<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 1996
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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, dated as of January 8, 1996, 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. [_]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share(1)..... 2,025,000(2) $21.75(3) $44,043,750(3) $15,188(4)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) To be issued by the Registrant to holders of the Class A Common Stock of
Taj Holding ("Taj Holding Class A Common Stock") in the Merger.
(2) The amount of Common Stock, par value $.01 per share (the "Common Stock"),
of the Registrant being registered hereby has been determined, pursuant to
the Merger Agreement, by multiplying (x) 1,350,000, representing the total
number of shares of Taj Holding Class A Common Stock outstanding, by (y)
the result of dividing $30 by $20 (the lowest market value of the Common
Stock at which THCR is required to consummate the Merger, assuming all
other conditions to THCR's obligations to consummate the Merger are
satisfied or waived).
(3) The proposed maximum aggregate offering price per share was determined
pursuant to Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act"). The proposed maximum aggregate offering price was
estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act by assuming the exchange of
all of the outstanding shares of Taj Holding Class A Common Stock in the
Merger. The proposed maximum offering price per unit represents the
closing price per share of the Common Stock on the New York Stock Exchange
on January 8, 1996.
(4) $15,188 was wired to the Securities and Exchange Commission's account at
Mellon Bank in payment of the required registration fee due in connection
with this Registration Statement.
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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, dated as of January 8, 1996 (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 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 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 Trump Taj
Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net proceeds of which
will be used, together with available cash of Taj Associates, to (a) pay
cash to those holders of Taj Holding Class A Common Stock electing to
receive cash in the Merger, (b) redeem Taj Funding's outstanding 11.35%
Mortgage Bonds, Series A due 1999 (the "Bonds"), (c) redeem the outstanding
shares of Class B Common Stock of Taj Holding as required in connection
with the redemption of the Bonds, (d) purchase certain real property used
in the operation of the Taj Mahal that is currently leased from a
corporation wholly owned by Trump, and (e) make a payment to Bankers Trust
Company ("Bankers Trust") to obtain releases of the liens and guarantees
that Bankers Trust has with respect to Taj Associates;
(ii) the contribution by Trump to THCR Holdings and Taj Mahal Holdings
LLC ("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his
direct and indirect ownership interests in Taj Associates; and
(iii) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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."
<PAGE>
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), THCR's
financial advisor, rendered its opinion on January 8, 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 8,
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>
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 (the "Merger
Agreement"), 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, 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 Trump Taj Mahal Funding, Inc. ("Taj Funding") of up to
$750,000,000 aggregate principal amount of debt securities, the aggregate net
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 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 as
required in connection with the redemption of the Bonds, (iv) purchase certain
real property used in the operation of the Trump Taj Mahal Casino Resort (the
"Taj Mahal") that is currently leased from 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 and guarantees that Bankers
Trust has with respect to Taj Associates; (b) the contribution by Trump to
Trump Hotels & Casino Resorts Holdings L.P. ("THCR Holdings") and Taj Mahal
Holdings LLC ("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of
his direct and indirect ownership interests in Trump Taj Mahal Associates
("Taj Associates"), the owner and operator of the Taj Mahal; and (c) the
contribution by THCR to THCR Holdings and Taj Holdings LLC 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 wholly own Taj Associates, and THCR's and Trump's
beneficial equity interests in THCR Holdings will be approximately % and %,
<PAGE>
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."
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
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, dated as of
January 8, 1996 (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
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 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 Trump Taj
Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net proceeds of which
will be used, together with available cash of Taj Associates, to (a) pay
cash to those holders of Taj Holding Class A Common Stock electing to
receive cash in the Merger, (b) redeem Taj Funding's outstanding 11.35%
Mortgage Bonds, Series A due 1999 (the "Bonds"), (c) redeem the outstanding
shares of Class B Common Stock of Taj Holding as required in connection
with the redemption of the Bonds, (d) purchase certain real property used
in the operation of the Taj Mahal that is currently leased from a
corporation wholly owned by Trump, and (e) make a payment to Bankers Trust
Company ("Bankers Trust") to obtain releases of the liens and guarantees
that Bankers Trust has with respect to Taj Associates;
(ii) the contribution by Trump to THCR Holdings and Taj Mahal Holdings
LLC ("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his
direct and indirect ownership interests in Taj Associates; and
(iii) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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. 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."
<PAGE>
Rothschild Inc. ("Rothschild"), Taj Holding's financial advisor, rendered
its opinion on January 8, 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 8, 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 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>
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 (the
"Merger Agreement"), 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, 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
Trump Taj Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net 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 Taj Funding's outstanding 11.35% Mortgage Bonds,
Series A due 1999 (the "Bonds"), (iii) redeem the outstanding shares of Taj
Holding Class B Common Stock as required in connection with the redemption of
the Bonds, (iv) purchase certain real property used in the operation of the
Trump Taj Mahal Casino Resort (the "Taj Mahal") that is currently leased from
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 and guarantees that Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to Trump Hotels & Casino Resorts Holdings, L.P.
("THCR Holdings") and Taj Mahal Holdings LLC ("Taj Holdings LLC"), a
subsidiary of THCR Holdings, of all of his direct and indirect ownership
interests in Trump Taj Mahal Associates ("Taj Associates"), the owner and
operator of the Taj Mahal; and (c) the contribution by THCR to THCR Holdings
and Taj Holdings LLC 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,
<PAGE>
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 JANUARY 11, 1996
JOINT PROXY STATEMENT-PROSPECTUS
-----------
JOINT PROXY STATEMENT PROSPECTUS
FOR FOR
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 (the "Merger
Agreement"), among THCR, Taj Holding and Merger Sub. 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 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 high and low per share sales prices on
the New York Stock Exchange ("NYSE") of a share of THCR
(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 TRANSACTION
(AS DEFINED HEREIN).
-----------
This Proxy Statement-Prospectus also constitutes the Prospectus of THCR with
respect to the shares of THCR Common Stock to be issued in connection with 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)
Common Stock on the fifteen 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 Trump Taj Mahal Funding, Inc. ("Taj Funding") of up to
$750,000,000 aggregate principal amount of debt securities (the "Taj Notes")
(the "Taj Note Offering," and, together with the THCR Stock Offering, the
"Offerings"), the aggregate net 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 Taj Funding's outstanding 11.35% Mortgage Bonds, Series A due
1999 (the "Bonds"), (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 Bonds
pursuant to the Amended and Restated Certificate of Incorporation of Taj
Holding (the "Taj Holding Certificate of Incorporation"), (iv) 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"), and (v) make a
payment to Bankers Trust Company ("Bankers Trust") to obtain releases of the
liens and guarantees that Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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, THCR will issue to Trump a
warrant to purchase an aggregate of 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 $30.00 per share, (ii) the fourth
anniversary of the issuance of the warrant at $35.00 per share and (iii) 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."
<PAGE>
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") 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 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 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>
PAGE
----
<S> <C>
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............................................................ 16
Stock Exchange Listing.................................................. 16
Comparative Per Share Prices............................................ 16
Comparative Rights of Stockholders...................................... 17
Certain Federal Income Tax Considerations............................... 17
Accounting Treatment.................................................... 17
Regulatory Approvals.................................................... 17
Summary Financial Information of THCR................................... 18
Summary Financial Information of Taj Associates ........................ 21
Corporate and Financial 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.......................................................... 29
Trump Plaza Expansion and the Taj Mahal Expansion....................... 29
The Indiana Riverboat................................................... 32
Competition............................................................. 33
Conflicts of Interest................................................... 36
Control and Involvement of Trump........................................ 37
Reliance on Key Personnel............................................... 38
Strict Regulation by Gaming Authorities................................. 39
Considerations with Respect to the Acquisition or Development of Addi-
tional Gaming Ventures................................................. 40
Limitations on License of the Trump Name................................ 41
The Possible Application of Fraudulent Conveyance Laws to the Merger
Transaction............................................................ 41
Interests of Certain Members of the Boards of Directors of THCR and Taj
Holding................................................................ 42
Limitations Inherent in Fairness Opinions............................... 42
Shares Eligible for Future Sale......................................... 43
Effect of Merger Transaction on Holders of THCR Common Stock............ 43
Trading Markets; Potential Volatility of Market Price................... 44
SPECIAL FACTORS........................................................... 45
Background of the Merger Transaction.................................... 45
Recommendations of the Board of Directors; Reasons for the Merger
Transaction; Fairness of the Merger Transaction........................ 50
Opinions of the Financial Advisors...................................... 54
AGI Appraisals.......................................................... 58
Purpose and Structure of the Merger Transaction......................... 65
Related Merger Transactions............................................. 66
Sources and Uses of Funds in the Merger Transaction..................... 68
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Effects of the Merger Transaction; Operations of Taj Associates
After the Merger Transaction........................................... 69
Interests of Certain Persons in the Merger Transaction.................. 69
Certain Federal Income Tax Consequences................................. 70
GENERAL INFORMATION....................................................... 71
THE THCR SPECIAL MEETING.................................................. 71
Purpose................................................................. 71
Record Date; Voting Rights; Proxies..................................... 71
Quorum.................................................................. 71
Required Vote........................................................... 72
Solicitation of Proxies................................................. 72
THE TAJ HOLDING SPECIAL MEETING........................................... 73
Purpose................................................................. 73
Record Date; Voting Rights; Proxies..................................... 73
Quorum.................................................................. 73
Required Vote........................................................... 73
Solicitation of Proxies................................................. 74
Election Procedures..................................................... 74
THE MERGER AGREEMENT...................................................... 75
The Merger ............................................................. 75
Closing; Effective Time ................................................ 75
Terms of the Merger..................................................... 75
Election Procedures..................................................... 75
Surrender and Payment; Exchange Fund.................................... 76
Dividends; Liability; No Further Rights for Holders Electing Cash Con-
sideration ............................................................ 77
Fractional Shares....................................................... 78
Dissenting Shares....................................................... 78
Conditions to the Merger................................................ 78
Representations and Warranties.......................................... 79
Conduct Pending the Merger.............................................. 80
Other Covenants......................................................... 81
No Solicitation......................................................... 81
Indemnification and Insurance........................................... 82
Termination............................................................. 83
Fees and Expenses....................................................... 83
Amendment; Waiver....................................................... 83
DISSENTING STOCKHOLDERS' RIGHTS OF APPRAISAL.............................. 84
UNAUDITED PRO FORMA FINANCIAL INFORMATION................................. 87
SELECTED HISTORICAL FINANCIAL INFORMATION OF THCR......................... 101
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THCR....................................................... 103
General................................................................. 103
Results of Operations for the Nine-Month Periods Ended September 30,
1995 and 1994.......................................................... 103
Results of Operations for the Years Ended December 31, 1994 and 1993.... 104
Results of Operations for the Years Ended December 31, 1993 and 1992.... 105
Liquidity and Capital Resources......................................... 107
Seasonality............................................................. 110
Inflation............................................................... 110
BUSINESS OF THCR.......................................................... 111
Trump Plaza............................................................. 112
Facilities and Amenities............................................... 113
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Trump Plaza Business Strategy.......................................... 114
Seasonality............................................................. 116
Employees and Labor Relations........................................... 116
Indiana Riverboat....................................................... 116
Other Jurisdictions..................................................... 119
Properties.............................................................. 120
Trademark/Licensing..................................................... 123
The 1992 Plaza Restructuring............................................ 123
Certain Indebtedness of THCR............................................ 124
Legal Proceedings....................................................... 125
SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES............... 128
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF TAJ ASSOCIATES............................................. 129
General................................................................. 129
Results of Operations for the Nine-Month Periods Ended September 30,
1995 and 1994.......................................................... 129
Results of Operations for the Years Ended December 31, 1994 and 1993.... 130
Results of Operations for the Years Ended December 31, 1993 and 1992.... 132
Liquidity and Capital Resources......................................... 133
Taj Associates........................................................ 133
Taj Holding........................................................... 136
Seasonality............................................................. 137
Inflation............................................................... 137
BUSINESS OF TAJ HOLDING................................................... 138
General................................................................. 138
Business Strategy....................................................... 138
Properties.............................................................. 141
Seasonality............................................................. 142
Employees and Labor Relations........................................... 142
The 1991 Taj Restructuring.............................................. 142
Certain Indebtedness.................................................... 143
Bonds................................................................. 143
NatWest Loan.......................................................... 144
First Fidelity Loan/Specified Parcels................................. 145
TTMI Note............................................................. 146
Working Capital Facility.............................................. 146
Legal Proceedings....................................................... 147
ATLANTIC CITY MARKET...................................................... 149
COMPETITION............................................................... 151
REGULATORY MATTERS........................................................ 154
Antitrust Regulations................................................... 154
Gaming Laws--General.................................................... 154
New Jersey Gaming Regulations........................................... 154
Indiana Gaming Regulations.............................................. 161
Other Laws and Regulations.............................................. 166
MANAGEMENT OF THCR........................................................ 168
Directors and Executive Officers........................................ 168
Management of Trump Plaza............................................... 170
Executive Compensation.................................................. 171
Employment Agreements................................................... 174
Compensation of Directors............................................... 175
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Committees of the Board of Directors.................................... 176
Compensation Committee Interlocks and Insider Participation............. 176
MANAGEMENT OF TAJ HOLDING................................................. 177
General................................................................. 177
Directors and Executive Officers........................................ 178
Executive Compensation.................................................. 180
Employment Agreements................................................... 182
Compensation of Directors............................................... 183
Compensation Committee Interlocks and Insider Participation............. 183
CERTAIN TRANSACTIONS...................................................... 184
THCR.................................................................... 184
Plaza Associates........................................................ 185
Taj Holding and Affiliates.............................................. 188
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THCR.... 190
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TAJ
HOLDING.................................................................. 191
DESCRIPTION OF THCR CAPITAL STOCK......................................... 192
General................................................................. 192
THCR Common Stock and THCR Class B Common Stock......................... 192
THCR Preferred Stock.................................................... 193
Provisions Having Possible Anti-takeover Effects........................ 193
Delaware Law and Certain Charter and By-Law Provisions.................. 194
DESCRIPTION OF THE THCR HOLDINGS PARTNERSHIP AGREEMENT.................... 196
Distributions and Allocations of Profits and Losses..................... 196
Management.............................................................. 196
Transferability of Interests............................................ 197
Additional Capital Contributions; Issuance of Additional Partnership In-
terests................................................................ 197
Exchange and Registration Rights........................................ 197
Tax Matters Partner..................................................... 198
Term.................................................................... 198
Contribution Agreement.................................................. 199
Indemnification......................................................... 199
Certain Regulatory Matters.............................................. 200
Other................................................................... 200
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 201
Voting Rights........................................................... 201
Issuance of Preferred Stock............................................. 201
Stockholders' Meetings.................................................. 202
Business Combinations................................................... 202
Change of Control....................................................... 202
Board of Directors...................................................... 203
Indemnification and Liability of Directors and Officers................. 203
Amendment of Certificate of Incorporation and By-Laws................... 204
Disqualification of Stockholders........................................ 204
MARKET PRICE AND DIVIDEND DATA............................................ 205
THCR.................................................................... 205
Taj Holding............................................................. 205
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................. 207
The Merger.............................................................. 207
Redemption of the Bonds................................................. 207
Redemption of the Taj Holding Class B Common Stock...................... 207
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Backup Withholding....................................................... 208
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS........................ 209
Dividends................................................................ 209
Gain on Disposition...................................................... 209
Federal Estate Taxes..................................................... 209
Information Reporting and Backup Withholding............................. 210
SUBMISSION OF STOCKHOLDER PROPOSALS........................................ 211
LEGAL MATTERS.............................................................. 211
EXPERTS.................................................................... 211
INDEX TO FINANCIAL STATEMENTS ............................................. F-1
</TABLE>
<TABLE>
<C> <S>
Annex A: Merger Agreement
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 the entire Proxy
Statement-Prospectus and Annexes hereto in their entirety.
GENERAL
The Merger Transaction is designed to combine into one entity two "Four Star"
Atlantic City casino hotels operated by Trump, as well as a riverboat gaming
project currently under development approximately 25 miles southeast of
downtown Chicago (the "Indiana Riverboat"), creating one of the largest casino
entertainment companies in the United States. 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 ("Trump Plaza"), which will be the largest casino hotel in Atlantic City
upon completion of its ongoing expansion program (the "Trump Plaza Expansion").
As part of the Merger Transaction, the maturity of Taj Associates' long-term
indebtedness will be extended by refinancing the Bonds with the Taj Notes,
providing the Taj Mahal with greater financial flexibility to undertake an
expansion program to increase its hotel room inventory and casino floor space
and expand its parking facilities (the "Taj Mahal Expansion"). In addition,
THCR's ownership and operation of the Indiana Riverboat, to be located at
Buffington Harbor on Lake Michigan, will give it a presence in the greater
Chicago metropolitan area market which is one of the most successful new gaming
markets in the United States. THCR will also continue to be the exclusive
vehicle through which Trump will engage in new gaming activities in both
emerging and established gaming jurisdictions.
THCR believes the acquisition of the Taj Mahal will strengthen THCR's
position as a leader in the casino entertainment industry. 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 6.2% 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. 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 the marquee status of the "Trump"
name, along with the critical mass resulting from the Merger Transaction, 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
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 fourth quarter of 1996 through the second quarter of 1999, are
preliminary and subject to modification.
(3) Excludes a 12,000 square foot poker, keno and race simulcasting room.
(4) Includes 150 rooms which were opened at Trump Plaza East on October 30,
1995.
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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 northern Indiana suburban and Chicago metropolitan areas.
Taj Holding. Taj Holding has no business operations and serves as a holding
company for a 50% investment in 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 new themed restaurants to be owned and
operated by nationally recognized restaurant operators, including the
Rainforest Cafe. In addition, the Taj Mahal features a 20,000-square-foot
multi-purpose entertainment complex known as the Xanadu Theater with seating
capacity for approximately 1,200 people, which can be used as a theater,
concert hall, boxing arena
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and 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.
Following the consummation of the Merger Transaction, THCR plans to undertake
an expansion plan at the Taj Mahal. It is currently expected that the Taj Mahal
Expansion will be funded out of the Taj Mahal's cash from operations and
borrowings and will be completed in phases from the fourth quarter of 1996
through 1999. The Taj Mahal Expansion, the plans for which are preliminary and
subject to change, involves the construction of a 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 fourth quarter of 1996; 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, to be completed in 1997; and the construction of two new 640 room
hotel towers adjacent to the Taj Mahal's existing hotel tower, 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 SPECIAL MEETINGS
Time, Place and Date. A Special Meeting of THCR stockholders will be held at
on March , 1996, at 10:00 a.m., local time.
A Special Meeting of Taj Holding stockholders 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.
Stockholders of THCR will also consider and vote upon any other matter that may
properly come 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 any other matter that may properly come 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
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<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 or 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--Interests of Certain Members of the Boards of
Directors of THCR and Taj Holding," "--Conflicts of Interest" and "Special
Factors--Interests of Certain Persons in the Merger Transaction."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The Board of Directors of THCR and the 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, and 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
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<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 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 8, 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 8, 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 8, 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 8, 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 on such date 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
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<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) 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 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 Agreement
shall have been duly approved by the requisite votes of the stockholders of
THCR and Taj Holding; (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 the New Jersey Casino
Control Commission (the "CCC"); (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 net 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 ($40.5
million assuming all such holders elect Cash Consideration); (ii) redeem the
outstanding 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
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Stock, as required in connection with the Bond redemption, at the redemption
price of $.50 per share (approximately $400,000 in the aggregate); (iv)
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"); and (v) pay Bankers Trust $10 million to obtain releases of the
liens and guarantees that Bankers Trust has in connection with certain
outstanding indebtedness owed by Trump to certain lenders, including Bankers
Trust (the "Bankers Trust Indebtedness"). See "Special Factors--Related Merger
Transactions."
Specified Parcels Purchase. 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 on a first lien basis by 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, in the event the First Fidelity Loan is not paid when due. 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 cause
the First Fidelity Loan to be satisfied 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 may be part of the
collateral securing the Taj Notes. See "Business of Taj Holding--Certain
Indebtedness--First Fidelity Loan/Specified Parcels."
Consent and Release Payment. As part of the Merger Transaction, Taj
Associates will pay $10 million to Bankers Trust in respect of certain of the
Bankers Trust Indebtedness. The Bankers Trust 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. In
exchange for such payment, Bankers Trust will consent to the Merger Transaction
and release its lien on Trump's direct and indirect equity interests in Taj
Associates and the pledge of the TTMI Note. See "Business of Taj Holding--
Certain Indebtedness--TTMI Note."
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 THCR Holdings and Taj Holdings LLC by contributing to THCR
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 causing TTMI to contribute to THCR Holdings and
Taj Holdings LLC, TTMI's 49.995% general partnership interest in Taj
Associates.
In addition, Trump will contribute to Taj Holding all of his Taj Holding
Class C Common Stock, which will be canceled pursuant to the Merger Agreement.
The Taj Holding Class C Common Stock provides Trump
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<PAGE>
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 the consummation of the Merger. The
Taj Services Agreement (as defined herein), pursuant to which Trump has
received or will receive $1,862,000, $1,353,000 and $1,566,000 during 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.
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 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 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 does not intend to exercise its right to cause Taj Associates
to make such payment and such right will terminate upon the redemption of the
Bonds.
In exchange for the contribution by Trump and TTMI to THCR Holdings and Taj
Holdings LLC, 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 40% to %, with a % interest 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 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 shares of THCR Common Stock,
representing approximately % of the then outstanding shares of THCR Common
Stock upon consummation of the Merger Transaction. At the time that TTMI
becomes a limited partner of THCR Holdings, THCR will issue 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 Common
Stock is not entitled to dividends or distributions. 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 (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,
one third of the underlying shares of which may be purchased on or prior to (i)
the third anniversary of the issuance of the warrant at $30.00 per share, (ii)
the fourth anniversary of the issuance of warrant at $35.00 per share and (iii)
the fifth anniversary of the issuance of the warrant at $40.00 per share.
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 THCR Holdings and Taj
Holdings LLC its general partnership interest in Taj Associates, and will cause
Taj Holding, which will become a direct wholly owned subsidiary of THCR after
the Effective Time, to contribute to TM/GP and will then cause TM/GP to
contribute to THCR Holdings the shares (consisting of 50% of the outstanding
capital stock) of TTMC held by Taj Holding. As a result of the Merger
Transaction, THCR's beneficial equity interest in THCR Holdings will increase
from 60% to %, including % interest held directly by TM/GP (assuming a $
price per share
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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 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 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 Bonds are redeemed, defeased
or paid, at the redemption price of $.50 per share. In connection with the
Merger Transaction, 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."
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 and Taj Holding; (ii) THCR's holding company structure, 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; (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) certain potential fraudulent conveyance risks; (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
16
<PAGE>
$100 principal amount of Bonds. The initial public announcement of the Merger
Transaction occurred after the close of trading on such date. The Taj Holding
Class B Common Stock and the 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 Bonds. There is no established market for 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 and holders of Taj Holding Class
B Common Stock and Bonds 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, and the redemption of the Bonds and the Taj Holding Class B
Common Stock will be taxable events for the holders thereof.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a "purchase" for accounting and
reporting purposes and Trump's contributions of all of his direct and indirect
ownership interests in Taj Associates are expected to be accounted for using
carry over basis accounting.
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."
17
<PAGE>
SUMMARY FINANCIAL INFORMATION OF THCR
The following tables set forth (a) certain historical consolidated financial
information of Trump Plaza Associates ("Plaza Associates") and Trump Plaza
Holding Associates ("Plaza Holding") (predecessors of THCR) for each of the
five years ended December 31, 1990 through 1994 and the nine month periods
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 June 1995 Offerings (as defined) see
Note 1). The unaudited pro forma information also gives effect to the Merger
Transactions (including the effects of the redemption of the Bonds, the
Offerings and the consolidation of Taj Associates in THCR's financial
statements). The historical
financial information of Plaza Holding 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 Plaza Holding 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 Plaza
Holding 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 $ 46,681 $ 27,697
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 81,362 (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>
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............ 58,023 46,165
Income from operations................... 115,549 116,735
Interest expense, net (l)................ 163,098 116,232
Net loss................................. (51,615) (4,337)
Net loss per common share (m)............ (2.93) (.25)
OTHER DATA:
EBITDA (b)(l)............................ 178,728 162,372
Ratio of earnings to fixed charges
(deficiency) (d)........................ (52,480) (3,344)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................. -- 1,532,073
Total long-term debt, net of current
maturities.............................. -- 1,281,663
Total capital............................ -- 138,428
</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 (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, Plaza Holding and
Plaza Associates, the owner and operator of Trump Plaza, to THCR Holdings 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, net expenses of Trump
World's Fair, non-cash compensation charges associated with awards to the
President of THCR under the 1995 Stock Incentive Plan, 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 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 $8.9 million for the years ended December 31, 1993 and
1994, and $6.2 million for the nine months ended September 30, 1994, and
$9.4 million for the period from inception (June 12, 1995) to September 30,
1995. Includes $ million and $ million related to the Trump Plaza
Expansion for the nine months ended September 30, 1994 and 1995,
respectively.
(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 from the net proceeds of
the June 1995 Offerings.
(m) Pro forma earnings per share assumes weighted average shares outstanding as
of September 30, 1995, shares awarded to the President of the Company
pursuant to the 1995 Stock Incentive Plan and shares to be issued in the
THCR Stock Offering.
(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 same had occurred on January 1, 1994 and the
Pro Forma Balance Sheet Data gives effect to the Merger Transaction as if
same had occurred on September 30, 1995.
20
<PAGE>
SUMMARY FINANCIAL INFORMATION OF TAJ ASSOCIATES
Taj Holding has no business operations and serves as a holding company for a
50% investment in 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)....... (120,277) (88,513) (35,099) (22,539) (36,658) (31,322) (13,708)
OTHER DATA:
EBITDA(c)............... 62,361 96,234 106,978 124,080 120,018 85,282 107,126
Capital expenditures.... 178,060 17,045 12,111 16,752 23,030 15,749 19,477
Ratio of earnings to
fixed charges
(deficiency)(d)........ (143,612) (71,105) (35,099) (22,539) (36,658) (31,322) (13,708)
Cash flows provided by
(used in)
operating activities... 7,798 35,126 31,786 48,634 33,422 40,562 73,310
Investing activities.... (117,965) (18,901) (17,759) (22,160) (27,231) (19,749) (23,751)
Financing activities.... 61,613 (16,170) (2,500) (2,492) (3,039) (2,355) (1,986)
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ 845,804 814,051 802,556 811,508 807,612 822,914 843,725
Total long-term debt,
net of current
maturities(e).......... 917(f) 573,844 595,682 625,765 656,701 651,626 688,143
Total capital
(deficit).............. (69,420) 167,837 130,913 106,641 67,812 73,609 52,899
OPERATING DATA (AT END OF
PERIOD)(G):
Casino Square Footage... 120,000 120,000 120,000 130,110 132,317 132,317 133,111
Number of Hotel Rooms... 1,250 1,250 1,250 1,250 1,250 1,250 1,250
Hotel Occupancy Rate.... 95.5% 87.3 % 91.3 % 92.3 % 92.4% 93.8 % 92.0%
TABLE GAMES:
Total Atlantic City
table drop(h).......... 7,903,249 7,219,192 7,055,034 6,835,572 6,832,517 5,131,243 5,350,188
Atlantic City table drop
growth................. 3.1% (8.7)% (2.3)% (3.1)% 0.0% (1.3)% 4.3%
Taj Mahal table games
market share(j)........ 12.6% 16.4 % 15.3 % 16.2 % 17.1% 16.4 % 17.7%
Taj Mahal table games
fair share(k).......... 12.3% 12.7 % 13.3 % 14.5 % 14.2% 14.4 % 13.4%
Taj Mahal table games
efficiency(l).......... 102.1% 129.1 % 115.0 % 111.7 % 120.4% 113.9 % 132.1%
Taj Mahal table units... 167 166 159 163 159 161 150
Taj Mahal table
revenue(i)............. 154,048 187,000 169,112 173,432 185,000 132,019 148,953
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(l)(m).... 1,724,309 1,851,070 2,113,829 2,214,638 2,297,280 1,738,656 1,971,442
Atlantic City slot
revenue growth........ 9.3% 7.4% 14.2% 4.8% 3.7% 1.7% 13.4%
Taj Mahal slot
revenue(i)(m)......... 150,842 197,383 246,947 264,504 259,114 200,213 217,475
Taj Mahal slot market
share(j).............. 8.8% 10.7% 11.7% 11.9% 11.3% 11.5% 11.0%
Taj Mahal slot fair
share(k).............. 14.2% 13.0% 12.7% 13.1% 12.6% 12.3% 12.5%
Taj Mahal slot
efficiency(l)......... 62.0% 82.3% 92.1% 90.8% 89.7% 93.5% 88.0%
Taj Mahal slot units... 2,909 2,778 2,840 3,146 3,342 3,241 3,540
Taj Mahal slot revenue
per day (actual
dollars)(i)(m)........ 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 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) Table and slot revenues represent the amount of money that a casino retains
(or wins) out of the total amount wagered at table games and slot machines,
respectively.
(j) Market share represents the total Taj Mahal gaming revenues expressed as a
percentage of total Atlantic City gaming revenues.
(k) Fair share is the percentage of the total number of gaming units (table
games or slot machines) in the Taj Mahal to the total number of gaming
units in casinos in Atlantic City.
(l) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(m) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
22
<PAGE>
CORPORATE AND FINANCIAL 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
Bonds, wholly owns Taj Funding, the issuer of the Bonds. Upon consummation of
the Merger Transaction, THCR Holdings will wholly own Taj Associates through
its ownership of a 99% equity interest in Taj Holdings LLC and all of the
capital stock of TTMC, which will own a 1% equity interest in Taj Holdings LLC.
In connection with the Merger Transaction, THCR Holdings and THCR Funding will
designate Taj Associates, Taj Funding, Taj Holdings LLC and TTMC as
unrestricted subsidiaries (each, an "Unrestricted Subsidiary") under the
indenture pursuant to which the Senior Notes were issued.
THCR is currently 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, Trump Plaza Funding, Inc.
("Plaza Funding"), Plaza Holding, Trump Plaza Holding, Inc. ("Plaza Holding
Inc.") and Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"). Plaza
Associates owns and operates Trump Plaza and is the guarantor of the 10 7/8%
Mortgage Notes due 2001 (the "Plaza Mortgage Notes"). Plaza Funding is the
issuer of the Plaza Mortgage Notes and owns a 1% equity interest in Plaza
Associates. Plaza Holding owns a 99% equity interest in Plaza Associates, and
Plaza Holding Inc. owns a 1% equity interest in Plaza Holding. THCR Funding,
together with THCR Holdings, are the co-obligors of the 15 1/2% Senior Secured
Notes due 2005 (the "Senior Notes"). Trump Indiana has a 50% equity interest in
Buffington Harbor Riverboats, LLC ("BHR").
Merger Sub, a wholly owned subsidiary of THCR, was formed for the purpose of
effecting the Merger and has not conducted any other business. Taj Holdings LLC
will be formed as a Delaware limited liability company prior to the
consummation of the Merger Transaction for the purpose of holding the 99%
equity interest in Taj Associates that it will acquire in the Merger
Transaction. The remaining 1% of Taj Associates will be owned by TTMC, which
will be a wholly owned subsidiary of THCR Holdings upon the consummation of the
Merger Transaction, thereby giving THCR Holdings beneficial ownership of 100%
of the equity of Taj Associates. TM/GP, a wholly owned subsidiary of Taj
Holding, currently serves as the managing general partner of Taj Associates.
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 members of the THCR Special Committee. 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 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.
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CURRENT OWNERSHIP STRUCTURE
[CHART OMITTED. GRAPHIC DEPICTS THE CURRENT OWNERSHIP STRUCTURE OF THCR AND TAJ
HOLDING AND THEIR RESPECTIVE SUBSIDIARIES]
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OWNERSHIP STRUCTURE AFTER THE MERGER TRANSACTION
[CHART OMITTED. GRAPHIC DEPICTS THE CURRENT OWNERSHIP STRUCTURE OF THCR AND ITS
SUBSIDIARIES AFTER THE MERGER TRANSACTION]
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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
September 30, 1995, after giving pro forma effect to the Merger Transaction,
THCR's consolidated indebtedness for borrowed money would have totaled
approximately $1.28 billion, including $155 million aggregate principal amount
of Senior Notes, $330 million aggregate principal amount of Plaza Mortgage
Notes, $750 million aggregate principal amount of Taj Notes (collectively, the
"Notes"), and approximately $45 million of indebtedness owed by Taj Associates
to National Westminster Bank U.S.A. ("NatWest") pursuant to the loan
agreement, dated as of November 3, 1989 (as amended, the "NatWest Loan"). See
"Special Factors--Sources and Uses of Funds in the Merger Transaction,"
"Business of THCR--Certain Indebtedness of THCR" and "Business of Taj
Holding--Description of Certain Indebtedness."
As a result of their designations as Unrestricted Subsidiaries, Taj Holdings
LLC, Taj Associates, Taj Funding and TTMC will not be subject to the Senior
Note Indenture, including the covenants and restrictions contained therein,
and THCR Holdings and THCR Funding will not derive any benefits (for covenant
purposes) from Taj Associates' operations. The Senior Note Indenture, however,
would restrict THCR Holdings and THCR Funding from providing Taj Associates
and Taj Funding with cash and/or credit support. Accordingly, as long as the
Senior Notes (or other similar indebtedness) are outstanding, Taj Associates
and Taj Funding will be required to satisfy their obligations, including the
obligations under the Taj Notes and future indebtedness incurred in connection
with the Taj Mahal Expansion, through cash generated by Taj Associates'
operations and through permitted borrowings and refinancings. See "--Holding
Company Structure; Risk in Refinancing and Repayment of Indebtedness; Need for
Additional Financing." In addition, no direct or indirect partner,
stockholder, employee, officer or director, as such, past, present or future,
of either of Taj Associates or Taj Funding or any successor entity will have
any personal liability in respect of the obligations of Taj Associates and Taj
Funding under the indenture with respect to which the Taj Notes will be issued
(the "Taj Mortgage Note Indenture") or the Taj Notes by reason of the status
as such partner, stockholder, employee, officer or director. The Senior Note
Indenture has a similar provision.
Assuming that the Merger Transaction had been consummated on January 1,
1994, THCR's consolidated pro forma earnings would have been insufficient to
cover fixed charges by $52.4 million for the year ended December 31, 1994 and
$3.3 million for the nine months ended September 30, 1995. Assuming the Merger
Transaction had been consummated on January 1, 1994, Taj Associates' pro forma
earnings would have been insufficient to cover fixed charges by $17.9 million
for the year ended December 31, 1994 and Taj Associates would have had a pro
forma ratio of earnings to fixed charges of 1.05x for the nine months ended
September 30, 1995, respectively.
Interest on the Senior Notes and the Plaza Mortgage Notes is, and interest
on the Taj Notes will be, payable semiannually in cash. The ability of THCR
Holdings and THCR Funding, Plaza Associates (as guarantor) and Plaza Funding,
Taj Associates (as guarantor) and Taj Funding to pay cash interest on the
Senior Notes, the Plaza Mortgage Notes and the Taj Notes, respectively, will
be dependent upon the ability of THCR and its subsidiaries (in the case of the
Senior Notes and the Plaza Mortgage Notes) and Taj Associates and Taj Funding
(in the case of the Taj Notes) to generate enough cash flow 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
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indebtedness, the ability of THCR Holdings and THCR Funding, Plaza Associates
and Taj Associates to make distributions or other payments to holders of their
equity interests is and will be severely limited. See "--Restrictions on
Certain Activities."
At September 30, 1995, Plaza Associates' Consolidated Net Worth (as defined
in the indenture pursuant to which the Plaza Mortgage Notes were issued (the
"Plaza Mortgage Note Indenture")) was approximately $83.7 million. If Plaza
Associates' Consolidated Net Worth should fall below negative $25.0 million,
Plaza Funding or Plaza Associates would be required to make an offer (a
"Deficiency Offer") to acquire 10% of the aggregate principal amount of the
Plaza Mortgage Notes, plus accrued interest to the date of purchase. There can
be no assurance that Plaza Funding or Plaza Associates would have sufficient
liquidity to fund a Deficiency Offer if one were required to be made.
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25.0
million. Obligations under the Working Capital Facility are secured to the
extent of such obligations by a mortgage on the assets of Taj Associates
senior to the lien of any mortgage that may secure the Taj Notes (the "Taj
Note Mortgage") and any mortgage that may secure the guarantee of Taj
Associates with respect to the Taj Notes. During 1994 and 1995, no amounts
were borrowed under the Working Capital Facility. If Taj Associates were to
draw on the entire amount of funds available to it under the Working Capital
Facility, the aggregate principal amount of Taj Associates' indebtedness would
be increased by an additional $25.0 million, and such additional indebtedness,
together with any accrued and unpaid interest thereon, would be senior in
right of payment to the Taj Notes.
The substantial indebtedness and fixed charges of THCR and Taj Associates
may limit their respective ability to respond to changing business and
economic conditions, to fund capital expenditures for future expansion or
otherwise, either through cash flow or additional indebtedness, to absorb
adverse operating results or to maintain their facilities at an operating
level which will continue to attract patrons. Future operating results are
subject to significant business, economic, regulatory and competitive
uncertainties and contingencies, many of which are outside their control. THCR
and Taj Associates, as the case may be, 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 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 their competitive position, reduce
cash flow and have a material adverse effect on their results of operations.
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, THCR Holdings is a holding company, the principal assets of which
are the shares of capital stock and partnership interest of its subsidiaries.
Dividends and distributions received with respect to equity interests in
subsidiaries of THCR Holdings are the sole source of funds which are available
to THCR Holdings to meet its obligations, including its obligations under the
Senior Notes. The payment of dividends and distributions by 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. See "--Restrictions on Certain
Activities" and "Description of the THCR Holdings Partnership Agreement."
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The ability of THCR Holdings and THCR Funding, Plaza Associates and Plaza
Funding, and Taj Associates and Taj Funding to pay their respective
indebtedness when due will depend upon their ability either 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 Plaza Mortgage Notes, and Taj Associates 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 Taj
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 and Taj Associates. There can be no assurance that the future
operating performance of THCR Holdings and THCR Funding, Plaza Associates and
Plaza Funding, and Taj Associates and Taj Funding, as the case may be, 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, 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 and is expected to open 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 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 an unsecured working capital facility and $10 million in
operating leases. Trump Indiana is seeking commitments for this additional
financing, although no 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.
Commitments for only a portion of this financing are 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 and the Plaza Mortgage Note Indenture impose
restrictions on the activities of THCR Holdings and its subsidiaries, and on
Plaza Associates and Plaza Funding, respectively. The Taj Note Indenture will
impose restrictions on the activities of Taj Associates and its subsidiaries.
In addition, the NatWest Loan and the Working Capital Facility impose
restrictions on the activities of Taj Associates and Taj Funding. 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
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restrictions could limit the ability of THCR (including Plaza Associates and
Trump Indiana), and Taj Associates, as the case may be, 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, the Plaza Mortgage Note Indenture or the Taj Note Indenture, which
could permit acceleration of the Notes and acceleration of certain other
indebtedness of THCR or Taj Associates 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 Plaza Holding 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 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 Bonds") were exchanged for the 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 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 change, is
expected to be completed in phases from the fourth quarter of 1996 through the
second quarter of 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,
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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 THCR 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.
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.
The Trump Plaza Expansion and the Taj Mahal Expansion will each require
various licenses and regulatory approvals, including the approval of the CCC.
Furthermore, the New Jersey Casino Control Act (the "Casino Control Act")
requires that additional guest rooms be put in service within a specified time
period after any such casino expansion. If Plaza Associates or Taj Associates
completed any casino expansion and subsequently did not complete the requisite
number of additional guest rooms within the specified time period, such party
might have to close all or a portion of the expanded casino in order to comply
with regulatory requirements, which could have a material adverse effect on
the results of operations and financial condition of Plaza Associates or Taj
Associates, as applicable. In addition, in order to 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. On June 24, 1993, Plaza Associates acquired a five-year
option to purchase the fee and leasehold interests comprising Trump Plaza East
(the "Trump Plaza East Purchase Option"). 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 nine months
ended September 30, 1995 and the year ended December 31, 1994, Plaza
Associates incurred approximately $3.2 million and $4.9 million, respectively,
of such expenses. Under the Trump Plaza East Purchase Option, Plaza Associates
has the right to acquire the fee interest in Trump Plaza East for a purchase
price of $28.0 million through December 31, 1996 increasing by $1.0 million
annually thereafter until expiration on June 30, 1998.
Should THCR determine to acquire Trump Plaza East, 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,
although there can be no assurance that such extension will 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."
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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 September 30, 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, THCR 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 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 (as defined) 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 will be funded
out of the Taj Mahal's cash from operations and borrowings. It is contemplated
that the Taj Note Indenture will permit the incurrence by Taj Associates of up
to $ million of additional indebtedness to finance the Taj Mahal Expansion,
subject to certain restrictions and conditions. No commitments are currently
in place with respect to financing any of the Taj Mahal Expansion. If the
operations of the Taj Mahal do not generate the anticipated cash flow to fund
the Taj Mahal Expansion, the ability to complete such expansion will depend on
the ability of Taj Associates to obtain financing for such purposes in
addition to that currently contemplated. There can be no assurance that Taj
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Holding will be able to generate sufficient cash flow from operations or to
obtain financing on terms satisfactory to Taj Holding, if at all. In addition,
any indebtedness incurred in connection with the Taj Mahal Expansion in
addition to the $ million to be permitted to be incurred under the Taj Note
Indenture would be subject to the limitations set forth in the Taj 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."
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 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 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.
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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 September 30, 1995, THCR and its predecessors had
capitalized approximately $23.7 million in development and pre-opening costs
solely 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, 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 on Lake
Michigan, which, among other things, would require a U.S. Coast Guard hull
inspection at five-year intervals. Operating on Lake Michigan 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 or
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
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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 are 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.
Total Atlantic City gaming revenues have increased over the past three
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 the first nine months of 1995, all 12 casinos experienced
increased gaming revenues compared to the first nine months of 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. 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 connection with the June 1993 legalization of
simulcasting and poker, increasing total casino 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, Minnesota, 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 use of the "Trump" name,
Trump
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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, 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, Las Vegas experienced significant expansion in
1993 and 1994, 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,
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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 their respective results
of operations or financial condition.
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 Board 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 serves as the Chairman of the Board of THCR pursuant to an Executive
Agreement entered into by Trump, THCR and THCR Holdings (the "Trump Executive
Agreement"). Pursuant to the terms of the Trump Executive Agreement, Trump
provides to THCR, from time to time, when reasonably requested, marketing,
advertising, promotional 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 a Contribution Agreement, dated as of June 12, 1995, by and between
Trump and THCR Holdings (the "Contribution Agreement"), 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
"Management of THCR--Employment Agreements" and "Description of the THCR
Holdings Partnership Agreement." Pursuant to the terms of a services agreement
(the "TPM Services Agreement") between Plaza Associates and Trump
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Plaza Management Corp., a corporation beneficially owned by Trump ("TPM"), TPM
provides certain advisory services to Plaza Associates. See "Certain
Transactions."
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. See "Special
Factors--Related Merger Transactions" and "Business of Taj Holding--Certain
Indebtedness."
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 executive 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 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 the 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, 1990, 1991 and 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. Bankers
Trust, an affiliate of BT Securities Corporation ("BT Securities"), which has
rendered financial advisory services to THCR and Taj Holding in the past, 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--TTMI Note."
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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 and could trigger an obligation to make a repurchase offer with
respect to certain of the Notes by the issuers thereof. 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 and, under such circumstances, could adversely affect the ability to
provide for the payment of interest or principal on the Notes, or to refinance
the Notes on the respective maturities thereof. 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."
In order to consummate the Merger Transaction, Trump will need to obtain
certain consents and waivers from his creditors, 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 and the Plaza Mortgage
Note Indenture contain, and the Taj Note Indenture will contain, provisions
relating to certain changes of control of THCR and THCR Holdings, Plaza
Associates and Taj Associates, respectively. 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. To the extent
required under the Plaza Mortgage Note Indenture, Trump will retain the right
to control the management of Plaza Associates for as long as Trump continues
to own beneficially 20% or more of the voting power of THCR and no other
holder beneficially owns a greater percentage of such voting power. See
"Description of the THCR Holdings Partnership Agreement."
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, Chief Executive Officer and Chief Financial
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 Holding's various
operations as well as certain other
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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. 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, 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 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 would also
be dependent on the ability of Barden to obtain the requisite licenses and
fund its portion of joint development and operating costs.
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
be likely to require THCR to apply for and obtain 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
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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 which will be provide, 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."
CONSIDERATIONS WITH RESPECT TO THE ACQUISITION OR DEVELOPMENT OF ADDITIONAL
GAMING VENTURES
THCR's growth strategy includes the 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 other
than the Taj Mahal. 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. 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,
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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 Trump's Castle and the Taj Mahal (during the period prior to the
consummation of the Merger Transaction)) 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 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.
THE POSSIBLE APPLICATION OF FRAUDULENT CONVEYANCE LAWS TO THE MERGER
TRANSACTION
The Merger Transaction may be subject to review under relevant federal and
state fraudulent conveyance laws if a bankruptcy or reorganization case were
commenced or a lawsuit (including in circumstances where bankruptcy is not
involved) were commenced by or on behalf of unpaid creditors, if such
creditors were to exist, of THCR, THCR Holdings, Taj Holding, Taj Funding, Taj
Associates, Trump or TM/GP (each a "Transaction Participant"), as the case may
be, at some future date. The laws vary among the various jurisdictions. In
general, under these laws, if a court were to find that, at the time property
was transferred, an obligation was incurred or a security interest was
granted, either (i) such property was transferred or such obligation was
incurred or security interest granted with the intent of hindering, delaying
or defrauding creditors, or (ii) both (a) the entity transferring the property
or incurring the obligation or granting such security interest received less
than reasonably equivalent or fair value or consideration in exchange for such
property, the incurrence of such obligation or the granting of such security
interest and (b) the entity (x) was insolvent or was rendered insolvent
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by reason thereof, (y) was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, or (z) intended to
incur, or believed, or reasonably should have believed, that it would incur,
debts beyond its ability to pay such debts as they matured (as all of the
foregoing terms are defined in or interpreted under the fraudulent conveyance
statutes) (a "Fraudulent Conveyance"), such court could impose legal and
equitable remedies, including (A) subordination of the obligation to presently
existing and future indebtedness of the entity, (B) avoidance of the issuance
of the obligation or granting of the security interest, and direction of the
repayment of any amounts paid from the proceeds thereof to a fund for the
benefit of the entity's creditors or (C) taking of other action detrimental to
the transferees of the property or holders of the instruments evidencing the
entity's obligations.
The measures of insolvency for purposes of determining whether a Fraudulent
Conveyance occurred would vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, an entity would be considered insolvent for
purposes of the foregoing if the sum of the entity's debts, including
contingent unliquidated and unmatured liabilities, is greater than all the
entity's property at a fair valuation, or if the present fair saleable value
of the entity's assets is less than the amount that would be required to pay
the probable liability on its existing debts as they become absolute and
matured.
THCR and Taj Holding believe that each Transaction Participant will receive
reasonably equivalent and fair value in connection with the applicable
transactions involved in the Merger Transaction. It is possible, however, that
a court could conclude differently. Notwithstanding such possibility, however,
each of THCR and Taj Holding believe that at the time of, or as a result of,
the consummation of the transactions comprising the Merger Transaction, such
entity and its subsidiaries (i) will not be insolvent or rendered insolvent
under the foregoing standards; (ii) will not be engaged in a business or
transaction for which its remaining assets constitute unreasonably small
capital; and (iii) do not intend to incur, and do not believe that it will or
would (subject to the discussion regarding the likely need to refinance the
Taj Notes at maturity as described herein under "--Holding Company Structure;
Risk in Refinancing and Repayment of Indebtedness; Need for Additional
Financing") incur, debts beyond its ability to pay such debts as they mature.
Consequently, THCR and Taj Holding believe that even if one or more elements
of the transactions were deemed to involve the transfer of property, the
incurrence of an obligation or the grant of a security interest for less than
reasonably equivalent or fair value, a Fraudulent Conveyance would not occur.
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, and certain guarantees of indebtedness by Trump and certain
of his affiliates will be released. 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 8,1996 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
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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 8, 1996 may affect DLJ's fairness opinion.
The fairness opinion of Rothschild dated January 8, 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 8, 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 $ in connection
with the Merger) ( 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 limited partnership interest in THCR Holdings, (ii)
an additional shares of THCR Common Stock reserved for issuance pursuant
to the 1995 Stock Plan (as defined) and (iii) 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,
issued to First Fidelity 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 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 such shares 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, and up to shares of THCR Common Stock pursuant to
the
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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). As required pursuant to the terms of the
THCR Holdings Partnership Agreement, Trump's beneficial ownership of limited
partnership interests in THCR Holdings will be adjusted to be convertible into
approximately shares of THCR Common Stock in connection with the Merger
Transaction. 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.
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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 Bonds (the "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 Bondholders and an additional $15 million principal
amount of new bonds to be issued to exchanging 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 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
Bondholders, who held in excess of 15% of the outstanding principal amount of
the 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 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 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 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 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 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 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 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
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 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 new mortgage notes by Taj
Funding with a longer maturity and greater covenant flexibility than the
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 Merger Transaction, including the Merger
Agreement. During November and December 1995 and January 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
Merger 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 Merger Transaction as described in the
draft of the Proxy Statement-Prospectus previously distributed to the Board,
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 Merger 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 Merger 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 Merger Transaction. Following
a presentation of the proposed Merger 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 Merger 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 Merger 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 Merger Transaction be submitted to a vote of all
unaffiliated stockholders of THCR in addition to the vote of all of THCR's
stockholders required by Delaware law.
On December 21, 1995, Rothschild presented to the Board of Directors of Taj
Holding its preliminary written report on the Merger, which is discussed below
(the "Rothschild Report"). 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 Joint Proxy Statement-Prospectus distributed
December 15, 1995. Rothschild described the Rothschild Report 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 Merger 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 Merger Transaction.
On January 4, 1996, the THCR Special Committee met with DLJ, Willkie Farr
and the General Counsel of THCR to discuss the Merger Transaction. At such
meeting, DLJ presented its preliminary 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. 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 Merger
Transaction and the DLJ Report. The DLJ Report may be inspected at THCR's
principal executive offices.
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 the Rothschild Report 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 the Rothschild
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 Merger 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 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.
On January 8, 1996, the THCR Special Committee met telephonically with DLJ,
Willkie Farr and the General Counsel of THCR to further discuss the DLJ
Report. 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 Merger Transaction, 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 telephonically 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. In determining to recommend approval and adoption of the
Merger Agreement and the transactions contemplated thereby and in approving
the Merger Agreement, the Board of Directors considered a number of factors,
including but not limited to the factors discussed below.
(a) In determining that the Proposed 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 opinion
dated January 8, 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,
(iv) 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,
(v) 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,
(vi) 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,
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(vii) 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.
(viii) 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,
(ix) 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
(x) 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 Bond with which such share trades, and
(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), (iv), (v), (vi) and (vii) 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) and (ii) 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
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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 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 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.
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.
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THCR. On January 8, 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. 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 Taj 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 Bonds with the Taj Notes which will extend the maturity of
Taj 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.
(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" and its written opinion, dated
January 8, 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 is fair to THCR from a financial point of
view. 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 $3.3 million annual rental 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 its liens on Trump's direct and
indirect equity interests in Taj Associates.
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(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 Trump Holding and Taj Holdings LLC 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 and Merger Sub reasonably believes that
the Merger Transaction 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.
OPINIONS OF THE FINANCIAL ADVISORS
Taj Holding--Opinion of Rothschild. Rothschild has delivered its written
opinion, dated January 8, 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 8, 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, (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
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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 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
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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 6.5x 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 5.9x 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 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 6.5x 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;
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specifically, the elimination of lease payments to Realty Corp. 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 a recent privately negotiated
block trade 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 opinion dated January 8, 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 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 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.
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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.
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.
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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.
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 Majal, 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
and 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.
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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 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 (the "AGI
Specified Parcels Report") which concluded that the market value of the
Specified Parcels was in the range of $80.2 million and $95.6 million.
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 opinion that, based upon,
and subject to, the assumptions, factors, limitations and other matters set
forth in its opinion, as of January 8, 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 does not constitute a recommendation to any holder as to how
to vote on the Merger Transaction and by its terms provides that no person
other than the Special Committee may rely upon such opinion.
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 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 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, (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 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
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Committee's consent, that Taj Holdings LLC, 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 any 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 8, 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, Donald 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.
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
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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 8, 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 December 22, 1995. DLJ also made a comparison of
the historical trading performance of THCR Common Stock against (i) the
Standard & Poors 400 Stock Index and against a DLJ constructed index of gaming
companies (the "Gaming Index"). DLJ selected the following companies whose
equity securities are publicly traded for inclusion in the Gaming Index based
upon qualitative factors which DLJ deemed relevant based upon its experience
in the gaming industry: Aztar Corporation, Bally Entertainment Corporation,
Griffin Gaming & Entertainment, Inc., Harrah's Entertainment, Inc. Hollywood
Casino Corporation, MGM Grand, Inc., Mirage Resorts, Incorporated, Rio Hotel &
Casino, 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 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 be (a)
dilutive to pro forma 1995 earnings per share, except on the basis described
in (ii) above, projected 1996 earnings per share, and 1997 projected earnings
per share on an unadjusted basis and (b) accretive to pro forma 1995 earnings
per share on the basis described in (ii) above and 1997 projected earnings per
share on each basis described in (ii) through (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.
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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 companies
comprising the Gaming Index. 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 Corporation ("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 companies in the Gaming
Index 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 in the Gaming Index 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 0.8x to 2.6x for the
companies included in the Gaming Index, was 1.9x 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
companies included in the Gaming Index to LTM EBITDA ranged from 4.5x to
11.2x, was 7.1x 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 companies included in the
Gaming Index to LTM EBIT ranged from 6.0x to 17.3x, was 10.1x for Bally
Entertainment, was 10.0x for Taj Associates without giving effect to synergies
and other cost reductions and was 8.4x 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 8.4x for the companies
included in the Gaming Index, was 6.0x for Bally Entertainment, was 5.9x for
Taj Associates without giving effect to synergies and other cost reductions
and was 5.3x for Taj Associates after giving effect to operating synergies and
other cost reductions. The ratio of price to book value for the companies
included the Gaming Index ranged form 0.8x to 4.1x, was 1.4x 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
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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, 10.0x for the Transaction without giving effect to
synergies and other cost reductions and 8.4x 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 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 $2,022 million and
$1,149 million to $1,544 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. THCR and Taj Associates provided 46.7% and 53.3%,
respectively, of the combined enterprise value; these ratios would be 47.8%
and 52.2%, 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
37.3% to 54.2% of combined revenues; from 34.4% to 49.0% of combined EBITDA
and from 37.0% to 50.0% of combined EBIT. On a corresponding basis Taj
Associates would provide from 62.7% to 45.8% of combined revenues, from 65.6%
to 51.0% of combined EBITDA and from 63.0% to 50.0% 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
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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 and
its 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 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 $4,500,000 upon consummation of the Merger; this fee may be
reduced, at THCR's option to $2,500,000 in exchange for a specific allocation
to DLJ of a portion of the underwriting commissions payable in connection with
the Taj Note Offering. 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 Taj 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).
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 is designed to combine into one entity two "Four Star" Atlantic
City casino hotels, operated by Trump, as well as the Indiana Riverboat,
thereby creating one of the largest casino entertainment companies in the
United States. THCR believes the acquisition of the Taj Mahal will strengthen
THCR's position as a leader in the casino entertainment industry. THCR further
believes that 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, and that the Merger Transaction will
enhance THCR's presence in the growing Atlantic City market.
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, THCR 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 THCR, which contribute to the feasibility of
the Merger Transaction. Although Taj Holding has in the past
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considered several recapitalization transactions, none of such
recapitalizations were implemented. See "Special Factors--Background to the
Merger Transaction." Other than certain variations of the current structure,
THCR, THCR Holdings, Merger Sub and Taj Holdings LLC did not consider any
alternatives to the Merger Transaction.
RELATED MERGER TRANSACTIONS
The Offerings. The consummation of the Taj Note Offering and the THCR Stock
Offering will occur simultaneously with, and will be conditioned upon, the
closing of the Merger. There can be no assurance that the Taj Note Offering
and the THCR Stock Offering will be able to be consummated on terms
satisfactory to THCR. To the extent that holders of Taj Holding Class A Common
Stock elect Stock Consideration, THCR will proportionately reduce the number
of shares offered pursuant to the THCR Stock Offering and issue shares
directly to such holders. In the event that either of such offerings is not
consummated, THCR would pursue any other alternatives available to it at the
time. The aggregate net proceeds, together with available cash of Taj
Associates, 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 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
Bond redemption, at the redemption price of $.50 per share (approximately
$400,000 in the aggregate); (iv) purchase, for $50 million in cash and 500,000
shares of THCR Common Stock, the Specified Parcels from Realty Corp.; and (v)
pay to Bankers Trust $10 million to obtain releases of the liens and
guarantees that Bankers Trust has in connection with certain of the Bankers
Trust Indebtedness.
THCR currently intends the Offerings to consist of the issuance in
underwritten transactions of up to $140,000,000 of THCR Common Stock
(including an over-allotment option) and up to $750,000,000 of aggregate
principal amounts of Taj Notes with up to a ten year maturity. However, such
financing could also involve public or private issuances of debt (including
convertible debt or debt accompanied by warrants) and/or equity securities or
foreign or domestic bank loans. THCR and its financial advisors have not yet
determined the precise composition and terms of the foregoing financing. The
actual amounts of debt and equity of various types raised will depend upon a
number of factors, including market conditions, the price of THCR Common Stock
and other factors beyond the control of THCR management. The interest rates on
any debt financing could be fixed or floating, and such financing could
require prepayments prior to maturity, periodically and/or result of asset
dispositions, excess cash flow or issuances of equity. To the extent the Taj
Note Offering involves commitments for future loans, such commitments may be
conditioned on continued compliance by Taj Associates with the terms of the
loan agreements and the absence of material adverse change in Taj Associates'
business. Subject to the terms of existing indentures, any debt financing may
be secured by some or all of Taj Associates' assets. Events of default
resulting in acceleration of the maturity of any debt financing are likely to
include failure to make required payments, breaches of covenants or
representations, default with respect to other debt securities, failure to
satisfy judgments and certain events of bankruptcy or insolvency. Any debt
financing is likely to include a change of control provision and restrictive
covenants prohibiting or limiting, among other things, mergers, sales of
assets, making of acquisitions and other investments, capital expenditures,
transactions with affiliates, entry into new lines of business, the incurrence
of additional debt and liens and the payment of dividends. Non-compliance
could result in the acceleration of such indebtedness.
Specified Parcels Purchase. 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 on a first
lien basis by 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,
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under certain circumstances, to terminate the lease on the Specified Parcels
in the event the First Fidelity Loan is not paid when due. 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
cause the First Fidelity Loan to be satisfied 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 may be part of the collateral securing the Taj Notes. See "Business of
Taj Holdings--Certain Indebtedness--First Fidelity Loan/Specified Parcels."
Consent and Release Payment. As part of the Merger Transaction, Taj
Associates will pay $10 million to Bankers Trust in respect of certain of the
Bankers Trust Indebtedness. The Bankers Trust 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. In exchange for such
payment, Bankers Trust will consent to the Merger Transaction and release its
lien on Trump's direct and indirect equity interests in Taj Associates and the
pledge of the TTMI Note. See "Business of Taj Holding--Certain Indebtedness--
TTMI Note."
Trump Contribution and Consideration. In connection with the Merger
Transaction, Trump will contribute to 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
THCR Holdings and Taj Holdings LLC TTMI's 49.995% general partnership interest
in Taj Associates.
In addition, Trump will contribute to Taj Holding all of his 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
the consummation of the Merger. The Taj Services Agreement, pursuant to which
Trump has received or will receive $1,862,000, $1,353,000 and $1,566,000
during 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 THCR Holdings and Taj
Holdings LLC, 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 40% to %, with a % interest 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 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 shares of THCR Common Stock,
representing approximately % of the then outstanding shares of THCR Common
Stock. At the time that TTMI becomes a limited partner of THCR Holdings, THCR
will issue 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
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convertible. The THCR Class B Stock is not entitled to dividends or
distributions. Upon conversion of all or any portion of a THCR Holdings
limited partnership interest into shares of THCR Common Stock, the
corresponding voting power of the THCR Class B Common Stock held (equal in
voting power to the number of shares of THCR Common Stock issued upon such
conversion) will be proportionately diminished. In connection with the Merger
Transaction, THCR will issue to Trump a warrant to purchase an aggregate of
1.8 million shares of THCR Common Stock, one third of the underlying shares of
which may be purchased on or prior to (i) the third anniversary of the
issuance of the warrant at $30.00 per share, (ii) the fourth anniversary of
the issuance of the warrant at $35.00 per share and (iii) 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."
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 THCR Holdings and Taj
Holdings LLC 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 THCR Holdings the shares (consisting of 50% of the outstanding
capital stock) of TTMC held by Taj Holding. As a result of the Merger
Transaction, THCR's beneficial equity interest in THCR Holdings will increase
from 60% to %, including a % interest 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).
SOURCES AND USES OF FUNDS IN THE MERGER TRANSACTION
The following table sets forth the sources and uses of funds for the Merger
Transaction (assuming a March 31, 1996 consummation).
Anticipated Sources of Funds
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
THCR Stock Offering(/1/)..................................... $100,000
Taj Note Offering............................................ 750,000
THCR Common Stock Issued to Holders of Taj Holding Class A
Common Stock and Trump(/2/)................................. 81,000
THCR Common Stock Issued to First Fidelity(/3/).............. 10,000
Available Cash............................................... 30,642
--------
Total Sources................................................ $971,642
========
Anticipated Uses of Funds
Acquisition of Taj Holding Class A Common Stock and Trump's
Direct and Indirect Equity Interests in Taj Associates(/1/). $ 81,000
Redeem Taj Holding Class B Common Stock...................... 400
Redeem Bonds(/4/)............................................ 780,242
Cash Payment to First Fidelity............................... 50,000
THCR Common Stock Issued to First Fidelity(/2/).............. 10,000
Cash Payment to Bankers Trust................................ 10,000
Transaction Fees and Expenses................................ 40,000
--------
Total Uses................................................... $971,642
========
</TABLE>
- --------
(/1/Assumes)all holders of Taj Holding Class A Common Stock elect Stock
Consideration.
(/2/Includes)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/Excludes)accrued interest through the redemption date.
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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 Taj Holdings LLC and 100% ownership of TTMC.
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 and $(13,708), respectively, and THCR
and Trump will have a % beneficial interest and % 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 and $(6,854), 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 and $(6,853),
respectively, and THCR, THCR Holdings, Merger Sub and Taj Holdings LLC did not
have any interest in Taj Associates. Upon consummation of the Merger
Transaction, THCR's % 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 % interest), and Trump's % 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 % 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.
In connection with the Merger Transaction, THCR will cause TM/GP, the holder
of a 49.995% general partnership interest in Taj Associates, to contribute to
Taj Holdings LLC TM/GP's 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 THCR Holdings the shares of TTMC held by Taj Holding at the time
of 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. Taj Associates and
Taj Funding, however, will continue to file periodic reports with the SEC
under the Exchange Act as required in connection with the Taj Notes. 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 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.
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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. Kelly, First, 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 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, Taj Holdings LLC,
TM/GP and Taj Holding, no director or officer of any of THCR, THCR Holdings,
Merger Sub, Taj Holdings LLC, TM/GP or Taj Holding beneficially owns any
shares of Taj Holding Class A Common Stock or Taj Holding Class B Common
Stock, except as set forth "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--
Idemnification and Insurance."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Holders of Taj Holding Class A Common Stock and holders of Taj Holding Class
B Common Stock and Bonds 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 and the redemption of the Bonds and the Taj
Holding Class B Common Stock is anticipated to be a taxable event for the
holders thereof.
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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. 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.
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
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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 voting power of the shares of THCR Class
A 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 the Trump/THCR Voting
Agreement, 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.
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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
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have indicated that they intend to vote their shares for approval and adoption
of the Merger Agreement. Pursuant to the Trump/Taj Holding Voting 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 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 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 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 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 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
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 Prior 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 Services, 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 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) 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, 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
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official notice of issuance; and (vi) the waiting period applicable to the
consummation of the Merger under the HSR Act will have expired or been
terminated.
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 Taj Note Offering will 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 will 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 will 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 the Merger Agreement; (iv) 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; (v) 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 (vi)
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 (iv) and (v) 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 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 THCR Holdings and Taj
Holdings LLC 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.
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,
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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
Taj 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 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
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; provided, however, that Taj Funding may consummate
the Taj Note Offering; (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 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,
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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 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.
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
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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.
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 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.
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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.
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.
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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.
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.
84
<PAGE>
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
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
85
<PAGE>
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.
86
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
(I) TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
(II) TRUMP HOTELS & CASINO RESORTS, INC. AND
(III) TRUMP HOTELS & CASINO RESORTS, INC. AND TRUMP TAJ MAHAL ASSOCIATES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheets of (i) Taj Associates,
(ii) THCR and (iii) THCR and Taj Associates 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 respective Balance Sheets
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 Taj Associates included on pages 87 to 91 give effect to (a) the
redemption of the Bonds and the Taj Holding Class B Common Stock, (b) the Taj
Note Offering, (c) the contribution by THCR of the net proceeds of the THCR
Stock Offering to Taj Associates, (d) the "push down" of the purchase
accounting adjustments associated with the Merger to Taj Associates, (e) the
termination of the Taj Services Agreement, (f) the cancellation of payments to
Realty Corp. and First Fidelity in connection with the acquisition of the
Specified Parcels, and (g) the payment to Bankers Trust to obtain releases of
the liens and guarantees that Bankers Trust has with respect to Taj
Associates. The Unaudited Pro Forma Consolidated Balance Sheet and Statements
of Operations of THCR included on pages 92 to 95 give effect to (h) the THCR
Stock Offering and the contribution of the net proceeds therefrom to Taj
Associates as described in (c) above, and the Statement of Operations gives
effect to (i) the June 1995 Offerings which reflect the formation and initial
financing of THCR and THCR Holdings and their acquisition of Trump Plaza and
Trump Indiana. The adjustments referred to in (i) above are required because
the historical audited and historical unaudited financial information included
in this Proxy Statement-Prospects for THCR, for all periods before June 12,
1995, does not give effect to the transactions described in (i) above. The
Unaudited Consolidated Pro Forma Balance Sheet and Consolidated Statements of
Operations of THCR and Taj Associates included on pages 96 to 99 give effect
to the (j) consolidation of Taj Associates, which will be an indirect wholly
owned subsidiary of THCR Holdings after the Merger Transaction. These
Unaudited Pro Forma Financial Statements assume that all holders of Taj
Holding Class A Stock elect to receive Stock Consideration in the Merger; if
this assumption is not accurate the size of the THCR Offering will be
increased to the extent of Cash consideration paid in the Merger (the maximum
THCR Offering size is $140 million).
The Merger is expected to be accounted for as a "purchase" for accounting
and reporting purposes and Trump's contributions of all of his direct and
indirect ownership interests in Taj Associates are expected to be accounted
for using carry over basis accounting.
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."
87
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR
ADJUSTMENTS CONTRIBUTION ADJUSTMENTS
TAJ FOR TAJ OF THCR STOCK FOR MERGER
ASSOCIATES NOTE OFFERING PRO FORMA OFFERING PROCEEDS TRANSACTION PRO FORMA
------------ ------------- --------- ----------------- ----------- ---------
(HISTORICAL)
<S> <C> <C> <C> <C> <C> <C>
Current Assets
Cash and cash
equivalents............. $108,769 $750,000 (a) $ 17,927 $87,000(f) $(10,000)(g) $ 44,927
(780,243)(b) (50,000)(h)
(390)(c)
(33,209)(d)
(27,000)(e)
Accounts receivable,
net..................... 15,759 15,759 15,759
Inventories........... 6,950 6,950 6,950
Prepaid expenses and
other current
assets.................. 5,175 5,175 5,175
Investment in THCR
Common Stock......... -- -- -- 10,000 (f) 10,000 (h) --
-------- -------- --------
Total current
assets.................. 136,653 45,811 72,811
Property and
Equipment, net....... 694,602 694,602 43,475 (h) 820,877
40,500 (i)
42,300 (j)
Deferred loan costs... 27,000 (e) 27,000 27,000
Other assets.......... 12,470 12,470 12,470
-------- -------- --------
Total assets........ $843,725 $779,883 $933,158
======== ======== ========
Current Liabilities
Current maturities of
long- term debt....... $ 868 $ 868 $ 868
Accounts payable and
accrued expenses..... 5,880 5,880 5,880
Accrued interest
payable................. 27,441 (27,430)(d) 11 11
Due to affiliates,
net..................... 547 547 547
Other current
liabilities............. 38,303 38,303 38,303
-------- -------- --------
Total current
liabilities............. 73,039 45,609 45,609
Other long-term
liabilities.......... 29,644 (5,779)(d) 23,865 (16,525)(h) 7,340
Bonds, net of
discount................ 643,135 (643,135)(b) -- --
Other long term debt.. 45,008 45,008 45,008
Notes................. -- 750,000(a) 750,000 750,000
-------- -------- -------- --------
Total Liabilities... 790,826 864,482 847,957
Capital:
Contributed Capital... 123,765 123,765 87,000(f) (10,000)(g) 85,201
40,500 (i)
(166,064)(k)
Accumulated Deficit... (70,866) (137,108)(b) (208,364) 42,300 (j) --
(390)(c) 166,064 (k)
-------- -------- --------
Total capital......... 52,899 (84,599) 85,201
-------- -------- --------
Total Liabilities
and Capital........ $843,725 $779,883 $933,158
======== ======== ========
</TABLE>
88
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
TAJ FOR TAJ FOR MERGER
ASSOCIATES NOTE OFFERING PRO FORMA TRANSACTION PRO FORMA
------------ -------------- --------- ----------- ---------
(HISTORICAL)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $461,622 $461,622 $461,622
Rooms................. 41,815 41,815 41,815
Food and Beverage..... 58,029 58,029 58,029
Other................. 17,894 17,894 17,894
-------- -------- --------
Gross Revenues...... 579,360 579,360 579,360
Less--Promotional
Allowances.............. 62,178 62,178 62,178
-------- -------- --------
Net Revenues........ 517,182 517,182 517,182
-------- -------- --------
Cost and Expenses:
Gaming................ 260,472 260,472 260,472
Rooms................. 15,662 15,662 15,662
Food and Beverage..... 25,035 25,035 25,035
General and
Administrative.......... 99,629 $(2,725)(h) 96,904 $(1,353)(m) 95,551
Depreciation and
Amortization............ 39,750 373 (h) 40,123 2,247 (n) 42,370
-------- -------- --------
440,548 438,196 439,090
-------- -------- --------
Income from
Operations.............. 76,634 78,986 78,092
Interest Income....... 2,019 2,019 2,019
Interest Expense...... (115,311) 17,275(l) (98,036) (98,036)
-------- -------- --------
Loss before
Extraordinary Loss...... $(36,658) $(17,031)(o) $(17,925)(o)
======== ======== ========
</TABLE>
89
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC. PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS FOR ADJUSTMENTS
TAJ TAJ FOR MERGER
ASSOCIATES NOTE OFFERING PRO FORMA TRANSACTION PRO FORMA
------------ --------------- --------- ----------- ---------
(HISTORICAL)
<S> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $377,368 $377,368 $377,368
Rooms................. 33,035 33,035 33,035
Food and Beverage..... 42,933 42,933 42,933
Other................. 11,479 11,479 11,479
-------- -------- --------
Gross Revenues...... 464,815 464,815 464,815
Less--Promotional
Allowances.............. 47,519 47,519 47,519
-------- -------- --------
Net Revenues........ 417,296 417,296 417,296
-------- -------- --------
Cost and Expenses:
Gaming................ 208,671 208,671 208,671
Rooms................. 11,500 11,500 11,500
Food and Beverage..... 18,597 18,597 18,597
General and
Administrative.......... 73,717 $(2,044)(h) 71,673 $1,296(m) 70,377
Depreciation and
Amortization............ 32,407 280 (h) 32,687 1,686(n) 34,373
-------- -------- --------
344,892 343,128 343,518
-------- -------- --------
Income from
Operations.............. 72,404 74,168 73,778
Interest Income....... 2,752 2,752 2,752
Interest Expense...... (88,864) 15,839(l) (73,025) (73,025)
-------- -------- --------
Income (loss) before
Extraordinary Loss...... $(13,708) $ 3,895(o) $ 3,505(o)
======== ======== ========
</TABLE>
90
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $750,000 aggregate principal amount of Taj
Mortgage Notes with interest at a rate of 12%. The Taj Mortgage Notes
are assumed to be issued at face value.
(b) To record the redemption of the Bonds 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 relating to the redemption of the Bonds
including 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 share of Taj
Holding Class B Common Stock as an extraordinary loss.
(d) To record the payment of accrued interest on the redemption of the
Bonds as of September 30, 1995.
(e) To record the payment of transaction expenses which are expected to be
approximately $27,000 and consist of the following:
<TABLE>
<S> <C>
Financial advisory fees and expenses................................ $
Underwriting discounts and commissions..............................
SEC filing fee......................................................
New York Stock Exchange listing fee.................................
Legal fees and expenses.............................................
Accounting fees and expenses........................................
Printing and engraving expenses.....................................
Proxy solicitation, distribution and Exchange Agent fees............
Blue Sky fees.......................................................
Miscellaneous.......................................................
Total.............................................................
</TABLE>
(f) To record the net proceeds from the THCR Stock Offering and the
issuance of the common stock for the purchase of the Specified Parcels,
which will be subsequently contributed to Taj Associates.
(g) To record the payment to Bankers Trust to obtain releases of the liens
and guarantees that Bankers Trust has with respect to Taj Associates.
(h) 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 on
the purchase.
(i) To record the purchase of the Taj Holding Class A Common Stock by THCR
which is being pushed down to the Taj Mahal's books as an adjustment to
property plant and equipment.
(j) To record 50% of the historical negative book value of Taj Associates,
as adjusted for the pro forma extraordinary loss on the redemption of
the Bonds, as part of the push down of the cost of the purchase of the
Taj Holding Class A Common Stock by THCR. No adjustment is required for
Trump's 50% interest since his contribution is recorded using the carry
over basis of accounting.
(k) To eliminate the capital deficit of the Taj Mahal as a result of the
push down of the cost of the purchase of Taj Holding Class A Common
Stock by THCR. This adjustment represents the accumulated deficit after
the adjustments for the Taj Note Offering of $208,364 less the $42,300
as described in footnote (j).
91
<PAGE>
(l) To record adjustments to historical interest expense to give effect to the
Merger Transaction as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 SEPTEMBER 30, 1995
----------------- ------------------
<S> <C> <C>
Historical interest expense $ 115,311 $ 88,864
(i)Elimination of interest and discount
accretion on Bonds..................... (105,141) (82,264)
(ii)Elimination of the interest on the
Realty Corp. obligation................ (2,047) (1,748)
(iii)Elimination of refinancing trans-
action expenses........................ (2,787) (1,352)
(iv)Reflect Taj Mortgage Note inter-
est.................................... 90,000 67,500
(v)Reflect amortization of deferred
loan costs............................. 2,700 2,025
--------- --------
Pro Forma Adjustment................... $ (17,275) $(15,839)
========= ========
Pro Forma Interest Expense............. $ 98,036 $ 73,025
========= ========
</TABLE>
A 0.25% increase in the interest rate on the Taj Notes would result in a
$1,875 and a $1,406 increase in interest expense for the year ended December
31, 1994 and the nine months ended September 30, 1995, respectively.
(m) To record the elimination of the fee resulting from the termination of the
Taj Services Agreement.
(n) To record the additional depreciation expense resulting from the
allocation of the purchase price to property and equipment. The purchase
price is being allocated as follows: $47,615 to land and $78,660 to
building based upon an appraisal and the amount allocated to building is
being depreciated over the remaining life of the building (35 years).
(o) Excludes the effect of the extraordinary loss of $137,498 upon the
redemption of the Bonds. See notes (b) and (c).
92
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
THCR ADJUSTMENTS PRO FORMA
------------ ----------- ---------
(HISTORICAL)
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents.............. $ 23,357 $ (500)(a) $ 22,857
Restricted cash........................ 24,225 24,225
Accounts receivable, net............... 13,074 13,074
Inventories............................ 2,598 2,598
Other current assets................... 5,497 5,497
-------- --------
Total current assets................. 68,751 68,251
Investment in Taj Associates............. -- 40,500 (a) 137,500
97,000 (b)
Property and Equipment, net.............. 399,922 399,922
Land rights.............................. 29,412 29,412
Cash restricted for future construction.. 71,750 71,750
Note receivable.......................... 3,091 3,091
Deferred loan costs, net................. 9,855 9,855
Other assets............................. 16,634 16,634
-------- --------
Total assets......................... $599,415 $736,415
======== ========
Current Liabilities
Current maturities of long-term debt... $ 2,100 $ 2,100
Accounts payable and accrued expenses.. 31,946 31,946
Accrued interest payable............... 17,743 17,743
Due to affiliates, net................. 403 403
Other current liabilities.............. -- --
-------- --------
Total current liabilities............ 52,192 52,192
Long-term debt, net of discount and
current maturities....................... 486,655 486,655
Deferred income taxes.................... 5,173 5,173
-------- --------
Total Liabilities.................... 544,020 544,020
Minority interest........................ 1,668 1,668
Capital:
Common Stock........................... 101 75 (a,b) 176
Additional paid in capital............. 52,327 39,980 (a) 189,252
96,945 (b)
Retained earnings...................... 1,299 1,299
-------- --------
Total Capital........................ 53,727 190,727
-------- --------
Total Liabilities and Capital........ $599,415 $736,415
======== ========
</TABLE>
93
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------
PLAZA TRUMP
HOLDING INDIANA
THCR AND PLAZA AND OTHER PRO FORMA
(PARENT CO. ONLY) ASSOCIATES JURISDICTIONS COMBINED ADJUSTMENTS PRO FORMA
----------------- ---------- ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ -- $261,451 -- $261,451 $261,451
Rooms................. -- 18,312 -- 18,312 18,312
Food and Beverage..... -- 40,149 -- 40,149 40,149
Other................. -- 8,408 -- 8,408 8,408
----- -------- ------- -------- --------
Gross Revenues...... -- 328,320 -- 328,320 328,320
Less--Promotional
Allowances........... -- 33,257 -- 33,257 33,257
----- -------- ------- -------- --------
Net Revenues........ -- 295,063 -- 295,063 295,063
----- -------- ------- -------- --------
Cost and Expenses:
Gaming................ -- 139,540 -- 139,540 139,540
Rooms................. -- 2,715 -- 2,715 2,715
Food and Beverage..... -- 17,050 -- 17,050 17,050
General and
Administrative....... -- 73,075 $ 25 73,100 $ 5,933 (c) 79,033
Depreciation and
Amortization......... -- 15,653 -- 15,653 15,653
Other................. -- 3,615 -- 3,615 3,615
----- -------- ------- -------- --------
-- 251,648 25 251,673 257,606
----- -------- ------- -------- --------
Income (loss) from
Operations........... -- 43,415 (25) 43,390 37,457
Interest Income....... -- 842 7 849 300 (d) 1,149
Interest Expense...... -- (49,061) (3,192) (52,253) (24,025)(e) (68,230)
(714)(f)
9,777 (g)
(1,015)(h)
Other non-operating
expense.............. -- (4,931) -- (4,931) (4,931)
----- -------- ------- -------- --------
Loss before state income
taxes, minority
interest and
extraordinary loss..... -- (9,735) (3,210) (12,945) (34,555)
Benefit for state income
taxes.................. -- (865) -- (865) (865)
----- -------- ------- -------- --------
Loss before minority
interest and
extraordinary loss..... -- (8,870) (3,210) (12,080) (33,690)
Minority Interest....... -- -- -- -- --
----- -------- ------- -------- --------
Loss before
extraordinary loss..... -- $ (8,870) $(3,210) $(12,080) $(33,690)
===== ======== ======= ======== ========
</TABLE>
94
<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)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------
NINE MONTHS
ENDED
FROM INCEPTION DATE (JUNE 12, 1995) SEPTEMBER 30,
THROUGH SEPTEMBER 30, 1995 1995
------------------------------------- -------------
THCR TRUMP
THCR HOLDINGS INDIANA PLAZA HOLDING
(PARENT CO. (PARENT CO. AND OTHER AND PLAZA PRO FORMA
ONLY) ONLY) JURISDICTIONS ASSOCIATES COMBINED ADJUSTMENTS PRO FORMA
----------- ----------- ------------- ------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................. -- -- -- $224,499 $224,499 $224,499
Rooms.................. -- -- -- 14,671 14,671 14,671
Food and Beverage...... -- -- -- 33,403 33,403 33,403
Other.................. -- -- -- 7,187 7,187 7,187
------- ------- ----- -------- -------- --------
Gross Revenues......... -- -- -- 279,760 279,760 279,760
Less--Promotional
Allowances............ -- -- -- 28,611 28,611 28,611
------- ------- ----- -------- -------- --------
Net Revenues........... -- -- -- 251,149 251,149 251,149
------- ------- ----- -------- -------- --------
Cost and Expenses:
Gaming................. -- -- -- 121,987 121,987 121,987
Rooms.................. -- -- -- 1,741 1,741 1,741
Food and Beverage...... -- -- -- 13,783 13,783 13,783
General and
Administrative........ $ 1,202 $ 1,371 $ 393 51,073 54,039 $ 2,294 (c) 56,333
Depreciation and
Amortization.......... -- -- -- 11,792 11,792 11,792
Other.................. -- -- -- 2,556 2,556 2,556
------- ------- ----- -------- -------- --------
1,202 1,371 393 202,932 205,898 208,192
------- ------- ----- -------- -------- --------
Income (loss) from
Operations............ (1.202) (1,371) (393) 48,217 45,251 42,957
Interest Income........ -- 2,075 -- 689 2,764 134 (d) 2,898
Interest Expense....... -- (7,572) -- (34,419) (41,991) (10,745)(e) (48,857)
(536)(f)
4,878 (g)
(463)(h)
Other non-operating
expense............... -- -- -- (3,847) (3,847) (3,847)
------- ------- ----- -------- -------- --------
Income (loss) before
state income taxes,
minority interest and
extraordinary loss..... (1,202) (6,868) (393) 10,640 2,177 (6,849)
Provision for state
income taxes........... -- -- -- 993 993 993
------- ------- ----- -------- -------- --------
Income (loss) before
minority interest and
extraordinary loss..... (1,202) (6,868) (393) 9,647 1,184 (7,842)
Minority interest....... -- -- -- -- (1,668) 1,668 (i) --
------- ------- ----- -------- -------- --------
Income (loss) before
extraordinary loss..... $(1,202) $(6,868) $(393) $ 9,647 $ (484) $ (7,842)
======= ======= ===== ======== ======== ========
</TABLE>
95
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS:
THCR and THCR Holdings were formed in March 1995 and commenced operations on
June 12, 1995 with the consummation of the June 1995 Stock Offering and the
June 1995 Note Offering.
(a) To record the purchase of Taj Holding Class A Common Stock through the
issuance of THCR Common Stock and with available cash.
(b) To record the proceeds from the THCR Stock Offering which will be
subsequently contributed to Taj Associates, net of transaction expenses
which are expected to be approximately $13,000 and consist of the
following:
<TABLE>
<S> <C>
Financial advisory fees and expenses................................. $
Underwriting discounts and commissions...............................
New York Stock Exchange listing fee..................................
SEC filing fees......................................................
Legal fees and expenses..............................................
Accounting fees and expenses.........................................
Printing and engraving expenses......................................
Proxy solicitation, distribution and Exchange Agent fees.............
Blue Sky fees........................................................
Miscellaneous........................................................
----
Total.............................................................. $
====
</TABLE>
(c) To record additional general and administrative expenses relating to the
operations of THCR Holdings, Trump Indiana and THCR.
(d) To record interest income on a $3,000 note receivable from Trump at prime
plus 1%.
(e) To record interest expense relating to the Senior Notes.
(f) To reflect 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 additional amounts, no assurances can be given that such
financing will be available.
(g) To eliminate interest expense (including amortization of deferred
financing costs) on the PIK Notes which were redeemed with the proceeds
from the offering of the June 1995 Stock Offering.
(h) To reflect the amortization of deferred financing costs associated with
the Senior Notes.
(i) To eliminate minority interest as pro forma adjustments result in a loss
at THCR Holdings and there is no minority interest basis on the THCR
Balance Sheet.
96
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND TRUMP TAJ MAHAL ASSOCIATES PRO FORMA
CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1995 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------
ELIMINATION
AND
TAJ PRO FORMA
THCR ASSOCIATES ADJUSTMENTS PRO FORMA
-------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents....... $ 22,857 $ 44,927 $ 67,784
Restricted cash................. 24,225 -- 24,225
Accounts receivable, net........ 13,074 15,759 28,833
Inventories..................... 2,598 6,950 9,548
Other current assets............ 5,497 5,175 10,672
-------- -------- ----------
Total current assets.......... 68,251 72,811 141,062
Investment in Taj Associates...... 137,500 -- $(97,000)(a) --
(40,500)(b)
Property and Equipment, net....... 399,922 820,877 1,220,799
Land rights....................... 29,412 -- 29,412
Cash restricted for future
construction...................... 71,750 -- 71,750
Note receivable................... 3,091 -- 3,091
Deferred loan costs, net.......... 9,855 27,000 36,855
Other assets...................... 16,634 12,470 29,104
-------- -------- ----------
Total assets.................. $736,415 $933,158 $1,532,073
======== ======== ==========
Current Liabilities
Current maturities of long-term
debt.............................. $ 2,100 $ 868 $ 2,968
Accounts payable and accrued
expenses.......................... 31,946 5,880 37,826
Accrued interest payable........ 17,743 11 17,754
Due to affiliates, net.......... 403 547 950
Other current liabilities....... -- 38,303 38,303
-------- -------- ----------
Total current liabilities..... 52,192 45,609 97,801
Other long-term liabilities....... 7,340 7,340
Long-term debt, net of discount
and current maturities............ 486,655 795,008 1,281,663
Deferred income taxes............. 5,173 -- 5,173
-------- -------- ----------
Total Liabilities............. 544,020 847,957 1,391,977
Minority interest................. 1,668 -- 1,668
Capital:
Common Stock.................... 176 176
Additional paid in capital...... 189,252 85,201 (97,000)(a) 136,953
(40,500)(b)
Retained earnings .............. 1,299 -- 1,299
-------- -------- ----------
Total Capital................. 190,727 85,201 138,428
-------- -------- ----------
Total Liabilities and Capital. $736,415 $933,158 $1,532,073
======== ======== ==========
</TABLE>
97
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND TRUMP TAJ MAHAL ASSOCIATES PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA
--------------------
TAJ PRO FORMA
THCR ASSOCIATES ADJUSTMENTS PRO FORMA
-------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Gaming................... $261,451 $461,622 $ 723,073
Rooms.................... 18,312 41,815 60,127
Food and Beverage........ 40,149 58,029 98,178
Other.................... 8,408 17,894 26,302
-------- -------- -----------
Gross Revenues......... 328,320 579,360 907,680
Less--Promotional
Allowances................. 33,257 62,178 95,435
-------- -------- -----------
Net Revenues........... 295,063 517,182 812,245
-------- -------- -----------
Cost and Expenses:
Gaming................... 139,540 260,472 400,012
Rooms.................... 2,715 15,662 18,377
Food and Beverage........ 17,050 25,035 42,085
General and
Administrative............. 79,033 95,551 174,584
Depreciation and
Amortization............... 15,653 42,370 58,023
Other.................... 3,615 -- 3,615
-------- -------- -----------
257,606 439,090 696,696
-------- -------- -----------
Income from Operations... 37,457 78,092 115,549
Interest Income.......... 1,149 2,019 3,168
Interest Expense......... (68,230) (98,036) (166,266)
Other non-operating
expenses................... (4,931) -- (4,931)
-------- -------- -----------
Loss before state income
taxes and extraordinary
loss....................... (34,555) (17,925) (52,480)
Benefit for state income
taxes...................... (865) -- (865)
-------- -------- -----------
Loss before extraordinary
loss (d)................... $(33,690) $(17,925)(e) $ (51,615)(e)
======== ======== === ===========
Loss per share before
extraordinary loss......... $ (2.93)
===========
Weighted Average Shares
Outstanding (c)............ $17,633,333
===========
</TABLE>
98
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND TRUMP TAJ MAHAL ASSOCIATES PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
PRO FORMA
---------------------
TAJ PRO FORMA
THCR ASSOCIATES ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Gaming.................. $ 224,499 $ 377,368 $ 601,867
Rooms................... 14,671 33,035 47,706
Food and Beverage....... 33,403 42,933 76,336
Other................... 7,187 11,479 18,666
--------- --------- ------------
Gross Revenues........ 279,760 464,815 744,575
Less--Promotional
Allowances................ 28,611 47,519 76,130
--------- --------- ------------
Net Revenues.......... 251,149 417,296 668,445
--------- --------- ------------
Cost and Expenses:
Gaming.................. 121,987 208,671 330,658
Rooms................... 1,741 11,500 13,241
Food and Beverage....... 13,783 18,597 32,380
General and
Administrative............ 56,333 70,377 126,710
Depreciation and
Amortization.............. 11,792 34,373 46,165
Other................... 2,556 -- 2,556
--------- --------- ------------
208,192 343,518 551,710
--------- --------- ------------
Income from Operations.. 42,957 73,778 116,735
Interest Income......... 2,898 2,752 5,650
Interest Expense........ (48,857) (73,025) (121,882)
Other non-operating
expenses.................. (3,847) -- (3,847)
--------- --------- ------------
Income (loss) before state
income taxes and
extraordinary loss....... (6,849) 3,505 (3,344)
Provision for state income
taxes..................... 993 -- 993
--------- --------- ------------
Income (loss) before
extraordinary loss (d).... $ (7,842) $ 3,505(e) $ (4,337)(e)
========= ========= ============
Loss per share before
extraordinary loss........ $ (0.25)
============
Weighed Average Shares
Outstanding (c)........... $ 17,633,333
============
</TABLE>
99
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
PRO FORMA ADJUSTMENTS:
(a) To record the elimination of THCR's investment in the Taj Mahal
resulting from the contribution of the proceeds of the THCR Stock
Offering to Taj Associates.
(b) To record the elimination of THCR's investment in the Taj Mahal
resulting from the purchase of Taj Holding Class A Common Stock.
(c) 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 Incentive Plan and the
shares to be issued in this offering.
(d) No amounts attributable to the minority interest in THCR Holdings have
been recorded since there is no minority interest basis on the balance
sheet of THCR to absorb such losses.
(e) Excludes the extraordinary loss upon the redemption of the Bonds and
the Taj Holding Class B Common Stock.
100
<PAGE>
SELECTED HISTORICAL
FINANCIAL INFORMATION OF THCR
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Plaza Holding (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 Plaza Holding 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 Plaza Holding 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 Plaza Holding 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,
Plaza Holding 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.
101
<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 on the weighted average number of shares of
THCR Common Stock and common stock equivalents including shares awarded to
the Chief Executive Officer under a phantom stock unit award. 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.
102
<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. 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.
103
<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
104
<PAGE>
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
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 Mortgage 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--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 has no definitive
plans with respect to exercising the Trump Plaza East Purchase Option.
THCR management believes that 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, at September 30, 1995, of
approximately
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$12.7 million as contemplated by the Trump Plaza Expansion. However,
additional financing will be required should THCR propose to exercise the
Trump Plaza East Purchase Option, and there can be no assurance that such
financing will be available on attractive terms, if at all. 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
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 equipment financing, $10 million from a
mortgage on Trump Indiana's interest in the Buffington Harbor site or from an
unsecured working capital facility and $10 million from operating leases.
Trump Indiana has received commitments for $15 million in vessel financing and
$10 million in slot machine
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financing.Trump Indiana is seeking commitments 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 Trump
World's Fair, Trump Plaza's casino floor space would be the largest in
Atlantic City, increasing from 75,000 square feet to an aggregate of
approximately 139,340 square feet of gaming space, housing a total of
approximately 4,300 slot machines and 142 table games. Trump Plaza's
hotel capacity would increase to a total of 1,404 guest rooms from 555
rooms, making Trump Plaza's guest room inventory the largest in Atlantic
City.
. 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, with only five of these 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 northern Indiana
suburban and Chicago metropolitan areas. Approximately 11.2 million and
24.2 million people live within a 100- and 200-mile radius of the site.
. 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 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 "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 $51.6
million as of September 30, 1995. Upon completion, Trump World's Fair would
add 49,340 square feet of casino floor space directly accessible from The
Boardwalk and 500 hotel rooms, connected with the current Trump Plaza hotel
and casino facility 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. THCR management believes that
Trump World's Fair represents an attractive expansion opportunity and use of
capital, particularly relative to what management estimates it would cost to
construct a comparable facility. Commencement of operations at Trump World's
Fair is contingent upon, among other things, obtaining certain regulatory
approvals. See "Risk Factors--Trump Plaza Expansion and the Taj Mahal
Expansion."
Trump Plaza is also in the process of renovating and integrating into Trump
Plaza a hotel tower, Trump Plaza East, located adjacent to Trump Plaza's
existing facility, at a remaining cost of approximately $25.2 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 has an option to acquire it from an unaffiliated entity. See
"Certain Transactions--Plaza Associates--Trump Plaza East." Trump Plaza East
will be reconfigured to provide a new entranceway to Trump Plaza directly off
the
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Atlantic City Expressway. Management believes the increased hotel capacity as
a result of the Trump Plaza Expansion will enable it better to meet demand and
accommodate its casino guests, as well as to host additional and larger
conventions and corporate meetings. 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
Main Tower. The casino in the existing facility of Trump Plaza (the "Main
Tower") 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. The 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 the 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.
The Main Tower's guest rooms are located in a tower which affords most guest
rooms a view of the ocean. While rooms are of varying size, a typical guest
room consists of approximately 400 square feet. Trump Plaza also features 16
one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites." The Super
Suites are located on the top two floors of 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 (the "Club
Level Lounge") that offers food and bar facilities.
The 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.
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
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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 East. Plaza Associates is in the process of renovating and
integrating Trump Plaza East, which is located directly adjacent to the Main
Tower, into Trump Plaza. The hotel will be opened in stages beginning with the
hotel rooms, of which 150 were opened on October 30, 1995. This construction
was completed ahead of schedule 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 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.
Plaza Associates is obligated to either pay a tax to the CRDA of 2.5% of its
gross casino revenues (excluding revenues from casino operations at Trump
World's Fair during its first year of operation, and including such revenues
at all times after its first year of operation) or to obtain investment tax
credits in an amount equal to 1.25% of its gross casino revenues. In 1993,
Plaza Associates obtained approval from the CRDA for $14.1 million of funding
with respect to the demolition of certain structures at Trump Plaza East and
the construction of certain improvements on the site. Recently, the New Jersey
Superior Court ruled that the CRDA exceeded its statutory authority in
granting such approval. The ruling is being appealed by Plaza Associates, but
there can be no assurance as to the success of such appeal. See "--Legal
Proceedings--Trump Plaza East."
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 ("high-end players"). 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.
After a period of turnover in management in 1994, Plaza Associates hired a
new president and chief operating officer for Trump Plaza, as well as several
other senior managers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations of THCR--Results of Operations for the
Years Ended December 31, 1994 and 1993" and "Management of THCR--Employment
Agreements." The new management team at Trump Plaza is dedicated to continuing
Trump Plaza's long-standing commitment to maintaining high quality amenities,
while at the same time pursuing an aggressive new strategy focusing on
strategic expansion and customer service. 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 casino gaming
activity generally at its casino and, in particular, to attract casino patrons
who tend to wager more frequently and in larger denominations than the typical
Atlantic City patron. These initiatives include targeted marketing and
advertising campaigns directed to select groups of customers in the Boston-New
York-Washington, D.C. corridor, the introduction of new slot machines and
table games and the addition of bill acceptors on slot machines.
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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 and has reduced credit to
international patrons. 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 and
complete both phases prior to commencing operations. On August 30, 1995, Trump
Indiana entered into a
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loan and security agreement with dFS, pursuant to which dFS has agreed,
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 29, 1995, Trump Indiana acquired, pursuant to the Agreement of Sale
(the "Site Sale Agreement") with Lehigh Portland Cement Company ("Lehigh"),
dated May 10, 1995, approximately 88 acres of land at
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Buffington Harbor for $13.5 million (the "Site Purchase Price"). Pursuant to
the Site Sale Agreement, Lehigh also granted Trump Indiana a ten year lease
for the initial use of certain of Lehigh's property adjacent to the Buffington
Harbor site for the docking of the Indiana Riverboat vessel. Trump Indiana
will make no lease payments 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 Trump Indiana 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.
OTHER JURISDICTIONS
Casino gaming is currently permitted in a number of other states, as well as
on Native American lands in a number of other states. New or expanded
operations by other persons can be expected to increase competition for THCR's
existing and future operations and could result in the saturation of certain
gaming markets.
THCR explores opportunities to establish additional gaming operations,
particularly in jurisdictions where the legalization of casino gaming is
relatively recent or is anticipated. There can be no assurance as to whether,
or the point at which, THCR will be successful in commencing gaming operations
in any particular jurisdiction. The results of THCR's efforts to establish
such operations will depend upon the level of competition for available
opportunities, THCR's financial resources and other factors which may be
beyond THCR's control, including the decision of various jurisdictions to
establish or expand legalized casino gaming and risks associated with
construction. See "Risk Factors--Considerations with Respect to the
Acquisition or Development of Additional Gaming Ventures."
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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 subject to the liens of the
mortgages associated with the Plaza Mortgage Notes (collectively, the "Plaza
Mortgages") and certain other liens. Upon its acquisition, Trump Plaza East
would also become subject to the Plaza Mortgages. One of the Plaza Mortgages
(the "Plaza Note Mortgage") and related assignments of assets encumber the
real property owned and leased by Plaza Associates and substantially all of
Plaza Associates' other assets, all of which constitute Trump Plaza and its
related properties, and secure a note from Plaza Associates to Plaza Funding
in the same principal amount of the Plaza Mortgage Notes (the "Plaza
Associates Note"). Plaza Funding has assigned the Plaza Note Mortgage and
Plaza Associates Note to the trustee under the Plaza Mortgage Note Indenture.
Another of the Plaza Mortgages (the "Plaza Guarantee Mortgage") and related
assignments of assets of Plaza Associates encumber the real property and
assets of Plaza Associates described above, senior to the liens of the Plaza
Note Mortgage, and secure Plaza Associates' non-recourse guarantee (the "Plaza
Guarantee") of the Plaza Mortgage Notes. The Plaza Mortgage Note Indenture and
the Plaza Mortgages are herein collectively referred to as the "Plaza Mortgage
Note Agreements."
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 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.
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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 Mortgage Notes (the
"Plaza Mortgage Note Trustee") as leasehold mortgagee under the Plaza Mortgage
Note Agreements, would continue in full force and effect. If the Plaza Ground
Lease is rejected, Plaza Associates would have the right, at its election,
either (i) to treat the Plaza Ground Lease as terminated, or (ii) to continue
in possession of the land and improvements under the Plaza Ground Lease for
the balance of the term thereof and at the rental set forth therein (with a
right to offset against such rent any damages caused by the Plaza Ground
Lessor's failure to thereafter perform its obligations under such Plaza Ground
Lease). The Plaza Mortgage Note Agreements provide that if a Plaza Ground
Lease is rejected, Plaza Associates assigns to the Plaza Mortgage 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 Mortgage 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.
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Plaza Associates leases, pursuant to the PHMC Lease, a parcel of unimproved
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
September 30, 1995, of approximately $1.5 million and is encumbered by the
Plaza Mortgages.
Trump Plaza East. 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 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 September 30, 1995 is, in the
aggregate, approximately $3.1 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.
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Trump Tower. THCR Holdings 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 Holdings may use for its general, executive and
administrative offices. The fixed rent is $115,000 per year, paid in monthly
installments, for the period from July 1, 1995 to June 30, 2000 and will be
$129,250 per year, paid in monthly installments, for the period from July 1,
2000 to June 30, 2005. In addition, THCR Holdings will pay as additional rent
a portion of the taxes for each tax year. THCR Holdings 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 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.
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.
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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 Mortgage 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 Mortgage Notes), (c) 100% of the general partnership interests in Plaza
Holding, (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, excluding Unrestricted Subsidiaries, 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 "Collateral"). The security interests in the
Collateral are first priority security interests and are exclusive except to
the extent required by the Plaza Mortgage Note Indenture to equally and
ratably secure the Plaza Mortgage Notes with respect to any of the direct or
indirect equity interests in Plaza Associates, Plaza Funding, Plaza Holding
and Plaza Holding Inc. Any equity interests in subsidiaries of THCR Holdings,
excluding equity interests in Unrestricted Subsidiaries, 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 connection with the Merger Transaction, THCR
will designate Taj Holdings LLC, TTMC, Taj Associates and Taj Funding as
Unrestricted Subsidiaries under the Senior Note Indenture.
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In addition to the Senior Notes, $330 million of the Plaza Mortgage Notes
remain outstanding. The Plaza Mortgage Notes were issued by Plaza Funding,
with Plaza Associates providing a full and unconditional guaranty thereof. The
Plaza Mortgage Notes will mature in 2001 and bear interest semiannually in
arrears. The Plaza Mortgage 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 Mortgage
Note Indenture. In addition, upon the occurrence of a Plaza Mortgage Note
Change of Control (as defined in the Plaza Mortgage Note Indenture), each
holder of Plaza Mortgage Notes may require Plaza Funding or Plaza Associates
to repurchase such holder's Plaza Mortgage Notes at 101% of the principal
amount thereof, together with accrued and unpaid interest to the date of
repurchase.
Plaza Funding's and Plaza Associates' obligations under the Plaza Mortgage
Note Indenture are 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 Mortgage Note Indenture, by a pledge of (x) THCR
Holdings' 99% general partnership interest in Plaza Holding, (y) Plaza
Holding's 99% general partnership interest in Plaza Associates, and (z) 100%
of the capital stock of Plaza Funding and Plaza Holding Inc. (the holder of
the remaining 1% of Plaza Holding).
In addition to the foregoing, THCR's consolidated long-term indebtedness
includes approximately $3.1 million of outstanding mortgage notes described
under "--Properties" as of September 30, 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.
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.
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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 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.
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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 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.
127
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SELECTED HISTORICAL FINANCIAL INFORMATION OF TAJ ASSOCIATES
Taj Holding has no business operations and serves as a holding company for a
50% investment in 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.
128
<PAGE>
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 a
50% investment in 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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<PAGE>
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
Bonds to satisfy the Additional Amount (as defined in the Bond Indenture) and
(ii) the increased accretion of the discount on the 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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<PAGE>
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 increase
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 has 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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<PAGE>
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 Bonds to satisfy the Additional Amount (as defined), the increased
accretion of discount on the 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 Bonds, and the
portion of interest on the Bonds payable in the form of additional principal
amounts of the 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 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 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 Bonds. In September 1994, Taj Associates extended the maturity
from 1996 to November 1999, in consideration of the modification of certain of
the terms of the Working Capital Facility. 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 and 1994 and the first nine months of
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.
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 of the interest
rate on certain of Taj Associates' long-term indebtedness, including its Old
Bonds and, in the case of the Bonds, the deferral of the due date of a portion
of accrued interest thereon through the issuance from time to time of
additional 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.
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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 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 $795.9.
Upon consummation of the Merger Transaction, Taj Associates' aggregate
outstanding indebtedness will consist of $750 million of Taj Notes,
approximately $45 million due under the NatWest Loan and $0.9 million of other
obligations. In addition, upon consummation of the Merger Transaction, the Taj
Associates--First Fidelity Guarantee (as defined) will be released in
connection with the purchase of the Specified Parcels by Taj Associates. See
"Business of Taj Holding--Certain Indebtedness--First Fidelity Loan/Specified
Parcels." Assuming industry conditions do not deteriorate substantially, Taj
Holding management believes that, as a result of cash provided from
operations, together with its current cash and cash investment balance, it
will have sufficient cash flow for the next twelve months to meet its debt
service requirements, capital expenditure program and have sufficient
operating liquidity.
Interest on the 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 Bonds or a combination thereof is payable equal to the difference
between 11.35% of the outstanding principal amount of the 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 Bonds issued on October 4, 1991
amounted to approximately $7.2 million. For the period from the issuance of
the 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 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 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:
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:
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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Management believes, based upon current levels of operations, that although
following the consummation of the Merger Transaction Taj Associates will
continue to be highly leveraged, as a result of the Merger Transaction it will
have the ability to pay interest on the Taj Notes and Taj Associates' other
indebtedness and to pay other liabilities with funds from operations (and, if
necessary, from the Working Capital Facility) for the next twelve months.
However, there can be no assurance to that effect. See "Risk Factors--High
Leverage and Fixed Charges." In addition, Taj Holding does not currently
anticipate that Taj Associates will be able to generate sufficient cash flow
from its operations to repay a substantial portion of the principal amount of
the Taj Notes. Thus the repayment of the Taj Notes is likely to be dependent
primarily upon Taj Associates' ability to refinance the Taj Notes when due.
There can be no assurance that the status of the capital markets or Taj
Associates' operating performance in the future will be conducive to
refinancing the Taj Mortgage Notes or other attempts to raise capital. See
"Risk Factors--Holding Company Structure; Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing."
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 change. It is currently expected that the expansion
will be funded out of cash from operations and borrowings and is scheduled to
be completed in phases by the end of the second quarter of 1999. The Taj Mahal
Expansion involves the construction of two new 640 room hotel towers adjacent
to the Taj Mahal's existing hotel tower, a 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 and expected completion dates:
<TABLE>
<CAPTION>
PROJECT
PROJECT COST
------- -------------
(IN MILLIONS)
<S> <C>
Parking facility, 2,200 spaces.............................. $ 26.0
New Arena................................................... $ 10.5
Circus Casino............................................... $ 53.3
First hotel tower, 640 rooms................................ $ 76.0
Second hotel tower, 640 rooms(/1/).......................... $ 83.6
------
Total................................................... $249.4
======
</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 new nationally recognized
themed restaurants, including the Rainforest 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
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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 Bond Indenture prohibits Taj Associates from making any distributions
other than Tax Distributions and Expense Distributions during such time as the
Bonds are outstanding.
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
Bonds in the form of additional Units in accordance with the terms of the 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 a
50% investment in 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, race
simulcasting room with 61 poker tables, which was added in 1993 and expanded
in 1994. The casino's offerings include blackjack, craps, roulette, baccarat,
red dog, sic-bo, pai gow, pai gow poker, caribbean stud poker and big six. 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 new themed restaurants to be owned and
operated by nationally recognized restaurant operators, including the
Rainforest 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
new game of keno, opened an Asian themed table game area and increased the
number of poker tables and slot machines. Taj
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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 out of the Taj Mahal's cash from
operations and borrowings, and will be completed in phases from the fourth
quarter of 1996 through 1999. The Taj Mahal Expansion, the plans for which are
preliminary and subject to change, involves the construction of a 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 fourth quarter of 1996; 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, to be completed in 1997; and the construction of two
new 640 room hotel towers adjacent to the Taj Mahal's existing hotel tower,
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
Bonds and the mortgage securing the $25 million Working Capital Facility. Upon
consummation of the Merger Transaction, these parcels of land may also secure
the Taj Notes. All of the following properties (other than certain property
underlying the casino parcel, which is owned by Taj Associates) comprised 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 in 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 and
Energy ("NJDEPE"), 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 fleet
maintenance and limousine services, and 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 which approximately 1,850 employees are represented by
collective bargaining agreements. Taj Associates believes that its
relationships with its employees are satisfactory and that its staffing levels
are sufficient to provide first-rate 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
Bonds, resulting in an event of default under the indenture with respect to
such Old 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 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 Bonds with an overall
lower rate of interest as compared with Taj Funding's Old Bonds.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of the Old 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 the Units to the holders of the Old 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 Bonds and 1,350,000 shares of Taj Holding
Class C Common Stock to Trump. In accordance with the terms of the Bond
Indenture, a portion of the interest on the Bonds may be paid in additional
Bonds. At May 15, 1992, 1993, 1994 and 1995, 8,844 Units comprised of
$8,844,000 of Bonds and 8,844 shares of Taj Holding Class B Common Stock,
14,579 Units comprised of $14,579,000 of Bonds and 14,579 shares of Taj
Holding Class B Common Stock, 12,249 Units comprised of $12,249,000 of Bonds
and 12,249 shares of Taj Holding Class B Common Stock, and 15,112 Units
comprised of $15,112,000 of 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 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 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 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.
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 Bonds
and one share of Taj Holding Class B Common Stock. Pursuant to the Bond
Indenture, Taj Funding may issue up to $860 million of Bonds. On October 4,
1991, at the time the Units were issued, the principal amount of Bonds issued
was $729,458,000.
Terms. As of September 30, 1995, the principal amount of Bonds issued was
$780,242,000. The Bonds have a stated maturity date of November 15, 1999. The
Bonds bear interest at 11.35% per annum. Interest on the Bonds is due semi-
annually on each November 15 and May 15. Interest on the Bonds must be paid in
cash on
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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 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 Bonds are guaranteed by Taj Associates.
Security. The Bonds are secured by an assignment by Taj Funding to the
trustee under the Bond Indenture (the "Taj Bond Trustee") of a promissory
note, dated as of October 4, 1991, issued by Taj Associates to Taj Funding
(the "Taj Bond Partnership Note") in a principal amount of $675 million, with
payment terms substantially similar to the payment terms of the Bonds, which
is in turn secured by an amended mortgage, dated as of October 4, 1991, by Taj
Associates as mortgagor and Taj Funding as mortgagee, securing payment of the
Taj Bond Partnership Note, as amended to reflect the terms of the Bonds (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 Bonds.
Covenants. The 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 Bonds will be paid in full in connection with the
Merger Transaction. Concurrently with the retirement of the 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 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 Bond
Indenture) for the preceding calendar year in excess of the Additional
Amount (as defined in the 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. The NatWest Loan will remain
outstanding following the consummation of the Merger Transaction subject to
obtaining the consent of NatWest.
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 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 and the
first $75,000 of the Incentive Fees 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. It is anticipated that holders of the Taj 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 Bankers Trust
Indebtedness, Trump pledged to certain lenders, including Bankers Trust, his
right, title and interest in the TTMI Note. As additional security for the
Bankers Trust 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 Bankers Trust 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 Bankers Trust
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 Bond
Mortgage securing the Bonds. On September 1, 1994, Taj Associates and Foothill
extended the
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maturity to November 13, 1999, in consideration of modifications of the terms
of the facility. 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, 1994, 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 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. The Working Capital Facility may
remain outstanding following the consummation of the Merger Transaction and
Foothill's consent would be required in such event.
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
Bonds, which were outstanding prior to the consummation of the
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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 NJDEPE 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. NJDEPE 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 $3.43 billion in gaming
revenues in 1994, an approximately 3.6% increase over 1993 gaming revenues of
approximately $3.31 billion, despite the effects of unfavorable winter weather
in the first quarter of 1994. For the first eleven months of 1995, which
experienced milder winter weather in the first three months compared to the
same period in 1994, gaming revenues for the 12 casino hotels in the Atlantic
City market were approximately $3.48 billion, an increase of approximately
10.1% from the comparable period in 1994. From 1989 to 1994, total gaming
revenues in Atlantic City have increased 22%, while hotel rooms increased only
slightly during that period. Occupancy levels in Atlantic City increased to
historic highs in 1994, reaching 88%, up from 83% in 1989. Although total
visitor volume to Atlantic City remained relatively constant in 1994, the
volume of bus customers dropped to 8.1 million in 1994, continuing a decline
from 13.1 million in 1989. The volume of customers traveling by other means to
Atlantic City has grown from 18.9 million in 1989 to 24.7 million in 1994.
Total Atlantic City slot revenues increased 3.7% in 1994, continuing a solid
trend of increases over the past five years. From 1989 through 1994, slot
revenue growth in Atlantic City has averaged 7.9% per year. Total table
revenue increased 1% in 1994, while table game revenue from 1989 to 1994 has
decreased on average 2.6% 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 28%, while the number of table games has decreased by 17%. Slot
revenues increased from 58% of total casino revenues in 1990 to 67% in 1994.
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 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 $3.18
billion of gaming revenue produced by the 12 casino hotels in Atlantic City in
the first ten months of 1995 exceeded the approximately $2.60 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 are 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, Minnesota, Mississippi, Missouri, Nevada, South Dakota,
Ontario (Windsor), the Bahamas, Puerto Rico and other locations inside and
outside the United States, and from other forms of legalized gaming in New
Jersey and in its surrounding states such as lotteries, horse racing
(including off-track betting), jai alai, bingo and dog racing, and from
illegal wagering of various types. New or expanded operations by other persons
can be expected to increase competition and could result in the saturation of
certain gaming markets. In September 1995, New York introduced a keno lottery
game, which is played on video terminals that have been set up in 1,800 bars,
restaurants and bowling alleys across the state. In addition to competing with
other casino hotels in Atlantic City and elsewhere, by virtue of their
proximity to each other and the common aspects of certain of their respective
marketing efforts, including 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 have appealed the decision. 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, Las Vegas experienced significant expansion in
1993 and 1994, 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
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were permitted in jurisdictions near or elsewhere in New Jersey or in other
states in the Northeast. In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at Lincoln
Greyhound Park and Newport Jai Alai, where poker and blackjack have been
offered for over two years. Currently, casino gaming, other than Native
American gaming, is not allowed in other areas of New Jersey or in
Connecticut, New York or Pennsylvania. On November 17, 1995, a proposal to
allow casino gaming in Bridgeport, Connecticut, was voted down by that state's
Senate. A New York State Assembly plan has the potential of legalizing non-
Native American gaming in portions of upstate New York. Essential to this plan
is a proposed New York State constitutional amendment that would legalize
gambling. To amend the New York Constitution, the next elected New York State
Legislature must repass a proposal legalizing gaming and a statewide
referendum, held no sooner than November 1997, must approve the constitutional
amendment. To the extent that legalized gaming becomes more prevalent in New
Jersey or other jurisdictions near Atlantic City, competition would intensify.
In particular, a proposal has been introduced to legalize gaming in
Philadelphia and other locations in Pennsylvania.
In addition, legislation has from time to time been introduced in the New
Jersey State Legislature relating to types of statewide legalized gaming, such
as video games with small wagers. To date, no such legislation, which may
require a state constitutional amendment, has been enacted. 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 their respective results of operations
or financial condition.
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 Antitrust Division.
No person may be the holder of a casino license if the holding 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. See "Risk Factors--Trump Plaza Expansion and the Taj Mahal
Expansion."
To be considered financially stable, a licensee must demonstrate the
following ability: to pay winning wagers when due; to achieve an annual gross
operating profit; to pay all local, state and federal taxes when due; to make
necessary capital and maintenance expenditures to insure that it has a
superior first-class facility; and to pay, exchange, refinance or extend debts
which will mature or become due and payable during the license term. The CCC
is required to review and approve a transaction such as the Merger Transaction
with regard to the financial stability standards.
In the event a licensee fails to demonstrate financial stability, the CCC
may take such action as it deems necessary to fulfill the purposes of the
Casino Control Act and protect the public interest, including: issuing
conditional licenses, approvals or determinations; establishing an appropriate
cure period; imposing reporting requirements; placing restrictions on the
transfer of cash or the assumption of liabilities; requiring reasonable
reserves or trust accounts; denying licensure; or appointing a conservator.
See "--New Jersey Gaming Regulations--Conservatorship."
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
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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, Plaza Holding, 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 Antitrust
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 Antitrust 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 Taj 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 Taj 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; 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
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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 Antitrust
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 Taj 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 Taj 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, Plaza Holding, 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 partnership interest, are deemed to be the securities of a Regulated
Company.
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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
Antitrust Division and a hearing by the CCC, the CCC grants interim
authorization, the property will be subject to a trust. If the CCC denies
interim authorization, the contract may not close or settle until the CCC
makes a determination on the qualifications of the applicant. If the CCC
denies qualification, the contract will be terminated for all purposes and
there will be no liability on the part of the transferor.
If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC
or, in the alternative, within 120 days after the CCC determines that
qualification is required, the person whose qualification is required must
divest such securities as the CCC may require in order to remove the need to
qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to
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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.
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 Antitrust Division. There is
also an annual license fee of $500 for each slot machine maintained for use or
in use in any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1992,
1993 and 1994 and for the nine months ended September 30, 1995, Plaza
Associates' gross revenue tax was approximately $21.0 million, $21.3 million,
$21.0 million and $18.1 million, respectively, and its license, investigations
and other fees and assessments totaled approximately
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$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., Plaza Holding, 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 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, 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 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. 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. The IGC has imposed a tax 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. It is possible that
these nonconforming provisions may be reconciled by the Indiana General
Assembly upon its reconvening of the Indiana General Assembly in January 1996.
There can be no assurance that the nonconforming provisions in the Riverboat
Gambling Act will be corrected in a favorable manner. Further, 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.
Without first complying with the procedures established by the Executive
Director of the IGC regarding the notice of intention to enter into restricted
contracts, no riverboat licensee or riverboat license applicant may enter into
any contract, among others, which is described as follows: any contract to
acquire (by lease, rental or purchase) any gaming equipment or supplies; any
contract which relates to maintenance or servicing of electronic gaming
devices; any contract which relates to the provision of security to the
riverboat gaming operation; any contract in which the goods or services are
valued at more than $100,000 with the same party during a 12-month period; any
contract in which the goods or services are valued at more than $50,000 and
for which the riverboat licensee or riverboat license applicant did not
solicit and consider competitive offerors to supply the goods or services; and
any other contract, identified by the IGC so that the IGC may insure the
contracts are for a fair market value and were competitively negotiated.
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
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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
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 proposed administrative rules, 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.
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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.
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-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
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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 of 1936 and the federal
Shipping Act of 1916 and the applicable regulations thereunder contain
provisions designed to prevent persons who are not citizens of the United
States, as defined therein, from beneficially owning more than 25% of the
capital stock of any entity operating a vessel on the Great Lakes.
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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........... 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 Plaza Holding from February 1993 until June 1995. 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 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
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had served as Secretary of TC/GP, Inc. from November 1991 to may 1992. Mr.
Ribis has been Vice President of Trump Corp. since September 1991. From
January 1993 to January 1995 Mr. Ribis served as the Chairman of the Casino
Association of New Jersey and has been a member of the Board of Trustees of
the CRDA since October 1993. From January 1980 to January 1991, Mr. Ribis was
Senior Partner in, and since February 1991, is 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 16, 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 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 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 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. John P. Burke was
Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America, a thrift holding company whose major subsidiary,
Imperial Savings, was seized by the Resolution Trust Corporation in February
1990. Subsequently, in February 1990, Imperial filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code.
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 the managing general partner of Plaza Associates, the
partnership that owns and operates Trump Plaza. 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 Mortgage 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").
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 have been 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 $14.00
per share.
Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of
THCR, for each of the last three completed fiscal years. Compensation accrued
during one year and paid in another is recorded under the year of accrual.
Because THCR was formed in 1995, compensation for the years ended December 31,
1994 and 1993 reflect solely the compensation paid or accrued to these
individuals as executive officers of Plaza Associates. Historically, Plaza
Associates has not provided its executive officers with participation in
stock-based compensation plans or long-term incentive plans and, accordingly,
such information is not reflected in the table below. Compensation for the
year ended December 31, 1995 includes compensation paid or accrued to these
individuals as executive officers of THCR and Plaza Associates.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION(/1/) YEAR SALARY BONUS COMPENSATION(/2/) AWARDS($) OPTIONS(#) COMPENSATION
------------------ ---- -------- -------- ----------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump(/3/).... 1995 $583,333 $ -- $ -- -- -- $1,321,000(/3/)
Chairman of the 1994 -- -- -- -- -- 1,288,000(/3/)
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(/4/)
Executive Vice President 1994 163,759 32,500 -- -- -- 3,291(/4/)
and Secretary 1993 5,808 -- -- -- -- --
John P. Burke........... 1995 $ 50,000 $ 38,333 $ -- -- -- $ --
Corporate Treasurer 1994 50,000 -- -- -- -- --
1993 45,903 20,000 -- -- -- --
</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. 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. Payments received by TPM under the TPM Services
Agreement are currently pledged by TPM to secured 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) 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 consist 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.
(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 $1,433,319. These phantom stock units were issued to
Mr. Ribis in connection with his employment agreement with THCR. Each
phantom stock unit entitles Mr. Ribis to one share of THCR Common Stock on
the vesting date of the phantom stock unit. All of the phantom stock units
are scheduled to vest on June 12, 1997. Vesting will accelerate in the
event of Mr. Ribis' termination of employment with THCR (i) because of his
death or disability, (ii) by THCR without cause, or (iii) voluntarily by
Mr. Ribis under circumstances which constitute a constructive termination.
Alternatively, the phantom stock units may expire prior to June 12, 1997
in the event Mr. Ribis voluntarily terminates his employment with THCR
under circumstances which do not constitute constructive termination or if
he is terminated by THCR with cause. Dividend equivalents with respect to
the phantom stock units will be credited to a bookkeeping account on
behalf of Mr. Ribis and will be paid out in cash at the time the phantom
stock units vest or will expire along with the phantom stock units.
The following table sets forth options granted to Mr. Ribis in 1995. No
other member of the Executive Group received stock options in 1995. THCR did
not issue any stock appreciation rights in 1995. This table also sets forth
the hypothetical gains that would exist for the options at the end of their
ten-year terms at assumed annual rates of stock appreciation of 5% and 10%.
The actual future value of the options will depend on the market value of the
THCR Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------ ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($/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. 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."
174
<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 $907,500, which is 50% of the aggregate current
annual base salary ($1,815,000) that Mr. Ribis receives as Chief Executive
Officer of THCR ($907,500), Taj Mahal ($453,750) and Trump's Castle
($453,750). 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 $1,361,250 per
year with respect to his services to these entities. See "Management of Taj
Holding--Employment Agreements." Mr. Ribis will continue to receive $453,750
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
175
<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."
176
<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 Taj Holdings LLC 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 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 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.
177
<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 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.
178
<PAGE>
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, 52 years old, has been Senior Vice President,
Food & Beverage of Taj Associates since April 1992; Vice President, Food &
Beverage of Taj Associates from April 1991 to April 1992 and from November
1988 to November 1990, and was Vice President, Operations of Taj Associates
from November 1990 to April 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.
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
179
<PAGE>
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.
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. John P. Burke was
Executive Vice President and Chief Administrative Officer of Imperial
Corporation of America, a thrift holding company, whose major subsidiary,
Imperial Savings, was seized by the Resolution Trust Corporation in February
1990. Subsequently, in February 1990, Imperial filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code.
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.
180
<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. 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 consist 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 $453,750. Mr. Ribis acts as President, Chief Executive
Officer and Chief Financial Officer of THCR and THCR Holdings, the Chief
Executive Officer of TCA and Plaza Associates, the partnerships that own
Trump's Castle and Trump Plaza, and receives additional compensation from such
entities. Mr. Ribis devotes approximately one quarter of his professional time
to the affairs of Taj Associates. Following the consummation of the Merger
Transaction, Mr. Ribis will devote 75% of his professional time to the
operations of THCR, Plaza Associates and Taj Associates. See "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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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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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 Holdings 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 Holdings may use for its general executive and administrative offices.
The fixed rent is $115,000 per year, paid in monthly installments, for the
period from July 1, 1995 to June 30, 2000 and will be $129,250 per year, paid
in monthly installments, for the period from July 1, 2000 to June 30, 2005. In
addition, THCR Holdings will pay as additional rent a portion of the taxes for
each tax year. THCR Holdings has the option to terminate this lease upon
ninety days written notice and payment of $32,312.50.
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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, is 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.
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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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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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 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 Trump Plaza 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 Mortgage 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 $1,553,000,
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 Trump's Castle Associates for
$1,687,000 two adjacent parcels of land on the Pleasantville-Egg Harbor
Township border, constituting approximately 10 acres. The first parcel
contains two buildings, certain fleet maintenance facilities and an office
building and warehouse facility, portions of which were leased to 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.
188
<PAGE>
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 $1,056,000, respectively, of
which all but $69,000, $30,000, and $148,000, 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 $339,000,
respectively, all of which were offset against amounts owed to Taj Associates
by Plaza Associates, with exception of $61,000 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 Merger
Transaction and the payment of $[50] million and [500,000 shares of THCR
Common Stock] to First Fidelity in complete satisfaction of the obligations
due under the First Fidelity Loan contemplated thereby, 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 $1,566,000,
$1,353,000 and $1,862,000, respectively, in respect of the Annual Fee,
including amounts paid to a third party pursuant to an assignment agreement.
In addition to the Annual Fee, Taj Associates reimburses Trump on a monthly
basis for all reasonable out-of-pocket expenses up to certain aggregate
amounts incurred by Trump in performing his obligations under the Taj Services
Agreement. During 1993, 1994 and 1995, Taj Associates reimbursed Trump
$232,000, $224,000 and $166,000, respectively, for expenses pursuant to the
Taj Services Agreement, of which $127,000, $148,000 and $105,000,
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.
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 Transaction--Indemnification and Insurance."
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<PAGE>
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...................................... -- --
The Capital Group Companies, Inc................... 1,064,000(/4/) 10.6
State Street Research & Management Company......... 1,193,600(/5/) 11.9
Oppenheimer Group, Inc............................. 1,227,200(/6/) 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 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) 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.
(5) 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.
(6) 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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<PAGE>
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. No directors or executive officers of
Taj Holding beneficially own 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
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) One Post Office Square, Boston, MA 02109.
(4) 950 Third Avenue, New York, NY 10022.
(5) 512 Fifth Avenue, New York, NY 10022
(6) Party to 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.
191
<PAGE>
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 is the beneficial owner of all 1000 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 of THCR
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<PAGE>
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, the Indiana
Riverboat Gambling Act and the Mississippi Gaming 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, 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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<PAGE>
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.
194
<PAGE>
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.
195
<PAGE>
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, Taj Holdings LLC 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
THCR Holdings and Taj Holdings LLC.
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 THCR Holdings the
indirect interests in Taj Associates that THCR acquires in the Merger rather
than contribute the proceeds from the THCR Stock Offering to 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 Associate, and to provide that THCR may issue shares of
THCR Class B Common Stock to TTMI at such as TTMI becomes a Limited Partner.
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.
TTMI will be granted registration rights with respect to the shares of THCR
Common Stock into which its limited partnership interests will be convertible
which are similar to those granted to Trump under the Exchange Rights
Agreement (as defined).
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) 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. 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
Mortgage Notes remain outstanding, to the extent required under the Plaza
Mortgage 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 Bonds (the "Bond Redemption"), the Taj
Holding Class A Common Stock has no voting rights, except as otherwise
provided by law. After the 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
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 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 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 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 is
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 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 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 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 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 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 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 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 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 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 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.
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 the purchase price of such capital stock.
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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 9, 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 9, 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 Taj 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 9, 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.
205
<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 Bonds, as a Unit. The Taj Holding Class B Common Stock may
not trade separately from the Unit. The Unit is traded on the American Stock
Exchange ("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
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 9, 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 announcement of the Merger Transaction, was $98. As of
January 9, 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 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.
206
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Federal income tax consequences of the Merger Transaction 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 or holder of Taj Holding Class B Common Stock and Bonds
in light of such holder's particular circumstances and income tax situation.
Each holder should consult such holder's tax adviser as to the specific tax
consequences to the holder of the Merger Transaction, 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 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 treated as a capital gain or loss if the
Taj Holding Class A Common Stock was held as a capital asset and 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 Bonds will be taxable for federal income tax purposes.
A holder will recognize gain or loss measured by the difference between the
redemption price of the Bonds and the holder's adjusted issue price of the
Bonds. Subject to the market discount rules discussed in the next paragraph,
such gain or loss will be a capital gain or loss if the Bonds were held as
capital assets by the holder and will be a long-term capital gain or loss if
the holding period for the Bonds is in excess of one year.
Holders who purchased Bonds for a purchase price that was less than the
Bonds' stated redemption price at maturity may realize ordinary income upon
the redemption of the Bonds. The Internal Revenue Code of 1986, as amended
(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 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 Bonds represents
accrued and unpaid interest, a holder of a Bond will (i) increase the adjusted
issue price of the 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 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 capital gain or loss if the stock was held as a capital
asset and will be a long-term capital gain or loss if the holding period
exceeds one year.
207
<PAGE>
BACKUP WITHHOLDING
Holders of Taj Holding Class A Common Stock and holders of Taj Holding Class
B Common Stock and Bonds 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 Bonds or (ii) Merger Consideration received in exchange for the
Taj Holding Class A Common Stock or the cash proceeds received in connection
with the redemption of the Bonds or the Taj Holding Class B Common Stock. 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 Taj Holding Class A Common Stock and holders of Taj Holding Class B
Common Stock and Bonds should consult their tax advisers as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
208
<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.
209
<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.
210
<PAGE>
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.
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. 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.
211
<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 Sheet as of December 31, 1993 and 1994............. F-10
Consolidated Statements of Operations for the years ended December 31,
1992, 1993
and 1994............................................................... F-11
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1992, 1993
and 1994............................................................... F-12
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-13
Notes to Consolidated Financial Statements.............................. F-14
Trump Hotels & Casino Resorts, Inc.
Condensed Consolidated Balance Sheet as of September 30, 1995
(unaudited)............................................................ F-25
Condensed Consolidated Statements 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 Sheet as of December 31, 1994 and
September 30, 1995 (unaudited)......................................... F-35
Condensed Consolidated Statements of Operations for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-36
Condensed Consolidated Statement of Capital (Deficit) for the Nine
Months Ended September 30, 1995 (unaudited)............................ F-37
Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1994 and 1995 (unaudited).......................... F-38
Notes to Condensed Consolidated Financial Statements (unaudited)........ F-39
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-42
Consolidated Balance Sheet as of December 31, 1993 and 1994............. F-43
Consolidated Statements of Operations for the years ended December 31,
1992, 1993 and 1994.................................................... F-44
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1992, 1993
and 1994............................................................... F-45
Consolidated Statements of Cash Flows for the years ended December 31,
1992, 1993
and 1994............................................................... F-46
Notes to Consolidated Financial Statements.............................. F-47
Taj Mahal Holding Corp. and Subsidiary
Report of Independent Public Accountants................................ F-56
Consolidated Balance Sheet as of December 31, 1993 and 1994............. F-57
Consolidated Statement of Operations for the years ended December 31,
1992, 1993 and 1994.................................................... F-58
Consolidated Statement 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 8, 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) PROPOSED PUBLIC OFFERINGS
THCR, THCR Holdings and THCR Funding have filed registration statements for
the offering and sale of THCR Common Stock for gross proceeds of $150 million,
as well as $140 million of Senior Secured Notes (the "June 1995 Offerings").
The proceeds from the June 1995 Offerings are intended to be used to develop
the gaming operations described in Note 1 as well as to repurchase or redeem
certain indebtedness of Trump Plaza.
In connection with the contribution by Trump of his beneficial ownership in
Trump Plaza Funding, Inc. ("Plaza Funding"), Trump Plaza Holding Associates
("Plaza Holding") and Trump Plaza Associates ("Plaza Associates") as well as
his investments in other gaming jurisdictions to THCR Holdings, Trump will
receive shares of THCR Class B Common Stock. The THCR Class B Common Stock will
vote with the THCR Common Stock on all matters submitted to stockholders of
THCR for a vote or in respect of which consents are solicited. The number of
votes represented by the THCR Class B Common Stock will be equal to the number
of shares of THCR Common Stock that could be acquired by Trump and his
affiliates upon
F-5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
MARCH 29, 1995
conversion of interests in THCR Holdings then held by such persons into shares
of 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. The THCR Class B Common Stock will have no
right to receive any dividend or other distribution in respect of the equity
of THCR. In addition, Trump has agreed to waive any state law rights to vote
the THCR Class B Common Stock as a class in the event of a merger or sale of
substantial assets.
(3) 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.
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
F-6
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO BALANCE SHEET--(CONTINUED)
MARCH 29, 1995
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.
(4) 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.
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.
(5) SUBSEQUENT EVENTS
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 (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 offering by Trump Taj
Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net proceeds of which
will be used, together with available cash of Taj Mahal Associates ("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 Taj Funding's
outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Bonds"), (iii)
redeem the outstanding
F-7
<PAGE>
shares of Class B Common Stock, par value $.01 per share, of Taj Holding as
required in connection with the redemption of the Bonds pursuant to the
Amended and Restated Certificate of Incorporation of Taj Holding, (iv)
purchase certain real property adjacent to the Trump Taj Mahal Casino Resort
that is currently leased from Trump Taj Mahal Realty Corp., a corporation
wholly owned by Trump, and (v) make a payment to Bankers Trust to obtain
releases of the liens and guarantees that Bankers Trust has with respect to
Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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 (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 8, 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 ("Plaza Holding"), 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. Plaza Holding's 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 Plaza Holding 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 Mortgage Notes") as well
as Plaza Holding's Stock Units.
Plaza Holding was formed in February, 1993 for the purpose of raising funds
for Plaza Associates. On June 25, 1993, Plaza Holding completed the sale of
12,000 Units (the "Units"), each Unit consisting of $5,000 principal amount of
12 1/2% Pay-In-Kind Notes, due 2003 (the "PIK Notes"), and one PIK Note Warrant
(the "PIK Note Warrant") to acquire $1,000 principal amount of PIK Notes. The
PIK Notes and the PIK Note Warrants are separately transferable. Plaza Holding
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 Plaza Holding, 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 financial statements of Plaza Funding include a provision
for Federal income taxes, based on distributions from Plaza Associates relating
to Plaza Funding's Preferred Stock which was redeemed on June 25, 1993. Plaza
Funding will be reimbursed for such income taxes by Plaza Associates. 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 Plaza Holding 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, Plaza Holding
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:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1993 1994
------------ ------------
<S> <C> <C>
PLAZA FUNDING:
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
============ ============
</TABLE>
PLAZA HOLDING 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
PLAZA HOLDING:
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) all of Plaza Funding's Stock
Units, comprised of $75,000,000 liquidation preference participating
cumulative redeemable Preferred Stock with associated shares of Common
Stock, to repay $17,500,000 principal amount 9.14% Regency Note due 2003,
to make a portion of a distribution to Trump to pay certain personal
indebtedness, and to pay transaction expenses.
F-16
<PAGE>
TRUMP PLAZA HOLDING ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Plaza Mortgage 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 Mortgage Notes bear interest at the stated rate of 10 7/8% per annum
from the date of issuance, payable semi-annually on each June 15 and
December 15, commencing December 15, 1993 and are secured by substantially
all of Plaza Associates assets. The accompanying consolidated financial
statements reflect interest expense at the effective interest rate of
11.12% per annum.
The Indenture governing the Plaza Mortgage Notes (the "Mortgage 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 Mortgage
Notes represent the senior indebtedness of Plaza Funding. The note from
Plaza Associates to Plaza Funding in the same principal amount of the
Plaza Mortgage Notes (the "Plaza Associates Note") and the guarantee of
the Plaza Mortgage Notes (the "Plaza Guarantee") rank pari passu in right
of payment with all existing and future senior indebtedness of Plaza
Associates.
The Plaza Mortgage 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 Mortgage Notes would have recourse only to the assets of
Plaza Funding and Plaza Associates.
(B) On June 25, 1993 Plaza Holding 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
Plaza Holding, 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 Plaza Holding 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 Plaza Holding's 99% equity interest in Plaza Associates. The
indenture to which the PIK Notes were issued (the "PIK Note Indenture")
contains covenants prohibiting Plaza Holding 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 Mortgage Note Indenture. The PIK Notes and
the PIK Note Warrants are non-recourse to the Partners of Plaza Holding,
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
included $3,873,000 and $4,931,000, respectively, in costs associated with
Trump Plaza East (see Note 6--Commitments and Contingencies Future Expansion),
net of miscellaneous non-operating credits which amounts included $2,322,000
and $798,000 for 1993 and 1994, respectively, representing real estate taxes
applicable for the period prior to June 24, 1993.
(6) COMMITMENTS AND CONTINGENCIES
CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates is
required to maintain certain licenses.
In April 1993, the New Jersey Casino Control Commission ("CCC") renewed Plaza
Associates license to operate Trump Plaza. This license must be renewed in June
1995, is not transferable and will include a review of the financial stability
of Plaza Associates. Upon revocation, suspension for more than 120 days, or
failure to renew the casino license, the Casino Control Act provides for the
mandatory appointment of a conservator to take possession of the hotel and
casino's business and property, subject to all valid liens, claims and
encumbrances.
LEGAL PROCEEDINGS
Plaza Associates, its Partners, certain members of its former Executive
Committee, and certain of its employees, have been involved in various legal
proceedings. In general, Plaza Associates has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, judgements, fines and penalties )
incurred by them in said legal proceedings. Such persons and entities are
vigorously defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against Plaza Associates. Plaza
Associates considers all such proceedings to be ordinary litigation incident to
the character of its business. Plaza Associates believes that the resolution of
these claims will not, individually or in the aggregate, have a material
adverse effect on its financial condition or results of operations.
Plaza Associates is also a party to various administrative proceedings
involving allegations that it has violated certain provisions of the Casino
Control Act. Plaza Associates believes that the final outcome of these
proceedings will not, either individually or in the aggregate, have a material
adverse effect on its financial condition, results of operations or on the
ability of Plaza Associates to otherwise retain or renew any casino or other
licenses required under the Casino Control Act for the operation of Trump
Plaza.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
commencing twelve months after the date of opening of Trump Plaza in May 1984,
and continuing for a period of twenty-five years thereafter, must either obtain
investment tax credits (as defined in the Casino Control Act), in an amount
equivalent to 1.25% of its gross casino revenues, or pay an alternative tax of
2.5% of its gross casino revenues, (as defined in the Casino Control Act).
Investment tax credits may be obtained by making qualified investments or by
the purchase of bonds at below market interest rates from the Casino
Reinvestment Development Authority ("CRDA"). Plaza Associates is required to
make quarterly deposits with the CRDA based on 1.25% of its
F-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 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, 1995. 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 Mortgage 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,
Plaza Holding 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 Plaza Holding 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 (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 offering by Trump Taj Mahal Funding, Inc. ("Taj Funding")
of up to $750,000,000 aggregate principal amount of debt securities, the
aggregate net 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 Taj
Funding's outstanding 11.35% Mortgage Bonds, Series A due 1999 (the
"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 Bonds pursuant to the Amended and Restated Certificate of
Incorporation of Taj Holding, (iv) purchase certain real property adjacent
to the Taj Mahal that is currently leased from Trump Taj Mahal Realty Corp.,
a corporation wholly owned by Trump, and (v) make a payment to Bankers Trust
to obtain releases of the liens and guarantees that Bankers Trust has with
respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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; (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 in the Annual Report on Form 10-K for the year ended December 31, 1994
and Trump Plaza Funding's ("Plaza Funding") and Trump Plaza Associates' ("Plaza
Associates") Form 10-Q for the nine months ended September 30, 1995, of Plaza
Funding, Trump Plaza Holding Associates ("Plaza Holding") and Plaza Associates
each filed with the Securities and Exchange Commission.
The accounting policies followed by THCR are substantially the same as those
followed by Plaza Funding and 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 Plaza
Holding (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 Plaza Holding and all of the
outstanding capital stock of Trump Plaza Holding, Inc. ("Plaza Holding Inc."),
which owns the remaining 1% equity interest in Plaza Holding. 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 Mortgage Notes"), net of discount of
$4,313,000. At September 30, 1995, the Plaza Mortgage 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 (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 offering by Trump Taj
Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net proceeds of which
will be used, together with available cash of Taj Mahal Associates ("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 Trump Taj Mahal
Funding, Inc's ("Taj Funding") outstanding 11.35% Mortgage Bonds, Series A
due 1999 (the "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 Bonds pursuant to the Amended and
Restated Certificate of Incorporation of Taj Holding, (iv) purchase (using
cash and 500,000 shares of THCR Common Stock) certain real property adjacent
to the Trump Taj Mahal Casino Resort that is currently leased from Trump Taj
Mahal Realty Corp., a corporation wholly owned by Trump, and (v) make a
payment to Bankers Trust to obtain releases of the liens and guarantees that
Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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, ("Plaza Holding") 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. Plaza Holding's 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 Plaza Holding.
The accompanying condensed financial statements have been prepared by Plaza
Funding, Plaza Holding and Plaza Associates without audit. In the opinion of
Plaza Funding, Plaza Holding 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, Plaza Holding 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 in Plaza
Funding's, Plaza Holding's and Plaza Associates' Annual Report on Form 10-K for
the year ended December 31, 1994 filed with the Securities and Exchange
Commission.
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 Plaza Holding.
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 Plaza Holding and all of the outstanding capital stock of
Trump Plaza Holding, Inc. ("Plaza Holding, Inc.") which owns the remaining 1%
equity interest in Plaza Holding). 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
Plaza Holding:
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 Mortgage Notes"), net of discount
of $4,313,000, and loaned the proceeds to Plaza Associates.
(B) On June 25, 1993 Plaza Holding 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 (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 offering by Trump Taj
Mahal Funding, Inc. ("Taj Funding") of up to $750,000,000 aggregate
principal amount of debt securities, the aggregate net proceeds of which
will be used, together with available cash of Taj Mahal Associates ("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 Trump Taj Mahal
Funding, Inc's ("Taj Funding") outstanding 11.35% Mortgage Bonds, Series A
due 1999 (the "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 Bonds pursuant to the Amended and
Restated Certificate of Incorporation of Taj Holding, (iv) purchase (using
cash and 500,000 shares of THCR Common Stock) certain real property adjacent
to the Trump Taj Mahal Casino Resort that is currently leased from Trump Taj
Mahal Realty Corp., a corporation wholly owned by Trump, and (v) make a
payment to Bankers Trust to obtain releases of the liens and guarantees that
Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of THCR Holdings, of all of his direct
and indirect ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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 8, 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 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 Bonds were subsequently
exchanged for the Taj Funding's 11.35% Mortgage Bonds, Series A, due 1999 (the
"Bonds"). Since Taj Funding has no business operations, its ability to repay
the principal and interest on the Bonds is completely dependent on the
operations of Taj Associates.
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 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 Bonds is
due semi-annually on each November 15 and May 15. Interest on the 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 Bonds or a combination thereof, is payable equal to the
difference between 11.35% of the outstanding principal amount of the Bonds
and the Mandatory Cash Interest Amount previously paid. To the extent that
there is excess available cash
F-48
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
Bonds issued on October 4, 1991 amounted to approximately $7,208,000. For
the period from the issuance of the 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 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 Bonds. Of the $15,111,000 Additional
Amount due May 15, 1995, Taj Associates expects to satisfy the obligation
through the issuance of Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Bonds is completely dependent on the
operations of Taj Associates. The Bonds are guaranteed as to payment of
principle and interest by Taj Associates and are collateralized by
substantially all Taj Associates property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code", the Bonds when
issued were stated at the present value of amounts to be paid, determined
at current interest rates (effective rate of approximately 18%). The
effective interest rate of the Bonds was determined based on the trading
price of the 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 Bonds. This gain is being offset
by increased interest costs over the period of the 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 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 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 and Energy ("NJDEPE"), 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 Mortgage 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 (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 offering by Taj Funding of
up to $750,000,000 aggregate principal amount of debt securities, the
aggregate net 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 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 Bonds pursuant to the Amended and Restated Certificate of Incorporation
of Taj Holding, (iv) purchase certain real property adjacent to the Taj
Mahal that is currently leased from Realty Corp., a corporation wholly owned
by Trump , and (v) make a payment to Bankers Trust to obtain releases of the
liens and guarantees that Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings"), of all of his direct and indirect
ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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 (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 8, 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 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 ("Bonds") in exchange for the Old
Bonds. Each $1,000 principal amount of 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 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 Bonds
were issued (the "Taj Mortgage Note Indenture"), a portion of the interest on
the Bonds may be paid in cash or in additional Bonds (the "Additional Amount").
On May 15, 1992, 8,844 units comprised of $8,844,000 of 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 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 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 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.
CLASS B COMMON STOCK
As the redemption of the Class B Common Stock is outside of the control of
Taj Holding, the Class B Common Stock is not shown as a component of
Stockholders' Equity. Accretion of the Class B Common Stock to redemption value
and the value of the additional Class B Common Stock issued in connection with
the additional Bonds (Note 1) are not material.
EARNINGS PER SHARE
For the calculation of net loss per share, Class A 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 Class A 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 (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 offering by Taj Funding of
$750,000,000 aggregate principal amount of debt securities, the aggregate
net 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 Bonds, (iii)
redeem the outstanding shares of Taj Holding Class B Common Stock as
required in connection with the redemption of the Bonds pursuant to the
Amended and Restated Certificate of Incorporation of Taj Holding, (iv)
purchase certain real property adjacent to the Trump Taj Mahal Casino Resort
that is currently leased from Trump Taj Mahal Realty Corp., a corporation
wholly owned by Trump, and (v) make a payment to Bankers Trust to obtain
releases of the liens and guarantees that Bankers Trust has with respect to
Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings"), of all of his direct and indirect
ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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; (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 "Bonds"). Each $1,000 principal amount of 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 Bonds is due semi-annually on each November 15 and May 15. Interest on the
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
Bonds or a combination thereof, is payable equal to the difference between
11.35% of the outstanding principal amount of the 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
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 Bonds
issued on October 4, 1991 amounted to approximately $7,208,000. For the period
from the issuance of the 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
F-68
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES, AND SUBSIDIARY
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
approximately $14,579,000 and $8,844,000, respectively, in additional 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 Bonds. Of the $15,112,000 Additional Amount due
May 15, 1995, Taj Funding satisfied the entire obligation through the issuance
of Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Bonds is completely dependent on the operations
of Taj Associates. The Bonds are guaranteed as to payment of principle and
interest by Taj Associates and are collateralized by substantially all Taj
Associates' property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting By
Entities in Reorganization Under the Bankruptcy Code", the Bonds when issued
were stated at the present value of amounts to be paid, determined at current
interest rates (effective rate of approximately 18%). The effective interest
rate of the Bonds was determined based on the trading price of the 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 Bonds.
This gain is being offset by increased interest costs over the period of the
Bonds to accrete such 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 (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 offering by Taj Funding of
up to $750,000,000 aggregate principal amount of debt securities, the
aggregate net 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
F-70
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES, AND TRUMP TAJ MAHAL FUNDING, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
receive cash in the Merger, (ii) redeem the Bonds, (iii) redeem the
outstanding shares of Taj Holding Class B Common Stock as required in
connection with the redemption of the Bonds pursuant to the Amended and
Restated Certificate of Incorporation of Taj Holding, (iv) purchase certain
real property adjacent to the Taj Mahal that is currently leased from Trump
Taj Mahal Realty Corp., a corporation wholly owned by Trump, and (v) make a
payment to Bankers Trust to obtain releases of the liens and guarantees that
Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of Trump Hotels & Casino Resorts
Holdings, L.P. ("THCR Holdings"), of all of his direct and indirect
ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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 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 "Bonds") in exchange for the
Old Bonds. Each $1,000 principal amount of 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 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 Bonds may be paid in cash or in
additional Bonds (the "Additional Amount"). On May 15, 1992, 8,844 units
comprised of 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 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 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 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 (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 offering by Taj Funding of
up to $750,000,000 aggregate principal amount of debt securities, the
aggregate net 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 Bonds,
(iii) redeem the outstanding shares of Taj Holding Class B Common Stock as
required in connection with the redemption of the Bonds pursuant to the
Amended and Restated Certificate of Incorporation of Taj Holding, (iv)
purchase certain real property adjacent to the Taj Mahal that is currently
leased from Trump Taj Mahal Realty Corp., a corporation wholly owned by
Trump, make a payment to Bankers Trust to obtain releases of the liens and
guarantees that Bankers Trust has with respect to Taj Associates;
(b) the contribution by Trump to THCR Holdings and Taj Mahal Holdings LLC
("Taj Holdings LLC"), a subsidiary of Trump Hotels & Casino Resorts
Holdings, Inc. ("THCR Holdings"), of all of his direct and indirect
ownership interests in Taj Associates; and
(c) the contribution by THCR to THCR Holdings and Taj Holdings LLC 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;
A-1
<PAGE>
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.
A-2
<PAGE>
"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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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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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>
ANNEX B
[DLJ LETTERHEAD]
January 8, 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 to be dated as of January 8,
1996, among the Company, THCR Merger Corp. and Taj Mahal Holding Corp. ("Taj
Holding") (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 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, (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 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 LLC, 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 balance
sheets immediately
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<PAGE>
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
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<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
BY: ___________________________
B-3
<PAGE>
ANNEX C
[ROTHSCHILD LETTERHEAD]
January 8, 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 (the "Merger Agreement"), among Trump
Hotels & Casino Resorts, Inc. ("THCR"), Taj Holding 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 (draft dated January 5, 1996) to be filed
with respect to the Merger, 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 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 shall receive 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.
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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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
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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
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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.
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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(16) Agreement and Plan of Merger, dated January 8, 1996, between
Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
THCR Merger Corp.
3.1(15) Amended and Restated Certificate of Incorporation of Trump
Hotels & Casino Resorts, Inc.
3.2(15) Amended and Restated By-Laws of Trump Hotels & Casino Resorts,
Inc.
4.1(9) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(9) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(9) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(9) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(9) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(9) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(9) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(9) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(9) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(9) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(9) 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(15) 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(15) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(15) 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(15) 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(15) 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(15) 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(15) 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(14) 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(12) Employment Agreement between Trump Plaza Associates and Barry
Cregan.
10.8-10.9 Intentionally omitted.
10.10(4) 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(4) 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(4) 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(2) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(5) 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.
10.22-10.23 Intentionally omitted.
10.24(5) Employment Agreement, dated January 28, 1991, between Trump
Plaza Associates and Kevin DeSanctis.
10.24.1(7) Amendment to Employment Agreement, dated August 6, 1992, between
Trump Plaza Associates and Kevin DeSanctis.
10.25 Intentionally omitted.
10.26(l) Employment Agreement, dated as of June 1, 1992, between Trump
Plaza Associates and Ernest E. East.
10.27(3) Employment Agreement, dated as of March 13, 1991, between Trump
Plaza Associates and William Vellardo.
10.27.1(14) Employment Agreement, dated as of April 5, 1994, between Trump
Plaza Associates and William Vellardo.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.27.2(14) Agreement, dated April 20, 1994, between Trump Plaza Associates
and William Vellardo.
10.28(3) Option Agreement, dated as of February 2, 1993, between Donald
J. Trump and Trump Plaza Associates.
10.29(8) Intentionally omitted.
10.30(6) Amended and Restated Services Agreement between Trump Plaza
Associates and Donald J. Trump.
10.31(l) Working Capital Facility between Trump Plaza Associates and
Belmont Fund, L.P.
10.31.1(8) Mortgage and Security Agreement of Trump Plaza Associates in
favor of Belmont Fund, L.P.
10.31.2(8) Assignment of Rents and Leases by Trump Plaza Associates to
Belmont Fund L.P., dated May 29, 1992.
10.31.3(8) Assignment of Operating Assets by Trump Plaza Associates to
Belmont Fund L.P., dated May 29, 1992.
10.32.1(8) Mortgage from Donald J. Trump, as nominee, to Emil F. Aysseh, as
trustee, dated January 12, 1983.
10.32.2(8) Mortgage from Donald J. Trump, as nominee, to Emil F. Aysseh, as
trustee, dated June 23, 1983.
10.32.3(8) Mortgage Consolidation, Modification, and Extension Agreement,
dated June 23, 1983.
10.32.4(8) Partial Assignment of Mortgage (1/3 interest) by Alfred Aysseh
to New Canaan Bank and Trust Company.
10.32.5(8) Partial Assignment of Mortgage (1/3 interest) by New Canaan Bank
and Trust Company to Alfred Aysseh.
10.32.6(8) Assignment of Mortgage by Emil F. Aysseh, as trustee, to
Community National Bank and Trust Company of New York.
10.32.7(4) Mortgage Note and Mortgage Modification Agreement by and between
Emil F. Aysseh, as trustee, and Donald J. Trump, as nominee,
dated January 10, 1992.
10.33(8) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(8) Mortgage from Harrah's Associates to Adeline Bordonaro, dated
January 28, 1986.
10.35(8) Mortgage from Trump Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.35.1(8) 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(11) Employment Agreement between Trump Plaza Associates and Nicholas
L. Ribis.
10.38.1(15) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.39(11) Severance Agreement between Trump Plaza Associates and Robert M.
Pickus.
10.40(13) Employment Agreement, dated as of February 7, 1995, between
Trump Plaza Associates and Kevin S. Smith.
10.41(13) Employment Agreement between Trump Plaza Associates and James A.
Rigot.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.42(13) Option and Right of First Offer Agreement between Trump Plaza
Associates and Missouri Boardwalk Inc., dated June 24, 1993.
10.43(13) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated
June 24, 1993.
10.44(13) Sublease between Donald J. Trump and Missouri Boardwalk Inc.,
dated June 24, 1993.
10.45(13) Option Agreement among Donald J. Trump, ACFH Inc. and Chemical
Bank, dated December 17, 1993.
10.45.1(13) Amended and Restated Option Agreement among Donald J. Trump,
ACFH Inc. and Chemical Bank, dated June 16, 1994.
10.45.2(13) Amendment to Amended and Restated Option Agreement among Donald
J. Trump, ACFH Inc. and Chemical Bank, dated August 30, 1994.
10.45.3(13) Second Amendment to Amended and Restated Option Agreement among
Donald J. Trump, ACFH Inc. and Chemical Bank, dated March 6,
1995.
10.46(15) Executive Agreement among Donald J. Trump, Trump Hotels & Casino
Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47(15) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.48(14) Sales and Construction Agreement, dated May 1, 1995, between
Trump Indiana, Inc. and Atlantic Marine, Inc.
10.49(14) Agreement of Sale, dated May 10, 1995, between Trump Indiana,
Inc. and Lehigh Portland Cement Company.
10.50(14) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51(14) Amended and Restated Partnership Agreement of Trump Hotels &
Casino Resorts Holdings, L.P.
10.52(15) Exchange and Registration Rights Agreement, dated June 12, 1995,
between Trump Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.53(15) Contribution Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump.
10.54(15) Trademark License Agreement, dated June 12, 1995, between Donald
J. Trump and Trump Hotels & Casino Resorts Holdings, L.P.
10.55(15) Trademark Security Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.56(14) Agreement of Sublease between Donald J. Trump and Time Warner
Entertainment Company, L.P., as amended.
10.57 Intentionally omitted.
10.58(15) 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 Form of Loan and Security Agreement, by and between debis
Financial Services, Inc. and Trump Indiana, Inc., dated August
30, 1995.
10.61 Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
21(14) 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(17) 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>
- --------
*To be filed by amendment.
(1) Incorporated herein by reference to the Exhibit to the Quarterly Report on
Form 10-Q of Trump Plaza Funding, Inc. for the quarter ended June 30,
1992.
(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, 1986.
(3) 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.
(4) 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.
(5) 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.
(6) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Plaza Holding Associates.
(7) Incorporated herein by reference to the Exhibit to the Quarterly Report on
Form 10-Q of Trump Plaza Funding, Inc. for the quarter ended September 30,
1992.
(8) 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.
(9) 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.
(10) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58602, of Trump Plaza Funding, Inc. and Trump Plaza Associates.
(11) 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.
(12) 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.
(13) 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.
(14) 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.
(15) 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-6
<PAGE>
(16) 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 , 1996.
(17) 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 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
II-7
<PAGE>
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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York, on January 11, 1996.
TRUMP HOTELS & CASINO RESORTS, INC.
/s/ Donald J. Trump
By __________________________________
Name:Donald J. Trump
Title:Chairman of the Board of
Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each officer and director of Trump Hotels
& Casino Resorts, Inc. whose signature appears below constitutes and appoints
Donald J. Trump and Nicholas L. Ribis, and each of them, his true and lawful
attorneys-in-fact and agents, with full and several power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as they or he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
/s/ Donald J. Trump Chairman of the January 11,
- ------------------------------------- Board of Directors 1996
DONALD J. TRUMP
/s/ Nicholas L. Ribis President, Chief January 11,
- ------------------------------------- Executive Officer, 1996
NICHOLAS L. RIBIS Chief Financial
Officer and
Director (principal
executive and
financial officer)
/s/ Wallace B. Askins Director January 11,
- ------------------------------------- 1996
WALLACE B. ASKINS
/s/ Don M. Thomas Director January 11,
- ------------------------------------- 1996
DON M. THOMAS
/s/ Peter M. Ryan Director January 11,
- ------------------------------------- 1996
PETER M. RYAN
/s/ John P. Burke Corporate Treasurer January 11,
- ------------------------------------- (principal 1996
JOHN P. BURKE accounting officer)
II-9
<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 8, 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 8, 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 8, 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 8, 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>
EXHIBT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
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 Form of Loan and Security Agreement, by and between debis
Financial Services, Inc. and Trump Indiana, Inc., dated August
30, 1995.
10.61 Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
23.1 Consent of Arthur Anderson LLP.
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>
<PAGE>
EXHIBIT 10.59
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
of
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
by and between
TRUMP INDIANA, INC.
and
BARDEN-DAVIS CASINO, L.L.C.
DATED: As of October 31, 1995
<PAGE>
FIRST AMENDED AND RESTATED
OPERATING AGREEMENT
of
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement")
is made as of the 31st day of October, 1995 by and between TRUMP INDIANA, INC.,
a Delaware corporation, having an office at 6012 W. Industrial Highway, Gary,
Indiana 46406 (hereinafter sometimes referred to as "Trump"), and BARDEN-DAVIS
CASINO, L.L.C., an Indiana limited liability company, having an office at Suite
2400, 400 Renaissance Center, Detroit, Michigan 48243 (hereinafter sometimes
referred to as "BDC"; Trump and BDC are hereinafter sometimes referred to as the
"Members" and individually as a "Member").
WITNESSETH:
WHEREAS, Trump and BDC have entered into certain agreements with the
City (this and all other capitalized terms having the meanings ascribed to them
below) and have been awarded Certificates of Suitability by the Commission to
conduct separate but coordinated riverboat gaming operations in the City; and
WHEREAS, to acquire control over the common site from which the
aforementioned riverboat gaming operations are to be conducted, and in
anticipation of assigning the same to the LLC, Trump has acquired the Lehigh
Property, has entered into the Pre-Formation Agreements, and has commenced
development of the site for riverboat gaming operations in accordance with the
Site Plan; and
WHEREAS, Trump and BDC have formed Buffington Harbor Riverboats,
L.L.C., a Delaware limited liability company (the "LLC") pursuant to the terms
of an Operating Agreement dated as of September 27, 1995 (the "Original
Agreement"), for the purpose of acquiring the LLC Property (including by
accepting the contributions to the LLC by Trump as set forth below),
constructing common roadways, utilities and other infrastructure improvements on
the LLC Property in accordance with the Site Plan, operating, maintaining,
repairing and replacing the Common Areas, and entering into agreements with each
of Trump and BDC pursuant to which each of Trump and BDC shall have the right to
conduct separate riverboat gaming operations and construct separate facilities,
all as more particularly described below; and
WHEREAS, Trump and BDC desire to enter into this Agreement to define
and express all of the terms, covenants and conditions of the LLC and their
respective rights and obligations with respect thereto and to, among other
things amend and restate the Original Agreement to reflect the facts that (i)
the Members
<PAGE>
did not make the Initial Contributions specified in Sections 4.1(a)(1) and (2)
of the Original Agreement upon execution of the Original Agreement, as the same
were delayed for reasons beyond the control of the Members; (ii) subsequent to
the execution of the Original Agreement, the Members entered into an Agreement
dated as of September 29, 1995 with the City, whereby certain payments are to be
made (or have been made) by each Member to the City in lieu of the LLC conveying
the City Property (as defined in the Original Agreement) to the City; (iii) the
Members desire to reduce the number of Construction Representatives on the
Construction Committee; and (iv) the Members wish to restate Exhibits B-1, B-2,
E, F and G to include additional items; and
WHEREAS, Trump and BDC desire to be bound by this Agreement pursuant to
the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
-----------
have the meanings set forth below:
1.1 "Act" means the Delaware Limited Liability Company Act, as
---
amended from time to time.
1.2 "Additional Facilities" shall have the meaning ascribed to it in
---------------------
Section 3.1(e) below.
1.3 "Affiliate" means any Person directly or indirectly controlling
---------
or controlled by or under direct or indirect common control with such Person.
For purposes of this definition, "control" shall mean the power to direct
management or policies through ownership of voting securities or similar equity
interest.
1.4 "Agreement" means this First Amended and Restated Operating
---------
Agreement, as the same from time to time may be amended, modified, supplemented
or restated.
1.5 "Bankruptcy" means, with respect to the applicable Person, that
----------
such Person shall have (1) made an assignment for the benefit of creditors; (2)
filed a voluntary petition in bankruptcy; (3) been adjudicated a bankrupt or
insolvent; (4) filed a petition or answer seeking for himself or itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (5) filed an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against him or it in any proceeding set forth in (4) above; or
(6) sought, consented to, or acquiesced in the appointment of a trustee,
receiver, or liquidator of all or any substantial part of his or its properties;
or if 180 days after the commencement
-2-
<PAGE>
of any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
statute, law, or regulation, the proceeding has not been dismissed, or if within
150 days after the appointment without his or its consent or acquiescence of a
trustee, receiver, or liquidator of the Person or all or any substantial part of
his or its properties, the appointment is not vacated or stayed, or within 90
days after the expiration of any such stay, the appointment is not vacated.
1.6 "BDC Costs" shall have the meaning ascribed to it in Section 4.1
---------
(c) below.
1.7 "BDC Memorandum of Understanding" means the Memorandum of
-------------------------------
Understanding dated as of September 5, 1995 between BDC and the City.
1.8 "BDC Projects" means the projects which BDC is to develop on
------------
parts of the LLC Property in its own name and right in order to satisfy its
obligations under its Certificate of Suitability, the BDC Memorandum of
Understanding and/or the Development Agreement, but specifically excluding any
obligations under the Development Agreement of the LLC to develop projects in
its name and right.
1.9 "Berthing Agreements" shall have the meaning ascribed to it in
-------------------
Section 2.3(h) below.
1.10 "Capital Account" shall have the meaning ascribed to it in
---------------
Section 4.1(f) below.
1.11 "Cash Needs" of the LLC shall have the meaning ascribed to it in
----------
Section 4.3(a)(3) below.
1.12 "Certificate" means the Certificate of Formation iled with
-----------
respect to the LLC in the office of the Delaware Secretary of State, as the same
may be from time to time amended, modified or supplemented in accordance with
the provisions of this Agreement.
1.13 "Certificate of Suitability" means the Certificate of
--------------------------
Suitability issued to BDC or Trump, as applicable, by the Indiana Gaming
Commission, as well as any Riverboat Owner's License issued to BDC or Trump
pursuant to their respective Certificates of Suitability.
1.14 "City" means the City of Gary, Indiana.
----
1.15 "Code" means the Internal Revenue Code of 1986, as amended, or
----
any corresponding provision of any succeeding law.
1.16 "Commission" means the Indiana Gaming Commission.
----------
-3-
<PAGE>
1.17 "Common Areas" means that part of the LLC Property which is
------------
intended to serve the gaming operations of Trump and BDC together with the
improvements to be constructed thereon, all as designated on the Site Plan or as
the same are to be designated on the Master Plan.
1.18 "Common Area Development Approvals" means the applications for
---------------------------------
permits, licenses or approvals, together with any such permits, licenses or
approvals, which either Trump or BDC have applied for or procured prior to the
date of this Agreement, which pertain to the development or construction of the
Common Areas, including without limitation the applications, permits, licenses
and other approvals listed on Exhibit A.
1.19 "Construction Committee" shall have the meaning ascribed to it in
----------------------
Section 3.1(b) below.
1.20 "Development Agreement" means the Development Agreement to be
---------------------
entered into among the City, the LLC, BDC and Trump pursuant to or in
furtherance of the Certificates of Suitability, the BDC Memorandum of
Understanding and the Trump Memorandum of Understanding (or, if applicable, both
of the separate development agreements to be entered into between the City and
BDC and the City and Trump).
1.21 "Event of Default" shall have the meaning ascribed to it in
----------------
Section 7.1(a) below.
1.22 "Harbor" means Buffington Harbor in the City of Gary, Indiana.
------
1.23 "Harbor Lease Agreement" means the Harbor Lease Agreement dated
----------------------
June 29, 1995 between Lehigh Portland Cement Company, as lessor, and Trump, as
lessee.
1.24 "Improvements Budget" shall have the meaning ascribed to it in
-------------------
Section 3.10 below.
1.25 "Lehigh Property" means the real property interests purchased by
---------------
Trump from Lehigh Portland Cement Company, including the lessee's interest under
the Harbor Lease Agreement.
1.26 "LLC" means the limited liability company to which this Agreement
---
pertains, as such limited liability company may from time to time be
constituted.
1.27 "LLC Property" means the Lehigh Property and any other real
------------
property interests which the LLC acquires or leases, less any part of the
foregoing which is exchanged or otherwise disposed of by the LLC.
1.28 "Master Plan" shall have the meaning ascribed to it in Section
-----------
3.1(e) below.
-4-
<PAGE>
1.29 "Master Plan Improvements" shall have the meaning ascribed to it
------------------------
in Section 3.1(e) below.
1.30 "Member" means any Person who is admitted to the LLC pursuant to
------
the provisions of this Agreement. The initial Members of the LLC are Trump and
BDC.
1.31 "New Harbor" shall have the meaning ascribed to it in Section
----------
3.1(e) below.
1.32 "Operating Committee" shall have the meaning ascribed to it in
-------------------
Section 3.2 below.
1.33 "Operating Plan and Budget" shall have the meaning ascribed to it
-------------------------
in Section 3.9(a) below.
1.34 "Operating Reserve" means a reserve to be maintained by the LLC
-----------------
(initially to be funded as part of the Improvements Budget and thereafter to be
reflected in each year's Operating Plan and Budget and funded under the Berthing
Agreements) equal to one-half of the projected funds (net of anticipated
revenues other than borrowings) required by the LLC in connection with its
operations for the applicable year, but excluding any funds required for
construction of the Site Plan Improvements or the Master Plan Improvements.
1.35 "Original Agreement" shall mean the Operating Agreement for the
------------------
LLC dated as of September 27, 1995.
1.36 "Percentage Interest" shall have the meaning ascribed to it in
-------------------
Section 4.2 below.
1.37 "Person" means any individual, corporation, partnership (general
------
or limited), association, limited liability company, trust, estate or other
entity.
1.38 "Pre-Formation Agreements" means the agreements listed on
------------------------
attached Exhibit B-1.
1.39 "Prime Rate" shall have the meaning ascribed to it in Section
----------
4.1(e)(4) below.
1.40 "Required Amount" shall have the meaning ascribed to it in
---------------
Section 4.3(a)(1) below.
1.41 "Site Plan" means the site plan attached as Exhibit C, as the
---------
same may be modified or revised. The Site Plan depicts the Site Plan
Improvements on the LLC Property.
1.42 "Site Plan Improvements" means all of the improvements shown on
----------------------
or contemplated by the Site Plan, including improvements to the Harbor, a
pavilion, parking areas and other improvements (save for riverboats) necessary
to serve the gaming operations of BDC and Trump.
-5-
<PAGE>
1.43 "State" means the State of Delaware.
-----
1.44 "Studies" means the agreements or studies listed on attached
-------
Exhibit B-2.
1.45 "Trump Costs" shall have the meaning ascribed to it in Section
-----------
4.1(b) below.
1.46 "Trump Memorandum of Understanding" means the Memorandum of
---------------------------------
Understanding dated as of May 27, 1995 between Trump and the City.
1.47 "Trump Projects" means the projects which Trump is to develop on
--------------
parts of the LLC Property in its own name and right in order to satisfy its
obligations under its Certificate of Suitability, the Trump Memorandum of
Understanding and/or the Development Agreement, but specifically excluding any
obligations under the Development Agreement of the LLC to develop projects in
its name and right.
1.48 "Uncontrollable Expenses" shall have the meaning ascribed to it
-----------------------
in Section 3.9(a).
2. ORGANIZATION.
------------
2.1 Name. The name of the LLC is Buffington Harbor Riverboats, L.L.C.,
----
and such name shall be used at all times in connection with the business and
affairs of the LLC.
2.2 Organization of the LLC. The LLC has been organized under the laws
-----------------------
of the State and is qualified to transact business in the State of Indiana. The
LLC has been organized on the date of the filing of the Certificate. The Members
shall execute or cause to be executed and filed such other documents and
instruments with such appropriate authorities as may be necessary or appropriate
from time to time to comply with all requirements for the formation and
operation of a limited liability company in the State and for the qualification
of a limited liability company to transact business in the State of Indiana.
2.3 Purpose of the LLC. The business and purposes of the LLC shall be:
------------------
(a) To accept the contribution of the Lehigh Property and the
assignment of the Pre-Formation Agreements by Trump as contemplated below, to
accept the assignment of the Studies by BDC as contemplated below, and to assume
all obligations arising under the Pre-Formation Agreements and/or the Studies so
assigned, and to indemnify Trump or BDC, as the case may be, with respect to
liability under the Pre-Formation Agreements and/or the Studies as provided
below;
-6-
<PAGE>
(b) To enter into leases, subleases or other arrangements regarding
the use or occupancy of all or part of the LLC Property with BDC, Trump or any
other Person, upon such terms and conditions as are specified herein or are
otherwise approved by the LLC;
(c) To make application for, process and negotiate all governmental
approvals or permits and/or private rights for land use, utility services,
drainage rights, dockage rights, access rights and similar rights as may be
necessary or desirable for implementing the Site Plan;
(d) To construct the Site Plan Improvements;
(e) To obtain all necessary permits, licenses and approvals with
respect to the construction, operation, maintenance, repair and replacement of
the Common Areas;
(f) To construct, operate, maintain, repair and replace the Common
Areas;
(g) To enter into license agreements (each a "Berthing Agreement" and
both being the "Berthing Agreements") with each of Trump and BDC with respect to
the berthing of their respective riverboats within or adjacent to the Common
Areas and the terms on which such parties may otherwise enjoy a license to use
the Common Areas;
(h) To revise and refine the Site Plan and to develop, revise and
refine the Master Plan;
(i) Subject to the provisions of Section 3.1(e) below, to make
application for, process and negotiate all governmental approvals or permits
and/or private rights for land use, utility services, drainage rights, dockage
rights, access rights and similar rights as may be necessary or desirable for
implementing the Master Plan, and to construct the Master Plan Improvements;
(j) To otherwise develop, improve, manage, exchange, finance, operate
and deal with and in every way exercise complete control and dominion over the
Common Areas and all assets acquired and facilities constructed in connection
therewith; and
(k) To do all things necessary or desirable in connection with the
foregoing or as otherwise contemplated in this Agreement, including but not
limited to executing and delivering such documents and instruments as are
necessary to effectuate or memorialize any of the foregoing.
2.4 No Other Purpose. The LLC shall have no other purpose (including,
----------------
without limitation, no purpose having to do with the operation of casinos, BDC
Projects or Trump Projects), unless approved by both Members in writing. The LLC
shall not assume any obligation of either or both of the Members to the
-7-
<PAGE>
City, the Commission or the State of Indiana unless approved by both Members in
writing.
2.5 Property for Resale; Terms of Ground Leases or Subleases. The LLC
--------------------------------------------------------
shall not hold any real property primarily for resale to customers in the
ordinary course of its trade or business, but may lease, sublease or exchange
certain portions thereof in furtherance of the LLC's activities. Unless
otherwise agreed in writing by both Members, any ground lease or sublease of
part of the LLC Property by the LLC to a Member or its Affiliate shall be for a
nominal amount of rent (i.e., $1.00 per year), shall have a term ending ninety
nine (99) years from the date of this Agreement (or at such earlier date as the
LLC's interest or leasehold interest in the relevant property expires), shall
contain such customary terms as will facilitate the financing of the
contemplated improvements on the applicable part of the LLC Property by the
Member or its Affiliate, and shall obligate the tenant to pay impositions (if
any) on the applicable property.
2.6 Term. The term of the LLC commenced on the date of the filing of
the Certificate, and shall continue in existence until terminated pursuant to
this Agreement.
2.7 Registered Agent and Office. The registered agent is Prentice-Hall
---------------------------
Corporation Systems, Inc. The registered office is at 32 Loockerman Square,
Suite L-100, Dover, Delaware 19901. The principal place of business and mailing
address of the LLC shall be determined by the Members. The LLC may maintain
additional offices at such locations as the Operating Committee deems advisable.
2.8 Title to LLC Property. All of the LLC's right, title and interest
---------------------
in tangible property, intangible property, real property, personal property and
other assets acquired by the LLC shall be held in the name of the LLC as an
entity. The Members shall execute such documents as may be necessary to reflect
the LLC's ownership interest in such property and shall record the same in such
public offices as shall be necessary to reflect such ownership interest by the
LLC. No Member shall have an ownership interest in any property of the LLC in
its individual name or right except any such right held pursuant to a separate
written agreement approved by both Members (e.g., ground leases, subleases or
Berthing Agreements), and each Member's LLC interest shall be personal property
for all purposes.
2.9 Tradename. The LLC shall adopt such tradename as may be agreed
---------
upon by the Members in writing, consistent with a marketing strategy, if any,
adopted by the Operating Committee.
2.10 Mutual Representations and Warranties. Each Member and, in the
-------------------------------------
case of an organization, the persons executing this Agreement, represents and
warrants to the LLC and to the other Member that as of the date of this
Agreement:
-8-
<PAGE>
(a) It is a corporation (or in the case of BDC, a limited liability
company) duly organized and validly existing under the laws of the state of its
organization and is qualified to do business in the State of Indiana; has all
necessary power and authority under its Articles of Incorporation and Bylaws or
other applicable organizational documents and the laws of the state of
organization to own its properties and assets, to conduct its business as now
conducted or as contemplated by this Agreement, and to execute and deliver and
perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement, the formation of the
LLC and the performance of all obligations hereunder required to be performed by
such Member have been duly authorized by all necessary corporate (or other
organizational) action and do not and will not result in a breach or violation
of, or default under, or will not with the giving of notice or passage of time,
or both, result in a default under, its Articles of Incorporation and Bylaws (or
other applicable organizational documents), any agreement, commitment, order,
judgment or decree by which it or any of its constituent shareholders or members
or any of its respective properties is or are bound, or any statute, regulation,
order or other law by which it or any of its constituent shareholders or members
is or are subject.
(c) This Agreement is binding upon each Member and is enforceable
against it in accordance with its terms.
(d) It is not a "foreign person" within the meaning of Section 1445(f)
of the Code.
(e) It is the holder of a Certificate of Suitability and there is no
default thereunder by such Member.
2.11 Certain Trump Representations and Warranties. Trump hereby
--------------------------------------------
represents and warrants to BDC that as of the date of this Agreement: the Lehigh
Property has not been previously pledged, assigned, mortgaged, transferred or
hypothecated by Trump and has not been encumbered by Trump except for (i)
property rights granted of record to Lehigh Portland Cement Company
contemporaneously with Trump's acquisition of the Lehigh Property, and (ii)
possible mechanic's liens arising under Pre-Formation Agreements; Trump has
provided to BDC true, correct and complete copies of the Pre-Formation
Agreements to which it is a party; Trump has not made or executed any amendment,
modification or termination of the Pre-Formation Agreements, and each remains in
full force and effect; neither Trump nor an Affiliate of Trump has entered into
or is bound by any agreements, written or oral, pertaining to the construction
or development of the Common Areas or affecting the LLC Property, other than the
Pre-Formation Agreements, the Trump Memorandum of Understanding and Trump's
Certificate of Suitability; and except as disclosed in writing on
-9-
<PAGE>
or prior to the date hereof, Trump is not in material default under any Pre-
Formation Agreement.
2.12 Certain BDC Representations and Warranties. BDC hereby represents
------------------------------------------
and warrants to Trump that as of the date of this Agreement neither BDC nor an
Affiliate of BDC has entered into or is bound by any agreements, written or
oral, pertaining to the construction or development of the Common Areas or
affecting the LLC Property, other than the Studies, the BDC Memorandum of
Understanding and BDC's Certificate of Suitability, and BDC is not in material
default under any of the Studies.
3. MANAGEMENT AND DEVELOPMENT.
--------------------------
3.1 Implementation of Site Plan Construction
Committee; Preparation of Master Plan.
-------------------------------------
(a) The Members agree that the LLC Property is to be developed in
accordance with the Site Plan, although in no event shall Trump or the LLC have
any responsibility for any BDC Project nor shall BDC or the LLC have any
responsibility for any Trump Project. Each Member agrees to cooperate with the
other in causing the LLC to construct the Site Plan Improvements at the earliest
practical time and at a cost within the amounts budgeted therefor in the
Improvements Budget. The Members acknowledge that they must use every effort to
reach timely agreement on such construction plans and specifications as are
necessary to implement the construction of the Site Plan Improvements within the
Improvements Budget. The Members also shall use every effort to agree upon any
modifications to the Site Plan (and applicable construction plans and
specifications) which are necessary to complete the Site Plan Improvements in a
timely fashion within the Improvements Budget or in accordance with applicable
laws, rules and regulations, but the Site Plan shall not be modified otherwise
unless such modification is agreed to in writing by the Members.
(b) In order to facilitate the construction of the Site Plan
Improvements, the management and control of such construction activities shall
be vested in a committee (the "Construction Committee") consisting of one voting
representative appointed by each Member (each such representative, a
"Construction Representative," and both such representatives, collectively, the
"Construction Representatives").
(c) In the absence of a contrary direction from the Operating
Committee or both Members, the Construction Committee shall have day-to-day
authority over the construction of the Site Plan Improvements, including
oversight over and administration of the applicable architect, engineering and
construction contracts; architect, supplier, engineer or contractor payments;
and the award of contracts in an amount less than two hundred fifty thousand
($250,000) dollars; all provided that the same are in accordance with budgets
and schedules previously approved by the
-10-
<PAGE>
Operating Committee. All payments shall be made in accordance with the
disbursement procedures set forth in Section 3.8(c) below. The LLC will retain
or utilize the services of the Persons in the capacities identified in attached
Exhibit D, unless the Members agree to the contrary.
(d) It is contemplated that each Construction Representative shall
have an ongoing presence in the City during the construction process, and shall
meet at the construction site (or at such other location as the Construction
Representatives agree upon) not less than twice each week. The presence of both
Construction Representatives at a meeting of the Construction Committee shall
constitute a quorum, and the Construction Committee shall act only upon the
affirmative approval of both Construction Representatives. No Member shall be
entitled to compensation for the services of the Construction Representative
appointed by it. The LLC is a member-managed limited liability company. Each
Construction Representative shall be deemed to be the agent of, and to
represent, the Member that appointed him and her, and shall owe his or her
loyalty and duty to such Member.
(e) The Members acknowledge that the Site Plan does not depict (i) the
BDC Projects, (ii) the Trump Projects, (iii) common areas ancillary thereto
which must be constructed on the LLC Property to satisfy each Member's
obligations to the City and the Commission, (iv) a new harbor, lying to the west
of the Harbor, which is contemplated under the Harbor Lease Agreement as a
dockage site to replace the Harbor (the "New Harbor"), or (v) a new pavilion and
related improvements which would be appropriate to conduct riverboat gaming
operations at the New Harbor (the "Additional Facilities"). (The New Harbor and
the Additional Facilities collectively are referred to herein as the "Master
Plan Improvements"). The Members shall endeavor to prepare a site plan (the
"Master Plan") designating the areas in which the Trump Projects and the BDC
Projects are to be constructed and establishing the nature and location of the
Master Plan Improvements. The following provisions apply to the Master Plan and
the Master Plan Improvements:
(1) Unless otherwise agreed to in writing by the Members, the areas to
be designated on the Master Plan as the areas for the Trump Projects and the BDC
Projects shall be sufficient for each Member to comply with its obligations to
the Commission and/or the City, and the desirability and fitness for its purpose
of the areas to be ground leased (or subleased) to each Member shall be
reasonably equivalent.
(2) The Members acknowledge that the Master Plan Improvements cannot
be constructed unless the LLC receives the necessary permits, licenses and other
governmental approvals, including permits from the Army Corps of Engineers.
(3) Pending a final determination by the Members as to whether the LLC
can and should construct the Master Plan
-11-
<PAGE>
Improvements, the Members shall prepare the Master Plan to show the location and
general nature of the Master Plan Improvements and the BDC Projects and Trump
Projects, shall engage in preliminary design and engineering of the Master Plan
Improvements, and shall procure estimates of the costs of construction
associated with the Master Plan Improvements. In connection with such
activities, the Members shall establish and approve a budget for the
construction and development of the Master Plan Improvements, in form similar to
the Improvements Budget. Unless otherwise agreed to the contrary, the Master
Plan Improvements shall be of at least the same capacity and quality as the Site
Plan Improvements.
(4) The LLC shall proceed with the construction and development of the
Master Plan Improvements if it receives all applicable permits, licenses and
other approvals necessary for such construction and development, and if both
Members agree in writing to do so.
(5) The Members shall endeavor to finalize the Master Plan as soon as
practical after the date of this Agreement, and to formulate cost estimates or
projections for the Master Plan Improvements as soon as practical after the
Master Plan has been finalized.
(6) If due to requirements applicable to the LLC or both Members under
the Certificates of Suitability, the BDC and Trump Memoranda of Understanding or
the Development Agreement, the LLC or both Members are required to relocate
their gaming operations to the Master Plan Improvements, and both Members do not
agree that the LLC should construct the Master Plan Improvements, then a Member
that wishes to construct the Master Plan Improvements shall have the right to
enter into a ground lease or sublease with the LLC for the applicable part of
the LLC Property on which the Master Plan Improvements are to be located, and to
construct the same in its own name and right and at its own cost. Any such
ground lease or sublease shall be on the terms and conditions set forth in
Section 2.5 above, although the ground lease or sublease may include a right on
behalf of the Member and the LLC to share parts of the Common Areas that may
service both the Site Plan Improvements (for such duration as the same may be
used for riverboat gaming operations) and the Master Plan Improvements.
3.2 Operating Committee.
-------------------
(a) The management and control of the ordinary business and affairs of
the LLC shall be vested in the Members. The Members shall manage and control the
business and affairs of the LLC (other than the affairs managed by the
Construction Committee established pursuant to Section 3.1 above) through a
committee (the "Operating Committee") consisting of two voting representatives
appointed by each Member (each such representative, a "Representative," and all
of such
-12-
<PAGE>
representatives, collectively, the "Representatives"). Except as otherwise
provided in this Agreement the Operating Committee shall have full and exclusive
authority and discretion over the business of the LLC. The presence of all four
Representatives at a meeting of the Operating Committee shall constitute a
quorum.
(b) In connection with the development and construction of the
improvements on the Common Areas as designated in the Site Plan, and the Master
Plan Improvements, if applicable, the Operating Committee shall:
(1) review and, if appropriate, refine or revise the Site Plan, and
approve constructions plans and specifications for the Site Plan Improvements;
(2) develop traffic and circulation plans;
(3) address environmental remediation issues, if any;
(4) obtain necessary permits, licenses and approvals, including
without limitation the permits or approvals required from the Army Corps of
Engineers in order to construct the Site Plan Improvements or the Master Plan
Improvements;
(5) arrange for construction and property insurance and contractor
bonding;
(6) engage necessary architects, engineers, designers, suppliers and
contractors required in connection with the design and construction of the
improvements that are to be part of the Common Areas;
(7) oversee compliance with any affirmative action, equal employment
opportunity or like requirements imposed on the LLC under the terms of a
Certificate of Suitability or the Development Agreement;
(8) make any decisions that otherwise are within the authority of
the Construction Committee to make, but upon which the Construction Committee
can not agree;
(9) oversee and manage aspects of project scheduling or construction
that are outside of the authority of the Construction Committee; and
(10) develop the Master Plan.
(c) In connection with the operation, maintenance, repair and
replacement of the Common Areas, the Operating Committee shall coordinate and
assist in establishing or shall otherwise provide for the:
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(1) scheduling of cruises. Unless the Members agree otherwise in
writing, cruises shall be staggered, and the schedules for each Member's
riverboat shall be equivalent in terms of the overall desirability of their
cruise times (e.g., each shall get an equal share of the prime schedule slots);
(2) security for the Common Areas;
(3) transportation within the LLC Property;
(4) maintenance of Common Areas;
(5) hiring and training of employees and managing the Common Areas
on a day-to-day basis in a manner complying with the requirements of applicable
laws, rules and regulations, the Berthing Agreements and any other obligations
of the LLC;
(6) development and implementation of a name, theme and marketing
strategy for the LLC Property as a gaming destination. Absent agreement by the
Members on a different name, the name shall be "Buffington Harbor." The overall
project shall be promoted by the LLC as a project by the name so selected, and
while each Member may separately advertise or market its riverboat, any
reference in such separate advertising to the location of the riverboat shall
mention the name of the overall project (e.g., the "Trump Boat" or the "BDC
Boat" at Buffington Harbor); and
(7) insurance and bonding for Common Areas.
(d) Except as provided in Section 3.3, in addition to and not in
limitation of the foregoing, the Operating Committee shall take such other
actions as may be reasonably necessary and desirable in connection with the
purposes of the LLC as provided in Section 2 of this Agreement.
(e) The Members agree as follows with respect to Operating Committee
meetings:
(1) The Operating Committee shall meet on a regular basis, not less
frequently than bi-monthly. At such meetings the Operating Committee shall:
review the affairs and operations of the LLC, including the status of the Site
Plan, the Berthing Agreements and the construction of the Site Plan
Improvements; review and, if appropriate, revise in light of actual experience
the annual budget theretofore approved by the Operating Committee; and consider
and pass upon such other matters which, pursuant to the provisions of this
Agreement, are to be submitted to the Operating Committee for its approval. All
such meetings shall be held in the vicinity of the Lehigh Property or at such
other location upon which the Members shall agree. Actions of the Operating
Committee shall be reflected in written consents, which may be faxed or
telephoned if confirmed in writing.
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(2) Any Member shall have the right from time to time to call a
special meeting of the Operating Committee on not less than ten (10) days' prior
written notice to the other Member; provided, a special meeting may be called
upon three (3) days' prior telephonic notice if the meeting is required to allow
the LLC to make timely decisions necessary to maintain construction or
development progress or to address other exigent circumstances. Each special
meeting shall be held at the principal office of the LLC or at such other
location upon which the Members shall agree.
(3) All meetings hereinabove provided for may be conducted by
telephone.
(f) The Operating Committee may employ any Person, whether directly or
indirectly affiliated with or related to any Member, on behalf of the LLC to
render or perform a service (including but not limited to leasing and financing)
or to purchase merchandise or other property, and neither the LLC nor any of the
Members shall have any rights in or to any income or profits derived therefrom
by such Person as a result of this Agreement. Any contract proposed to be
entered into between the LLC and such Person shall be disclosed in writing as
such to the Members in advance and (except as specifically waived in writing by
the Members) shall be on terms and conditions which are no less favorable to the
LLC than would be available from third parties.
(g) Except as specifically set forth herein, the Members shall not be
entitled to any compensation with respect to any duties performed for or on
behalf of the LLC. Each Member shall bear the cost of its own personnel, the
fees of its own legal counsel and overhead (including any costs incurred in the
name of an entity other than the LLC unless such costs are incurred to third
parties with the prior written approval of the Operating Committee or the
Members), which costs shall not be charged to the LLC.
(h) The LLC is a member-managed limited liability company. Each
Representative shall be deemed to be the agent of, and to represent, the Member
that appointed him and her, and shall owe his or her loyalty and duty to such
Member. The two Representatives appointed by each Member shall act in concert
with one another in approving, or declining to approve, any action of the
Operating Committee.
3.3 Matters Requiring Special Approval of the Members. The following
-------------------------------------------------
shall require the unanimous approval of the Members, which approval shall be
evidenced by a written memorandum executed by an authorized officer or member of
each Member:
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(a) The establishment and approval of the initial business plan and
budget;
(b) Approval of changes to the Site Plan or approval of the Master
Plan;
(c) Approval of changes to the Improvements Budget or to any similar
budget approved with respect to the Master Plan Improvements;
(d) Approval of a material change in the schedule for completion of
the Site Plan Improvements;
(e) Subject to the provisions of Section 2.5 above, approval or
modification of the terms of any ground lease, sublease or other agreement with
respect to the BDC Projects or the Trump Projects;
(f) Approval of the terms of any financing for the construction of
improvements constituting part of the Common Areas;
(g) Establishment of the timing and amounts of any distributions to
the Members;
(h) Any decision to amend, renew, extend or otherwise change the terms
and conditions of a Berthing Agreement;
(i) The selection of the legal counsel and certified public
accountants for the LLC, although the certified public accountants shall be a
Big 6 accounting firm;
(k) The approval or modification of the terms of any development
agreement or other agreement between the LLC and the City or the State of
Indiana; and
(l) Any other matter which BDC and Trump both shall deem, in writing,
to be of fundamental importance to the LLC.
Notwithstanding the foregoing, if a Member or an Affiliate of a Member causes,
suffers or permits an Event of Default under the terms of its Berthing Agreement
or under any other agreement between the LLC and such Member (or its Affiliate),
the other Member shall have the power and authority to determine whether, how
and when the LLC will enforce its rights or invoke its remedies with respect to
such Event of Default.
3.4 Members May Engage in Other Businesses.
--------------------------------------
The Members and each of the Construction Representatives and
Representatives and their respective Affiliates may engage independently or with
others in other business ventures of every kind and nature including, but not
limited to, the ownership, financing, leasing, operation,
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management, brokerage, sale and development of real property, or gaming
operations, whether or not competitive with the business of the LLC or any of
its assets or facilities, and neither the LLC, the Members, the Construction
Representatives, the Representatives nor their respective Affiliates, shall have
any rights by virtue of this Agreement in and to said independent ventures or to
the income or profits derived therefrom. Notwithstanding the foregoing, (a) any
direct or indirect interest of a Member or an Affiliate of a Member in any
contract or other act with or in respect of the LLC, other than its interest as
a Member, shall be disclosed in writing to the other Member, (b) a Member shall
account to the LLC for any property, profit or benefit derived by such Member or
its Affiliate from a use or appropriation of property of the LLC, including
information developed exclusively for the LLC, and (c) if a Member or an
Affiliate of a Member acquires or has acquired in its own name, any property,
permit, license or approval that is required by the LLC to (i) construct and
develop the Site Plan Improvements, (ii) construct and develop the Master Plan
Improvements, (iii) operate the Common Areas, or (iv) otherwise carry out the
purposes of the LLC, such Member shall make, or shall cause its Affiliate to
make, such property, permit, license or approval available to the LLC on the
terms and conditions on which the Member or its Affiliate acquired the same.
3.5 Members' Liability.
------------------
(a) The Members, Construction Representatives and Representatives
shall not be responsible or accountable in damages or otherwise to the LLC, any
Member, Construction Representative, Representative or any other Person for any
acts performed in good faith within the scope of authority conferred on them by
this Agreement, or for their performance of, or failure or refusal to perform,
any acts required by or prohibited or inhibited by any governmental act or
decree of any nature. The Members, Construction Representatives and
Representatives shall be entitled to indemnity from the LLC on account of any
claim, liability, action or damage arising from or relating to any action taken
by them, in good faith, for or on behalf of the LLC as aforesaid.
(b) Notwithstanding the foregoing, and subject to the management
prerogatives of each of the Members under this Agreement, each Member agrees to
act in good faith in participating in the affairs of the LLC and in approving
and taking actions required for the LLC to efficiently conduct its operations so
as to accomplish the purposes of the LLC, including by (i) attending, or causing
its Construction Representative and Representatives to attend, meetings of the
Members, the Construction Committee or the Operating Committee, as applicable,
(ii) executing contracts and other documents that have been approved under this
Agreement, including checks for expenses that have been approved during the
budgeting process or otherwise, and (iii) otherwise not impeding the ability of
the LLC to accomplish
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its purposes so as to permit the efficient construction and operation of the
Common Areas.
(c) In the event any action or proceeding is instituted or threatened
against any Member, Construction Representative, Representative or any of them,
or any officer, director, shareholder, guarantor or employee of a Member, in
connection with the LLC Property or the business or affairs of the LLC (except
actions or proceedings between the Members or by the LLC) or to which any of the
foregoing may be a party on behalf of the LLC, each Member, Construction
Representative or Representative, as the case may be, shall be entitled to
retain legal counsel and other experts at the expense of the LLC and (subject to
the limitation of liability set forth in Section 3.5(a)) any of the foregoing
shall be immediately reimbursed for, indemnified against and held harmless by
the LLC with respect to all liabilities, costs and expenses arising out of, or
in connection with, such action or proceeding, and whether or not any of the
foregoing is serving in such capacity as of the date that such liability, costs
or expenses are fixed or incurred and without awaiting determination of the
actual proceeding. In any action commenced against the LLC, no Member,
Construction Representative or Representative shall be joined or named as a
party, except as an indispensable party as may be required by applicable statute
or court rule. In the event the indemnified Person is judicially determined not
to have acted in good faith with regard to the claim asserted against it, such
Person shall, in addition to its liability in respect of such wrongful actions,
forthwith reimburse the LLC for payments made to such Person under this Section
3.5(c).
3.6 Bank Accounts.
-------------
All funds of the LLC shall be deposited and maintained in a bank or
banks designated by the Operating Committee and in accounts established in the
LLC's name. The Operating Committee shall pay out of such accounts, to the
extent of the funds from time to time therein, all costs and expenses incurred
in connection with the development, construction, operation and management of
the Common Areas and all costs and expenses incurred in connection with the
purposes of the LLC as provided in Section 2. Checks or other documents of
withdrawal drawn upon the accounts shall be signed by two members of the
Operating Committee, one each from Trump and BDC, or by persons designated as
signatories on behalf of each Member.
3.7 Books and Records.
-----------------
The Operating Committee shall keep full and adequate books of account
and other records reflecting the results of the LLC from inception of the LLC.
Such books and records shall be kept at the offices of the LLC and shall at all
times be kept in accordance with (i) generally accepted accounting principles,
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consistently applied, and (ii) such laws, rules, regulations and orders
applicable to the LLC.
3.8 Financial Reports and Records.
-----------------------------
(a) Financial Reports. The Operating Committee shall deliver to the
-----------------
LLC within thirty (30) days after the end of each calendar month, an unaudited
financial statement prepared from the books and records of account maintained by
the Operating Committee which financial statement shall be set forth on an
accrual basis, containing (i) a balance sheet as of the end of such calendar
quarter; (ii) an income and loss statement; and (iii) copies of all statements,
if any, filed with the Commission. The Operating Committee shall also deliver to
the LLC, within ninety (90) days after the end of each calendar year, an audited
financial statement prepared by an independent certified public accounting firm
containing (i) a balance sheet as of the end of such year; (ii) an income and
loss statement for such year; (iii) a statement of cash flows for such year; and
(iv) copies of all statements, if any, filed with the Commission. Once received
by the LLC, copies of all reports shall immediately be delivered to each Member.
(b) Records. The Operating Committee shall keep complete records of
-------
all revenues and expenses with respect to the management and operation of the
LLC Property and the Common Areas. Each Member shall have the right, itself or
through its representatives or accountants, at its own expense, to inspect the
books of account and records of the LLC and audit the statements required by
this Section 3.8, at any time and from time to time during business hours of the
LLC. Such inspections and audits shall take place at the offices of the LLC and
out-of-pocket expenses incurred by the inspecting Member relative to such audit
shall be the responsibility of the inspecting Member.
(c) Construction Procedures. In connection with paying any amounts
-----------------------
payable in respect of construction of the Common Areas, the LLC shall procure
such sworn statements, waivers of lien, architect's certificates, inspection
reports and like documents as are typically procured as part of prudent
construction draw practices and procedures, both to ensure that the applicable
funds are being disbursed in accordance with the relevant construction contract,
architect's agreement and/or construction management agreement (including
requirements relative to retainage and keeping the contracts in balance) and to
prevent mechanic's liens or similar impositions from being imposed on the LLC
Property or any part thereof. Also in connection with such construction
activities the LLC will prepare and distribute to the Members cash flow
statements on a periodic (not less frequently than monthly) basis for each
applicable construction project, showing payments made to date, available funds,
the anticipated costs of completion and cost comparisons relative to budget.
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3.9 Annual Budget.
-------------
(a) The Operating Committee will prepare an annual business plan and
operating budget for each year (the "Operating Plan and Budget"), which shall be
submitted to the Members for approval and formal adoption. The Operating Plan
and Budget shall include the Operating Reserve. Upon approval by the Members of
the Operating Plan and Budget, the Operating Committee shall have the right,
without the further consent or approval of the Members, to incur and pay the
operating expenses and capital improvement costs set forth therein, including
Uncontrollable Expenses whether or not they exceed the amounts reflected for
them in the Operating Plan and Budget; provided that in the case of any
operating expense which is not an Uncontrollable Expense, the Operating
Committee shall not have the right to incur or pay the same if it exceeds by
more than 10% the amount set forth on the appropriate line for the category of
expense or cost involved in the Operating Plan and Budget or if such expenditure
will cause the aggregate amount of operating expenses which are not
Uncontrollable Expenses to exceed by more than 5% the aggregate amount of such
operating expenses provided for in the Operating Plan and Budget. As used in
this Section 3.9, the term "Uncontrollable Expense" shall mean an item of
expense, the amount of which is not within the power of the Operating Committee
to control and shall consist of real estate taxes, debt service payable in
respect of any mortgage or other loans obtained in accordance with the terms of
this Agreement, amounts required to meet the LLC's obligations under the "Lehigh
Agreements" (as defined in a certain Consent and Acknowledgement of even date
between the LLC, Lehigh Portland Cement Company and BDC), premiums for
insurance, fixed charges under contracts, utility charges and such other costs
and expenses as may hereafter be designated as Uncontrollable Expenses by the
Members.
(b) If at any time the Operating Committee desires to make a capital
improvement, repair, replacement or alteration, or to incur an operating
expense, which is not provided for in an Operating Plan and Budget, the
Operating Committee shall not proceed with such improvement, repair, replacement
or alteration, and shall not incur such expense, without the Members' prior
written consent. If at any time it becomes evident to the Operating Committee
that the cost of any capital improvement, repair, replacement or alteration
provided for in the Operating Plan and Budget will exceed by more than 10% the
amount budgeted therefor in such budget, or the aggregate amount of the cost of
all capital improvements, repairs, replacements and alterations provided for in
such budget will exceed by more than 5% the amount budgeted therefor in such
budget, the Operating Committee shall not proceed further with the making of
such improvement, repair, replacement or alteration or, where the aggregate
amount set forth in the Operating Plan and Budget will be exceeded by more than
5%, with any of such capital improvements, repairs, replacements or alterations,
without the written consent of the
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Members. Similarly, if at any time it becomes evident to the Operating Committee
that the cost of any operating expense which is not an Uncontrollable Expense
will exceed by more than 10% of the amount set forth in respect thereof in the
Operating Plan and Budget, or the cost of all such expenses will exceed by more
than 5% the aggregate amount budgeted therefor in such Operating Plan and
Budget, the Operating Committee shall not incur the operating expense in
question, or, where the aggregate amount of such expenses will exceed by more
than 5% the aggregate amount budgeted for in such approved Operating Plan and
Budget, any of such operating expenses, without the written consent of the
Members.
(c) Notwithstanding anything to the contrary set forth in this
subsection, if in the reasonable good-faith judgment of the Operating Committee
any capital improvement, repair, replacement or alteration must at any time
immediately be undertaken, or any operating cost immediately incurred, in order
to protect any property or to avoid accident or injury to Persons, the Operating
Committee shall be free to make such capital improvement, repair, replacement or
alteration or to incur such operating expense without regard to the approved
Operating Plan and Budget and without first securing the approval of the
Members, provided that the Operating Committee shall use its reasonable efforts
to limit the work performed to the minimum required to remedy the emergency
condition pending approval by the Members of more extensive work and the
Operating Committee shall notify the Members promptly of any such expenditure
made or incurred which exceeds $20,000.
(d) The initial Operating Plan and Budget shall be agreed to within
thirty (30) days after the date of this Agreement. Subsequent Operating Plans
and Budgets shall be agreed to prior to the commencement of the applicable
fiscal year of the LLC. If the Members can not reach agreement on the Operating
Plan and Budget for a fiscal year, the Operating Plan and Budget shall be
determined by (i) adjusting Uncontrollable Expenses to the levels the Members
anticipate will be incurred or for which the LLC is contractually obligated,
(ii) establishing the Operating Reserve, and (iii) increasing the remaining line
items in the Operating Plan and Budget for the prior fiscal year by five (5%)
percent.
(e) If during any year it becomes apparent that the Operating Plan and
Budget does not reflect the amounts of money the LLC will have to spend to (i)
meet its contractual obligations under the Lehigh Agreements or its obligations
to a Member or an Affiliate of a Member under the Assignment and Assumption
Agreement of even date, or (ii) maintain and operate the Common Areas in the
manner and to the standards contemplated by this Agreement (e.g., the Operating
Plan and Budget for the year in question did not accurately reflect the
applicable financial requirements or the occurrence of some unanticipated event,
such as an uninsured casualty), the Members shall revise
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the Operating Plan and Budget for such year to reflect the amounts necessary for
the LLC to meet such contractural obligations or to maintain and operate the
Common Areas in the manner and to the standards contemplated by this Agreement;
provided, in no event shall such an obligatory increase or increases in respect
of expenses of the nature specified in subclause (ii) of this subsection (e) be
greater than two million five hundred thousand ($2,500,000) dollars during any
fiscal year. In the event the Operating Plan and Budget is increased in order to
enable the LLC to reimburse a Member for payments made by the Member as to which
the Member is entitled to indemnification or reimbursement from the LLC under
the Assignment and Assumption Agreement of even date, such Member shall be
entitled to a credit against amounts payable under its Berthing Agreement in an
amount equal to one-half of the payment so made by the Member, which credit also
shall serve to reduce the indemnification or reimbursement obligation of the LLC
to the Member.
3.10 Improvements Budget.
-------------------
The Members have established a budget, a copy of which is attached as
Exhibit E (the "Improvements Budget") reflecting the costs (both "hard" and
"soft," but exclusive of Trump Costs and BDC Costs) anticipated to be required
from and after the date hereof to develop and construct all the Site Plan
Improvements and to fund the initial Operating Reserve, but excluding costs
associated with the construction of the Master Plan Improvements. In refining
such anticipated costs, the LLC shall consult with (and if feasible procure bids
or quotations from) unaffiliated architects, engineers and contractors to
confirm the level of quality contemplated in the Site Plan and the anticipated
costs thereof. The Improvements Budget includes a contingency for unanticipated
conditions and/or inflationary increases. The initial amount established for the
Improvements Budget may be adjusted upward or downward by a written agreement
confirming such adjustment. Notwithstanding the foregoing, if the LLC requires
additional funds to complete construction of and open the Site Plan
Improvements, the Members must increase the Improvements Budget to reflect the
amounts so needed, provided such obligatory increase shall in no event be more
than fifteen (15%) percent of the initial amount of the Improvements Budget.
3.11 Decisions of the Operating Committee.
------------------------------------
All decisions of the Operating Committee shall require the consent of
all of the Representatives. In the event that the Representatives do not concur
in any action, the arbitration procedures set forth in Section 13 shall become
applicable unless the Members agree upon the action.
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4. CAPITAL CONTRIBUTIONS, PROFITS AND LOSSES, AND DISTRIBUTIONS.
------------------------------------------------------------
4.1 Capital Contributions.
---------------------
(a) Initial Capital Contributions. Each Member is making or shall make
-----------------------------
the following contributions to the LLC (the "Initial Contributions") at the
times indicated below:
(1) Upon the execution of this Agreement Trump shall (i) contribute
the Lehigh Property to the LLC by transferring title to the same by special
warranty deed (or, in the case of the Harbor Lease Agreement, by an assignment
of the same), (ii) cause a title insurance policy to be issued to the LLC,
insuring the LLC's interest in the Lehigh Property, each with a non-imputation
endorsement and all at the LLC's expense, (iii) cause the survey and
environmental reports issued to Trump in connection with its acquisition of the
Lehigh Property to be assigned or recertified to the LLC, and (iv) assign to the
LLC Trump's right, title and interest in and under the Pre-Formation Agreements
and the Common Area Development Approvals;
(2) Also upon execution of this Agreement BDC shall assign to the
LLC its right, title and interest in and under the Studies and have the same
certified to the LLC (to the extent reasonably required by Trump), and shall
contribute in cash or immediately available funds the sum of six million seven
hundred fifty thousand ($6,750,000) dollars;
(3) BDC shall from time to time after the date of this Agreement
make additional cash contributions to the LLC totaling thirteen million nine
hundred eighty nine thousand nine hundred ninety one ($13,989,991) dollars,
which is the difference between the Trump Costs and the contributions being made
by BDC pursuant to subsection (2) above (including the BDC Costs), as and when
needed by the LLC to fund construction of the Site Plan Improvements;
(4) After BDC has made additional cash contributions in the amount
specified in Subsection (3) above, each of Trump and BDC shall contribute one-
half (1/2) of the amounts needed from time to time by the LLC to fund
construction of the Site Plan Improvements and the Operating Reserve until such
time as each has contributed the aggregate sum of eighteen million nine hundred
ninety three thousand four hundred fifteen ($18,993,415) dollars pursuant to
this Subsection; and
(5) In connection with planning the construction of the Site Plan
Improvements the Members shall prepare or cause to be prepared cash flow
projections for such activities which identify the amounts needed from time to
time by the LLC to fund construction of the Site Plan Improvements. Such cash
flow projections shall determine the times at which capital contributions shall
be payable under Subsections (3) and (4)
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above absent any further agreement of the Members. Notwith-standing the
foregoing, in any event the full amount of all capital contributions payable
under Subsection (3) shall be due and payable no later than December 1, 1995,
and the full amount of all capital contributions payable under Subsection (4)
shall be due and payable no later than March 1, 1996.
(b) Trump Costs. "Trump Costs" are hereby defined as the purchase
-----------
price of thirteen million five hundred thousand ($13,500,000) dollars paid by
Trump for the Lehigh Property plus or minus the closing adjustments (such as tax
prorations, transfer taxes, utility prorations and like adjustments) paid or
received by Trump in connection with such acquisition, plus the other costs
incurred by Trump on or after December 9, 1994 in connection with such
acquisition and development of the LLC Property, all as listed on attached
Exhibit F.
(c) BDC Costs. "BDC's Costs" are hereby defined as the fees or other
---------
costs paid or incurred by BDC (or its Affiliates) on or after December 9, 1994
for the design and engineering studies and surveys obtained by BDC (or its
Affiliates) for the Lehigh Property or the Harbor or otherwise in connection
with the development of the LLC Property, all as those costs are listed on
attached Exhibit G.
(d) Credits to Initial Capital Accounts. For the purposes of
-----------------------------------
determining the initial capital accounts of each Member resulting from the
capital contributions to be made pursuant to Section 4.1(a) above, the parties
agree that (i) the fair market value of the Lehigh Property and the Pre-
Formation Agreements, and the amount to be credited to Trump's capital account
in respect of the contribution thereof to the LLC, is equal to the Trump Costs,
and (ii) the fair market value of the Studies, and the amount to be credited to
BDC's capital account in respect of the contribution thereof to the LLC, is
equal to the BDC Costs. Accordingly, the capital contributions of each Member
after each has made all of the capital contributions required under Section
4.1(a) shall be forty million eight hundred sixteen thousand four hundred thirty
three ($40,816,433) dollars.
(e) Other Actions in Connection With the Execution of this Agreement.
----------------------------------------------------------------
Within thirty (30) days of the date of this Agreement each Member shall enter
into a Berthing Agreement with the LLC on terms and conditions that are the same
for each Member and have been approved by each of the Members. Each Berthing
Agreement shall:
(1) call for monthly payments in respect of the use of the
improvements on the Common Areas which, when taken with the payments under the
Berthing Agreement with the other Member, are sufficient to enable the LLC to
fund all costs and expenses of the LLC other than the capital contributions
referred to in Section 4.1(a) above and Section 4.1(h) below. The monthly
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payments under the Berthing Agreements shall be determined by the Operating Plan
and Budget. If the Operating Plan and Budget is amended by the Members pursuant
to Section 3.9, any increase or decrease therein shall be spread evenly among
the remaining monthly payments due under each Berthing Agreement;
(2) provide the Member with the exclusive use of certain aspects of
the Site Plan Improvements (such as ticketing booths, money counting facilities
or marshaling facilities) which are designed to service the gaming operations of
such Member (with corollary facilities for the exclusive use of the other Member
under its Berthing Agreement);
(3) define an "Event of Default" thereunder as (i) a default
involving the payment of money which continues for ten (10) or more days after
the LLC (or the other Member) provides written notice of such default, or (ii) a
default not involving the payment of money which continues for thirty (30) or
more days after the LLC (or the other Member) provides written notice of such
default, although if the default is of a nature that can not be cured within 30
days, an Event of Default shall not be deemed to have occurred so long as within
such 30 day period the Member commences (and thereafter diligently pursues to
completion) appropriate measures to cure the default;
(4) call for interest to accrue (and be payable immediately) at a
rate per annum equal to the prime rate published from time to time by Chase
Manhattan Bank (the "Prime Rate") plus five (5%) percent (although in no event
shall the rate exceed the maximum interest rate permitted by applicable law),
from the due date until final payment thereof, on any amount that remains unpaid
for more than ten (10) days after the same constitutes an Event of Default;
(5) call for any payments of the nature referred to in subsection
(1) above which are payable during the period during which an Event of Default
has continued for thirty (30) or more days to be increased by one hundred (100%)
percent (and provide that the Member is relieved from the obligation to make
such payments during any period in which the other Member is obligated to make
increased payments under the corresponding provision in its Berthing Agreement);
(6) authorize the LLC to suspend the right of the Member to use the
Common Areas (including its right to dock its boat) if an Event of Default
continues for one hundred twenty (120) or more days or if the Member is in
default of its obligations under Section 4.1(a)(3) or (4) or Section 4.1(h) of
this Agreement for a period of thirty (30) or more days, although such
suspension shall cease if such defaulting Member cures any and all defaults
under the Berthing Agreement, under Section 4.1(a)(3) or (4) above or under
Section 4.1(h) below within sixty (60) days of the commencement of such
suspension. Furthermore, if the defaulting Member sells its entire interest in
the LLC to
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a Person that is not an Affiliate in accordance with Section 8(b) below, the
purchaser may lift the suspensions by curing any and all defaults under the
Berthing Agreement, under Section 4.1(a) above or under Section 4.1(h) below
within thirty (30) days of the date on which such sale occurs;
(7) authorize the other Member (or its designee) to acquire the
Member's right, title and interest under the Berthing Agreement on the terms set
forth in Section 7.2(b) below;
(8) obligate the LLC to maintain the improvements on the Common
Areas to an agreed upon standard consistent with the obligations of each Member
under its Certificate of Suitability; and
(9) contain notice and cure provisions that will provide customary
protections to a lender to the Member in order that the lender may cure any
default that could otherwise result in a suspension or termination of the rights
of the Member under the Berthing Agreement.
(f) Capital Accounts. There shall be established on the books of the
----------------
LLC for each Member a capital account (the "Capital Account"), which shall
consist of the value of such Member's capital contributions pursuant to Section
4.1(a)(1) and (2), increased by (i) the amount of all additional contributions,
if any, to the capital of the LLC made by such Member pursuant to Sections
4.1(a)(3) and (4), 4.1(h), 4.4 or otherwise, and (ii) the amount of all Net
Income credited to the account of such Member pursuant to Section 4.5 and
decreased by (x) the amount of all Net Losses charged to the account of such
Member pursuant to Section 4.5, and (y) the amount of all distributions, if any,
made to such Member pursuant to Section 4.9 or otherwise. It is agreed that the
Initial Contributions of the Members pursuant to Section 4.1(a) above shall
result in the Capital Accounts of each Member being equal after all such Initial
Contributions have been made. Payments by the LLC on account of an
indemnification obligation of the LLC to a Member shall not be deemed
distributions to such Member.
(g) Maintenance of Capital Accounts. Notwithstanding anything herein
-------------------------------
to the contrary, it is the intention of the members to maintain each Member's
Capital Account in accordance with Treas. Reg. (S)1.704-1(b)(2)(iv).
(h) Additional Capital Contributions. The Members as such shall not be
--------------------------------
bound by the obligations of the LLC, and shall not be obligated to make
contributions to the LLC in excess of the amounts provided for in Section
4.1(a). Notwithstanding the foregoing, the Members hereby agree to contribute
additional funds in the form of capital contributions to the LLC as follows: (i)
on a pro rata basis in proportion to their respective Percentage Interests,
whenever the Operating Committee
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discretionarily elects, but in no event unless such additional funds are
necessary to accomplish the business or purpose of the LLC, (ii) if the Members
approve (or are obligated under Section 3.10 above to approve) an increase in
the Improvements Budget, each Member shall contribute one-half of the difference
within ten (10) days after the approval of the increase in the Improvements
Budget, and (iii) if both Members agree in writing that the LLC is to construct
the Master Plan Improvements, each Member shall contribute one-half of the funds
necessary to permit the LLC to construct the Master Plan Improvements within
such time frame as the Members may establish in connection with their agreement
to construct the Master Plan Improvements.
4.2 Percentage Interest in the LLC.
------------------------------
Each Member shall have an interest in the LLC ("the Percentage
Interest") of fifty (50%) percent.
4.3 Cash Needs, Contributions and Loans.
-----------------------------------
(a) It is understood that the LLC may from time to time require funds
in addition to the funds which may then be available to the LLC out of (i) gross
revenues generated from its operations (including without limitation payments
under the Berthing Agreements), (ii) loans made to the LLC (not including loans
made by the Members pursuant to this Section 4 but including loans available to
the LLC within the time period the funds in question are required for use by the
LLC), (iii) contributions made by BDC and Trump to the capital of the LLC
pursuant to this Section 4, and (iv) in the event of a fire, other casualty or
condemnation, the amount of insurance proceeds or condemnation awards available
to the LLC to pay the costs of such repairs or restoration. In order to help
ensure that the LLC will have funds in amounts sufficient to meet its needs at
all times the Members agree as follows:
(1) If at any time either Member determines, in the exercise of
reasonable business judgment and good faith, that funds in an amount less than
$100,000.00 are required to meet Cash Needs of the LLC, such Member may, by
notice (the "Cash Needs Notice") to the Members, specify the entire amount of
the Cash Needs of the LLC at such time (the "Required Amount") and call upon the
Members to advance to the LLC their respective proportionate share, determined
in accordance with each Member's Percentage Interest, of the Required Amount
(each Member's "Requested Contribution"). The Cash Needs Notice given to the
Members shall be accompanied by documentation reasonably satisfactory to the
Members confirming the actual or estimated amount of such Cash Needs of the LLC
(and the Required Amount) for the period for which such demand is being made
(which period shall not be less than thirty (30) days and shall not exceed
ninety (90) days) and itemizing how the Required Amount will be applied. Within
thirty (30) days after the date of the Cash Needs Notice, each Member shall
advance as a capital contribution
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to the LLC its Requested Contribution. Any funds advanced by either Member to
the LLC pursuant to this Subsection 4.3(a)(1) and not refunded to such Member
shall, subject to the provisions of Subsection 4.3(a)(2), constitute "Cash Needs
Contributions" and shall constitute contributions to the capital of the LLC. No
Member shall be personally liable to the LLC or the other Member for its failure
to advance funds to the LLC pursuant to this Subsection 4.3(a)(1), but any
Member who fails to advance a part of its share of the Required Amount shall
thereby become subject to the provisions of Subsection 4.3(a)(2).
(2) If either Member (such Member being hereinafter referred to as the
"Non-Contributing Member") shall fail to advance all or any part of its share of
the Required Amount which it is called upon and requested to advance pursuant to
a Cash Needs Notice within thirty (30) days after the date of such Cash Needs
Notice (the "Due Date" shall be deemed to be the last day of said 30 day
period), the other Member (the "Contributing Member") shall have the following
rights and remedies (which rights and remedies shall be exclusive):
(a) If the Non-Contributing Member shall have advanced none of its
share of the Required Amount on or before the Due Date, the Contributing Member
shall be relieved of any obligation to advance any portion of its share of the
Required Amount and shall be entitled, if it so elects, to receive a refund from
the LLC of all amounts which it may have advanced to the LLC pursuant to the
Cash Needs Notice.
(b) If the Non-Contributing Member shall have advanced part, but
not all, of its share of the Required Amount on or before the Due Date, the
Contributing Member shall be relieved of any obligation to advance any portion
of its share of the Required Amount in excess of its Percentage Interest of the
Base Amount and shall be entitled, if it so elects, to receive a refund from the
LLC of all amounts which it may have advanced to the LLC pursuant to the Cash
Needs Notice in excess of its Percentage Interest of the Base Amount. As used in
this Subsection 4.3(a)(2)(B), the term "Base Amount" shall mean the amount of
the Required Amount actually contributed by the Non-Contributing Member on or
before the Due Date, divided by the Percentage Interest of the Non-Contributing
Member.
(c) The Contributing Member shall be entitled, but shall not be
obligated, within sixty (60) days of the date of the Cash Needs Notice to
advance to the LLC (which for this purpose shall include not electing to receive
any refund to which it is entitled pursuant to Subsections 4.3(a)(2)(a) or (b)
above, as applicable) an amount equal to all or any part of the excess of (i)
the Requested Funds over (ii) the Base Amount, if any, and such advance shall
constitute a loan (a "Cash Needs Loan") to the LLC, which Loan shall bear
interest at the Prime Rate plus five (5%) percent (although in no event shall
such interest rate exceed the maximum interest rate permitted by
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applicable law), and shall be repayable, as to interest and principal, before
any other distributions are made to the Members as hereinafter provided in
Section 4.10.
(3) As used in this Section 4.3, "Cash Needs of the LLC" shall mean
and include any cash needs or requirements of the LLC of whatever kind or nature
subsequent to the date hereof for which sufficient funds are not available to it
from the sources described in Subsections 4.3(a)(i) through (iv), and shall
include, without limiting the generality of the foregoing, costs of repairs,
alterations and improvements to the LLC Property, operating costs of the LLC
Property, debt service payable under mortgages and other loans (other than Cash
Needs Loans) made to the LLC, real estate taxes and any other payments which are
necessary or appropriate to make in the ordinary course of business to protect
or further the interests of the LLC.
4.4 Income and Losses.
-----------------
(a) For the purposes of this Agreement:
(1) "Net Income" and "Net Losses" with respect to any fiscal
period shall mean the net income or net losses of the LLC for that period from
the construction, operation and management of the LLC Property (including the
amount of any tax exempt income received or accrued) after all operating
expenses incurred in connection with the LLC's business (including, without
limitation, real estate taxes, utilities, repairs and maintenance, management
fees, insurance, labor costs and interest on Cash Needs Loans and any other
loans to the LLC) have been paid or accrued and after making allowance for
depreciation or amortization of the cost of the LLC Property and assets of the
LLC and expenditures of the LLC of the nature described in Section 705(a)(2)(B)
of the Code (including expenditures treated as described in Section 705(a)(2)(B)
of the Code under Treas. Reg. (S) 1.704-1(b)(2)(iv)(i) ("Section 705(a)(2)(B)
Expenditures")) and after taking into account any gain or loss arising from
capital transactions. Consistent with the foregoing definition, income, net
losses, gain and loss shall be determined on the same basis as reported by the
LLC for federal income tax purposes; provided, however, that in computing net
income, net loss, gain and loss of the LLC it shall be assumed that the agreed
fair market value of any property contributed to the LLC by any Member is an
amount equal to its initial tax basis.
4.5 Allocation of Net Income and Net Losses.
---------------------------------------
From and after the date of this Agreement, the Net Income and Net
Losses of the LLC for each calendar year or fraction thereof shall be allocated
to the Capital Accounts of the Members in accordance with their Percentage
Interests.
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4.6 Special Allocations. From and after the date of this Agreement,
-------------------
the following special allocation provisions shall apply:
(a) Qualified Income Offset. Notwithstanding the allocation provided
-----------------------
in Section 4.5 and except as otherwise provided in this Section 4.6, in the
event any Member receives an unexpected allocation of Net Loss or deduction or
an unexpected distribution as described in Treasury Regulations 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) that results in a deficit balance in its Capital
Account (after taking into account reductions for the items set forth in
Treasury Regulations 1.704-1(b)(2)(ii)(d)(4), (5), or (6)) in excess of (i) the
amount such Member is obligated to restore, if any, and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the penultimate sentence
of Treasury Regulations 1.704-2(g)(1) and (S)1.704-2(i)(5), such Member shall be
allocated items of gross income or gain in the amount necessary to eliminate
such excess as quickly as possible. This provision is intended to satisfy the
definition of "qualified income offset", as defined in Treasury
Regulation 1.704-1(b)(2)(ii)(d).
(b) Minimum Gain. Notwithstanding the allocation provided in Section
------------
4.5 and except as otherwise provided in this Section 4.6, if there is a net
decrease in LLC Minimum Gain during any fiscal year, each Member with a deficit
Capital Account balance at the end of such fiscal year (decreased by the amount
such Member is obligated to restore and the amount such Member is deemed to be
obligated to restore pursuant to the penultimate sentences of Treasury
Regulations 1.704-2(g)(1) and 1.704-(2)(i)(5), and increased by the items set
forth in Treasury Regulations (S)1.704-1(b)(2)(ii)(d)(4), (5) or (6)) shall be
allocated items of gross income and gain for such fiscal year and, if necessary,
for subsequent fiscal years, in an amount equal to such Member's share of the
net decrease in such LLC Minimum Gain, determined in accordance with Treasury
Regulations (S)1.704-2(g)(2). This provision is intended to satisfy the
definition of a "minimum gain chargeback" as defined in Treasury Regulations
(S)1.704-2(f), and the term "LLC Minimum Gain" shall have the meaning ascribed
to the term "Partnership Minimum Gain" in Treasury Regulation 1.704-2(d).
(c) Gross Income Allocation. Notwithstanding the allocation provided
-----------------------
in Section 4.5 and except as otherwise provided in this Section 4.6, in the
event any Member has a deficit Capital Account at the close of any fiscal year
which is in excess of the sum of (i) the amount.. if any, such member is
obligated to restore pursuant to any provision of this Agreement, and (ii) the
amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations (S)1.704-2(g)(1) and 1.704-
2(i)(5), each Member shall be specially allocated items of gross income and gain
in the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 4.6 shall be made only if and
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to the extent that such Member would have a deficit Capital Account in excess of
such sum after all other allocations provided for in this Section 4.6 have been
made as if Section 4.6(a) and this Section 4.6(c) were inoperative.
(d) Member Nonrecourse Deductions. Notwithstanding the allocation
-----------------------------
provided for in Section 4.5 and except as otherwise provided in this Section
4.6, any "Member Nonrecourse Deduction", defined as having the meaning ascribed
to the term "Partner Nonrecourse Deduction" in Treasury Regulation (S)1.704-
2(i)(2), for any fiscal year shall be allocated to the Member who bears the
economic risk of loss in accordance with Treasury Regulation 1.704-2(i)(1), and
if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any
fiscal year, each Member with a deficit Capital Account balance at the end of
such fiscal year (decreased by the amount, if any, such Member is obligated to
restore and the amount such Member is deemed to be obligated to restore pursuant
to the penultimate sentences of Treasury Regulation 1.704-2(g)(1) and 1.704-
2(i)(5), and increased by the items set forth in Treasury Regulations 1.704-
1(b)(2)(ii)(d)(4), (5) or (6)) shall be allocated items of gross income and gain
for such fiscal year and, if necessary, for subsequent fiscal years, in an
amount equal to such Member's share of the net decrease in such Member
Nonrecourse Debt Minimum Gain, determined in accordance with Treasury Regulation
1.704-2(i)(4). This provision is intended to comply with the chargeback
provisions of Treasury Regulation 1.704-2(i)(4), and the term "Member
Nonrecourse Debt Minimum Gain" shall have the meaning ascribed to the term
"Partner Nonrecourse Debt Minimum Gain" in Treasury Regulation 1.704-2(i)(3).
(e) LLC Nonrecourse Deductions. Notwithstanding the allocations
--------------------------
provided for in Section 4.5 and except as otherwise provided in this Section
4.6, any "LLC Nonrecourse Deductions", defined as having the meaning ascribed to
the term "Partnership Nonrecourse Deductions" in Treasury Regulation 1.704-2(c),
for any fiscal year shall be allocated to the Members in accordance with their
Percentage Interests as provided under Treasury Regulation 1.704-2(e).
(f) Limitation on Loss Allocations. The Net Losses allocated
------------------------------
pursuant to Section 4.5 shall not exceed the maximum amount of Net Losses that
can be allocated without causing any Member to have a deficit balance in such
Member's Capital Account at the end of any fiscal year (decreased by the amount,
if any, such Member is obligated to restore to the LLC and the amount such
Member is deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulations 1.704-2(g)(1) and 1.704-2(i)(5), and increased
by the items set forth in Treasury Regulations 1.704-1(b)(2)(ii)(d)(4), (5) or
(6)). All Net Losses in excess of the limitations set forth in this paragraph
shall be allocated among the Members, pro-rata, to the extent each,
respectively, is liable or otherwise bears the economic risk of loss with
respect to any debt or other obligation of the LLC.
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(g) Curative Allocations. The allocations set forth in Section 4.6
--------------------
(the "Regulatory Allocations") are intended to comply with certain requirements
of Treasury Regulations 1.704-1 and 1.704-2. Notwithstanding any provision of
Section 4.6 (other than the Regulatory Allocations and the provisions of Section
4.7), the Regulatory Allocations shall be taken into account in allocating Net
Losses and Net Income and items of gross income, gain and deduction among the
Members so that, to the extent possible, the net amount of such allocations to
the Members shall be equal to the net amount that would have been allocated to
the Members if the Regulatory Allocations had not occurred.
(h) In-Kind Contributions. In accordance with Code Section 704(c)
---------------------
and the Treasury Regulations thereunder, Net Income, gain, Net Loss and
deduction with respect to any property contributed to the capital of the LLC
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the LLC
for federal income tax purposes and its initial fair market value. Any elections
or other decisions relating to such allocation shall be made by the Operating
Committee in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 4.6(h) are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Member's Capital Account or share of Net
Income, Net Losses, other items or distributions pursuant to any provision of
this Agreement.
4.7 Authority To Vary Allocations. The Members intend that each
-----------------------------
Member's distributive share of gross income, Net Income, gain, Net Loss or
deduction (or item thereof) shall be determined and allocated in accordance with
Sections 4.5 and 4.6 to the fullest extent permitted by Code Section 704(b). To
preserve and protect the determinations and allocations provided for in Sections
4.5 and 4.6, the Operating Committee shall, and hereby is authorized and
directed to, allocate Net Income, gross income, gain, Net Loss or deduction (or
item thereof) arising in any year differently than otherwise provided for in
Sections 4.5 and 4.6, if, and to the extent that, allocating Net Income, gross
income, gain, Net Loss or deduction (or item thereof) in the manner provided for
in Sections 4.5 and 4.6 would cause the determinations and allocations of each
Member's distributive share of Net Income, gross income, gain, Net Loss or
deduction (or item thereof) not to be permitted by Code Section 704(b) or any
Treasury Regulations promulgated thereunder. Any allocation made by the
Operating Committee pursuant to this Section 4.7 shall be deemed to be a
complete substitute for any allocation otherwise provided for in Section 4.5 or
4.6 and no amendment of this Agreement or approval of any Member shall be
required.
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4.8 Members' Interest in Profits.
----------------------------
Pursuant to Treas. Reg. (S) 1.752-3(a)(3), the Members' interests in
LLC profits shall be the Percentage interests of the Members.
4.9 Distributions to Members.
------------------------
(a) As used in this Agreement, the term "Excess Cash Flow" for any
calendar year or fraction thereof shall mean the amount, if any, of cash
available to the LLC after (i) payment of all operating expenses, and (ii) the
establishment of the Operating Reserve and such other reserves as may determined
in the sole discretion of the Operating Committee. Any cash included as part of
the Improvements Budget shall not be deemed to be available to the LLC for
distribution under this Section until such time as the Site Plan Improvements
have been completed and all construction and development costs associated
therewith have been paid; thereafter, any surplus funds from the Improvements
Budget shall be available for distribution under this Section.
(b) From and after the date of this Agreement, but subject to the
provisions of Section 9.2, the Excess Cash Flow for each calendar year or
fraction thereof shall be distributed to the Members as follows, and in the
following order of priority:
(1) An amount of Excess Cash Flow up to the amount of the accrued
and unpaid interest on Cash Needs Loans shall first be paid as interest to the
Members in proportion to the amount of such interest owed to each;
(2) An amount of Excess Cash Flow up to the then aggregate unpaid
principal balance of Cash Needs Loans shall next be distributed to the Members
in proportion to the amount of such principal owed to each; and
(3) The balance, if any, of Excess Cash Flow shall be distributed to
the Members in proportion to their respective Percentage Interests in the LLC.
5. ACCOUNTING
----------
5.1 Accounting Decisions.
--------------------
All decisions as to accounting principles and elections, whether for
book or tax purposes (and such decisions may be different for each such
purpose), shall be approved by the Operating Committee.
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5.2 Tax Returns.
-----------
The LLC, under the supervision of the Operating Committee, will
prepare and timely file federal and state income tax returns of the LLC. As
promptly as practicable, and in any event, in sufficient time to permit timely
preparation and filing by each Member of its respective federal and state tax
returns, the LLC shall deliver to each Member a copy of each federal and state
tax return or tax report filed by the LLC.
5.3 Elections.
---------
To the extent that the LLC may or is required to make elections for
federal, state or local tax purposes, and to the extent that Members may or are
required to make such elections concerning the business and properties of the
LLC and such elections may not be made in different ways by different Members,
such elections shall be made in such manner as is best calculated, in the
judgment of the Operating Committee, to minimize taxable income of the LLC and
maximize deductions therefrom. In the event of the transfer of all or part of
the interest of a Member, the Members shall elect pursuant to Section 754 of the
Code to adjust the basis of the LLC's property.
5.4 Information Concerning Basis.
----------------------------
Each Member shall furnish to the LLC information as to its adjusted
basis for federal income tax purposes of all property contributed by such Member
to the LLC pursuant to Section 4.
6. WITHDRAWAL; ADJUDICATION; DISSOLUTION
-------------------------------------
6.1 Withdrawal.
----------
Except as specifically permitted under the terms of this Agreement, no
Member may withdraw or resign from the LLC. If a Member shall withdraw or resign
from the LLC (the "Withdrawn Member"), then at the election of the other Member
(a) the Berthing Agreement with the Withdrawn Member shall immediately
terminate, (b) the Withdrawn Member shall have no right to use any of the Common
Areas, (c) the Construction Representative selected by the Withdrawn Member
shall immediately be removed from the Construction Committee, (d) the
Representatives selected by the Withdrawn Member shall immediately be removed
from the Operating Committee, (e) the business theretofore conducted by the LLC
shall thereafter be controlled by the Construction Representative or the
Representatives selected by the remaining Member, (e) the Withdrawn Member shall
remain liable to other Members as if it were a Member but shall no longer have
the rights and powers of a Member, (f) the Withdrawn Member shall be liable to
other Members for any loss or damages resulting from such withdrawal, and (g)
the Withdrawn Member shall be entitled to, and only to,
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(i) those distributions to which the Withdrawn Member would otherwise
be entitled, as and when made, until such time, if ever, the LLC (at
the direction of the remaining Member) elects to pay the Withdrawn
Member, in 24 interest-free installments, the sum described in Section
604 of the Act, less
(ii) any amounts owing by the Withdrawn Member pursuant to this
Subsections 6.1, as may be set off by the LLC for the account of the
LLC or the other Member.
6.2 Adjudication of Incompetency; Death, Disability or Dissolution of
a Member.
-----------------------------------------------------------------
In the event any Member (the "Terminating Member") voluntarily
withdraws from the LLC or suffers death, mental incapacity or dissolution, then
the other Member (the "Non-Terminating Member") or its designee, shall succeed
to the rights and obligations of the Terminating Member, the Berthing Agreement
with the Terminating Member shall immediately terminate and the Terminating
Member shall have no right to use any of the Common Areas.
7. EVENTS OF DEFAULT; REMEDIES.
---------------------------
7.1 Events of Default.
-----------------
(a) The following shall constitute events of default under this
Agreement ("Events of Default"):
(1) The failure of any Member to make a capital contribution to the
LLC as required by the provisions of Section 4.1(a)(3) or (4) or Section 4.1(h);
or
(2) The failure of any Member to fulfill any of its other
obligations under this Agreement within thirty (30) days after written notice
from the other Member, which default may be cured during such thirty (30) day
period; or
(3) A Member causes, permits or suffers an Event of Default under
its Berthing Agreement; or
(4) A Member suffers Bankruptcy.
7.2 Remedies in the Event of a Default by a Member. If a Member
----------------------------------------------
causes, permits or suffers an Event of Default under this Agreement, such Member
(the "Defaulting Member") shall be subject to the following remedies, each of
which shall be cumulative and not exclusive of any other right or remedy of the
other Member:
(a) During any period in which an Event of Default continues: (i) the
Defaulting Member's approval shall no longer
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be required for any action by the LLC which is specified under Section 3.3
above, and (ii) the Construction Representative and the Representatives selected
by the Defaulting Member which is in default or deemed to be in default under
this Agreement shall be suspended from participation in the Construction
Committee and the Operating Committee, and (iii) the Construction Committee and
the Operating Committee shall thereafter be controlled by the Construction
Representative or the Representatives selected by the other Member.
(b) If such Event of Default continues for a period of more than two
hundred seventy (270) days, the other Member shall have a right to acquire (or
to have its designee acquire) the interest of the Defaulting Member in the LLC
and all of the Defaulting Member's right, title and interest in its Berthing
Agreement on the following terms and conditions:
(1) The purchase price shall be one million ($1,000,000) dollars.
(2) Any such acquisition shall be subject to the approval of the
Commission.
(3) In connection with such acquisition the Defaulting Member shall
be removed as a Member and the acquiring party shall be substituted as a Member.
(4) Such right may only be exercised by the other Member by
providing a written notice to the Defaulting Member within ninety (90) days of
the date which is 270 days after the commencement of the Event of Default. Such
notice shall specify a closing date for the acquisition, which closing date
shall be not less than thirty (30) days or more than ninety (90) days after the
date of the notice.
The parties acknowledge that the other Member shall have a right to obtain
specific performance of the obligations of the Defaulting Member's to transfer
its interest as a Member in the LLC and its right, title and interest in and
under its Berthing Agreement, it being recognized that such interests are unique
and that there would be no adequate remedy at law or in damages for a failure or
refusal by the Defaulting Member to honor and perform such obligations in a
timely fashion. The foregoing sentence shall not be construed to imply that the
remedy of specific performance or other equitable relief is not available, or
should not be ordered, for breaches of other obligations of the Members under
this Agreement.
(c) If such Event of Default is a failure to make an obligatory
capital contribution under Sections 4.1(a)(3) or (4) or 4.1(h), in addition to
any other remedy, the other Member shall have the right to invoke the rights and
remedies set forth in Sections 4.3(a)(2)(a) through (c), in which event the
Required Amount shall be deemed to be the amount of the capital
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contributions to be made by the Members. Notwithstanding the last parenthetical
clause of the introductory paragraph of Section 4.3(a)(2), in connection with
exercising any right or remedy under the subsection a Member may exercise any
other right or remedy available to it under this Agreement.
(d) If the Event of Default is a failure to make an obligatory
capital contribution under Section 4.1(a)(3) or (4) above, in addition to the
remedies referred to above, and as a condition to curing such Event of Default,
the Defaulting Member shall pay to the other Member an amount equal to five (5%)
percent of the amount by which it is in default in making the applicable capital
contribution.
8. SALE OR ASSIGNMENT OF INTEREST
------------------------------
(a) No interest of any Member in the LLC or otherwise under this
Agreement shall be sold, transferred, pledged, encumbered, hypothecated or
assigned, unless (i) such transaction complies with any relevant provisions of
Section 8(b), (ii) any sale or other assignment of the interest subsumes the
Member's entire interest in the LLC (including all of the Member's voting
rights, powers of appointment, informational rights, Percentage Interest and
Capital Account), (iii) the counterparty to the transaction expressly
acknowledges that it acquires its rights in or against the interest subject to
the terms of this Agreement (which shall continue to govern) and such
counterparty assumes in writing any obligations of the selling Member from and
after the date of such assumption under this Agreement and the Assignment and
Assumption Agreement of even date, (iv) reasonable assurances are provided to
the remaining Member that all monetary obligations hereunder of the selling
Member prior to the date of such assumption have been or will be satisfied, and
(v) such transaction would not result in a breach or default under any agreement
to which the LLC is a party or give rise to the right to accelerate the maturity
of any LLC indebtedness or result in any fees or penalties to the LLC (unless
the transferee or assignor indemnifies the LLC against such fees or penalties in
a manner reasonably satisfactory to the non-transferring Member or pays such
fees or penalties).
(b) A Member may sell its entire interest in the LLC to any Person
which simultaneously acquires or has acquired a Certificate of Suitability or a
Riverboat Owner's License issued by the Commission for use at the LLC Property.
A Member may pledge its entire interest in the LLC as additional security to a
lender which has made a loan to the Member which is secured by the Member's
interest in its riverboat(s) being berthed pursuant to a Berthing Agreement with
the LLC and the proceeds of which are being applied to the payment (or
reimbursement) of costs associated with this project, including the refinancing
of such loans; provided, in no event shall any such loan (or refinancing) serve
as security for, or be cross-collateralized with, a loan that is not made in
respect of this project.
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<PAGE>
(c) Any purported sale, transfer, pledge, encumbrance, hypothecation,
grant of a security interest or assignment in violation of this Agreement shall
be void and of no force or effect and shall in no way limit, modify, alter or
impair the Member's obligations under this Agreement or create any rights on the
part of the purported transferee, assignee or creditor against the LLC or the
other Member.
9. TERMINATION AND LIQUIDATION OF THE LLC
--------------------------------------
9.1 Dissolution. The LLC shall be dissolved upon the occurrence of any
-----------
of the following events:
(a) December 31, 2035;
(b) The sale or other disposition of substantially all of the LLC's
assets;
(c) The written consent of all Members;
(d) The withdrawal, Bankruptcy or dissolution of any Member; provided,
however, that the LLC's existence shall not terminate if, within ninety (90)
days after such event, (i) the LLC has at least two (2) Members, and (ii) a
majority in interest of the Members (determined independently by reference to
Percentage Interests and by reference to Capital Accounts) elects to continue
the LLC's existence, or
(e) Upon entry of a decree of judicial dissolution.
9.2 Winding-Up.
----------
(a) Upon dissolution of the LLC, the Operating Committee shall
conclude the affairs of the LLC. The LLC's assets may be liquidated and
distributed in cash, or, if the Operating Committee unanimously so determines,
distributed in kind. To the extent such assets cannot either be sold without
undue loss or readily divided for distribution in kind to the Members, the LLC
may, as determined by the Operating Committee, convey those assets to a trust or
other suitable holding entity established for the benefit of the Members in
order to permit the assets to be sold without undue loss and the proceeds
thereof distributed to the Members at a future date. The legal form of the
holding entity, the identity of the trustee or other fiduciary, and the terms of
its governing instrument shall be determined by the Operating Committee.
(b) Pursuant to the winding-up of the LLC, the LLC's assets shall
first be applied to the payment of, or to a reserve for the payment of, LLC
liabilities (including Cash Needs Loans and other debts to Members and their
Affiliates and further including such provision for contingent or unforeseen
liabilities as the Operating Committee deems appropriate), and then shall be
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<PAGE>
distributed to the Members in accordance with their respective positive Capital
Accounts after the allocations pursuant to Sections 4.5 through 4.8 and after
any distributions pursuant to Section 4.9 for the then-current fiscal year. If
assets are distributed in kind, the assets so distributed shall be valued at
their then-current fair-market values and the unrealized appreciation or
depreciation in value of such assets shall be allocated to the Members'
respective Capital Accounts as if such assets had been sold, and such assets
shall then be distributed to the Members in accordance with their respective
positive Capital Accounts as so adjusted.
(c) A taking of all or substantially all of the LLC's property and
assets in condemnation or by eminent domain shall be treated in all respects as
a sale of the LLC's assets upon the dissolution and liquidation of the LLC
pursuant to this Section 9. In such event any portion of the property and assets
of the LLC not so taken shall be sold and the proceeds, together with the
condemnation award, distributed in the manner provided for in this Section 9.
(d) The amount by which the fair market value of any property to be
distributed in kind to the Members exceeds or is less than the basis of such
property (determined without regard to any election under Section 754 of the
Code) shall, to the extent not otherwise recognized to the LLC, be taken into,
account in computing gain or loss of the LLC for purposes of crediting or
charging the Capital Accounts of, and distributing proceeds to, the Members
under this Section 9.
(e) If, following the termination of the LLC, any asset of the LLC is
sold in a transaction in which, by reason of the provisions of Section 453 of
the Code, gain is realized but not recognized, such realized gain shall be taken
into account in computing gain of the LLC for the purposes of making allocations
under Section 9.2(b) hereof and distributions of proceeds to the Members under
Sections 9.2 hereof.
10. NOTICES
-------
10.1 Notices by Registered or Certified Mail.
---------------------------------------
(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Agreement must be in writing. All notices, demands and
requests to be sent by any party hereto or to any other party shall be deemed to
have been properly given or served by depositing the same in the United States
Mail, postpaid and registered or certified, with return receipt requested, or by
delivering the same to an overnight delivery service of nationally recognized
standing, and addressed to the party to whom the notice, demand or request is
intended, at its address designated hereinbelow or to such other address as such
party may hereafter designate by written notice.
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<PAGE>
(b) All notices, demands and requests shall be effective upon being
deposited in the United States Mail or being delivered to an overnight delivery
service of nationally recognized standing. However, the time period in which a
response to any such notice, demand or request must be given shall commence to
run three (3) days from the date of such mailing or two (2) days from the date
of such delivery.
10.2 Routine Communications.
----------------------
Notwithstanding the foregoing, routine communications, distribution
checks, copies of financial statements, etc., may be sent by ordinary first-
class mail.
10.3 Notice to Trump.
---------------
Copies of all notices to Trump shall be sent to Nicholas L. Ribis,
President, Trump Indiana, Inc., 725 Fifth Avenue, New York 10022. Copies thereof
shall concurrently be sent to Robert M. Pickus, Executive Vice President -
Corporate and Legal Affairs, Trump Indiana, Inc., c/o Trump Plaza Hotel &
Casino, The Boardwalk at Mississippi Avenue, Atlantic City, New Jersey 08401;
and Peter Michael Laughlin, Esq., Ribis, Graham & Curtin, 4 Headquarters Plaza,
Morristown, New Jersey 07962-1991.
10.4 Notices to BDC.
--------------
Copies of all notices to BDC shall be sent to Don H. Barden, The
Barden Companies, 400 Renaissance Center, 24th Floor, Detroit, Michigan 48243.
Copies thereof shall concurrently by sent to Cameron H. Piggott, Esq., Dykema
Gossett, PLLC, 400 Renaissance Center, Detroit, Michigan 48243.
11. NO RIGHT TO OBLIGATE OR INCUR LIABILITIES FOR OTHER MEMBERS
-----------------------------------------------------------
Each of the Members hereby covenants and agrees that it will not,
during the term of this LLC, do any act or incur any obligation on behalf of the
LLC of any kind whatsoever, except as herein expressly authorized and permitted
in this Agreement and each Member hereby agrees to indemnify and hold harmless
the other Members from any obligation or liability, including the reasonable
expenses of defense thereof, arising out of its breach of any of the provisions
hereof.
12. COMPLIANCE WITH INDIANA GAMING REGULATIONS.
------------------------------------------
12.1 Transfer of LLC Interest.
------------------------
Notwithstanding anything to the contrary contained in this Agreement,
any sale, transfer, assignment or other conveyance of all or any part of the
interest (whether legal or beneficial) of any Member in the LLC shall be subject
to and conditioned upon, to the extent applicable, the provisions of the
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<PAGE>
Indiana Riverboat Gambling Act and the regulations of the Commission.
12.2 Licensing.
---------
If it is determined by any agency or regulatory body or by the
provisions of any applicable law or regulation that the LLC or any Member must
be licensed or qualified in order to participate in the affairs and ownership of
the LLC, then each Member hereby agrees to cooperate reasonably and promptly
with the other in obtaining any and all licenses, permits or approvals required
by such governmental authority or deemed expedient by the Members in connection
with applicable law or regulation.
13. ARBITRATION
-----------
13.1 Agreement to Arbitrate. Any controversy, dispute or claim arising
----------------------
out of, in connection with, or in relation to the interpretation, performance or
breach of this Agreement shall be resolved by binding arbitration conducted in
Indianapolis, Indiana in accordance with the then existing Commercial
Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA"),
specifically including the Rules relating to "Expedited Procedures" (the
"Expedited Procedures").
13.2 Selection of Arbitrators. Each party to the dispute shall by
------------------------
notice to the other party name an arbitrator and the two (2) arbitrators so
named shall decide upon a third (3rd) arbitrator. The second (2nd) arbitrator to
be appointed must be appointed by notice to the party who appointed the first
(1st arbitrator within five (5) business days after the notice of the
appointment of the first (lst) arbitrator, failing which the first (lst)
arbitrator so appointed shall act as the sole arbitrator. If pursuant to the
preceding two (2) sentences, two (2) arbitrators have been appointed by the
parties and if the two (2) so appointed do not agree upon a third (3rd)
arbitrator, the AAA in Indianapolis, Indiana shall be requested to submit a list
of five (5) persons to serve as the third (3rd) arbitrator. The parties shall
select the third (3rd) arbitrator from the list submitted, provided that if the
parties cannot agree upon the third (3rd) arbitrator, then the third (3rd)
arbitrator shall be selected from the list of five (5) through the process of
the two (2) arbitrators jointly striking names from the list until one (1) name
remains. The decision of any two (2) of the arbitrators shall be final and
binding upon all parties. A judgment upon any award rendered by a majority of
the arbitrators may be entered and enforced in any court of competent
jurisdiction. Unless the arbitrators determine otherwise (which they shall have
the right to do), all costs and expenses of the arbitrators shall be borne
equally by the parties with the exception that the cost of the arbitrator
selected by each party shall be paid by the selecting party. The arbitrators
shall be requested to render an opinion within thirty (30) days after the date
the controversy (within fifteen (15) days in the case of any expedited
proceeding) is
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<PAGE>
submitted to them. The above procedures contemplate that there will only be two
(2) parties to the arbitration proceeding; if there are more, and the parties
cannot agree upon the method of choosing arbitrators, the method of proceeding
shall be determined pursuant to the then existing Commercial Arbitration Rules
of the AAA.
13.3 Expenses. The arbitrator shall award to the prevailing party in
--------
any arbitration proceeding commenced hereunder the prevailing party's costs and
expenses (including expert witness expenses and reasonable attorneys' fees but
excluding the cost of the arbitrator selected by the prevailing party) of
investigating, preparing and presenting such arbitration claim.
13.4 Expedited Procedures. Each party hereto hereby consents to the
--------------------
use of the Expedited Procedures without regard to the amount in controversy and
agrees to cooperate in all respects with the arbitrator in order to permit a
speedy resolution to such disputes. The arbitrator shall convene a hearing as
quickly as practicable after his or her appointment, and in any event no later
than fifteen (15) days after such appointment. There shall be only one hearing,
which shall not exceed five (5) consecutive business days in length.
13.5 Submission to Jurisdiction; Agent to Service. EACH OF THE PARTIES
--------------------------------------------
HERETO CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
THE CITY OF INDIANAPOLIS, STATE OF INDIANA, AND IRREVOCABLY AGREES THAT ALL
ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY AGREEMENT OR INSTRUMENT
EXECUTED HEREUNDER, OTHER THAN ANY ACTION OR PROCEEDING REQUIRED BY SECTION
13(a) HEREOF TO BE SUBMITTED TO ARBITRATION, SHALL BE LITIGATED IN SUCH COURTS,
AND EACH OF THE PARTIES WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS TO ALL SUCH SERVICE OR PROCESS MADE IN THE MANNER SET FORTH IN SECTION
10 HEREOF. Nothing contained in this Section shall affect the right of any party
to serve legal process on any other party in any other manner permitted by law.
Nothing contained in this Section shall affect the obligations of the parties
with respect to the arbitration of disputes under Section 13.1 hereof.
13.6 Certain Decisions or Disputes Not Subject to Arbitration.
--------------------------------------------------------
Notwithstanding anything to the contrary in the foregoing, the following
decisions or disputes shall not be subject to arbitration:
(a) any amendment to, renewal or extension of, or other change in the
terms and conditions of the Berthing Agreements;
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<PAGE>
(b) any decision by a Member to cause the LLC to enforce its rights
under a Berthing Agreement;
(c) approval of a change in the Improvements Budget, other than an
obligatory increase under the circumstances referred to in Section 3.10 above;
(d) a change in the Site Plan that is not required in order to
complete the Site Plan Improvements (i) in a timely fashion, (ii) within the
Improvements Budget, or (iii) in accordance with applicable laws, rules and
regulations;
(e) approval of the Master Plan, or the agreement of the Members that
the LLC should construct the Master Plan Improvements; and
(f) a change in the Master Plan Improvements that is not required in
order to complete the Master Plan Improvements (i) in a timely fashion, (ii)
within the agreed upon budget, or (iii) in accordance with applicable laws,
rules and regulations.
13.7 Certain Limitations on the Authority of Arbitrators.
---------------------------------------------------
Notwithstanding Sections 13.1 and 13.2 above, the arbitrator(s) shall not have
the authority to determine that the Site Plan or Master Plan will include any
improvements (temporary or permanent) that cost more or are more extensive than
the minimum amount reasonably necessary to properly serve the operations of the
riverboats, to meet any contractual requirements undertaken by the LLC, or to
enable the Members to meet their respective obligations under the Development
Agreement or any obligations under the Certificates of Suitability or Riverboat
Owner's Licenses issued to the Members.
14. MISCELLANEOUS
-------------
14.1 Governing Law.
-------------
The LLC is and shall be a limited liability company existing under and
governed by the laws of the State of Delaware.
14.2 Waivers.
-------
No consent or waiver, expressed or implied, by any Member to or of any
breach or default by the other of its obligations hereunder shall be deemed or
construed to be a consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligations of such
Member hereunder. Failure on the part of any Member to complain of any act or
failure to act of another Member or to declare a Member in default, irrespective
of how long such failure continues, shall not constitute a waiver by such Member
of its rights hereunder.
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<PAGE>
14.3 Severability.
------------
If any provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provisions to other
persons or circumstances shall not be affected thereby and shall be enforced to
the greatest extent permitted by law.
14.4 Covenant Against Partition.
--------------------------
Except as otherwise provided in this Agreement, the Members, on behalf
of themselves, their legal representatives successors and assigns, hereby
specifically renounce, waive and forfeit all rights whether arising under
statute, or by operation of law, to seek, bring, or maintain any action in any
court of law or equity for partition of the Property, or any interest which is
considered to be LLC property, regardless of the manner in which title to any
such property may be held, and upon any breach of the provisions of this Section
14.4, the other Member, in addition to all rights and remedies in law and
equity, shall be entitled to a decree or order restraining or enjoining such
application, action or proceeding.
14.5 Pronouns, etc.
-------------
All pronouns or any variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, singular or plural, as to the identity of the
person or persons may require.
14.6 Entire Agreement.
----------------
This Agreement, together with other documents being executed of even
date, contain the entire agreement between the parties hereto relative to the
formation of the LLC and the LLC's ownership of the Property as of the date of
this Agreement, and all prior understandings and agreements between the parties
are merged in this Agreement. Without limiting the foregoing, this Agreement
amends, restates and supercedes the Original Agreement, and supercedes any other
agreements regarding the Original Agreement executed in connection therewith.
Each Member acknowledges that it is not relying upon any statement or
representation made by the other Member not embodied herein or in the Exhibits
attached hereto, in instruments delivered pursuant to specific provisions
hereof, or in other instruments signed or delivered by the parties (or the other
party) in connection with the execution of the Original Agreement or the
formation of the LLC or being signed or delivered by the parties (or the other
party) in connection with the execution of this Agreement or the contributions
referred to in Section 4.1(a) above. No variations, modifications or changes
herein or hereof shall be binding upon any Member hereto unless set forth in a
document duly executed by or on behalf of such Member.
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<PAGE>
14.7 Binding Agreement; No Third Party Beneficiaries.
-----------------------------------------------
Subject to the restrictions on transfers and encumbrances set forth
herein, this Agreement shall inure to the benefit of and be binding upon the
undersigned Members and their respective legal representatives, successors and
assigns. Whenever in this instrument, a reference to any Member is made, such
reference shall be deemed to include a reference to the legal representatives,
successors and permitted assigns of such Member. However, in no event shall any
third party be deemed to be a third party beneficiary of this Agreement or
otherwise be entitled to enforce the terms and conditions of this Agreement
against the Members.
14.8 Force Majeure.
-------------
All obligations set forth in this Agreement shall be subject to
impossibility of performance as a consequence of any strike, lock-out, fire,
destruction, acts of God, restrictions of any governmental authority, civil
commotion or unavoidable casualty.
14.9 Captions; Exhibits.
------------------
The captions used herein are for convenience only and do not in any
way affect, limit, amplify or otherwise modify the terms and provisions hereof.
Exhibits A through G, inclusive, attached hereto are a material part of this
Agreement and are hereby incorporated herein by reference.
14.10 Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of
which as executed shall be deemed to be an original, but all such counterparts
shall constitute one and the same instrument.
14.11 Time of the Essence.
-------------------
Time is of the essence in the performance by the Members of their
obligations under this Agreement.
14.12 Tax Matters Partner.
-------------------
Trump shall be the Tax Matters Partner of the LLC for all purposes
under the Code, under the direction of the Operating Committee. However, Trump
shall not cause the LLC to exercise any election available to the LLC under the
Code, or take any
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<PAGE>
other action in such capacity, without the prior written consent of the other
Member.
IN WITNESS WHEREOF, this Agreement is executed effective as of the
date first set forth above.
"TRUMP"
TRUMP INDIANA, INC.
By: /s/Nicholas L. Ribis
-------------------------------
Nicholas L. Ribis
President
"BDC"
BARDEN-DAVIS CASINO, LLC
By: BARDEN DEVELOPMENT, INC.,
Member
By: /s/Don H. Barden
-------------------------------
Don H. Barden
President
And
By: GARY RIVERBOAT GAMING, LLC
Member
By: BARDEN MANAGEMENT, INC.,
Its Manager
By: /s/Don H. Barden
-------------------------------
Don H. Barden
President
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<PAGE>
EXHIBIT "A"
COMMON AREA DEVELOPMENT APPROVALS
1. United States Army Corps of Engineers permit application (Lehigh
Portland Cement Co., applicant) for modifications to Buffington Harbor.
2. Indiana Department of Natural Resources permit application (Lehigh
Portland Cement Co., applicant) for modifications to Buffington Harbor.
3. Site clearance permit from the City of Gary.
4. Demolition permit from the City of Gary.
5. Application for use variance from the City of Gary.
<PAGE>
Exhibit "B-1"
PRE-FORMATION AGREEMENTS
1. Agreement of Sale between Lehigh Portland Cement Company and Trump
Indiana, Inc. dated May 10, 1995;
2. Corporate Warranty Deed between Lehigh Portland Cement Company and Trump
Indiana, Inc. dated June 29, 1995, recorded July 7, 1995, as Instrument
#95038220;
3. Environmental Disclosure Document for Transfer of Real Property dated
June 29, 1995, recorded July 7, 1995, as Instrument #95038221;
4. Easement Agreement between Lehigh Portland Cement Company and Trump Indiana,
Inc. dated June 30, 1995, recorded July 7, 1995, as Instrument #95038222;
5. Operations Agreement between Lehigh Portland Cement Company and Trump
Indiana, Inc. dated June 30, 1995, recorded July 7, 1995, as Instrument
#95038223;
6. Agreement Concerning Use Agreement between Lehigh Portland Cement Company
and Trump Indiana, Inc. dated June 30, 1995, recorded July 7, 1995, as
Instrument #95038224;
7. Access Easement between Lehigh Portland Cement Company and Trump Indiana,
Inc. dated June 30, 1995, recorded July 7, 1995, as Instrument #95038225;
8. Agreement with Respect to Railroads between Lehigh Portland Cement Company
and Trump Indiana, Inc. dated June 30, 1995, recorded July 7, 1995, as
Instrument #95038226;
9. Utility Easement between Lehigh Portland Cement Company and Trump Indiana,
Inc. dated June 30, 1995, recorded July 7, 1995, as Instrument #95038227;
10. Memorandum of Lease between Lehigh Portland Cement Company and Trump
Indiana, Inc. dated June 30, 1995, recorded July 7, 1995, as Instrument
#95038228;
11. Vendor's Affidavit by Lehigh Portland Cement Company dated June 29, 1995;
12. Standard Extended Coverage Questionnaire by Lehigh Portland Cement Company
and Trump Indiana, Inc. dated June 29, 1995;
13. Harbor Lease Agreement between Lehigh Portland Cement Company and Trump
Indiana, Inc. dated June 29, 1995;
<PAGE>
14. Certified Copy of Resolution of Lehigh Portland Cement Company dated June
29, 1995;
15. Agreement between Lehigh Portland Cement Company and Trump Indiana, Inc.
dated June 30, 1955;
16. Tax Agreement between Lehigh Portland Cement Company and Trump Indiana, Inc.
dated June 29, 1995;
17. Tax Escrow Agreement among Lehigh Portland Cement Company, Trump Indiana,
Inc. and Chicago Title Insurance Company dated June 29, 1995.
18. Opinion Letter of Sellers' Counsel (Burke, Murphy, Costanza & Cuppy) dated
June 29, 1995;
19. Lehigh Portland Cement Company Secretary's Certificate dated June 29, 1995;
20. FIRPTA Certification of Lehigh Portland Cement Company dated June 29, 1995;
21. Certificate of Good Standing for Lehigh Portland Cement Company
(Pennsylvania) dated June 20, 1995;
22. Certificate of Authorization for Lehigh Portland Cement Company (State of
Indiana) dated June 28, 1995;
23. Affidavit (as to Gross Income Tax Due) of Lehigh Portland Cement Company
dated June 30, 1995;
24. Affidavit (as to deferred maintenance) of Paul Pachapa dated June 30, 1995;
25. Certificate of Insurance (evidencing insurance in favor of Trump Indiana,
Inc.) dated June 20, 1995;
26. Secretary's Certificate of Trump Indiana, Inc. dated June 29, 1995;
27. Certificate of Authorization for Trump Indiana, Inc. (State of Indiana)
dated June 26, 1995;
28. Pro-Forma Policy #04-81-012 dated June 30, 1995 issued by Chicago Title
Insurance Company and such matters as are disclosed therein;
29. Plat of Survey - Sections 23 & 26, TWP. 37N. R.9W., 2nd P.M., prepared by
Cole Associates, dated June 29, 1995;
30. Letter Agreement (with respect to hold open agreement) of Chicago Title
Insurance Company dated June 29, 1995;
-2-
<PAGE>
31. Settlement Statement among Lehigh Portland Cement Company, Trump Indiana,
Inc. and Chicago Title Insurance Company dated June 29, 1995;
32. Personal Undertaking Against Mechanic's Liens by Lehigh Portland Cement
Company dated June 29, 1995;
33. Personal Undertaking (GAP) among Lehigh Portland Cement Company, Trump
Indiana, Inc. and Chicago Title Insurance Company dated June 29, 1995;
34. Stipulation for Dismissal with Prejudice as to Defendant Lehigh Portland
Cement Company;
35. Exhibits to Agreement of Sale Dated May 10, 1995 between Lehigh Portland
Cement Company and Trump Indiana, Inc. dated June 29, 1995;
36. Exhibit "L"/Endorsement to Non-Disclosure Agreement dated as of May 10, 1995
between Lehigh Portland Cement Company and Trump Indiana, Inc.;
37. Agreement Regarding Restrictive Covenants between City of Gary and USX
Corporation dated as of March __, 1995.
38. Construction Escrow Agreement between Lehigh Portland Cement Company and
Trump Indiana, Inc. dated August 15, 1995;
39. Architect Agreement between Trump Indiana, Inc. and Sykes, O'connor, Salerno
& Hazaveh, Architects, dated August 25, 1995;
40. Mechanical and Electrical Engineering Proposal of Giovanetti & Shulman
Associates dated June 12, 1995;
41. Consulting Structural Engineering Services Proposal of Cagley, Harman &
Associates dated August 16, 1995;
42. Construction Management Agreement between Trump Indiana, Inc. and Huber,
Hunt & Nichols, Inc. dated June 15, 1995;
43. Site and Civil Engineering Proposal of Cole Associates, Inc. dated July 27,
1995;
44. Phase II Environmental Engineering Proposal of Baker Environmental, Inc.
dated August 24, 1995;
45. Marine Design Proposal of Baird & Associates dated May 3, 1995;
46. Interior Design Proposal of Interior Design International, Inc. dated
August 17, 1995;
-3-
<PAGE>
47. Demolition Proposal of Congress Enterprises, Inc. dated July 19, 1995;
48. Sign Proposal of Corsair Graphics Sign Company dated July 14, 1995;
49. Security Temporary Service Agreement of Stanley Smith Security, Inc. dated
July 13, 1995;
50. Demolition Agreement between Trump Indiana, Inc. and National Wrecking
Company dated August 22, 1995 (and Change Order dated September __, 1995
between Trump Indiana, Inc. and Colfex (an affiliate of National Wrecking
Company));
51. Electrical Transformer Relocation Agreement between Lehigh Portland
Cement Company and Meade Electric Company, Inc. dated September 1, 1995;
52. Landscape Clean-up Estimate of Matthews Nursery, Inc. dated August 17, 1995;
53. Environmental Survey Proposal of Allstate Environmental, Inc. dated August
16, 1995.
54. General Consulting Services Agreement between Trump Indiana, Inc. and
Boelter Environmental Consultants, Inc.
55. Buffington Station Phase I Environmental Site Assessment (Draft) dated May
1995, prepared by Fluor Daniel Environmental Services, Inc.;
56. Buffington Station Phase II Environmental Site Assessment (Draft) dated May
1995, prepared by Fluor Daniel Environmental Services, Inc.;
57. Phase III letter proposal from Fluor Daniel Environmental Services, Inc.
dated December 14, 1994;
58. Authorization for Release of Confidential Information from the City of Gary
to Lehigh Portland Cement Company;
59. Non-Disclosure Agreement between the City of Gary and Lehigh Portland Cement
Company dated July 14, 1994;
60. Certification of Compliance with Confidentiality Agreement dated May 12,
1995;
61. Authorization for Release of Confidential Information from Trump Indiana,
Inc. to Lehigh Portland Cement Company;
62. Non-Disclosure Agreement by and between Trump Indiana, Inc. and Lehigh
Portland Cement Company dated _______________, 1995;
-4-
<PAGE>
63. Escrow Agreement among City of Gary, Trump Indiana, Inc. and Gilbert King,
Jr., Esq.;
64. Plat of Survey - Sections 23 & 26, TWP. 37N. R.9W., 2nd P.M., prepared by
Cole Associates, dated September __, 1995; and
65. Harbor Payment Commitment between Trump Indiana, Inc. and Lehigh Portland
Cement Company.
Note: Notwithstanding the identification of any of the foregoing as proposals
or estimates, work has commenced and/or been completed with respect to those
matters set forth in items 39 through 54 inclusive 66 and 67.
66. Commitment with Reith Riley for site paving and additional site work for
$3,626,743.00.
67. Commitment with Egan Marine for purchase of Barge EMC 424, with some
modifications thereto, for $650,000.00.
-5-
<PAGE>
EXHIBIT "B-2"
STUDIES
1. Agreement for a Physical Model Study with Lehigh Portland Cement.
2. Harbor Payment Commitment with Lehigh Portland Cement, et al.
3. David Seymour Consulting Agreement.
4. Walsh Construction Consulting Agreement.
5. Marnell Corrao Associates Consulting Agreement.
6. Transportation Consulting Group Consulting Agreement.
7. Design Workshop Consulting Agreement.
8. Survey by Cole & Associates
<PAGE>
EXHIBIT"C"
[SITE PLAN]
<PAGE>
Exhibit "D"
CONSULTANTS
================================================================================
CONSULTANT AMOUNT STATUS
- ---------------------------------- ---------- -----------------------------
Architectural
Sykes, O'connor, Salerno & Hazavha 550,000 Awaiting contract review
- --------------------------------------------------------------------------------
Mechanical & Electrical
Givovanetti & Shulman 122,500 Proposal signed, awaiting
Associates (GSA) contract
- --------------------------------------------------------------------------------
Structural 67,000 Proposal signed, awaiting
contract
Cagley Harmon & Associates
- --------------------------------------------------------------------------------
Construction Management 600,000 Contract executed
Huber, Hunt & Nichols
- --------------------------------------------------------------------------------
Site & Civil 596,700 Proposal signed, awaiting
contract
Cole Engineering
- --------------------------------------------------------------------------------
Environmental 50,000 Authorization letter sent,
awaiting contract
Baker Environmental
- --------------------------------------------------------------------------------
Marine 340,200 Contract with Lehigh
Baird & Associates
- --------------------------------------------------------------------------------
Landscape Architect and Master 55,775 Proposal in for review
Planning
Design work Shop
- --------------------------------------------------------------------------------
Interior Design 122,400 Proposal signed, awaiting
contract
Interior Design International, Inc.
- --------------------------------------------------------------------------------
Barge, Moorings, PMS 68,200 Proposal in for review
David Seymour
- --------------------------------------------------------------------------------
Contruction Management 220000 Proposal in for review
Walsh Construction Company
- --------------------------------------------------------------------------------
Pavilion & Barge Layout 36,400 Proposal in for review
Review
Marnell Corrao Associates
- --------------------------------------------------------------------------------
Mike Johnson & Associates 76,000 Proposal in for review
- --------------------------------------------------------------------------------
Transportation Consulting Group 13,600 Proposal in for review
Parking Lot & Shuttle Layout
- --------------------------------------------------------------------------------
Lighting, Security, Kitchen, etc. 100,000 Proposal not yet received
- --------------------------------------------------------------------------------
TOTAL 3,018,775
================================================================================
September 27, 1995
<PAGE>
2 of 2
BUFFINGTON HARBOR RIVERBOATS, L.L.C.
Exhibit "D"
CONTRACTORS
================================================================================
CONTRACTOR AMOUNT STATUS
- ---------------------------------- ---------- -----------------------------
Demolition $0 Work complete, signed
proposal
Congress Enterprises, Inc.
- --------------------------------------------------------------------------------
Signage 0 work complete, signed
proposal
Corsair Graphics Sign Company
- --------------------------------------------------------------------------------
Security 1,200/wk Ongoing 62,400/yr
Smith Security
- --------------------------------------------------------------------------------
Demolition 2,000,000 In progress, contract issued
National Wrecking Company
- --------------------------------------------------------------------------------
Electrical 82,700 In progress, contract issued
Meade Electric Company, Inc.
- --------------------------------------------------------------------------------
Landscape Clean-up 10,350 Work complete
Matthews Nursery, Inc.
- --------------------------------------------------------------------------------
Harbor Construction 3,240,000 Awaiting finalization
- --------------------------------------------------------------------------------
TOTAL 5,334,250
================================================================================
September 27, 1995
<PAGE>
Exhibit "E"
Improvements Budget
Lehigh Spur Relocation and New Grade Crossing 670,000
Parking(cars & ultra high lot) w/Shelters for Trams 5,820,000
New Road Work 836,200
Underpass Restoration 588,500
Track Signalization 189,600
Demolition 2,086,280
Temporary Building 5,800,000
Porte Cochere 635,000
Overhead Railroad Crossing 3,000,000
Substation/Generator 1,830,000
Exterior Signage/Landscaping 2,000,000
USX Power Lines 1,000,000
Barge/Walkway 7,000,000
Sewer/Water 1,828,000
Land/Boat Connections 270,000
UPS/CCTV 150,000
Insurance 455,500
General Conditions 3,200,000
Harbor 3,240,041
Site Fencing 211,000
Environmental Remediation 500,000
SUBTOTAL 41,310,121
Consultants 3,018,775
FF&E 5,000,000
Operating Reserve 4,000,000
Administration/Legal/Insurance 750,000
SUBTOTAL 12,768,775
Contingency (10%) 5,407,890
Less: Amounts Expended since 9-27-95 759,965
IMPROVEMENTS BUDGET 58,726,821
BDC Costs 1,083,027
Trump Costs 21,823,018
SUBTOTAL 22,906,045
PROJECT TOTAL 81,632,866
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF DISBURSEMENTS (CONTINUED)
WORK & LEGAL &
CK# DATE LAND HARBOR PROF
---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
5027 2/8/95 CITY OF GARY & WOODEN 10,000 10,000
5037 3/1/95 CITY OF GARY & WOODEN 15,000 15,000
5054 4/5/95 SHEFSKY FROELICH 10,324 10,324
5055 4/5/95 CITY OF GARY & WOODEN 20,000 20,000
5056 4/13/95 FBA ENVIRONMENTAL 4,200 4,200
DM 5/23/95 BURKE, MURPHY, COSTANZA 500,000 500,000
DM/FT 6/22/95 CHICAGO TITLE 13,000,000 13,000,000
DM 6/22/95 CHICAGO TITLE 29,767 29,767
DM/FT 7/11/95 FLUOR DANIELS 300,000 300,000
DM/FT 7/24/95 BURKE, MURPHY, COSTANZA 200,000 200,000
5093 7/1/95 SHEFSKY&FROELICH 2,227 2,227
5094 7/1/95 SHEFSKY&FROELICH 2,380 2,380
5098 7/5/95 LEHIGH PORTLAND 66,463 66,463
5108 7/19/95 CORSAIR GRAPHICS 1,430 1,430
5109 7/19/95 FBA ENVIRONMENTAL 27,240 27,240
5112 7/19/95 SHEFSKY&FROELICH 33,379 33,379
5114 7/26/95 CLERK OF LK SUPERIOR CRT 8,735 8,735
5115 7/26/95 LEHIGH PORTLAND 65,909 65,909
5117 7/26/95 SYKES, O'CONNOR 48,713 48,713
DM/FT 8/15/95 LEHIGH PORTLAND&TII 2,546,417 2,546,417
DM/FT 8/18/95 LEHIGH PORTLAND&TII 600,000 600,000
DM/FT 8/29/95 LEHIGH PORTLAND&TII 2,613,542 2,613,542
5122 8/2/95 GOV'T CONTRACTING/CONG 75,000 75,000
992 8/17/95 FLUOR DANIELS 162,913 162,913
996 8/18/95 STANLEY SMITH SECURITY 1,169 1,169
1007 8/18/95 STANLEY SMITH SECURITY 1,433 1,433
1016 9/5/95 SHEFSKY&FROELICH 63,868 63,868
1017 9/5/95 CONGRESS ENTERPRISES 129,320 129,320
1018 9/5/95 LEHIGH PORTLAND 93,641 93,641
1025 9/5/95 STANLEY SMITH SECURITY 1,433 1,433
1037 9/13/95 STANLEY SMITH SECURITY 2,866 2,866
1044 9/22/95 STANLEY SMITH SECURITY 5,314 5,314
1047 9/22/95 MATTHEWS NURSERY INC 10,350 10,350
1056 9/22/95 SYKES, O'CONNOR 46,170 46,170
DM/FT 10/6/95 LEHIGH PORTLAND&TII 300,000 300,000
1064 10/12/95 STANLEY SMITH SECURITY 1,433 1,433
1073 10/13/95 LEHIGH PORTLAND 103,893 103,893
VARIOUS SYKES, O'CONNOR/TRAVEL 5,012 5,012
---------- ---------- --------- -------
21,109,542 13,779,395 7,093,073 237,073
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF DISBURSEMENTS (CONTINUED)
WORK & LEGAL &
CK# DATE LAND HARBOR PROF
---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST 7/1-10/30/95 529,570
LEGAL RIBIS
GRAHAM 183,906
----------
21,823,018
</TABLE>
INTEREST EXPENSE CALCULATION
BEGINNING ENDING
BALANCE EXP INT BALANCE
6/1/95 13,589,291 13,589,291
7/1/95 13,589,291 756,476 105,317 14,451,084
8/1/95 14,451,084 6,000,474 111,996 20,563,554
9/1/95 20,563,554 352,963 154,227 21,070,744
10/1/95 21,070,744 410,338 158,031 21,639,112
21,109,542 529,570
<PAGE>
Exhibit "G"
BDC COSTS
Before September 27, 1995
Check
Number Date
PAID
Various Ashton-Barnes 18,483
01188 06/26/95 Cole Associates 1,607
01296 07/28/95 Cole Associates 20,846
01217 08/10/95 Cole Associates 13,600
1002 09/12/95 Cole Associates 3,445
Various Various Dykema Gossett 34,161
Various 03/03/95 Floyd Browne 1,119
01199 07/06/95 Lehigh Portland Cement 66,463
01220 08/10/95 Lehigh Portland Cement 65,909
087 08/17/95 Lehigh Portland Cement 93,641
1003 09/12/95 Lehigh Portland Cement 103,893
01090 01/18/95 Len Pryweller Realty 10,000
01100 02/06/95 Len Pryweller Realty 10,000
01110 02/13/95 Len Pryweller Realty 5,000
Various Various Michael Baker 42,565
Various Various Michael Johnson & Assoc. 70,535
1090 02/06/95 Wooden-Condemnation 10,000
1093 03/02/95 Wooden-Land Appraisal 15,000
Sub-Total 586,267
ACCRUED
Wire 09/28/95 Lehigh Portland Cement 300,000
Sykes, O'connor 48,712
Sub-Total 348,712
After September 27, 1995
Wire 10/20/95 Lehigh Portland Cement 99,500
1013 10/13/95 Athony A. Marnell II, Chtd. 2,731
1014 10/13/95 David J. Seymour 5,734
1011 09/29/95 David J. Seymour 2,674
1012 10/13/95 Design Workshop 5,000
1015 10/16/95 Sykes O'connor 3,799
1017 10/25/95 Cole & Associates 8,500
Sub-Total 127,939
Interest Thru 10/30/95 20,110
01:12PM
10/27/95 Total 1,083,027
Interest Rate
9.00%
<PAGE>
EXHIBIT 10.60
[DDC LOGO]
FORM OF 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 th is 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
-7-
<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
-8-
<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
-9-
<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:
RICHARD CRAIG ABRAHAM
VICE-PRESIDENT
BORROWER: TRUMP INDIANA, INC.
BY:
NICHOLAS L. RIBIS
PRESIDENT
-10-
<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
up
<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:______________________
NICHOLAS L. RIBIS
PRESIDENT
-2-
<PAGE>
CERTIFICATE OF SECRETARY
ON CORPORATE BORROWING RESOLUTIONS
Robert M. Pickus does hereby certify as Assistant Secretary of TRUMP INDIANA,
INC., a corporation duly organized under the laws of Delaware ("Corporation"),
that the following resolutions were duly adopted by the Board of Directors of
the Corporation at a meeting thereof duly called and held at which a quorum was
present and acting throughout, and that such resolutions are in full force and
effect.
RESOLVED, that the Corporation shall borrow from DEBIS FINANCIAL
SERVICES, INC. D/B/A DDC-MTU FINANCIAL SERVICES ("DDC-MTU"), in the
amount of $15,000,000.00 USD, on such terms and with such collateral as
any one of the officers of the Corporation whose signatures appear below
("Officers") may deem appropriate, including such additional or
supplemental amounts in excess of the amount specified above as may be
deemed reasonably necessary by any one of the Officers to accomplish the
purpose of this borrowing (all together referred to as "Loan"); and it
is
FURTHER RESOLVED, that any one of the Officers, are authorized to
execute and deliver to DDC-MTU on behalf of the Corporation such debt
and security instruments as he or she may deem appropriate to evidence
the Loan and the security interest provided to DDC-MTU in connection
with the Loan, such instruments to be valid and binding on the
Corporation; and it is
FURTHER RESOLVED, that any actions previously taken by the Officers in
connection with the Loan are hereby ratified and approved in all
respects.
Set forth below is the name, office, and genuine signature of all the presently
elected and acting officers of the Corporation, other than the Secretary.
PRINTED NAME OFFICE SIGNATURE
DONALD J. TRUMP CHAIRMAN _______________________
NICHOLAS L. RIBIS PRESIDENT _______________________
JOHN P. BURKE TREASURER _______________________
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Corporation (if applicable) this 30TH DAY OF AUGUST, 1995.
___________________________
(CORPORATE SEAL) ROBERT M. PICKUS
ASSISTANT SECRETARY
-2-
<PAGE>
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>
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 ____ day of October, 1995.
BORROWER: TRUMP INDIANA, INC.
BY:___________________________
NICHOLAS L. RIBIS
PRESIDENT
LENDER: DEBIS FINANCIAL SERVICES, INC. D/B/A
DDC-MTU FINANCIAL SERVICES
BY:____________________________
CRAIG ABRAHAM
VICE-PRESIDENT
-2-
<PAGE>
EXHIBIT 10.61
DONALD J. TRUMP
725 FIFTH AVENUE
NEW YORK, NEW YORK 10022
January 8, 1996
Trump Hotels & Casino Resorts, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attention: Board of Directors
Dear Sirs:
In connection with the merger of THCR Merger Corp. ("Merger Sub"), a wholly
owned subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR"), with and
into Taj Mahal Holding Corp. ("Taj Holding"), and the related transactions
described in the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of January 8, 1996, by and among THCR, Merger Sub and Taj Holding (the
"Merger Transaction"), and as an inducement for the parties thereto to enter
into the Merger Agreement, I hereby agree to take the actions contemplated to
be taken by me in connection with the Merger Transaction, including to vote or
to cause to be voted all shares of Common Stock, par value $.01 per share, and
Class B Common Stock, par value $.01 per share, of THCR beneficially owned by
me for approval of the Merger Transaction, which approval will include the
approval and adoption of the Merger Agreement.
By its countersignature below, THCR agrees to use reasonable efforts to
fulfill, and cause to be fulfilled, those obligations owed to me in connection
with the Merger Transaction.
The agreements of the undersigned and THCR contained herein shall terminate
at such time as the Merger Agreement is terminated in accordance with its
terms.
Sincerely,
/s/ Donald J. Trump
-------------------------------------
Donald J. Trump
Agreed and Accepted:
TRUMP HOTELS & CASINO RESORTS, INC.
By: /s/ Robert M. Pickus
_________________________________
Name: Robert M. Pickus
Title: Executive Vice President
<PAGE>
DONALD J. TRUMP
725 FIFTH AVENUE
NEW YORK, NEW YORK 10022
January 8, 1996
Trump Hotels & Casino Resorts, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attention: Board of Directors
Dear Sirs:
In connection with the merger of THCR Merger Corp. ("Merger Sub"), a wholly
owned subsidiary of Trump Hotels & Casino Resorts, Inc. ("THCR"), with and
into Taj Mahal Holding Corp. ("Taj Holding"), and the related transactions
described in the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of January 8, 1996, by and among THCR, Merger Sub and Taj Holding (the
"Merger Transaction"), and as an inducement for the parties thereto to enter
into the Merger Agreement, I hereby agree to take the actions contemplated to
be taken by me in connection with the Merger Transaction, including to vote or
to cause to be voted all shares of Common Stock, par value $.01 per share, and
Class B Common Stock, par value $.01 per share, of THCR beneficially owned by
me for approval of the Merger Transaction, which approval will include the
approval and adoption of the Merger Agreement.
By its countersignature below, THCR agrees to use reasonable efforts to
fulfill, and cause to be fulfilled, those obligations owed to me in connection
with the Merger Transaction.
The agreements of the undersigned and THCR contained herein shall terminate
at such time as the Merger Agreement is terminated in accordance with its
terms.
Sincerely,
/s/ Donald J. Trump
-------------------------------------
Donald J. Trump
Agreed and Accepted:
TRUMP HOTELS & CASINO RESORTS, INC.
By: _________________________________
Name:
<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 11, 1996
<PAGE>
EXHIBIT 99.1
PRELIMINARY COPY
TRUMP HOTELS & CASINO RESORTS, INC.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TRUMP HOTELS & CASINO RESORTS, INC.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
to be held at ______ at 10:00 a.m., local time, on March __, 1996
The undersigned hereby appoints Nicholas L. Ribis and Robert M.
Pickus, and each of them, with full power of substitution, as proxies of the
undersigned to vote all shares of stock which the undersigned is entitled in any
capacity to vote at the above-stated Special Meeting, and at any and all
adjournments or postponements thereof, on the matters set forth on the reverse
side of this Proxy Card, and, in their discretion, upon all matters incident to
the conduct of the Special Meeting and upon such other matters as may properly
be brought before the Special Meeting. This proxy revokes all prior proxies
given by the undersigned.
ALL PROPERLY SIGNED PROXIES WILL BE VOTED AS DIRECTED. IF NO
INSTRUCTIONS ARE INDICATED ON A PROPERLY EXECUTED PROXY, SUCH PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL NO. 1. All ABSTAIN votes will be counted in
determining the existence of a quorum at the Special Meeting, but will have the
same effect as a vote AGAINST Proposal No. 1.
RECEIPT OF THE NOTICE OF MEETING AND THE JOINT PROXY STATEMENT-
PROSPECTUS DATED FEBRUARY__, 1996 (THE "JOINT PROXY STATEMENT-PROSPECTUS") IS
HEREBY ACKNOWLEDGED.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on reverse side)
<PAGE>
PRELIMINARY COPY
(Continued from reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TRUMP HOTELS & CASINO RESORTS, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
---
Please mark boxes in blue or black ink.
1. Approval of the Merger Transaction, which approval constitutes approval and
adoption of the Merger Agreement (as such terms are defined in the Joint
Proxy Statement-Prospectus)
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Please mark the box indicating the type of stock of Trump Hotels & Casino
Resorts, Inc. which you are voting with this proxy card:
Common Stock [ ]
Class B Common Stock [ ]
2. In the discretion of the proxies with respect to any other matters that may
properly come before the Special Meeting or any adjournments or postponements
thereof.
(JOINT OWNERS SHOULD EACH SIGN. PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS ON
THIS CARD. WHEN SIGNING AS ATTORNEY, TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN
OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE BELOW.)
__________________________
(TITLE OR AUTHORITY)
__________________________
(SIGNATURE)
__________________________
(SIGNATURE)
DATED:_______________, 1996
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-2-
<PAGE>
EXHIBIT 99.2
PRELIMINARY COPY
TAJ MAHAL HOLD1NG CORP.
1000 The Boardwalk
Atlantic City, New Jersey 08401
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TAJ MAHAL HOLDING CORP.
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
To be held ______ at 10:00 a.m., local time, on March __, 1996
The undersigned hereby appoints Nicholas L. Ribis and Robert M.
Pickus, and each of them, with full power of substitution, as proxies of the
undersigned to vote all shares of stock which the undersigned is entitled in any
capacity to vote at the above-stated Special Meeting, and at any and all
adjournments or postponements thereof, on the matters set forth on the reverse
side of this Proxy Card, and, in their discretion, upon all matters incident to
the conduct of the Special Meeting and upon such other matters as may properly
be brought before the Special Meeting. This proxy revokes all prior proxies
given by the undersigned.
ALL PROPERLY SIGNED PROXIES WILL BE VOTED AS DIRECTED. IF NO
INSTRUCTIONS ARE INDICATED ON A PROPERLY EXECUTED PROXY, SUCH PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL NO. 1. All ABSTAIN votes will be counted in
determining the existence of a quorum at the Special Meeting, but will have the
same effect as a vote AGAINST Proposal No. 1.
RECEIPT OF THE NOTICE OF MEETING AND THE JOINT PROXY STATEMENT-
PROSPECTUS DATED FEBRUARY __, 1996 (THE "JOINT PROXY STATEMENT-PROSPECTUS") IS
HEREBY ACKNOWLEDGED.
PLEASE SIGN AND DATE ON THE REVERSE SIDE AND MAIL THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on reverse side)
<PAGE>
PRELIMINARY COPY
(Continued from reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TAJ MAHAL HOLDING CORP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 1.
---
Please mark boxes in blue or black ink.
1. Approval of the Merger Transaction, which approval constitutes approval and
adoption of the Merger Agreement (as such terms are defined in the
Joint Proxy Statement-Prospectus)
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
Please mark the box indicating the type of stock of Taj Mahal Holding Corp.
which you are voting with this proxy card:
Class A Common Stock [ ]
Class B Common Stock [ ]
Class C Common Stock [ ]
2. In the discretion of the proxies with respect to any other matters that may
properly come before the Special Meeting or any adjournments or postponements
thereof.
(JOINT OWNERS SHOULD EACH SIGN. PLEASE SIGN EXACTLY AS YOUR NAME(S) APPEARS ON
THIS CARD. WHEN SIGNING AS ATTORNEY, TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN
OR CORPORATE OFFICER, PLEASE GIVE YOUR FULL TITLE BELOW.)
--------------------------------
(TITLE OR AUTHORITY)
--------------------------------
(SIGNATURE)
--------------------------------
(SIGNATURE)
DATED: __________, 1996
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
-2-
<PAGE>
EXHIBIT 99.3
PRELIMINARY COPY
ELECTION FORM
THIS ELECTION FORM ALLOWS A HOLDER OF CLASS A COMMON STOCK OF TAJ MAHAL HOLDING
CORP. TO ELECT TO RECEIVE CASH CONSIDERATION RATHER THAN STOCK CONSIDERATION IN
CONNECTION WITH THE MERGER OF THCR MERGER CORP., A WHOLLY OWNED SUBSIDIARY OF
TRUMP HOTELS & CASINO RESORTS, INC., WITH AND INTO TAJ MAHAL HOLDING CORP.
This Election Form is submitted in connection with the proposed merger
(the "Merger") of THCR Merger Corp. ("Merger Sub"), a wholly owned subsidiary
of Trump Hotels & Casino Resorts, Inc. ("THCR"), with and into Taj Mahal
Holding Corp. ("Taj Holding"). This Election Form permits each holder of Class A
Common Stock (or the beneficial owner through appropriate and customary
documentation and instructions), par value $.01 per share, of Taj Holding (the
"Class A Common Stock") to elect to receive, for each of their shares of
Class A Common Stock, either (i) $30.00 in cash ("Cash Contribution") or (ii)
that number of fully paid and nonassessable shares of Common Stock, par value
$.01 per share, of THCR equal to the result obtained by dividing $30.00 by the
Market Value (as defined in the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of January 8, 1996, by and among Taj Holding, THCR
and Merger Sub) ("Stock Consideration" and, collectively with Cash
Consideration, "Merger Consideration").
TO ELECT TO RECEIVE CASH CONSIDERATION RATHER THAN STOCK
CONSIDERATION, THIS ELECTION FORM MUST BE PROPERLY COMPLETED AND SENT TO
CONTINENTAL STOCK TRANSFER & TRUST COMPANY (THE "EXCHANGE AGENT") AT THE
ADDRESSES LISTED BELOW ON OR BEFORE 5:00 P.M. ON MARCH __, 1996 (THE "Election
Deadline"). Any Election Form may be revoked prior to the Election Deadline by
submitting a new Election Form to the Exchange Agent. HOLDERS OF CLASS A COMMON
STOCK WHO DO NOT SUBMIT THIS ELECTION FORM OR WHO SUBMIT AN ELECTION FORM THAT
IS NOT PROPERLY COMPLETED WILL RECEIVE STOCK CONSIDERATION IN CONNECTION WITH
THE MERGER. 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. None of the Exchange Agent, THCR, Taj Holding or Merger
Sub shall be under any obligation to notify any person of any detect in an
Election Form or the revocation thereof.
To: Continental Stock Transfer & Trust Company, Exchange Agent
By mail: By Overnight Courier: By hand:
[2 Broadway
l9th Floor
New York. NY 10004]
By Facsimile: Confirm by telephone to:
[(212) 509-5150] [(212) 509-4000]
DELIVERY OF THIS ELECTION FORM TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A TELECOPY FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE VALID DELIVERY.
<PAGE>
PRELIMINARY COPY
PLEASE MAKE YOUR ELECTION BY PROPERLY FILLING IN THE INFORMATION
REQUESTED BELOW.
PLEASE MARK ONE OF THE FOLLOWING BOXES, INDICATING THE TYPE OF CONSIDERATION YOU
ELECT TO RECEIVE IN CONNECTION WITH THE MERGER:
STOCK CONSIDERATION [ ] CASH CONSIDERATION [ ]
DO NOT SEND YOUR STOCK CERTIFICATE(S) WITH THIS ELECTION FORM. If the
---
Merger is effected, the Exchange Agent will mail to each holder of shares of
Class A Common Stock (other than Dissenting Shares (as defined in the Merger
Agreement)) (i) a letter of transmittal and (ii) instructions to effect the
surrender of the certificates evidencing shares of Class A Common Stock in
exchange for Merger Consideration.
Name of Registered Holder*: Address of Registered Holder:
________________________________ ____________________________________
____________________________________
____________________________________
Total Number of Shares Held:
________
Certificate Number(s): (attach additional list if necessary)
- ----------------------
- --------------------
* Only certificates registered in a single form may be deposited with
this Election Form. If certificates are registered in different forms (e.g. John
R. Doe and J.R. Doe), it will be necessary to fill in, sign and submit as many
separate Election Forms as there are different registrations of certificates.
-2-
