuer, Taj Associates, as guarantor,
and First Bank National Association, as trustee, relating to the issuance of
the Bonds.
"Bond Redemption" shall have the meaning set forth in the Recitals.
"Bonds" shall have the meaning set forth in the Recitals.
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"Cash Consideration" shall have the meaning set forth in Section 2.02.
"Certificate of Merger" shall have the meaning set forth in Section 2.01.
"Class A Voting Agreement" means the letter agreement, dated as of October
6, 1995, among Taj Holding, Taj Associates, Taj Funding, Putnam Investment
Management, Hamilton Partners, L.P., Prudential Securities, Grace Brothers
Ltd., SC Fundamental Value Fund, L.P. and SC Fundamental Value BVI Ltd.,
relating to the voting of shares of Taj Holding Class A Common Stock, as such
agreement may be amended from time to time.
"Closing" shall have the meaning set forth in Section 2.01.
"Confidential Information" shall mean all information about a party hereto,
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
hereto; 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.
"Current D&O Premium" shall mean an amount not greater than 150% of the
premium paid by Taj Holding (on an annualized basis) for directors' and
officers' liability insurance during the period from January 1, 1996 to the
Effective Time.
"Debt S-1" shall have the meaning set forth in Section 3.15.
"DGCL" shall mean the Delaware General Corporation Law.
"Disclosing Party" shall mean any party to this Merger Agreement that
discloses or provides Confidential Information to any other party to this
Merger Agreement.
"Dissenting Shares" shall have the meaning set forth in Section 2.12.
"DLJ" shall have the meaning set forth in Section 4.06.
"DLJ Fairness Opinion" shall have the meaning set forth in Section 4.06.
"Effective Time" shall have the meaning set forth in Section 2.01.
"Election Deadline" shall have the meaning set forth in Section 2.07.
"Election Form" shall have the meaning set forth in Section 2.07.
"Equity S-1" shall have the meaning set forth in Section 3.16.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder.
"Exchange Agent" shall have the meaning set forth in Section 2.06.
"Exchange Agreement" shall mean the Exchange and Registration Rights
Agreement, dated as of June 12, 1995, between THCR and Trump.
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"Exchange Fund" shall have the meaning set forth in Section 2.08.
"First Fidelity" shall mean First Fidelity Bank, N.A.
"Gaming Authority" shall mean the New Jersey Casino Control Commission, the
New Jersey Division of Gaming Enforcement, the Indiana Gaming Commission, the
Mississippi Gaming Commission and the Mississippi State Tax Commission or any
other governmental agency which regulates gaming in a jurisdiction in which
either THCR or its Subsidiaries or Taj Holding or its Subsidiaries conducts
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.
"Joint Proxy Statement" shall mean the joint proxy statement of Taj Holding
and THCR with respect to the Taj Holding Meeting and the THCR Meeting.
"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.
"Market Value" shall mean the average of the high and low per share sales
prices of the THCR Common Stock during the fifteen trading days immediately
preceding the Effective Time or, if THCR and Taj Holding mutually agree,
during any such other period as agreed under the Class A Voting Agreement.
"Merger" shall have the meaning set forth in Recitals.
"Merger Agreement" shall have the meaning set forth in the Preamble.
"Merger Consideration" shall have the meaning set forth in Section 2.02.
"Merger Sub" shall have the meaning set forth in the Preamble.
"Merger Sub Common Stock" shall mean the Common Stock, par value $.01 per
share, of Merger Sub.
"Merger Sub Material Adverse Effect" shall mean a material adverse effect
with respect to the business, results of operations, properties, operations or
financial condition of Merger Sub.
"Merger Transaction" shall have the meaning set forth in the Recitals.
"NYSE" shall mean the New York Stock Exchange.
"Partnership Agreement" shall have the meaning set forth in the Recitals.
"Permitted Investments" shall have the meaning set forth in Section 2.08.
"Person" shall mean any individual, partnership, corporation, trust,
association, limited liability company, governmental agency or any other
entity.
"Realty Corp." shall have the meaning set forth in the Recitals.
"Receiving Party" shall mean any party to this Merger Agreement that
receives or obtains Confidential Information from a Disclosing Party.
"Rothschild" shall have the meaning set forth in Section 3.06.
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"Rothschild Fairness Opinion" shall have the meaning set forth in Section
3.06.
"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.
"Special Counsel" shall mean Andrews & Kurth L.L.P., special counsel to the
Taj Holding Class B Directors.
"Specified Parcels" shall have the meaning set forth in the Recitals.
"Stock Consideration" shall have the meaning set forth in Section 2.02.
"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 at least 50% of the outstanding securities generally entitled to
vote upon the election of directors. For the purposes of this Merger Agreement
the term "Subsidiary" shall also include, with respect to Taj Holding, Taj
Associates and, with respect to THCR, THCR Holdings, Trump Plaza Holding
Associates and Trump Plaza Associates.
"Surviving Corporation" shall mean the surviving corporation in the Merger.
"Taj Associates" shall have the meaning set forth in the Recitals.
"Taj Funding" shall have the meaning set forth in the Recitals.
"Taj Funding Offering" shall have the meaning set forth in the Recitals.
"Taj Holding" shall have the meaning set forth in the Preamble.
"Taj Holding Certificates" shall have the meaning set forth in Section 2.08.
"Taj Holding Class A Common Stock" shall have the meaning set forth in the
Recitals.
"Taj Holding Class B Common Stock" shall have the meaning set forth in the
Recitals.
"Taj Holding Class C Common Stock" shall mean the Class C Common Stock, par
value $.01 per share, of Taj Holding.
"Taj Holding Class B Directors" shall mean the Class B Directors of Taj
Holding.
"Taj Holding Class C Directors" shall mean the Class C Directors of Taj
Holding.
"Taj Holding Indemnified Parties" shall have the meaning set forth in
Section 7.04.
"Taj Holding Material Adverse Effect" shall mean a material adverse effect
with respect to the business, results of operations, properties, operations or
financial condition of Taj Holding and its Subsidiaries, taken as a whole.
"Taj Holding Meeting" shall have the meaning set forth in Section 6.03.
"Taj Holding SEC Reports" shall have the meaning set forth in Section 3.04.
"Taj Holdings LLC" shall have the meaning set forth in the Recitals.
"Taj Mahal" shall have the meaning set forth in the Recitals.
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"THCR" shall have the meaning set forth in the Preamble.
"THCR Certificates" shall have the meaning set forth in Section 2.08.
"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 Dividends" shall have the meaning set forth in Section 2.08.
"THCR Holdings" shall have the meaning set forth in the Recitals.
"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 7.03.
"THCR Offering" shall have the meaning set forth in the Recitals.
"THCR Registration Statement" shall mean the Registration Statement on Form
S-4 of THCR to be filed with the SEC in connection with the Merger, including
the Prospectus with respect to the THCR Common Stock included therein.
"THCR SEC Reports" shall have the meaning set forth in Section 4.04.
"THCR Special Committee" shall mean the Special Committee of the Board of
Directors of THCR.
"TM/GP" shall mean TM/GP Corporation, a wholly owned subsidiary of Taj
Holding.
"TM/GP Class B Common Stock" shall mean the Class B Common Stock of TM/GP,
par value $.01 per share.
"Trump" shall have the meaning set forth in the Recitals.
"Trump Taj Voting Agreement" shall have the meaning set forth in Section
3.06.
"Trump THCR Voting Agreement" shall have the meaning set forth in Section
4.06.
"TTMI Note" shall mean the promissory note from Trump Taj Mahal, Inc. to
Trump, dated October 4, 1991.
ARTICLE II
THE MERGER
Section 2.01. The Merger. (a) Upon the terms and subject to the conditions
of this Merger Agreement, at the Effective Time, Merger Sub shall be merged
with and into Taj Holding in accordance with the DGCL, whereupon the separate
existence of Merger Sub shall cease, and Taj Holding shall be the Surviving
Corporation.
(b) Unless this Merger Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10.01 and subject to the satisfaction or, if permissible, waiver of the
conditions set forth in Article IX, the closing of the Merger (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 IX, at the offices of Willkie Farr & Gallagher, 153 East 53rd Street,
New York, New York, unless another date, time or place is agreed to in writing
by the parties hereto.
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(c) At the Closing, (i) Taj Holding will deliver to THCR and Merger Sub the
opinion referred to in Section 6.04 and the various certificates, instruments
and documents referred to in Section 9.03, (ii) THCR and Merger Sub will
deliver to Taj Holding the various certificates, instruments and documents
referred to in Section 9.02 and (iii) THCR will deliver to the Exchange Agent
the Merger Consideration.
(d) As soon as practicable after the Closing, Taj Holding and Merger Sub
will file, or cause to be filed, with the Secretary of State of the State of
Delaware, a certificate of merger for the Merger in accordance with the
provisions of the DGCL (the "Certificate of Merger"). The Merger shall become
effective at the time such filing is accepted for filing by the Secretary of
State of the State of Delaware or at such other time as set forth in the
Certificate of Merger (the "Effective Time").
(e) From and after the Effective Time, the Surviving Corporation, shall have
all the rights, privileges, powers and franchises and be subject to all of the
restrictions, disabilities and duties of Taj Holding and Merger Sub, all as
provided under the DGCL.
Section 2.02. Conversion of Outstanding Shares; Redemption. (a) At the
Effective Time:
(i) each share of Taj Holding Class A Common Stock outstanding
immediately prior to the Effective Time shall, except as otherwise provided
in this Section, be converted into and represent the right to receive, at
the holder's election, either (x) $30.00 in cash (the "Cash Consideration")
or (y) that number of fully paid and nonassessable shares of THCR Common
Stock determined by dividing $30.00 by the Market Value (the "Stock
Consideration" and together with the Cash Consideration, the "Merger
Consideration");
(ii) all shares of Taj Holding Class C Common Stock outstanding
immediately prior to the Effective Time shall be canceled; and
(iii) each share of Merger Sub Common Stock outstanding immediately prior
to the Effective Time shall be converted into and represent the right to
receive one fully paid and nonassessable share of Common Stock, par value
$0.01 per share, of the Surviving Corporation.
(b) Immediately prior to the Effective Time, Taj Holding shall cause each
share of Taj Holding Class B Common Stock outstanding immediately prior to
such time to be redeemed at $.50 per share in accordance with the provisions
of the certificate of incorporation of Taj Holding and the Bond Indenture.
(c) Each share of Taj Holding Class A Common Stock held by Taj Holding as
treasury stock immediately prior to the Effective Time or owned by any direct
or indirect Subsidiary of Taj Holding immediately prior to the Effective Time
shall be canceled, and no conversion or payment shall be made with respect
thereto.
Section 2.03. Certificate of Incorporation. The certificate of incorporation
of Merger Sub in effect at the Effective Time shall be the certificate of
incorporation of the Surviving Corporation, until amended in accordance with
the DGCL, except that Article Second thereof shall be amended to read as
follows: "The name of the Corporation is Taj Mahal Holding Corp."
Section 2.04. By-laws. The by-laws of Merger Sub in effect at the Effective
Time shall be the by-laws of the Surviving Corporation, until amended in
accordance with the DGCL and the certificate of incorporation of the Surviving
Corporation.
Section 2.05. Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed in accordance with the DGCL and
the Surviving Corporation's certificate of incorporation and by-laws, (a) the
directors of Merger Sub at the Effective Time shall be the directors of the
Surviving Corporation and (b) the officers of Taj Holding at the Effective
Time shall be the officers of the Surviving Corporation.
Section 2.06. Exchange Agent. Prior to the Effective Time, THCR and Taj
Holding shall designate Continental Stock Transfer & Trust Company, or another
mutually acceptable bank or trust company, to act as exchange agent for the
Merger (the "Exchange Agent").
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Section 2.07. Election Procedures. (a) Taj Holding shall, or shall cause the
Exchange Agent to, send an election form (the "Election Form") in form
satisfactory to THCR, to each holder of Taj Holding Class A Common Stock
together with the Joint Proxy Statement. Each Election Form shall permit each
holder of Taj Holding Class A Common Stock (or the beneficial owner through
appropriate and customary documentation and instructions) to elect to receive
either the Stock Consideration or the Cash Consideration.
(b) Any holder of Taj Holding Class A Common Stock who wishes to receive
Cash Consideration must send the Election Form properly completed to the
Exchange Agent at the address set forth in the Election Form on or before 5:00
p.m. on the business day prior to the Taj Holding Meeting or at any other time
and date as Taj Holding and THCR may mutually agree (the "Election Deadline").
(c) Holders of the Taj Holding Class A Common Stock who (i) fail to complete
properly the Election Form, (ii) fail to send the Election Form to the
Exchange Agent prior to the Election Deadline or (iii) make no election, shall
be deemed to have elected to receive the Stock Consideration.
(d) Taj Holding shall use its best efforts to make available one or more
Election Forms as may be reasonably requested by all Persons who become
holders (or beneficial owners) of Taj Holding Class A Common Stock between the
record date established for purposes of the Taj Holding Stockholder Meeting
and the Election Deadline.
(e) Any Election Form may be revoked prior to the Election Deadline by
submitting a new Election Form to the Exchange Agent. In addition, all
Election Forms shall automatically be deemed revoked if the Exchange Agent is
notified in writing by Taj Holding and THCR that the Merger has been abandoned
or this Merger Agreement has been terminated.
(f) Subject to the terms of this Merger Agreement, the determination of the
Exchange Agent shall be binding and conclusive as to whether or not the
Election Form has been properly or timely submitted or revoked. Neither the
Exchange Agent, Taj Holding, THCR nor Merger Sub shall be under any obligation
to notify any Person of any defect in an Election Form or the revocation
thereof.
Section 2.08. Taj Holding Class A Common Stock Exchange Procedures. (a) As
soon as practicable after the Effective Time, THCR shall instruct the Exchange
Agent to mail to each holder of a certificate or certificates evidencing
shares of Taj Holding Class A Common Stock (other than Dissenting Shares) (the
"Taj Holding Certificates") (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Taj Holding
Certificates shall pass, only upon proper delivery of such Taj Holding
Certificates to the Exchange Agent) and (ii) instructions to effect the
surrender of the Taj Holding Certificates in exchange for Merger
Consideration. Each holder of Taj Holding Class A Common Stock, upon surrender
to the Exchange Agent of such holder's Taj Holding Certificates with the
letter of transmittal, duly executed, and such other customary documents as
may be required pursuant to such instructions, shall be given the amount to
which such holder is entitled, pursuant to this Merger Agreement, of (i)
certificates evidencing shares of THCR Common Stock (the "THCR Certificates")
as payment of the Stock Consideration, (ii) cash as payment of the Cash
Consideration (without any interest accrued thereon), (iii) dividends or
distributions declared or made on the THCR Common Stock after the Effective
Time and payable between the Effective Time and the time of such surrender
(the "THCR Dividends") and/or (iv) cash for payment of fractional shares of
THCR Common Stock. Until so surrendered, each Taj Holding Certificate shall
after the Effective Time represent for all purposes only the right to receive
THCR Certificates or cash, as the case may be. After the Effective Time, there
shall be no further registration of transfers of Taj Holding Class A Common
Stock. THCR shall establish reasonable procedures for the delivery of THCR
Certificates or cash, as the case may be, to holders of Taj Holding Class A
Common Stock whose Taj Holding Certificates have been lost, destroyed or
mutilated.
(b) At the Closing, THCR shall deposit in trust with the Exchange Agent, for
the benefit of the holders of Taj Holding Class A Common Stock, the
appropriate amount to which such holders are entitled, pursuant to this Merger
Agreement, of THCR Certificates for payment of the Stock Consideration, cash
for payment of the Cash
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Consideration, THCR Dividends, if any, and cash for payment of fractional
shares of THCR Common Stock (collectively, the "Exchange Fund"). The Exchange
Agent shall, pursuant to irrevocable instructions, make the payments to the
holders of Taj Holding Class A Common Stock as set forth in this Merger
Agreement. The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the THCR Common Stock held by it from time
to time hereunder, except that it shall hold all THCR Dividends paid or
distributed for the accounts of the Persons entitled thereto.
(c) If any delivery of the Merger Consideration is to be made to a Person
other than the registered holder of the Taj Holding Certificates surrendered
in exchange therefor, it shall be a condition to such delivery that the Taj
Holding Certificate so surrendered shall be properly endorsed or be otherwise
in proper form for transfer and that the Person requesting such delivery shall
(i) pay to the Exchange Agent any transfer or other taxes required as a result
of delivery to a Person other than the registered holder or (ii) establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) Any portion of the Exchange Fund that remains undistributed to the
holders of the Taj Holding Class A Common Stock for 180 days after the
Effective Time shall be delivered to THCR upon demand. Any holder of Taj
Holding Class A Common Stock who has not therefore complied with this Article
within 180 days after the Effective Time shall have no further claim upon the
Exchange Agent and shall thereafter look only to THCR for conversion or
payment, as the case may be, of the Merger Consideration, THCR Dividends and
fractional shares of THCR Common Stock.
(e) If a Taj Holding Certificate has not been surrendered prior to the date
on which any receipt of Merger Consideration, THCR Dividends or cash for
payment of fractional shares of THCR Common Stock would otherwise escheat to
or become the property of any governmental agency, such Taj Holding
Certificate shall, to the extent permitted by applicable law, be deemed to be
canceled and no money or other property will be due to the holder thereof.
(f) The Exchange Agent shall invest cash in the Exchange Fund, as directed
by THCR, on a daily basis, provided that all such investments shall be in
obligations of or guaranteed by the United States of America with remaining
maturities not exceeding 180 days, in commercial paper obligations receiving
the highest rating from either Moody's Investors Services, Inc. or Standard &
Poor's Corporation, or in certificates of deposit or banker's acceptances of
commercial banks with capital exceeding $500 million (collectively, "Permitted
Investments"). The maturities of Permitted Investments shall be such as to
permit the Exchange Agent to make prompt payment to former stockholders of Taj
Holding entitled thereto as contemplated by this Section. THCR shall promptly
replenish the Exchange Fund to the extent of any losses incurred as a result
of Permitted Investments. Any interest and other income resulting from such
investments shall be paid to THCR. If for any reason (including losses) the
Exchange Fund is inadequate to pay the amounts to which holders of Taj Holding
Class A Common Stock shall be entitled under this Merger Agreement, THCR shall
in any event be liable for payment thereof. The Exchange Fund shall not be
used for any purpose not specifically provided for in this Merger Agreement.
Section 2.09. Dividends; Liability. No THCR Dividend will be paid to Persons
entitled to receive certificates representing THCR Common Stock pursuant to
this Merger Agreement until such Persons surrender their Taj Holding
Certificates. Upon such surrender, THCR Dividends shall be paid to the Person
in whose name the THCR Certificate shall be issued. In no event shall the
Person entitled to receive such dividends or distributions be entitled to
receive interest on such dividends or distributions. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to
a holder of Taj Holding Class A Common Stock for any shares of THCR Common
Stock or dividends or distributions thereon delivered to a governmental agency
pursuant to any applicable escheat or similar laws.
Section 2.10. No Further Rights for Holders Electing Cash
Consideration. Holders of Taj Holding Class A Common Stock who elect to
receive the Cash Consideration or who shall receive cash for payment of
fractional shares of THCR Common Stock shall, upon properly surrendering their
Taj Holding Certificates, be deemed to have been paid in full satisfaction of
all rights pertaining to the shares or fractions thereof exchanged for cash
theretofore.
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Section 2.11. No Fractional Shares. No fractional shares of THCR Common
Stock will be issued in connection with the Merger. In lieu of any fractional
shares, each holder of Taj Holding Class A Common Stock who would otherwise
have been entitled to a fractional share of THCR Common Stock upon surrender
of Taj Holding Certificates for exchange will be paid cash (without interest)
in an amount equal to the Market Value of such fractional shares. As soon as
practicable after the determination of the amount of cash to be paid to former
holders of Taj Holding Class A Common Stock in lieu of any fractional shares,
the Exchange Agent will make available such amounts to such former holders.
Section 2.12. Dissenting Shares. (a) Notwithstanding any other provision of
this Merger Agreement to the contrary, shares of Taj Holding Class A Common
Stock that are outstanding immediately prior to the Effective Time and which
are held by holders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in writing
appraisal for such shares in accordance with Section 262 of the DGCL and who
shall not have withdrawn such demand or otherwise have forfeited appraisal
rights (collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive the Merger Consideration. Such holders shall be
entitled to receive payment of the appraised value of such shares, except that
all Dissenting Shares held by holders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for the right
to receive, without any interest thereon, the Stock Consideration, upon
surrender of the Taj Holding Certificates evidencing such shares.
(b) Taj Holding shall give THCR (i) prompt notice of any demands for
appraisal received by Taj Holding, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by Taj Holding and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. Taj Holding shall not, except with the
prior written consent of THCR, make any payment with respect to any demands
for appraisal, or offer to settle, or settle, any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TAJ HOLDING
Taj Holding represents and warrants to THCR and Merger Sub that:
Section 3.01. Corporate Organization. Taj Holding 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. Taj
Holding 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 Taj Holding Material Adverse
Effect.
Section 3.02. Capitalization. The authorized capital stock of Taj Holding
consists of (i) 1,000,000 shares of Preferred Stock, par value $1.00 per
share, (ii) 10,000,000 shares of Taj Holding Class A Common Stock, (iii)
860,000 shares of Taj Holding Class B Common Stock and (iv) 10,000,000 shares
of Taj Holding Class C Common Stock. 1,350,000, 780,242 and 1,350,000 shares
of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj
Holding Class C Common Stock, respectively, are issued and outstanding. The
outstanding shares of Taj Holding Class A Common Stock, Taj Holding Class B
Common Stock and Taj Holding Class C Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights. The outstanding shares of Taj Holding Class A Common Stock, Taj
Holding Class B Common Stock and Taj Holding Class C Common Stock are the sole
outstanding capital stock of Taj Holding. There are no options, warrants or
other rights to purchase debt or equity securities of Taj Holding outstanding.
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Section 3.03. Subsidiaries. Each Subsidiary of Taj Holding (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 Taj Holding 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 Taj Holding Material Adverse Effect.
Section 3.04. Financial Statements; SEC Reports. Taj Holding has previously
furnished THCR and Merger Sub with true and complete copies of the Taj Holding
and Taj Associates (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as filed with the SEC, (ii) Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1995, June 30, 1995, and September 30, 1995,
as filed with the SEC, (iii) proxy statements related to all meetings of
stockholders (whether annual or special) since January 1, 1995 and prior to
the date hereof and (iv) all other reports or registration statements filed
with the SEC since January 1, 1995 (clauses (i) through (iv) being referred to
herein collectively as the "Taj Holding SEC Reports"). As of their respective
filing dates, the Taj Holding 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 Taj Holding 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 Taj Holding 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
Exchange Act, and are, in all material respects, in accordance with the books
of account and records of Taj Holding.
Section 3.05. Absence of Certain Changes or Events. Except as described in
the Taj Holding SEC Reports, during the period since September 30, 1995, (i)
the business of Taj Holding and its Subsidiaries has been conducted only in
the ordinary course, consistent with past practice, (ii) neither Taj Holding
nor any of its Subsidiaries 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 Taj Holding Material Adverse
Effect.
Section 3.06. Authorization and Validity of Agreements; Opinion of Financial
Advisor. (a) Taj Holding has the corporate power to enter into this Merger
Agreement and to carry out its obligations hereunder and, subject to the
approval of the holders of the Taj Holding Class B Common Stock and the Taj
Holding Class C Common Stock, each voting as a separate class, has the
corporate power to consummate the Merger and the other transactions
contemplated by this Merger Agreement to be performed by Taj Holding. The
execution and delivery of this Merger Agreement, the performance of Taj
Holding's obligations hereunder and the consummation of the Merger and the
other transactions contemplated by this Merger Agreement to be performed by
Taj Holding have been duly authorized by all necessary corporate action by the
Taj Holding Class B Directors and the Board of Directors of Taj Holding.
Rothschild Inc. ("Rothschild") has delivered to the Taj Holding Class B
Directors and to the Board of Directors of Taj Holding its opinion, dated
January 8, 1996 (the "Rothschild Fairness Opinion"), that the consideration to
be received by the holders of the Taj Holding Class A Common Stock in
connection with the Merger Transaction is fair, from a financial point of
view, to the holders of the Taj Holding Class A Common Stock. The Taj Holding
Class B Directors and the Board of Directors of Taj Holding have unanimously
approved the terms of the Merger and the other transactions contemplated by
this Merger Agreement to be performed by Taj Holding (subject to, in the case
of the Taj Funding Offering, the negotiation
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of the terms relating thereto) and this Merger Agreement. This Merger
Agreement has been duly executed and delivered by Taj Holding and constitutes
the valid and binding obligation of Taj Holding enforceable against Taj
Holding 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) The Class B Directors of TM/GP and the entire board of directors of
TM/GP have unanimously approved the terms of all the transactions relating to
the Merger to the extent they contemplate action by TM/GP or Taj Associates.
The Taj Holding Class B Directors have caused, pursuant to the certificate of
incorporation of Taj Holding, all the shares of TM/GP Class B Common Stock to
approve the terms of all the transactions relating to the Merger to the extent
they contemplate action by TM/GP or Taj Associates. The Taj Holding Class B
Directors and Taj Holding Class C Directors have caused, pursuant to the
certificate of incorporation of Taj Holding, Taj Holding to approve, as the
sole shareholder of TM/GP, the terms all the transactions relating to the
Merger to the extent they contemplate action by TM/GP or Taj Associates.
(c) Except for the approvals referred to in this Section, no other corporate
proceedings on the part of Taj Holding are necessary to authorize this Merger
Agreement and the transactions contemplated hereby to be performed by it
(subject to, in the case of the Taj Funding Offering, the negotiation of the
terms relating thereto); provided, however, that pursuant to Section 9.01
hereof, this Merger Agreement must also be approved and adopted by a majority
of the outstanding shares of the Taj Holding Class A Common Stock, voting as a
separate class.
(d) Trump, the beneficial owner of all the outstanding shares of Taj Holding
Class C Common Stock, has agreed to vote all of such shares in favor of the
Merger pursuant to a voting agreement (the "Trump Taj Voting Agreement"), a
copy of which has been delivered to each of the parties hereto.
Section 3.07. No Conflict or Violation. The execution, delivery and
performance by Taj Holding of this Merger Agreement, the consummation of the
Merger, the Bond Redemption and the Taj Funding Offering do not and will not
violate or conflict with any provision of the charter documents or by-laws of
Taj Holding or its 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 Taj Holding or its 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 Taj Holding or its
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 Taj Holding or its
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 Taj Holding Material Adverse Effect or as would
not prevent consummation of the transactions contemplated by this Merger
Agreement.
Section 3.08. Consents and Approvals. The execution, delivery and
performance of this Merger Agreement by Taj Holding 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, 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 Taj Holding Material Adverse Effect, (iii) would
not prevent consummation of the transactions contemplated by this Merger
Agreement or (iv) is otherwise contemplated in this Merger Agreement.
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Section 3.09. Litigation. Except as disclosed in the Taj Holding SEC
Reports, there are no actions, suits, investigations or proceedings
(adjudicatory, rulemaking or otherwise) pending or, to the knowledge of Taj
Holding, threatened against Taj Holding or any of its Subsidiaries, or any
property of Taj Holding or any such Subsidiary 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 Taj Holding Material Adverse Effect.
Section 3.10. Taxes. Taj Holding and its 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
appropriate reserves for which have been made in the financial statements of
Taj Holding and its Subsidiaries (and, to the extent material, such reserves
have been accurately described to THCR). There are no assessments or
adjustments that have been asserted in writing against Taj Holding or its
Subsidiaries for any period for which Taj Holding has not made appropriate
reserves in its financial statements.
Section 3.11. Contracts and Leases. The Taj Holding 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 Exchange Act. Each of such
contracts, leases, agreements and understandings is in full force and effect
and (i) none of Taj Holding or its Subsidiaries or, to Taj Holding's best
knowledge, 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 Taj Holding's best knowledge, been asserted or
threatened and (iv) none of Taj Holding or its Subsidiaries or, to Taj
Holding's best knowledge, 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
Taj Holding Material Adverse Effect.
Section 3.12. Joint Proxy Statement. None of the information supplied or to
be supplied by Taj Holding for inclusion or incorporation by reference in the
THCR Registration Statement, the Joint Proxy Statement or the Schedule 13E-3
to be filed by Taj Holding and others in connection with the Merger
Transaction, will at the time it becomes effective (in the case of the THCR
Registration Statement) or it is mailed (in the case of the Joint Proxy
Statement) 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 Effective Time any event
with respect to Taj Holding, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, such registration statement or proxy statement, Taj
Holding shall notify THCR thereof.
Section 3.13. Takeover Provisions Inapplicable. As of the date hereof and at
all times on or prior to the Effective Time, Section 203 of the DGCL, is, and
shall be, inapplicable to the Merger and the other transactions contemplated
by the Merger Transaction.
Section 3.14. Brokerage/Finder's Fees. Except for Rothschild, no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made
by or on behalf of Taj Holding or its Subsidiaries, and the fees and
commissions payable to Rothschild, as contemplated by this Section, will be
paid in full by Taj Holding. Taj Holding hereby indemnifies THCR and Merger
Sub for any fees owing as a result of a breach of this Section.
Section 3.15. Bond Redemption; Taj Funding Offering. Taj Holding, Taj
Associates and Taj Funding have the right under the Bond Indenture to effect
the Bond Redemption. The Boards of Directors of Taj Holding and Taj Funding
have authorized, subject to the consummation of the Merger and the other
elements of the Merger Transaction, (a) the Bond Redemption and (b) the filing
of a registration statement on Form S-1 with the SEC relating to the Taj
Funding Offering (the "Debt S-1") and, subject to the negotiation of the terms
relating thereto, the Taj Funding Offering.
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Section 3.16. THCR Offering. None of the information supplied by Taj Holding
with respect to Taj Holding and its Subsidiaries for inclusion in the
registration statement on Form S-1 to be filed by THCR with the SEC relating
to the THCR Offering (the "Equity S-1") will, at the time the Equity S-1
becomes effective under the Securities Act, 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 any time prior to
the Effective Time any event with respect to Taj Holding, its officers and
directors or any of its Subsidiaries should occur which is required to be
described in an amendment to or supplement to such registration statement, Taj
Holding shall immediately notify THCR thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THCR
THCR represents and warrants to Taj Holding that:
Section 4.01. Corporate Organization. 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.
Section 4.02. Capitalization. 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.
10,066,667 and 1,000 shares of the THCR Common Stock and the THCR Class B
Common Stock, respectively, are issued and outstanding. All outstanding shares
of THCR Class B Common Stock are 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 the THCR Common Stock and the THCR Class B
Common Stock are the sole outstanding capital stock of THCR. THCR is the sole
general partner of THCR Holdings, and, as of December 31, 1995, THCR held a
60% general partnership interest in THCR Holdings. As of December 31, 1995,
Trump's 40% limited partnership interest in THCR Holdings was convertible, at
Trump's option, into 6,666,667 shares of THCR Common Stock (subject to certain
adjustments set forth in the Exchange Agreement). The shares of THCR Common
Stock to be issued to holders of Taj Holding Class A Common Stock in
connection with the Merger have been duly authorized and, when issued and
delivered to such holders as provided in this Merger Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such shares
of THCR Common Stock will not be subject to any preemptive or similar rights.
Section 4.03. Subsidiaries. Each Subsidiary of THCR (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. Financial Statements; SEC Reports. THCR has previously
furnished Taj Holding with true and complete copies of the THCR (i)
Registration Statement on Form S-1 (File No. 33-90784), as filed with the SEC,
(ii) Quarterly Reports on Form 10-Q for the quarters ended June 30, 1995 and
September 30, 1995, as filed with the SEC, and (iii) all other reports or
registration statements filed with the SEC since June 7, 1995 (clauses (i)
through (iii) being referred to herein collectively as the "THCR SEC
Reports"). As of their
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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 Exchange Act, and are,
in all material respects, in accordance with the books of account and records
of THCR.
Section 4.05. Absence of Certain Changes or Events. Except as described in
the THCR SEC Reports, during the period since September 30, 1995, (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 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 and Validity of Agreements; Opinion of Financial
Advisor. (a) THCR has the corporate power to enter into this Merger Agreement
and to carry out its 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, has the power to
consummate the Merger and the other transactions contemplated by this Merger
Agreement to be performed by THCR. The execution and delivery of this Merger
Agreement, the performance of THCR's obligations hereunder and the
consummation of the Merger have been duly authorized by all necessary
corporate action by the THCR Special Committee and the Board of Directors of
THCR. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has
delivered to the THCR Special Committee its opinion, dated January 8, 1996
(the "DLJ Fairness Opinion"), that the aggregate consideration to be paid by
THCR pursuant to the transactions contemplated by this Merger Agreement, is
fair, from a financial point of view, to THCR. The THCR Special Committee and
the Board of Directors of THCR have unanimously approved the terms of the
Merger Transaction and this Merger Agreement. This Merger Agreement has been
duly executed and delivered by THCR and constitutes the valid and binding
obligation of THCR enforceable against THCR 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 Merger Transaction by the holders of THCR
Common Stock and THCR Class B Common Stock as described in this Section and in
Section 9.01 hereof (which approval shall constitute adoption of this Merger
Agreement) and the required amendment to the Partnership Agreement, no other
corporate proceedings on the part of THCR are necessary to authorize the
Merger Transaction.
(c) Trump, the beneficial owner of all the outstanding shares of THCR Class
B Common Stock, has agreed to vote all of such shares and any shares of THCR
Common Stock that he beneficially owns in favor of the Merger Transaction
pursuant to a voting agreement (the "Trump THCR Voting Agreement"), a copy of
which has been delivered to each of the parties hereto.
Section 4.07. No Conflict or Violation. The execution, delivery and
performance by THCR of this Merger Agreement, the consummation of the Merger
and the other elements of the Merger Transaction, including, without
limitation, the THCR Offering, do not, and will not violate or conflict with
any provision of the charter documents or by-laws of THCR or its 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
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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 THCR or
its 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 THCR or its 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 THCR or its 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 this Merger Agreement.
Section 4.08. Consents and Approvals. The execution, delivery and
performance of this Merger Agreement by THCR and Merger Sub 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, 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 this Merger Agreement
or the payment of the Merger Consideration following consummation of the
Merger or (iv) is otherwise contemplated in this Merger 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 THCR, threatened against THCR or
any of its Subsidiaries, or any property of THCR or any such Subsidiary 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 THCR Material Adverse
Effect.
Section 4.10. Taxes. THCR and its 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 appropriate
reserves for which have been made in the financial statements of THCR and its
Subsidiaries (and, to the extent material, such reserves have been accurately
described to Taj Holding). There are no assessments or adjustments that have
been asserted in writing against THCR or its Subsidiaries for any period for
which THCR has not made appropriate reserves in its 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 Exchange Act. Each of such contracts, leases,
agreements and understandings is in full force and effect and (i) none of THCR
or its Subsidiaries or, to THCR's best knowledge, 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 THCR's best
knowledge, been asserted or threatened and (iv) none of THCR or its
Subsidiaries or, to THCR's best knowledge, 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. THCR Registration Statement. None of the information supplied
or to be supplied by THCR with respect to THCR and its Subsidiaries for
inclusion or incorporation by reference in the THCR Registration Statement and
the Joint Proxy Statement will at the time it becomes effective (in the case
of the THCR Registration Statement) or it is mailed (in the case of the Joint
Proxy Statement) contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
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to make the statements therein, in light of the circumstances under which they
are made, not misleading. If at any time prior to the Effective Time any event
with respect to THCR, its officers and directors or any of its Subsidiaries
should occur which is required to be described in an amendment of, or a
supplement to, such registration statement or proxy statement, THCR shall
notify Taj Holding thereof.
Section 4.13. Takeover Provisions Inapplicable. As of the date hereof and at
all times on or prior to the Effective Time, Section 203 of the DGCL, is, and
shall be, inapplicable to the Merger and the other transactions contemplated
by the Merger Transaction.
Section 4.14. Brokerage/Finder's Fees. Except for DLJ, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of THCR or its Subsidiaries, and the fees and commissions payable to
DLJ, as contemplated by this Section, will be paid in full by THCR. THCR
indemnifies Taj Holding for any fees owing as a result of a breach of this
Section.
Section 4.15. Taj Funding Offering. None of the information supplied by THCR
with respect to THCR and its Subsidiaries for inclusion in the Debt S-1 will,
at the time the Debt S-1 becomes effective under the Securities Act, 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 any time prior to the Effective Time any event with respect to
THCR, its officers and directors or any of its Subsidiaries should occur which
is required to be described in an amendment to, or supplement to, such
registration statement, THCR shall immediately notify Taj Holding thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub represents and warrants to Taj Holding that:
Section 5.01. Corporate Organization; Subsidiaries. Merger Sub 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. Merger Sub 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 Merger Sub Material
Adverse Effect. Merger Sub has no Subsidiaries.
Section 5.02. Capitalization. The authorized capital stock of Merger Sub
consists of 1,000 shares of Merger Sub Common Stock, 100 of which are issued
and outstanding. THCR is the owner of all the outstanding shares of the Merger
Sub Common Stock. The outstanding shares of Merger Sub Common Stock have been
duly authorized and validly issued and are fully paid, nonassessable and free
of preemptive rights. The Merger Sub Common Stock is the sole outstanding
capital stock of Merger Sub.
Section 5.03. Authorization and Validity of Agreements. Merger Sub has the
corporate power to enter into this Merger Agreement and to carry out its
obligations hereunder and has the power to consummate the Merger. The
execution and delivery of this Merger Agreement, the performance of Merger
Sub's obligations hereunder and the consummation of the Merger have been duly
authorized by all necessary corporate action by the Board of Directors of
Merger Sub and by THCR as the sole holder of Merger Sub Common Stock. This
Merger Agreement has been duly executed and delivered by Merger Sub and
constitutes the valid and binding obligation of Merger Sub enforceable against
Merger Sub 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. No other corporate proceedings on the
part of Merger Sub are necessary to authorize this Merger Agreement and the
transactions contemplated hereby.
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ARTICLE VI
COVENANTS OF TAJ HOLDING
Section 6.01. Conduct Pending the Merger. From and after the date of this
Merger Agreement and until the Effective Time, Taj Holding shall, and shall
cause each of its Subsidiaries to, conduct its business solely in the ordinary
course consistent with past practice and, without the prior written consent of
THCR, Taj Holding shall not, and shall cause each of its Subsidiaries not to,
except as required or permitted pursuant to the terms hereof or as
contemplated in the Taj Holding SEC Reports filed through the date hereof or
by the terms of the Merger Transaction:
(i) make any material change in the conduct of its businesses and
operations or enter into any transaction, other than in the ordinary course
of business consistent with past practice, or make any investment other
than a Permitted Investment (as such term is defined in the Bond
Indenture);
(ii) make any change in its certificate of incorporation or by-laws,
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 its
capital stock, alter in any material respect the terms of any of its
outstanding securities, or make any change in its outstanding shares of
capital stock or in its 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;
(iv) make any sale, assignment, transfer, abandonment or other conveyance
of any of its assets or any part thereof, except in the ordinary course of
business consistent with past practices;
(v) subject any of its 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 its capital stock or declare, set aside or pay
any dividends or other distribution in respect of such shares;
(vii) increase the compensation payable or to become payable to its
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 Merger Agreement not to remain true and
correct; or
(ix) commit itself to do any of the foregoing.
Section 6.02. Joint Proxy Statement. As promptly as reasonably practicable
after the execution of this Merger Agreement, Taj Holding and THCR shall
prepare and file with the SEC the preliminary Joint Proxy Statement, which
will be included within the THCR Registration Statement. As promptly as
reasonably practicable after comments are received from the SEC with respect
to the THCR Registration Statement and after the satisfactory response thereto
by Taj Holding and THCR, Taj Holding and THCR shall file with the SEC the
definitive Joint Proxy Statement and any amendment to the THCR Registration
Statement and shall use all reasonable efforts to cause the THCR Registration
Statement to become effective as soon thereafter as it is reasonably
practicable. Promptly thereafter, Taj Holding shall distribute the Joint Proxy
Statement and related proxy card and the Election Form to its stockholders.
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Section 6.03. Stockholders Meeting. Taj Holding 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
Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj
Holding Class C Common Stock (the "Taj Holding Meeting") as promptly as
practicable for the purpose of approving and adopting this Merger Agreement.
Subject to its fiduciary duties, as advised by Special Counsel, the Board of
Directors of Taj Holding will recommend that holders of Taj Holding Class A
Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common
Stock vote in favor of this Merger Agreement at the Taj Holding Meeting.
Section 6.04. Compliance with the Securities Act. At the Closing, Taj
Holding shall cause to be delivered to THCR a certificate (satisfactory to
counsel for THCR) of the general counsel of Taj Associates identifying all
holders of Taj Holding Class A Common Stock who were, to the best of his
knowledge and after being advised by outside counsel, affiliates (for purposes
of Rule 145 under the Securities Act) of Taj Holding at the time of the Taj
Holding Meeting.
Section 6.05. No Solicitation. (a) Subject to the fiduciary duties of the
Board of Directors of Taj Holding, as advised by Special Counsel, neither Taj
Holding nor any of its Subsidiaries shall, directly or indirectly, take (nor
shall Taj Holding authorize or permit its Subsidiaries, 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 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. Taj Holding
will promptly communicate to the other parties hereto any solicitation by or
of Taj Holding 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.
(b) Notwithstanding paragraph (a) above, Taj Holding may, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, to any Person pursuant to appropriate
confidentiality agreements, and may participate in discussions and negotiate
with such Person concerning any Acquisition Proposal involving Taj Holding or
any direct or indirect Subsidiary of Taj Holding, if the Taj Holding Class B
Directors by a majority vote determine in their good faith judgment that such
action is appropriate in furtherance of the best interests of stockholders.
Section 6.06. Dividend Prohibition. From the date of this Merger Agreement
through the Effective Time, Taj Holding shall not, and shall cause its
Subsidiaries not to, pay or declare any dividend or make any distribution with
respect to any of their equity interests except as contemplated in connection
with the Merger Transaction.
Section 6.07. Letters of Accountants. Taj Holding shall use its reasonable
best efforts to cause to be delivered to THCR "comfort letters" of Arthur
Andersen LLP, Taj Holding's independent public accountants, dated and
delivered the date on which the THCR Registration Statement shall become
effective and as of the Effective Time, and addressed to THCR, in form and
substance reasonably satisfactory to THCR and reasonably customary in scope
and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Merger
Agreement.
ARTICLE VII
COVENANTS OF THCR
Section 7.01. Conduct Pending the Merger. From and after the date of this
Merger Agreement and until the Effective Time, THCR shall, and shall cause
each of its Subsidiaries to, conduct its business solely in the
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ordinary course consistent with past practice and, without the prior written
consent of Taj Holding, THCR shall not, and shall cause each of its
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 Merger Transaction:
(i) make any material change in the conduct of its 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
make any material change in its outstanding shares of capital stock or in
its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise;
(iii) take any other action that would cause any of the representations
and warranties made in this Merger Agreement not to remain true and
correct; or
(iv) commit itself to do any of the foregoing.
Section 7.02. Joint Proxy Statement. As promptly as reasonably practicable
after the execution of this Merger Agreement, THCR and Taj Holding shall
prepare and THCR shall file with the SEC the THCR Registration Statement,
which shall include the preliminary Joint Proxy Statement and the preliminary
prospectus with respect to the THCR Common Stock to be issued in connection
with the Merger. As promptly as reasonably practicable after comments are
received from the SEC with respect to the THCR Registration Statement and
after the satisfactory response thereto by THCR and Taj Holding, THCR and Taj
Holding shall file with the SEC the definitive Joint Proxy Statement and THCR
shall file with the SEC any amendment to the THCR Registration Statement and
shall use all reasonable efforts to cause the THCR Registration Statement to
become effective as soon thereafter as it is reasonably practicable. Promptly
thereafter, THCR shall distribute the Joint Proxy Statement and related proxy
card to its stockholders.
Section 7.03. Stockholders Meeting. (a) 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 Merger Transaction.
Subject to its fiduciary duties, as advised by outside counsel, the Board of
Directors of THCR will recommend that holders of THCR Common Stock vote in
favor of and adopt the Merger Transaction (which approval will constitute
adoption of this Merger Agreement) at the THCR Meeting.
(b) THCR, as the sole stockholder of Merger Sub, has consented to the
adoption of this Merger Agreement by Merger Sub and agrees that such consent
shall be deemed for all purposes as a vote duly adopted at a meeting of the
stockholders of Merger Sub held for such purpose.
Section 7.04. Indemnification and Insurance. (a) For a period of six years
from the Effective Time, each of the Surviving Corporation and TM/GP shall,
and THCR shall cause the Surviving Corporation and TM/GP to, provide to the
former officers and directors of Taj Holding (the "Taj Holding Indemnified
Parties") indemnification as set forth in the certificate of incorporation and
by-laws of THCR as in effect as of the date hereof. THCR agrees, and shall
cause the Surviving Corporation and TM/GP to agree, that until six years from
the Effective Time, unless otherwise required by law, the certificate of
incorporation and by-laws of the Surviving Corporation and TM/GP shall not be
amended, repealed or modified to reduce or limit the rights of indemnity
afforded to the present and former directors, officers and employees of Taj
Holding and TM/GP (including, without limitation, with respect to the
transactions contemplated by this Merger Agreement), or the ability of the
Surviving Corporation or TM/GP to indemnify them, nor to hinder, delay or make
more difficult the exercise of such rights of indemnity or the ability to
indemnify.
(b) Should any claim or claims be made against any present or former
director, officer, employee or agent of Taj Holding or TM/GP, arising from his
services as such, within six years of the Effective Time, the provisions of
this Section with respect to indemnification and the certificate of
incorporation and the by-laws of the Surviving Corporation and TM/GP shall
continue in effect until the final disposition of all such claims.
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(c) In the event the Surviving Corporation or TM/GP or any of their
respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then and in each such case,
proper provision shall be made so that the successors and assigns of the
Surviving Corporation or TM/GP, as the case may be, shall assume all of its
obligations set forth in this Section.
(d) For a period of six years after the Effective Time, the Surviving
Corporation and TM/GP shall, and THCR shall cause the Surviving Corporation
and TM/GP to, purchase and maintain in effect directors' and officers'
liability insurance policies covering the Taj Holding Indemnified Parties on
terms no less favorable than the terms of the current insurance policies
coverage. Notwithstanding the foregoing, if the directors' and officers'
liability insurance referred to in this paragraph is unavailable for the
Current D&O Premium, the Surviving Corporation and TM/GP shall obtain as much
insurance as can be obtained for a premium not in excess (on an annualized
basis) of the Current D&O Premium.
(e) In the event any claim is made against present or former directors,
officers or employees of Taj Holding or TM/GP that is covered or potentially
covered by insurance, THCR agrees that it shall, and shall cause the Surviving
Corporation and TM/GP to, do nothing that would forfeit, jeopardize, restrict
or limit the insurance coverage available for that claim until the final
disposition of that claim unless otherwise required by law or their respective
certificate of incorporation or by-laws.
(f) This Section 7.04 is intended to be for the benefit of, and shall be
enforceable by, the Taj Holding Indemnified Parties, their heirs and personal
representatives and shall be binding on THCR, the Surviving Corporation and
TM/GP and their respective successors and assigns.
Section 7.05. Letters of Accountants. THCR shall use its reasonable best
efforts to cause to be delivered to Taj Holding "comfort letters" of Arthur
Andersen LLP, THCR's independent public accountants, dated and delivered the
date on which the THCR Registration Statement shall become effective and as of
the Effective Time, and addressed to Taj Holding, in form and substance
reasonably satisfactory to Taj Holding and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Merger
Agreement.
ARTICLE VIII
OTHER AGREEMENTS
Section 8.01. Stock Exchange Listing. THCR shall, prior to the Effective
Time, use its best efforts to list on the NYSE, subject to official notice of
issuance, the THCR Common Stock to be issued pursuant to the Merger.
Section 8.02. Additional Agreements; Consents and Permits. Subject to the
terms and conditions herein provided, each of the parties hereto agrees 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 this Merger Agreement, 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 Merger Agreement
(and, in such case, to proceed with the transactions contemplated by this
Merger Agreement as expeditiously as possible), subject, however, to the
appropriate vote of the respective stockholders or stockholder, as the case
may be, of Taj Holding, THCR and Merger Sub.
Section 8.03. Registration of Securities. Each of the parties hereto shall
use its reasonable efforts to prepare promptly and file with the SEC, shall
furnish such information required to be included in, and shall
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cooperate in the preparation of, such registration statements under the
Securities Act and Schedules 13E under the Exchange Act, and to cause such
registration statements to be declared effective, as applicable, as shall be
required to finance the Merger Transaction and to register the shares of THCR
Common Stock issuable pursuant to the terms of this Merger Agreement. Each of
the parties hereto shall use its reasonable efforts to cause such registration
statements and schedules to comply as to form in all material respects with
the provisions of the Securities Act and the Exchange Act, respectively.
Section 8.04. Access to Information; Confidentiality. (a) Each of the
parties hereto shall afford to the other parties hereto 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 Effective Time 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 Merger 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 Merger 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 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 8.05. Notification of Certain Matters. Taj Holding, THCR and Merger
Sub 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 Merger Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Merger Agreement;
(iii) any action, suit, claim, investigation or proceeding commenced or,
to its knowledge, threatened against, relating to or involving or otherwise
affecting Taj Holding, THCR or any of their Subsidiaries, which is
reasonably likely to (A) have a Taj Holding Material Adverse Effect, THCR
Material Adverse Effect or Merger Sub Material Adverse Effect, as the case
may be, or (B) prevent the consummation of the transactions contemplated by
this Merger Agreement or cause any of such transactions to be rescinded
following consummation;
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(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 Merger Agreement to
be untrue or inaccurate in any material respect at any time from the date
hereof to the Effective Time; 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 8.06. HSR Act. The Parties shall use their best efforts to file or
cause to be filed as soon as practicable notifications under the HSR Act in
connection with the Merger, 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 8.07. Bond Redemption. Taj Holding shall take all necessary actions
to cause the Bond Redemption to occur immediately after the Effective Time.
ARTICLE IX
CONDITIONS TO THE MERGER
Section 9.01. Conditions to the Obligations of Each Party. The respective
obligations of Taj Holding, THCR and Merger Sub to consummate the transactions
contemplated by this Merger Agreement are subject to the fulfillment at or
prior to the Effective Time 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) this Merger Agreement shall have been duly approved and adopted by
the affirmative vote of a majority of the outstanding shares of the Taj
Holding Class B Common Stock and Taj Holding Class C Common Stock, each
voting as a separate class, in accordance with the DGCL and the certificate
of incorporation of Taj Holding;
(ii) this Merger Agreement shall have been duly approved and adopted by
the affirmative vote of a majority of the outstanding shares of Taj Holding
Class A Common Stock, voting as a separate class;
(iii) the Merger Transaction 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;
(iv) the Merger Transaction shall have been duly approved by the
affirmative vote of a majority of the outstanding shares of THCR Common
Stock (excluding officers and directors of THCR and their affiliates),
voting as a separate class;
(v) all filings required to be made prior to the Effective Time with, and
all consents, approvals, permits and authorizations required to be obtained
prior to the Effective Time from, governmental and regulatory authorities
(including, without limitation, Gaming Authorities) in connection with the
execution and delivery of this Merger Agreement and the consummation of the
transactions contemplated hereby by Taj Holding, THCR and Merger Sub 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 Taj Holding
Material Adverse Effect or a THCR Material Adverse Effect (assuming the
merger has taken place);
(vi) 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)
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or taken any action that prohibits the consummation of the transactions
contemplated by this Merger Agreement; provided, however, that the parties
invoking this condition shall use their best efforts to have any such
judgment, decree, injunction or order vacated;
(vii) the shares of THCR Common Stock to be issued pursuant to the Merger
shall have been approved for listing on the NYSE, subject to official
notice of issuance; and
(viii) the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
Section 9.02. Conditions to the Obligation of Taj Holding. The obligation of
Taj Holding to consummate the transactions contemplated by this Merger
Agreement is subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in whole
or in part by Taj Holding to the extent permitted by applicable law:
(i) the Taj Funding Offering shall have been consummated on terms
reasonably acceptable to Taj Holding;
(ii) the consent of certain of Taj Associates' creditors necessary to
consummate the Merger Transaction shall have been obtained;
(iii) Taj Holding LLC or any other Person to which part or all of the
assets of Taj Holding or any of its Subsidiaries has been or will be
transferred shall have assumed (without releasing the Surviving Corporation
or TM/GP) the indemnification and other obligations of the Surviving
Corporation and TM/GP set forth in Section 7.04 hereof;
(iv) each of THCR and Merger Sub shall have performed in all material
respects all of its respective obligations hereunder required to be
performed by them at or prior to the Effective Time;
(v) each of the representations and warranties of each of THCR and Merger
Sub contained in this Merger Agreement and in any certificate or other
writing delivered by THCR and Merger Sub pursuant hereto shall be true in
all material respects at and as of the Effective Time, as if made at and as
of such time (except to the extent it relates to a particular date); and
(vi) Taj Holding shall have received a certificate from THCR and Merger
Sub, signed by an executive officer of THCR and Merger Sub, respectively,
to the effect set forth in clauses (iv) and (v) of this Section.
Section 9.03. Conditions to the Obligations of THCR and Merger Sub. The
obligation of each of THCR and Merger Sub to consummate the transactions
contemplated by this Merger Agreement is subject to the fulfillment at or
prior to the Effective Time of each of the following conditions, any or all of
which may be waived in whole or in part by THCR to the extent permitted by
applicable law:
(i) the Market Value of the THCR Common Stock shall be $20 or more;
(ii) the THCR Offering and the Taj Funding Offering shall have been
consummated on terms acceptable to THCR;
(iii) the purchase of the Specified Parcels shall have been consummated
on terms acceptable to THCR, the obligations relating to the outstanding
indebtedness of Realty Corp. to First Fidelity shall have been satisfied
and the releases of the Liens and guarantees relating to such indebtedness
shall have been obtained;
(iv) the payment to Bankers Trust of $10 million, contemplated as part of
the Merger Transaction, shall have been made and the releases of the Liens
and guarantees that Bankers Trust has with respect to Taj Associates
(including Trump's direct and indirect ownership interest therein) and with
respect to the TTMI Note shall have been obtained;
(v) Trump shall have contributed, or caused to be contributed, to THCR
Holdings and Taj Holdings LLC all of his direct and indirect ownership
interests in Taj Associates on terms acceptable to THCR;
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(vi) the number of shares of Taj Holding Class A Common Stock for which
written demand for appraisal has been properly made pursuant Section 262 of
the DGCL shall have not exceeded 5% of the total number of shares of Taj
Holding Class A Common Stock outstanding immediately prior to the Effective
Time;
(vii) the THCR Registration Statement shall have been declared effective
and no stop order suspending effectiveness shall have been issued, no
action, suit, proceeding or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals under blue sky or other state securities laws, the
Securities Act or the Exchange Act relating to the issuance or trading of
the THCR Common Stock shall have been received;
(viii) the consent of certain of Trump's creditors necessary to
consummate the Merger Transaction shall have been obtained;
(ix) Taj Holding shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(x) each of the representations and warranties of Taj Holding contained
in this Merger Agreement and in any certificate or other writing delivered
by Taj Holding pursuant hereto shall be true in all material respects at
and as of the Effective Time, as if made at and as of such time (except to
the extent it relates to a particular date); and
(xi) THCR and Merger Sub shall have received a certificate signed by an
executive officer of Taj Holding to the effect set forth in clauses (ix)
and (x) of this Section.
ARTICLE X
TERMINATION
Section 10.01. Termination. This Merger Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time (whether
before or after approval of this Merger Agreement by the respective
stockholders of Taj Holding or THCR):
(i) by joint written consent of Taj Holding and THCR;
(ii) by Taj Holding if any of the conditions specified in Sections 9.01
or 9.02 have not been satisfied or waived by Taj Holding at such time as
such condition is no longer capable of satisfaction;
(iii) by THCR and Merger Sub if any of the conditions specified in
Sections 9.01 or 9.03 have not been satisfied or waived by THCR and Merger
Sub at such time as such condition is no longer capable of satisfaction;
(iv) by Taj Holding, acting through the Taj Holding Class B Directors, if
the Taj Holding Class B Directors shall have withdrawn or modified their
approval or recommendation of this Merger Agreement or the Merger in order
to permit Taj Holding to execute an agreement to effect an Acquisition
Proposal determined by the Taj Holding Class B Directors to be more
favorable to the Taj Holding stockholders than the transactions
contemplated hereby; or
(v) by either party if the Merger has not been consummated on or before
June 30, 1996; provided, however, that a party may not terminate this
Merger Agreement pursuant to this clause if the failure of such party to
fulfill any of its obligations under this Merger Agreement shall have been
the reason that the Merger shall not have been consummated on or before
said date.
Section 10.02. Effect of Termination. In the event of termination of this
Merger Agreement pursuant this Article, this Merger Agreement shall forthwith
terminate and (except for the willful breach of this Merger Agreement by any
party hereto) there shall be no liability on the part of any party hereto;
provided, however, that Sections 3.14, 4.14, 8.04(b), (c) and (d), 10.02,
11.05, 11.06, 11.07, 11.09, 11.11 and 11.13 shall survive the termination of
this Merger Agreement.
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<PAGE>
ARTICLE XI
MISCELLANEOUS
Section 11.01. 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 Taj Holding to:
Taj Mahal Holding Corp.
1000 The Boardwalk
Atlantic City, New Jersey 08401
Facsimile: (609) 449-5593
Attention: Nicholas F. Moles, Esq.
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 THCR or Merger Sub 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 hereto. 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 11.02. Survival. None of the representations, warranties, agreements
or covenants contained herein shall survive the Effective Time, except for the
agreements contained in Articles I and II, Sections 3.14, 4.14, 7.04, 8.02,
8.04(b), (c) and (d), 11.02, 11.05, 11.06, 11.07, 11.09, 11.11, 11.13 and the
last sentence of Section 11.03.
Section 11.03. Amendment. Any provision of this Merger Agreement may be
amended by the parties hereto by action of each of their respective Boards of
Directors, at any time prior to the Effective Time; provided, however, that
any such amendment made after the adoption of this Merger Agreement by the
stockholders of Taj Holding or THCR shall not, without further approval of
such stockholders (i) alter or change the amount, kind or manner of payment of
the Merger Consideration, (ii) alter or change any term of the certificate of
incorporation of the Surviving Corporation (except as otherwise provided in
this Merger Agreement) or (iii) change any other terms or conditions of this
Merger Agreement, if any of such changes, alone or in the aggregate, would
materially and adversely affect the stockholders of Taj Holding or THCR. Any
amendment to this Merger Agreement shall be in writing signed by all the
parties hereto.
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<PAGE>
Section 11.04. Waiver. At any time prior to the Effective Time, Taj Holding,
THCR and Merger Sub may, unless otherwise set forth in this Merger Agreement,
(i) extend the time for the performance of any agreement of the other party or
parties hereto, (ii) waive any accuracy 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
hereto 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 11.05. Successors and Assigns. The provisions of this Merger
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided, however, that no party
may assign or otherwise transfer any of its rights under this Merger Agreement
without the consent of each of the other parties hereto.
Section 11.06. Governing Law. Except to the extent set forth in Section
11.07 or in the DGCL, this Merger 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 11.07. Gaming Laws. Each of the provisions of this Merger Agreement
is subject to and shall be enforced in compliance with the Gaming Laws.
Section 11.08. Integration. This Merger Agreement embodies the entire
agreement and understanding among the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Section 11.09. Third Party Beneficiaries. This Merger Agreement (including
the documents and instruments referred to herein) is not intended to confer
upon any other Person any rights or remedies hereunder; provided, however, the
Taj Holding Indemnified Parties shall be third party beneficiaries of Section
7.04 hereof.
Section 11.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Merger 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 Merger
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 11.11. Remedies Cumulative. All rights, powers and remedies provided
under this Merger 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 11.12. Publicity. So long as this Merger 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 Merger,
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 Merger Agreement or any
proceedings in connection therewith shall not be deemed a violation of this
Section.
Section 11.13. Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Merger Agreement and
the transactions contemplated hereby shall be paid equally by Taj Holding and
THCR; provided, however, that all costs and expenses incurred in connection
with (i) printing, filing and distributing the Equity S-1 and (ii) any filings
pursuant to Section 8.06 hereof, shall be borne solely by THCR.
A-27
<PAGE>
Section 11.14. Headings; Counterparts; Effectiveness. The headings contained
in this Merger Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Merger Agreement. This Merger
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 Merger Agreement shall become effective when
each party hereto shall have received counterparts hereof signed by the other
parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
TAJ MAHAL HOLDING CORP.
/s/ R. Bruce McKee
_____________________________________
By: R. Bruce McKee
Title: Assistant Treasurer and
Acting Chief Operating Officer
of Trump Taj Mahal Associates
TRUMP HOTELS & CASINO RESORTS, INC.
/s/ Nicholas L. Ribis
_____________________________________
By: Nicholas L. Ribis
Title: President and Chief Executive
Officer
THCR MERGER CORP.
/s/ Nicholas L. Ribis
_____________________________________
By: Nicholas L. Ribis
Title: President and Chief Executive
Officer
A-28
<PAGE>
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of January 31, 1996 (the
"Amendment"), by and among TRUMP HOTELS & CASINO RESORTS, INC., a Delaware
corporation ("THCR"), TAJ MAHAL HOLDING CORP., a Delaware corporation ("Taj
Holding"), and THCR MERGER CORP., a Delaware corporation and a wholly owned
subsidiary of THCR ("Merger Sub"). Capitalized terms not otherwise defined
herein shall have the same meanings as ascribed to them in the Agreement and
Plan of Merger, dated as of January 8, 1996, by and among the parties hereto.
WHEREAS, THCR, Taj Holding and Merger Sub wish to amend the Merger
Agreement;
WHEREAS, the THCR Special Committee and the Board of Directors of THCR have
approved the Merger Transaction, the Merger Agreement and this Amendment;
WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj
Holding have approved the Merger, the Merger Agreement and this Amendment; and
WHEREAS, the Board of Directors of Merger Sub has approved this Amendment
and THCR, as the sole stockholder of Merger Sub, has approved and adopted this
Amendment.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and in
the Merger Agreement, the parties hereto agree to amend the Merger Agreement,
in accordance with Section 11.03 thereof, as follows:
1. The first recital in the Merger Agreement immediately following the
preamble is hereby deleted in its entirety and amended to read as follows:
WHEREAS, Taj Holding and certain of its affiliates and THCR and certain
of its affiliates desire to effect the Merger Transaction, which includes
(a) the merger of Merger Sub with and into Taj Holding upon the terms and
subject to the conditions set forth herein (the "Merger"); (b) consummation
of the offering by THCR (the "THCR Offering") of up to $140 million (which
amount may be increased at THCR's discretion) of Common Stock of THCR, par
value $.01 per share ("THCR Common Stock"), and the offering by THCR
Atlantic City Holdings ("AC Holdings") and its wholly owned finance
subsidiary, THCR Atlantic City Funding, Inc. (the "Mortgage Note
Offering"), of up to $1.2 billion aggregate principal amount of mortgage
notes (the "Mortgage Notes"), the aggregate proceeds of which will be used,
together with available cash, to (i) pay cash, pursuant to this Merger
Agreement, to those holders of Class A Common Stock of Taj Holding, par
value $.01 per share (the "Taj Holding Class A Common Stock"), electing to
receive cash in the Merger, (ii) redeem (the "Bond Redemption") Trump Taj
Mahal Funding, Inc.'s outstanding 11.35% Mortgage Bonds, Series A due 1999
(the "Bonds"), (iii) redeem the outstanding shares of Class B Common Stock
of Taj Holding, par value $.01 per share (the "Taj Holding Class B Common
Stock"), as required in connection with the Bond Redemption, (iv) retire,
by purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due
2001 of Trump Plaza Funding, Inc. (the "Plaza Note Purchase," and, together
with the Mortgage Note Offering and the Bond Redemption, the "Debt
Refinancing"), (v) satisfy the indebtedness of Trump Taj Mahal Associates
("Taj Associates") under its loan agreement with National Westminster Bank
USA, (vi) purchase certain real property (collectively, the "Specified
Parcels") used in the operation of the Trump Taj Mahal Casino Resort (the
"Taj Mahal") that is currently leased from Trump Taj Mahal Realty Corp.
("Realty Corp."), a corporation wholly owned by Donald J. Trump ("Trump"),
(vii) purchase certain real property used in the operation of Trump Plaza
Casino Hotel and Casino that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust Company ("Bankers Trust") to
obtain releases of the Liens (defined below) that Bankers Trust has with
respect to certain equity interests of Taj Associates and related
guarantees and (ix) pay related fees and expenses; (c) the contribution by
Trump to AC Holdings (on behalf, and at the direction, of Trump Hotels &
Casino Resorts Holdings, L.P., a subsidiary of THCR ("THCR Holdings")), of
all of his direct and indirect ownership interests in Taj Associates; and
(d) the contribution by THCR to AC Holdings (on behalf, and at the
direction, of THCR Holdings) of all its indirect ownership interests in Taj
Associates acquired in the Merger;
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<PAGE>
2. The words "THCR Holdings and Taj Holdings LLC" in part (a) of the second
recital in the Merger Agreement are hereby deleted in their entirety and
replaced with the following term: "AC Holdings."
3. Section 1.01 of the Merger Agreement is hereby amended to add the
following defined terms to the terms contained therein:
"AC Holdings" shall have the meaning set forth in the Recitals.
"Consent Solicitation" shall mean the consents and waivers to be
solicited from the holders of the Senior Notes to modify, in connection
with the Merger Transaction, certain provisions of the indenture pursuant
to which the Senior Notes were issued.
"Debt Refinancing" shall have the meaning set forth in the Recitals.
"Mortgage Note Offering" shall have the meaning set forth in the
Recitals.
"Mortgage Notes" shall have the meaning set forth in the Recitals.
"Plaza Note Purchase" shall have the meaning set forth in the Recitals.
"Senior Notes" shall mean the $155 million aggregate principal amount of
15 1/2% Senior Notes of THCR Holdings and Trump Hotels & Casino Resorts
Funding, Inc.
"Taj Associates Guarantee" shall mean the guarantee of Taj Associates
with respect to the Mortgage Notes.
4. Section 1.01 of the Merger Agreement is hereby further amended (i) to
delete the definitions of "Taj Funding Offering" and "Taj Holdings LLC" in
their entirety and (ii) to amend the definitions of "Merger Agreement" and
"Merger Transaction" to read as follows:
"Merger Agreement" shall have the meaning set forth in the Preamble and
shall also include any amendments pursuant to Section 11.03 hereof.
"Merger Transaction" shall have the meaning set forth in the Recitals;
provided, however, that for purposes of Section 7.03(a) and Paragraphs
(iii) and (iv) of Section 9.01 hereof, the term shall not include the Debt
Refinancing.
5. The clause in the third sentence of Section 3.06(a) of the Merger
Agreement that reads "dated January 8, 1996 (the "Rothschild Fairness
Opinion")" is hereby deleted in its entirety and amended to read as follows:
"dated January 31, 1996 (the "Rothschild Fairness Opinion")."
6. The term "Taj Funding Offering" in Sections 3.06(a), 3.06(c) and 3.07 of
the Merger Agreement is hereby deleted in its entirety and replaced with the
following term: "Taj Associates Guarantee."
7. Section 3.15 of the Merger Agreement is hereby amended by (i) replacing
the term "Taj Funding Offering" in the heading with the term "Mortgage Note
Offering" and (ii) deleting clause (b) in its entirety and replacing it with
the following language:
(b) the filing of a registration statement on Form S-1 with the SEC jointly
with the issuers of the Mortgage Note Offering to the extent required in
order to register the Taj Associates Guarantee (the "Debt S-1").
8. Section 3.16 of the Merger Agreement is hereby amended by replacing (i)
the term "THCR Offering" in the heading with the words "Debt S-1 and Equity S-
1," (ii) the words "will, at the time the Equity S-1" in the first sentence
with the words "and the Debt S-1 will, at the time each registration
statement" and (iii) the word "statement" in the second sentence with the word
"statements."
9. The clause in the third sentence of Section 4.06(a) of the Merger
Agreement that reads "dated January 8, 1996 (the "DLJ Fairness Opinion")" is
hereby deleted in its entirety and amended to read as follows: "dated January
31, 1996 (the "DLJ Fairness Opinion")."
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<PAGE>
10. The heading in Section 4.15 of the Merger Agreement is hereby deleted in
its entirety and amended to read as follows: "Section 4.15. Mortgage Note
Offering."
11. Section 9.01 of the Merger Agreement is hereby amended by (a) deleting
the word "and" in Paragraph (vii), (b) replacing the period at the end of
Paragraph (viii) with a semicolon and the word "and" and (c) inserting a new
Paragraph at the end of the Section to read as follows:
(ix) Taj Holding and THCR shall have received one or more solvency
opinions with respect to the Mortgage Note Offering and related guarantees
from a nationally recognized appraisal firm, in form and substance
reasonably satisfactory to Taj Holding and THCR.
12. Paragraph (i) of Section 9.02 of the Merger Agreement is hereby deleted
in its entirety and amended to read as follows: "(i) [intentionally omitted]."
13. Paragraph (iii) of Section 9.02 of the Merger Agreement is hereby
deleted in its entirety and amended to read as follows:
(iii) assuming consummation of the Merger Transaction, AC Holdings shall
have assumed the indemnification and other obligations of the Surviving
Corporation and TM/GP set forth in Section 7.04 hereof with the
understanding that any subsequent action on the part of AC Holdings
pursuant to Section 7.04(c) hereof shall not release AC Holdings of such
indemnification and other obligations;
14. Paragraph (ii) of Section 9.03 of the Merger Agreement is hereby deleted
in its entirety and amended to read as follows:
(ii) the THCR Offering, the Mortgage Note Offering, the Plaza Note
Purchase and the Consent Solicitation shall have been consummated on terms
acceptable to THCR;
15. Paragraph (v) of Section 9.03 of the Merger Agreement is hereby deleted
in its entirety and amended to read as follows:
(v) Trump shall have contributed, or caused to be contributed, to AC
Holdings (on behalf, and at the direction, of THCR Holdings) all of his
direct and indirect ownership interests in Taj Associates on terms
acceptable to THCR;
Except as modified herein, the Merger Agreement shall remain unmodified and
in full force and effect. This Amendment 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed by their respective authorized officers as of the day and year first
above written.
TAJ MAHAL HOLDING CORP.
/s/ R. Bruce McKee
-------------------------------------
By: R. Bruce McKee
Title: Assistant Treasurer and
Acting Chief Operating Officer
of Trump Taj Mahal Associates
TRUMP HOTELS & CASINO RESORTS, INC.
/s/ Nicholas L. Ribis
-------------------------------------
By: Nicholas L. Ribis
Title: President and Chief Executive
Officer
THCR MERGER CORP.
/s/ Nicholas L. Ribis
-------------------------------------
By: Nicholas L. Ribis
Title: President and Chief Executive
Officer
A-31
<PAGE>
ANNEX B
[DLJ LETTERHEAD]
January 31, 1996
Special Committee of the Board of Directors of Trump Hotels & Casino Resorts
, Inc.
725 Fifth Avenue
New York, NY 10022
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Trump Hotels & Casino Resorts, Inc. (the "Company") of the aggregate
consideration to be paid by the Company pursuant to the transactions
contemplated by the Agreement and Plan of Merger dated as of January 8, 1996,
among the Company, THCR Merger Corp. and Taj Mahal Holding Corp. ("Taj
Holding") as amended on January 31, 1996 (the "Agreement"). Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.
We have assumed, with your consent, that both the consideration to be paid
and the consideration to be received by the Company pursuant to the
transactions contemplated by the Agreement is as set forth in this paragraph.
Not more than 4,550,000 (less the Reduced Amount (as defined below)) shares of
common stock, $0.01 par value per share (the "Common Stock") of the Company
(or equivalents of such shares) will be issued by the Company (excluding any
shares of Common Stock issued pursuant to the THCR Offering), warrants (the
"Warrants") to purchase not more than 600,000, 600,000 and 600,000 shares of
Common Stock at exercise prices not less than $30.00, $35.00 and $40.00 per
share, respectively, and which will have a maturity of three, four and five
years, respectively, will be issued by the Company, and not more than $60
million in cash plus the Cash Consideration will be expended (exclusive of any
transaction fees and expenses). For purposes of this letter, the Reduced
Amount shall be equal to a number of shares of Common Stock determined by
dividing (a) the Cash Consideration received by the holders of the Taj Holding
Class A Common Stock in the transactions contemplated by the Agreement by (b)
$20.00. Upon consummation of the transactions contemplated by the Agreement,
(i) the Company will receive additional general partnership interests in Trump
Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings") for contributing or
causing its subsidiaries to contribute its total direct and indirect
beneficial ownership of Taj Associates to subsidiaries of THCR Holdings in an
amount calculated pursuant to the Amended and Restated Agreement of Limited
Partnership of THCR Holdings, (ii) THCR Holdings will be the beneficial owner
of 100% of the outstanding equity of Taj Associates free and clear of any
liens and encumbrances, except for lien of the trustee on behalf of the Senior
Notes, (iii) immediately after giving effect to the transactions contemplated
by the Agreement, the Company will own the Specified Parcels free and clear of
any liens and encumbrances, except for the lien of the trustee on behalf of
the Mortgage Notes and the lease between Taj Associates and Trump Realty Corp.
relating to the Specified Parcels shall terminate and Taj Associates shall no
longer be obligated to make any payments to Trump Realty Corp. and/or First
Fidelity on account of such Specified Parcels and (iv) the Services Agreement
dated as of April 1, 1991 by and between Taj Associates and Donald J. Trump
will be terminated. We have assumed, with your consent, that Taj Holding,
TTMC, Taj Associates and Taj Funding will not have more than $800 million of
net indebtedness (i.e., aggregate face value of outstanding indebtedness
(including accrued cash interest and non-cash interest) less available cash
(excluding reasonable and customary amounts of cash or restricted cash))
collectively on their
B-1
<PAGE>
balance sheets immediately prior to the consummation of the transactions
contemplated by the Agreement. We have also assumed, with your consent, that
for the purposes of this opinion, the price of the Common Stock will be no
less than $20.00 per share (before deducting any underwriting discounts or
commissions).
In arriving at our opinion, we have reviewed the Agreement and the Proxy
Statement in draft form included in the draft Form S-4 registration statement
as proposed to be filed with the Securities and Exchange Commission, both
dated as of January 5, 1995. We also have reviewed financial and other
information that was publicly available or furnished to us by or on behalf of
the Company and Taj Associates including information provided during
discussions with their respective managements. Included in the information
provided to us during discussions with the respective managements were certain
financial projections of Taj Associates for the periods beginning the quarter
ending December 31, 1995 and ending the fiscal year ending December 31, 2000
prepared by the management of Taj Associates and certain financial projections
of the Company for the periods beginning the quarter ending December 31, 1995
and ending the fiscal year ending December 31, 1997 prepared by the management
of the Company. In addition, we have compared certain financial and securities
data of the Company and Taj Associates with various other companies whose
securities are traded in public markets, reviewed prices and premiums paid in
other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed the accuracy, and
completeness of all of the financial and other information that was available
to us from public sources, that was provided to us by or on behalf of the
Company and Taj Associates or their respective representatives, or that was
otherwise reviewed by us. In particular, we have relied upon the estimates of
the management of the Company of the operating synergies achievable as a
result of the Merger and upon our discussion of such synergies with the
management of Taj Associates. With respect to the financial projections
supplied to us, we have assumed, with your consent, that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company and Taj Associates as
to the future operating and financial performance of the Company and Taj
Associates. We have not assumed any responsibility for making any independent
evaluation or appraisal of the Specified Parcels or Taj Associates' assets or
liabilities or for making any independent verification of any of the
information reviewed by us. We have relied as to all legal matters on advice
of counsel to the Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
fairness of the allocation of the aggregate consideration to be paid by the
Company among the parties receiving such consideration. Additionally, we are
expressing no opinion herein as to the prices at which the Company's common
stock will actually trade at any time, including the Effective Time. Our
opinion does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed transaction. Finally, our opinion does
not address the underlying business decision of the Company to consummate the
transactions contemplated by the Agreement.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
DLJ has performed investment banking and other services for the Company, Taj
Holding and other Trump affiliated businesses in the past and has been
compensated for such services. During 1990-1992, DLJ served as a financial
advisor to Trump in connection with refinancings at the Trump Plaza and Trump
Taj Mahal casinos in Atlantic City. In June 1995, DLJ served as lead manager
in connection with a concurrent $140 million IPO and $155 million Senior
Secured Note offering for the Company. DLJ has been retained with respect to
other transactions related to entities controlled by Donald Trump. DLJ has
been retained to act as lead manager in connection with the issuance and sale
by the Company (including its subsidiaries) of
B-2
<PAGE>
any debt securities or any equity securities (including the THCR Offering)
related to or contemplated by the acquisition of Taj Associates. DLJ has also
been retained to act as the financial advisor to the Company in connection
with the acquisition of Taj Associates, including rendering this opinion. The
Company has paid or has agreed to pay, as applicable, DLJ fees in connection
with the performance of these services.
Please note that DLJ is a full service securities firm engaged in securities
trading and brokerage activities, as well as providing investment banking and
financial advisory services. In the ordinary course of our trading and
brokerage activities, DLJ or its affiliates may at any time hold long or short
positions, and may trade or otherwise effect transactions, for our own account
or the accounts of customers, in debt or equity securities of the Company, Taj
Associates or their affiliates. We recognize our responsibility for compliance
with federal laws in connection with any such activities.
Based upon, and subject to, the foregoing and such other factors as we deem
relevant, we are of the opinion that the aggregate consideration to be paid by
the Company pursuant to the transactions contemplated by the Agreement (as
described herein), is fair to the Company from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/s/ R. Scott Turicchi
BY: ______________________
Name: R. Scott Turicchi
Title: Managing Director
B-3
<PAGE>
ANNEX C
[ROTHSCHILD LETTERHEAD]
January 31, 1996
Board of Directors
Class B Directors
Taj Mahal Holding Corp.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Dear Sirs:
You have requested our opinion (the "Opinion") as to the fairness, from a
financial point of view, to the holders of Class A Common Stock ("Class A
Shareholders") of Taj Mahal Holding Corp. ("Taj Holding") of the consideration
to be received by the Class A Shareholders, pursuant to the Agreement and Plan
of Merger, dated as of January 8, 1996, as amended to date (the "Merger
Agreement"), among Trump Hotels & Casino Resorts, Inc. ("THCR"), Taj Holding
and THCR Merger Corp., a Delaware corporation and a wholly-owned subsidiary of
THCR, in connection with the Merger Transaction (as defined below). The Merger
Agreement, in addition to addressing other potential related transactions,
provides that each outstanding share of Taj Holding's Class A Common Stock
will be converted into a right to receive, at each Class A Shareholder's
election, either (a) $30.00 in cash or (b) shares of Common Stock of THCR
("THCR Common Stock") having a Market Value (as such term is defined in the
Merger Agreement) of $30.00. The merger ("Merger") and the other related
transactions contemplated to be consummated in connection with the Merger, as
more fully described in the Merger Agreement and the Registration Statement on
Form S-4 (Registration No. 333-153) as filed on January 11, 1996 and as
proposed to be amended by Amendment No. 1 thereto (draft dated January 26,
1996), are hereinafter referred to as the "Merger Transaction".
In formulating the Opinion, we considered: (i) the terms and conditions of
the Merger Transaction as set forth in the Merger Agreement; (ii) certain
publicly available information relating to Taj Holding and THCR; (iii)
financial and business information including financial projections, provided
by Taj Holding and THCR and their respective representatives both orally and
in writing; (iv) discussions with Taj Holding's and THCR's managements
regarding Taj Holding's and THCR's businesses, respectively; (v) analyses
utilizing several different methodologies relating to Taj Holding and THCR;
(vi) historical market prices and trading volumes of the THCR Common Stock and
certain other gaming companies; (vii) that the Merger Transaction is
contingent upon the consummation of other related transactions contemplated by
the Merger Agreement; (viii) publicly available information regarding certain
other gaming companies and transactions we deemed relevant; and (ix) other
factors and information we deemed appropriate.
We have (i) relied upon, without independent verification (which it was
agreed was beyond the scope of our assignment), the accuracy and completeness,
in all material respects, of all financial and other information publicly
available and/or furnished to us orally or in writing by Taj Holding and THCR
or their respective representatives and (ii) neither made an independent
appraisal or evaluation of the assets of Taj Holding nor received any such
appraisal or evaluation other than the appraisal of Trump Taj Mahal Casino
Resort prepared by Appraisal Group International ("AGI") for Trump Taj Mahal
Associates in March 1994 and AGI's appraisal, dated December 1995, regarding
various parcels of land owned by Trump Taj Mahal Realty Corp. In addition, it
was agreed we were not asked to, and do not, express any opinion as to whether
another transaction with THCR, or its affiliates or any other entity, might
provide more favorable terms to the Class A Shareholders than the Merger
Transaction. With respect to financial forecasts, we understand from Taj
Holding and THCR that they have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the future financial
performance of Taj Holding and THCR.
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<PAGE>
We have acted as financial advisor to the Board of Directors of Taj Holding
(including the Directors elected by the holders of Class B Common Stock of Taj
Holding) for the purpose of rendering a written Opinion and have received a
fee for such service. In February 1995, we were retained, together with BT
Securities Corporation, to act as financial advisor to Taj Holding and certain
of its affiliates in connection with a proposed restructuring pursuant to
which we received a fee. Said retention has been terminated. In addition, we
have previously acted as financial advisor to a committee of bondholders of
Trump Taj Mahal Funding, Inc. in connection with a restructuring transaction
in 1991 and, during the preceding two years, have performed investment banking
and other financial advisory services for entities affiliated with Donald J.
Trump for which customary compensation was received. Pursuant to a letter
agreement with Trump Castle Associates ("Trump Castle") dated July 28, 1995,
Rothschild and Donaldson, Lufkin & Jenrette Securities Corporation are
retained by Trump Castle as advisors in connection with certain possible
transactions involving its outstanding Midlantic term loan and debt securities
for which customary compensation may be received in the future.
Based on and subject to the foregoing and other factors we deemed relevant,
it is our Opinion as of the date hereof that the consideration in the form of
either cash or THCR Common Stock to be received by the Class A Shareholders,
at each Class A Shareholder's election, in connection with the Merger
Transaction, is fair, from a financial point of view, to the Class A
Shareholders.
Very truly yours,
/s/ Rothschild Inc.
_____________________________________
ROTHSCHILD INC.
C-2
<PAGE>
ANNEX D
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to (S)228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251,252,254,257,258,263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in /1/ subsections (f) or (g) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
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<PAGE>
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to (S)288 or 253
of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and
shall include in such notice a copy of this section. The notice shall be
sent by certified or registered mail, return receipt requested, addressed
to the stockholder at his address as it appears on the records of the
corporation. Any stockholder entitled to appraisal rights may, within 20
days after the date of mailing of the notice, demand in writing from the
surviving or resulting corporation the appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsection (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their
D-2
<PAGE>
shares have not been reached by the surviving or resulting corporation. If the
petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list
at the addresses therin stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the
D-3
<PAGE>
written approval of the corporation, then the right of such stockholder to an
appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation may indemnify directors and officers against liabilities
and expenses they may incur in such capacities provided certain standards are
met, including good faith and the belief that the particular action is in or
not opposed to the best interests of the corporation.
Article IX of the THCR Certificate of Incorporation provides that THCR shall
indemnify to the fullest extent permitted under and in accordance with the
laws of the State of Delaware any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of THCR) by reason of the fact that
he is or was a director, officer, incorporator, employee or agent of THCR, or
is or was serving at the request of THCR as a director, officer, trustee,
employee or agent of or in any other similar capacity with another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of THCR,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interests of THCR, and, with
respect to any criminal action or proceeding, shall not, of itself, create a
presumption that the person had reasonable cause to believe that his conduct
was unlawful. Expenses (including attorneys' fees) incurred in defending any
civil, criminal, administrative or investigative action, suit or proceeding
shall (in the case of any action, suit or proceeding against a director of
THCR) or may (in the case of any action, suit or proceeding against an
officer, trustee, employee or agent) be paid by THCR in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors upon receipt of an undertaking by or on behalf of the indemnified
person to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by THCR as authorized in Article IX.
No director or officer shall be personally liable to THCR or any stockholder
for monetary damages for breach of fiduciary duty as a director or officer,
except for any matter in respect of which such director or officer (A) shall
be liable under Section 174 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision thereto, or (B) shall
be liable by reason that, in addition to any and all other requirements for
liability, he:
(i) shall have breached his duty of loyalty to THCR or its stockholders;
(ii) shall not have acted in good faith or, in failing to act, shall not
have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
If the General Corporation Law of the State of Delaware is amended after the
date hereof to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of THCR
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
2.1(13) Agreement and Plan of Merger, dated January 8, 1996, between
Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
THCR Merger Corp.
2.1.1(14) Amended to Agreement and Plan of Merger, dated January 31, 1996,
by and among Trump Hotels & Casino Resorts, Inc., Taj Mahal
Holding Corp. and THCR Merger Corp.
3.1(12) Amended and Restated Certificate of Incorporation of Trump
Hotels & Casino Resorts, Inc.
3.2(12) Amended and Restated By-Laws of Trump Hotels & Casino Resorts,
Inc.
4.1(7) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(7) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(7) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(7) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(7) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(7) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(7) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(7) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(7) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(7) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(7) Pledge Agreement of Trump Plaza Funding, Inc., in favor and for
the benefit of First Bank National Association, as trustee.
4.12-4.16 Intentionally omitted.
4.17(12) Senior Secured Note Indenture between Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers, and First Bank National Association,
as trustee.
4.18(12) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as collateral agent, on behalf of First Bank
National Association in its respective capacities as trustees.
4.19.2(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as trustee.
4.19.3(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding
Associates, as pledgor to First Bank National Association as
collateral agent, on behalf of First Bank National Association
in its respective capacities as trustees.
4.19.4(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding,
Inc. as pledgor to First Bank National Association as collateral
agent, on behalf of First Bank National Association in its
respective capacities as trustees.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
4.20 Intentionally omitted.
4.21-4.23 Intentionally omitted.
4.24(12) Cash Collateral and Disbursement Agreement, dated June 12, 1995,
among First Bank National Association, as disbursement agent,
First Bank National Association, as trustee, and Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers.
4.25(11) Certificate of Common Stock of Trump Hotels & Casino Resorts,
Inc.
5.1** Opinion of Willkie Farr & Gallagher.
8.1** Opinion of Willkie Farr & Gallagher with respect to certain tax
matters.
10.1-10.6 Intentionally omitted.
10.7(9) Employment Agreement between Trump Plaza Associates and Barry
Cregan.
10.8-10.9 Intentionally omitted.
10.10(3) Agreement of Lease, dated as of July 1, 1980, by and between SSG
Enterprises, as lessor and Atlantic City Seashore 2, Inc., as
lessee, as SSG Enterprises' interest has been assigned to
Seashore Four, and as Atlantic City Seashore 2, Inc.'s interest
has been, through various assignments, assigned to Trump Plaza
Associates (with schedules).
10.11(3) Agreement of Lease, dated July 11, 1980, by and between Plaza
Hotel Management Company, as lessor, and Atlantic City Seashore
3, Inc., as lessee, as Atlantic City Seashore 3, Inc.'s interest
has been, through various assignments, assigned to Trump Plaza
Associates (with schedules).
10.12(3) Agreement of Lease, dated as of July 1, 1980, by and between
Magnum Associates and Magnum Associates II, as lessor and
Atlantic City Seashore 1, Inc., as lessee, as Atlantic City
Seashore 1, Inc.'s interest has been, through various
assignments, assigned to Trump Plaza Associates (with
schedules).
10.13-10.15 Intentionally omitted.
10.16(1) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(4) Assignment of Lease, dated as of July 28, 1988, by and between
Magnum Associates and Magnum Associates II, as assignor, Trump
Seashore Associates, as assignee, and Trump Plaza Associates, as
lessee.
10.22-10.27 Intentionally omitted.
10.28(2) Option Agreement, dated as of February 2, 1993, between Donald
J. Trump and Trump Plaza Associates.
10.29 Intentionally omitted.
10.30(5) Amended and Restated Services Agreement between Trump Plaza
Associates and Donald J. Trump.
10.31-10.32 Intentionally omitted.
10.33(6) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(6) Intentionally omitted.
10.35(6) Mortgage from Trump Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.35.1(6) Collateral Assignment of Leases from Trump Plaza Associates to
The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.36-10.37 Intentionally omitted.
10.38(8) Employment Agreement between Trump Plaza Associates and Nicholas
L. Ribis.
10.38.1(2) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.39(8) Severance Agreement between Trump Plaza Associates and Robert M.
Pickus.
10.40(10) Employment Agreement, dated as of February 7, 1995, between
Trump Plaza Associates and Kevin S. Smith.
10.41(10) Employment Agreement between Trump Plaza Associates and James A.
Rigot.
10.42(10) Option and Right of First Offer Agreement between Trump Plaza
Associates and Missouri Boardwalk Inc., dated June 24, 1993.
10.43(10) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated
June 24, 1993.
10.44(10) Sublease between Donald J. Trump and Missouri Boardwalk Inc.,
dated June 24, 1993.
10.45 Intentionally omitted.
10.46(12) Executive Agreement among Donald J. Trump, Trump Hotels & Casino
Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47(12) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.48(11) Sales and Construction Agreement, dated May 1, 1995, between
Trump Indiana, Inc. and Atlantic Marine, Inc.
10.49(11) Agreement of Sale, dated May 10, 1995, between Trump Indiana,
Inc. and Lehigh Portland Cement Company.
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51(11) Amended and Restated Partnership Agreement of Trump Hotels &
Casino Resorts Holdings, L.P.
10.52(12) Exchange and Registration Rights Agreement, dated June 12, 1995,
between Trump Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.53(12) Contribution Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump.
10.54(12) Trademark License Agreement, dated June 12, 1995, between Donald
J. Trump and Trump Hotels & Casino Resorts Holdings, L.P.
10.55(12) Trademark Security Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.56(11) Agreement of Sublease between Donald J. Trump and Time Warner
Entertainment Company, L.P., as amended.
10.57 Intentionally omitted.
10.58(12) Promissory Note of Donald J. Trump in favor of Trump Hotels &
Casino Resorts Holdings, L.P.
10.59* First Amended and Restated Operating Agreement of Buffington
Harbor Riverboat, L.L.C. by and between Trump Indiana, Inc. and
Barden-Davis Casinos, L.L.C., dated as of October 31, 1995.
10.60 Loan and Security Agreement, by and between debis Financial
Services, Inc. and Trump Indiana, Inc., dated August 30, 1995.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.60.1 Amendment Agreement to Loan and Security Agreement, by and
between debis Financial Services, Inc. and Trump Indiana, Inc.,
dated as of October 25, 1995.
10.61* Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
21** List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Intentionally omitted.
23.3** Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
23.4** Consent of Sterns & Weinroth.
23.5** Consent of Tabbert Hahn & Zanetis, P.C.
23.6** Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.7** Consent of Rothschild Inc.
24.1(15) Power of Attorney.
99.1* Proxy Card for the Special Meeting of Stockholders of Trump
Hotels & Casino Resorts, Inc.
99.2* Proxy Card for the Special Meeting of Stockholders of Taj Mahal
Holding Corp.
99.3* Election Form for holders of Class A Common Stock of Taj Mahal
Holding Corp.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
(1) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1986.
(2) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1992.
(3) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-4604, of Trump
Plaza Funding, Inc.
(4) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the fiscal
year ended December 31, 1990.
(5) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Plaza Holding Associates.
(6) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58602, of
Trump Plaza Funding, Inc. and Trump Plaza Associates.
(7) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58608, of
Trump Plaza Holding Associates.
(8) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Plaza Holding Associates for the year ended December 31, 1993.
(9) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. for the
quarter ended September 30, 1994.
(10) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Plaza Holding Associates for the year ended December 31, 1994.
(11) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-1, Registration No. 33-90784, of
Trump Hotels & Casino Resorts, Inc.
(12) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. for the quarter ended June 30, 1995.
II-5
<PAGE>
(13) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated January 10, 1996.
(14) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated February 1, 1996.
(15) Contained on the signature page of this Registration Statement.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--Valuation and Qualifying Accounts of Trump Plaza Holding
Associates and Trump Plaza Associates for the years ended
December 31, 1992, 1993 and 1994.
SCHEDULE II--Valuation and Qualifying Accounts of Trump Taj Mahal
Associates and Trump Taj Mahal Funding, Inc. for the years
ended December 31, 1992, 1993 and 1994.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by any other Items
of the applicable form.
(2) that every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering
II-6
<PAGE>
of securities subject to Rule 415, will be filed as a part of an amendment
to the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, New York, on February 1, 1996.
TRUMP HOTELS & CASINO RESORTS, INC.
/s/ Nicholas L. Ribis
By __________________________________
Name: Nicholas L. Ribis
Title: President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
* Chairman of the
- ------------------------------------- Board of Directors February 1,
DONALD J. TRUMP 1996
/s/ Nicholas L. Ribis President, Chief February 1,
- ------------------------------------- Executive Officer 1996
NICHOLAS L. RIBIS and Director
(principal
executive and
financial officer)
* Director
- ------------------------------------- February 1,
WALLACE B. ASKINS 1996
* Director
- ------------------------------------- February 1,
DON M. THOMAS 1996
* Director
- ------------------------------------- February 1,
PETER M. RYAN 1996
*
- ------------------------------------- Senior Vice February 1,
JOHN P. BURKE President of 1996
Corporate Finance
(principal
accounting officer)
/s/ Nicholas L. Ribis
*By: ________________________________
NICHOLAS L. RIBIS
ATTORNEY-IN-FACT
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Plaza Holding Associates and Trump Plaza Associates:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Plaza Holding Associates and Trump Plaza
Associates (Partnerships) included in this registration statement and have
issued our report thereon dated February 18, 1995 (except with respect to the
matters discussed in Note 10, as to which the date is January 31, 1996). Our
audit was made for the purposes of forming an opinion on the basic financial
statements taken as a whole. The accompanying schedule is the responsibility
of the Partnerships' management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
February 18, 1995
(except with respect to
the matters discussed in
Note 10, as to which the
date is January 31, 1996)
S-1
<PAGE>
SCHEDULE II
TRUMP PLAZA HOLDING ASSOCIATES AND
TRUMP PLAZA ASSOCIATES VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992 1993 AND 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND CHANGES END OF
OF PERIOD EXPENSES (DEDUCTIONS) PERIOD
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1992
Allowances for doubtful
accounts................ $20,231,000 $4,675,000 $(10,504,000)(A) $14,402,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 1,385,000 $ 645,000 $ (96,000)(B) $ 1,934,000
=========== ========== ============ ===========
YEAR ENDED DECEMBER 31,
1993
Allowances for doubtful
accounts................ $14,402,000 $ 90,000 $ (3,876,000)(A) $10,616,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 1,934,000 $1,047,000 -- $ 2,981,000
=========== ========== ============ ===========
YEAR ENDED DECEMBER 31,
1994
Allowances for doubtful
accounts................ $10,616,000 $ 323,000 $ (2,466,000)(A) $ 8,493,000
=========== ========== ============ ===========
Valuation allowance for
interest differential on
CRDA bonds.............. $ 2,981,000 $ 838,000 $ (1,645,000)(B) $ 2,174,000
=========== ========== ============ ===========
</TABLE>
- --------
(A) Write-off of uncollectible accounts.
(B) Write-off of allowance applicable to contribution of CRDA deposits.
S-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Taj Mahal Associates and Subsidiary:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Taj Mahal Associates (Partnership) and
Subsidiary included in this registration statement and have issued our report
thereon dated March 22, 1995 (except with respect to the matter discussed in
Note 10, as to which the date is January 31, 1996). Our audit was made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying schedule is the responsibility of the Partnership's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 22, 1995
(except with respect to
the matter discussed in
Note 10, as to which the
date is January 31, 1996)
S-3
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED DEDUCTIONS BALANCE
BEGINNING COSTS AND TO OTHER FROM AT END
OF PERIOD EXPENSES ACCOUNTS RESERVES OF PERIOD
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
December 31, 1992:
Allowance for doubtful
receivables............ $ 5,664 $6,197 $-- $6,586(B) $ 5,275
Valuation allowance for
CRDA investments (A)... 1,806 2,563 -- -- 4,369
------- ------ ---- ------ -------
$ 7,470 $8,760 $-- $6,586 $ 9,644
======= ====== ==== ====== =======
December 31, 1993:
Allowance for doubtful
receivables............ $ 5,275 $3,472 $-- $4,401(B) $ 4,346
Valuation allowance for
CRDA investments (A)... 4,369 2,764 -- -- 7,133
------- ------ ---- ------ -------
$ 9,644 $6,236 $-- $4,401 $11,479
======= ====== ==== ====== =======
December 31, 1994:
Allowance for doubtful
receivables............ $ 4,346 $2,974 $-- $3,261(B) $ 4,059
Valuation allowance for
CRDA investments (A)... 7,133 2,134 -- 4,753 4,514
------- ------ ---- ------ -------
$11,479 $5,108 $-- $8,014 $ 8,573
======= ====== ==== ====== =======
</TABLE>
- --------
(A) See Note 5 to financial statements.
(B) Uncollectible accounts written off, net of recoveries.
S-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
10.60 Loan and Security Agreement, by and between debis Financial Services,
Inc. and Trump Indiana, Inc., dated August 30, 1995.
10.60.1 Amendment Agreement to Loan and Security Agreement, by and between debis
Financial Services, Inc. and Trump Indiana, Inc., dated as of October
25, 1995.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE>
EXHIBIT 10.60
[DDC LOGO]
LOAN AND SECURITY AGREEMENT
(VESSEL CONSTRUCTION AND PURCHASE)
This Loan and Security Agreement ("Loan Agreement") is made this 30TH
day of AUGUST, 1995, by and between DEBIS FINANCIAL SERVICES, INC. D/B/A DDC-MTU
FINANCIAL SERVICES ("Lender"), a Delaware corporation, with its principal place
of business at 201 MERRITT 7, SUITE 700, NORWALK, CONNECTICUT 06856, as LENDER,
and TRUMP INDIANA, INC., with a principal place of business at 725 FIFTH AVENUE,
TRUMP TOWER, 24TH FLOOR, NEW YORK, NY 10022, as BORROWER.
RECITALS:
WHEREAS Borrower desires to finance construction of ONE (1) 280 FOOT
2,000 PASSENGER RIVERBOAT CASINO ("Vessel") as more particularly described in
the SALES AND CONSTRUCTION CONTRACT dated JUNE 16TH, 1995 by and between
ATLANTIC MARINE, INC., a Florida corporation ("Contractor") and Borrower,
("Construction Contract"), which Vessel shall be completed pursuant to the terms
of the Contract by Contractor; and
WHEREAS Borrower desires to borrow from Lender an amount not exceeding
FIFTEEN MILLION AND XX/100 IN UNITED STATES DOLLARS in United States dollars
($15,000,000.00 USD) ("Loan Amount"), to finance construction and purchase of
the Vessel;
WHEREAS Lender is willing to consider providing financing to Borrower
because, as set forth in the Construction Contract, Borrower is installing as a
part of Vessel's construction engines manufactured by Detroit Diesel Corporation
("DDC"), which is a company related to Lender;
NOW, THEREFORE, the parties agree:
SECTION ONE
ADVANCES TO BORROWER
1.1 Lender shall loan Borrower amounts not to exceed a total of
$15,000,000.00 USD, that loan to be repaid according to the terms of a
promissory note signed contemporaneously with this Loan Agreement as evidence of
Borrower's debt to Lender ("Note").
1.2 Lender shall disburse the Loan Amount to Borrower in incremental
payments made directly to Contractor on Borrower's behalf ("Advances").
1.3 Advances shall be disbursed in arrears, for work that has
actually been completed, for materials that have been incorporated into the
vessel, and/or for value that has otherwise been added to the Vessel. Borrower
shall be entitled to request an Advance in the amounts specified below at the
following times.
<PAGE>
(a) $2,400,000.00 to Borrower, upon execution of Loan documents;
(b) $3,600,000.00 to Contractor, upon completion of the deck,
bottom and sides of the first module of
approximately 35 feet in length;
(c) $4,800,000.00 to Contractor, upon installation of engines in
Vessel;
(d) $4,200,000.00 to Contractor, upon launching of Vessel and
satisfactory completion of sea trials.
1.4 An Advance requested shall be made following the expiration of
seven days from Lender's receipt of a certificate from Contractor that all of
the work necessary to achieve the stage of construction for which the Advance is
requested has in fact been satisfactorily completed; provided, however, that
Lender reserves the right to condition its payment of any Advance on the receipt
of additional evidence from Contractor that the level of construction certified
has in fact been satisfactorily achieved or on its independent investigation.
1.5 The aggregate amount of Advances which Lender is obligated to
make pursuant to this Loan Agreement shall not at any time exceed the aggregate
amount then payable to Contractor on the Construction Contract.
1.6 Any obligation of Lender to make Advances shall terminate on the
occurrence of an Event of Default as defined in Section 6 of this Loan
Agreement.
SECTION TWO
ADDITIONAL DOCUMENTATION
CONDITIONS PRECEDENT
2.1 As a condition precedent to Lender's being required to make any
Advance pursuant to this Loan Agreement, Borrower will furnish Lender with a
true and correct copy of the Construction Contract, which contract Lender must
approve before being obligated to make any Advance.
2.2 As a condition precedent to Lender's being required to make any
Advance pursuant to this Loan Agreement, Borrower hereby grants to Lender an
assignment, as security, which gives Lender a first, prior and perfected
security interest in:
a) all of Borrower's rights, title and interest in the
Construction Contract; and
-2-
<PAGE>
b) that certain security interest given in the Project to
Borrower, by Contractor, together with all of the Borrower's
rights, title and interest in all insurance on the Vessel,
and all warranties by manufacturers, distributors and others
relating to the construction of the Vessel.
Borrower warrants that (1) the Construction Contract is valid and
constitutes the entire contract with respect thereto, (2) all names, addresses,
amounts, dates, signatures and other statements and facts contained in the
Construction Contract are true and correct, (3) the Construction Contract is and
will be legally enforceable according to the terms of each, (4) the Construction
Contract and the Vessel will be free from any liens, setoffs, counterclaims and
other defenses, (5) Borrower has the right to assign the rights assigned by this
Section 2.2, and (6) Borrower has complied with all of their obligations under
the Construction Contract.
Should Borrower default on the Promissory Note referenced herein,
Lender shall be entitled to take over Borrower's position as Buyer under the
Construction Contract and as Secured party on the Vessel, and to take any action
which Borrower would have been entitled to take.
2.3 As a condition precedent to Lender's being required to make any
Advance pursuant to this Loan Agreement, Contractor shall execute and deliver to
Lender a security agreement, in form satisfactory to Lender, which gives Lender
a first, prior, and perfected security interest in Contractor's interest in the
Vessel and any materials delivered to Contractor to be included in the Vessel.
2.4 Prior to the final Advance, and contingent upon Lender's receipt
of an executed builder's certificate from Contractor, Borrower shall a) execute
and deliver to Lender a preferred ship mortgage which gives Lender a first,
prior, and perfected security interest in the Vessel and a promissory note,
which shall evidence the loan obligation, or b) repay the Loan Amount in full,
together with all accrued but unpaid interest, costs and fees incurred. Upon
execution of the preferred ship mortgage and promissory note, or receipt by
Lender of full repayment of the Loan Amount, together with all outstanding
accrued interest, costs and fees incurred, the Note executed contemporaneously
with this Loan Agreement will be cancelled.
2.5 Borrower shall execute and deliver to Lender on request any such
additional documentation as may reasonably be requested to (a) evidence the
execution authority of any signer of this Loan Agreement or the additional
documents it contemplates, (b) substantiate Borrower's compliance with any
representations and warranties made by it, (c) evidence the debt created by this
Loan Agreement and the Note, (d) evidence and
-3-
<PAGE>
perfect any security interest to which Lender is entitled pursuant to this Loan
Agreement, or (e) otherwise carry out the transactions contemplated by this Loan
Agreement.
2.6 Borrower agrees to sign any additional documents which Lender
deems are necessary to protect or perfect Lender's interest in the Vessel and,
for that purpose, hereby makes Lender its attorney-in-fact for signing builder's
certificates, manufacturer's statements of origin, title certificates, or other
documents necessary to effect the purpose of this Loan Agreement without
enhancing Lender's position beyond this Loan Agreement.
SECTION THREE
BORROWER'S REPRESENTATIONS AND WARRANTIES
3.1 Borrower represents and warrants to Lender that:
(a) Borrower is a corporation duly organized and in good standing
under the laws of Delaware, is duly authorized and in good standing under the
laws of those states or nations in which it does business and has the corporate
power and authority to own its properties and assets, including the Vessel;
(b) Execution and delivery of this Loan Agreement, Borrower's
consummation of any of the transactions contemplated hereby, and Borrower's
compliance with the terms of this Loan Agreement and those transactions, do not
contravene or materially conflict with any provision of law, statute or
regulation to which Borrower is subject, any decree, license, order, or permit
applicable to Borrower, or any indenture, loan agreement, mortgage, deed of
trust, or other contract to which Borrower is a party or by which it may be
bound. No consent, approval, authorization, or order of any court or
governmental authority or third party is required in connection with execution
and delivery by Borrower of this Loan Agreement or to consummate the
transactions it contemplates;
(c) No Event of Default as defined in Section 6 of this Loan
Agreement currently exists;
(d) Borrower is not in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement, or any
other material agreement or obligation to which it is a party or by which any of
its properties are bound;
(e) There is no litigation, arbitration, or administrative
proceedings pending or (to Borrower's knowledge) threatened against Borrower
that could have a materially adverse effect on (i) the validity, performance, or
enforceability of this Loan Agreement, (ii) the financial condition or business
operations of Borrower, or (iii) the ability of Borrower to fulfill its
obligations under this Loan Agreement;
-4-
<PAGE>
(f) All tax returns required to be filed by Borrower in any
country or jurisdiction have been filed, and all taxes (including mortgage
recording taxes), assessments, fees, and other governmental charges due from
Borrower or charged on any of its assets have been paid. Borrower is unaware of
any assessments pending or proposed against it or its assets.
3.2 Each Advance made pursuant to this Loan Agreement shall
constitute, without the need for a specific written statement, a representation
and warranty by Borrower that no Event of Default exists hereunder, and that all
representations and warranties contained in this Section 3 are true and correct
as of the date of any such Advance.
SECTION FOUR
CREATION OF SECURITY
4.1 Borrower hereby grants Lender a security interest in the
following:
(a) the Vessel, together with all its appurtenances and
equipment, currently or hereafter attached, excluding any and all equipment
relating to gaming operations;
(b) all materials or equipment delivered to Borrower for, or
identified for, incorporation into the Vessel,
4.2 Borrower shall execute whatever further documentation Lender may
reasonably request to evidence or perfect the security interests granted by this
Loan Agreement.
SECTION FIVE
INSURANCE
5.1 During construction of the Vessel, if insurance acceptable to
Lender is not provided by Contractor, Borrower will, at its own expense, cause
to be carried and maintained on the Vessel, insurance in such amounts, against
such risk, in such form (including, without limitation, a loss payable clause
which shall be in favor of Lender, and a cancellation clause and designation of
named assured, which shall include Lender), and with such insurance companies,
underwriters or funds as shall be in the reasonable judgment of Lender necessary
or advisable for the protection of Lender's interest in the Vessel; provided,
however, that Borrower will in any event cause the following minimum insurance
to be carried or maintained:
(a) Marine Insurance on the Vessel in an amount at least equal to
110% of the Note or the full market value of the Vessel, whichever is greater,
covering the Vessel against all such usual marine risks.
-5-
<PAGE>
(b) Evidence of protection and Indemnity Insurance, in an amount
not less than the full market value of the Vessel;
(c) Breach of Warranty Insurance for the full amount of the Note,
in favor of Lender.
5.2 Borrower may substitute different forms for any of the above forms
of insurance if such substitute forms furnish at least equal coverage, and
Borrower may eliminate from any such insurance any risk customarily covered
thereunder if such risk is insured under a separate but different form of policy
furnishing at least equal coverage. The deductible of any such insurance shall
not exceed five percent (5.0%) of Vessel cost. Coverage limits shall be stated
in United States currency. Copies of all policies or certificates evidencing
such insurance shall be given to Lender, for its approval and retention at least
ten (10) days prior to the effective date thereof.
5.3 All policies or certificates evidencing insurance required to be
carried and maintained by this Section 5 shall provide that underwriters shall
give at least thirty (30) days prior written notice to Lender in the event of
cancellation.
5.4 The underwriters of the insurance referred to in this Section 5
shall make no payments to Borrower, nor shall Borrower accept such payments,
without the express written permission of Lender. Lender may waive the terms of
this provision at its option.
5.5 On behalf of Lender, Borrower will make all proofs of loss and
take all other action necessary or appropriate to collect on insurance carried
on the Vessel. To that end, Lender, at Borrower's expense, will execute such
claim papers and other documents, take such action and furnish such information,
as Borrower may reasonably request in writing, including tendering abandonment
of the Vessel to underwriters.
5.6 Borrower will not commit any act, nor voluntarily suffer or permit
any act to be committed or omitted, whereby any insurance required to be carried
and maintained hereunder shall or may be suspended, impaired, or defeated;
5.7 Lender is hereby appointed owner's attorney-in-fact as respects to
insurance claims, and Lender, should it elect to exercise its authority, shall
have full power and authority to make, compromise, pursue, and collect on any
claim which could be made on insurance on the Vessel or insurance provided
pursuant to this Loan Agreement; provided, however, that Lender shall not act
unreasonably as respects to its exercise of that authority and shall pay to
Borrower any amount it collects which is in excess of amounts owed Lender by
Borrower.
-6-
<PAGE>
SECTION SIX
EVENTS OF DEFAULT
6.1 Borrower shall be in default on this Loan Agreement, and Lender
shall have the right to declare the entire indebtedness hereunder and on the
Note to be due and payable at once, with no obligation of Lender to make further
Advances, upon the happening of any of the following events ("Events of
Default"):
(a) Borrower's failure to timely pay any amount due on the Note;
(b) Borrower's failure to execute a preferred ship mortgage
satisfactory to Lender on completion of the Vessel and/or prior to causing the
Vessel to be moved from the Contractor's yard;
(c) Contractor's failure to reasonably meet the construction
schedule set forth in the Construction Contract or to timely complete the Vessel
in accordance with that contract;
(d) Borrowers' failure to take delivery of the Vessel on its
completion or on its tender by Contractor;
(e) Entry against Borrower of any judgment in an amount over
$100,000 USD in any court of competent jurisdiction which remains unsatisfied
after expiration of thirty (30) days from the date of entry of such judgement;
(f) Failure of any guaranty of Borrower's obligations under this
Loan Agreement or the Note to remain in full force and effect, including the
filing of any bankruptcy, or similar occurrence by or against any such
guarantor;
(g) Assignment by Borrower of all or any part of this Loan
Agreement or Advances made pursuant to it without first having obtained Lender's
written consent;
(h) Contractor's failure to construct the Vessel in a workmanlike
manner, in accordance with all applicable laws and regulations and in accordance
with the Construction Contract, which Contract includes the installation of DDC
engines;
(i) Borrower's failure to maintain insurance on the Vessel as
required by Section 5 of this Agreement;
(j) Destruction of or serious damage to the Vessel prior to its
completion and delivery to Borrower, in such case as the Vessel is not covered
by insurance as required by section 5 of this Agreement;
(k) Borrower's filing, or the filing against Borrower, of a
petition under the bankruptcy laws or any similar
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<PAGE>
statute, Borrower's making a general assignment for the benefit of creditors, or
appointment of a receiver for Borrower;
(l) Borrower's failure to comply with any of the terms of this
Loan Agreement;
(m) Seizure of the Vessel by any person acting under color of
government authority;
(n) Contractor fails to permit Lender or its agents, acting on
Lender's behalf, to inspect the Vessel at reasonable times; or
(o) Borrower's failure to keep the Vessel in good repair and
condition.
SECTION SEVEN
TAXES
7.1 All payments (whether of principal, interest, or otherwise) to be
made by the Borrower to the Lender hereunder shall be made free and clear of and
without deduction for any taxes, levies, duties, charges, fees, deductions or
withholdings of any nature now or hereinafter imposed. If at any time applicable
law requires the Borrower to make any such deduction or withholding, the sum due
from the Borrower shall be increased to the extent necessary to ensure that the
Lender receives an after tax sum equal to the sum which it would have received
after taxes had no such deduction or withholding been required.
SECTION EIGHT
MISCELLANEOUS
8.1 On completion of construction of the Vessel, Borrower shall insure
the Vessel with a company and in a form acceptable to Lender, in an amount not
less than the amount then owing Lender by Borrower under this Loan Agreement and
the Note.
8.2 As between Borrower and Lender, Borrower is responsible for and
will pay when due any fees, taxes, and other charges imposed against the Vessel
or as a result of this Loan Agreement or any additional transactions or
documents contemplated by it. Lender has the right to pay any such amounts on
Borrower's behalf, for which Borrower will promptly reimburse Lender on demand.
8.3 Should any liens or other encumbrances attach to or be asserted
against the Vessel, Borrower will act promptly to discharge them, and, if
Borrower disputes such liens or encumbrances or the debt associated with them,
Borrower will post such bond as is necessary to permanently discharge the liens
or encumbrances while Borrower resolves the disputed debt. Lender has the right
to pay on Borrower's behalf any amount necessary to discharge any liens or
encumbrances which may attach to or be
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<PAGE>
asserted against the Vessel, for which amount Borrower will promptly reimburse
Lender on demand.
8.4 Lender is not in any way responsible for Contractor's performance
under the Construction Contract, nor is Lender required in any manner to
investigate the extent of Contractor's work on the Vessel or its entitlement to
Advances requested. Even though Lender may in fact do such an investigation for
itself, Borrower is not entitled to rely on that investigation for any purpose.
Borrower is obligated to repay all Advances made by Lender whether or not
Contractor was in fact entitled to be paid the amounts paid by Lender as
Advances.
8.5 Borrower agrees to pay Lender all its reasonable attorney fees and
costs, including the fees of expert witnesses, incurred in enforcing Lender's
rights under, or interpreting, this Loan Agreement, whether incurred outside of
any litigation, at trial, on appeal, or in any bankruptcy.
8.6 Any remedies provided Lender in this Loan Agreement are not
exclusive, but are cumulative and in addition to any other remedies available to
Lender, whether existing in law, equity, admiralty, or bankruptcy.
8.7 If any provision of this Loan Agreement is inconsistent with or in
contravention of applicable law, then such provision shall be deemed inoperative
and of no force and effect, but all other terms shall remain in full force and
effect.
8.8 This Loan Agreement, the Note, and all other documents
contemplated by the Loan Agreement to be executed, shall be governed by the laws
of the state of Connecticut, U.S.A. (excluding Connecticut's conflicts of law
rules), and Borrower hereby submits to the jurisdiction of the courts of that
state; provided, however, that Lender shall have the right, but not the
obligation, to litigate in any state or country in which Borrower or any of its
assets may be located.
8.9 This Loan Agreement, together with the Note and additional
documents referred to herein as being documents to be executed, constitute the
entire agreement between Lender and Borrower. No waiver or modification to this
Loan Agreement, the Note, or those additional documents shall be effective
unless in writing. No waiver or indulgence by Lender of any deviation by
Borrower with respect to any performance required by this Loan Agreement, the
Note, or the additional documents contemplated by this Loan Agreement shall be
deemed a waiver of Lender's right to subsequent or other full and timely
performance.
8.10 If this Loan Agreement is between Lender and more than one
borrower, all references to Borrower refer not only to the borrowers
collectively but also to each of them individually
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<PAGE>
so that, for example, an occurrence affecting one borrower which would be an
Event of Default is an occurrence with respect to both borrowers and, thus, an
Event of Default.
8.11 This Loan Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement to be
executed by their duly authorized officers on the date first above written.
LENDER: DEBIS FINANCIAL SERVICES, INC.
D/B/A DDC-MTU FINANCIAL SERVICES
BY: /s/ Richard Craig Abraham
----------------------------------
RICHARD CRAIG ABRAHAM
VICE-PRESIDENT
BORROWER: TRUMP INDIANA, INC.
BY: /s/ Nicholas L. Ribis
----------------------------------
NICHOLAS L. RIBIS
PRESIDENT
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<PAGE>
PROMISSORY NOTE
(VESSEL CONSTRUCTION)
$15,000,000.00 USD Date: August 30th, 1995
For value received, Trump Indiana, Inc., a Delaware corporation, with
its principal place of business at 725 Fifth Avenue, Trump Tower, 24th Floor,
New York, NY 10022 as Borrower, promises to pay to the order of debis Financial
Services, Inc. d/b/a DDC-MTU Financial Services, a Delaware corporation, and its
assigns ("DDC-MTU") with its principal place of business at 201 Merritt 7, Suite
700, Norwalk, CT 06856, as Lender, or at such other place as may be designated
in writing by the holder of this Note, the principal sum of Fifteen Million and
XX/100 in United States Dollars ($15,000,000.00 USD) or so much thereof as may
be advanced in accordance with the provisions of the Loan And Security Agreement
between DDC-MTU and Borrower dated August 30th, 1995 (the "Loan Agreement"), on
or before the 30th day of May, 1996 with interest thereon, compounded monthly,
at the rate of one and one-half percent (1.50%) per annum, above the Prime
Commercial Rate of The Bank of America, floating.
Interest accruing hereunder shall be due monthly as set forth herein,
and shall be calculated on the basis of a 30-day month and a 360-day year.
The first monthly interest payment shall be due thirty (30) days from
the date of the initial disbursement of funds. Subsequent payments ("Monthly
Payments") shall be due thirty days thereafter, for each and every month
("Payment Due Date") until this Note is fully paid. Monthly Payments associated
with all disbursements made in any thirty (30) day period shall be due on the
Payment Date for such thirty (30) day period.
However, for mutual convenience of DDC-MTU and Borrower, Monthly
Payments shall be calculated approximately fifteen (15) days prior to the
Payment Due Date ("Payment Calculation Date") and shall include disbursements
made prior to the Payment Calculation Date. Monthly Payments associated with
disbursements made prior to the Payment Calculation Date for a given thirty (30)
day period shall be due upon that period's Payment Due Date. Monthly Payments
associated with disbursements made after the Payment Calculation Date for a
given thirty (30) day period shall be due upon the Payment Due Date for the
following thirty (30) day period, provided, however, that DDC-MTU reserves the
right to collect such amounts on the Payment Due Date of the same period in
which the disbursements were made.
For purposes of calculating Monthly Payments, it shall be assumed
that the outstanding principal balance and the interest rate in effect as of the
Payment Calculation Date shall remain constant from the Payment Calculation Date
through the Payment Due Date. In the event the outstanding principal balance
<PAGE>
or the interest rate should change from the Payment Calculation Date through the
Payment Due Date, any such change shall be reflected by adding or subtracting
the appropriate amount to or from the next Monthly Payment. Monthly Payments
associated with such adjusted amounts shall be due on the Payment Due Date of
the next following Monthly Payment. Any interest payment not received by DDC-MTU
when due, shall be subject to a late charge equal to five percent (5%) of the
amount of said payment.
All amounts due on this Note, including the full amount of principal,
shall at the option of DDC-MTU become immediately due and payable on the
happening of any event of default under the terms of the Loan Agreement.
DDC-MTU is entitled to recover its reasonable attorneys' fees and
costs, including expert witness fees, in any action brought on this Note,
whether at trial, on appeal, or in bankruptcy. Borrower waives demand,
presentment for payment, notice of dishonor, protest, and notice of protest. If
more than one person signs this Note, the obligations under this Note shall be
joint and several. No delay or omission on the part of DDC-MTU in demanding
payment or exercising any right under this Note shall operate as a waiver. The
obligations under this Note may be changed only by a writing signed by both
Borrower and DDC-MTU.
BORROWER: TRUMP INDIANA, INC.
BY: /s/ Nicholas L. Ribis
------------------------------
NICHOLAS L. RIBIS
PRESIDENT
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EXHIBIT A
One (1) new Two Hundred Eighty foot (280') 2,000 passenger Riverboat Casino,
powered by DDC engines, or the uncompleted portion thereof (the "Vessel), being
constructed under the terms of the Sales and Construction Contract dated June
16th, 1995 by and between Atlantic Marine, Inc. (the "Contractor") and Trump
Indiana, Inc. ("Buyer"), together with:
i) all tangible personal property including, but not limited to, all
personal property, machinery, equipment, motors, engines, supplies,
generators, electronic components, parts, inventory, work in process,
and materials which are owned, or will be acquired by Contractor for the
purpose of constructing the Vessel, whether or not integrated into or
attached to the Vessel, excluding any and equipment relating to gaming
operations, and
ii) all intangible personal property including but not limited to, all
drawings, models, plans, specifications, documentation, and records
which are owned, or will be acquired or used by Contractor for the
purpose of constructing the Vessel.
Location: Atlantic Marine, Inc.
8500 Heckscher Drive
Jacksonville, FL 32226
<PAGE>
EXHIBIT 10.60.1
AMENDMENT AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, it is mutually agreed that the Loan and Security
Agreement dated the 30th day of August, 1995 by Trump Indiana, Inc., a Delaware
corporation("Borrower") in favor of debis Financial Services, Inc. d/b/a DDC-MTU
Financial Services, Inc. ("Lender") is hereby amended as follows:
In Section One, Advances to Borrower, Section 1.3 shall be deleted in its
entirety and replaced by the following:
1.3 Advances shall be disbursed in arrears, for work that has actually
been completed, for materials that have been incorporated into the Vessel,
and/or for value that has otherwise been added to the Vessel. Borrower shall be
entitled to request an Advance in the amounts specified below at the following
times:
(a) $3,600,000.00 Due upon completion of deck, bottom and sides of
first module of approximately 35 feet in length;
(b) $3,150,000.00 Due upon completion of installation of engines in
Vessel;
(c) $3,000,000.00 Due upon launching of Vessel and satisfactory
completion of sea trials;
(d) $3,750,000.00 Due when the Vessel is ready to depart from
Atlantic Marine, Inc. on its delivery voyage to
Gary, Indiana;
(e) $1,500,000.00 Due upon delivery to and acceptance by Borrower,
and tender to Lender of original Builder's
Certificate of Completion, together with all
necessary surveys and safety inspections
Except for the above stated modification, the Loan and Security Agreement shall
remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment Agreement as of
this 25th day of October, 1995.
BORROWER: TRUMP INDIANA, INC.
BY: /s/ Nicholas L. Ribis
------------------------------
NICHOLAS L. RIBIS
PRESIDENT
LENDER: DEBIS FINANCIAL SERVICES, INC. D/B/A
DDC-MTU FINANCIAL SERVICES
BY: /s/ Craig Abraham
------------------------------
CRAIG ABRAHAM
VICE-PRESIDENT
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<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports, and to all references to our Firm, included in or made a part of this
registration statement.
Arthur Andersen LLP
Roseland, New Jersey
January 31, 1996
