<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1996
REGISTRATION NO. 333-639
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TRUMP HOTELS & CASINO RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7011 13-3818402
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
MISSISSIPPI AVENUE AND THE BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 441-6060
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
NICHOLAS L. RIBIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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. NICHOLAS P. SAGGESE,
WILLKIE FARR & GALLAGHER EXECUTIVE VICE PRESIDENT ESQ.
ONE CITICORP CENTER TRUMP HOTELS & CASINO SKADDEN, ARPS, SLATE,
153 EAST 53RD STREET RESORTS, INC. MEAGHER & FLOM
NEW YORK, NEW YORK 10022 MISSISSIPPI AVENUE AND 300 SOUTH GRAND AVENUE
(212) 821-8000 THE BOARDWALK SUITE 3400
ATLANTIC CITY, NEW JERSEY 08401 LOS ANGELES, CALIFORNIA
(609) 441-6060 90071
(213) 687-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.1 per
share........................... 14,875,000 $33.375 $496,453,125 $171,191
</TABLE>
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(1) Includes 1,875,000 shares which may be sold pursuant to the Underwriters'
over-allotment option and 500,000 shares to be issued to First Fidelity
Bank, National Association.
(2) Estimated solely for purposes of determining the registration fee.
(3) $123,104 was previously paid. $48,087 is being paid herewith.
---------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CROSS REFERENCE SHEET
Cross-reference sheet furnished pursuant to Item 501(b) of Regulation S-K
showing location in the Prospectus of information required by Items of Form S-
1.
<TABLE>
<CAPTION>
ITEM IN FORM S-1 LOCATION IN PROSPECTUS
---------------- ----------------------
<C> <S> <C>
1. Forepart of the Registration Statement
and Outside Front Cover Page of Facing Page; Cross Reference
Prospectus........................... Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus.................. Cover Pages; Available
Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges... Prospectus Summary; Risk Factors
4. Use of Proceeds....................... Prospectus Summary; Use of
Proceeds
5. Determination of Offering Price....... Not Applicable
6. Dilution.............................. Not Applicable
7. Selling Security Holders.............. Not Applicable
8. Plan of Distribution.................. Outside Front Cover Page;
Underwriting
9. Description of Securities to be
Registered........................... Prospectus Summary; Dividend
Policy; Capitalization;
Description of Capital Stock;
Special Tax Considerations for
Foreign Shareholders
10. Interests of Named Experts and
Counsel.............................. Experts
11. Information with Respect to the
Registrant........................... Prospectus Summary; Risk Factors;
Price Range of Common Stock;
Dividend Policy; Capitalization;
Selected Historical Financial
Information; Management's
Discussion and Analysis of
Financial Condition and Results
of Operations; Unaudited Pro
Forma Financial Information;
Business; Regulatory Matters;
Management; Certain
Transactions; Security Ownership
of Certain Beneficial Owners and
Management; Description of
Capital Stock; Description of
THCR Holdings Partnership
Agreement; Shares Eligible for
Future Sale; Legal Matters
12. Disclosure of Commission Position on
Indemnification of Securities Act
Liabilities.......................... Not Applicable
</TABLE>
----------------
This Registration Statement also relates to 500,000 shares of Common Stock
to be issued by Trump Hotels & Casino Resorts, Inc. directly to First Fidelity
Bank, National Association.
<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 APRIL 9, 1996
PROSPECTUS
APRIL , 1996
TRUMP
HOTEL &
CASINO RESORTS
12,500,000 SHARES
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
All of the shares of Common Stock ("Common Stock") offered hereby (the "Stock
Offering") are being sold by Trump Hotels & Casino Resorts, Inc. (the
"Company").
The Stock Offering is part of a comprehensive plan (the "Merger Transaction")
relating to the acquisition (the "Merger") of Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), by Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of
the Company ("THCR Holdings"), and the refinancing of the debt obligations of
Taj Associates and Trump Plaza Associates ("Plaza Associates"), the owner and
operator of the Trump Plaza Hotel and Casino ("Trump Plaza"). Upon consummation
of the Merger Transaction, Trump Atlantic City Associates ("Trump AC"), a
wholly owned subsidiary of THCR Holdings, will wholly own Plaza Associates and
Taj Associates. In addition to the shares of Common Stock to be issued in the
Stock Offering, the Company may issue shares of Common Stock pursuant to the
Merger.
As part of the Merger Transaction and concurrently with the Stock Offering,
Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding"), a wholly
owned finance subsidiary of Trump AC, are offering $1.1 billion aggregate
principal amount of first mortgage notes (the "Mortgage Notes") (the "Mortgage
Note Offering"). Consummation of the Stock Offering is conditioned upon the
consummation of the other transactions contemplated by the Merger Transaction
(including the Mortgage Note Offering).
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "DJT." On April 8, 1996, the closing price of the Common Stock on the
NYSE was $33 3/8 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION, THE INDIANA GAMING
COMMISSION NOR ANY OTHER REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
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</TABLE>
(1) The Company and its subsidiaries have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses estimated at $ , payable by Trump Hotels &
Casino Resorts Holdings, L.P.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 1,875,000 additional shares of Common Stock, on the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters when, as and if delivered to and accepted by the
Underwriters and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of the shares
of Common Stock will be made in New York, New York on or about April , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
SANDS BROTHERS & CO., LTD.
<PAGE>
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
IN CONNECTION WITH THIS STOCK OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in this
Prospectus and is qualified in its entirety by the more detailed information
and financial statements, and notes thereto, contained elsewhere in this
Prospectus. Unless otherwise indicated, (i) the term "Company" as used in this
Prospectus includes the Company and its subsidiaries and gives effect to the
Merger Transaction and (ii) the information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. Prospective investors are
urged to read this Prospectus carefully in its entirety. This Prospectus
contains forward-looking information that involves risks and uncertainties and
such information is subject to the assumptions set forth in connection
therewith and the information contained herein.
THE COMPANY
Trump Hotels & Casino Resorts, Inc. (the "Company") will acquire all of the
outstanding equity interests of Trump Taj Mahal Associates ("Taj Associates"),
which owns and operates the Trump Taj Mahal Casino Resort (the "Taj Mahal"), in
connection with the Merger Transaction. The Merger Transaction will create one
of the largest casino entertainment companies in the United States by combining
two "Four Star" Atlantic City casino hotels, a riverboat gaming project
approximately 25 miles from downtown Chicago (the "Indiana Riverboat") and the
rights to any future Donald J. Trump ("Trump") gaming venture. Upon
consummation of the Merger Transaction, the Company will own and operate the
Taj Mahal, currently Atlantic City's largest casino, and Trump Plaza Hotel and
Casino ("Trump Plaza" and, together with the Taj Mahal, the "Atlantic City
Properties"), which will have the largest casino in Atlantic City upon
completion of its ongoing expansion program (the "Trump Plaza Expansion").
Following the consummation of the Merger Transaction, the Company also plans to
undertake an expansion program at the Taj Mahal designed to increase its hotel
room inventory and casino floor space and expand its entertainment and parking
facilities (the "Taj Mahal Expansion"). In addition, the Company expects to
commence operations in the second quarter of 1996 of the Indiana Riverboat
casino at Buffington Harbor on Lake Michigan, which will establish the
Company's position in the greater Chicago metropolitan area market, one of the
most successful new gaming markets in the United States. The Company is and
will continue to be the exclusive vehicle through which Trump will engage in
new gaming activities in both emerging and established gaming jurisdictions.
Management believes that the acquisition of the Taj Mahal will strengthen the
Company's position as a leader in the casino entertainment industry through its
ownership of two successful land-based casino hotels. Furthermore, the Merger
Transaction will enhance the Company's presence in the growing Atlantic City
market, which, in terms of gaming revenues, has demonstrated a ten-year
compound annual growth rate of approximately 5.8% and a growth rate of
approximately 9.5% for calendar year 1995 versus calendar year 1994. After
giving effect to the Merger Transaction and the Trump Plaza Expansion, the
Company will have approximately one-quarter of Atlantic City's casino square
footage, slot machines, table games and hotel room inventory. In addition, the
combination of the Taj Mahal with Trump Plaza's existing and planned operations
will provide opportunities for operational efficiencies, economies of scale and
benefits from the expertise and experience of management at the operating
entities. Management further believes that the Company's size following the
Merger Transaction along with its industry experience and reputation for
quality will allow the Company to compete effectively for gaming licenses in
other jurisdictions.
Management believes the Company will benefit from the following factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation of the Trump Plaza
Expansion, the Company will own and operate the two largest casino hotel
properties in Atlantic City, both of which are strategically located on
The Boardwalk. The Company believes that the Atlantic City Properties'
prime locations, reputations for high quality amenities and first-class
customer service and targeted marketing strategies are ideally suited to
capitalize on the expected continued growth in the Atlantic City gaming
market. The Company believes that its leading size and market share in
Atlantic City following the
3
<PAGE>
consummation of the Merger Transaction, will provide it with a competitive
advantage in marketing the Atlantic City Properties, particularly to large
convention groups and multi-day stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. The Company has nearly completed the
Trump Plaza Expansion and is developing the plans for the Taj Mahal
Expansion, which projects will increase the Atlantic City Properties'
gaming space and hotel room capacity allowing the Company to meet both
existing demand and the anticipated demand from the increased number of
available rooms and infrastructure improvements that are currently under
development to enhance further the "vacation destination appeal" of
Atlantic City.
The following table profiles the Company's casino and hotel capacity
following the planned expansions at the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ INDIANA TRUMP PLAZA TAJ MAHAL
PLAZA(A) MAHAL RIVERBOAT(B) EXPANSION(C) EXPANSION(D) TOTAL
-------- ------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 37,000 64,158 60,000 356,553
Slot machines........... 2,368 3,550 1,500 1,898 2,500 11,816
Table games............. 97 169 73 44 -- 383
Hotel rooms............. 555 1,250 -- 849 800 3,454
</TABLE>
- --------
(a) Includes the 2,000 square foot area connecting the existing facility with
Trump Plaza East (as defined) and the 75 slot machines included in this
area.
(b) Scheduled to open in the second quarter of 1996.
(c) Includes the 15,000 square foot casino with 400 slot machines and 13 table
games and 326 hotel rooms which have already opened at Trump Plaza East.
The remaining 14 hotel rooms and suites at Trump Plaza East are scheduled
to be opened by the end of April 1996. Also reflects nine super suites
scheduled to open early in 1997 and not otherwise included in the "Trump
Plaza Expansion." The remaining portion of the Trump Plaza Expansion, Trump
World's Fair (as defined), is scheduled to open in the second quarter of
1996.
(d) Plans for the Taj Mahal Expansion, scheduled to be completed in phases from
the first quarter of 1997 through early 1998, are subject to modification.
(e) Excludes a 12,000 square foot poker, keno and race simulcasting room which
contains 64 poker tables.
. OPERATING SYNERGIES. The Company intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties, which previously have
been operated separately. Management has identified cost savings which
management estimates, by the end of the second year following the Merger
Transaction, to be approximately $18-20 million on an annual basis,
although no assurance may be made as to the amount which will be
realized. Management believes that it will be able to consolidate certain
departments at the Atlantic City Properties, reduce general and
administrative expenses through possible personnel reductions and the
consolidation of certain marketing efforts and reduce operating costs
through efficiencies that are expected to result from the combined
purchasing power of the Atlantic City Properties.
. INDIANA RIVERBOAT. Trump Indiana, Inc. ("Trump Indiana"), the Company's
subsidiary that owns and will operate the Indiana Riverboat, has received
site approval and a certificate of suitability to develop a gaming
project at Buffington Harbor on Lake Michigan, approximately 25 miles
southeast of downtown Chicago. The Indiana Riverboat is one of 11
riverboat gaming projects permitted under current Indiana law and one of
only five to be located in northern Indiana. The Indiana Riverboat is
currently scheduled to open for business in the second quarter of 1996.
The Indiana Riverboat is planned to have approximately 37,000 square feet
of gaming space that will 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 Buffington Harbor in the
greater Chicago metropolitan area. Approximately 11.2 million and 24.2
million people live within a 100- and 200-mile radius of Buffington
Harbor, respectively.
4
<PAGE>
. THE "TRUMP" NAME. The Company capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first class service. To this end, the Company 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. The Company 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, as well as to explore
opportunities to establish additional gaming operations, particularly in
jurisdictions where the legalization of casino gaming is relatively new
or anticipated.
ATLANTIC CITY PROPERTIES
TRUMP PLAZA
Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association rating reflect the high
quality amenities and services that Trump Plaza provides to its casino patrons
and hotel guests. These amenities and services include a broad selection of
dining choices, headline entertainment, deluxe accommodations, tennis courts
and swimming and health spa facilities.
Trump Plaza Expansion. The Company is seeking to enhance further Trump
Plaza's position as an industry leader through the Trump Plaza Expansion,
scheduled to be completed in the second quarter of 1996, which involves
expanding and renovating Trump Plaza's gaming space, increasing its hotel
capacity and constructing retail operations and entertainment venues. As part
of the Trump Plaza Expansion, the Company has renovated and integrated into
Trump Plaza a hotel located adjacent to Trump Plaza's main tower ("Trump Plaza
East"), the grand opening for which was held on February 16, 1996, and is in
the process of renovating and integrating the former Trump Regency Hotel
("Trump World's Fair"), located on The Boardwalk adjacent to the existing
Atlantic City Convention Center, which is next to Trump Plaza.
In February 1996, Trump Plaza East opened the 15,000 square foot Ocean View
Casino and Bar, and has to date opened 326 of its 349 hotel rooms. The Ocean
View Casino and Bar is the first gaming room in Atlantic City to combine a
casino, bar and entertainment area and features a 70-foot long bar with 27 bar-
top slot machines, live entertainment and a 58 square foot video wall. With its
high ceilings and windows overlooking the Atlantic Ocean and The Boardwalk,
Trump Plaza is creating a new and exciting entertainment environment for its
casino patrons.
Upon completion of the Trump Plaza Expansion, Trump Plaza's casino floor
space will be the largest in Atlantic City, increasing from approximately
75,000 square feet to an aggregate of approximately 140,000 square feet,
housing a total of approximately 4,270 slot machines and 140 table games. Trump
Plaza's hotel capacity will increase to a total of 1,404 guest rooms, making
Trump Plaza's guest room inventory one of the largest in Atlantic City.
Management believes the increased hotel capacity as a result of the Trump Plaza
Expansion will better enable Trump Plaza 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
TRUMP PLAZA TRUMP WORLD'S
FACILITY(a) PLAZA EAST(b) FAIR(c) TOTAL
----------- ------------- ------- -------
<S> <C> <C> <C> <C>
Casino square footage................. 75,395 14,886 49,272 139,553
Slot machines......................... 2,368 405 1,493 4,266
Table games........................... 97 12 32 141
Hotel rooms........................... 555 349 500 1,404
</TABLE>
- --------------------
(a) Includes the 2,000 square foot area connecting the existing facility with
Trump Plaza East (as defined) and the 75 slot machines included in this
area.
(b) The casino and 326 hotel rooms have already opened. The remaining 14 hotel
rooms and suites are scheduled to be open by the end of April 1996. Also
reflects nine super suites scheduled to open early in 1997 and not
otherwise included in the "Trump Plaza Expansion."
(c) Scheduled to open in the second quarter of 1996.
5
<PAGE>
The Trump Plaza Expansion will increase Trump Plaza's prime central frontage
on The Boardwalk to nearly a quarter of a mile. Furthermore, Trump World's Fair
will add approximately 50,000 square feet of casino floor space, approximately
16,000 of which will be directly accessible from The Boardwalk, and Trump Plaza
has been reconfigured to provide a new entranceway to Trump Plaza directly off
the Atlantic City Expressway. Management believes that the construction of a
new convention center and "tourist corridor" linking the new convention center
with The Boardwalk will enhance the desirability of Atlantic City generally
and, as a result of Trump Plaza's central location, will benefit Trump Plaza in
particular. Trump Plaza's location on The Boardwalk at the end of the main
highway into Atlantic City makes it highly accessible for both "drive-in" and
"walk-in" patrons.
THE TAJ MAHAL
The Taj Mahal currently has the largest casino in Atlantic City and has
ranked first among all Atlantic City casinos in terms of total gaming revenues,
table revenues and slot revenues since it commenced operations in 1990. The Taj
Mahal capitalizes on the widespread recognition and marquee status of the
"Trump" name and its association with high quality amenities and first-class
service as evidenced by its "Four Star" Mobil Travel Guide rating. Management
believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities and its status as a "must-see"
attraction will enable the Taj Mahal to benefit from the expected continued
growth of the Atlantic City market. In order to enhance its status as a "must-
see" attraction, the Taj Mahal has recently signed agreements for the
development of the Hard Rock Cafe(R), Rainforest Cafe(R) and All Star Cafe(R)
themed restaurants on the property. In addition, in order to continue to
attract high end players, the Taj Mahal has recently opened the Dragon Room, a
new Asian themed table game area, and plans to open the "Sultan's Palace," a
new high-end "slots only" lounge and private club in the second quarter of
1996.
The Taj Mahal Expansion. The Taj Mahal Expansion is scheduled to be completed
in phases from the first quarter of 1997 through early 1998. The Taj Mahal
Expansion, the plans for which are subject to modification, involves the
construction of an approximately 2,000 space expansion of the Taj Mahal's
existing self-parking facilities and a new 10,000 seat arena adjacent to the
Taj Mahal, each scheduled to be completed in the first quarter of 1997; the
conversion of the current site of the Mark Etess Arena into a new 60,000
square-foot circus-themed casino with 2,500 slot machines, scheduled to be
completed in mid-1997; and the construction of an approximately 800 room hotel
tower adjacent to the Taj Mahal's existing hotel tower, which is scheduled to
be completed early in 1998.
THE ATLANTIC CITY MARKET
The Atlantic City gaming market has demonstrated continued growth despite the
recent proliferation of new gaming venues across the country. The 12 casino
hotels in Atlantic City generated approximately $3.75 billion in gaming
revenues in 1995, an approximately 9.5% increase over 1994 gaming revenues of
approximately $3.42 billion. During 1995, all 12 casinos experienced increased
gaming revenues compared to 1994.
The approximately $3.75 billion of gaming revenues produced by the 12
Atlantic City casino hotels in 1995 exceeded the approximately $3.12 billion of
gaming revenues produced by the 18 largest (based on net revenues) casino
hotels on the Las Vegas Strip for the same period, even though the 12 Atlantic
City casino hotels have less than one-quarter the number of hotel rooms of such
Las Vegas Strip casino hotels. Management believes, however, that given current
high occupancy levels, future casino revenue growth in the Atlantic City market
will be dependent in part upon expansion in hotel capacity.
Due principally to an improved regulatory environment, the general
improvement of economic conditions in 1993, 1994 and 1995 and existing high
occupancy rates, significant investment in the Atlantic City market has been
initiated and/or announced. For example, Trump Plaza will be located at the end
of the planned "tourist corridor" featuring an entertainment and retail complex
that will link The Boardwalk with downtown Atlantic
6
<PAGE>
City. In addition, the New Jersey Casino Redevelopment Authority ("CRDA") is
currently overseeing the development of a new convention center. When
completed, the approximately $250 million convention center will be the largest
exhibition space between New York City and Washington, D.C. The new convention
center, currently scheduled to open in January 1997, will be located at the
base of the Atlantic City Expressway. Trump Plaza is adjacent to the existing
Atlantic City Convention Center and will also be one of the closest casino
hotels to the new convention center, which as currently planned would hold
approximately 500,000 square feet of exhibit and pre-function space, 45 meeting
rooms, food-service facilities and a 1,600-car underground parking garage. An
additional planned infrastructure improvement is the State of New Jersey's
approximately $125 million capital plan to upgrade and expand the Atlantic City
International Airport. The Company believes that, as leading Atlantic City
attractions, the Atlantic City Properties will attract a large portion of any
increase in the number of potential casino hotel patrons.
THE INDIANA RIVERBOAT
The Indiana Riverboat, currently scheduled to open for business in the second
quarter of 1996, will feature an approximately 288-foot luxury yacht with
approximately 37,000 square feet of gaming space with 1,500 slot machines, 73
table games and capacity for approximately 2,450 passengers and 300 employees
and will be one of the largest riverboat casinos in the United States. Trump
Indiana is one of 11 riverboat gaming projects permitted under current Indiana
law and one of only five to be located in northern Indiana.
The Indiana Riverboat's principal market will be the approximately 6.8
million people residing within 50 miles of Buffington Harbor in the greater
Chicago metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of Buffington Harbor, respectively,
encompassing portions of the states of Indiana, Illinois, Michigan, Ohio and
Wisconsin (the "Great Lakes Market"). Through the use of the "Trump" name and
systematic marketing programs, the Company will seek to attract drive-in
customers to the Indiana Riverboat. Casinos currently operating in the Great
Lakes Market have generally been very successful, achieving operating results
exceeding those of most new jurisdictional markets. The Company believes that
these operating results indicate that the Great Lakes Market should be capable
of absorbing significant capacity expansion in the future. Under current
regulations in Indiana, most games typically available in Atlantic City casinos
will be permitted on the Indiana Riverboat. 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.
THE STOCK OFFERING
<TABLE>
<C> <S>
Common Stock Offered.................. 12,500,000 shares
Common Stock to be outstanding after
the Merger Transaction............... 23,066,667 shares(/1/)
New York Stock Exchange Symbol........ DJT
</TABLE>
- --------------------
(1) Does not include (i) 6,666,836 shares of Common Stock (subject to certain
adjustments) issuable to Trump upon conversion of his limited partnership
interest in THCR Holdings; (ii) 1,687,331 shares of Common Stock (subject
to certain adjustments) issuable to Trump Taj Mahal, Inc. ("TTMI"), a
corporation wholly owned by Trump, upon conversion of its limited
partnership interests in THCR Holdings; (iii) 133,333 shares of Common
Stock issuable upon exercise of options granted to the Chief Executive
Officer of the Company pursuant to the 1995 Stock Plan; (iv) a phantom
stock unit award (representing the right to receive 66,666 shares of Common
Stock on June 12, 1997) granted to the Chief Executive Officer of the
Company pursuant to the 1995 Stock Plan; (v) 733,334 additional shares
reserved for issuance pursuant to the 1995 Stock Incentive Plan; (vi)
1,800,000 shares of Common Stock underlying the warrant to be issued to
Trump in connection with the Merger Transaction (a) 600,000 shares of which
may be purchased on or before the third anniversary of the issuance of the
warrant at $30.00 per share, (b) 600,000 shares of which may be purchased
on or before the fourth anniversary of the issuance of the warrant at
$35.00 per share, and (c) 600,000 shares of which may be purchased on or
before the fifth anniversary of the issuance of the warrant at $40.00 per
share; or (vii) any shares of Common Stock which may be issued in the
Merger. Also excludes shares of Class B Stock of the Company held and to be
held by Trump and TTMI which represent non-economic voting interest in the
Company. Assumes a Market Value (as defined) of $24.00 per share of Common
Stock in the Merger and as the public offering price in the Stock Offering.
In the event that shares of Common Stock are issued in the Merger, the
Company may reduce the size of the Stock Offering.
7
<PAGE>
THE MORTGAGE NOTE OFFERING
(Offered by Trump AC and Trump AC Funding exclusively pursuant to a separate
prospectus.)
Concurrently with and as a condition to consummation of the Stock Offering,
Trump AC and Trump AC Funding will issue $1.1 billion of Mortgage Notes
pursuant to the Mortgage Note Offering. Trump AC Funding, a Delaware
corporation, was recently formed for the sole purpose of, and will engage in no
activities or business other than in connection with, the issuance of the
Mortgage Notes. Certain terms of the Mortgage Notes are described under
"Business--Certain Indebtedness."
The Mortgage Note Offering and the Stock Offering (collectively, the
"Offerings") are part of the comprehensive plan relating to the Merger of a
subsidiary of the company with and into Taj Mahal Holding Corp. ("Taj
Holding"), which currently beneficially owns a 50% equity interest in Taj
Associates; the contribution by the Company to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of its direct and indirect ownership
interests in Taj Associates acquired in the Merger; the contribution by Trump
of the remaining 50% equity interest in Taj Associates to Trump AC (on behalf,
and at the direction, of THCR Holdings); and the refinancing of substantially
all of the outstanding indebtedness of Taj Associates and Plaza Associates.
The consummation of the Stock Offering is conditioned upon the consummation
of each transaction contemplated by the Merger Transaction, including the
Senior Note Consent Solicitation (as defined), the Plaza Note Consent
Solicitation (as defined), the Plaza Note Purchase (as defined) and the
Mortgage Note Offering.
RISK FACTORS
Prospective investors should carefully evaluate the matters set forth herein,
including those under the heading "Risk Factors." Factors to be considered
include:
. the high leverage and fixed charges of the Company
. the Company's holding company structure and the likelihood that dividends
will not be paid for the foreseeable future
. the risk in refinancing and repayment of indebtedness, and the need for
additional financing
. the restrictions on certain activities imposed by certain debt
instruments
. the historical results of Trump Plaza and the Taj Mahal, including past
net losses
. conflicts of interest
. control by and the involvement of Trump
. risks associated with the Trump Plaza Expansion and the Taj Mahal
Expansion
. risks relating to the Indiana Riverboat
. competition in the gaming industry
. reliance on certain key personnel
. the strict regulation by gaming authorities, including the potential
disqualification of holders of Common Stock
. considerations with respect to the acquisition and development of
additional gaming ventures
. limitations on the Company's license of the "Trump" name
. fraudulent transfer considerations
. the shares of Common Stock eligible for future sale
. the trading markets and potential volatility of the market price of the
shares of Common Stock.
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Stock Offering, after payment of
underwriting discounts and expenses of the Stock Offering, are estimated to be
$ million ($ million if the Underwriters' over-allotment option is
exercised in full). The proceeds from the Stock Offering, together with the
proceeds from the Mortgage Note Offering, and available cash, will be used as
set forth below to:
(i) pay cash to those holders of Class A Common Stock, par value $.01 per
share, of Taj Holding (the "Taj Holding Class A Common Stock") electing to
receive cash in the Merger;
(ii) redeem the outstanding 11.35% Mortgage Bonds, Series A, due 1999
(the "Taj Bonds") of Trump Taj Mahal Funding, Inc.'s ("Taj Funding") (the
"Taj Bond Redemption"), at a redemption price equal to 100% of the
principal amount thereof, plus accrued interest to the date of redemption;
(iii) redeem the outstanding shares of the Class B Common Stock, par
value $.01 per share, of Taj Holding (the "Taj Holding Class B Common
Stock"), as required in connection with the Taj Bond Redemption at the
redemption price of $.50 per share;
(iv) retire the outstanding 10 7/8% Mortgage Notes due 2001 (the "Plaza
Notes") of Trump Plaza Funding, Inc. ("Plaza Funding"), (the "Plaza Note
Purchase");
(v) satisfy the indebtedness of Taj Associates under a loan agreement
with National Westminster Bank USA ("NatWest") (the "NatWest Loan");
(vi) purchase certain real property used in the operation of the Taj
Mahal that is currently leased from a corporation wholly owned by Trump and
satisfy certain related indebtedness owed to First Fidelity Bank, National
Association (now known as First Union National Bank) ("First Fidelity")
(the "First Fidelity Loan");
(vii) purchase Trump Plaza East pursuant to the purchase option (the
"Trump Plaza East Purchase Option") held by Trump Plaza Associates ("Plaza
Associates"), the owner and operator of Trump Plaza;
(viii) pay Bankers Trust Company ("Bankers Trust") $10 million to obtain
releases of liens and guarantees that Bankers Trust has in connection with
certain outstanding indebtedness owed by Trump to Bankers Trust (the "Trump
Indebtedness"); and
(ix) pay related fees and expenses and provide for working capital.
9
<PAGE>
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming an April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
<S> <C>
Stock Offering(a)(b).............. $ 300.0
Mortgage Note Offering............ 1,100.0
Available Cash.................... 9.8
--------
Total Cash Sources............... 1,409.8
--------
<CAPTION>
NON-CASH SOURCES
<S> <C>
Common Stock Equivalents to be issued to Trump(d).. 40.5
Common Stock to be issued to First
Fidelity(b)...................... 12.0
--------
Total Non-Cash Sources........... 52.5
--------
TOTAL SOURCES..................... $1,462.3
========
</TABLE>
ANTICIPATED USES OF FUNDS
<TABLE>
<CAPTION>
CASH USES
<S> <C>
Redeem Taj Bonds(c).............. $ 794.4
Retire Plaza Notes............... 370.0
Satisfy NatWest Loan............. 36.5
Exercise Trump Plaza East
Purchase Option................. 28.0
Financing Fees and Expenses...... 49.4
Payment to First Fidelity........ 50.0
Payment to Bankers Trust......... 10.0
Acquisition of Taj Holding Class
A Common Stock(a)............... 40.5
Redeem Taj Holding Class B Common
Stock........................... 0.4
Transaction Fees and Expenses and
Working Capital................. 30.6
--------
Total Cash Uses................. 1,409.8
--------
NON-CASH USES
Acquisition of Trump's direct and
indirect equity interests in Taj
Associates...................... 40.5
Common Stock issued to First
Fidelity(b)..................... 12.0
--------
Total Non-Cash Uses............. 52.5
--------
TOTAL USES....................... $1,462.3
========
</TABLE>
- -------------------
(a) Assumes all holders of Taj Holding Class A Common Stock elect Cash
Consideration (as defined) in the Merger. In the event that any holder of
Taj Holding Class A Common Stock elects Stock Consideration (as defined) in
lieu of Cash Consideration, the Company may decrease the size of the Stock
Offering.
(b) Assumes a price of $24.00 per share of Common Stock.
(c) Includes the Additional Amount (as defined) through April 15, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(d) Represents the value as of the effective time of the Merger of the shares
of Common Stock into which the limited partnership interests in THCR
Holdings to be issued to Trump and TTMI, a corporation wholly owned by
Trump, in connection with the Merger Transaction will be convertible.
10
<PAGE>
SUMMARY FINANCIAL INFORMATION
SUMMARY FINANCIAL INFORMATION OF THE COMPANY
The following tables set forth (a) certain historical consolidated financial
information of Trump AC (formerly Trump Plaza Holding Associates) and Plaza
Associates (predecessors of the Company) for each of the years ended December
31, 1991 through 1994 and for the period January 1, 1995 through June 12, 1995
and certain historical consolidated financial information of the Company for
the period from inception (June 12, 1995) to December 31, 1995 (see Note 1
below) and (b) unaudited pro forma financial information of the Company. The
unaudited pro forma information gives effect to the Merger Transaction. The
historical financial information of Trump AC and Plaza Associates as of
December 31, 1994 and June 12, 1995 and for the years ended December 31, 1993,
1994 and for the period January 1, 1995 through June 12, 1995 as set forth
below has been derived from the audited consolidated financial statements of
Trump AC and Plaza Associates included elsewhere in this Prospectus. The
historical financial information of Trump AC and Plaza Associates as of
December 31, 1991, 1992 and 1993 and for the years ended December 31, 1991 and
1992 as set forth below was derived from the audited consolidated financial
statements of Trump AC and Plaza Associates not included in this Prospectus.
The historical financial information of the Company as of December 31, 1995 and
for the period from inception (June 12, 1995) through December 31, 1995 as set
forth below has been derived from the audited consolidated financial statements
of the Company included elsewhere in this Prospectus.
The pro forma Statement of Operations Data and Other Data give effect to the
Merger Transaction as if it had occurred on January 1, 1995 and the pro forma
Balance Sheet Data gives effect to the same as if it had occurred on December
31, 1995. The pro forma financial information should not be considered
indicative of actual results that would have been achieved had the transactions
occurred on the date or for the period indicated and does not purport to
indicate results of operations as of any future date or for any future period.
All financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Unaudited Pro Forma Financial Information" and the consolidated and condensed
financial statements and the related notes thereto included elsewhere in this
Prospectus.
11
<PAGE>
<TABLE>
<CAPTION>
TRUMP AC AND PLAZA ASSOCIATES THE COMPANY
------------------------------------------------------ ---------------
FROM FROM INCEPTION
YEARS ENDED DECEMBER 31, JANUARY 1 1995 (JUNE 12, 1995)
-------------------------------------- THROUGH TO DECEMBER 31,
1991 1992 1993 1994 JUNE 12, 1995 1995 (NOTE 1)
-------- -------- -------- -------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues........... $279,684 $313,318 $300,491 $295,063 $137,848 $195,473
Depreciation and amor-
tization.............. 16,193 15,842 17,554 15,653 6,999 9,219
Income from opera-
tions................. 16,087 35,003 49,640 43,415 21,818 33,446
Interest expense, net.. 33,363 31,356 39,889 48,219 22,113 31,273
Extraordinary gain
(loss) (a)............ -- (38,205) 4,120 -- (9,250) --
Net income (loss) (b).. (29,230) (35,787) 9,338 (8,870) (11,033) (1,921)
OTHER DATA:
EBITDA (c)............. $ 44,000 $ 60,399 $ 68,241 $ 60,524 $ 29,011 $ 42,942
Capital expenditures
(d)................... 5,509 8,643 10,052 20,489 7,364 115,430
Ratio of earnings to
fixed charges (defi-
ciency) (e)........... (32,094) 1.1x 1.1x (9,735) (1,944) (2,010)
Cash flows provided by
(used in)
Operating activities... 9,514 $ 26,191 $ 21,820 19,950 $ 22,758 $ (9,219)
Investing activities... (6,175) (10,469) (12,679) (21,691) (7,364) (190,973)
Financing activities... (2,870) (7,367) (13,550) (1,508) 1,587 191,214
BALANCE SHEET DATA (AT
END OF PERIODS):
Total assets........... $378,398 $370,349 $374,498 $375,643 $394,085 $ 584,545
Total long-term debt,
net of current
maturities (f)........ 33,326 249,723 395,948 403,214 331,142 494,471
Total capital (defi-
cit).................. 54,043 11,362 (54,710) (63,580) (74,613) 50,591
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA (AT END
OF
PERIOD): (g)
Casino square footage.. 60,000 60,000 60,000 73,000(h) 73,604
Number of hotel rooms.. 557 557 557 555 732
Hotel occupancy rate... 87.1% 86.9% 87.6% 88.6% 89.7%
TABLE GAMES:
Total Atlantic City
table drop (i)........ $7,219,192 $7,055,034 $6,835,572 $6,832,517 $7,110,612
Atlantic City table
drop growth........... (8.7)% (2.3)% (3.1)% 0.0% 4.1%
Trump Plaza table drop
(i)................... $ 646,480 $ 689,919 $ 626,621 $ 599,881 $ 626,832
Trump Plaza table games
market share (j)...... 9.0% 9.8% 9.2% 8.8% 8.8%
Trump Plaza table games
fair share (k)........ 8.5% 8.2% 7.8% 8.0% 8.6%
Trump Plaza table games
efficiency (l)........ 105.1% 118.8% 118.0% 110.6% 102.5%
Trump Plaza table
units................. 112 98 87 89 97
Trump Plaza table
revenue............... $ 98,905 $ 95,864 $ 93,392 $ 92,770 $ 96,518
Trump Plaza table
revenue per unit per
day (actual dollars).. $ 2,419 $ 2,679 $ 2,940 $ 2,855 $ 2,726
SLOTS:
Total Atlantic City
slot revenue (m)...... $1,851,070 $2,113,829 $2,214,638 $2,297,280 $2,572,719
Atlantic City slot
revenue growth........ 7.4% 14.2% 4.8% 3.7% 12.0%
Trump Plaza slot
revenue (m)........... $ 136,128 $ 168,388 $ 173,215 $ 170,316 $ 204,230
Trump Plaza slot market
share (j)............. 7.4% 8.0% 7.8% 7.4% 7.9%
Trump Plaza slot fair
share (k)............. 7.8% 7.8% 7.6% 8.0% 8.2%
Trump Plaza slot
efficiency (l)........ 94.5% 102.6% 103.1% 92.5% 96.7%
Trump Plaza slot
units................. 1,659 1,727 1,812 2,076 2,339
Trump Plaza slot
revenue per unit per
day (actual
dollars) (m).......... $ 225 $ 267 $ 262 $ 225 $ 239
</TABLE>
(footnotes on the following page)
12
<PAGE>
<TABLE>
<CAPTION>
THE COMPANY
PRO FORMA (n)
----------------------------
YEAR ENDED DECEMBER 31, 1995
(NOTE 1)
----------------------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA: (UNAUDITED)
<S> <C>
Net revenues..................................... $ 887,069
Depreciation and amortization.................... 64,752
Income from operations........................... 149,681
Interest expense, net (o) (excludes amortization
of deferred financing costs).................... 139,097
Net income ...................................... 59
Net income per common share (p).................. --
OTHER DATA:
EBITDA (c)(o).................................... $ 217,994
Ratio of earnings to fixed charges (e)........... 1.0x
CASH FLOWS PROVIDED BY (USED IN)(q):
Operating activities............................. 101,132
Investing activities............................. (230,908)
Financing activities............................. 191,772
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets..................................... $1,668,781
Total long-term debt, net of current maturities.. 1,268,128
Total capital.................................... 280,327
</TABLE>
Note 1: The Company was incorporated on March 28, 1995 and conducted no
operations until June 12, 1995, when the Company issued $140 million of Common
Stock (the "June 1995 Stock Offering" and together with the offering by THCR
Holdings and THCR Funding (as defined) of $155 million aggregate principal
amount of Senior Secured Notes due 2005 (the "Senior Notes") (the "June 1995
Note Offering") (the "June 1995 Offerings")) and contributed the proceeds from
the June 1995 Stock Offering to THCR Holdings in exchange for an approximately
60% general partnership interest in THCR Holdings. At the consummation of the
June 1995 Stock Offering, pursuant to the Contribution Agreement, dated as of
June 12, 1995, between Trump and THCR Holdings (the "Contribution Agreement"),
Trump contributed his 100% beneficial interest in Plaza Funding, Trump AC and
Plaza Associates to THCR Holdings, among other things, for an approximate 40%
limited partnership interest in THCR Holdings. The financial data as of
December 31, 1995 and for the period ended December 31, 1995 reflect the
operations of the Company from inception (June 12, 1995) to December 31, 1995.
- --------
(a) The extraordinary loss for the year ended December 31, 1992 consists of the
effect of stating Plaza Funding's Preferred Stock issued at fair value as
compared to the carrying value of these securities and the write off of
certain deferred financing charges and costs. The excess of the carrying
value of a note obligation over the amount of the settlement payment net of
related prepaid expenses in the amount of $4,120,000 has been reported as
an extraordinary gain for the year ended December 31, 1993. The
extraordinary loss of $9,250,000 for the period from January 1, 1995
through June 12, 1995 relates to the redemption of the 12 1/2% Pay-in-Kind
Notes due 2003 of Trump AC (the "PIK Notes") and related warrants to
acquire PIK Notes (the "PIK Note Warrants") and the write off of related
unamortized deferred financing costs.
(b) 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 (loss) for 1992 includes $1.5 million of costs associated with
certain litigation. Net income (loss) for the years ended December 31,
1993, 1994, for the period from January 1, 1995 through June 12, 1995 and
for the period from inception (June 12, 1995) to December 31, 1995,
includes $3.9, $4.9, $1.6 and $2.1 million, respectively, of real estate
taxes and leasing costs associated with Trump Plaza East.
(c) EBITDA represents income from operations before interest expense, taxes,
depreciation, amortization, restructuring costs, non-cash compensation
charges associated with awards to the President of the Company under the
1995 Stock Incentive Plan, and the non-cash write-down of New Jersey Casino
Reinvestment Development Authority ("CRDA") investments. EBITDA should not
be construed as an alternative to net income or any other measure of
performance determined in accordance with generally accepted accounting
principles or as an indicator of the Company's operating performance,
liquidity or cash flows generated by operating, investing and financing
activities. Management has included information concerning EBITDA as
management understands that it is used by certain investors as one measure
of the Company's historical ability to service its debt.
(d) Capital expenditures attributable to Trump Plaza East were approximately
$2.8 million, $8.7 million, $4.9 million, and $20.0 million for the years
ended December 31, 1993 and 1994 for the period January 1 through June 12,
1995 and for the period June 12, 1995 through December 31, 1995. Capital
expenditures attributable to Trump World's Fair were approximately $73.7
million for the period June 12, 1995 through December 31, 1995. Capital
expenditures for improvements to existing facilities were $7.3 million,
$11.8 million and $11.2 million for the years ended December 31, 1993, 1994
and 1995.
(e) 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 1991, 1994, for the period January 1, 1995 through June
12, 1995 and for the period June 12, 1995 through December 31, 1995.
13
<PAGE>
(f) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
(g) Atlantic City industry data has been compiled from information filed with
and published by the CCC (as defined) and is unaudited.
(h) The expansion of 13,000 square feet was commenced in April 1994 and
completed at the end of that year.
(i) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(j) Market share represents the total Trump Plaza table drop or slot revenues,
as applicable, expressed as a percentage of total Atlantic City table drop
or slot revenue, as applicable.
(k) Fair share is the percentage of the total number of gaming units (table
games or slot machines, as applicable) in Trump Plaza to the total number
of such units in casino hotels in Atlantic City.
(l) Efficiency is the ratio of Trump Plaza's market share to its fair share.
(m) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
(n) The Pro Forma Statement of Operations Data and Other Data give effect to
the Merger Transaction as if the same had occurred on January 1, 1995 and
the Pro Forma Balance Sheet Data gives effect to the Merger Transaction as
if the same had occurred on December 31, 1995.
(o) Does not give effect to any return on investment of the net proceeds of the
June 1995 Offerings.
(p) Pro forma earnings per share is based upon weighted average shares
outstanding as of December 31, 1995, shares and phantom stock units awarded
to the President of the Company pursuant to the 1995 Stock Incentive Plan
and shares to be issued in the Company Stock Offering. The shares of the
Company Class B Common Stock owned by Trump have no economic interest and
therefore, are not considered.
(q) Pro forma cash flows give effect to the June 1995 Offerings.
14
<PAGE>
SUMMARY FINANCIAL INFORMATION OF TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1991 through 1995. The financial information of Taj Associates as of December
31, 1991, 1992, 1993, 1994 and 1995 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, 1994 and
1995 and for the years ended December 31, 1993, 1994 and 1995 are included
elsewhere in this Prospectus. The audited financial information as of December
31, 1991, 1992 and 1993 and for the years ended December 31, 1991 and 1992 has
been derived from the audited consolidated financial statements of Taj
Associates not included herein. This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Conditions and Results
of Operations--Taj Associates," "Unaudited Pro Forma Financial Information" and
the consolidated financial statements and the related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1991(a) 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net Revenues........... $ 438,313 $ 469,753 $ 498,911 $ 517,182 $ 553,748
Depreciation and
amortization.......... 36,202 36,388 36,858 39,750 43,387
Income from
operations............ 31,828 68,027 84,458 76,634 89,890
Interest expense, net.. (100,683) (103,126) (106,997) (113,292) (116,513)
Extraordinary gain..... 259,618 0 0 0 0
Net income (loss)...... 188,513 (35,099) (22,539) (36,658) (26,623)
OTHER DATA:
EBITDA(b).............. $ 99,883 $ 111,022 $ 128,371 $ 127,796 $ 140,835
Capital expenditures... 17,045 12,111 16,752 23,030 26,498
Ratio of earnings to
fixed charges
(deficiency)(c)....... (71,105) (35,099) (22,539) (36,658) (26,623)
Cash flows provided by
(used in)
Operating Activities.. 35,126 31,786 48,634 33,422 62,899
Investing Activities... (18,901) (17,759) (22,160) (27,231) (32,571)
Financing Activities... (16,170) (2,500) (2,492) (3,039) (2,583)
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets........... $ 814,051 $ 802,556 $ 811,508 $ 807,612 $ 821,793
Total long-term debt,
net of current
maturities(d)......... 573,844 595,682 625,765 656,701 694,192
Total capital.......... 167,837 130,913 106,641 67,812 39,635
OPERATING DATA (AT END
OF PERIOD)(E):
Casino square footage.. 120,000 120,000 130,110 132,317 132,856
Number of hotel rooms.. 1,250 1,250 1,250 1,250 1,250
Hotel occupancy rate... 87.3 % 91.3 % 92.3 % 92.4% 91.2%
TABLE GAMES:
Total Atlantic City
table drop(f)......... $7,219,192 $7,055,034 $6,835,572 $6,832,517 $7,110,612
Atlantic City table
drop growth........... (8.7)% (2.3)% (3.1)% 0.0% 4.1%
Taj Mahal table
drop(f)............... $1,160,714 $1,067,595 $1,062,042 $1,125,029 $1,192,200
Taj Mahal table games
market share(g)....... 16.1 % 15.1 % 15.5 % 16.5% 16.8%
Taj Mahal table games
fair share(h)......... 12.7 % 13.3 % 14.5 % 14.2% 13.3%
Taj Mahal table games
efficiency(i)......... 126.8 % 113.5 % 106.9 % 116.2% 126.3%
Taj Mahal table units.. 166 159 163 159 150
Taj Mahal table
revenue............... $ 186,644 $ 169,112 $ 173,432 $ 184,774 $ 201,817
Taj Mahal table revenue
per unit per day
(actual dollars)...... 3,080 2,913 2,915 3,184 3,686
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1991(a) 1992 1993 1994 1995
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SLOTS:
Total Atlantic City
slot revenue(j)....... $1,851,070 $2,113,829 $2,214,638 $2,297,280 $2,572,719
Atlantic City slot rev-
enue growth........... 7.4% 14.2% 4.8% 3.7% 12.0%
Taj Mahal slot
revenue(j)............ $ 197,383 $ 246,947 $ 264,504 $ 259,114 $ 285,248
Taj Mahal slot market
share(g).............. 10.7% 11.7% 11.9% 11.3% 11.1%
Taj Mahal slot fair
share(h).............. 13.0% 12.7% 13.1% 12.6% 12.3%
Taj Mahal slot
efficiency(i)......... 82.3% 92.1% 90.8% 89.7% 90.2%
Taj Mahal slot units... 2,778 2,840 3,146 3,342 3,514
Taj Mahal slot revenue
per unit per day (ac-
tual dollars)(j)...... $ 195 $ 238 $ 230 $ 213 $ 222
</TABLE>
- --------------------
(a) Taj Associates and Taj Funding completed the 1991 Taj Restructuring (as
defined) on October 4, 1991, which may affect the comparability of prior
periods.
(b) EBITDA represents income from operations before depreciation, amortization,
restructuring costs, the non-cash write-down of CRDA investments, a
nonrecurring cost of a litigation settlement in 1994, lease payments on the
Specified Parcels and payments under the Taj Services Agreement. In
connection with the Merger Transaction, the lease payments and payments
under the Taj Services Agreement (as defined) will be terminated. 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.
(c) 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).
(d) The years ended December 31, 1991, 1992, 1993, 1994 and 1995 include
approximately $528,124, $550,140, $580,464, $611,533 and $649,139 of Taj
Bonds, net of discount of approximately $201,334, $188,162, $172,417,
$153,597 and $131,103, 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. The carrying value of the Taj Bonds was
$611,533 and $649,139, at December 31, 1994 and 1995, respectively, with a
face value of $765,130 and $780,242, respectively.
(e) Atlantic City industry data has been compiled from information filed with
and published by the CCC and is unaudited.
(f) Table drop represents the total dollar value of chips purchased for table
games for the period indicated.
(g) Market share represents the total Taj Mahal table drop or slot revenues, as
applicable, expressed as a percentage of total Atlantic City table drop or
slot revenues, as applicable.
(h) Fair share is the percentage of the total number of gaming units (table
games or slot machines, as applicable) in the Taj Mahal to the total number
of such units in casinos in Atlantic City.
(i) Efficiency is the ratio of the Taj Mahal's market share to its fair share.
(j) Slot revenue is shown on the cash basis and excludes amounts reserved for
progressive jackpot accruals.
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<PAGE>
THE MERGER TRANSACTION
Upon consummation of the Merger Transaction, the Company will own and operate
the Taj Mahal and Trump Plaza. Pursuant to the Agreement and Plan of Merger,
dated as of January 8, 1996, as amended by Amendment to Agreement and Plan of
Merger, dated as of January 31, 1996, among the Company, Taj Holding and THCR
Merger Corp. ("Merger Sub") (the "Merger Agreement"), (a) Merger Sub will be
merged with and into Taj Holding and (b) each outstanding share of Taj Holding
Class A Common Stock will be converted into the right to receive, at each
holder's election, either (i) $30.00 in cash ("Cash Consideration") or (ii)
that number of shares of the Company's Common Stock as is determined by
dividing $30.00 by the Market Value ("Stock Consideration"). Market Value is
defined as the average of the high and low per share sales prices on the NYSE
of a share of Common Stock on a random selection of ten trading days within the
fifteen trading day period ending five trading days immediately preceding the
effective time of the Merger (the "Effective Time"). In addition to the Merger,
the Stock Offering and the Mortgage Note Offering, the Merger Transaction
includes the transactions discussed below.
Real Property Purchases. Upon consummation of the Merger Transaction,Trump AC
intends to purchase from Trump Taj Mahal Realty Corp. ("Realty Corp."), a
corporation wholly owned by Trump, certain real property used in the operation
of the Taj Mahal, including land underlying a 20,000 square foot-multi-purpose
entertainment complex known as the Xanadu Theater with a seating capacity for
approximately 1,200 people, which can be used as a theater, concert hall,
boxing arena or exhibition hall (the "Taj Entertainment Complex"), land
adjacent to the Taj Majal 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"). The Specified
Parcels are currently leased by Taj Associates from Realty Corp. for
approximately $3.3 million per year. See "Business--Certain Indebtedness--Taj
Associates--First Fidelity Loan/Specified Parcels." Realty Corp. has
outstanding indebtedness of approximately $78 million under the First Fidelity
Loan which is due November 15, 1999. The First Fidelity Loan is currently
secured by a mortgage on the Specified Parcels, and Taj Associates has
previously guaranteed the repayment of the First Fidelity Loan up to a maximum
of $30 million. Trump has also previously personally guaranteed (up to a
maximum of approximately $19.2 million), and pledged his direct and indirect
equity interests in Taj Associates as collateral for, the First Fidelity Loan.
As mortgagee, First Fidelity has the right to terminate the lease on the
Specified Parcels under certain circumstances. See "Business--Certain
Indebtedness--Taj Associates--First Fidelity Loan/Specified Parcels."
In order to secure future use of the Specified Parcels and eliminate all
future lease payments on the Specified Parcels, Taj Associates expects to
satisfy the First Fidelity Loan through the payment of $50 million in cash and
500,000 shares of Common Stock and purchase the Specified Parcels from Realty
Corp. for ten dollars by exercising a purchase option with respect to the
Specified Parcels. Upon consummation of the purchase of the Specified Parcels,
(i) the lease relating to the Specified Parcels will be terminated, thus
eliminating Taj Associates' rental obligations thereunder; (ii) the $30 million
guaranty by Taj Associates of the First Fidelity Loan will be released; and
(iii) Trump's guaranty of such indebtedness will be released and First Fidelity
will relinquish its lien on Trump's direct and indirect equity interests in Taj
Associates. The Specified Parcels will be part of the collateral securing the
Mortgage Notes. See "Business--Certain Indebtedness--Taj Associates--First
Fidelity Loan/Specified Parcels."
Pursuant to the Trump Plaza East Purchase Option, Plaza Associates has the
right to purchase Trump Plaza East for a purchase price of $28.0 million
through December 31, 1996, increasing by $1.0 million annually thereafter until
expiration on June 30, 1998. Plaza Associates intends to exercise the Trump
Plaza East Purchase Option in connection with the Merger Transaction and
purchase Trump Plaza East, thereby eliminating approximately $3.1 million of
annual lease payments associated with Trump Plaza East. Plaza Associates will
thereby secure future use of Trump Plaza East. Should Plaza Associates be
unable to finance the purchase price of Trump Plaza East pursuant to the Trump
Plaza East Purchase Option and its leasehold interest therein is terminated,
any amounts expended with respect to Trump Plaza East and any improvements
thereon would inure to the benefit of the unaffiliated third party that owns
Trump Plaza East and not to Plaza Associates. As a result of such purchase,
Trump will obtain a release of a contingent debt obligation, which, if the
conditions thereunder are not satisfied (including, without limitation, the
failure by Plaza Associates to exercise the Trump Plaza East Purchase Option),
17
<PAGE>
would result in an obligation of Trump for approximately $18 million which
obligation was associated with Trump's original purchase of Trump Plaza East.
See "Business--Properties--Trump Plaza--Trump Plaza East."
Consent and Release Payment. The Trump Indebtedness is currently secured by,
among other things, a lien on Trump's direct and indirect equity interests in
Taj Associates, as well as the pledge of a promissory note from 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 part of
the Merger Transaction, Taj Associates will pay $10 million to Bankers Trust to
obtain the consent of Bankers Trust to the Merger Transaction and to obtain
releases of certain liens on Trump's direct and indirect equity interests in
Taj Associates and related guarantees, and on the TTMI Note, all of which
secure a portion of the Trump Indebtedness. See "Business--Certain
Indebtedness--Taj Associates--TTMI Note."
Plaza Note Purchase; Consent Solicitations. As part of the Merger
Transaction, Plaza Funding will retire the Plaza Notes. Any such purchase of
Plaza Notes will be conditioned upon, among other things, the concurrent
consummation of the other transactions contemplated by the Merger Transaction.
Plaza Associates and Plaza Funding solicited the consent of holders of the
Plaza Notes (the "Plaza Note Consent Solicitation") to amend certain provisions
in the indenture pursuant to which the Plaza Notes were issued (the "Plaza Note
Indenture"). The requisite number of consents has been obtained.
To effect the Merger Transaction, THCR Holdings and its subsidiary Trump
Hotels & Casino Resorts Funding, Inc. ("THCR Funding"), the issuers of the
Senior Notes, solicited from the holders of the Senior Notes the waiver of, and
consent to modify, certain provisions of the indenture pursuant to which the
Senior Notes were issued (the "Senior Note Indenture") (the "Senior Note
Consent Solicitation"). Consent of holders of a majority in aggregate principal
amount of outstanding Senior Notes is required in connection with the Senior
Note Consent Solicitation. The holders of approximately $154 million principal
amount of Senior Notes, representing approximately 99.6% of the outstanding
Senior Notes, have consented.
The successful completion of both the Plaza Note Consent Solicitation and the
Senior Note Consent Solicitation are conditions to the consummation of the
Stock Offering.
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 Trump AC (on behalf, and at the direction, of THCR Holdings).
Trump will contribute to Trump AC his shares (consisting of 50% of the
outstanding capital stock) of The Trump Taj Mahal Corporation, the holder of a
.01% general partnership interest in Taj Associates ("TTMC"), and will cause
TTMI to contribute to Trump AC (on behalf, and at the direction, of THCR
Holdings) TTMI's 49.995% general partnership interest in Taj Associates.
In addition, Trump will contribute to Taj Holding all of his shares of Class
C Common Stock of Taj Holding ("Taj Holding Class C Common Stock") which will
be canceled pursuant to the Merger Agreement. The Taj Holding Class C Common
Stock provides Trump with the ability to elect a majority of the members of the
Board of Directors of, and thereby control, Taj Holding. It also affords Trump
separate class voting rights in certain events, including in connection with
the Merger. The Taj Services Agreement, pursuant to which Trump has received
approximately $1.7 million, $1.4 million and $1.6 million (less $575,000 which
was paid annually by Trump to First Fidelity to reduce the amount owed by Taj
Associates under the lease for the Specified Parcels) in respect of the years
ended 1995, 1994 and 1993, respectively, as compensation for services rendered
to Taj Associates, will also be terminated in connection with the Merger
Transaction.
In exchange for the contribution by Trump and TTMI to Trump AC (on behalf,
and at the direction, of THCR Holdings), Trump's directly held limited
partnership interest in THCR Holdings will be modified and TTMI will receive a
limited partnership interest in THCR Holdings. As a result of the Merger
Transaction, Trump's aggregate beneficial ownership of limited partnership
interests in THCR Holdings will decrease from approximately 40% to
approximately 27%, of which an approximately 5% interest will be held directly
by TTMI (assuming a price of $24.00 per share of Common Stock as the Market
Value in connection with the Merger and as the public offering price in the
Stock Offering).
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<PAGE>
Trump's current limited partnership interest in THCR Holdings represents his
economic interest in the assets and operations of THCR Holdings and is
convertible, at Trump's option, into 6,666,667 shares of Common Stock
(representing approximately 40% of the outstanding shares of Common Stock after
giving effect to such conversion). Upon consummation of the Merger Transaction
(assuming a price of $24.00 per share of Common Stock as the Market Value in
connection with the Merger and as the public offering price in the Stock
Offering) Trump's and TTMI's limited partnership interests in THCR Holdings
will be convertible into an aggregate of 8,354,167 shares of Common Stock,
representing approximately 27% of the then outstanding shares of Common Stock
(after giving effect to the Merger Transaction and such conversion). At the
time that TTMI becomes a limited partner of THCR Holdings, Trump will
contribute 200 shares of Class B Common Stock of the Company, par value $.01
per share ("Class B Common Stock") to TTMI. The Company's Class B Common Stock
has voting power equivalent to the voting power of the Common Stock into which
a Class B Common Stockholder's limited partnership interest in THCR Holdings is
convertible. The Class B Common Stock is not entitled to dividends or
distributions. Upon conversion of all or any portion of a holder's THCR
Holdings limited partnership interest into shares of Common Stock, the
corresponding voting power of such holders's Class B Common Stock (equal in
voting power to the number of shares of Common Stock issued upon such
conversion) will be proportionately diminished.
Concurrent with the consummation of the Merger Transaction, the Company will
issue to Trump a warrant to purchase an aggregate of 1.8 million shares of
Common Stock, (i) 600,000 shares of which may be purchased on or prior to the
third anniversary of the issuance of the warrant at $30.00 per share, (ii)
600,000 shares of which may be purchased on or prior to the fourth anniversary
of the issuance of the warrant at $35.00 per share and (iii) 600,000 shares of
which may be purchased on or prior to the fifth anniversary of the issuance of
the warrant at $40.00 per share.
Trump, through TTMI, has the right to reduce the equity interest of the Taj
Holding Class A Common Stock in Taj Associates from 50% to 20% by causing Taj
Associates to make a payment to the holders of the Taj Bonds in an amount
calculated to provide them with a cumulative return equal to approximately 14%
per annum (the "14% Payment"). If the 14% Payment is made (which can occur only
if the Taj Bonds are retired, redeemed or paid in full), Trump would
beneficially own 80% of Taj Associates. Moreover, the 14% Payment is permitted
to be financed with Taj Associates' borrowings. In connection with the Merger
Transaction, TTMI will not exercise its right to cause Taj Associates to make
such payment and such right will terminate upon the redemption of the Taj
Bonds.
The Company Contribution and Consideration. In connection with the Merger
Transaction, the Company will cause TM/GP Corporation ("TM/GP"), which will
become an indirect wholly owned subsidiary of the Company after the Effective
Time and which holds a 49.995% general partnership interest in Taj Associates,
to contribute to Trump AC (on behalf, and at the direction, of THCR Holdings)
its general partnership interest in Taj Associates, and will cause Taj Holding,
which will become a direct wholly owned subsidiary of the Company after the
Effective Time, to contribute to TM/GP and will then cause TM/GP to contribute
to Trump AC (on behalf, and at the direction, of THCR Holdings) its shares
(consisting of 50% of the outstanding capital stock) of TTMC (the holder of a
.01% general partnership in Taj Associates). As a result of the Merger
Transaction, the Company's beneficial equity interest in THCR Holdings will
increase from approximately 60% to approximately 73%, of which an approximately
5% interest will be held directly by TM/GP (assuming a $24.00 price per share
of Common Stock as the Market Value in connection with the Merger and as the
public offering price in the Stock Offering).
Redemption of the Taj Bonds and the Taj Holding Class B Common Stock. The Taj
Holding Class B Common Stock is essentially a nonparticipating stock issued as
part of a unit ("Unit"), consisting of $1,000 principal amount of Taj Bonds and
one share of Taj Holding Class B Common Stock, that entitles the holders
thereof to elect the Class B Directors, to vote on matters presented to the
stockholders of Taj Holding and to separately approve certain matters. The Taj
Holding Certificate of Incorporation provides that the outstanding shares of
Taj Holding Class B Common Stock must be redeemed at such time as the principal
amount of Taj
19
<PAGE>
Bonds are redeemed, defeased or paid, at the redemption price of $.50 per
share. In connection with the Merger Transaction, Taj Funding will redeem the
outstanding Taj Bonds at a redemption price equal to 100% of the principal
amount thereof plus accrued interest to the date of redemption and Taj Holding
will cause each outstanding share of Taj Holding Class B Common Stock to be
redeemed at the redemption price of $.50 per share in accordance with the
provisions of the Taj Holding Certificate of Incorporation.
MANAGEMENT AND CORPORATE STRUCTURE
Trump is the Company's Chairman of the Board and Nicholas L. Ribis is the
Company's President, Chief Executive Officer and Chief Financial Officer. The
Company 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 subsidiary
corporations and partnerships. The partnership agreement governing THCR
Holdings provides that all business activities of the Company must be conducted
through THCR Holdings or its subsidiary corporations and partnerships. As the
sole general partner of THCR Holdings, the Company generally has the exclusive
rights, responsibilities and discretion in the management and control of THCR
Holdings.
THCR Holdings' subsidiary corporations and partnerships currently include
Trump Indiana, Plaza Associates, Plaza Funding, Trump AC (formerly Trump Plaza
Holding Associates), Trump Plaza Holding, Inc. ("Plaza Holding Inc."), Trump AC
Funding and Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"). THCR
Funding and THCR Holdings are the co-obligors of the Senior Notes. Plaza
Associates owns and operates Trump Plaza and is the guarantor of Plaza
Funding's 10 7/8% First Mortgage Notes due 2001 (the "Plaza Notes"). Plaza
Funding is the issuer of the Plaza Notes and currently owns a 1% equity
interest in Plaza Associates which will be transferred to TTMC in connection
with the Merger Transaction. The Plaza Notes will be retired in connection with
the Merger Transaction. Trump AC currently owns a 99% equity interest in Plaza
Associates, and Plaza Holding Inc. owns a 1% equity interest in Trump AC. In
addition to its ownership of the Indiana Riverboat, Trump Indiana has a 50%
equity interest in Buffington Harbor Riverboats, LLC ("BHR"), which will own,
develop and operate all common land-based and waterside operations in support
of the Indiana Riverboat and another operator's riverboat casino at Buffington
Harbor.
Upon consummation of the Merger Transaction, THCR Holdings will indirectly
wholly own Taj Associates through its ownership of a 99% equity interest in
Trump AC and all of the capital stock of Plaza Holding Inc., which owns a 1%
equity interest in Trump AC. Trump AC will wholly own Taj Associates through
its ownership of a 99% equity interest in Taj Associates and all of the capital
stock of TTMC, which will own a 1% equity interest in Taj Associates. Trump AC
and its subsidiary Trump Atlantic City Funding will be the issuers and co-
obligors of the Mortgage Notes. Plaza Associates and Taj Associates will be
guarantors of the Mortgage Notes.
The Company, a Delaware corporation, was incorporated on March 28, 1995. The
principal executive offices of the Company are located at Mississippi Avenue
and The Boardwalk, Atlantic City, New Jersey 08401, and the Company's telephone
number is (609) 441-6060.
20
<PAGE>
PRO FORMA STRUCTURE OF THE COMPANY
[CHART APPEARS HERE]
(1) Trump's and TTMI's economic interest in the Company will be held through
limited partnership interests in THCR Holdings. The Class B Common Stock
will represent Trump's and TTMI's non-economic voting interest in the
Company, which will be proportionate to their respective economic interest
in THCR Holdings.
(2) Assumes a price of $24.00 per share of Common Stock as the Market Value in
connection with the Merger and as the public offering price in the Stock
Offering.
(3) Co-issuers of the Mortgage Notes.
(4) Guarantors of the Mortgage Notes.
21
<PAGE>
RISK FACTORS
Each prospective investor should consider carefully all information
contained in this Prospectus and should give particular consideration to the
following factors before deciding to purchase shares of Common Stock offered
hereby.
HIGH LEVERAGE AND FIXED CHARGES
Upon consummation of the Merger Transaction, the Company and its
subsidiaries will have a substantial amount of indebtedness on a consolidated
basis. At December 31, 1995, after giving pro forma effect to the Merger
Transaction, the Company's consolidated indebtedness for borrowed money would
have totaled approximately $1.27 billion, including $155 million aggregate
principal amount of Senior Notes and $1.10 billion aggregate principal amount
of Mortgage Notes (collectively, the "Notes"). See "Use of Proceeds" and
"Business--Certain Indebtedness." Assuming that the Merger Transaction had
been consummated on January 1, 1995, the Company's ratio of consolidated
earnings to fixed charges on a pro forma basis was 1.0x for the year ended
December 31, 1995.
Interest on the Senior Notes is, and interest on the Mortgage Notes will be,
payable semiannually in cash. The ability of THCR Holdings and Trump AC to pay
interest on the Senior Notes and the Mortgage Notes, respectively, will be
dependent upon the ability of the Company and its subsidiaries (in the case of
the Senior Notes) and Trump AC and its subsidiaries (in the case of the
Mortgage Notes) to generate enough cash from operations sufficient for such
purposes and will be subject to the risks associated with refinancing and
repayment of indebtedness described below. See "--Holding Company Structure;
No Anticipation of Dividends," "--Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing," "--Historical Results; Past Net
Losses--Trump Plaza," and "--Historical Results; Past Net Losses--Taj Mahal."
Taj Associates has a working capital facility (the "Working Capital
Facility") which matures in 1999 and permits borrowings of up to $25 million.
During 1994 and 1995, no amounts were borrowed under the Working Capital
Facility. Taj Associates will terminate the Working Capital Facility in
connection with the consummation of the Merger Transaction and the Company
anticipates replacing it with a new $25 million facility which would be
available to Trump AC and its subsidiaries, although there can be no assurance
that a replacement facility could be obtained on acceptable terms, if at all.
See "--Risk in Refinancing and Repayment of Indebtedness; Need for Additional
Financing" and "Business--Certain Indebtedness--Taj Associates--Working
Capital Facility."
The substantial consolidated indebtedness and fixed charges of the Company
may limit its ability to respond to changing business and economic conditions,
to fund capital expenditures for future expansion or otherwise, either through
cash flow or additional indebtedness, to absorb adverse operating results or
to maintain its facilities at an operating level that will continue to attract
patrons. Although management believes that the Merger Transaction will allow
the Company to realize certain cost savings (expected by management to be
approximately $18-20 million by the end of the second year following the
Merger Transaction), no assurance can be given as to the amount, if any, that
will be realized from these cost savings. Future operating results are subject
to significant business, economic, regulatory and competitive uncertainties
and contingencies, many of which are outside its control. The Company 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--
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; No Anticipation of Dividends" and "--Risk in
Refinancing and Repayment of Indebtedness; Need for Additional Financing."
Furthermore, such alternatives could impair the Company's competitive
position, reduce cash flow and/or have a material adverse effect on the
Company's results of operations. See "--Atlantic City Properties Expansion."
HOLDING COMPANY STRUCTURE; NO ANTICIPATION OF DIVIDENDS
The Company 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, the Company depends on distributions
and other permitted payments from THCR Holdings to meet its cash needs.
22
<PAGE>
In addition, both THCR Holdings and Trump AC are holding companies, the
principal assets of which are the shares of capital stock and partnership
interest of their respective subsidiaries. Dividends and distributions
received with respect to equity interests in subsidiaries of THCR Holdings and
Trump AC are the sole source of funds which are available to THCR Holdings and
Trump AC to meet their respective obligations, including the obligations under
the Senior Notes by THCR Holdings and the obligations under the Mortgage Notes
by Trump AC. The payment of dividends and distributions by the Company's
subsidiaries including 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. However, the terms of the
Mortgage Notes will, under certain circumstances and subject to certain
limitations, require Trump AC to make distributions to THCR Holdings to enable
THCR Holdings to make scheduled interest payments on its Senior Notes. See "--
Restrictions on Certain Activities" and "Description of the THCR Holdings
Partnership Agreement." Further, the ability of Plaza Associates to make
payments of dividends or distributions (except for payment of interest)
through Trump AC to THCR Holdings may be restricted by the CCC. Trump Indiana
may be similarly restricted by, among other things, the Indiana Gaming
Commission (the "IGC"). See "Regulatory Matters." In the event that THCR
Holdings and Trump AC are not able to meet scheduled payments of interest and
principal, with respect to the Senior Notes or the Mortgage Notes, the value
of the Common Stock would be materially and adversely affected.
The Company has never paid a dividend on the Common Stock and does not
anticipate paying one in the foreseeable future.
RISK IN REFINANCING AND REPAYMENT OF INDEBTEDNESS; NEED FOR ADDITIONAL
FINANCING
The ability of THCR Holdings and THCR Funding, and Trump AC and Trump AC
Funding, to pay their respective indebtedness when due will depend upon the
ability of the Company and its subsidiaries (with respect to the Senior Notes)
and Trump AC and its subsidiaries (with respect to the Mortgage Notes) to
generate cash from operations sufficient for such purpose or to refinance such
indebtedness on or before the date on which it becomes due. Management does
not currently anticipate being able to generate sufficient cash flow from
operations to repay a substantial portion of the principal amount of the
Senior Notes or Mortgage Notes. Thus, the repayment of the principal amount of
the Notes will likely depend primarily upon the ability to refinance the Notes
when due. The future operating performance and the ability to refinance the
Notes will be subject to the then prevailing economic conditions, industry
conditions and numerous other financial, business and other factors, many of
which are beyond the control of the Company. There can be no assurance that
the future operating performance of the Company and its subsidiaries will be
sufficient to meet these repayment obligations or that the general state of
the economy, the status of the capital markets generally or the receptiveness
of the capital markets to the gaming industry and to the Company will be
conducive to refinancing the Notes or other attempts to raise capital. In the
event that the Company is unable to refinance the Notes when due, the value of
the Common Stock would be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
The cost to the Company for the development of the Indiana Riverboat through
the commencement of its operations (expected in the second quarter of 1996),
which includes the land, the vessel, gaming equipment, a pavilion for staging
and ticketing and restaurant facilities, berthing and support facilities and
parking facilities, is expected to be approximately $84 million. The Company
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, the Company determined to
accelerate the second phase of the project, now expected to cost $25 million,
and complete both phases prior to commencing operations. The Company
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 $2.5 million in additional vessel financing,
$12.5 million in mortgage financing and/or from a working capital
23
<PAGE>
facility and $10 million in operating leases. Trump Indiana has entered into
an equipment lease for nearly $2.0 million and has signed a letter of intent
for an additional equipment lease for $14.2 million (including approximately
$8 million for slot machines included in the initial $59 million cost). Trump
Indiana is seeking commitments for the remaining financing. 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--Liquidity and
Capital Resources."
The Company contemplates obtaining an aggregate of approximately $17.5
million of equipment financing in connection with the acquisition of slot
machines and related gaming equipment for Trump Plaza's existing facilities,
Trump World's Fair and Trump Plaza East. Plaza Associates has obtained
commitments for $7.2 million of such financing and is seeking commitments for
the remainder of the financing. The Taj Mahal Expansion is expected to depend
in part on additional debt financing, for which no commitments are in place.
In addition, no assurances may be made that Trump AC will successfully replace
the Working Capital Facility. Finally, Taj Associates' obligations to make
certain improvements with respect to the Steel Pier may require additional
financing. See "Business--Properties." The failure of the Company to obtain
all or a significant portion of the financings discussed above may have a
material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
RESTRICTIONS ON CERTAIN ACTIVITIES
The Senior Note Indenture imposes restrictions on the activities of THCR
Holdings and its subsidiaries and the indenture pursuant to which the Mortgage
Notes will be issued (the "Mortgage Note Indenture") will impose restrictions
on the activities of Trump AC and its subsidiaries. Generally, the
restrictions contained in these instruments relate to the incurrence of
additional indebtedness, the distribution of cash and/or property to partners,
the repayment or repurchase of pari passu or junior securities, investments,
mergers and sales of assets and the creation of liens. These restrictions
could limit the ability of the Company to respond to changing business and
economic conditions. A failure to comply with any of these obligations could
also result in an event of default under the Senior Note Indenture or the
Mortgage Note Indenture, which could permit acceleration of the Notes and
acceleration of certain other indebtedness of the Company under other
instruments that may contain cross-acceleration or cross-default provisions.
In the event that the Notes are accelerated, the value of the Common Stock
would be materially and adversely affected.
HISTORICAL RESULTS; PAST NET LOSSES
Trump Plaza. Plaza Associates had net losses of $29.2 million, $35.8 million
(including an extraordinary loss of $38.2 million) and $8.9 million for the
years ended December 31, 1991, 1992 and 1994, respectively, and net income of
$9.3 million (including an extraordinary gain of $4.1 million) for the year
ended December 31, 1993. For the period from January 1, 1995 through June 12,
1995, Plaza Associates had a net loss of $11.0 million (including an
extraordinary loss of $9.3 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. 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--Business Strategy--Trump
Plaza." In June 1993, Plaza Associates, Plaza Funding and THCR Atlantic City
completed a refinancing, the purpose of which was to enhance Plaza Associates'
liquidity and to position Plaza Associates for a subsequent deleveraging
transaction. See "Business--Restructurings--The 1992 Plaza Restructuring." A
portion of the proceeds from the June 1995 Offerings was contributed to Plaza
Associates to help reduce its indebtedness.
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Taj Mahal. Taj Associates had net losses of $35.1 million, $22.5 million,
$36.7 million and $26.6 million for the years ended December 31, 1992, 1993,
1994 and 1995, respectively. From the opening of the Taj Mahal in April 1990
through the spring of 1991, cash generated from Taj Associates' operations was
insufficient to cover its fixed charges. As a result, Taj Associates failed to
provide Taj Funding with sufficient funds to meet its debt servicing needs.
During 1991, Taj Funding, Taj Associates and Taj Associates' then existing
general partners (TTMI and TTMC) restructured their existing indebtedness (the
"1991 Taj Restructuring"). Pursuant to the terms of the 1991 Taj
Restructuring, Taj Funding's 14% First Mortgage Bonds, Series A, due 1998 (the
"Old Taj Bonds") were exchanged for the Taj Bonds and certain modifications
were made to the terms of bank borrowings and amounts owed to both Trump and
his affiliates. In addition, approximately 50% of the ownership interest in
Taj Associates was transferred indirectly to the holders of the Old Taj Bonds.
See "Business--Restructurings--The 1991 Taj Restructuring."
CONFLICTS OF INTEREST
Conflicts Relating to Trump's Ownership of Trump's Castle. Trump is
currently the beneficial owner of 100% of Trump's Castle Casino Resort
("Trump's Castle"), which competes directly with the Taj Mahal and Trump
Plaza, and Trump could, under certain circumstances, have an incentive to
operate Trump's Castle to the competitive detriment of the Taj Mahal and Trump
Plaza.
Trump and TC/GP, Inc. ("TC/GP"), a corporation beneficially owned by Trump,
have entered into a services agreement (the "Trump's Castle Services
Agreement") with Trump's Castle Associates ("TCA"), the partnership that owns
and operates Trump's Castle, pursuant to which TC/GP has agreed to provide
marketing, advertising and promotional and other similar and related services
to Trump's Castle. Pursuant to the Trump's Castle Services Agreement, in
respect of any matter or matters involving employees, contractors,
entertainers, celebrities, vendors, patrons, marketing programs, promotions,
special events, or otherwise, Trump will, and will cause his affiliates to the
best of his ability and consistent with his fiduciary obligations to TCA,
Trump Plaza and the Taj Mahal to, act fairly and in a commercially reasonable
manner so that on an annual overall basis (x) neither Trump Plaza nor the Taj
Mahal shall realize a competitive advantage over Trump's Castle, by reason of
any activity, transaction or action engaged in by Trump or his affiliates and
(y) Trump's Castle shall not be discriminated against.
Conflicts Relating to Common Officers. Nicholas L. Ribis, the Chief
Executive Officer of the Company and Taj Associates, is also the Chief
Executive Officer of TCA. Messrs. Robert M. Pickus and John P. Burke, officers
of the Company, are each officers of TCA and Taj Associates. In addition,
Messrs. Trump, Ribis, Pickus and Burke serve on one or more of the governing
bodies of the Company, Taj Holding, TCA and their affiliated entities. 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 the Company.
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 the Company and Taj Holding that they will not engage in any activity
which they reasonably expect will harm the Company, Taj Holding or their
respective affiliates or is otherwise inconsistent with their obligations as
officers and directors of the Company, Taj Holding or their affiliates. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump" and "--Other Relationships."
CONTROL AND INVOLVEMENT OF TRUMP
Trump's Substantial Voting Power. Upon consummation of the Merger
Transaction, through his beneficial ownership of the Class B Common Stock,
Trump will continue to exercise considerable influence over the affairs
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of the Company and will control approximately 27% of the total voting power of
the Company (assuming a price of $24.00 per share of Common Stock as Market
Value in connection with the Merger and as the public offering price in the
Stock Offering). The Company believes that the involvement of Trump in the
affairs of the Company is an important factor that will affect the prospects
of the Company. Following the Merger Transaction, Trump will continue to
pursue, develop, control and conduct all of his gaming business (except for
Trump's Castle) through the Company. See "--Conflicts of Interest."
Trump's Personal Indebtedness. Although Trump has no obligation to
contribute funds to the Company or THCR Holdings and is not providing any
personal guarantees in connection with the Merger Transaction, management
believes that Trump's financial condition and general business success
together with the public's perception of such success may be relevant to the
success of the Company due, in part, to the marquee value of the "Trump" name.
The association of the "Trump" name with high quality amenities and first
class service at the Company's properties could be diminished in the event
that Trump experienced business reversals or the public perceived such
reversals, and accordingly, the value of a holder's shares of Common Stock
could be adversely effected. Trump is engaged, through various enterprises, in
a wide range of business activities. During 1989 through 1992, certain of
Trump's businesses, including businesses for which Trump supplied personal
guarantees, experienced financial difficulties that necessitated a
comprehensive financial restructuring of certain of his properties and
holdings, including Trump's interests in Trump Plaza, Trump's Castle and the
Taj Mahal, and his personal indebtedness. See "Management." 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. See "Business--
Properties."
Trump will have ongoing requirements to make payments of principal and
interest on his outstanding indebtedness following the consummation of the
Merger Transaction. In addition, the agreements with respect to Trump's
indebtedness generally contain comprehensive covenants and events of default
which relate to the operations of certain of his affiliates. If such covenants
are breached or if events of default otherwise occur, either of which could
occur at any time, such indebtedness could be subject to acceleration by the
applicable lenders. Any such acceleration could have a material adverse effect
on Trump. Furthermore, a substantial portion of Trump's assets consist of real
property or interests in regulated enterprises, which may affect the liquidity
of such assets. Trump has advised the Company 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 the Company. 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 the Company may
seek to conduct gaming operations would likely have similar regulations. See
"--Strict Regulation by Gaming Authorities" and "Regulatory Matters."
Trump has informed the Company that certain of his current or proposed
lenders, including an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), are expected to refinance certain of his personal
indebtedness, which new indebtedness would have covenants and events of
default similar in scope to those contained in his existing indebtedness. As
security for some or all of the new indebtedness, it is anticipated that Trump
will pledge, and cause TTMI to pledge, all of their interests in the Company
and THCR Holdings. In the event that Trump is unable to pay such indebtedness
when due, subject to applicable regulatory approval, such lenders would have
the right to foreclose on the pledged Class B Common Stock and the pledged
limited partnership interests in THCR Holdings and cause such limited
partnership interests to be converted into shares of Common Stock and to have
such shares registered for resale under the Securities Act. Such an event
could have an adverse effect on the value of a holder's shares of Common
Stock. Trump is currently subject to certain loan agreements which contain
covenants that relate to his equity interests in Taj Associates. In connection
with
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the Merger Transaction, Trump is seeking to obtain from his personal
creditors, among other things, releases of liens on his direct and indirect
equity interests in Taj Associates, which releases are required to consummate
the Merger Transaction. Bankers Trust, an affiliate of BT Securities
Corporation ("BT Securities") 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 "Business--Certain
Indebtedness--Taj Associates--TTMI Note." Both DLJ and BT Securities have
rendered financial advisory services to the Company and Taj Holding in the
past, acted as co-managers in the June 1995 Offerings and are serving as
underwriters of the Offerings. See "Underwriting."
Change of Control. The Amended and Restated Certificate of Incorporation of
the Company (the "Certificate of Incorporation") and Amended and Restated By-
Laws of the Company (the "By-Laws") contain provisions which may have the
effect of delaying, deferring or preventing a change in control of the
Company. In addition, the Senior Note Indenture contains, and the Mortgage
Note Indenture will contain, provisions relating to certain changes of control
of THCR Holdings and Trump AC. Upon the occurrence of such a change of
control, the respective issuers 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 to the date of purchase. There can be no assurance that funds
necessary to effect such a purchase would be available if such an event were
to occur. Because of the control of Trump as described above, the value of the
Common Stock may be less than it would otherwise be absent such control.
ATLANTIC CITY PROPERTIES EXPANSION
Construction and Regulatory Approvals. The Trump Plaza Expansion is expected
to be completed in the second quarter of 1996, and the Taj Mahal Expansion,
the plans for which are subject to modification, is expected to be completed
in phases from the first quarter of 1997 through early 1998. Construction
projects, however, such as those contemplated by the Trump Plaza Expansion and
the Taj Mahal Expansion, can entail significant development and construction
risks including, but not limited to, labor disputes, shortages of material and
skilled labor, weather interference, unforeseen engineering problems,
environmental problems, geological problems, construction, demolition,
excavation, zoning or equipment problems and unanticipated cost increases, any
of which could give rise to delays or cost overruns. There can be no assurance
that Plaza Associates and Taj Associates will receive the licenses and
regulatory approvals necessary to undertake, in the case of the Taj Mahal
Expansion, and to complete, in the case of each of the renovation of Trump
World's Fair and the Taj Mahal Expansion, their respective expansion plans, or
that such licenses and regulatory approvals will be obtained within the
anticipated time frames.
Trump World's Fair and the Taj Mahal Expansion will each require various
licenses and regulatory approvals, including the approval of the CCC.
Furthermore, the Casino Control Act requires that the additional guest rooms
contemplated by the Taj Mahal Expansion and at Trump Plaza East be put in
service within a specified time period after any such casino expansion and
that the Trump World's Fair open all guest rooms prior to or at the time of
opening its casino. If Plaza Associates, with respect to Trump Plaza East, 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 Company. 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 determinations. See "Regulatory Matters--New Jersey Gaming
Regulations--Casino Licensee" and "Regulatory Matters--New Jersey Gaming
Regulations--Approved Hotel Facilities" and "Management--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump--Plaza Associates."
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Trump Plaza East. Plaza Associates has opened the casino and 326 rooms at
Trump Plaza East and intends to exercise the Trump Plaza East Purchase Option
in connection with the Merger Transaction. If Plaza Associates were unable to
finance the purchase price of Trump Plaza East pursuant to the Trump Plaza
East Purchase Option and its leasehold interest therein were terminated, any
amounts expended with respect to Trump Plaza East, including payments under
the Trump Plaza East Purchase Option and the lease pursuant to which Plaza
Associates leases Trump Plaza East, and any improvements thereon, would inure
to the benefit of the unaffiliated third party that owns Trump Plaza East and
not to Plaza Associates and would increase the cost of demolition of any
improvements for which Plaza Associates would be liable. As of December 31,
1995, Plaza Associates had capitalized approximately $35.7 million in
construction costs related to Trump Plaza East. If the development of Trump
Plaza East is not successful, the Company would be required to write off the
capitalized construction costs associated with the project. Plaza Associates
intends to exercise the Trump Plaza East Purchase Option in connection with
the Merger Transaction. See "Management--Compensation Committee Interlocks and
Insider Participation--Certain Related Party Transactions of Trump--Plaza
Associates."
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 (which will be extinguished by the exercise of the Trump
Plaza East Purchase Option) 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 July 1996 in the event that gross sales for
the store do not meet certain threshold amounts or if at any time after July
1996 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 "Management--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump--Plaza Associates."
Trump World's Fair. The ongoing renovation of Trump World's Fair is
currently expected to be completed 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, the Company intends to operate Trump
World's Fair as a casino hotel. In order to operate the casino space in Trump
World's Fair, Plaza Associates must obtain all necessary regulatory approvals,
including approval of the CCC, which approval cannot be assured. Plaza
Associates has applied for a separate casino license with respect to Trump
World's Fair. The CCC was required to determine that the operation of the
casino by Plaza Associates will not result in undue economic concentration in
Atlantic City. On May 18, 1995, the CCC ruled that the operation of Trump
World's Fair by Plaza Associates will not result in undue economic
concentration. Although this determination is a required condition precedent
to the CCC's ultimate issuance of a casino license for Trump World's Fair, and
management believes that a casino license will ultimately be issued for Trump
World's Fair, there can be no assurance that the CCC will issue this casino
license or what conditions may be imposed, if any, with respect thereto. See
"Regulatory Matters--New Jersey Gaming Regulations--Casino Licensee" and
"Regulatory Matters--New Jersey Gaming Regulations--Approved Hotel
Facilities." Although construction at Trump World's Fair has commenced, if the
costs of developing, constructing, equipping and opening Trump World's Fair
exceed the proceeds allocated from the June 1995 Offerings for such
expenditures, Plaza Associates may be forced to rely on alternative methods of
financing, which may not be available and which could impair the competitive
position of Trump Plaza and reduce Plaza Associates' cash flow. See "--High
Leverage and Fixed Charges," "--Holding Company Structure; No Anticipation of
Dividends," "--Risk in Refinancing and Repayment of Indebtedness; Need for
Additional Financing" and "--Restrictions on Certain Activities."
The Taj Mahal. It is expected that the Taj Mahal Expansion, the plans for
which are subject to modification, will be principally funded out of cash from
the operations of the Atlantic City Properties. The
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ability to complete such expansion may depend in part on the ability of the
Company to obtain debt financing for such purpose. There can be no assurance
that the Atlantic City Properties will be able to generate sufficient cash
from operations or that financing could be obtained on terms satisfactory to
the Company, if at all. In addition, any indebtedness to be incurred in
connection with the Taj Mahal Expansion would be subject to the limitations
set forth in the Senior Note Indenture and the Mortgage Note Indenture. See
"--High Leverage and Fixed Charges," "--Holding Company Structure; No
Anticipation of Dividends," "--Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing," "--Restrictions on Certain
Activities" and "Business--Atlantic City Marketing Strategy--The Taj Mahal."
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 the
Company to market and operate a new venture in a new gaming jurisdiction.
Although construction of the vessel and land-based facilities has begun and is
scheduled for opening in the second quarter of 1996, 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."
As with gaming laws and regulations generally, and particularly in light of
the limited history of regulated gaming activities in Indiana, the application
of Indiana gaming laws and rules promulgated by the IGC regulations may cause
uncertainty with respect to the Indiana Riverboat and the restrictions under
which Trump Indiana must operate. The Company cannot make any predictions as
to the application of such gaming laws and rules by the IGC.
While the Company and its management have substantial experience in
operating gaming properties in New Jersey, the Company has never been involved
in constructing or operating riverboat casinos, and there is no operating
history with respect to the Company's proposed operation at Buffington Harbor,
Indiana. The Company's future operating results at Buffington Harbor will
depend upon the Company's ability to complete and open gaming facilities on
schedule and several other factors over which the Company 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 the Company's operations will prove successful or that
the Company will be able to generate sufficient revenues from such operations
or attain and maintain profitable operations. In addition, the Company is
unable to predict whether seasonality will have a material effect on the
operations of the Indiana Riverboat.
Trump Indiana and The Majestic Star Casino, LLC ("Barden"), an entity
beneficially owned by Don H. Barden, a developer based in Detroit without
significant gaming experience, are the two holders of certificates of
suitability for Buffington Harbor. Trump Indiana and Barden formed BHR and
have entered into an agreement (the "BHR Agreement") relating to the joint
ownership, development and operation of all common land-based and waterside
operations in support of each of Trump Indiana's and Barden's separate
riverboat casinos at Buffington Harbor. Trump Indiana and Barden will each be
equally responsible for the development and operating expenses of the common
land-based facilities at such site and the Company will be dependent on the
ability of Barden to pay for its share of all future expenses. There can be no
assurance that the Company or Trump Indiana will be able to fund from
operations or to finance on terms satisfactory to the Company or Trump Indiana
any such required expenditures or, if available, such other indebtedness would
be permitted under existing debt instruments of the Company. Furthermore,
while Barden has made all required capital contributions to date, there can be
no assurance that Barden will be able to fund its portion of such expenses in
the future. 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
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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 million.
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 an owner and
operator of the Indiana Riverboat, Trump Indiana and the Company 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 the Company nor
Trump Indiana has a source of indemnity for any such liability. However, the
Company believes, based on third-party engineering reports, that it has
completed all remedial activities expected to be required.
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. The Company expects that it will have
adequate insurance to cover employee claims.
The Indiana Riverboat is anticipated to be a cruising riverboat, which,
among other things, would require a U.S. Coast Guard hull inspection at five-
year intervals. Operating at Buffington Harbor will expose the Indiana
Riverboat to marine hazards such as unpredictable currents, floods or other
severe weather conditions and a heavy volume of maritime traffic. The Company
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 the Company. Trump Indiana's
revenues will be derived from its riverboat and land-based facilities. A
riverboat could be lost from service due to casualty, mechanical failure,
extended or extraordinary maintenance, or inspection. The loss of a vessel
from service for an extended period of time could adversely affect Trump
Indiana's operations. Business activity at any location could also be
adversely affected by a flood or other severe weather conditions. Flooding in
particular, as well as other severe weather conditions, could make the
Company'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 the Company. Although the Company expects to
maintain insurance against casualty losses resulting from severe weather, the
insurance coverage maintained may not adequately compensate the Company for
losses, including loss of profits, resulting from severe weather.
COMPETITION
Trump Plaza and the Taj Mahal. Competition in the Atlantic City casino hotel
market is intense. The Atlantic City Properties 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 "--Conflicts of Interest."
The Atlantic City Properties each 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 Atlantic City Properties, 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 the Company is not 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
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recently expanded or are in the process of expanding their operations. While
management believes that the addition of hotel capacity would be beneficial to
the Atlantic City market generally, there can be no assurance that such
expansion would not be materially disadvantageous to either of the Atlantic
City Properties. There also can be no assurance that the Atlantic City
development projects which are planned or underway will be completed.
Total Atlantic City gaming revenues have increased over the past four years,
although at varying rates. Although all 12 Atlantic City casinos reported
increases in gaming revenues in 1992 as compared to 1991, the Company believes
that this was due, in part, to the depressed industry conditions in 1991. In
1993, nine casinos experienced increased gaming revenues compared to 1992
(including the Taj Mahal), while three casinos (including Trump Plaza)
experienced decreased revenues. In 1994, ten casinos experienced increased
gaming revenues compared to 1993 (including the Taj Mahal), while two casinos
(including Trump Plaza) experienced decreased revenues. During 1995, all 12
casinos experienced increased gaming revenues compared to 1994.
In 1990, the Atlantic City casino industry experienced a significant
increase in room capacity and in available casino floor space, including the
rooms and floor space made available by the opening of the Taj Mahal. The
effects of such expansion were to increase competition and to contribute to a
decline in 1990 in gaming revenues per square foot of casino floor space. In
1990, the Atlantic City casino industry experienced a decline in gaming
revenues per square foot of 5.0%, which trend continued in 1991, although at
the reduced rate of 2.9%. In 1992, however, the Atlantic City casino industry
experienced an increase of 6.9% in gaming revenues per square foot from 1991.
Gaming revenues per square foot increased by 1.4% for 1993 (excluding poker
and race simulcast rooms, which were introduced for the first time in such
year), compared to 1992. In 1994, gaming revenues per square foot decreased
2.5% (or 4.5% including square footage devoted to poker, keno and race
simulcasting). The 1994 decline was due, in part, to the increase in casino
floor space in Atlantic City as a result of expansion of a number of casinos
and to the severe weather conditions which affected the Northeast during the
winter of 1994. Between April 30, 1993 and December 31, 1995, many operators
in Atlantic City expanded their facilities in anticipation of and in
connection with the June 1993 legalization of simulcasting and poker,
increasing total gaming square footage by approximately 181,200 square feet
(23.3%) of which approximately 83,700 square feet is currently devoted to
poker, keno and race simulcasting. During this same period, 172 poker tables
and 5,500 slot machines were added. See "Business--Atlantic City Market."
The Atlantic City Properties also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, the Atlantic City Properties face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In addition to competing with other
casino hotels in Atlantic City and elsewhere, by virtue of their proximity to
each other and the common aspects of certain of their respective marketing
efforts, including the common use of the "Trump" name, the Atlantic City
Properties compete directly with each other and with Trump's Castle 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 or the Taj Mahal will operate to the competitive detriment of the
other.
The Indiana Riverboat. The Company anticipates that the Indiana Riverboat
will compete primarily with riverboats and other casinos in the greater
Chicago metropolitan area and throughout the Great Lakes Market. Although
northern Indiana is part of the greater Chicago metropolitan market, which is
one of the most successful new gaming markets in the United States, the
Indiana Riverboat may be more dependent on patrons from northern Indiana than
its Illinois competitors, and the propensity of these patrons to wager cannot
be
31
<PAGE>
predicted with any degree of certainty. 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 the Company believes that there is sufficient demand in the market to
sustain the Indiana Riverboat, there can be no assurance to that effect.
Legislation has also been introduced on numerous occasions in recent years to
expand riverboat gaming in Illinois, including by authorizing new sites in the
Chicago area with which the Indiana Riverboat would compete. The Company
understands that there have been recent discussions in Illinois regarding
possible legislation to permit dockside gaming and or increase the gaming
position limitations. There can be no assurance that either Indiana or
Illinois, or both, will not authorize additional gaming licenses, including
for the Chicago metropolitan area. See "--The Indiana Riverboat."
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based principally on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Although management of the
Company believes that the location of the Indiana Riverboat will allow the
Company to compete effectively with other casinos in the geographic area
surrounding its casino, the Company expects competition in the casino gaming
industry to be intense as more casinos are opened and new entrants into the
gaming industry become operational. Furthermore, new or expanded operations by
other persons can be expected to increase competition for existing and future
operations and could result in a saturation of the Great Lakes Market.
Other Competition. In addition, the Atlantic City Properties face, and the
Indiana Riverboat will face, competition from casino facilities in a number of
states operate 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 the Atlantic City
Properties and the Indiana Riverboat. In March 1996, the United States Supreme
Court struck down a provision of IGRA which allowed Native American tribes to
sue states in federal court for failing to negotiate gaming compacts in good
faith. The Company cannot predict the impact of this decision on the ability
of Native American tribes to negotiate compacts with the states. See
"Business--Competition."
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans
to begin operating slot machines at race tracks in the State of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, since 1993, gaming floor space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Plaza and the Taj Mahal could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast. In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at Lincoln
Greyhound Park and Newport Jai Alai, where poker and blackjack have been
offered for over two years. Currently, casino gaming, other than Native
American gaming, is not allowed in other areas of New Jersey or in
Connecticut, New York or Pennsylvania. On November 17, 1995, a proposal to
allow casino gaming in Bridgeport, Connecticut, was voted down by that state's
Senate. A New York State Assembly plan
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<PAGE>
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, 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. The Company is unable to predict whether any
such legislation, in New Jersey, Indiana, Illinois or elsewhere, will be
enacted or whether, if passed, it would have a material adverse impact on the
Company.
RELIANCE ON KEY PERSONNEL
The ability of the Company and Taj Associates to operate successfully is
dependent, in part, upon the continued services of certain of its employees,
including Nicholas L. Ribis, the President and Chief Executive Officer of the
Company, the Chief Executive Officer of THCR Holdings and the Chief Executive
Officer of Taj Associates. Mr. Ribis' employment agreements with the Company
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 the Company and Taj Associates currently
allocate their time among the Company's and Taj Associates' various operations
as well as certain other enterprises owned by Trump. Following the
consummation of the Merger Transaction, Mr. Ribis will devote approximately
75% of his professional time to the affairs of the Company and its
subsidiaries. See "Management."
STRICT REGULATION BY GAMING AUTHORITIES
General. Any jurisdiction in which the Company may seek to conduct gaming
operations would likely require the Company to apply for and obtain licenses
and regulatory approvals with respect to the construction, design and
operational features of the gaming facilities it intends to operate in that
jurisdiction. The obtaining of such licenses and approvals may be time
consuming and expensive and cannot be assured.
The Company believes that the availability of significant additional revenue
through taxation is one of the primary reasons that Indiana and other
jurisdictions have legalized gaming. The Company's current gaming operations
are, and any future gaming operations are likely to be, subject to significant
taxes and fees in addition to normal federal and state corporate income taxes,
and such taxes and fees are subject to increase at any time. Any material
increase in these taxes or fees would adversely affect the Company.
Trump Plaza and the Taj Mahal. 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 the Company. 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, subject to
revocation or suspension upon the occurrance of certain events. 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 Regulations."
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<PAGE>
The Casino Control Act imposes substantial restrictions on the ownership of
securities of the Company. A shareholder may be required to meet the
qualification provisions of the Casino Control Act relating to financial
sources and/or security holders. Each institutional investor (as defined in
the Casino Control Act) seeking a waiver of qualification must execute a
certification that it has no intention of influencing or affecting the affairs
of the issuer, the casino licensee or its holding or intermediary companies
(except for voting at shareholder meetings), which certification will be
provided to the New Jersey Division of Gaming Enforcement and the CCC.
Pursuant to the provisions of the Casino Control Act, the Certificate of
Incorporation provides that all securities of the Company are held subject to
the condition that, if a holder thereof is found to be disqualified by the CCC
pursuant to the provisions of the Casino Control Act, such holder shall (a)
dispose of his interest in the Company; (b) not receive any dividends or
interest upon any such securities; (c) not exercise, directly or through any
trustee or nominee, any right conferred by such securities; and (d) not
receive any remuneration in any form from the casino licensee for services
rendered or otherwise. See "Regulatory Matters--New Jersey Gaming
Regulations."
The Indiana Riverboat. In January 1996, 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
substantial satisfaction of the conditions of the certificate of suitability
and the requirements of the gaming laws, which include completion of the
Indiana Riverboat's vessel, acquisition of necessary permits or approvals from
federal, state and local authorities, execution of a "Development Agreement"
with the City of Gary (which is currently being negotiated) and readiness to
commence operations. See "Business--Indiana Riverboat." 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 the Company 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, subject to revocation or suspension.
With respect to certain land-based, berthing and support facilities as
currently planned, Trump Indiana is also dependent on the ability of Barden to
obtain the requisite licenses and fund its portion of joint development and
operating costs under the BHR Agreement.
In October 1994, the U.S. Attorney General's Office in Indiana notified the
IGC that a federal law passed in 1951, commonly known as the Johnson Act,
prohibits gaming vessels from cruising within federal maritime jurisdiction
and prohibits gaming on such vessels. The Department of Justice has expressed
concern that the Johnson Act may prohibit gaming on vessels on the Great Lakes
because it has contended that the Great Lakes are within federal maritime
jurisdiction. The Department of Justice is still considering the issue,
however, and has not reached a definitive conclusion. Currently, Congress has
legislation pending that contains a related amendment to the Johnson Act. The
Coast Guard Authorization bill, which contains a provision that would amend
the Johnson Act specifically to allow gaming on vessels in the Indiana waters
of Lake Michigan, was passed by the House of Representatives. The Senate-
passed version of the Coast Guard Authorization bill does not contain a
similar provision. Because the House of Representatives and the Senate passed
different versions of the Coast Guard Authorization bill, a conference
committee composed of House and Senate members is expected to be formed later
in the Second Session of the 104th Congress (1996) to resolve differences in
these versions. The Johnson Act also contains an exception to such
prohibitions if a state adopts a law that permits gaming vessels to depart and
return to ports within its jurisdiction and engage in gaming outside federal
maritime jurisdiction. The Indiana General Assembly has taken certain actions
with respect to gaming on vessels and the Company believes that the IGC has
determined that Indiana law now allows gaming on vessels while the vessels are
docked under certain conditions even if cruising would result in a violation
of federal law. Notwithstanding
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<PAGE>
the IGC's determination, there can be no assurance that commencement of gaming
operations by Trump Indiana when the riverboat is cruising would not be
challenged as a violation of the Johnson Act or when the riverboat is docked
would not be challenged as a violation of Indiana law or federal law. See
"Regulatory Matters--Indiana Gaming Regulations--Excursions."
Pursuant to IGC proposed rules, any person acquiring 5% or more of Common
Stock (or for certain institutional investors, 15%) 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 Certificate of Incorporation provides that the Company may redeem
any shares of the Company'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 the Company. Such redemption shall be at the lesser of the
price at which the stock was purchased or the market price (as defined in the
Certificate of Incorporation). See "Regulatory Matters--Indiana Gaming
Regulations--Indiana Gaming Commission."
CONSIDERATIONS WITH RESPECT TO THE ACQUISITION OR DEVELOPMENT OF ADDITIONAL
GAMING VENTURES
The Company's growth strategy includes the selective acquisition,
development, ownership and/or management of dockside, riverboat and/or land-
based casinos in emerging and established gaming jurisdictions. The Company'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
the Company has no present plans to acquire or develop any other specific
gaming venture. The availability of new gaming opportunities is largely
dependent on the legality of gaming in various states, and gaming is currently
prohibited throughout most of the United States. Moreover, the recent expansion
of the legalization of gaming may not continue and furthermore, the potential
exists for the repeal of gaming in certain jurisdictions where it is currently
permitted. Legislation relating to gaming has been introduced and failed to
pass in the legislatures in a number of states including Connecticut and
Florida, and furthermore, the potential exists for the repeal of gaming in
certain jurisdictions where it is currently permitted. For these and other
reasons, no assurance can be given that attractive opportunities to develop new
operations will be available to the Company or that the Company will be able to
take advantage of any opportunity that does arise.
To engage in multiple projects or larger scale development activities, the
Company 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 the Company. Incurrence of such indebtedness
would also be subject to restrictions under debt instruments of the Company.
See "--High Leverage and Fixed Charges" and "--Restrictions on Certain
Activities." In addition, the Company 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 the Company
will be able to obtain desirable sites or necessary licenses or successfully
overcome the regulatory, financial, business and other problems inherent in the
construction and operation of any new gaming venture.
Construction projects, such as those proposed in connection with the
development of new gaming ventures, including those currently proposed by Plaza
Associates, Trump Indiana and Taj Associates, entail significant risks,
including shortages of materials or skilled labor, unforeseen engineering,
environmental or geological problems, work stoppages, weather interference,
floods, unanticipated cost increases, the inability to commence operations as
scheduled and other problems. The number and scope of the licenses and
approvals required to complete the construction of any project, such as a hotel
and other destination resort facilities, are extensive, including, without
limitation, the approval of state and local land-use authorities and the
acquisition of building and zoning permits. Unexpected concessions required by
local, state or federal regulatory authorities could involve significant
additional costs and delay scheduled openings of facilities. There can be no
assurance that the Company 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, the Company has the exclusive right (except
with respect to the Taj Mahal (during the period prior to the consummation of
the Merger Transaction) and Trump's Castle) to use the
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<PAGE>
"Trump" name and likeness in connection with gaming and related activities
pursuant to a trademark license agreement between Trump and the Company (the
"License Agreement"). See "Business--Trademark/Licensing." The Company'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, the Company 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 the Company might not yield the full
amount of damages that the Company 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 the Company to realize the benefits of the Trademark Security
Agreement. The Company'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 the Company's having
repossessed and disposed of the Marks. Under the Bankruptcy Code, secured
creditors, such as the Company, 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 the Company would repossess or dispose of the
Marks, or whether or to what extent the Company 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, the Company could assert a claim for damages, secured by the
Company's lien on the Marks.
FRAUDULENT TRANSFER CONSIDERATIONS
The obligations of Trump AC under the Mortgage Notes, which will be issued
as part of the Merger Transaction, may be subject to review under state or
federal fraudulent transfer laws in the event of the bankruptcy or other
financial difficulty of Trump AC. Under those laws, if a court in a lawsuit by
an unpaid creditor or representative of creditors of Trump AC, such as a
trustee in bankruptcy, or Trump AC as debtor in possession, were to find that
at the time Trump AC incurred its obligations under the Mortgage Notes, it (a)
did so with actual intent to hinder, delay or defraud its creditors, or (b)
did not receive reasonably equivalent value or fair consideration therefor,
and either (i) was insolvent, (ii) was rendered insolvent, (iii) was engaged
in a business or transaction for which its remaining unencumbered assets
constituted unreasonably small capital, or (iv) intended to incur or believed
that it would incur debts beyond its ability to pay as such debts matured,
such court could avoid Trump AC's obligations under the Mortgage Notes and
direct the return of any amounts paid thereunder to Trump AC or to a fund for
the benefit of its creditors.
Similarly, the obligations of Taj Associates, Plaza Associates or any other
guarantor (each, a "Guarantor") under its guarantee of the Mortgage Notes, as
well as the security interest granted by such Guarantor in its assets to
secure the Mortgage Notes and such guarantee, may be subject to review under
such laws in the event of the bankruptcy or other financial difficulty of such
Guarantor. In that event, if a court were to find that at the time such
Guarantor incurred such obligations or granted such security interest the
factors set forth in either clause (a) or (b) in the foregoing paragraph
applied to such Guarantor, such court could avoid such Guarantor's obligations
under its guarantee, as well as the security interests securing such
guarantee, and direct the return of any amounts paid under such guarantee to
such Guarantor or to a fund for the benefit of its creditors.
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<PAGE>
Among other things, a court might conclude that a Guarantor did not receive
reasonably equivalent value or fair consideration for its guarantee to the
extent that the economic benefits realized by it in the Merger Transaction
(including the payment of its outstanding obligations) were less than the
aggregate amount of its liability under its guarantee.
In the event a fraudulent transfer were found to have occurred under the
circumstances described above, an unpaid creditor or representative of
creditors of Trump AC, such as a trustee in bankruptcy, or Trump AC as debtor
in possession, would not have recourse against stockholders of the Company.
If a court were to conclude that Trump AC received less than reasonably
equivalent value from selling stockholders of Taj Holding, and, as a
consequence thereof, Trump AC: (i) was insolvent, (ii) was rendered insolvent,
(iii) was engaged in a business or transaction for which its remaining
unencumbered assets constituted unreasonably small capital, or (iv) intended
to incur or believed that it would incur debts beyond its ability to pay as
such debts matured, Trump AC, as debtor in possession, or another
representative of its estate (such as a bankruptcy trustee) could, among other
things, seek to recover the amounts paid to such selling stockholders to the
extent such amounts exceed the fair market value of the assets transferred.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if the sum of its debts (including contingent or
unliquidated debts) is greater than all of its property at a fair valuation or
if the present fair salable value of its assets is less than the amount that
would be required to pay its probable liability on its existing debts as they
become absolute and matured.
SHARES ELIGIBLE FOR FUTURE SALE
Immediately following completion of the Merger Transaction, there will be
23,066,667 shares of Common Stock outstanding (assuming all of the holders of
Taj Holding elect Cash Consideration and a Market Value of $24.00 per share in
connection with the Merger and as the public offering price in the Stock
Offering) (24,941,667 shares if the Underwriters' over-allotment option is
exercised in full), excluding (i) 8,354,167 shares of Common Stock (subject to
certain adjustment) issuable upon conversion of Trump's and TTMI's limited
partnership interest in THCR Holdings, (ii) the 66,666 shares of Common Stock
underlying phantom stock units issued to the Chief Executive Officer of the
Company, (iii) 133,333 shares of Common Stock issuable upon exercise of
options granted to the Chief Executive Officer of the Company pursuant to the
1995 Stock Plan, (iv) an additional 733,334 shares of Common Stock reserved
for issuance pursuant to the 1995 Stock Plan, (v) 1.8 million shares of Common
Stock reserved for issuance in connection with the warrant to be issued to
Trump and (vi) the Class B Common Stock, which shares are not entitled to
dividends or distributions and represent Trump's and TTMI's respective voting
interest and become nonvoting to the extent of a conversion of Trump's and
TTMI's respective interest in THCR Holdings. In the event that shares of
Common Stock are issued in the Merger, the Company may reduce the size of the
Stock Offering. Of the shares of Common Stock to be outstanding following the
consummation of the Merger Transaction, the shares to be sold in the Stock
Offering and to be issued to First Fidelity, as well as the shares of Common
Stock issued in the June 1995 Stock Offering, will be freely tradeable without
restriction (subject to any applicable lock-up) or future registration under
the Securities Act of 1933, as amended (the "Securities Act"), unless acquired
by an "affiliate" (as defined in the Securities Act) of the Company, which
shares will be subject to resale limitations of Rule 144 promulgated under the
Securities Act ("Rule 144"). The remaining 66,667 shares outstanding upon
completion of the Stock Offering 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, the shares of Common Stock
issuable upon conversion of Trump's and TTMI's limited partnership interest in
THCR Holdings and the shares issuable under the warrant to be issued to Trump
have or 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. The Company, certain stockholders and the directors and
executive officers of the Company will agree not to issue, sell or otherwise
dispose of shares of or securities convertible into or
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<PAGE>
exercisable or exchangeable for Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of DLJ. First
Fidelity will agree not to sell or otherwise dispose of 425,000 of the 500,000
shares of Common Stock to be received by it for a period of 30 days after the
date of this Prospectus without the prior written consent of DLJ. Upon
expiration of the applicable lock-up period, the shares 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 Common Stock in the public market subsequent
to the Stock Offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock and could
impair the Company's ability to raise capital through the sale of equity
securities. See "Shares Eligible for Future Sale."
TRADING MARKETS; POTENTIAL VOLATILITY OF MARKET PRICE
The Common Stock began trading in June 1995, and since that time its price
has fluctuated substantially. The price at which the Common Stock will trade
in the future will depend upon a number of factors, including, without
limitation, the Company'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 the
Company. In addition, factors such as quarterly fluctuations in the Company's
financial and operating results, announcements by the Company or others, and
developments affecting the Company, its customers, the Atlantic City or Great
Lakes markets or the gaming industry generally, could cause the market price
of the Common Stock to fluctuate substantially. See "Price Range of Common
Stock."
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USE OF PROCEEDS
The net proceeds to the Company from the Stock Offering, after payment of
underwriting discounts and expenses, are estimated to be $ million ($
million if the Underwriters' over-allotment option is exercised in full). In
connection with the Merger Transaction, the proceeds from the Stock Offering,
together with the proceeds from the Mortgage Note Offering and available cash,
will be used as set forth below.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming an April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
<S> <C>
Stock Offering(a)(b)..... $ 300.0
Mortgage Note Offering... 1,100.0
Available Cash........... 9.8
--------
Total Cash Sources...... 1,409.8
--------
</TABLE>
ANTICIPATED USES OF FUNDS
<TABLE>
<CAPTION>
CASH USES
<S> <C>
Redeem Taj Bonds(c)........... $ 794.4
Retire Plaza Notes............ 370.0
Satisfy NatWest Loan.......... 36.5
Exercise Trump Plaza East
Purchase Option.............. 28.0
Financing Fees and Expenses... 49.4
Payment to First Fidelity..... 50.0
Payment to Bankers Trust...... 10.0
Acquisition of Taj Holding
Class A Common Stock(a)...... 40.5
Redeem Taj Holding Class B
Common Stock................. 0.4
Transaction Fees and Expenses
and
Working Capital ............. 30.6
--------
Total Cash Uses.............. 1,409.8
--------
</TABLE>
<TABLE>
<CAPTION>
NON-CASH SOURCES
<S> <C>
Common Stock Equivalents to be issued to Trump(d).. 40.5
Common Stock to be issued to
First Fidelity(b).............. 12.0
--------
Total Non-Cash Sources......... 52.5
--------
TOTAL SOURCES................... $1,462.3
========
</TABLE>
<TABLE>
<S> <C>
NON-CASH USES
Acquisition of Trump's direct
and indirect equity interests
in Taj Associates............. 40.5
Common Stock issued to First
Fidelity(b)................... 12.0
--------
Total Non-Cash Uses........... 52.5
--------
TOTAL USES..................... $1,462.3
========
</TABLE>
- ---------------------
(a) Assumes all holders of Taj Holding Class A Common Stock elect Cash
Consideration in the Merger. In the event that any holder of Taj Holding
Class A Common Stock elects Stock Consideration in lieu of Cash
Consideration, the Company may decrease the size of the Stock Offering.
(b) Assumes a price of $24.00 per share of Common Stock.
(c) Includes the Additional Amount (as defined) through April 15, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) Represents the value as of the effective time of the Merger of the shares
of Common Stock into which the limited partnership interests in THCR
Holdings to be issued to Trump and TTMI, a corporation wholly owned by
Trump, in connection with the Merger Transaction will be convertible.
39
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the NYSE under the symbol "DJT." The initial
public offering price of the Common Stock was $14.00 per share. The following
table reflects the high and low sales prices of the 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 1/4 $11 3/8
Third quarter............................................... $19 3/4 $13
Fourth quarter.............................................. $21 5/8 $14
1996
----
First quarter............................................... $29 1/4 $18 3/4
Second quarter (through April 8, 1996)...................... $33 1/2 $29
</TABLE>
On April 8, 1996, the last sales price of the Common Stock reported on the
NYSE was $33 3/8. As of April 5, 1996, there were approximately 230 holders of
record of Common Stock.
Trump is the sole beneficial owner of all 1,000 outstanding shares of Class
B Common Stock. No established trading market exists for the Class B Common
Stock, and no shares of Class B Common Stock have been transferred since their
issuance to Trump. Following the Merger Transaction, Trump and TTMI will each
own Class B Common Stock; because Trump wholly owns TTMI, Trump will remain
the sole beneficial owner of all outstanding shares of Class B Common Stock.
DIVIDEND POLICY
The Company has never paid a dividend on the Common Stock and does not
anticipate paying one in the foreseeable future. The payment of any future
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, the Company's financial condition and capital needs,
legal restrictions on the payment of dividends, contractual restrictions in
financing agreements and other factors deemed pertinent by the Board of
Directors. See "Risk Factors--Restrictions on Certain Activities." It is the
current policy of the Board of Directors to retain earnings, if any, for use
in the Company's subsidiaries' operations (except as set forth in the THCR
Holdings Partnership Agreement), and the Company otherwise has no current
intention of paying dividends to the holders of Common Stock. In addition, the
Senior Note Indenture contains, and the Mortgage Note Indenture will contain,
certain covenants, including, without limitation, covenants with respect to
limitations on the payment of dividends, which limitations would limit the
Company's ability to obtain funds from THCR Holdings and Trump AC,
respectively, 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
indentures subject to certain exceptions, (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--Certain
Indebtedness" and "Description of the THCR Holdings Partnership Agreement."
The Class B Common Stock has no right to receive any dividend or other
distribution from the Company.
40
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization as of December 31, 1995 of
Taj Associates, the Company, Taj Associates and the Company on a combined
basis and the Company as adjusted to give effect to the Merger Transaction.
This table should be read in conjunction with the Company's consolidated
financial statements and notes thereto and Unaudited Pro Forma Financial
Information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
----------------------------------------------------
ACTUAL
---------------------
TAJ THE
ASSOCIATES COMPANY COMBINED PRO FORMA
---------- -------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash:
Total cash............. $ 88,941 $ 19,208 $ 108,149 $ 91,346
======== ======== ========== ==========
Debt (including current
maturities):
Total debt............. $826,215(a) $500,720(b) $1,326,935(a)(b) $1,271,749
-------- -------- ---------- ----------
Minority Interest........ -- -- -- 30,500
-------- -------- ---------- ----------
Stockholders' Equity:
Common Stock, $.01 par
value, 50,000,000
shares authorized,
10,066,667 shares
issued and outstanding
(23,066,677 shares(c)
on a pro forma
basis)................ -- 101 101 231
Class B Common Stock,
$.01 par value, 1,000
shares authorized,
issued and
outstanding........... -- -- -- --
Preferred Stock, $1.00
par value, 1,000,000
shares authorized,
none were issued and
outstanding........... -- -- -- --
Contributed
Capital/Additional
Paid-in Capital....... 123,765 52,411 176,176 336,131
Accumulated deficit.... (84,130) (1,921) (86,051) (56,035)
-------- -------- ---------- ----------
Total Capital/Total
Stockholders'
Equity.............. 39,635 50,591 90,226 280,327
-------- -------- ---------- ----------
Total Capitaliza-
tion.............. $865,850 $551,311 $1,417,161 $1,582,576
======== ======== ========== ==========
</TABLE>
- ---------------------
(a) Does not include unamortized discount of $131,103.
(b) Does not include unamortized discount of $3,348.
(c) Does not include (i) 6,666,836 shares of Common Stock (subject to certain
adjustments) issuable to Trump upon conversion of his limited partnership
interest in THCR Holdings; (ii) 1,687,331 shares of Common Stock (subject
to certain adjustments) issuable to TTMI, a corporation wholly owned by
Trump, upon conversion of its limited partnership interests in THCR
Holdings; (iii) 133,333 shares of Common Stock issuable upon exercise of
options granted to the Chief Executive Officer of the Company pursuant to
the 1995 Stock Plan; (iv) a phantom stock unit award (representing the
right to receive 66,666 shares of Common Stock on June 12, 1997) granted
to the Chief Executive Officer of the Company pursuant to the 1995 Stock
Plan; (v) 733,334 additional shares reserved for issuance pursuant to the
1995 Stock Plan; (vi) 1,800,000 shares of Common Stock underlying the
warrant to be issued to Trump in connection with the Merger Transaction
(a) 600,000 shares of which may be purchased on or before the third
anniversary of the issuance of the warrant at $30.00 per share, (b)
600,000 shares of which may be purchased on or before the fourth
anniversary of the issuance of the warrant at $35.00 per share, and (c)
600,000 shares of which may be purchased on or before the fifth
anniversary of the issuance of the warrant at $40.00 per share; or (vii)
any shares of Common Stock which may be issued in the Merger. Also
excludes shares of Class B Stock of the Company held and to be held by
Trump and TTMI which represent non-economic voting interest in the
Company. Assumes a Market Value of $24.00 per share of Common Stock in the
Merger and as the public offering price in the Stock Offering. In the
event that shares of Common Stock are issued in the Merger, the Company
may reduce the size of the Stock Offering.
41
<PAGE>
SELECTED HISTORICAL
CONSOLIDATED FINANCIAL INFORMATION
THE COMPANY
The following table sets forth certain historical consolidated financial
information of Plaza Associates and Trump AC (predecessors of the Company) for
each of the years ended December 31, 1991 through 1994 and for the period
January 1, 1995 through June 12, 1995 and certain historical consolidated
financial information of the Company for the period from inception (June 12,
1995) to December 31, 1995 (See Note 1 below). The historical financial
information of Trump AC and Plaza Associates as of December 31, 1994 and June
12, 1995 and for the years ended December 31, 1993 and 1994 for the period
January 1, 1995 through June 12, 1995 as set forth below has been derived from
the audited consolidated financial statements of Trump AC and Plaza Associates
included elsewhere in this Prospectus. The historical financial information of
Trump AC and Plaza Associates as of December 31, 1991, 1992 and 1993 and for
the years ended December 31, 1991 and 1992 as set forth below has been derived
from the audited consolidated financial statements of Trump AC and Plaza
Associates not included in this Prospectus. The historical financial
information of the Company as of December 31, 1995 and for the period from
inception (June 12, 1995) through December 31, 1995 as set forth below has
been derived from the audited consolidated financial statements of the Company
included elsewhere in this Prospectus. All financial information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Unaudited Pro Forma Financial
Information" and the consolidated and condensed financial statements and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TRUMP AC AND PLAZA ASSOCIATES
THE COMPANY
FROM INCEPTION
(JUNE 12, 1995)
TO
FROM DECEMBER 31, 1995
YEARS ENDED DECEMBER 31, JANUARY 1, 1995 (NOTE 1)
-------------------------------------- THROUGH -----------------
1991 1992 1993 1994 JUNE 12, 1995 1995
-------- -------- -------- -------- --------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $233,265 $265,448 $264,081 $261,451 $122,865 $175,208
Other.................. 66,411 73,270 69,203 66,869 29,523 44,659
Trump World's Fair
(formerly Trump
Regency Hotel)........ 11,547 9,465 -- -- -- --
-------- -------- -------- -------- -------- --------
Gross revenues......... 311,223 348,183 333,284 328,320 152,388 219,867
Promotional
allowances............ 31,539 34,865 32,793 33,257 14,540 24,394
-------- -------- -------- -------- -------- --------
Net revenues........... 279,684 313,318 300,491 295,063 137,848 195,473
-------- -------- -------- -------- -------- --------
Costs and expenses:
Gaming................. 133,547 146,328 136,895 139,540 69,467 95,533
Other.................. 23,404 23,670 24,778 23,380 9,483 14,449
General and
administrative........ 69,631 75,459 71,624 73,075 30,081 42,826
Depreciation and
amortization.......... 16,193 15,842 17,554 15,653 6,999 9,219
Restructuring charges.. 943 5,177 -- -- -- --
Trump World's Fair
(formerly Trump
Regency Hotel)........ 19,879 11,839 -- -- -- --
-------- -------- -------- -------- -------- --------
Total costs and
expenses.............. 263,597 278,315 250,851 251,648 116,030 162,027
-------- -------- -------- -------- -------- --------
Income from operations.. 16,087 35,003 49,640 43,415 21,818 33,446
Interest expense, net... 33,363 31,356 39,889 48,219 22,113 31,273
Other non-operating
expense(a)............. 14,818 1,462 3,873 4,931 1,649 4,094
Extraordinary (loss)
gain(b)................ -- (38,205) 4,120 -- (9,250) --
Provision (benefit) for
income taxes........... (2,864) (233) 660 (865) (161) --
-------- -------- -------- -------- -------- --------
Net income (loss)....... $(29,230) $(35,787) $ 9,338 $ (8,870) $(11,033) $ (1,921)
======== ======== ======== ======== ======== ========
Net (loss) per common
share(c)............... $(.19)
=====
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash
equivalents............ $ 10,474 $ 18,802 $ 14,393 $ 11,144 $ 28,125 $ 19,208
Property and equipment,
net.................... 306,834 300,266 293,141 298,354 301,316 408,231
Total assets............ 378,398 370,349 374,498 375,643 394,085 584,545
Total long-term debt,
net of current
maturities(d).......... 33,326 249,723 395,948 403,214 331,142 494,471
Preferred partnership
interest............... -- 58,092 -- -- -- --
Total capital
(deficit).............. 54,043 11,362 (54,710) (63,580) (74,613) 50,591
</TABLE>
- ------------------
Note 1: The Company 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. Trump AC and Plaza Associates, the owner and operator of Trump
Plaza, to THCR Holdings for an approximate 40% limited partnership interest
in THCR Holdings. In addition, Trump contributed to THCR Holdings all of his
existing interests and rights to new gaming activities in both emerging and
established gaming jurisdictions, including Trump Indiana. The financial
data as of December 31, 1995 and for the period ended December 31, 1995
reflect the operations of the Company from inception (June 12, 1995) to
December 31, 1995.
(footnotes on following page)
42
<PAGE>
(a) Other non-operating expense for the year ended December 31, 1991 includes
a $10.9 million charge associated with the rejection of the lease
associated with the former Trump Regency Hotel and $4.0 million of costs
associated with certain litigation. Other non-operating expense for 1992
includes $1.5 million of costs associated with certain litigation. Other
non-operating expense for the years ended December 31, 1993, 1994, for the
period January 1, 1995 through June 12, 1995 and for the period June 12,
1995 through December 31, 1995 includes $3.9, $4.9, $1.6 and $2.1 million,
respectively, of real estate taxes and leasing costs associated with Trump
Plaza East.
(b) The extraordinary loss for the year ended December 31, 1992 consists of
the effect of stating Plaza Funding's Preferred Stock issued at fair value
as compared to the carrying value of these securities and the write off of
certain deferred financing charges and costs. The excess of the carrying
value of a note obligation over the amount of the settlement payment net
of related prepaid expenses in the amount of $4,120,000 has been reported
as an extraordinary gain for the year ended December 31, 1993. The
extraordinary loss of $9,250,000 for the period from January 1, 1995
through June 12, 1995 relates to the redemption of the PIK Notes and PIK
Note Warrants and the write off of related unamortized deferred financing
costs.
(c) Earnings per share is based upon weighted average shares outstanding,
shares and phantom stock units awarded to the Chief Executive Officer of
the Company under the 1995 Stock Plan and common stock equivalent. The
shares of Class B Common Stock owned by Trump have no economic interest
and, therefore, are not considered.
(d) Reflects reclassification in 1991 of indebtedness relating to outstanding
mortgage bonds as a current liability due to then existing events of
default.
43
<PAGE>
TAJ ASSOCIATES
The following table sets forth certain historical consolidated financial
information of Taj Associates for each of the five years ended December 31,
1991 through 1995. The historical financial information of Taj Associates as
of December 31, 1993, 1994 and 1995, and for the years ended December 31,
1993, 1994 and 1995 as set forth below has been derived from the audited
consolidated financial statements of Taj Associates included elsewhere in this
Prospectus. The historical financial information of Taj Associates as of
December 31, 1991, 1992 and 1993, and for the years ended December 31, 1991
and 1992 as set forth below has been derived from the audited consolidated
financial statements of Taj Associates not included in this Prospectus.
All financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Taj
Associates," "Unaudited Pro Forma Financial Information" and the consolidated
and condensed financial statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Gaming................. $ 380,997 $ 414,045 $ 442,064 $ 461,622 $ 501,378
Other.................. 111,251 116,958 113,291 117,738 116,368
--------- --------- --------- --------- ---------
Gross Revenues........ 492,248 531,003 555,355 579,360 617,746
Promotional
allowances............ 53,935 61,250 56,444 62,178 63,998
--------- --------- --------- --------- ---------
Net Revenues.......... 438,313 469,753 498,911 517,182 553,748
Costs and Expenses:
Gaming................. 204,513 227,394 237,566 260,472 283,786
Other.................. 39,181 39,125 40,605 40,697 39,842
General and
Administrative........ 100,191 98,819 99,424 99,629 96,843
Depreciation and
Amortization.......... 36,202 36,388 36,858 39,750 43,387
Restructuring costs.... 26,398 -- -- -- --
--------- --------- --------- --------- ---------
Income from
operations............ 31,828 68,027 84,458 76,634 89,890
--------- --------- --------- --------- ---------
Net interest expense... (100,683) (103,126) (106,997) (113,292) (116,513)
Extraordinary gain(a).. 259,618 -- -- -- --
--------- --------- --------- --------- ---------
Net Income (loss)...... $ 188,513 $ (35,099) $ (22,539) $ (36,658) $ (26,623)
========= ========= ========= ========= =========
Balance Sheet Data (at
end of period):
Cash and cash
equivalents........... $ 22,535 $ 34,062 $ 58,044 $ 61,196 $ 88,941
Property and equipment-
net................... 766,135 742,129 722,834 706,785 690,987
Total assets........... 814,051 802,556 811,508 807,612 821,793
Total long-term debt,
net of current
maturities............ 573,844 595,682 625,765 656,701 694,192
Total capital.......... 167,837 130,913 106,641 67,812 39,635
</TABLE>
- --------
(a) The extraordinary gain of $259,618 for the year ended December 31, 1991
reflects a $204,276 accounting adjustment to carry the Old Taj Bonds at
fair market value based on current interest rates at the date of issuance
(effective rate of approximately 18%), and $20,000 related to settlement
of the subcontractors' note payable, with the balance representing a
discharge of accrued interest on indebtedness.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
As the Company commenced operations on June 12, 1995 and its results of
operations are primarily those of Plaza Associates, a discussion and analysis
of the financial condition and results of operations of Plaza Associates is
set forth below. Neither the Company nor any of its subsidiaries has any
significant operating history, other than Plaza Associates, although THCR
Holdings has incurred certain expenses including interest on the Senior Notes
and Trump Indiana has incurred significant expenses relating to the
development of the Indiana Riverboat. See "--Liquidity and Capital Resources".
The partnership agreement governing THCR Holdings provides that all business
activities of the Company must be conducted through THCR Holdings or
subsidiary partnerships or corporations. Also set forth below is a discussion
and analysis of the financial condition and results of operations of Taj
Associates.
PLAZA ASSOCIATES
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Gaming revenues were $298.1 million for the year ended December 31, 1995, an
increase of $36.6 million or 14.0% from gaming revenues of $261.5 million in
1994. This increase in gaming revenues consisted of an increase in both table
games and slot revenues. While 1994 was 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 to
management's marketing and other initiatives, including the introduction of
new slot machines and table games, the addition of bill acceptors on slot
machines, an increase in casino floor square footage and an increase in
promotional allowances.
Slot revenues were $201.7 million for the year ended December 31, 1995, an
increase of $33.0 million or 19.5% from $168.7 million in 1994. This increase
was primarily due to certain factors mentioned in the foregoing paragraph
including the implementation of an aggressive slot marketing program.
Table games revenues were $96.4 million for the year ended December 31,
1995, an increase of $3.6 million or 3.9% from table games revenues of $92.8
million in 1994. This was primarily due to an increase in table games drop
(i.e., the dollar value of chips purchased) by $27.0 million or 4.5% for the
year ended December 31, 1995 from 1994.
During the year ended December 31, 1995, gaming credit extended to customers
was approximately 17.7% of overall table play, an increase of approximately
0.7% from 1994. At December 31, 1995, gaming receivables amounted to
approximately $13.8 million, an increase of approximately $0.1 million from
1994, with allowances for doubtful gaming receivables of approximately $7.9
million, a decrease of approximately $0.6 million from 1994.
Other revenues were $74.2 million for the year ended December 31, 1995, an
increase of $7.3 million or 10.9% from other revenues of $66.9 million in
1994. Other revenues include revenues from rooms, food and beverage and
miscellaneous items. This increase primarily reflects increases in food and
beverage revenues attendant to higher levels of gaming activity and
promotional allowances and expenses.
Promotional allowances were $38.9 million for the year ended December 31,
1995, an increase of $5.6 million or 16.8% from $33.3 million in 1994. This
increase is primarily attributable to an increase in gaming activity.
Gaming costs and expenses were $164.8 million for the year ended December
31, 1995, an increase of $25.3 million or 18.1% from gaming costs and expenses
of $139.5 million in 1994. This increase is primarily due to increased
promotional and operating expense and taxes associated with increased levels
of gaming revenues from 1994.
45
<PAGE>
General and administrative expenses were $68.6 million for the year ended
December 31, 1995, a decrease of $4.5 million or 6.2% from general and
administrative expenses of $73.1 million in 1994. This decrease is primarily
the result of cost containment measures.
Income from operations was $59.8 million for the year ended December 31,
1995, an increase of $16.4 million or 37.8% from income from operations of
$43.4 million in 1994.
Net interest expense was $43.3 million for the year ended December 31, 1995,
a decrease of $4.9 million or 10.2% from net interest expense of $48.2 million
in 1994. This decrease is attributable to the retirement of the
PIK Notes in June 1995 partly offset by the increased interest expense
associated with equipment financing and capital leases incurred during 1995.
Other non-operating expense was $5.7 million for the year ended December 31,
1995, an increase of $0.8 million or 16.3% from non-operating expense of $4.9
million in 1994. This increase is primarily attributable to costs associated
with Trump World's Fair.
The extraordinary loss of $9,250,000 for the year ended December 31, 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
PIK Notes and related 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--Atlantic City Marketing Strategy--Trump Plaza" and "Management--
Employment Agreements."
Slot revenues were $168.7 million for the year ended December 31, 1994, a
decrease of $1.8 million or 1.1% from slot revenues of $170.5 million in 1993.
This decrease was due in part to the sensitivity of slot revenues to certain
of the factors specified in the foregoing paragraph. Plaza Associates elected
to discontinue certain progressive slot programs, thereby reversing certain
accruals into revenue which had the effect of improving slot revenue by $0.6
million for the year ended December 31, 1994.
Table games revenues were $92.8 million for the year ended December 31,
1994, a decrease of $0.8 million or 0.9% from table games revenues of $93.6
million in 1993. This decrease was primarily due to a reduction in table games
drop by $26.7 million or 4.3% for the year ended December 31, 1994 from 1993,
offset by an increase in the table games 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.
46
<PAGE>
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
increased marketing costs instituted toward the end of 1994. These marketing
programs consisted of increased bus programs and direct marketing activities.
The increase in marketing costs was offset by decreased gaming taxes
associated with the decreased levels of gaming activity and revenues from
1993.
General and administrative expenses were $73.1 million for the year ended
December 31, 1994, an increase of $1.5 million or 2.1% from the general and
administrative expenses of $71.6 million in 1993. This increase resulted
primarily from $1.1 million in cash associated with donations to the CRDA for
the year ended December 31, 1994.
Income from operations was $43.4 million for the year ended December 31,
1994, a decrease of $6.2 million or 12.5% from income from operations of $49.6
million for 1993.
Net interest expense was $48.2 million for the year ended December 31, 1994,
an increase of $8.3 million or 20.8% from net interest expense of $39.9
million in 1993. This increase is primarily attributable to increased interest
expenses associated with the Plaza Notes and the PIK Notes which were
outstanding for all of 1994.
Other non-operating expense was $4.9 million (including $3.1 million of
leasing costs) for the year ended December 31, 1994, an increase of $1.0
million or 25.6% from other non-operating expense of $3.9 million in 1993.
This increase is directly attributable to twelve months of costs associated
with Trump Plaza East. See Note 6 to the accompanying Financial Statements of
Trump AC and Plaza Associates.
TAJ ASSOCIATES
The following information has been prepared by Taj Associates and provides
historical information regarding Taj Associates' operations.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
Net revenues were approximately $553.7 million for the year ended December
31, 1995, an increase of $36.5 million or 7.1% from net revenues of $517.2
million for the year ended December 31, 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 $501.4 million for the year ended December 31,
1995, an increase of $39.8 million or 8.6% from total gaming revenues of
$461.6 million for the year ended December 31, 1994. These revenues represent
a market share of 13.5% of the Atlantic City gaming market in each of 1995 and
1994, based on figures filed with the CCC.
Table game win was approximately $201.8 million for the year ended December
31, 1995, an increase of $17.1 million or 9.3% from table game win of $184.7
million for the year ended December 31, 1994. Dollars wagered at table games
were $1,192.2 million for the year ended December 31, 1995, an increase of
$67.2 million or 6.0% from dollars wagered at table games of $1,125.0 million
for the year ended December 31, 1994. Table win percentage was 16.9% for the
year ended December 31, 1995, an increase from 16.4% in 1994. Table
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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 year ended December 31, 1995 is significantly above Taj
Associates' and the industry's historical win percentage, and Taj Associates'
win percentage could 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. The Atlantic City average for the years ended
December 31, 1995, 1994 and 1993 was approximately 15.8%, 15.8% and 15.6%
respectively. Management believes that a significant factor in Taj Associates'
table game win being higher than the Atlantic City average is its mix of
higher hold table games.
Slot revenues were approximately $279.2 million for the year ended December
31, 1995, an increase of $21.3 million or 8.3% from slot revenues of $257.9
million for the year ended December 31, 1994. Dollars wagered in slot machines
was $3,376.5 million for the year ended December 31, 1995, an increase of
$436.4 million or 14.8% from dollars wagered in slot machines of $2,940.0
million for the year ended December 31, 1994. This increase was offset by a
decrease in slot win percentage to 8.3% in 1995 from 8.8% 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 $17.2 million in
poker revenues, $1.4 million of simulcasting revenue and $1.8 million of keno
revenue in 1995, compared to $16.3 million of poker revenue, $1.4 million of
simulcasting revenue and $1.3 million of keno revenue in 1994. Keno operations
commenced June 15, 1994.
Increases in gaming revenues during the year ended December 31, 1995 as
compared to the year ended December 31, 1994 were attributable primarily to
(i) the increase in dollars wagered on slots relative to the depressed 1994
levels caused by severe winter weather during the first three months of the
year, (ii) the increase in dollars wagered on table games and the improved win
percentage, both of which were substantially attributable to international
high level players and (iii) the general growth of the Atlantic City market.
Nongaming revenues consist primarily of room, food, beverage and
entertainment. For the years ended December 31, 1995 and 1994, these revenues
totaled $116.4 million and $117.8 million, respectively. Room
revenue of approximately $43.3 million in 1995 was the result of an occupancy
rate of 91.2% and an average room rate of $104.04. In 1994, room revenue of
$41.8 million was the result of an occupancy rate of 92.4% and an average room
rate of $99.19.
In the food and beverage outlets, Taj Associates generated revenues of
approximately $57.2 million and $58.0 million during 1995 and 1994,
respectively. The approximately $0.8 million decrease is primarily
attributable to the decrease in the average food check to $11.62 in 1995 from
$11.68 in 1994 and the elimination of the private bar in guest rooms. 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 $2.0 million was primarily
attributable to a decrease in entertainment revenue of approximately $1.6
million resulting from fewer in-house sponsored events and an increased
emphasis on promoter sponsored entertainment events in 1995 versus events
sponsored by Taj Associates in 1994.
Promotional allowances were $64.0 million for the year ended December 31,
1995, an increase of $1.8 million from promotional allowances of $62.2 million
for the year ended December 31, 1994. Promotional allowances were 10.4% of
gross revenues in 1995 compared to 10.7% in 1994, reflecting Taj Associates'
efforts to increase control over complimentaries while increasing gaming
revenues.
Gaming expenses increased approximately $23.3 million or 9.0% for the year
ended December 31, 1995 from the year ended December 31, 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
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which were incurred during 1994. Costs for settlement of litigation for the
year ended December 31, 1995 decreased by approximately $3.7 million or 100%
to $0 from the year ended December 31, 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 83.8%
for the year ended December 31, 1995 compared to 85.2% for the year ended
December 31, 1994.
As a result of the foregoing factors, income from operations was $89.9
million for the year ended December 31, 1995, an increase of $13.3 million or
17.3% from income from operations of $76.6 million for the year ended December
31, 1994.
The $5.1 million or 4.4% increase in interest expense is attributable to (i)
the increased amount of principal outstanding resulting from the issuance of
Taj Bonds to satisfy the Additional Amount (as defined in the Taj Bond
Indenture) and (ii) the increased accretion of the discount on the Taj Bonds
as they approach maturity.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
Net revenues were $517.2 million for the year ended December 31, 1994, an
increase of $18.3 million or 3.7% from net revenues of $498.9 million for the
year ended December 31, 1993.
Gaming revenues, which comprise the major component of total revenues and
consist of win from table games, poker, slot machines, horserace simulcasting
and keno, were approximately $461.6 million in 1994, an increase of $19.5
million or 4.4% from gaming revenues of $442.1 million in 1993. The increase
in gaming revenues occurred while the overall Atlantic City gaming industry
experienced an increase in gaming revenue of 3.9%. These revenues represent a
market share of the Atlantic City market of approximately 13.5% in each of
1994 and 1993, based on figures filed with the CCC.
Table game win was approximately $184.7 million for the year ended December
31, 1994, an increase of $11.3 million or 6.5% from table game win of $173.4
million in 1993. Dollars wagered at table games was $1,125.0 million in 1994,
an increase of $63.0 million or 5.9% from dollars wagered at table games of
$1,062.0 million in 1993. Table win percentage (i.e., percentage of dollars
wagered that were retained by Taj Associates) increased to 16.4% in 1994 from
16.3% in 1993.
For the year ended December 31, 1994, slot win was approximately $257.9
million, a decrease of $2.4 million or 0.9% from slot win of $260.3 million in
1993. The decrease was largely due to a decrease in the slot
win percentage. Slot win percentages were 8.8% in 1994 and 9.3% in 1993.
Dollars wagered at slot machines were $2,940.1 million in 1994, an increase of
$82.2 million or 2.9% from the dollars wagered at slot machines of $2,857.9
million in 1993. The decrease in slot win percentage and the increase in slot
machine wagering is consistent with the industry trend in Atlantic City in
recent years.
In addition to table game and slot revenues, Taj Associates' newly opened
keno room and expanded poker/simulcasting operations generated approximately
$16.3 million of revenues from poker, $1.4 million of revenues from
simulcasting and $1.3 million of revenues from keno in 1994 compared to
approximately $7.5 million in poker revenue and $0.8 million in simulcasting
revenue for the year ended December 31, 1993. Poker/Simulcasting operations
commenced in June 1993 while keno operations commenced on June 15, 1994.
Nongaming revenues consist primarily of room, food, beverage and
entertainment revenues. Nongaming revenues were $117.7 million for the year
ended December 31, 1994, an increase of $4.4 million or 3.9% from nongaming
revenues of $113.3 million in 1993. This increase was attributable primarily
to an increase in food and beverage revenue of approximately $2.1 million or
3.8%, and an increase in room revenue of approximately $1.2 million or 2.9%.
Food and beverage revenue and room revenue were $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
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was partially attributable to the increase of the average food check to $11.68
in 1994 from $10.82 in 1993 and the increased banquet functions associated
with gaming promotions. Room occupancy was 92.4% and 92.5% and the average
room rate was $99.19 and $96.38 for the years ended December 31, 1994 and
1993, respectively.
Promotional allowances were $62.2 million in 1994, an increase of $5.8
million from promotional allowances of $56.4 million in 1993. Promotional
allowances were 10.7% of gross revenues in 1994 compared to 10.2% of gross
revenues in 1993, reflecting the more aggressive marketing posture necessary
in order to maintain or achieve increases in gaming revenues comparable to
1993.
Gaming expenses were $260.5 million in 1994, an increase of $22.9 million or
9.6% from gaming expenses of $237.6 million in 1993, primarily due to
increased marketing promotional costs directed at slot machine and table game
play and operating expenses associated with the new or expanded games of
poker, simulcasting and keno.
During the year ended December 31, 1994, room expenses increased slightly
and food and beverage expenses decreased slightly over the comparable period
in 1993, reflecting continuing cost controls in this area. General and
administrative expenses increased slightly, primarily due to costs associated
with a settlement of outstanding litigation, offset by decreases in real
property taxes resulting from settlement of appeals. Costs for settlement of
litigation were approximately $3.7 million in 1994, an increase of $3.7
million or 100% from 1993. Real property taxes were $12.2 million in 1994, a
decrease of approximately $4.9 million or 28.7% from real property taxes of
$17.1 million for 1993. Were it not for these items, costs in this category
would have increased approximately $2.0 million over the comparable period in
1993. Depreciation expense increased in 1994 compared to 1993 due to increased
capital expenditures on replacement furniture, fixtures and equipment and the
shorter lives associated therewith.
Total operating expenses as a percentage of net revenue increased to 85.2%
in 1994 from 83.1% in 1993.
Interest expense was $115.3 million in 1994, an increase of $6.9 million
from interest expense of $108.4 million in 1993. The increase is attributable
to the increased amount of principal outstanding resulting from the issuance
of the Taj Bonds to satisfy the Additional Amount (as defined), the increased
accretion of discount on the Taj Bonds as they approach maturity and
professional fees incurred during the first six months of 1994 related to 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.
LIQUIDITY AND CAPITAL RESOURCES
General. On June 12, 1995, the Company consummated the June 1995 Stock
Offering of 10 million shares of Common Stock at the offering price of $14.00
per share, resulting in aggregate gross proceeds to the Company of
$140,000,000, and THCR Holdings and THCR Funding consummated the June 1995
Note Offering. The proceeds to the Company from the June 1995 Stock Offering
were contributed by the Company 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
December 31, 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
for Trump World's Fair of $13,346,000, (d) construction costs at Trump Plaza
East of $15,150,000 and (e) construction and land acquisition costs of
$29,999,000 for the Indiana Riverboat. The balance of the proceeds have been
and 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.
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The Senior Note Indenture restricts the ability of THCR Holdings to make
distributions to partners or pay dividends, as the case may be, unless certain
financial ratios are achieved, and the Mortgage Note Indenture will contain
similar restrictions on Trump AC. Further, given the rapidly changing
competitive environment and the risks associated with the Company's proposed
expansion plans, the Company'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 December 31, 1995,
$12,013,000 was restricted for the second interest payment on the Senior Notes
and is reflected as restricted cash in the Company's condensed consolidated
balance sheets. The balance of restricted funds as of December 31, 1995
consisted of approximately $4,001,000 to be used at Trump Indiana and
approximately $36,029,000 to be used at Trump World's Fair, and such amounts
are reflected as cash restricted for future construction as a non-current
asset in the Company'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), 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. The Company is unable to estimate the
cost, if any, to Plaza Associates of such compliance. See "Regulatory
Matters--Other Laws and Regulations." Further, the ability of Plaza Associates
to make payments of dividends or distributions (except for payment of
interest) through Trump AC to THCR Holdings may be restricted by the CCC.
Similarly, the ability of Trump Indiana to make payments of dividends or
distributions to THCR Holdings may be restricted by the IGC. See "Regulatory
Matters."
Plaza Associates. Cash flow from operating activities is Plaza Associates'
principal source of liquidity. Cash flow from operating activities was $26.9
million for the year ended 1995. The increase of $6.9 million in net cash
provided by operating activities as compared to 1994 principally reflects
increased income from operations.
Capital expenditures of $109.8 million for the year ended December 31, 1995
increased approximately $89.3 million from 1994. Capital expenditures
attributable to Trump Plaza East were approximately $8.7 million and $24.9
million for the years ended December 31, 1994 and 1995. Capital expenditures
attributable to Trump World's Fair were approximately $73.7 million for 1995.
Capital expenditures for improvements to existing facilities were $11.8
million and $11.2 million for the years ended December 31, 1994 and 1995. See
"Business--Facilities and Amenities--Trump Plaza."
The Company has approximately $15.7 million in additional consolidated long-
term indebtedness, including, as of December 31, 1995, approximately $3.0
million due under outstanding mortgage notes described under "Business--
Properties--Trump Plaza." Approximately $2.9 million of such indebtedness will
mature through December 31, 1996. Management expects that this debt will be
repaid with cash from operating activities.
At December 31, 1995, Plaza Associates had combined working capital of $6.6
million, which included a receivable from the CRDA of $6.0 million for
reimbursable improvements made to the Trump Plaza East, which
receivable is currently the subject of litigation. See "Business--Legal
Proceedings--Plaza Associates." At December 31, 1994, Plaza Associates had a
combined working capital deficit totalling $7.1 million, which also included
such receivable.
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 commenced the
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expansion and renovation of rooms at Trump Plaza East and as of the date
hereof, the casino and 326 (of 349) hotel rooms and suites had opened. Trump
World's Fair renovations are scheduled for completion during the second
quarter of 1996. See "Risk Factors--High Leverage and Fixed Charges," "--
Atlantic City Properties 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, and 3,000 square feet in December 1994. At December
31, 1995, the total casino square footage was approximately 73,600 square
feet. On February 16, 1996, an additional approximately 17,000 square feet of
casino space was opened at Trump Plaza and Trump Plaza East.
Pursuant to the Trump Plaza East Purchase Option, which expires on June 30,
1998, Plaza Associates may purchase both the fee and leasehold interest
comprising Trump Plaza East. See "Management--Compensation Committee
Interlocks and Insider Participation--Certain Related Party Transactions of
Trump--Plaza Associates." 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
terms of 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-- Atlantic City Properties Expansion." Plaza Associates intends
to exercise the Trump Plaza East Purchase Option in connection with the Merger
Transaction.
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 East at a remaining cost, at December 31, 1995, of approximately $8.7
million. 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; however, a portion of the
proceeds from the Offerings will be used to exercise the Trump Plaza East
Purchase Option.
Approximately $58 million of the net proceeds of the June 1995 Offerings
were used to exercise the Trump World's Fair Purchase Option. Management
believes that the net proceeds of the June 1995 Offerings, together with
additional equipment financing, will be sufficient to fund the additional
approximately $42.5 million required to complete renovation of and open Trump
World's Fair in the second quarter of 1996, although there
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can be no assurance given to that effect. Associated with the opening of Trump
World's Fair, management anticipates incurring approximately $5.3 million of
pre-opening costs, which will be expensed at the time of its opening.
Pursuant to the terms of an agreement, dated January 24, 1993, between Plaza
Associates and Trump Plaza Management Corp. ("TPM") (the "TPM Services
Agreement"), in consideration for services provided, Plaza Associates pays TPM
each year an annual fee of $1.0 million in equal monthly installments and
reimburses TPM on a monthly basis for all reasonable out-of-pocket expenses
incurred by TPM in performing its obligations under the TPM Services
Agreement, up to certain amounts. Approximately $1.3 million, $1.3 million and
$1.2 million of payments under the TPM Services Agreement were expensed for
the years ended December 31, 1995, 1994 and 1993, 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. See
"Management-- Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates."
Trump Indiana. Pursuant to the terms of the certificate of suitability
issued to Trump Indiana, 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 the Company 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. The Company anticipates that its riverboat
owner's license (which would supersede the certificate of suitability) would
impose substantially similar conditions on the operations of the Indiana
Riverboat to those set forth in the certificate of suitability, although no
assurances may be made.
In addition to the approximately $84 million anticipated to be spent prior
to commencing the operations of the Indiana Riverboat 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, $17.5 million from vessel
financing, $10 million from slot machine financing, $12.5 million from a
mortgage on Trump Indiana's interest in the Buffington Harbor site and/or from
a working capital facility and $10 million from operating leases. Trump
Indiana has received commitments for $17.5 million in vessel financing and
nearly $2 million in equipment financing and has signed a letter of intent for
an additional $14.2 million in equipment financing (including approximately $8
million for slot machines). 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 over the initial
five-year license term 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, $17.5 million in
financing for the gaming vessel. As of April 5, 1996, dFS had provided Trump
Indiana with approximately $15.1 million pursuant to such agreement.
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
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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 the Company or Trump Indiana will be able to fund from operations or to
finance on terms satisfactory to the Company or Trump Indiana any future
required expenditures or, if available, other such indebtedness would be
permitted under existing debt instruments of the Company. Furthermore, the
Company 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 $5.75 million of pre-
opening costs, which will be expensed at the time of the opening. See "Risk
Factors--The Indiana Riverboat."
The Company. The Company without its subsidiaries 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, the
Company 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 the Company shall, to the maximum extent practicable, be paid
directly by THCR Holdings. Any other expenses paid directly by the Company are
required to be reimbursed promptly by THCR Holdings and are deemed to be
expenses of THCR Holdings. Any other projects pursued by the Company 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 AC. Giving pro forma effect to the consolidation of Taj Associates and
the other elements of the Merger Transaction, Trump AC will have approximately
$1.1 billion of indebtedness for borrowed money on a consolidated basis,
principally representing the Mortgage Notes. See "Capitalization" and
"Unaudited Pro Forma Financial Information."
Taj Associates. Following the consummation of the Merger Transaction,
management plans to undertake an expansion plan of the Taj Mahal, which plans
are preliminary and subject to modification. It is currently expected that the
expansion will be principally funded out of cash from operations of the
Atlantic City Properties and is scheduled to be completed in phases from the
first quarter of 1997 through early 1998. The Taj Mahal Expansion, as
currently contemplated, involves the construction of an approximately 800 room
hotel tower adjacent to the Taj Mahal's existing hotel tower, an approximately
2,000 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. See "Risk Factors--Atlantic
City Property Expansion."
In addition, the Taj Mahal is adding three new nationally recognized themed
restaurants: the Hard Rock Cafe, the Rainforest Cafe and the All Star Cafe.
Construction costs for each of the themed restaurants will be the obligation
of the lessees. However, the lease for the Rainforest Cafe will require Taj
Associates to contribute $2.5 million towards construction after the project
is completed and the restaurant opens for business.
Capital expenditures by Taj Associates totaled approximately $26.5 million,
$23.0 million and $16.8 million for the years ended 1995, 1994 and 1993,
respectively. Major 1995 capital expenditures included the replacement of slot
machines with new slot machines having bill acceptors, hotel room renovations,
opening the Dragon Room (an Asian themed table gaming area), new telephone
reservation equipment, continued casino floor reconfiguration, carpet
replacement, casino signage and limousine replacements. Major 1994 capital
expenditures 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.
Major 1993 capital expenditures included parking garage upgrades, restaurant
and room renovations, carpet replacement and ongoing casino floor
reconfiguration, including slot machines, completion of the Taj Entertainment
Complex and modification of existing space to accommodate the new games of
race simulcasting and poker.
Taj Associates' capital budget for fiscal 1996 totals approximately $28.6
million and is expected to be financed principally by cash from operations.
The budget includes provision for hotel tower and room
54
<PAGE>
renovations, completion of a program to replace older slot machines,
construction of a high end slot player gaming area and club, ongoing casino
floor reconfiguration and limousine replacements. 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 additional one-year extensions, most recently through
March 1997, 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. See
"Business--Properties--Steel Pier." In addition, Taj Associates may be
obligated to comply with certain proposed regulations of 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 $6.4 million, $19.2 million and $24.0 million for
the years ended 1993, 1994 and 1995, respectively. Taj Associates' capital
budget for fiscal 1996 is approximately $28.6 million (excluding any amounts
to be expended for the Taj Mahal Expansion) and includes approximately $24.3
million to maintain Taj Associates' facilities. The capital budget is expected
to be financed principally by cash from operations.
Except with respect to the Taj Mahal Expansion, management believes that
following the Merger Transaction, cash from the Atlantic City Properties'
operations, together with equipment financings, should be sufficient to meet
anticipated capital and debt service requirements through 1999. Commitments
are currently in place for only a portion of necessary equipment financings,
although management believes that it will be able to obtain the remainder of
such financings on customary terms acceptable to Trump AC. The Taj Mahal
Expansion is expected to depend in part on additional debt financing, for
which no commitments are in place. In addition, no assurances may be made that
Trump AC will successfully replace the Working Capital Facility. Finally, Taj
Associates' obligations to the CCC with respect to the Steel Pier may require
additional financing. See "Business--Properties." See "Risk Factors--Holding
Company Structure; No Anticipation of Dividends," "--Risk in Refinancing and
Repayment of Indebtedness; Need for Additional Financing" and "--Atlantic City
Properties Expansion."
SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and the Taj Mahal occurring during the period from May through
September. Consequently, the Company'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. The Company 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' or Taj Associates'
respective operations as a result of inflation during 1995, 1994 or 1993.
55
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Consolidated Balance Sheet of the Company as of
December 31, 1995 and the Unaudited Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1995 (the "Unaudited Pro Forma
Financial Statements") are set forth below.
The Unaudited Pro Forma Consolidated Balance Sheet has been prepared
assuming the Merger Transaction had occurred on December 31, 1995. The
Unaudited Pro Forma Consolidated Statement of Operations have been prepared
assuming that the Merger Transaction had occurred on January 1, 1995.
The Unaudited Pro Forma Financial Statements are presented for informational
purposes only and do not purport to present what the Balance Sheet would have
been had the Merger Transaction, in fact, occurred on December 31, 1995 or
what the results of operations for the year ended December 31, 1995 would have
been had the Merger Transaction, in fact, occurred on January 1, 1995 or to
project the results of operations for any future period.
The Unaudited Pro Forma Consolidated Balance Sheet and Statement of
Operations of the Company each give effect to (a) the consolidation of Taj
Associates, which will be an indirect subsidiary of the Company after the
Merger Transaction, (b) the redemption of the Taj Bonds and the Taj Holding
Class B Common Stock and the retirement of the Plaza Notes, (c) the Mortgage
Note Offering, (d) the Stock Offering, (e) purchase accounting adjustments
required by the Merger, (f) the termination of the Taj Services Agreement, (g)
the cancellation of payments to Realty Corp. and First Fidelity in connection
with the acquisition of the Specified Parcels and (h) the payment to Bankers
Trust to obtain releases of liens that Bankers Trust has with respect to
certain equity interests in Taj Associates and related guarantees. The
Unaudited Pro Forma Consolidated Statement of Operations of the Company gives
effect to (i) the June 1995 Offerings for the full period presented and (ii)
the Merger Transaction, including those transactions described in (a) through
(h) above. The accompanying unaudited financial information assumes (x) that
all holders of Taj Holding Class A Common Stock elect to received Cash
Consideration in the Merger, (y) that the underwriters' over-allotment option
is not exercised in the Stock Offering and (z) that the Market Value of Common
Stock in the Merger is $24.00.
The pro forma financial statements do not include (i) the financial
statements of Taj Holding as Taj Holding will not be an operating entity or
incur any further costs and (ii) the financial statements of Merger Sub,
TM/GP, TTMI and TTMC as such companies are not operating entities and have
incurred no prior costs.
The Merger is expected to be accounted for as a "purchase" for accounting
and reporting purposes.
The Unaudited Pro Forma Financial Statements should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this Prospectus and the information set forth in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
56
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
MORTGAGE OTHER
TAJ NOTE STOCK MERGER
THE COMPANY ASSOCIATES OFFERING OFFERING TRANSACTIONS THE COMPANY
------------ ------------ ---------- -------- ------------ -----------
(HISTORICAL) (HISTORICAL) (PRO FORMA)
<S> <C> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equiva- $ 19,208 $ 88,941 $1,100,000 (a) $273,350(j) $ (9,900)(g) $ 91,346
lents................. (780,243)(b) (10,000)(k)
(390)(c) (50,000)(l)
(370,900)(d) (40,500)(m)
(28,000)(e)
(18,775)(f)
(43,450)(g)
(36,500)(h)
(1,495)(i)
Restricted cash........ 12,013 12,013
Accounts receivable, 14,460 17,215 31,675
net...................
Inventories............ 2,609 7,161 9,770
Prepaid expenses and 5,171 3,864 9,035
other current assets..
-------- -------- ----------
Total current as- 53,461 117,181 153,839
sets.................
Property and Equipment, 408,231 690,987 28,000 (e) 9,900 (g) 1,344,880
net................... 43,347 (l)
40,500 (m)
40,500 (m)
83,415 (n)
Investment in Buffing- 21,823 21,823
ton Harbor............
Land rights............ 29,320 29,320
Cash restricted for fu- 40,030 40,030
ture construction.....
Note receivable........ 3,000 3,000
Deferred loan costs.... 20,026 43,450 (g) 53,610
(9,866)(d)
Other assets........... 8,654 13,625 22,279
-------- -------- ----------
Total assets.......... $584,545 $821,793 $1,668,781
======== ======== ==========
Current Liabilities:
Current maturities of
long-term debt........ $ 2,901 $ 920 (200)(h) $ 3,621
Accounts payable and
accrued expenses...... 24,368 8,335 32,703
Accrued interest pay- 2,498 9,154 (9,144)(f) 1,013
able.................. (1,495)(i)
Due to affiliates, 278 974 1,252
net...................
Other current liabili- 5,257 35,210 40,467
ties..................
-------- -------- ----------
Total current liabil-
ities................ 35,302 54,593 79,056
Other long-term liabili-
ties................... 33,373 (9,631)(f) (17,153)(l) 6,589
Taj Bonds, net of dis-
count.................. 649,139 (649,139)(b) 0
Plaza Mortgage Notes,
net of discount........ 326,652 (326,652)(d) 0
Long-term debt, net of
discount and current
maturities............. 161,069 161,069
Mortgage Notes.......... 1,100,000 (a) 1,100,000
Other long-term debt.... 6,750 45,053 (44,744)(h) 7,059
Deferred state income
taxes.................. 4,181 4,181
-------- -------- ----------
Total Liabilities..... 533,954 782,158 1,357,954
Minority interest....... 40,500 (m) 30,500
(10,000)(k)
Capital:
Common stock........... 101 125(j) 5 (l) 231
Contributed capital.... 52,411 123,765 273,225(j) 10,495 (l) 336,131
(123,765)(o)
Accumulated (deficit).. (1,921) (84,130) (131,104)(b) 83,415 (n) (56,035)
(390)(c) 123,765 (o)
(54,114)(d)
8,444 (h)
-------- -------- ----------
Total capital......... 50,591 39,635 280,327
-------- -------- ----------
Total Liabilities and
Capital............. $584,545 $821,793 $1,668,781
======== ======== ==========
</TABLE>
See Notes to Unaudited Pro Forma Financial Information.
57
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
TRUMP HOTELS & CASINO RESORTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
PLAZA HOLDING
AND PLAZA
ASSOCIATES THE COMPANY PRO FORMA THE PRO FORMA
---------------- ---------------- ADJUSTMENTS FOR COMPANY ADJUSTMENTS
JANUARY 1, 1995- JUNE 12 1995- JUNE 1995 PRO FORMA TAJ FOR MERGER
JUNE 12, 1995 DECEMBER 31 1995 OFFERINGS COMBINED ASSOCIATES TRANSACTION PRO FORMA
---------------- ---------------- --------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming................ $122,865 $175,208 $ 298,073 $501,378 $ 799,451
Rooms................. 7,676 12,310 19,986 43,309 63,295
Food and Beverage..... 18,537 26,065 44,602 57,195 101,797
Other................. 3,310 6,284 9,594 15,864 25,458
-------- -------- ---------- -------- ----------
Gross Revenues...... 152,388 219,867 372,255 617,746 990,001
Less-Promotional
Allowances........... 14,540 24,394 38,934 63,998 102,932
-------- -------- ---------- -------- ----------
Net Revenues........ 137,848 195,473 333,321 553,748 887,069
-------- -------- ---------- -------- ----------
Cost and Expenses:
Gaming................ 69,467 95,533 165,000 283,786 448,786
Rooms................. 958 1,305 2,263 15,230 17,493
Food and Beverage..... 7,128 11,178 18,306 24,612 42,918
General and
Administrative....... 30,081 42,826 72,907 96,843 $(2,725)(l) 160,076
2,738 (p)
(1,743)(q)
(7,944)(r)
Depreciation and
Amortization......... 6,999 9,219 16,218 43,387 416 (l) 64,752
4,731 (s)
Other................. 1,397 1,966 3,363 3,363
-------- -------- ---------- -------- ----------
116,030 162,027 278,057 463,858 737,388
-------- -------- ---------- -------- ----------
Income from Operations.. 21,818 33,446 55,264 89,890 149,681
Interest Income....... 403 3,741 $ 134 (t) 4,278 3,922 8,200
Interest Expense...... (22,516) (35,014) (11,239)(u) (63,711) (120,435) (709)(v) (154,574)
5,058(w) 30,281 (x)
Other non-operating... (1,649) (4,094) (5,743) 3,120 (e) (2,623)
-------- -------- ---------- -------- ----------
Income (loss) before
state income taxes,
minority interest and
extraordinary loss..... (1,944) (1,921) (9,912) (26,623) 684
Benefit for state income
taxes ................. (161) -- (161) 161 (z) --
-------- -------- ---------- -------- ----------
Income (loss) before
minority interest and
extraordinary loss..... (1,783) (1,921) (9,751) (26,623) 684
Minority Interest....... -- -- -- (625)(y) (625)
-------- -------- ---------- -------- ----------
Income (loss) before
extraordinary loss..... $(1,783) $(1,921) $ (9,751) $(26,623) $ 59
======== ======== ========== ======== ==========
Income per share
before extraordinary
loss (z)............. $ 0.00
==========
Weighted Average
Shares
Outstanding (aa)..... 23,133,333
==========
</TABLE>
See Notes to Unaudited Financial Information.
58
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(a) To record the issuance of $1,100,000 aggregate principal amount of
Mortgage Notes issued by Trump AC Funding, a wholly owned subsidiary of
Trump AC. Trump AC and Plaza Associates are, and upon consummation of
the Merger Transaction Taj Associates will be, direct or indirect
wholly owned subsidiaries of THCR Holdings.
(b) To record the redemption of the Taj Bonds, at par, which had a face
value of $780,243 and a book value of $649,139 as of December 31, 1995,
and an extraordinary loss of $131,494 which includes the redemption of
the Taj Holding Class B Common Stock (see note (c) below).
(c) To record the payment of $.50 for the redemption of each of the 780,243
outstanding shares of Taj Holding Class B Common Stock as an
extraordinary loss.
(d) To record the retirement of the Plaza Notes which have a face value of
$330,000 and a book value of $326,652 as of December 31, 1995 for
$370,900 and related deferred loan costs resulting in an extraordinary
loss of $54,114.
(e) To record the payment of $28,000 in connection with exercise of the
Trump Plaza East Purchase Option and the effect of the termination of
the Trump Plaza East lease and the $3,120 of associated annual expense.
(f) To record the payment of accrued interest on the redemption of the Taj
Bonds as of December 31, 1995, including $9,631 of the Additional
Amount.
(g) To record the payment of fees and expenses associated with the Merger
Transaction.
(h) To record the satisfaction of indebtedness under the NatWest Loan which
had a book value of $44,944 for $36,500 and an extraordinary gain of
$8,444 resulting from such satisfaction.
(i) To record the payment of accrued interest on the retirement of the
Plaza Notes as of December 31, 1995.
(j) To record the net proceeds from the Stock Offering of 12,500,000 shares
at $24 per share.
(k) To record the payment to Bankers Trust to obtain certain releases of
the liens and guarantees that Bankers Trust has in connection with
certain indebtedness owed by Trump to Bankers Trust. The obligation
under this indebtedness is a personal liability of Trump and,
accordingly, the release of indebtedness is considered a payment to
Trump and a reduction of the interests attributable to him as such
payment would only occur as part of the Merger Transaction.
(l) To record the purchase of the Specified Parcels and the release of the
Taj Associates-First Fidelity Guarantee, the elimination of the lease
payments on the Specified Parcels and the additional depreciation
associated with the purchase. The aggregate cost of acquiring the
Specified Parcels is $50,000 in cash and 500,000 shares of Common Stock
valued at $10,500 (an average value of $21 per share of Common Stock
based on the price of the Common Stock several days before and after
the date of the amended Merger Agreement). Taj Associates had accrued
$17,153 with respect to its obligation under the Taj Associates-First
Fidelity Guarantee.
(m) To record the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect
ownership interest in 50% of Taj Associates and the purchase of the Taj
Holding Class A Common Stock by the Company in the Merger. The Company
will pay $30 for each of the 1,350,000 outstanding shares of Taj
Holding Class A Common Stock, which is payable at the option of the
holder in cash or shares of Common Stock ($40,500). It is assumed
herein that all holders elect cash consideration. As Trump's ownership
interest in Taj Associates is 50%, the amount of consideration paid for
the publicly held 50% (represented by the Taj Holding Class A Common
Stock) has been ascribed as the value of his contribution.
59
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(n) To record the historical book value of Taj Associates and Taj Funding
($39,635), as adjusted for the extraordinary loss on the redemption of
the Taj Bonds ($131,494) and, the extraordinary gain resulting from the
satisfaction of indebtedness under the NatWest Loan ($8,444), which
results in a negative book value of $83,415.
(o) To reclassify the remaining capital deficit of Taj Associates to
contributed capital as the carryforward accumulated deficit should be
that of the Company in accordance with purchase accounting.
(p) To record $2,083 of additional general and administrative expenses
relating to corporate overhead of the Company and THCR Holdings, and
$655 of operating expenses incurred at Trump Indiana prior to opening.
(q) To record the elimination of the fee resulting from the termination of
the Taj Services Agreement.
(r) To reflect the reduction of identifiable costs resulting from the
consolidation of departments and the reduction of personnel. Management
believes that within two years, annual cost savings from the Merger
Transaction will total $18-$20 million.
(s) To record the additional depreciation expense resulting from the
allocation of the purchase price ($174,315--see notes (g), (m) and (n)
above) to property and equipment based on an appraisal. Amounts are
being allocated to land ($8,715) and building ($165,600) on a pro rata
basis and are being depreciated over the remaining life of the building
(35 years).
(t) To record interest income on a $3,000 note receivable from Trump at
prime plus 1%.
(u) To record interest expense (including amortization of deferred
financing costs) relating to the Senior Notes.
(v) To record interest expense on amounts borrowed under the equipment and
vessel financing line. To date, Trump Indiana has obtained a commitment
for $17,000, has signed a letter of intent for an equipment lease for
$14,200 and has obtained advances of $9,750 at a rate of 10.5%.
Although the Company expects to borrow an additional $15,000, no
assurances can be given that such financing will be available. See
"Risk Factors--The Indiana Riverboat."
(w) To eliminate interest expense (including amortization of deferred
financing costs) on Plaza Associates' PIK Notes which were redeemed
with the proceeds from the June 1995 Offerings.
(x) To record adjustments to historical interest expense to give effect to
the Merger Transaction as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Interest expense adjustment:
(i)Elimination of interest and discount accretion on
redemption of the Taj Bonds and the Plaza Notes........ (146,714)
(ii)Elimination of accretion on the Taj Associates-First
Fidelity Guarantee..................................... (2,375)
(iii)Elimination of interest on the NatWest Loan.......... (4,281)
(iv)Elimination of refinancing transaction expenses....... (1,787)
(v)Elimination of amortization of deferred offering
costs...................................................... (2,973)
(vi)Reflect interest and amortization of deferred loan
costs on the Mortgage Notes............................ 127,849
--------
Pro Forma Adjustment........................................ $(30,281)
========
</TABLE>
For every 0.5% change in interest rate, the correlative change in
interest expense for the period would be $5,500 on a pre-tax basis, with
an identical change to the denominator in debt service coverage ratios.
If the composition of the financing were to change, whereby there was a
decrease in the Mortgage Note Offering of $10,000 and a corresponding
increase in the Stock Offering, there would be a $1,100 decrease in
annual interest expense.
60
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION)
PRO FORMA ADJUSTMENTS:
(y) To reflect minority interest as pro forma adjustments result in a loss
at THCR Holdings and there is a minority interest basis on the Company
pro forma balance sheet.
(z) A provision for state income taxes is not required as state tax net
operating losses are used to offset pro forma taxable income.
(aa) Weighted Average Shares Outstanding includes the number of shares
outstanding on December 31, 1995, shares awarded to the Chief
Executive Officer of the Company pursuant to the 1995 Stock Plan and
the shares to be issued in the Merger Transaction. If the composition
of the financing were to change, whereby there was an increase in the
Stock Offering of $10,000 and a corresponding decrease in the Mortgage
Note Offering, there would be an increase in the pro forma income per
share before extraordinary loss of $.03.
61
<PAGE>
BUSINESS
GENERAL
The Company will acquire all of the outstanding equity interests of Taj
Associates, which owns and operates the Taj Mahal, in connection with the
Merger Transaction. The Merger Transaction will create one of the largest
casino entertainment companies in the United States by combining two "Four
Star" Atlantic City casino hotels, the Indiana Riverboat and all of Trump's
future gaming activities. Upon consummation of the Merger Transaction, the
Company will own and operate the Taj Mahal, currently Atlantic City's largest
casino (in terms of casino square footage), and Trump Plaza, which will have
the largest casino in Atlantic City (in terms of casino square footage) upon
the completion of the ongoing Trump Plaza Expansion. Following the
consummation of the Merger Transaction, the Company also plans to undertake
the Taj Mahal Expansion, an expansion program at the Taj Mahal designed to
increase its hotel room inventory and casino floor space and expand its
entertainment and parking facilities. In addition, the Company expects to
commence operations in the second quarter of 1996 of the Indiana Riverboat to
be located at Buffington Harbor on Lake Michigan. The Indiana Riverboat will
establish the Company's position in the greater Chicago metropolitan area
market, which is one of the most successful new gaming markets in the United
States. Furthermore, the Company is and will continue to be the exclusive
vehicle through which Trump will engage in new gaming activities in both
emerging and established gaming jurisdictions.
Management believes that the acquisition of the Taj Mahal will strengthen
the Company's position as a leader in the casino entertainment industry
through its ownership of two successful land-based casino hotels. Furthermore,
the Merger Transaction will enhance the Company's presence in the growing
Atlantic City market, which, in terms of gaming revenues, has demonstrated a
ten-year compound annual growth rate of approximately 5.8% and a growth rate
of approximately 9.5% for calendar year 1995 versus calendar year 1994. After
giving effect to the Merger Transaction and the Trump Plaza Expansion, the
Company will have approximately one-quarter of Atlantic City's casino square
footage, slot machines, table games and hotel room inventory. In addition, the
combination of the Taj Mahal with Trump Plaza's existing and planned
operations will provide opportunities for operational efficiencies, economies
of scale and benefits from the expertise and experience of management at the
operating entities. Management further believes that the Company's size
following the Merger Transaction along with its industry experience and
reputation for quality will allow the Company to compete effectively for prime
gaming licenses in other jurisdictions.
Management believes the Company will benefit from the following factors:
. LEADING ATLANTIC CITY FACILITIES. Upon consummation the Trump Plaza
Expansion, the Company will own and operate the two largest casino hotel
properties in Atlantic City (in terms of casino square footage), both of
which are strategically located on The Boardwalk. The Company believes
that the Atlantic City Properties' prime locations, reputations for high
quality amenities and first-class customer service and targeted marketing
strategies are ideally suited to capitalize on the expected continued
growth in the Atlantic City gaming market. The Company believes that its
leading size and market share in Atlantic City following the consummation
of the Merger Transaction will provide it with a competitive advantage in
marketing the Atlantic City Properties, particularly to large convention
groups and multi-day stay destination resort visitors.
. ATLANTIC CITY PROPERTIES EXPANSION. The Company has nearly completed the
Trump Plaza Expansion and is developing the plans for the Taj Mahal
Expansion, which projects will increase the Atlantic City Properties'
gaming space and hotel room capacity, allowing the Company to meet both
existing demand and the anticipated demand from the increased number of
available rooms and infrastructure improvements that are currently under
development to enhance further the "vacation destination appeal" of
Atlantic City.
62
<PAGE>
The following table profiles the Company's casino and hotel capacity
following the expansions at the Atlantic City Properties:
<TABLE>
<CAPTION>
TRUMP TAJ INDIANA TRUMP PLAZA TAJ MAHAL
PLAZA(a) MAHAL RIVERBOAT(b) EXPANSION(c) EXPANSION(d) TOTAL
-------- ------- ------------ ------------ ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Casino square footage... 75,395 120,000(e) 37,000 64,158 60,000 356,553
Slot machines........... 2,368 3,550 1,500 1,898 2,500 11,816
Table games............. 97 169 73 44 -- 383
Hotel rooms............. 555 1,250 -- 849 800 3,454
</TABLE>
- --------
(a) Includes the 2,000 square foot area connecting the existing facility with
Trump Plaza East and the 75 slot machines included in this area.
(b) Scheduled to open in the second quarter of 1996.
(c) Includes the 15,000 square foot casino with 400 slot machines and 13 table
games and 326 hotel rooms which have already opened at Trump Plaza East.
The remaining 14 hotel rooms and suites at Trump Plaza East are scheduled
to be opened by the end of April 1996. Also reflects nine super suites
scheduled to open early in 1997 and not otherwise included in the "Trump
Plaza Expansion." The remaining portion of the Trump Plaza Expansion,
Trump World's Fair, is scheduled to open in the second quarter of 1996.
(d) Plans for the Taj Mahal Expansion, scheduled to be completed in phases
from the first quarter of 1997 through early 1998, are subject to
modification.
(e) Excludes a 12,000 square foot poker, keno and race simulcasting room which
contains 64 poker tables.
. OPERATING SYNERGIES. The Company intends to capitalize on the
opportunities for efficiencies which can be generated by integrating
certain operations of the Atlantic City Properties, which previously have
been operated separately. Management has identified cost savings which
management estimates, by the end of the second year following the Merger
Transaction, to be $18-20 million on an annual basis, although no
assurance may be made as to the amount which will be realized. Management
believes that it will be able to consolidate certain departments at the
Atlantic City Properties, reduce general and administrative expenses
through possible personnel reductions and the consolidation of certain
marketing efforts and reduce operating costs through efficiencies that
are expected to result from the combined purchasing power of the Atlantic
City Properties.
. 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. The Indiana Riverboat is one of 11 riverboat gaming projects
permitted under current Indiana law, and one of only five to be located
in northern Indiana. The Indiana Riverboat is currently scheduled to open
for business in the second quarter of 1996. The Indiana Riverboat is
planned to have approximately 37,000 square feet of gaming space that
will 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 Buffington Harbor in the greater Chicago
metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of Buffington Harbor,
respectively.
. THE "TRUMP" NAME. The Company capitalizes on the widespread recognition
of the "Trump" name and its association with high quality amenities and
first-class service. To this end, the Company 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. The Company 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, as well as to explore
opportunities to establish additional gaming operations, particularly in
jurisdictions where the legalization of casino gaming is relatively new
or anticipated.
ATLANTIC CITY PROPERTIES
TRUMP PLAZA
Management believes that Trump Plaza's "Four Star" Mobil Travel Guide rating
and "Four Diamond" American Automobile Association rating reflect the high
quality amenities and services that Trump Plaza provides to its casino patrons
and hotel guests. These amenities and services include a broad selection of
dining choices, headline entertainment, deluxe accommodations, tennis courts
and swimming and health spa facilities.
Trump Plaza Expansion. Management believes that as a result of the Trump
Plaza Expansion and Trump Plaza's strategic location, Trump Plaza is well
positioned to become one of the premier host properties in
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Atlantic City. The Trump Plaza Expansion is currently scheduled to be
completed in the second quarter of 1996 and would increase Trump Plaza's prime
central frontage on The Boardwalk to nearly a quarter of a mile. Management
also believes that the construction of the new convention center and tourist
corridor linking the new convention center with The Boardwalk will enhance the
desirability of Atlantic City generally and, as a result of Trump Plaza's
central location, will benefit Trump Plaza in particular. In addition,
management expects to be able to take advantage of recent gaming regulatory
changes that will allow casino space to be directly visible and accessible
from The Boardwalk. Trump Plaza's location on The Boardwalk at the end of the
main highway into Atlantic City makes it highly accessible for both "drive-in"
and "walk-in" patrons.
The Company 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 $42.5 million. Upon completion, Trump World's Fair would add 49,272
square feet of casino floor space, approximately 16,000 of which will be
directly accessible from The Boardwalk, and 500 hotel rooms, connected with
the current Trump Plaza's main tower by an enclosed walkway overlooking The
Boardwalk. Renovations are ongoing at Trump World's Fair and the Company
expects, although there can be no assurances, that the renovations at Trump
World's Fair will be completed in the second quarter of 1996. See "Risk
Factors--Atlantic City Properties Expansion."
Trump Plaza has opened the casino and 326 rooms at Trump Plaza East.
Management intends to open the remaining 14 hotel rooms and suites at Trump
Plaza East by the end of April 1996. Trump Plaza East has approximately 15,000
square feet of casino space and, when fully opened, will have 349 hotel rooms,
including nine super suites scheduled to be opened early in 1997. Trump Plaza
currently leases Trump Plaza East and intends to exercise its option to
acquire it from an unaffiliated entity. See "--Properties--Plaza Associates--
Trump Plaza East" and "Management--Compensation Committee Interlocks and
Insider Participation--Certain Related Party Transactions of Trump--Plaza
Associates." Trump Plaza has been reconfigured to provide a new entranceway to
Trump Plaza directly off the Atlantic City Expressway. Management believes the
increased hotel capacity as a result of the Trump Plaza Expansion will enable
Trump Plaza to better 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(a) EAST(b) FAIR(c) TOTAL
----------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Casino square footage............. 75,395 14,886 49,272 139,553
Slot machines..................... 2,368 405 1,493 4,266
Table games....................... 97 12 32 141
Hotel rooms....................... 555 349 500 1,404
</TABLE>
- ---------------------
(a) Includes the 2,000 square foot area connecting the existing facility with
Trump Plaza East and the 75 slot machines included in this area.
(b) The casino and 326 hotel rooms have already opened. The remaining 14 hotel
rooms and suites are scheduled to be open by the end of April 1996. Also
reflects nine super suites are scheduled to open early in 1997 and not
otherwise included in the "Trump Plaza Expansion."
(c) Scheduled to open in the second quarter of 1996.
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 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 TAJ MAHAL
The Taj Mahal is currently the largest casino hotel facility in Atlantic
City (in terms of casino floor square footage) 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
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class service as evidenced by its "Four Star" Mobil Travel Guide rating.
Management believes that the breadth and diversity of the Taj Mahal's casino,
entertainment and convention facilities and its status as a "must see"
attraction will enable the Taj Mahal to benefit from the expected continued
growth of the Atlantic City market.
In recent years, under the direction of Trump and the management team led by
Nicholas L. Ribis, its Chief Executive Officer, Taj Associates has completed
construction of the Taj Entertainment Complex, reconfigured and expanded the
casino floor to provide race simulcasting, poker wagering and the recently
introduced game of keno, opened a private Asian themed table game area and
increased the number of poker tables and slot machines. The Taj Mahal's poker
room is the largest in Atlantic City, which management believes adds to its
overall gaming mix. Taj Associates continually monitors operations to adapt to
and anticipate industry trends. Since 1994, the Taj Mahal has embarked on a
strategy to refurbish all of its hotel guest rooms and corridors by April 1996
and to replace all of its existing slot machines by the middle of 1996 with
new, more efficient machines with bill collectors. Moreover, to further
attract high-end players, the Taj Mahal has recently opened the "Dragon Room,"
an Asian themed table gaming area with 16 table games, and is currently in the
process of constructing "Sultan's Palace," a separate 5,900 square-foot high-
end slot lounge and private club to be completed in the second quarter of
1996.
The Taj Mahal Expansion. Following the consummation of the Merger
Transaction, the Company plans to undertake an expansion plan at the Taj Mahal
to meet both existing demand and the increase in demand that management
anticipates will result from the increased number of rooms and infrastructure
improvements that are currently being implemented to enhance further the
"vacation destination appeal" of Atlantic City. It is currently expected that
the Taj Mahal Expansion will be funded principally out of cash from operations
of the Atlantic City Properties and is scheduled to be completed in phases
from the first quarter of 1997 through early 1998. The Taj Mahal Expansion,
the plans for which are subject to modification, involves the construction of
an approximately 2,000 space expansion of the Taj Mahal's existing self-
parking facilities and a new 10,000 seat arena adjacent to the Taj Mahal, each
scheduled to be completed in mid-1997; the conversion of the current site of
the Mark Etess Arena into a new 60,000-square foot circus-themed casino with
2,500 slot machines, scheduled to be completed in 1997; and the construction
of an approximately 800 room hotel tower adjacent to the Taj Mahal's existing
hotel tower, scheduled to be completed early in 1998. See "Risk Factors--
Atlantic City Properties Expansion--The Taj Mahal."
The following table details the plans for the Taj Mahal Expansion:
<TABLE>
<CAPTION>
CURRENT TAJ
TAJ MAHAL MAHAL
FACILITIES EXPANSION TOTAL
---------- --------- -------
<S> <C> <C> <C>
Casino square footage............................. 120,000(a) 60,000 180,000
Slot machines..................................... 3,550 2,500 6,050
Table games....................................... 169 -- 169
Hotel rooms....................................... 1,250 800 2,050
</TABLE>
- ---------------------
(a) Excludes a 12,000 square-foot poker, keno and race simulcasting room which
contains 64 poker tables.
The following table summarizes the different phases of the Taj Mahal
Expansion with their associated capital costs:
<TABLE>
<CAPTION>
PROJECT
PROJECT COST
------- -------
(IN MILLIONS)
<S> <C>
Parking facility, approximately 2,000 spaces................... $ 26.0
New arena...................................................... 15.0
Circus themed casino........................................... 53.3
Hotel tower, 800 rooms......................................... 100.9
------
Total........................................................ $195.2
======
</TABLE>
It is expected that the Taj Mahal Expansion, the plans for which are subject
to modification, will be principally funded out of the cash from operations of
the Atlantic City Properties. If the operations of the Atlantic City
Properties do not generate the anticipated cash flow to fund the Taj Mahal
Expansion, the ability to complete
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such expansion will depend on the ability to obtain debt financing for such
purposes in addition to that currently contemplated. There can be no assurance
that Taj Associates and Plaza Associates will be able to generate sufficient
cash flow from operations or to obtain debt financing on terms satisfactory to
Trump AC, if at all.
ATLANTIC CITY MARKETING STRATEGY
In order to provide a sharpened marketing focus at the different properties
and appeal to a variety of segments in the Atlantic City marketplace, the
Company intends to pursue a targeted marketing approach with respect to the
Atlantic City Properties.
Trump Plaza. Trump Plaza East has been integrated into Trump Plaza and
together are operated as a single casino hotel facility. Trump Plaza will
continue the marketing strategies it has found successful in the past,
including targeting lucrative high-end drive-in slot customers. Management
believes the additional hotel rooms and gaming facilities at Trump Plaza East
will better enable Trump Plaza to accommodate the more profitable weekend
drive-in patron, who tends to wager more per play and per visit than the
typical walk-in or bus patron.
Trump World's Fair. Trump World's Fair, which will operate as part of Trump
Plaza, will seek to attract the "middle market" segment (primarily bus
customers and Boardwalk pedestrian traffic) by offering high value food and
entertainment attractions in a festive "World's Fair" atmosphere. The first
floor of Trump's World's Fair will feature a Boardwalk level casino offering
walk-in customers direct access from The Boardwalk to 581 slot machines. In
addition, Trump World's Fair is constructing a new bus terminal that will have
a dedicated escalator leading directly to a separate casino entertainment area
that will contain a 500-seat buffet style restaurant, an Oriental Pavilion and
a casino with 538 slot machines. The new bus terminal and dedicated casino
facilities will allow Trump World's Fair to efficiently serve a high volume of
bus customers. A smoke-free casino with approximately 385 slot machines and 32
table games along with additional restaurants will be located on the second
floor of Trump World's Fair. Moreover, with its prime location adjoining the
current Atlantic City Convention Center and near the new Atlantic City
Convention Center and its newly refurbished base of 500 rooms and
approximately 50,000 square feet of total gaming space, management believes
that Trump World's Fair is ideally suited to attract convention visitor
traffic.
The Taj Mahal. The Taj Mahal will continue to capitalize on its status as
Atlantic City's "must see" casino entertainment facility by offering
"something for everyone." The Taj Mahal has been successful in attracting all
segments of the Atlantic City gaming market because of the size and diversity
of its entertainment and gaming facilities. The Taj Mahal has been
particularly successful in attracting the segments of the Atlantic City gaming
market that tend to wager more frequently and in larger denominations than the
typical Atlantic City gaming customer. To attract these high-end players, the
Taj Mahal offers international musical and entertainment attractions and has
recently opened the Dragon Room, an Asian themed table game area, and is in
the process of constructing the Sultan's Palace, a high-end slots lounge and
private club.
BUSINESS STRATEGY
"Comping" Strategy. In order to compete effectively with other Atlantic City
casino hotels, the Atlantic City Properties offer complimentary drinks, meals,
room accommodations and/or travel arrangements to their patrons
("complimentaries" or "comps"). Management at the Atlantic City Properties
focuses promotional activities, including complimentaries, on middle and upper
middle market "drive-in" patrons who visit Atlantic City frequently and have
proven to be the most profitable market segment. Additionally, as a result of
increased regulatory flexibility, the Taj Mahal has implemented a cash comping
policy to high-end players in order to compete with similar practices in Las
Vegas and to attract international business.
Entertainment. Management believes headline entertainment, as well as other
entertainment and revue shows, are effective means of attracting and retaining
gaming patrons. Trump Plaza offers headline entertainment as part of its
strategy to attract high-end and other patrons. Trump Plaza offers headline
entertainment weekly during the summer and monthly during the off-season, and
also features other entertainment and revue shows. The Xanadu Theater allows
the Taj Mahal to offer longer running, more established productions that cater
to the
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tastes of the Taj Mahal's high-end international guests. The Taj Mahal's
facilities also include the Mark Etess Arena, an approximately 63,000 square-
foot exhibition hall and entertainment facility. The Xanadu Theater, together
with the Mark Etess Arena, and, subsequent to the conversion of the Mark Etess
Arena, the new arena that is intended to be constructed in connection with the
Taj Mahal Expansion afford and are expected to afford the Taj Mahal more
flexibility in the use of its facilities for sporting and other headline
programs. The Taj Mahal regularly engages well-known musicians and
entertainment personalities and will continue to emphasize weekend "marquee"
events such as Broadway revues, high visibility sporting events, festivals and
contemporary concerts to maintain the highest level of glamour and excitement.
Mid-week uses for the facilities include convention events and casino
marketing sweepstakes.
Player Development/Casino Hosts. The Atlantic City Properties currently
employ gaming representatives in New Jersey, New York and other states, as
well as several international representatives, to promote Trump Plaza and the
Taj Mahal to prospective gaming patrons. Player development personnel host
special events, offer incentives and contact patrons directly in an effort to
attract high-end table game patrons from the United States, Canada and South
America. The Atlantic City Properties' casino hosts assist patrons on the
casino floor, make room and dinner reservations and provide general
assistance. In addition, targeted marketing to international clientele will be
continued and expanded at the Taj Mahal through new sales representatives in
Latin America, Mexico, Europe, the Far East and the Middle East. As a special
bonus to high-end players, the Taj Mahal offers three clubs for the exclusive
use of select customers: the Maharajah Club for table game players, the
Presidents Club for high-end slot players, and the Bengal Club for other
preferred slot players. The Atlantic City Properties also plan to continue the
development of their slot and coin programs through direct mail and targeted
marketing campaigns emphasizing the high-end player.
Promotional Activities. The Trump Card constitutes a key element in the
Atlantic City Properties' direct marketing program. Subject to regulatory
constraints, the Trump Card will be used in all of the Company'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. The Company's computer systems record
data about the cardholders, including playing preferences, frequency and
denomination of play and the amount of gaming revenues produced. The Atlantic
City Properties design promotional offers, conveyed via direct mail and
telemarketing, to patrons expected to provide revenues based upon their
historical gaming patterns. Such information is gathered on slot wagering by
the Trump Card and on table game wagering by the casino game supervisors.
Promotional activities include the mailing of vouchers for complimentary slot
play. The Atlantic City Properties also utilize a special events calendar
(e.g., birthday parties, sweepstakes and special competitions) to promote its
gaming operations.
Bus Program. Trump Plaza and the Taj Mahal each have bus programs which
transport approximately 2,400 and 2,700 gaming patrons per day during the week
and 3,500 and 3,600 per day on the weekends, respectively. Trump Plaza's
Transportation Facility (as defined) contains 13 bus bays and is connected by
an enclosed pedestrian walkway to Trump Plaza, and the Taj Mahal's facility
contains 18 bus bays.
Credit Policy. Historically, the Atlantic City Properties have extended
credit to certain qualified patrons. For the years ended December 31, 1993,
1994 and 1995, credit play as a percentage of total dollars wagered at Trump
Plaza was approximately 18%, 17%, and 18%, respectively. As part of Trump
Plaza's business strategy, Trump Plaza has imposed stricter standards on
applications for new or additional credit. For the years ended December 31,
1993, 1994 and 1995, the Taj Mahal's credit play as a percentage of total
dollars wagered was approximately 23.5%, 22.8% and 24.5%, respectively.
FACILITIES AND AMENITIES
TRUMP PLAZA
Trump Plaza. The casino in the existing facility of Trump Plaza currently
offers 97 table games and 2,368 slot machines. In addition to the casino,
Trump Plaza's main tower consists of a 31-story tower with 555 guest rooms,
including 62 suites. Trump Plaza's main tower also offers 10 restaurants, a
750-seat cabaret theater, four
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cocktail lounges, 28,000 square feet of convention, ballroom and meeting room
space, a swimming pool, tennis courts and a health spa.
In February 1996, Trump Plaza East opened the 15,000 square foot Ocean View
Casino and Bar, and has to date opened 326 of its 349 hotel rooms. The Ocean
View Casino and Bar is the first gaming room in Atlantic City to combine a
casino, bar and entertainment area and features a 70-foot long bar with 27
bar-top slot machines, live entertainment and a 58 square foot video wall.
With its high ceilings and windows overlooking the Atlantic Ocean and The
Boardwalk, Trump Plaza is creating a new and exciting entertainment
environment for its casino patrons.
The entry level of Trump Plaza's main tower includes a cocktail lounge, two
gift shops, a deli, a coffee shop, an ice cream parlor and a buffet. The
casino level houses the casino, a fast food restaurant, an exclusive slot
lounge for high-end patrons and a new oceanfront baccarat gaming area. Upon
completion, an enclosed walkway will connect Trump Plaza at the casino level
with the Atlantic City Convention Center and with Trump World's Fair.
Trump Plaza's guest rooms are located in two towers which afford most guest
rooms a view of the ocean. While rooms are of varying size, a typical guest
room consists of approximately 400 square feet. Trump Plaza's main tower also
features 16 one-bedroom suites, 28 two-bedroom suites and 18 "Super Suites."
The Super Suites are located on the top two floors of Trump Plaza's main tower
and offer luxurious accommodations and 24-hour butler and maid service. The
Super Suites and certain other suites are located on the "Club Level" which
requires guests to use a special elevator key for access and contains a lounge
area that offers food and bar facilities.
Trump Plaza's main tower is connected by an enclosed pedestrian walkway to a
ten-story parking garage, which can accommodate approximately 2,650 cars, and
contains 13 bus bays, a comfortable lounge, a gift shop and waiting area (the
"Transportation Facility"). The Transportation Facility provides patrons with
immediate access to the casino, and is located directly off the Atlantic City
Expressway, the main highway into Atlantic City.
In July 1994, Time Warner opened its second largest Warner Brothers Studio
Store pursuant to a sublease of the entire first floor of retail space on The
Boardwalk at Trump Plaza East (approximately 17,000 square feet). Management
believes that the commitment of Time Warner at Trump Plaza East, together with
other 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.
Trump World's Fair. Upon completion of the renovation in the second quarter
of 1996, Trump World's Fair will be connected to Trump Plaza's main tower by
an enclosed walkway overlooking The Boardwalk and will add an additional 500
hotel rooms to Trump Plaza. In addition, Trump World's Fair will be outfitted
with approximately 50,000 square feet of casino floor space housing 1,493 slot
machines and 32 table games. In addition to the casino, Trump World's Fair
will feature three restaurants, including a state-of-the-art buffet, a
cocktail lounge, convention, ballroom and meeting room space, a swimming pool
and a health spa. The enclosed walkway will run through a portion of the
Atlantic City Convention Center, which is located between Trump World's Fair
and Trump Plaza's main tower. In this connection, Plaza Associates has
acquired an easement with regard to portions of the Atlantic City Convention
Center. See "--Properties--Trump Plaza--Trump World's Fair" and "Regulatory
Matters--New Jersey Gaming Regulations--Approved Hotel Facilities."
THE TAJ MAHAL
The Taj Mahal currently features Atlantic City's largest casino, with
120,000-square-feet of gaming space, 169 table games and 3,550 slot machines.
In addition, the Taj Mahal has a 12,000-square-foot poker, keno and race
simulcasting room with 64 poker tables, which was added in 1993 and expanded
in 1994. The casino's offerings include blackjack, progressive blackjack,
craps, roulette, baccarat, mini baccarat, red dog, sic-bo, pai gow, pai gow
poker, Caribbean stud poker, big six, mini big six and let it ride poker. In
December 1995, the Taj
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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 President's Club for high-end slot players, and the Bengal Club
for other preferred slot players.
The Taj Mahal currently consists of a 42-story hotel tower and contiguous
low-rise structure, sited on approximately 17 acres of land. The Taj Mahal has
1,250 guest rooms (including 242 suites), 16 dining rooms and 10 beverage
locations, parking for approximately 5,200 cars, an 18-bay bus terminal and
approximately 65,000-square-feet of ballroom, meeting room and pre-function
area space. The Taj Mahal has also signed agreements for the development of
the Hard Rock Cafe, Rainforest Cafe and All Star Cafe themed restaurants on
the property. 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 and entertainment facility. The Xanadu Theater and the Mark
Etess Arena have allowed the Taj Mahal to offer longer running, more
established productions that cater to the tastes of the Taj Mahal's high-end
international guests, and has afforded the Taj Mahal more flexibility in the
use of its facilities for sporting and other headline programs. The Taj Mahal
regularly engages well-known musicians and entertainment personalities and
will continue to emphasize weekend marquee events such as Broadway revues,
high visibility sporting events, international festivals and contemporary
concerts to maximize casino traffic and to maintain the highest level of
glamour and excitement at the Taj Mahal.
Management believes that the Taj Mahal's 1,250-room capacity and vast
casino, entertainment, convention and exhibition space, including the Mark
Etess Arena, make it a highly attractive convention and destination resort
facility at which visitors may stay for extended periods. In addition to its
normal advertising, Taj Associates actively promotes the Taj Mahal with
various local chambers of commerce, travel agencies which specialize in
convention travel and various corporate travel departments in order to attract
convention business.
ATLANTIC CITY MARKET
The Atlantic City gaming market has demonstrated continued growth despite
the recent proliferation of new gaming venues across the country. The 12
casino hotels in Atlantic City generated approximately $3.75 billion in gaming
revenues in 1995, an approximately 9.5% increase over 1994 gaming revenues of
approximately $3.42 billion. From 1990 to 1995, total gaming revenues in
Atlantic City have increased approximately 27%, while hotel rooms increased
approximately 10% during that period. Although total visitor volume to
Atlantic City remained relatively constant in 1995, the volume of bus
customers dropped to 9.6 million in 1995, continuing a decline from 11.7
million in 1990. The volume of customers traveling by other means to Atlantic
City has grown from 20.1 million in 1990 to 23.7 million in 1995.
Casino revenue growth in Atlantic City has lagged behind that of other
traditional gaming markets, principally Las Vegas, for the last five years.
The Company believes that this relatively slower growth is primarily
attributable to two key factors. First, there have been no significant
additions to hotel capacity in Atlantic City since 1990. Las Vegas visitor
volumes have increased, in part, due to the continued addition of new hotel
capacity. Both markets have exhibited a strong historical correlation between
hotel room inventory and total casino revenues. Secondly, the regulatory
environment and infrastructure problems in Atlantic City have made it more
difficult and costly to operate. Total regulatory costs and tax levies in New
Jersey have exceeded those in Nevada since inception, and there is generally a
higher level of regulatory oversight in New Jersey than in Nevada. The
infrastructure problems, manifested by impaired accessibility of the casinos,
downtown Atlantic City congestion and the condition of the areas surrounding
the casinos, have made Atlantic City less attractive to the gaming customer.
Total Atlantic City slot revenues increased 12.2% in 1995, continuing a
solid trend of increases over the past five years. From 1990 through 1995,
slot revenue growth in Atlantic City has averaged 8.3% per year. Total
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table revenue increased 4.4% in 1995, while table game revenue from 1990 to
1995 has decreased on average 0.7% 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 37.2%, while the number of table games has decreased by
4.0%. Slot revenues increased from 58% of total casino revenues in 1990 to 69%
in 1995. The second reason for historic slow growth in table revenue is that
table game players are typically higher end players and are more likely to be
interested in overnight stays and other amenities. During peak season and
weekends, room availability in Atlantic City is currently inadequate to meet
demand, making it difficult for casino operators to aggressively promote table
play.
Despite generally lower overall growth rates than the Las Vegas market,
management believes that Atlantic City possesses similar revenue and cash flow
generation capabilities. The approximately $3.75 billion of gaming revenue
produced by the 12 casino hotels in Atlantic City in 1995 exceeded the
approximately $3.12 billion of gaming revenues produced by the 18 largest
(based on net revenues) casino hotels on the Las Vegas Strip for the same
period, even though the 12 Atlantic City casino hotels have less than one-
quarter the number of hotel rooms of such Las Vegas Strip casino hotels. Win
per unit figures in Atlantic City are at a significant premium to Las Vegas
win-per-unit performance, primarily due to the constrained supply of gaming
positions in Atlantic City compared to Las Vegas.
The regulatory environment in Atlantic City has improved recently. Most
significantly, 24-hour gaming has been approved, poker and keno have been
added and regulatory burdens have been reduced. In particular, Bill A61 was
passed in January 1995, which has eliminated duplicative regulatory oversight
and channeled operator's funds from regulatory support into CRDA uses.
Administrative costs of regulation will be reduced while increasing funds
available for new development.
In addition 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 $250 million convention center would be the largest exhibition
space between New York City and Washington, D.C. It will be located at the
base of the Atlantic City Expressway and is currently planned to open in
January 1997. The State of New Jersey is also implementing an approximately
$125 million capital plan to upgrade and expand the Atlantic City
International Airport.
Management believes that recent gaming regulatory reforms will serve to
permit future reductions in operating expenses of casinos in Atlantic City and
to increase the funds available for additional infrastructure development
through the CRDA. Due principally to an improved regulatory environment,
general improvement of economic conditions in 1993, 1994 and 1995 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, the Grand
to add 295 rooms (both of which are under construction) and the Taj Mahal to
add approximately 800 rooms and a 1,500 space parking garage (with an
application pending to increase the size to 2,000 spaces). Overall, various
casinos in the market have applied to the CRDA for funding to construct 3,400
new hotel rooms. Management believes that these increases in hotel capacity,
together with infrastructure improvements, will be instrumental in stimulating
future revenue growth in the Atlantic City market. See "--Competition."
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SEASONALITY
The gaming industry in Atlantic City is seasonal, with the heaviest activity
at Trump Plaza and at the Taj Mahal during the period from May through
September, and with December and January showing substantial decreases in
activity. Revenues have been significantly higher on Fridays, Saturdays,
Sundays and holidays than on other days.
EMPLOYEES AND LABOR RELATIONS
TRUMP PLAZA
Plaza Associates has approximately 3,700 employees of whom approximately
1,100 are covered by collective bargaining agreements. Management believes
that its relationships with its employees are satisfactory. Certain of Plaza
Associates' employees must be licensed under the Casino Control Act. See
"Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees." Plaza Funding has no employees.
In April 1993, the National Labor Relations Board (the "NLRB") found that
Plaza Associates had violated the National Labor Relations Act (the "NLRA") in
the context of a union organizing campaign by table game dealers of Plaza
Associates in association with the Sports Arena and Casino Employees Union
Local 137, a/w Laborers' International Union of North America, AFL-CIO ("Local
137"). In connection with such finding, Plaza Associates was ordered to
refrain from interfering with, restraining or coercing employees in the
exercise of the rights guaranteed them by Section 7 of the NLRA, to notify its
employees of such rights and to hold an election by secret ballot among its
employees regarding whether they desire to be represented for collective
bargaining by Local 137. The election was held on May 20 and 21, 1994 and the
vote, which has been certified by the NLRB, was in favor of management and
against representation by Local 137.
TAJ MAHAL
Taj Associates has approximately 6,100 employees for the operation of the
Taj Mahal, of whom approximately 1,850 employees are covered by collective
bargaining agreements. Taj Associates believes that its relationships with its
employees are satisfactory and that its staffing levels are sufficient to
provide superior service. Since opening in April 1990, during which time some
collective bargaining agreements with various unions have expired prior to the
execution of new agreements, the business of Taj Associates has not been
interrupted due to any labor disputes. The collective bargaining agreement
with HERE Local 54, which covers substantially all of Taj Associates' hotel
and restaurant employees, was renegotiated in September 1994 and will expire
on September 14, 1999.
Certain Taj Associates' employees must be licensed under the Casino Control
Act. See "Regulatory Matters--New Jersey Gaming Regulations--Qualification of
Employees."
INDIANA RIVERBOAT
The Indiana Riverboat is expected to feature an approximately 288-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 the Company 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 in the second quarter of
1996. The Company 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, the Company
determined to accelerate the second phase of the project, now expected to cost
$25 million, and complete both phases prior to commencing operations. In
addition to the approximately $84 million to be spent through the planned
opening, the Company has further committed
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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.
Buffington Harbor 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 Buffington Harbor. The Company 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 coordinated cruise schedules and (iii)
the widespread recognition of the "Trump" name and what management believes to
be its reputation for quality. Gaming facilities in Illinois are limited at
present to 1,200 gaming positions under current regulations in Illinois, which
the Company believes puts Illinois properties at a competitive disadvantage to
larger facilities such as the Indiana Riverboat. The Company 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.
The Company 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, the
Company will seek to attract drive-in customers to the facility. Casinos
currently operating in the Great Lakes Market have generally been very
successful, achieving operating results exceeding those of most new
jurisdictional markets in terms of win per unit. The Company believes that
these operating results indicate that the Great Lakes Market should be capable
of absorbing significant capacity expansion in the future.
Under current gaming laws in Indiana, most 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. Subject to certain exceptions, the Johnson Act
prohibits gaming vessels from cruising within federal maritime jurisdiction
and prohibits gaming on such vessels. The Johnson Act contains an exception to
such prohibitions if a state adopts a law that permits gaming vessels to
engage in gaming outside federal maritime jurisdiction. The Indiana General
Assembly has taken certain actions with respect to gaming on vessels and the
IGC has determined that Indiana law now allows gaming on vessels which are
docked under certain conditions even if cruising would not be challenged as a
violation of federal law. Notwithstanding the IGC's determination, there can
be no assurance that commencement of gaming operations by Trump Indiana when
the riverboat is cruising would not be challenged as a violation of the
Johnson Act or when the riverboat is docked would not be challenged as a
violation of Indiana law or federal law. See "Risk Factors--The Indiana
Riverboat" and "Regulatory Matters--Indiana Gaming Regulations--Excursions."
The Company 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 the Company believes
that the location of the Indiana Riverboat will allow the Company to
effectively compete with other casinos in the geographic area surrounding its
casino, the Company 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 prior 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--Liquidity and Capital Resources."
On June 30, 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 Harbor Lease Agreement, between Lehigh and BHR, Lehigh granted Trump
Indiana and Barden a 30-month lease (which may be extended up to ten years)
for the initial use of the harbor and certain of Lehigh's property adjacent to
the Buffington Harbor site for the docking of the Indiana Riverboat vessel and
the Barden vessel. Under the Harbor Lease Agreement, after Trump Indiana
receives permits from applicable regulatory agencies for the construction of
its reconfigured harbor site, the initial term of 30 months will be extended
for the period of time necessary for Trump Indiana to complete construction of
a reconfigured harbor site (as determined by Lehigh's coastal engineer
consultant). If Trump Indiana has not obtained the necessary permits within
the initial term of 30 months, after diligently seeking such permits, the term
of the Harbor Lease Agreement will be automatically extended to December 31,
2005. No lease payments will be made to Lehigh during the first 30 months of
the lease. In the event that the use of this property continues beyond the 30-
month period, Lehigh will be entitled to receive a license fee in an amount
equal to $125,000 per month for each month either Trump Indiana or Barden uses
Lehigh's property during the remaining term of the lease.
In 1994, the City of Gary (the "City") commenced a legal proceeding in Lake
County Superior Court of Indiana captioned City Of Gary v. Lehigh Portland
Cement Company, et al., in which the City sought to exercise its eminent
domain power to acquire certain of Lehigh's property, including the Buffington
Harbor site, for the purpose of using the land as a gaming venture. On May 12,
1995, the court ruled in favor of the City. Consummation of the condemnation
process is subject to additional conditions. However, on May 27, 1995, the
Company 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. The Company 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. 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 for a payment of $5
million each. To date, the Company and Trump Indiana have complied with the
terms of the Amended MOU.
As contemplated in the Amended MOU and required by the certificate of
suitability, Trump Indiana is negotiating a "Development Agreement" with the
City, which will serve to memorialize the commitments made by Trump Indiana to
the City during the licensing process. The Development Agreement will replace
the Amended MOU and is generally expected to include the principal terms of
the Amended MOU, subject to certain updated provisions. Trump Indiana's
certificate of suitability indicates as a condition to the issuance of a
riverboat owner's license, that among other things, Trump Indiana enter into a
Development Agreement with the City. In addition, Trump Indiana anticipates
that the final Development Agreement will include provisions regarding The
Trump Foundation, a private foundation established by Trump Indiana for
charitable purposes primarily within the City and Lake County, Indiana. The
Development Agreement would require Trump Indiana and the City to enter into a
separate agreement which would, among other things, require Trump Indiana to
contribute to The Trump Foundation $50,000 on or before July 15, 1996,
$950,000 on or before December 31, 1996 and $100,000 on or before the end of
each calender year thereafter, and to cause The Trump Foundation, as one of
its charitable purposes, to grant $5,000 college scholarships to ten seniors
of Gary public high school and the Performing Arts School.
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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 or the other conditions
contained in the certificate of suitability 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 or the denial of a riverboat
owner's license. There can be no assurance that the Company 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, among other things, the completion of the Indiana
Riverboat, acquisition of necessary permits or approvals from federal, state
and local authorities, readiness to commence operations and the execution of a
Joint Development Agreement with the City. See "Regulatory Matters--Indiana
Gaming Regulations--Interim Compliance Requirements." If granted, such license
would be for an initial term of five years and renewable annually thereafter.
The Company anticipates that its riverboat owner's license (which would
supersede the certificate of suitability) would impose substantially similar
conditions on the operations of the Indiana Riverboat, although no assurances
may be made. With respect to certain land-based facilities, the Company would
also be dependent on the ability of Barden to obtain the requisite licenses and
fund its portion of joint construction costs.
Commencing in early 1994, Trump Indiana (which was then wholly owned by
Trump), through its Indiana counsel, had discussions with eight Indiana
residents regarding the potential purchase by such residents of non-voting
stock of Trump Indiana, representing a total of 7.5% of the equity in Trump
Indiana. The purchase price of the stock was to have been paid with a
promissory note secured by the stock purchased, although the purchase price and
other material terms of the proposed purchase were never agreed upon. Such
discussions did not result in an agreement for or the purchase of any stock by
the residents. It was subsequently determined to include Trump Indiana as a
wholly owned subsidiary of THCR Holdings in connection with the June 1995
Offerings. The residents have since asserted a right to purchase stock in Trump
Indiana. Trump Indiana and the Company do not agree that these individuals have
any rights with respect to the stock of Trump Indiana or otherwise, and have so
advised the residents. Although discussions had been ongoing with respect to
the resolution of this matter, on March 29, 1996, the Indiana residents filed a
lawsuit against Trump, the Company, THCR Holdings and Trump Indiana with
respect to this matter. See "--Litigation--Trump Indiana."
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, to date Trump Indiana
has paid $15.6 million ($9.8 million provided by the vessel financing) of the
Vessel Contract Price to AMI. 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 the Company 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
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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 the Company 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 the Company, 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," "--Competition," "Risk
Factors--The Indiana Riverboat" and "Regulatory Matters--Indiana Gaming
Regulations."
The Company 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 the Company believes
that the location of the Indiana Riverboat will allow the Company to compete
effectively with other casinos in the geographic area surrounding its casino,
the Company 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."
The Company has no operating history in Indiana and is unable to predict
seasonality with respect to the Indiana Riverboat.
PROPERTIES
THE COMPANY
Trump Tower. The Company 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 the Company may use for its general, executive and administrative
offices. The fixed rent is $115,500 per year, paid in equal monthly
installments, for the period from July 1, 1995 to June 30, 2000 and will be
$129,250 per year, paid in equal monthly installments, for the period from July
1, 2000 to June 30, 2005. In addition, the Company will pay as additional rent,
among other things, a portion of the property taxes due each year. The Company
has the option to terminate this lease upon ninety days' written notice and
payment of $32,312.50.
TRUMP PLAZA
Plaza Associates owns and leases several parcels of land in and around
Atlantic City, New Jersey, each of which is used in connection with the
operation of Trump Plaza and each of which is currently subject to the liens of
the mortgages associated with the Plaza Notes (collectively, the "Plaza
Mortgages") and certain other liens. Upon consummation of the Merger
Transaction, these parcels of land will secure the Mortgage Notes. Upon its
acquisition, Trump Plaza East would also become subject to the mortgage
securing the Mortgage Notes.
Plaza Casino Parcel. Trump Plaza's main tower is located on The Boardwalk in
Atlantic City, New Jersey, next to the existing Atlantic City Convention
Center. It occupies the entire city block (approximately 2.38 acres) bounded by
The Boardwalk, Mississippi Avenue, Pacific Avenue and Columbia Place (the
"Plaza Casino Parcel").
The Plaza Casino Parcel consists of four tracts of land, one of which is
owned by Plaza Associates and three of which are leased to Plaza Associates
pursuant to three non-renewable ground leases, each of which
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expires on December 31, 2078 (each, a "Plaza Ground Lease"). Trump Seashore
Associates ("Trump Seashore"), Seashore Four Associates ("Seashore Four") and
Plaza Hotel Management Company (each, a "Plaza Ground Lessor") are the
owners/lessors under such respective Plaza Ground Leases (respectively, the
"TSA Lease," "SFA Lease" and "PHMC Lease"; the land which is subject to the
Plaza 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 and Seashore Four are 100%
beneficially owned by Trump and are, therefore, affiliates of the Company.
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.
The SFA Lease, the TSA Lease and the PHMC Lease each contain 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 SFA Lease, the TSA Lease and the PHMC Lease, respectively.
The Plaza Ground Leases are "net leases" pursuant to which Plaza Associates,
in addition to the payment of fixed rent, is responsible for all costs and
expenses with respect to the use, operation and ownership of the Plaza
Leasehold Tracts and the improvements now, or which may in the future be,
located thereon, including, but not limited to, all maintenance and repair
costs, insurance premiums, real estate taxes, assessments and utility charges.
The improvements located on the Plaza Leasehold Tracts are owned by Plaza
Associates during the terms of the respective Plaza Ground Leases, and upon the
expiration of the term of each Plaza Ground Lease (for whatever reason),
ownership of such improvements will vest in the Plaza Ground Lessor.
If a bankruptcy case is filed by or commenced against a Plaza Ground Lessor
under applicable bankruptcy law, the trustee in bankruptcy in a liquidation or
reorganization case under the applicable bankruptcy law, or a debtor-in-
possession in a reorganization case under the applicable bankruptcy law, has
the right, at its option, to assume or reject the Plaza Ground Lease of the
debtor-lessor (subject, in each case, to court approval). If the Plaza Ground
Lease is assumed, the rights and obligations of Plaza Associates thereunder,
and the rights of the trustee with respect to the Plaza Notes (the "Plaza Note
Trustee") (and, following the issuance of the Mortgage
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Notes, the rights of the trustee for the Mortgage Notes (the "Mortgage Note
Trustee") as leasehold mortgagee under agreements relating to the issuance of
the Plaza Notes (the "Plaza Note Agreements"), would continue in full force
and effect). If the Plaza Ground Lease is rejected, Plaza Associates would
have the right, at its election, either (i) to treat the Plaza Ground Lease as
terminated or (ii) to continue in possession of the land and improvements
under the Plaza Ground Lease for the balance of the term thereof and at the
rental set forth therein (with a right to offset against such rent any damages
caused by the Plaza Ground Lessor's failure to thereafter perform its
obligations under such Plaza Ground Lease). Under the Plaza Note Agreements,
Plaza Associates assigned to the Plaza Note Trustee its rights to elect
whether to treat the Plaza Ground Lease as terminated or to remain in
possession of the leased premises if the Plaza Ground Leases are rejected. In
connection with the issuance of the Mortgage Notes, the Mortgage will provide
that Plaza Associates will assign such rights to the Mortgage Note Trustee.
In the case of the Plaza Ground Leases, the rejection of a Plaza Ground
Lease by a trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
may result in termination of any options to purchase the fee estate of the
debtor-lessor and the Plaza Note Trustee's option (as leasehold mortgagee as
described above), if the Plaza Ground Lease is terminated, to enter into a new
lease directly with the lessor. In addition, under an interpretation of New
Jersey law, it is possible that a court would regard such options as separate
contracts and, therefore, severable from the Plaza Ground Lease. In such
event, the trustee in bankruptcy or debtor-lessor (as debtor-in-possession)
could assume the Plaza Ground Lease, while rejecting some or all of such
options under the Plaza 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 ten-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 December 31, 1995, such mortgage
secured indebtedness had an approximate outstanding principal balance of $0.1
million.
Plaza Associates leases, pursuant to the PHMC Lease, a parcel of land
located on the northwest corner of the intersection of Mississippi and Pacific
Avenues consisting of approximately 11,800 square feet ("Additional Parcel 1")
and owns another parcel on Mississippi Avenue adjacent to Additional Parcel 1
consisting of approximately 5,750 square feet (the "Bordonaro Parcel").
Additional Parcel 1 and the Bordonaro Parcel are presently paved and used for
surface parking.
Plaza Associates also owns five parcels of land, aggregating approximately
43,300 square feet, and subleases one parcel consisting of approximately 3,125
square feet. All of such parcels are contiguous and are located along Atlantic
Avenue, in the same block as the Plaza Garage Parcel. They are used for
signage and surface parking and are not encumbered by any mortgage liens other
than those of the Plaza Mortgages.
Warehouse Parcel. Plaza Associates owns a warehouse and office facility
located in Egg Harbor Township, New Jersey, containing approximately 64,000
square feet of space (the "Egg Harbor Parcel"). The Egg Harbor Parcel is
encumbered by a first mortgage having an outstanding principal balance, as of
December 31, 1995, of approximately $1.5 million and is encumbered by the
Plaza Mortgage.
Trump Plaza East. In connection with the Merger Transaction, Plaza
Associates intends to exercise the Trump Plaza East Purchase Option, a five-
year option to purchase the fee and leasehold interests comprising Trump Plaza
East. In October 1993, Plaza Associates assumed the leases associated with
Trump Plaza East. Until such time as the Trump Plaza East Purchase Option is
exercised or expires, Plaza Associates is obligated to pay the net expenses
associated with Trump Plaza East. See "Management's Discussion and Analysis of
Financial
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Condition and Results of Operations--Liquidity and Capital Resources" and
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates." During the
years ended December 31, 1995 and 1994, Plaza Associates incurred
approximately $3.8 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.
Plaza Associates currently intends to exercise the Trump Plaza East Purchase
Option in connection with the Merger Transaction. However, if Plaza Associates
does not exercise the Trump Plaza East Purchase Option in connection with the
Merger Transaction, up to $30.0 million of internally generated funds and/or
additional financing would be required to fund the acquisition pursuant to the
existing purchase option. There can be no assurance that such financing would
be available on attractive terms, if at all. In addition, the exercise of the
Trump Plaza East Purchase Option may require the consent of certain of Trump's
personal creditors, and there can be no assurance that such consent will be
obtained at the time Plaza Associates desires to exercise the Trump Plaza East
Purchase Option. The CCC has required that Plaza Associates exercise the Trump
Plaza East Purchase Option no later than July 1, 1996. Plaza Associates
intends to request that the CCC extend the July 1, 1996 deadline for
exercising the Trump Plaza East Purchase Option if it is not exercised in
connection with the Merger Transaction, although there can be no assurance
that such extension would be granted. Failure of the Company to acquire Trump
Plaza East, to obtain an extension of the July 1, 1996 deadline or to obtain
an extension of the existing lease of the premises beyond its current June 30,
1998 expiration date would have a material adverse effect on the Company. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates."
Plaza Associates has substantially completed its renovation and integration
of Trump Plaza East. If Plaza Associates is unable to finance the purchase
price of Trump Plaza East pursuant to the Trump Plaza East Purchase Option,
any amounts expended with respect to Trump Plaza East, including payments
under the Trump Plaza East Purchase Option and the lease pursuant to which
Plaza Associates leases Trump Plaza East, and any improvements thereon, would
inure to the benefit of the owner of Trump Plaza East and not to Plaza
Associates and would increase the cost of demolition of any improvements for
which Plaza Associates would be liable. As of December 31, 1995, Plaza
Associates had capitalized approximately $35.7 million in construction costs
related to Trump Plaza East. If the development of Trump Plaza East is not
successful, the Company would be required to write off the capitalized
construction costs associated with the project.
In September 1993, Trump (as predecessor in interest to Plaza Associates
under the lease for Trump Plaza East) entered into the Time Warner Sublease
with Time Warner pursuant to which Time Warner subleased the entire first
floor of retail space for a new Warner Brothers Studio Store which opened in
July 1994. The Time Warner Sublease provides for a ten-year term which expires
on the last day of the month immediately preceding the tenth anniversary of
the commencement date and contains two five-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
(prior to the exercise of the Trump Plaza East Purchase Option) 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 July 1996
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 "Management--Compensation Committee Interlocks
and Insider Participation--Certain Related Party Transactions of Trump--Plaza
Associates."
Trump World's Fair. Pursuant to the Trump World's Fair Purchase Option, on
June 12, 1995, Plaza Associates acquired title to Trump World's Fair. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Plaza Associates--Liquidity and Capital Resources." Pursuant to an
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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 Trump Plaza's main tower and Trump World's Fair. The
easement is for a 25-year term and may be renewed at the option of Plaza
Associates for one additional 25-year period. In consideration of the granting
of the easement, Plaza Associates must pay to NJSEA the sum of $2,000,000
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
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--Plaza Associates" and "Regulatory
Matters--New Jersey Gaming Regulations--Approved Hotel Facilities."
Superior Mortgages. The liens securing the indebtedness on the Plaza Garage
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 and will be senior to the liens of mortgages associated with
the Mortgage Notes. The principal amount currently secured by such Existing
Senior Plaza Mortgages as of December 31, 1995 was, in the aggregate,
approximately $3.0 million.
Plaza Associates has financed or leased and from time to time will finance
or lease its acquisition of furniture, fixtures and equipment. The lien in
favor of any such lender or lessor may be senior to the liens of the mortgages
associated with the Mortgage Notes.
TAJ MAHAL
Taj Associates owns and leases several parcels of land in Atlantic City, New
Jersey, each of which is used in connection with the operation of the Taj
Mahal and each of which is encumbered by the amended mortgage securing the Taj
Bonds and the mortgage securing the Working Capital Facility. Upon
consummation of the Merger Transaction, these parcels of land will secure the
Mortgage Notes and could secure any replacement of the Working Capital
Facility as well as certain expansion debt that Trump AC and its subsidiaries
are permitted to incur. All of the following properties (other than certain
property underlying the casino parcel and the facilities, which are owned by
Taj Associates and the office space leased in The Trump Tower) comprise the
Specified Parcels.
The Casino Parcel. The land comprising the site upon which the Taj Mahal is
located consists of approximately 17 acres, which are bounded by The Boardwalk
to the south, Maryland Avenue to the east, Pennsylvania Avenue to the west and
which extends to the north towards Pacific Avenue for approximately three-
quarters of a city block on the western portion of the site and two-thirds of
a city block on the eastern portion of the site. Construction was
substantially completed and the Taj Mahal was opened to the public on April 2,
1990.
Taj Entertainment Complex. The Taj Entertainment Complex is situated on a
parcel of land leased from Realty Corp. and features a 20,000-square-foot
multi-purpose entertainment complex known as the Xanadu Theater with seating
capacity for approximately 1,200 people, which can be used as a theater,
concert hall, boxing arena or exhibition hall. In connection with of the
Merger Transaction, Taj Associates will purchase the Taj Entertainment
Complex.
Steel Pier. Taj Associates leases the Steel Pier from Realty Corp. In
connection with the Merger Transaction, Taj Associates will purchase the Steel
Pier. A condition imposed on Taj Associates' CAFRA Permit (which, in turn, is
a condition of Taj Associates' casino license) initially required that Taj
Associates begin construction of certain improvements on the Steel Pier by
October 1992, which improvements were to be completed within 18 months of
commencement. Taj Associates initially proposed a concept to improve the Steel
Pier, the estimated cost of which improvements was $30 million. Such concept
was approved by the New Jersey Department of Environmental Protection
("NJDEP"), the agency which administers CAFRA. In March 1993, Taj Associates
obtained a modification of its CAFRA permit providing for the extension of the
required commencement and completion dates of the improvements to the Steel
Pier for one year based upon an interim use of the Steel Pier for an amusement
park. Taj Associates received additional one-year extensions, most
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recently through March 1997, of the required commencement and completion dates
of the improvements of the Steel Pier based upon the same interim use of the
Steel Pier for an amusement park pursuant to a sublease ("Pier Sublease") with
an amusement park operator ("Pier Subtenant"). The Pier Sublease provides for
a five-year lease term through December 31, 1999. However, Taj Associates may
terminate the Pier Sublease after December 31 of each year if written notice
of termination is given to the Pier Subtenant on or before September 1 of such
year.
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 TCA which are presently leased to commercial tenants and used
for office space and vehicle maintenance facilities. Taj Associates currently
leases from Realty Corp a warehouse complex of approximately 34,500 square
feet. As a part of the Specified Parcels purchase in connection with the
Merger Transaction, Taj Associates will purchase such warehouse.
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 5,200 cars of
which 4,600 spaces are located in indoor parking garages and 600 spaces are
located on land leased to Taj Associates by Realty Corp. In addition, Taj
Associates entered into a lease agreement with TCA to share its employee
parking facilities. In connection with the Taj Mahal Expansion, Taj Associates
will expand its self-parking facilities by 2,000 spaces.
Themed Restaurants. Hard Rock Cafe International (N.J.), Inc. ("Hard Rock")
has entered into a fifteen-year lease (the "Hard Rock Cafe Lease") with Taj
Associates for the lease of space at the Taj Mahal for a Hard Rock Cafe. The
basic rent under the Hard Rock Cafe Lease is $750,000 per year, paid in equal
monthly installments, for the first 10 years of the lease term, and will be
$825,000 per year, paid in equal monthly installments, for the remaining 5
years of the lease term. In addition, Hard Rock will pay percentage rent in an
amount equal to 10% of Hard Rock's annual gross sales in excess of $10
million. Hard Rock has the right to terminate the Hard Rock Cafe Lease on the
tenth anniversary thereof and also has the option to extend the term of the
lease for an additional five year period at an annual basic rental of $907,500
during such renewal term.
Rainforest Cafe, Inc.-Atlantic City ("Rainforest") has entered into a ten-
year lease (the "Rainforest Cafe Lease") with Taj Associates for the lease of
space at the Taj Mahal for a Rainforest Cafe. The basic rent under the
Rainforest Cafe Lease is $2.5 million per year, paid in equal monthly
installments. In addition, Rainforest will pay percentage rent in an amount
equal to the difference, if any, between (i) 10% of Rainforest's gross sales
made during each calendar month during the lease term and (ii) one-twelfth of
the annual basic rent. Rainforest has the option to extend the term of the
Rainforest Cafe Lease for two successive additional terms of five years each
at an annual basic rental of $2.75 million during the first renewal term and
an annual basic rental of $3,025,000 during the second renewal term. The
Rainforest Cafe Lease will require Taj Associates to contribute $2.5 million
toward construction after the project is completed and the restaurant opens
for business.
All Star Cafe, Inc. ("All Star") has entered into a twenty-year lease (the
"All Star Cafe Lease"), with Taj Associates for the lease of space at the Taj
Mahal for an All Star Cafe. The basic rent under the All Star Cafe Lease is $1
million per year, paid in equal monthly installments. In addition, All Star
will pay percentage rent in an amount equal to the difference, if any, between
(i) 8% of All Star's gross sales made during each calendar month during the
first lease year, 9% of All Star's gross sales made during each calendar month
during the second lease year and 10% of All Star's gross sales made during
each calendar month during the third through the twentieth lease years, and
(ii) one-twelfth of the annual basic rent.
The total minimum annual rental payments payable under these three leases
will be $4.25 million.
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INDIANA RIVERBOAT
See "--Indiana Riverboat."
TRADEMARK/LICENSING
Pursuant to the License Agreement, Trump granted to the Company the world-
wide right and license to use the Marks in connection with casino and gaming
activities and related services and products. The license is exclusive,
subject to existing licenses of the Marks to the Taj Mahal (prior to the
Merger Transaction) and Trump's Castle. The License Agreement does not
restrict or restrain Trump from the right to use or further license the Trump
Names in connection with services and products other than casino services and
products.
The license is for a term of the later of (i) June 2015; (ii) such time as
Trump and his affiliates no longer hold a 15% or greater voting interest in
the Company; or (iii) such time as Trump ceases to be employed or retained
pursuant to an employment, management, consulting or similar services
agreement with the Company. Upon expiration of the term of the license, Trump
has agreed to grant the Company a non-exclusive license for a reasonable
period of transition on terms to be mutually agreed upon between Trump and the
Company. Trump's obligations under the License Agreement are secured by a
security agreement, pursuant to which Trump granted the Company a first
priority security interest in the Marks for use in connection with casino
services, as well as related hotel, bar and restaurant services. See "Risk
Factors--Limitations on License of the Trump Name."
RESTRUCTURINGS
THE 1992 PLAZA RESTRUCTURING
In 1991, Trump Plaza experienced liquidity problems. Management believes
that those liquidity problems were attributable, in part, to an overall
deterioration in the Atlantic City gaming market, as indicated by reduced
rates of casino revenue growth for the industry for the two prior years,
aggravated by an economic recession in the Northeast. In addition, increased
casino gaming capacity in Atlantic City, due in part to the opening of the Taj
Mahal in April 1990, may also have contributed to Trump Plaza's liquidity
problems.
In order to alleviate its liquidity problem, pursuant to the 1992 Plaza
Restructuring, Plaza Associates and Plaza Funding restructured their
indebtedness through a prepackaged plan of reorganization under Chapter 11 of
the Bankruptcy Code.
The purpose of the 1992 Plaza Restructuring was to improve the amortization
schedule and extend the maturity of Plaza Associates' indebtedness by (i)
eliminating the sinking fund requirement on Plaza Funding's 12 7/8% Mortgage
Bonds, due 1998 (the "Original Plaza Bonds"), (ii) extending the maturity of
such indebtedness from 1998 to 2002, (iii) lowering the interest rate from 12
7/8% per annum to 12% per annum, (iv) reducing the aggregate principal amount
of the indebtedness under the Original Plaza Bonds and certain other
indebtedness from $250 million to $225 million and (v) eliminating certain
other indebtedness by reconstituting such debt in part as new bonds (the
"Successor Plaza Bonds") and in part as Stock Units (as defined). The 1992
Plaza Restructuring was necessitated by the inability to either generate cash
flow or obtain additional financing sufficient to make the scheduled sinking
fund payment on the Original Plaza Bonds. In connection with the 1992 Plaza
Restructuring, each holder of $1,000 principal amount of Original Plaza Bonds
and such other indebtedness received (i) $900 principal amount of Successor
Plaza Bonds, (ii) 12 Stock Units, each representing one share of Common Stock
and one share of Preferred Stock of Plaza Funding (the "Stock Units") and
(iii) cash payments of approximately $58.65, reflecting accrued interest.
On May 29, 1992, Plaza Funding, which theretofore had no interest in Plaza
Associates, received a 50% beneficial interest in TP/GP, Inc. ("Trump Plaza
GP"), and Plaza Funding and Trump Plaza GP were admitted as partners of Plaza
Associates. Plaza Funding also issued approximately three million Stock Units
to holders of the Original Plaza Bonds and certain other indebtedness.
Pursuant to the terms of Plaza Associates' partnership agreement, Plaza
Funding was issued a preferred partnership interest, which provided Plaza
Funding with
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partnership distributions designed to pay dividends on, and the redemption
price of, the Stock Units. Trump Plaza GP became the managing general partner
of Plaza Associates, and, through its Board of Directors, managed the affairs
of Plaza Associates. Trump Plaza GP was subsequently merged with and into
Plaza Funding, which became the managing general partner of Plaza Associates.
The Successor Plaza Bonds and the Stock Units were redeemed in 1993 out of
the proceeds of a refinancing designed to enhance Trump Plaza's liquidity and
to position the Trump Plaza for a subsequent deleveraging transaction. The
1993 refinancing included (i) the sale by Plaza Funding of $330 million in
aggregate principal amount of Plaza Notes and (ii) the sale by Trump AC of $60
million aggregate principal amount of PIK Notes and PIK Note Warrants to
acquire an aggregate of $12 million in principal amount of additional PIK
Notes. Upon consummation of the refinancing, Plaza Funding held a 1% equity
interest in Plaza Associates and Plaza Holding held a 99% equity interest.
THE 1991 TAJ RESTRUCTURING
During 1990 and 1991, Taj Associates experienced liquidity problems. Taj
Associates believes that these problems were attributable, in part, to an
overall deterioration in the Atlantic City gaming market, as indicated by
reduced rates of casino revenue growth for the industry for the two prior
years, aggravated by an economic recession in the Northeast and the Persian
Gulf War, as well as the risks inherent in the establishment of a new business
enterprise. Comparatively, excessive casino gaming capacity in Atlantic City
may also have contributed to Taj Associates' liquidity problems.
As a result of Taj Associates' liquidity problems, Taj Funding failed to
make its November 15, 1990 and May 15, 1991 interest payments on its Old Taj
Bonds, resulting in an event of default under the indenture with respect to
such Old Taj Bonds. During 1990 and 1991, Taj Associates also failed to pay
certain principal and interest installments on certain indebtedness due under
its loan with NatWest.
In order to alleviate its liquidity problems, during 1991, TTMC, Taj
Funding, Taj Associates and TTMI (together, the "Debtors") restructured their
indebtedness through the 1991 Taj Restructuring, which was a "prepackaged"
plan of reorganization under Chapter 11 of the Bankruptcy Code. At the time,
the Debtors believed that there was no alternative to their liquidity problems
other than filing petitions under the Bankruptcy Code. Taj Associates had been
unable to obtain additional financing, and Taj Funding was restricted from
amending the payment terms of the Old Taj Bonds outside of a case under the
Bankruptcy Code without the unanimous consent of the holders thereof. The
purpose of the 1991 Taj Restructuring was to improve the amortization schedule
and extend the maturity of Taj Associates' indebtedness by reducing and
deferring the Debtors' annual debt service requirements by (i) restructuring
Taj Associates' and affiliated entities' long-term indebtedness to NatWest,
First Fidelity and Bankers Trust and (ii) issuing the Taj Bonds with an
overall lower rate of interest as compared with the Old Taj Bonds.
Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj
Associates issued to the holders of the Old Taj Bonds a general partnership
interest representing 49.995% of the equity of Taj Associates. Such holders in
turn contributed such partnership interest to Taj Holding. Taj Funding and Taj
Holding also issued the Units to the holders of the Old Taj Bonds. As part of
the 1991 Taj Restructuring, TM/GP, which has no other assets, received a
49.995% partnership interest in Taj Associates from Taj Holding. Trump also
contributed to Taj Holding a 50% ownership interest in TTMC, which owns a .01%
interest in Taj Associates, in exchange for the Taj Holding Class C Common
Stock, as described below.
At the time of these transfers, Taj Holding issued 1,350,000 shares of Taj
Holding Class A Common Stock and 729,458 shares of Taj Holding Class B Common
Stock to the holders of the Old Taj Bonds and 1,350,000 shares of Taj Holding
Class C Common Stock to Trump. In accordance with the terms of the Taj Bond
Indenture, a portion of the interest on the Taj Bonds may be paid in
additional Taj Bonds. At May 15, 1992, 1993, 1994 and 1995, 8,844 Units
comprised of $8,844,000 of Taj Bonds and 8,844 shares of Taj Holding Class B
Common Stock, 14,579 Units comprised of $14,579,000 of Taj Bonds and 14,579
shares of Taj Holding Class B Common
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Stock, 12,249 Units comprised of $12,249,000 of Taj Bonds and 12,249 shares of
Taj Holding Class B Common Stock and 15,112 Units comprised of $15,112,000 of
Taj Bonds and 15,112 shares of Taj Holding Class B Common Stock, respectively,
were issued in lieu of the payment of a portion of the cash interest on the
outstanding Taj Bonds.
CERTAIN INDEBTEDNESS
THE COMPANY
The Mortgage Notes. Trump AC is issuing in an underwritten offering
approximately $1,100,000,000 aggregate principal amount of Mortgage Notes with
a maturity of ten years. The actual amounts raised will depend upon a number
of factors, including market conditions, and other factors beyond the control
of the Company's and Trump AC's management. The Mortgage Notes include
restrictive covenants prohibiting or limiting, among other things, the sale of
assets, the making of acquisitions and other investments, capital
expenditures, the incurrence of additional debt and liens and the payment of
dividends and distributions. Non-compliance could result in the acceleration
of such indebtedness. In addition, the Mortgage Notes contain a requirement
that Trump AC offer to purchase each holder's Mortgage Notes at 101% of the
principal amount thereof, together with accrued and unpaid interest to the
date of repurchase, upon a "Change of Control." The Mortgage Note Indenture
will define a "Change of Control" to include events similar to those
constituting a "Change of Control" under the Senior Note Indenture (generally,
an acquisition by a person or group of affiliated persons other than Trump of
more than a 35% voting interest in the Company, unless Trump owns more than
such percentage). The failure by THCR Holdings to maintain 100% beneficial
ownership of Trump AC will also constitute a Mortgage Note "Change of
Control."
Senior Notes. THCR Holdings and THCR Funding (the "THCR Obligors") are the
issuers of $155 million principal amount of Senior Notes. The Senior Notes are
the joint and several obligations of the THCR Obligors. Interest on the Senior
Notes is payable semiannually in arrears. In connection with the Merger
Transaction, the THCR Obligors will solicit from the holders of Senior Notes
the waiver of, and the consent to modify, certain provisions of the Senior
Note Indenture.
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.
The obligations of the THCR Obligors under the Senior Note Indenture are
secured by (1) an assignment and pledge to the trustee under the Senior Note
Indenture (the "Senior Note Trustee") of (a) 99% of the general partnership
interests in Plaza Associates, (b) 100% of the capital stock of Plaza Funding
(the holder of the remaining 1% general partnership interest in Plaza
Associates, which 1% is pledged exclusively for the benefit of the holders of
the Plaza Notes until the Plaza Note Purchase, at which time such interest
will be pledged for the exclusive benefit of the holders of the Senior Notes),
(c) 100% of the general partnership interests in Trump AC, (d) 100% of the
capital stock of Plaza Holding Inc., a direct wholly owned subsidiary of THCR
Holdings which owns a 1% general partnership interest in Trump AC, (e) 100% of
the capital stock of Trump Indiana, (f) 100% of the capital stock of THCR
Funding, (g) other equity interests issued from time to time by THCR Holdings
or any of its Subsidiaries (as defined in the Senior Note Indenture) and (h)
promissory notes issued by THCR Holdings or any of its Subsidiaries, excluding
Unrestricted Subsidiaries (as defined in the Senior Note Indenture) from time
to time directly owned or acquired by THCR Holdings; (2) certain remaining net
proceeds from the June 1995 Offerings; and (3) certain proceeds from time to
time received, receivable or otherwise distributed in respect of the assets
described in clauses (1) and (2) above (collectively, the "Senior Note
Collateral"). The security interests in the Senior Note Collateral are first
priority security interests and are exclusive except to the extent required by
the Plaza Note Indenture to equally and ratably secure the Plaza Notes (prior
to the retirement of the Plaza Notes) with respect to any of the direct or
indirect equity interests in Plaza
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Associates, Plaza Funding, Trump AC and Plaza Holding Inc. (as described
below). Any equity interests in Subsidiaries of THCR Holdings which are
acquired by THCR Holdings will be assigned and pledged to the Senior Note
Trustee and the security interests granted in such equity interests will be
exclusive, first priority security interests.
PLAZA ASSOCIATES
The Plaza Notes, $330 million of which are outstanding, were issued by Plaza
Funding, with Plaza Associates providing a full and unconditional guaranty
thereof. In connection with the Merger Transaction, the Plaza Notes will be
retired. The Plaza Notes mature in 2001 and bear interest semiannually in
arrears. The Plaza Notes are subject to redemption at any time on or after
June 15, 1998, at the option of Plaza Funding or Plaza Associates, in whole or
in part, at the redemption prices set forth in the Plaza Note Indenture. In
addition, upon the occurrence of a Plaza Note Change of Control (as defined in
the Plaza Note Indenture), each holder of Plaza Notes may require Plaza
Funding or Plaza Associates to repurchase such holder's Plaza Notes at 101% of
the principal amount thereof, together with accrued and unpaid interest to the
date of repurchase.
Until the Plaza Note Purchase, Plaza Funding and Plaza Associates'
obligations under the Plaza Note Indenture are secured principally by (i) the
mortgage encumbering substantially all of Plaza Associates' assets (the "Plaza
Note Mortgage") (see "--Properties") and (ii) the pledge by Plaza Funding of
its 1% general partnership interest in Plaza Associates and, equally and
ratably with the Senior Notes to the extent required by the Plaza Note
Indenture, by a pledge of (x) 100% of the general partnership interest in
Trump AC, (y) Trump AC'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 Trump AC) (the "Plaza Note Security"). Following
the Plaza Note Purchase in connection with the Merger Transaction, the Plaza
Note Security will be released and (i) subject to clause (ii), Plaza
Associates' assets, together with Taj Associates' assets, will secure the
Mortgage Notes and (ii) the Senior Notes will have an exclusive security
interest in 100% of the equity of all of THCR Holdings' direct or indirect
Subsidiaries (as defined in the Senior Note Indenture).
In addition to the foregoing, Plaza Associates' long-term indebtedness
includes approximately $3.0 million of outstanding mortgage notes as of
December 31, 1995, described under "--Properties."
TAJ ASSOCIATES
Taj Bonds. In connection with the 1991 Taj Restructuring, Taj Funding and
Taj Holding issued Units, each of which was comprised of $1,000 principal
amount of Taj Bonds and one share of Taj Holding Class B Common Stock.
Pursuant to the Taj Bond Indenture, Taj Funding may issue up to $860 million
of Taj Bonds. On October 4, 1991, at the time the Units were issued, the
principal amount of Taj Bonds issued was $729,458,000.
As of December 31, 1995, the principal amount of Taj Bonds issued was
$780,242,000. The Taj Bonds have a stated maturity date of November 15, 1999.
The Taj Bonds bear interest at 11.35% per annum. Interest on the Taj Bonds is
due semi-annually on each November 15 and May 15. Interest on the Taj Bonds
must be paid in cash on each interest payment date at a rate of 9.375% per
annum, and, in addition, effective May 15, 1992, and annually thereafter, an
additional amount of interest in cash or additional Taj Bonds or a combination
thereof, is payable in an amount to increase the interest paid to 11.35% per
annum. The obligations of Taj Funding to pay the principal of, premium, if
any, and interest on the Taj Bonds are guaranteed by Taj Associates. The Taj
Bonds are secured by an assignment by Taj Funding to the trustee under the Taj
Bond Indenture (the "Taj Bond Trustee") of a promissory note, dated as of
October 4, 1991, issued by Taj Associates to Taj Funding (the "Taj Bond
Partnership Note") in a principal amount of $675 million with payment terms
substantially similar to the payment terms of the Taj Bonds, which is in turn
secured by an amended mortgage, dated as of October 4, 1991, by Taj Associates
as mortgagor and Taj Funding as mortgagee, securing payment of the Taj Bond
Partnership Note, as amended to reflect the terms of the Taj Bonds (the
"Amended Taj Mortgage"), which has been assigned to the Taj Bond Trustee and
encumbers Taj Associates' interest in the Taj Mahal and
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substantially all of the other assets of Taj Associates, excluding certain
furniture, furnishings, fixtures, machinery and equipment which is subject to
the lien of the NatWest Loan. In addition, the Taj Bond Partnership Note is
secured by a second, subordinated lien on all the real estate owned by Realty
Corp. Moreover, Taj Associates has acquired an option to purchase the real
estate owned by Realty Corp., and such option has been assigned to the Taj
Bond Trustee as security for the Taj Bonds.
The principal and accrued and unpaid interest on the outstanding Taj Bonds
will be paid in full in connection with the Merger Transaction. Concurrently
with the retirement of the Taj Bonds, the outstanding shares of Taj Holding
Class B Common Stock will be redeemed in accordance with their terms, at a
redemption price of $.50 per share.
NatWest Loan. On November 3, 1989, Taj Associates entered into the NatWest
Loan, which provided financing of $50 million for certain items of furniture,
fixtures and equipment installed in the Taj Mahal. On October 4, 1991, in
connection with the 1991 Taj Restructuring, the NatWest Loan was amended in
order to, among other things, modify the interest rate and other payment
terms.
As of December 31, 1995, the outstanding principal amount outstanding under
the NatWest Loan was $44,944,000, and the interest rate was 9.375% per annum.
Principal and interest on the NatWest Loan are payable as follows:
(i) on the last business day of each month until the earlier of the last
business day of October 1999 or the date the NatWest Loan, together with
all interest thereon, is paid in full, the sum of $416,667, to be applied
first in respect of accrued interest on the NatWest Loan and thereafter, to
the extent available, in reduction of the principal of the NatWest Loan;
provided, however, up to $525,000 of such payments received by NatWest in
any year shall be paid to either First Fidelity or Bankers Trust for
application by First Fidelity in payment of obligations of Taj Associates
to First Fidelity, and by Bankers Trust on behalf of Taj Associates on
behalf of TTMI in payment of interest on the TTMI Note. Such amounts paid
by NatWest shall not have been applied by NatWest in payment of the
principal of, interest on or any other sums due in respect of the NatWest
Loan or otherwise payable to NatWest;
(ii) on May 15 of each year (if any of the principal of or interest on
the NatWest Loan is then outstanding), commencing on May 15, 1992 to and
including May 15, 1999, an amount (the "EACF Payment") equal to 16.5% (or,
if the First Fidelity Loan shall have been paid in full on or prior to any
such May 15, 20%) of Excess Available Cash Flow (as defined in the Taj Bond
Indenture) for the preceding calendar year in excess of the Additional
Amount (as defined in the Taj Bond Indenture) payable on such May 15 (such
remaining Excess Available Cash Flow, the "Remaining EACF Amount"), if any,
to be applied first in reduction of then accrued but unpaid interest on and
then to principal of the NatWest Loan; and
(iii) on November 15, 1999 the outstanding principal of and all accrued
but unpaid interest on the NatWest Loan.
The NatWest Loan is secured by a first priority lien on the furniture,
fixtures and equipment acquired with the proceeds of the NatWest Loan plus any
after-acquired furniture, fixtures and equipment that replaces such property,
or of the same type; provided, however, that the NatWest Loan may be
subordinated to a lien to secure purchase money financing of such after-
acquired property which does not exceed 50% of the purchase price of such
after-acquired property.
Upon the occurrence of an event of default under the NatWest Loan,
including, without limitation, the sale of any real estate by Realty Corp. for
less than the release price set forth in the First Fidelity Loan (as defined
below) without the prior written consent of NatWest, NatWest may accelerate
any and all indebtedness outstanding under the NatWest Loan.
Taj Associates will satisfy the NatWest Loan in connection with the Merger
Transaction.
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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 December 31, 1995, the principal amount outstanding on the First Fidelity
Loan was approximately $78 million. Unpaid principal and accrued interest on
the First Fidelity Loan is due and payable on November 15, 1999, unless
otherwise extended in connection with the extension of the maturity of the Taj
Bonds.
Taj Associates currently leases the Specified Parcels from Realty Corp., a
corporation wholly owned by Trump, pursuant to an Amended and Restated Lease
Agreement, dated as of October 4, 1991 (the "Specified Parcels Lease").
Pursuant to the Specified Parcels Lease, Taj Associates is obligated to pay
Realty Corp. $3.3 million plus 3.5% of the Remaining EACF Amount per year.
Such annual payment, however, is reduced by (i) all of the Base Fees (as
defined therein) and the first $75,000 of the Incentive Fees (as defined
therein) payable to Trump pursuant to the Taj Services Agreement which are
each assigned by Trump to First Fidelity (which amounts were $575,000 in 1995)
and (ii) the portion of monies payable by Taj Associates to NatWest to be
remitted to First Fidelity (which amounts were $525,000 in 1995). The
Specified Parcels Lease expires on December 31, 2023; however, the lease may
be terminated prior to such date following a foreclosure or similar proceeding
on the Specified Parcels by First Fidelity, the holder of a first mortgage
lien on the Specified Parcels which secures the First Fidelity Loan (the
"First Fidelity Mortgage") or any other mortgagee thereof.
The Specified Parcels Lease provides that, upon payment of the First
Fidelity Loan, and upon discharge of the First Fidelity Mortgage, Taj
Associates may purchase the Specified Parcels for ten dollars. Payment of the
First Fidelity Loan is guaranteed by a guarantee (limited to any deficiency in
the amount owed under the First Fidelity Loan when due, up to a maximum of $30
million) by Taj Associates (the "Taj Associates-First Fidelity Guarantee"), a
personal guarantee by Trump (pursuant to which First Fidelity has agreed to
forbear from asserting any personal claim with respect thereto in excess of
approximately $19.2 million) (the "Trump-First Fidelity Guarantee") and
limited recourse guarantees by TTMC (the "TTMC-First Fidelity Guarantee") and
TTMI (as amended, the "TTMI-First Fidelity Guarantee" and, together with the
Trump-First Fidelity Guarantee and the TTMC-First Fidelity Guarantee, the
"Other First Fidelity Guarantees"). The Other First Fidelity Guarantees are
secured by pledges by Trump of 62.5% of his Taj Holding Class C Common Stock,
TTMC's Common Stock and TTMI's Common Stock and all of his shares of Realty
Corp.'s Common Stock, and pledges by TTMI and TTMC of 62.5% and 31.25%,
respectively, of their equity and financial interests as general partners in
Taj Associates (all such interests pledged to First Fidelity as security for
the Other First Fidelity Guarantees are referred to herein as the "Other First
Fidelity Guarantee Collateral"). First Fidelity's recourse under the TTMC-
First Fidelity Guarantee and the TTMI-First Fidelity Guarantee is limited to
the collateral pledged by TTMC and TTMI, respectively.
Upon the satisfaction in full of the obligations due under the First
Fidelity Loan at a negotiated amount of $50 million and 500,000 shares of
Common Stock, Taj Associates will purchase the Specified Parcels from Realty
Corp. In connection therewith, First Fidelity will (i) release and discharge
Realty Corp. from the First Fidelity Loan and release its lien on the
Specified Parcels, (ii) release Taj Associates from the Taj Associates-First
Fidelity Guarantee, (iii) release each of Trump, TTMC and TTMI from their
respective obligations under the Other First Fidelity Guarantees and (iv)
release its lien on the Other First Fidelity Guarantee Collateral. In
addition, the purchase of the Specified Parcels will eliminate Taj Associates'
current obligations under the Specified Parcels Lease and the termination
rights with respect to the Specified Parcels Lease, thereby facilitating the
Taj Mahal Expansion by securing the future use of the Specified Parcels by Taj
Associates. The holders of the Mortgage Notes will have a first priority
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
of Trump, including Bankers Trust, as security for certain of Trump's personal
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indebtedness. On October 4, 1991, in connection with the 1991 Taj
Restructuring and in order to facilitate the reorganization of Taj Associates
and certain of its affiliates, the Old Taj Associates Note was canceled and,
in lieu thereof, TTMI, a corporation wholly owned by Trump which was formed
for the purpose of holding a general partnership interest in Taj Associates,
executed the TTMI Note, a promissory note payable to Trump in the principal
amount of $27,188,000. At such time, in order to secure the Trump
Indebtedness, Trump pledged to certain lenders, including Bankers Trust, his
right, title and interest in the TTMI Note. As additional security for the
Trump Indebtedness, Trump pledged to Bankers Trust and certain other lenders
all of his shares of Taj Holding Class C Common Stock, TTMC's Common Stock and
TTMI's Common Stock, which pledges are subordinate, in part, to the liens of
First Fidelity in such collateral. In addition, TTMI and TTMC have each
guaranteed the repayment of the Trump Indebtedness, which limited recourse
guarantees are secured by pledges by TTMI and TTMC to Bankers Trust and
certain other lenders of 100% and 50%, respectively, of their equity and
financial interests as general partners in Taj Associates, which pledges are
subordinate, in part, to the liens of First Fidelity in such collateral.
In connection with the Merger Transaction, Bankers Trust will receive $10
million from Taj Associates in respect of certain of the Trump Indebtedness.
Upon such payment, Bankers Trust will release (i) its lien on the TTMI Note,
(ii) its liens on the remaining collateral pledged by Trump to Bankers Trust
and (iii) TTMI and TTMC from their respective obligations as guarantors of
certain of Trump's personal indebtedness and the liens securing such
obligations. See "Underwriting." All other liens in respect of the foregoing
in favor of other lenders holding a portion of the Trump Indebtedness will be
released at such time.
Working Capital Facility. On November 14, 1991, Taj Associates entered into
the Working Capital Facility with Foothill Capital Corporation ("Foothill") in
the amount of $25 million, which is secured by a lien on Taj Associates'
assets senior to the lien of the Taj Bond Mortgage securing the Taj Bonds. On
September 1, 1994, Taj Associates and Foothill extended the maturity of the
Working Capital Facility to November 13, 1999, in consideration of
modifications of the terms thereof. Borrowings under the Working Capital
Facility bear interest at a rate equal to the prime lending rate plus 3%, with
a minimum of 0.666% per month. The agreement further provides for a .75%
annual fee and a .50% unused line fee. As of December 31, 1995, no amounts
were outstanding under the Working Capital Facility.
The occurrence of any of the following events constitutes an event of
default under the Working Capital Facility: (i) failure to pay principal,
interest, fees, charges or reimbursements due to Foothill, when due and
payable or when declared due and payable; (ii) failure or neglect to perform
certain duties and covenants under the agreement; (iii) any material portion
of Taj Associates' assets is attached, seized, subjected to a writ or distress
warrant, levied upon, or comes into the possession of any judicial officer or
assignee and such attachment or writ is not dismissed within 60 days; (iv) an
insolvency proceeding is commenced by Taj Associates; (v) an insolvency
proceeding is commenced against Taj Associates, and is not dismissed within 60
days; (vi) Taj Associates is enjoined, restrained, or in any way prevented by
certain governmental agencies from continuing to conduct all or any material
part of its business affairs; (vii) Taj Associates fails to pay certain liens,
levies or assessments on the payment date thereof; (viii) certain judgments or
claims in excess of $500,000 become a lien or encumbrance upon a material
portion of Taj Associates' assets; (ix) Taj Associates defaults in payments
owing to NatWest or the Taj Bond Trustee; (x) Taj Associates makes
unauthorized payments on debt subordinated to the Working Capital Facility;
(xi) misrepresentations are made by Taj Associates to Foothill in any
warranty, representation, certificate or report; (xii) certain ERISA
violations occur which could have a material adverse effect on the financial
condition of Taj Associates; or (xiii) Taj Associates incurs or enters into a
commitment to incur any indebtedness which is secured by Taj Associates assets
subject to the Working Capital Facility.
Upon the occurrence of an event of default, Foothill may, at its election,
without notice of its election and without demand, do any one or more of the
following: (i) declare all obligations immediately due and payable; (ii) cease
advancing money or extending credit; (iii) terminate the Working Capital
Facility without affecting Foothill's rights and security interest in Taj
Associates' assets; (iv) settle disputes and claims directly with certain Taj
Associates' debtors; (v) make such payments and perform such acts as Foothill
deems necessary to protect
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its security interests; (vi) set off amounts owed under the Working Capital
Facility by other Taj Associates' accounts or deposits held by Foothill; (vii)
prepare for sale and sell, after giving proper notice, Taj Associates' assets
securing the Working Capital Facility in a commercially reasonable manner;
(viii) exercise its rights under certain mortgage and assignment documents
between Taj Associates and Foothill; or (ix) credit bid and purchase at any
public sale subject to the provisions of the Casino Control Act; or (x) any
deficiency which exists after 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.
In connection with the Merger Transaction, Taj Associates will terminate the
Working Capital Facility and the Company anticipates replacing it with a new
$25 million facility which would be available to Trump AC and its
subsidiaries, although there can be no assurance that a replacement facility
could be obtained on acceptable terms, if at all. See "Risk Factors--High
Leverage and Fixed Charges" and "--Risk in Refinancing and Repayment of
Indebtedness; Need for Additional Financing."
LEGAL PROCEEDINGS
PLAZA ASSOCIATES
General. Plaza Associates, its partners, certain members of its former
Executive Committee, and certain of its employees, have been involved in
various legal proceedings. In general, Plaza Associates has agreed to
indemnify such persons and entities against any and all losses, claims,
damages, expenses (including reasonable costs, disbursements and counsel fees)
and liabilities (including amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties) incurred by them in said legal
proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to vigorously contest any future
proceedings.
Trump Plaza East. From monies made available to it, the CRDA is required to
set aside $100 million for investment in hotel development projects in
Atlantic City undertaken by casino licensees which result in the construction
or rehabilitation of at least 200 hotel rooms by December 31, 1996. These
investments are to fund up to 35% of the cost to casino licensees of such
projects. See "Regulatory Matters--New Jersey Gaming Regulations--Investment
Alternative Tax Obligations." Plaza Associates made application for such
funding to the CRDA with respect to its proposed construction and
rehabilitation of the Trump Plaza East hotel rooms and related Boardwalk and
second level facilities, proposed demolition of an existing hotel expansion
structure attached thereto and development of an appurtenant public park,
roadway and parking area on the site thereof and proposed acquisition of the
entire project site.
The CRDA, in rulings through January 10, 1995, approved the hotel
development project and, with respect to same, reserved to Plaza Associates
the right to take investment tax credits in an amount equal to 27% ($14.1
million) of $52.4 million of eligible estimated project development costs. In
October 1994, following a September 1994 CCC ruling authorizing same, Plaza
Associates advised the CRDA of its intention to, without affecting either the
project development costs or the tax credits, locate approximately 15,000
square feet of casino space on the second floor of Trump Plaza East and was
advised by the CRDA that its proposed use of such space would not affect the
approval of the hotel development project.
As part of its approval and on the basis of its powers of eminent domain,
the CRDA, during 1994, initiated five condemnation proceedings in the Superior
Court of New Jersey, Atlantic County, to acquire certain small parcels of land
within the project site. The defendants in three of those matters, with
respect to parcels which impact only the public park and parking areas, Casino
Reinvestment Development Authority v. Banin, et al., Docket No. ATL-L-2676-94,
Casino Reinvestment Development Authority v. Sabatini, et al., Docket No.
ATL-L-2976-94, and Casino Reinvestment Development Authority v. Coking, et
al., Docket No. ATL-L-2974-94, asserted numerous defenses to the condemnation
complaints and filed counterclaims against CRDA and third-party complaints
against Plaza Associates alleging, inter alia, an improper exercise of CRDA
power for private purposes and conspiracy between the CRDA and Plaza
Associates. After the filing of briefs and a hearing, a New Jersey Superior
Court judge issued an opinion that the Trump Plaza East acquisition and
renovation was
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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, 1995, the same judge dismissed the
counter claims and third-party complaints without prejudice. Notices of appeal
were filed with the New Jersey Superior Court, Appellate Division, on April
21, 1995 by the CRDA and on April 24, 1995 by Plaza Associates. On May 1,
1995, the Casino Association of New Jersey on behalf of its members, 11 of the
12 Atlantic City casino hotels, filed a motion to intervene or, in the
alternative, for leave to appear as an amicus curiae. Briefs have been filed
by all parties and the matter has been scheduled for oral argument during the
week beginning April 15, 1996.
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. The OLS opinion
cannot be offered by Plaza Associates and the CRDA in support of their
position on the current appeal, however, because it was not considered by the
trial court when it rendered its opinion.
In a related matter, Vera Coking, et al. v. Atlantic City Planning Board and
Trump Plaza Associates, Docket No. ATL-L-339-94, the Atlantic City Planning
Board's approval of the Trump Plaza East renovation was challenged on various
grounds. In July 1994, a New Jersey Superior Court judge upheld the Atlantic
City Planning Board approvals with respect to the hotel renovation component
of Trump Plaza East and the new roadway but invalidated the approval of the
valet parking lot and the public park because Plaza Associates lacked site
control with respect to the small parcels of land CRDA sought to condemn.
Plaintiff appealed the court's decision upholding the approval of the hotel
renovation and new roadway and Plaza Associates cross-appealed the court's
decision invalidating the approval of the public park and valet parking area.
Plaza Associates withdrew its cross-appeal and plaintiff's appeal is pending
in the Superior Court of New Jersey, Appellate Division, Docket No. A-1511-94-
T1. Plaza Associates received land-use approval for and has constructed the
valet parking area after deletion of the small parcels.
In another related matter, Josef Banin and Vera Coking v. Atlantic City
Planning Board and Trump Plaza Associates, Docket No. L-2188-95, the land-use
approval for this area has been challenged on various grounds. Plaza
Associates filed its answer to the complaint denying the allegations of the
complaint. The land-use approval involves certain minor amendments to the
previously granted site plan approvals for the hotel renovation component of
Trump Plaza East and the new roadway. The amendments included certain design
changes with respect to the Trump Plaza East and certain design changes to the
roadway. The amendments did not require any variance relief and the amendments
fully complied with the Land Use Ordinance of the City of Atlantic City. The
plaintiffs allege the Atlantic City Planning Board acted in an arbitrary and
capricious manner in approving the amendments and further argue that the
chairperson of the Atlantic City Planning Board had a conflict of interest in
hearing the matter because of her status as an employee of the CRDA, the
entity that had approved certain funding for the project. On January 26, 1996,
the New Jersey Superior Court upheld the approval of the amendment by the
Atlantic City Planning Board and rejected the plaintiffs' claim with respect
to the chairwoman's conflict of interest. The plaintiffs have filed a motion
to the New Jersey Supreme Court for reconsideration of its decision, which
motion is currently pending. The plaintiffs may thereafter appeal such
decision.
Penthouse Litigation. On April 3, 1989, BPHC Acquisition, Inc. and BPHC
Parking Corp. (collectively, "BPHC") filed a third-party complaint (the
"Complaint") against Plaza Associates and Trump. The Complaint arose in
connection with the action entitled Boardwalk Properties, Inc. and Penthouse
International Ltd. v. BPHC Acquisition, Inc. and BPHC Parking Corp., which was
instituted on March 20, 1989 in the New Jersey Superior Court, Chancery
Division, Atlantic County.
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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 are being filed.
No argument date has been set.
Other Litigation. Various legal proceedings are now pending against Plaza
Associates. The Company 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 the Company
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 the Company.
From time to time, Plaza Associates may be involved in routine
administrative proceedings involving allegations that it has violated certain
provisions of the Casino Control Act. However, management believes that the
final outcome of these proceedings will not, either individually or in the
aggregate, have a material adverse effect on the Company 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.
TRUMP INDIANA
On March 29, 1996, in the matter entitled Keshav D. Aggarwal, et al v.
Donald J. Trump, Trump Hotels & Casino Resorts, Inc., Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Indiana, Inc., the Indiana residents with
whom Trump Indiana had discussions regarding the potential purchase of non-
voting stock of Trump Indiana filed a complaint with respect to this matter in
the United States District Court, Southern
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District of Indiana, seeking, among other things, compensatory and punitive
damages in an unspecified amount, and that the court order the defendants to
transfer ownership of 7.5% of Trump Indiana to the plaintiffs. The Company and
the other defendants intend to vigorously contest the allegations against
them. Further, the Company believes that the resolution of these claims will
not have a material adverse effect on the Company. See "Business--Indiana
Riverboat."
TAJ ASSOCIATES
General. Taj Holding, TM/GP, TTMI and TTMC are not parties to any material
legal proceedings. Taj Associates, its partners, certain members of its former
Executive Committee, Taj Funding, TTMI and certain of their employees are or
were involved in various legal proceedings, some of which are described below.
Taj Associates 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.
Atlantic City Lease Agreement. On March 29, 1990, Taj Associates entered
into a lease agreement with the City of Atlantic City for a term of seven
years, subject to the express, prior approval of NJDEP to continue use of the
land beyond April 2, 1992, pursuant to which Taj Associates leased a parcel of
land containing approximately 1,300 spaces for employee intercept parking at a
cost of approximately $1 million. In addition, Taj Associates has expended in
excess of $1.4 million in improving the site. The permit under which the lease
is operated was issued by NJDEP on December 20, 1989 for five years and
contains several conditions, one of which required Taj Associates to find
another location "off-island" for employee parking by April 2, 1992. NJDEP
extended this condition for two successive one-year periods through April 2,
1994. On November 14, 1994, as a result of the non-renewal of the permit, Taj
Associates notified Atlantic 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 TCA sufficient to
meet its employee parking requirements. Atlantic City has indicated in letters
to Taj Associates that it contests the cancellation of the lease agreement and
claims certain extensions to the permit apply, to which Taj Associates does
not agree. No legal proceedings have been commenced by Atlantic City to date.
There can be no assurances that Atlantic City will not institute or pursue
such an action.
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.
Taj Associates is also a party to a routine administrative proceeding
involving allegations that it has violated certain provisions of the Casino
Control Act. Taj Associates believes that the final outcome of this proceeding
will not have a material adverse effect on Taj Associates or on its ability to
otherwise retain or renew any casino or other licenses required under the
Casino Control Act for the operation of the Taj Mahal. At this juncture, the
prospects of a favorable outcome in the action described above cannot be
assessed. Taj Associates intends to vigorously contest the allegations made
against it.
COMPETITION
Competition in the Atlantic City casino hotel market is intense. The
Atlantic City Properties 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." The Atlantic
City Properties are each 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 Atlantic City Properties, all of which compete
for patrons. Trump Plaza and the Taj Mahal primarily compete with other
Atlantic City casinos by, among other things, providing superior
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products and facilities, premier locations, name recognition and targeted
marketing strategies. See "--Atlantic City Marketing Strategy" and "--
Facilities and Amenities."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 the Company is not 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 the Company believes that the addition of
hotel capacity would be beneficial to the Atlantic City market generally,
there can be no assurance that such expansion would not be materially
disadvantageous to either of the Atlantic City Properties. There also can be
no assurance that the Atlantic City development projects which are planned or
underway will be completed.
The Atlantic City Properties also compete, or will compete, with facilities
in the northeastern and mid- Atlantic regions of the United States at which
casino gaming or other forms of wagering are currently, or in the future may
be, authorized. To a lesser extent, the Atlantic City Properties face
competition from gaming facilities nationwide, including land-based, cruise
line, riverboat and dockside casinos located in Colorado, Illinois, Indiana,
Iowa, Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), the Bahamas, Puerto Rico and other locations inside and outside the
United States, and from other forms of legalized gaming in New Jersey and in
its surrounding states such as lotteries, horse racing (including off-track
betting), jai alai, bingo and dog racing, and from illegal wagering of various
types. New or expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming markets. In
September 1995, New York introduced a keno lottery game, which is played on
video terminals that have been set up in approximately 1,800 bars, restaurants
and bowling alleys across the state. In addition to competing with other
casino hotels in Atlantic City and elsewhere, by virtue of their proximity to
each other and the common aspects of certain of their respective marketing
efforts, including the common use of the "Trump" name, the Atlantic City
Properties 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 or the
Taj Mahal will operate to the competitive detriment of the other.
The Company 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. Although northern
Indiana is part of the greater Chicago metropolitan market, which is one of
the most successful new gaming markets in the United States, the Indiana
Riverboat may be more dependent on patrons from northern Indiana than its
Illinois competitors, and the propensity of these patrons to wager cannot be
predicted with any degree of certainty. In addition to competing with Barden's
riverboat at the Buffington Harbor site, the Indiana Riverboat 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).
The Company believes that competition in the gaming industry, particularly
the riverboat and dockside gaming industry, is based principally on the
quality and location of gaming facilities, the effectiveness of marketing
efforts, and customer service and satisfaction. Although management believes
that the location of the Indiana Riverboat will allow the Company to compete
effectively with other casinos in the geographic area surrounding its casino,
the Company expects competition in the casino gaming industry to be intense as
more casinos are opened and new entrants into the gaming industry become
operational. Furthermore, new or expanded operations by other persons can be
expected to increase competition for existing and future operations and could
result in a saturation of the Great Lakes Market.
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The Indiana Riverboat will seek a competitive advantage primarily based upon
its superior location, including its proximity to and direct access from
Chicago, extensive parking facilities, name recognition, a superior gaming
vessel and gaming experience, and targeted marketing strategies. See "--
Indiana Riverboat." In addition, a casino opened during 1994 in Windsor,
Ontario, across the river from Detroit, and Detroit is considering several
proposals for casinos in its downtown area. Although the Company believes that
there is sufficient demand in the market to sustain the Indiana Riverboat,
there can be no assurance to that effect. Legislation has also been introduced
on numerous occasions in recent years to expand riverboat gaming in Illinois,
including by authorizing new sites in the Chicago area with which the Indiana
Riverboat would compete. The Company understands that there have been recent
discussions in Illinois regarding possible legislation to permit dockside
gaming and/or increase the gaming position limitations. There can be no
assurance that either Indiana or Illinois, or both, will not authorize
additional gaming licenses, including for the Chicago metropolitan area. See
"Risk Factors--The Indiana Riverboat."
In addition, the Atlantic City Properties 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 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 the Atlantic City Properties and
the Indiana Riverboat. In March 1996, the United States Supreme Court struck
down a provision of IGRA which allowed Native American tribes to sue states in
federal court for failing to negotiate gaming compacts in good faith. The
Company cannot predict the impact of this decision on the ability of Native
American tribes to negotiate compacts with the states.
In 1991, the Mashantucket Pequot Nation opened Foxwoods Casino Resort
("Foxwoods"), a casino facility in Ledyard, Connecticut, located in the far
eastern portion of such state, an approximately three-hour drive from New York
City and an approximately two and one-half hour drive from Boston, which
currently offers 24-hour gaming and contains over 4,000 slot machines. The
Mashantucket Pequot Nation has announced various expansion plans, including
its intention to build another casino in Ledyard together with hotels,
restaurants and a theme park. In addition, the Mohegan Nation has commenced
construction of a casino resort to be located ten miles from Foxwoods. The
Mohegan Nation resort which will be built and managed by a joint venture
managed by Sun International Hotels Ltd., is scheduled to have approximately
75% of the gaming capacity of Foxwoods and is scheduled to open in October
1996. In addition, the Eastern Pequots are seeking formal recognition as a
Native American tribe for the purpose of opening a casino. There can be no
assurance that any continued expansion of gaming operations by the
Mashantucket Pequot Nation or that any commencement of gaming operations by
the Mohegan Nation or Eastern Pequots would not have a materially adverse
impact on Trump Plaza's or the Taj Mahal's operations.
A group in New Jersey calling itself the "Ramapough Indians" has applied to
the U.S. Department of the Interior to be federally recognized as a Native
American tribe, which recognition would permit it to require the State of New
Jersey to negotiate a gaming compact under IGRA. In 1993, the Bureau of Indian
Affairs denied the Ramapough Indians federal recognition. The Ramapough
Indians' appeal of this decision has been denied. Similarly, a group in
Cumberland County, New Jersey calling itself the "Nanticoke Lenni Lenape"
tribe has filed a notice of intent with the Bureau of Indian Affairs seeking
formal federal recognition as a Native American tribe. Also, it has been
reported that a Sussex County, New Jersey businessman has offered to donate
land he owns there to the Oklahoma-based Lenape/Delaware Indian Nation which
originated in New Jersey and already has federal recognition but does not have
a reservation in New Jersey. The Lenape/Delaware Indian Nation has signed an
agreement with the town of Wildwood, New Jersey to open a casino; however, the
plan requires federal and state approval in order to proceed. In July 1993,
the Oneida Nation opened a casino featuring 24-hour table gaming and
electronic gaming systems, but without slot machines, near Syracuse, New York,
and has announced an intention to open expanded gaming facilities.
Representatives of the St. Regis Mohawk Nation signed a gaming compact with
New York State officials for the opening of a casino, without slot machines,
in the northern portion of the state close to the Canadian border. The St.
Regis Mohawks have also announced their intent to open a casino at the
Monticello Race Track in the Catskill Mountains region of New York; however,
any Indian
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gaming operation in the Catskills is subject to the approval of the Governor of
New York. The Narragansett Nation of Rhode Island, which has federal
recognition, is seeking to open a casino in Rhode Island. The Gay Head
Wampanoag tribe is seeking to open a casino in New Bedford, Massachusetts.
Other Native American nations are seeking federal recognition, land and
negotiation of gaming compacts in New York, Pennsylvania, Connecticut and other
states near Atlantic City.
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. The Company understands that the Pokagon Band of Potawatomi
Indians have been in discussions with local authorities regarding a potential
land-based casino in northern Indiana, although the governor of Indiana has
stated that no compact negotiations are underway.
Legislation permitting other forms of casino gaming has been proposed, from
time to time, in various states, including those bordering New Jersey. Plans to
begin operating slot machines at race tracks in the state of Delaware are
underway, including the slot machines currently operating at the Dover Downs
and Delaware Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New York and
Pennsylvania, and New York City is considering a plan under which it would be
the embarking point for gambling cruises into international waters three miles
offshore. Several states are considering or have approved large scale land-
based casinos. Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and currently under
construction. The operations of Trump Plaza and the Taj Mahal could be
adversely affected by such competition, particularly if casino gaming were
permitted in jurisdictions near or elsewhere in New Jersey or in other states
in the Northeast. In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at Lincoln
Greyhound Park and Newport Jai Alai, where poker and blackjack have been
offered for over two years. Currently, casino gaming, other than Native
American gaming, is not allowed in other areas of New Jersey or in Connecticut,
New York or Pennsylvania. On November 17, 1995, a proposal to allow casino
gaming in Bridgeport, Connecticut, was voted down by that state's Senate. A New
York State Assembly plan has the potential of legalizing non-Native American
gaming in portions of upstate New York. Essential to this plan is a proposed
New York State constitutional amendment that would legalize gambling. To amend
the New York Constitution, the next elected New York State Legislature must
repass a proposal legalizing gaming and a statewide referendum, held no sooner
than November 1997, must approve the constitutional amendment. To the extent
that legalized gaming becomes more prevalent in New Jersey or other
jurisdictions near Atlantic City, competition would intensify. In particular, a
proposal has been introduced to legalize gaming in other locations, including
Philadelphia, Pennsylvania. In addition, legislation has from time to time been
introduced in the New Jersey State Legislature relating to types of statewide
legalized gaming, such as video games with small wagers. To date, no such
legislation, which may require a state constitutional amendment, has been
enacted. The Company is unable to predict whether any such legislation, in New
Jersey, Indiana, Illinois or elsewhere, will be enacted or whether, if passed,
it would have a material adverse impact on the Company.
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REGULATORY MATTERS
The following is only a summary of the applicable provisions of the Casino
Control Act of the State of New Jersey, the Riverboat Gambling Act of the
State of Indiana and certain other laws and regulations. It does not purport
to be a full description thereof and is qualified in its entirety by reference
to the New Jersey Casino Control Act, the Indiana Riverboat Gambling Act and
such other laws and regulations. Unless otherwise indicated, all references to
"Trump Plaza" include (a) Trump Plaza's main tower, including Trump Plaza East
(which operates pursuant to a casino license held by Plaza Associates) and (b)
Trump World's Fair (which will operate pursuant to a separate casino license
that is expected to be issued to Plaza Associates).
Each of the Company 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
casino license on May 14, 1984. On June 22, 1995, the CCC renewed Plaza
Associates' casino license through June 30, 1999. Management believes that a
casino license will ultimately be issued for Trump World's Fair, although
there can be no assurance that the CCC will issue this casino license or what
conditions may be imposed, if any, with respect thereto.
Casino Licensee. No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad discretion
with regard to the issuance, renewal, revocation and suspension of such
licenses and approvals, which are non-transferable. The qualification criteria
with respect to the holder of a casino license include its financial
stability, integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project; its good
character, honesty and integrity; and the sufficiency of its business ability
and casino experience to establish the likelihood of a successful, efficient
casino operation. The casino licenses currently held by Taj Associates and
Plaza Associates are renewable for periods of up to four years. The CCC may
reopen licensing hearings at any time, and must reopen a licensing hearing at
the request of the Division of Gaming Enforcement (the "Division").
Each casino license entitles the holder to operate one casino, which must
consist of a "single room." Further, no person may be the holder of a casino
license if the holding of such license will result in undue economic
concentration in Atlantic City casino operations by that person. On May 17,
1995, the CCC adopted a regulation defining the criteria for determining undue
economic concentration which codifies the content of existing CCC precedent
with respect to the subject. In April 1995, Plaza Associates petitioned the
CCC for certain approvals. In its May 18, 1995 declaratory rulings with
respect to such petition, the CCC, among other things, (i) determined that
Trump World's Fair is an approved hotel permitted to contain a maximum of
60,000 square feet of casino space, that the 40,000 square feet of casino
space therein is a "single room" and that its
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operation by Plaza Associates would not result in undue economic concentration
in Atlantic City casino operations; (ii) approved the operation of Trump
World's Fair by Plaza Associates under a separate casino license subject to an
application for and the issuance of such license and approved the proposed
easement agreements with respect to the proposed enclosed Atlantic City
Convention Center walkway; (iii) approved in concept the proposed physical
connection and integrated operation by Plaza Associates of Trump Plaza's main
tower, Trump Plaza East and Trump World's Fair; and (iv) determined that the
approved hotel comprised of the main tower and Trump Plaza East is permitted
to contain a maximum of 100,000 square feet of casino space. In addition, on
December 13, 1995, Plaza Associates received CCC authorization for 49,340
square feet of casino space at Trump World's Fair. A separate Plaza Associates
casino license with respect to Trump World's Fair would have a renewable term
of one year for each of its first three years and thereafter be renewable for
periods of up to four years. Plaza Associates has made application for such
separate casino license with respect to Trump World's Fair but there can be no
assurance that the CCC will issue this casino license or what conditions may
be imposed, if any, with respect thereto. In addition, Taj Associates will be
required to obtain a prior determination from the CCC that the operation of
the additional casino space created by the Taj Mahal Expansion will not
constitute undue economic concentration of Atlantic City casino operations,
and that such casino space, together with the Taj Mahal's existing casino
space, is a "single room" under the Casino Control Act. See "Risk Factors--
Atlantic City Properties 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 and all taxes and
fees imposed by the Casino Control Act or the CCC when due; to make necessary
capital and maintenance expenditures to insure that it has a superior first-
class facility of exceptional quality; and to pay, exchange, refinance or
extend debts which will mature or become due and payable during the license
term or otherwise manage such debts or any default of such debts. 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 "--Conservatorship."
The Company believes that, upon consummation of the Merger Transaction, Taj
Associates and Plaza Associates will each have, and will each continue to
have, adequate financial resources to meet the financial stability
requirements of the CCC for the foreseeable future. Taj Associates and Plaza
Associates plan to petition the CCC to approve the transactions contemplated
by the Merger Transaction. It is a condition to the consummation of the Merger
that the Merger Transaction is approved by the CCC.
Pursuant to the Casino Control Act, CCC Regulations and precedent, no entity
may hold a casino license unless each officer, director, principal employee,
person who directly or indirectly holds any beneficial interest or ownership
in the licensee, each person who in the opinion of the CCC has the ability to
control the licensee 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 the Working Capital Facility is not replaced and Plaza Associates' or
Taj Associates' cash position falls below $5.0 million for three consecutive
business days, Plaza Associates or Taj Associates, as the case may be, 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, Trump AC, Plaza Holding Inc., Plaza Funding, THCR
Holdings, THCR Funding or the Company is required to
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register with the CCC and meet the same basic standards for approval as a
casino licensee; provided, however, that the CCC, with the concurrence of the
Director of the Division, may waive compliance by a publicly-traded corporate
holding company with the requirement that an officer, director, lender,
underwriter, agent or employee thereof, or person directly or indirectly
holding a beneficial interest or ownership of the securities thereof,
individually qualify for approval under casino key employee standards so long
as the CCC and the Director of the Division are, and remain, satisfied that
such officer, director, lender, underwriter, agent or employee is not
significantly involved in the activities of the casino licensee, or that such
security holder does not have the ability to control the publicly-traded
corporate holding company or elect one or more of its directors. Persons
holding five percent or more of the equity securities of such holding company
are presumed to have the ability to control the company or elect one or more
of its directors and will, unless this presumption is rebutted, be required to
individually qualify. Equity securities are defined as any voting stock or any
security similar to or convertible into or carrying a right to acquire any
security having a direct or indirect participation in the profits of the
issuer.
Financial Sources. The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bear any relation to any
casino project, including holders of publicly-traded securities of an entity
which holds a casino license or is an entity qualifier, subsidiary or holding
company of a casino licensee (a "Regulated Company"), to qualify as financial
sources. In the past, the CCC has waived the qualification requirement for
holders of less than 15% of a series of publicly-traded mortgage bonds so long
as the bonds remained widely distributed and freely traded in the public
market and the holder had no ability to control the casino licensee. Taj
Associates and Plaza Associates will each petition the CCC for a determination
that the Mortgage Notes will be widely distributed and freely traded in the
public market. There can be no assurance, however, that the CCC will grant
such a petition, will determine that the holders of Mortgage Notes have no
ability to control either Taj Associates or Plaza Associates as a casino
licensee or will continue the practice of granting such waivers and, in any
event, the CCC may require holders of less than 15% of a series of debt to
qualify as financial sources even if not active in the management of the
issuer or casino licensee.
Institutional Investors. An institutional investor ("Institutional
Investor") is defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of Federal, state or
local public employees; any investment company registered under the Investment
Company Act of 1940, as amended; any collective investment trust organized by
banks under Part Nine of the Rules of the Comptroller of the Currency; any
closed end investment trust; any chartered or licensed life insurance company
or property and casualty insurance company; any banking and other chartered or
licensed lending institution; any investment
advisor registered under the Investment Advisers Act of 1940, as amended; and
such other persons as the CCC may determine for reasons consistent with the
policies of the Casino Control Act.
An Institutional Investor may be granted a waiver by the CCC from financial
source or other qualification requirements applicable to a holder of publicly-
traded securities, in the absence of a prima facie showing by the Division
that there is any cause to believe that the holder may be found unqualified,
on the basis of CCC findings that: (i) its holdings were purchased for
investment purposes only and, upon request by the CCC, it files a certified
statement to the effect that it has no intention of influencing or affecting
the affairs of the issuer, the casino licensee or its holding or intermediary
companies; provided, however, that the Institutional Investor will be
permitted to vote on matters put to the vote of the outstanding security
holders; and (ii) if (x) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary company of
the casino licensee's holding or intermediary companies which is related in
any way to the financing of the casino licensee and represent either (A) 20%
or less of the total outstanding debt of the company or (B) 50% or less of any
issue of outstanding debt of the company, (y) the securities are equity
securities and represent less than 10% of the equity securities of a casino
licensee's holding or intermediary companies or (z) the securities so held
exceed such percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant such waiver
and, in any event, an Institutional Investor may be required to produce for
the CCC or the Division upon request, any document or information which bears
any relation to such debt or equity securities.
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Generally, the CCC requires each institutional holder seeking waiver of
qualification to execute a certification to the effect that (i) the holder has
reviewed the definition of Institutional Investor under the Casino Control Act
and believes that it meets the definition of Institutional Investor; (ii) the
holder purchased the securities for investment purposes only and holds them in
the ordinary course of business; (iii) the holder has no involvement in the
business activities of and no intention of influencing or affecting, the
affairs of the issuer, the casino licensee or any affiliate; and (iv) if the
holder subsequently determines to influence or affect the affairs of the
issuer, the casino licensee or any affiliate, it shall provide not less than
30 days' prior notice of such intent and shall file with the CCC an
application for qualification before taking any such action. If an
Institutional Investor changes its investment intent, or if the CCC finds
reasonable cause to believe that it may be found unqualified, the
Institutional Investor may take no action with respect to the security
holdings, other than to divest itself of such holdings, until it has applied
for interim casino authorization and has executed a trust agreement pursuant
to such an application. See "--Interim Casino Authorization."
Declaratory Rulings. Taj Associates and Plaza Associates will petition the
CCC for declaratory rulings approving the Merger Transaction and determining,
among other things, that after consummation thereof, Taj Associates and Plaza
Associates will continue to satisfy the CCC's financial stability
requirements; Trump will continue to demonstrate his financial stability; the
Regulated Companies and natural person qualifiers are qualified; the
certificates of incorporation and partnership agreements of the Regulated
Companies contain required provisions with respect to the transfer of
securities and qualification of security holders under the Casino Control Act;
the Mortgage Notes are publicly-traded securities and that CCC approval of the
issuance or subsequent transfer of the securities is not required; the
individual holders of the Mortgage Notes need not be qualified as financial
sources and security holders, and their qualification may be waived by the
CCC; and qualification of the holders of Common Stock be waived by the CCC.
Ownership and Transfer of Securities. The Casino Control Act imposes certain
restrictions upon the issuance, ownership and transfer of securities of a
Regulated Company and defines the term "security" to include instruments which
evidence a direct or indirect beneficial ownership or creditor interest in a
Regulated Company including, but not limited to, mortgages, debentures,
security agreements, notes and warrants. Currently, each of TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, certain other entities that own
Taj Holding Class A Common Stock or Taj Holding Class B Common Stock, Plaza
Funding, Trump AC, Plaza Holding Inc., Plaza Associates, THCR Holdings, THCR
Funding and the Company are each deemed to be a Regulated Company, and
instruments evidencing a beneficial ownership or creditor interest therein,
including a partnership interest, are deemed to be the securities of a
Regulated Company.
If the CCC finds that a holder of such securities is not qualified under the
Casino Control Act, it has the right to take any remedial action it may deem
appropriate, including the right to force divestiture by such disqualified
holder of such securities. In the event that certain disqualified holders fail
to divest themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company which issued
the securities. If a holder is found unqualified, it is unlawful for the
holder (i) to exercise, directly or through any trustee or nominee, any right
conferred by such securities or (ii) to receive any dividends or interest upon
such securities or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
With respect to non-publicly-traded securities, the Casino Control Act and
CCC Regulations require that the corporate charter or partnership agreement of
a Regulated Company establish a right in the CCC of prior approval with regard
to transfers of securities, shares and other interests and an absolute right
in the Regulated Company to repurchase at the market price or the purchase
price, whichever is the lesser, any such security, share or other interest in
the event that the CCC disapproves a transfer. With respect to publicly-traded
securities, such corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject to the
condition that, if a holder thereof is found to be disqualified by the CCC,
such holder shall dispose of such securities. See "Description of Capital
Stock--Common Stock and Class B Common Stock."
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
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to a casino licensee to close on the contract or own the securities until
plenary licensure or qualification. During the period of interim casino
authorization, the property relating to the casino operation or the securities
is held in trust.
Whenever any person enters into a contract to transfer any property which
relates to an ongoing casino operation, including a security of the casino
licensee or a holding or intermediary company or entity qualifier, under
circumstances which would require that the transferee obtain licensure or be
qualified under the Casino Control Act, and that person is not already
licensed or qualified, the transferee is required to apply for interim casino
authorization. Furthermore, except as set forth below with respect to
publicly-traded securities, the closing or settlement date in the contract at
issue may not be earlier than the 121st day after the submission of a complete
application for licensure or qualification together with a fully executed
trust agreement in a form approved by the CCC. If, after the report of the
Division and a hearing by the CCC, the CCC grants interim authorization, the
property will be subject to a trust. If the CCC denies interim authorization,
the contract may not close or settle until the CCC makes a determination on
the qualifications of the applicant. If the CCC denies qualification, the
contract will be terminated for all purposes and there will be no liability on
the part of the transferor.
If, as the result of a transfer of publicly-traded securities of a licensee,
a holding or intermediary company or entity qualifier of a licensee or a
financing entity of a licensee, any person is required to qualify under the
Casino Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines that
qualification is required or declines to waive qualification. The application
must include a fully executed trust agreement in a form approved by the CCC
or, in the alternative, within 120 days after the CCC determines that
qualification is required, the person whose qualification is required must
divest such securities as the CCC may require in order to remove the need to
qualify.
The CCC may grant interim casino authorization where it finds by clear and
convincing evidence that: (i) statements of compliance have been issued
pursuant to the Casino Control Act; (ii) the casino hotel is an approved hotel
in accordance with the Casino Control Act; (iii) the trustee satisfies
qualification criteria applicable to key casino employees, except for
residency; and (iv) interim operation will best serve the interests of the
public.
When the CCC finds the applicant qualified, the trust will terminate. If the
CCC denies qualification to a person who has received interim casino
authorization, the trustee is required to endeavor, and is authorized, to
sell, assign, convey or otherwise dispose of the property subject to the trust
to such persons who are licensed or qualified or shall themselves obtain
interim casino authorization.
Where a holder of publicly-traded securities is required, in applying for
qualification as a financial source or qualifier, to transfer such securities
to a trust in application for interim casino authorization and the CCC
thereafter orders that the trust become operative: (i) during the time the
trust is operative, the holder may not participate in the earnings of the
casino hotel or receive any return on its investment or debt security
holdings; and (ii) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not exceed the
lower of their actual cost to the unqualified holder or their value calculated
as if the investment had been made on the date the trust became operative.
Approved Hotel Facilities. The CCC may permit an existing licensee, such as
Taj Associates and Plaza Associates, to increase its casino space if the
licensee agrees to add a prescribed number of qualifying sleeping units within
two years after the commencement of gaming operations in the additional casino
space. However, if the casino licensee does not fulfill such agreement due to
conditions within its control, the licensee will be required to close the
additional casino space, or any portion thereof that the CCC determines should
be closed. See "Risk Factors--Atlantic City Properties Expansion."
Persons who are parties to the lease for an approved hotel building or who
have an agreement to lease a building which may in the judgment of the CCC
become an approved hotel building are required to hold a casino license unless
the CCC, with the concurrence of the Attorney General of the State of New
Jersey, determines
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that such persons do not have the ability to exercise significant control over
the building or the operation of the casino therein.
Unless otherwise determined by the CCC, agreements to lease an approved
hotel building or the land under the building must be for a durational term
exceeding 30 years, must concern 100% of the entire approved hotel building or
the land upon which it is located and must include a buy-out provision
conferring upon the lessee the absolute right to purchase the lessor's entire
interest for a fixed sum in the event that the lessor is found by the CCC to
be unsuitable.
In its May 18, 1995 declaratory rulings with respect to the proposed
enclosed Atlantic City Convention Center walkway to Trump World's Fair, the
CCC, among other things, approved the proposed easement agreements with
respect to such walkway and determined, with the concurrence of the Attorney
General, that no CCC license is required to grant the easement and that the
easements satisfy the durational term requirement and need not concern 100% of
the entire approved hotel building or include such a buy-out provision. See
"Business --Properties--Trump Plaza--Trump World's Fair."
Agreement for Management of Casino. Each party to an agreement for the
management of a casino is required to hold a casino license, and the party who
is to manage the casino must own at least 10% of all the outstanding equity
securities of the casino licensee or any eligible applicant for a casino
license. Such an agreement shall: (i) provide for the complete management of
the casino; (ii) provide for the sole and unrestricted power to direct the
casino operations; and (iii) provide for a term long enough to ensure the
reasonable continuity, stability and independence and management of the
casino.
License Fees. The CCC is authorized to establish annual fees for the renewal
of casino licenses. The renewal fee is based upon the cost of maintaining
control and regulatory activities prescribed by the Casino Control Act, and
may not be less than $200,000 for a four-year casino license. Additionally,
casino licensees are subject to potential assessments to fund any annual
operating deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for use or in use
in any casino.
Gross Revenue Tax. Each casino licensee is also required to pay an annual
tax of 8% on its gross casino revenues. For the years ended December 31, 1993,
1994 and 1995 Plaza Associates' gross revenue tax was approximately $21.3
million, $21.0 million and $24.0 million, respectively, and its license,
investigation and other fees and assessments totaled approximately $4.0
million, $4.2 million and $4.4 million, respectively. For the years ended
December 31, 1993, 1994 and 1995, Taj Associates' gross revenue tax was
approximately $35.4 million, $36.7 million and $40.2 million, respectively,
and its license, investigation and other fees and assessments totaled
approximately $5.2 million, $5.2 million and $5.2 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 50 years and bear
interest at below market rates, resulting in a value lower than the face value
of such CRDA bonds.
For the first ten years of its tax obligation, the licensee is entitled to
an investment tax credit against the investment alternative tax in an amount
equal to twice the purchase price of bonds issued to the licensee by the CRDA.
Thereafter, the licensee (i) is 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
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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. 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 licensee for the years
1994 through 1998 allocated for projects in Northern New Jersey shall be paid
into and credited to the Atlantic City Fund. Amounts in the Atlantic City Fund
will be expended by the CRDA for economic development projects of a revenue
producing nature that foster the redevelopment of Atlantic City other than the
construction and renovation of casino hotels.
Conservatorship. If, at any time, it is determined that TM/GP, TTMC, Taj
Holding, Taj Funding, Taj Associates, TTMI, Plaza Associates, Plaza Funding,
Plaza Holding Inc., Trump AC, the Company, THCR Holdings, THCR Funding or any
other entity qualifier has violated the Casino Control Act or that any of such
entities cannot meet the qualification requirements of the Casino Control Act,
such entity could be subject to fines or the suspension or revocation of its
license or qualification. If a casino license is suspended for a period in
excess of 120 days or is revoked, or if the CCC fails or refuses to renew such
casino license, the CCC could appoint a conservator to operate and dispose of
such licensee's casino hotel facilities. A conservator would be vested with
title to all property of such licensee relating to the casino and the approved
hotel subject to valid liens and/or encumbrances. The conservator would be
required to act under the direct supervision of the CCC and would be charged
with the duty of conserving, preserving and, if permitted, continuing the
operation of the casino hotel. During the period of the conservatorship, a
former or suspended casino licensee is entitled to a fair rate of return out
of net earnings, if any, on the property retained by the conservator. The CCC
may also discontinue any conservatorship action and direct the conservator to
take such steps as are necessary to effect an orderly transfer of the property
of a former or suspended casino licensee.
Qualification of Employees. Certain employees of 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
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financial stability, integrity and responsibility, good character, honesty and
integrity, business ability and casino experience and New Jersey residency.
These requirements have resulted in significant competition among Atlantic
City casino operators for the services of qualified employees.
Gaming Credit. Taj Associates' and Plaza Associates' casino games are
conducted on a credit as well as cash basis. Gaming debts arising in Atlantic
City in accordance with applicable regulations are enforceable in the courts
of the State of New Jersey. The extension of gaming credit is subject to
regulations that detail procedures which casinos must follow when granting
gaming credit and recording counter checks which have been exchanged, redeemed
or consolidated.
Control Procedures. Gaming at the Taj Mahal and Trump Plaza is conducted by
trained and supervised personnel. Taj Associates and Plaza Associates employ
extensive security and internal controls. Security checks are made to
determine, among other matters, that job applicants for key positions have had
no criminal history or associations. Security controls utilized by the
surveillance department include closed circuit video camera to monitor the
casino floor and money counting areas. The count of moneys from gaming also is
observed daily by representatives of the CCC.
INDIANA GAMING REGULATIONS
Indiana Gaming Commission. The ownership and operation of riverboat gaming
operations in Indiana are subject to strict state regulation under the
Riverboat Gambling Act and the administrative rules promulgated thereunder.
The IGC is empowered to administer, regulate and enforce the system of
riverboat gaming established under the Riverboat Gambling Act and has
jurisdiction and supervision over all riverboat gaming operations in Indiana,
as well as all persons on riverboats where gaming operations are conducted.
The IGC is empowered to regulate a wide variety of gaming and non-gaming
related activities, including the licensing of suppliers to, and employees at,
riverboat gaming operations and to approve the form of ownership and financial
structure of not only riverboat owner and supplier licensees, but also their
entity qualifiers and intermediary and holding companies. Indiana is a new
gaming jurisdiction and the emerging regulatory framework is not yet complete.
The IGC has adopted certain final rules and has published others in proposed
or draft form which are proceeding through the review and final adoption
process. The IGC also has indicated its intent to publish additional proposed
rules in the future. The IGC has broad rulemaking power, and it is impossible
to predict what effect, if any, the amendment of existing rules or the
finalization of currently new rules might have on the
operations of the Indiana Riverboat or the Company. The following reflects
both adopted and proposed regulations. Further, the Indiana General Assembly
has the power to promulgate new laws and implement amendments to the Riverboat
Gambling Act, which could materially affect the operation or economic
viability of the gaming industry in Indiana.
Certificate of Suitability. On December 9, 1994, the IGC ordered that a
"Certificate of Suitability" for a riverboat owner's license for a riverboat
to be docked in Buffington Harbor, Indiana, be issued to Trump Indiana. The
certificate of suitability constitutes approval of the application of Trump
Indiana for a riverboat owner's license. The IGC extended Trump Indiana's
certificate of suitability until June 28, 1996. Pursuant to the terms of the
certificate of suitability, during such period, Trump Indiana must comply with
certain statutory and other requirements imposed by the IGC. In addition, as a
condition to the certificate of suitability, Trump Indiana has committed to
invest $153 million in the Indiana Riverboat and certain related projects and
to pay certain incentive fees to the City of Gary, Indiana. Failure to comply
with the foregoing conditions and/or failure to commence riverboat excursions
as required by the IGC may result in revocation of the certificate of
suitability. There can be no assurance that the Company 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
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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. The Company
anticipates that its riverboat owner's license (which would supersede the
certificate of suitability) would impose substantially similar conditions on
the operations of the Indiana Riverboat, although no assurances may be made.
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 rules, and no riverboat gaming
operation may operate unless the appropriate licenses and approvals are
obtained from the IGC. Under current Indiana law, a maximum of 11 owner's
licenses may be in effect at any time. No person or entity may simultaneously
own an interest in more than two riverboat owner's licenses. A person or
entity may simultaneously own up to 100% in one riverboat owner's license and
no more than 10% in a second riverboat owner's license.
A riverboat owner's licensee must possess a level of skill, experience, or
knowledge necessary to conduct a riverboat gaming operation that will have a
positive economic impact on the host site, as well as the entire State of
Indiana. Additional representative, but not exclusive, qualification criteria
with respect to the holder of a riverboat owner's license include character,
reputation, financial integrity, the facilities or proposed facilities for the
conduct 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 license may only be transferred in
accordance with the regulations promulgated under the Riverboat Gambling Act.
An applicant for the approval of a transfer of a riverboat owner's license
must comply with application procedures prescribed by the IGC, present
evidence that it meets or possesses the standards, qualifications and other
criteria under Indiana gaming laws that it meets all requirements for a
riverboat owner's license, and 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
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shall issue notice of denial to the applicant, and, unless, specifically
stated to the contrary, a notice of denial of an application for transfer
shall not constitute a finding that the applicant is not suitable for
licensure. A person who is served with notice of denial under this rule may
request an administrative hearing.
Control Persons and Operational Matters. The IGC has implemented strict
regulations with respect to the suitability of riverboat license owners, their
key personnel and their employees similar to the CCC regulations and
precedent. The IGC utilizes a "class-based" licensing structure that subjects
all individuals associated with Trump Indiana to varying degrees of background
investigations. Likewise, comprehensive security measures, including video
surveillance by both random and fixed cameras, are required in the casino and
money counting areas. Additionally, the IGC has delineated procedures for the
reconciliation of the daily revenues and tax remittance to the state as
further detailed below.
Tax. Under Indiana gaming law, a tax is imposed on admissions to gaming
excursions at a rate of three dollars for each person admitted to the gaming
excursion. This admission tax is imposed upon the license owner conducting the
gaming excursion on a per-person basis without regard to the actual fee paid
by the person using the ticket, with the exception that no tax shall be paid
by admittees who are actual and necessary officials, employees of the licensee
or other persons actually working on the riverboat. The IGC may suspend or
revoke the license of a riverboat owner's licensee that does not submit the
payment or the tax return form regarding admission tax within the required
time established by the IGC.
A tax is imposed on the adjusted gross receipts received from gaming
authorized under the Riverboat Gambling Act at a rate of 20% of the amount of
the adjusted gross receipts. Adjusted gross receipts is defined as the total
of all cash and property (including checks received by a licensee), whether
collected or not, received by a licensee from gaming operations less the total
of all cash paid out as winnings to patrons including a provision for
uncollectible gaming receivables as is further set forth in the Riverboat
Gambling Act. The IGC may, from time to time, impose other fees and
assessments on riverboat owner licensees. In addition, all use, excise and
retail taxes apply to sales aboard riverboats.
Excursions. Generally, gaming may not be conducted while a riverboat is
docked, other than during the 30-minute periods for passenger embarkation and
disembarkation. The Riverboat Gambling Act provides an exception if weather
conditions or water conditions present a danger to the riverboat. 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 within federal maritime jurisdiction and
prohibits gaming on such vessels. The Department of Justice has expressed
concern that the Johnson Act may prohibit gaming on vessels on the Great Lakes
because it has contended that the Great Lakes are within federal maritime
jurisdiction. Management understands that the Department of Justice is still
considering the issue, however, and has not reached a definitive conclusion.
Currently, Congress has legislation pending that contains a related amendment
to the Johnson Act. The Coast Guard Authorization bill, which contains a
provision that would amend the Johnson Act specifically to allow gaming on
vessels in the Indiana waters of Lake Michigan, was passed by the House of
Representatives. The Senate-passed version of the Coast Guard Authorization
bill does not contain a similar provision. Because the House of
Representatives and the Senate passed different versions of the Coast Guard
Authorization bill, a conference committee composed of House and Senate
members is expected to be formed later in the Second Session of the 104th
Congress (1996) to resolve differences in these versions. The Johnson Act also
contains an exception to such prohibitions if a state adopts a law that
permits gaming vessels to depart and return to ports within its jurisdiction
and engage in gaming outside federal maritime jurisdiction. The Indiana
General Assembly has taken certain actions with respect to gaming on vessels
and the Company believes that the IGC has determined that Indiana law now
allows gaming on vessels while the vessels are docked under certain conditions
even if cruising would result in a violation of federal law. Notwithstanding
the IGC's determination, there can be no assurance that commencement of gaming
operations by Trump Indiana when the riverboat is cruising would not be
challenged as a violation of the Johnson Act or when the riverboat is docked
would not be challenged as a violation of Indiana law or federal law. See
"Risk Factors--The Indiana Riverboat".
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Restricted Contracts. Under proposed IGC rules, no riverboat licensee or
riverboat license applicant may enter into or perform any contract or
transaction in which it transfers or receives consideration which is not
commercially reasonable or which does not reflect the fair market value of the
goods or services rendered or received as determined at the time the contract
is executed. Any contract entered into by a riverboat licensee or riverboat
license applicant that exceeds the total dollar amount of $50,000 shall be a
written contract. A riverboat license applicant means an applicant for a
riverboat owner's license that has been issued a certificate of suitability.
Pursuant to IGC proposed rules, riverboat licensees and riverboat license
applicants must submit an internal control procedure regarding purchasing
transactions which must contain provisions regarding ethical standards,
compliance with state and federal laws, and prohibitions on the acceptance of
gifts and gratuities by purchasing and contracting personnel from suppliers of
goods or services. The proposed rules also require any riverboat licensee or
applicant to submit any contract, transaction, or series of transactions
greater than $500,000 in any 12-month period to the IGC within 10 days of the
execution, and to submit a summary of all contracts or transactions greater
than $50,000 in any 12-month period on a quarterly basis. The proposed rules
provide that contracts submitted to the IGC are not submitted for approval by
the IGC, but grant the IGC authority to cancel or terminate any contract not
in compliance with Indiana law and the IGC rules.
Finance. Pursuant to IGC rules, any person (other than an institutional
investor) acquiring 5% or more of any class of voting securities of a publicly
traded corporation that owns a riverboat owner's license or 5% or more of the
beneficial interest in a riverboat licensee, directly or indirectly, through
any class of the voting securities of any holding or intermediary company of a
riverboat licensee shall apply to the IGC for finding of suitability within 45
days after acquiring the securities. Each institutional investor who,
individually or in association with others, acquires, directly or indirectly,
5% or more of any class of voting securities of a publicly-traded corporation
that owns a riverboat owner's license or 5% or more of the beneficial interest
in a riverboat licensee through any class of the voting securities of any
holding or intermediary company of a riverboat licensee shall notify the IGC
within 10 days after the institutional investor acquires the securities and
shall provide additional information and may be subject to a finding of
suitability as required by the IGC.
Under IGC rules, an institutional investor who would otherwise be subject to
a suitability finding shall, within 45 days after acquiring the interests,
submit the following information: a description of the institutional
investor's business and a statement as to why the institutional investor
satisfies the definitional requirements of an institutional investor under
Indiana gaming rule requirements; a certification made under oath that the
voting securities were acquired and are held for investment purposes only and
were acquired and are held in the ordinary course of business as an
institutional investor; the name, address, telephone number, social security
number or federal tax identification number of each person who has the power
to direct or control the institutional investor's exercise of its voting
rights as a holder of voting securities of the riverboat licensee; the name of
each person who beneficially owns 5% or more of the institutional investor's
voting securities or equivalent; a list of the institutional investor's
affiliates; a list of all securities of the riverboat licensee that are or
were beneficially owned by the institutional investor or its affiliates within
the preceding one year; a disclosure of all criminal and regulatory sanctions
imposed during the preceding ten years; a copy of any filing made under 16
U.S.C. 18(a); and any other additional information the IGC may request to
insure compliance with Indiana gaming laws.
Each institutional investor who, individually or in association with others,
acquires, directly or indirectly, the beneficial ownership of 15% or more of
any class of voting securities of a publicly-traded corporation that owns a
riverboat owner's license or 15% or more of the beneficial interest in a
riverboat licensee through any class of voting securities of any holding
company or intermediary company of a riverboat licensee shall apply to the IGC
for a finding of suitability within 45 days after acquiring the securities.
The Certificate of Incorporation provides that the Company may redeem any
shares of the Company'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 the Company. As defined in the 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.
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Under IGC rules, an institutional investor means any of the following: a
retirement fund administered by a public agency for the exclusive benefit of
federal, state, or local public employees; an investment company registered
under the Investment Company Act of 1940; a collective investment trust
organized by banks under Part 9 of the Rules of the Comptroller of the
Currency; a closed end investment trust; a chartered or licensed life
insurance company or property and casualty insurance company; a banking,
chartered or licensed lending institution; an investment adviser registered
under the Investment Advisers Act of 1940; and any other entity the IGC
determines constitutes an institutional investor. The IGC may in the future
promulgate regulations with respect to the qualification of other financial
backers, mortgagees, bond holders, holders of indentures, or other financial
contributors.
Minority and Women Business Participation. Indiana gaming laws provide that
the opportunity for full minority and women's business enterprise
participation in the riverboat industry in Indiana is essential to social and
economic parity for minority and women business persons. The IGC has the power
to review compliance with the goals of participation by minority and women
business persons and impose appropriate conditions on licensees to insure that
goals for such business enterprises are met.
Under Indiana gaming laws, a riverboat licensee or a riverboat license
applicant shall designate certain minimum percentages of the value of its
contracts for goods and services to be expended with minority business
enterprises and women's business enterprises such that 10% of the dollar value
of the riverboat licensee's or the riverboat license applicant's contracts be
expended with minority business enterprises and 5% of the dollar value of the
riverboat licensee's or the riverboat license applicant's contracts be
expended with women's business enterprises. Expenditures with minority and
women's business enterprises are not mutually exclusive.
IGC Action. All licensees subject to the jurisdiction of the IGC have a
continuing duty to maintain suitability for licensure. The IGC may initiate an
investigation or disciplinary action or both against a licensee whom the
commission has reason to believe is not maintaining suitability for licensure,
is not complying with licensure conditions, and/or is not complying with
Indiana gaming laws or regulations. The IGC may suspend, revoke, restrict, or
place conditions on the license of a licensee; require the removal of a
licensee or an employee of a licensee; impose a civil penalty or take any
other action deemed necessary by the IGC to insure compliance with Indiana
gaming laws.
CLEAN WATER REGULATIONS
Operation of the Indiana Riverboat must be in conformance with state and
federal clean water requirements, including the Federal Water Pollution
Control Act and the Oil Pollution Act of 1990 ("OPA"). OPA establishes an
extensive regulatory and liability regime for the protection and cleanup of
the environment from oil spills and affects all owners and operators whose
vessels operate in United States waters, which include the Great Lakes. OPA
requires vessel owners and operators to establish and maintain with the U.S.
Coast Guard evidence of financial responsibility sufficient to meet their
potential liabilities under OPA. U.S. Coast Guard regulations also implement
the financial responsibility requirements of the Comprehensive Environmental
Response, Compensation and Liability Act by requiring evidence of financial
responsibility in an amount of $300 per gross ton, in addition to any required
under OPA. The Company and Trump Indiana are in the process of obtaining
insurance coverage and a Certificate of Financial Responsibility as required
by OPA. The Company and Trump Indiana expect that the insurance coverage
obtained will be adequate to protect against liability that may arise under
OPA. However, in the case of a catastrophic spill or a spill in a sensitive
environment, there can be no assurance that such occurrence would not result
in liability in excess of the insurance coverage.
OTHER LAWS AND REGULATIONS
The U.S. Department of the Treasury has adopted regulations pursuant to
which a casino is required to file a report of each deposit, withdrawal,
exchange of currency, gambling tokens or chips, or other payments or transfers
by, through or to such casino which involve 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, the
Company and Taj Associates are each required to maintain detailed records
(including the names, addresses, social security
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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 the 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. Recently, as a result of the audit of Taj Associates, the U.S.
Department of Treasury has notified Taj Associates that it failed to timely
file the "Currency Transaction Report by Casino" in connection with 173
individual currency transactions. The U.S. Department of Treasury has
indicated in their notification that the matter can be resolved by the payment
of a penalty which is significantly lower than the maximum penalty allowed by
law. Management believes that any such amounts will not be material to the
Company.
The Indiana Riverboat site is located near, or adjacent to and may include
protected wetlands which may subject the Company to obligations or liabilities
in connection with wetlands mitigation or protection.
On April 5, 1994, OSHA proposed a regulation that would require, inter alia,
that employers who permit smoking in workplaces establish designated smoking
areas, permit smoking only in such areas, and assure that designated smoking
areas be enclosed, exhausted directly to the outside, and maintained under
negative pressure sufficient to contain tobacco smoke within the designated
area. Plaza Associates has estimated construction costs to build enclosed,
exhausted, negative-pressure smoking rooms in Trump Plaza to be $1.5 million
for its casino and $2.5 million for its restaurants. Plaza Associates has also
estimated construction costs to provide negative-pressure exhaust systems for
Trump Plaza hotel rooms to be $1,500 per room; however, management believes
that it is highly unlikely that the regulation, if promulgated, would require
hotel rooms to be equipped with exhaust systems if smoking is prohibited in
the rooms during housekeeping and maintenance activities. If the regulation is
promulgated and is applicable to Trump Plaza hotel rooms, the number of rooms
that would be 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.
The Company 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 the Company and
Taj Holding believe all required licenses and permits necessary to conduct the
business of the Company and Taj Associates have been obtained for operations
in the State of New Jersey.
The Company 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 the
Company in those jurisdictions.
In addition, the federal Merchant Marine Act, 1936 and the federal Shipping
Act, 1916 and the applicable regulations thereunder contain provisions
designed to prevent persons who are not citizens of the United States, as
defined therein, from beneficially owning more than 25% of the capital stock
of any entity operating a vessel on the Great Lakes.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors and executive officers:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Donald J. Trump......... Chairman of the Board
Nicholas L. Ribis....... President, Chief Executive Officer, Chief Financial Officer and Director
Robert M. Pickus........ Executive Vice President and Secretary
John P. Burke........... Senior Vice President of Corporate Finance and Corporate Treasurer
Wallace B. Askins....... Director
Don M. Thomas........... Director
Peter M. Ryan........... Director
</TABLE>
Donald J. Trump--Mr. Trump, 49 years old, has been Chairman of the Board of
the Company and THCR Funding since their formation in 1995. Mr. Trump is also
Chairman of the Board of Directors, President and Treasurer of Plaza Funding,
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 Trump
AC from February 1993 until June 1995. Trump has been Chairman of the Board of
Directors of Trump AC Funding since its formation in January 1996. Trump has
been Chairman of the Board of Directors and a Class C Director of Taj Holding
and TM/GP since October 1991; President and Treasurer of Taj Holding since
March 4, 1991; Chairman of the Board of Directors, President and Treasurer of
Taj Funding and TTMI since June 1988; sole director, President and Treasurer
of TTMC since March 1991; Chairman of the Executive Committee of Taj
Associates from June 1988 to October 1991; and President and sole Director of
Realty Corp. since May 1986. Trump has been the sole director of Trump Indiana
since its formation. Trump has been Chairman of the Board of Partner
Representatives of TCA, the partnership that owns Trump's Castle, since May
1992; and was Chairman of the Executive Committee of TCA from June 1985 to May
1992. In addition, Trump is the managing general partner of TCA. Trump is also
the President of The Trump Organization, which has been in the business,
through its affiliates and subsidiaries, of acquiring, developing and managing
real estate properties for more than the past five years. Trump was a member
of the Board of Directors of Alexander's Inc. from 1987 to March 1992.
Nicholas L. Ribis--Mr. Ribis, 51 years old, has been President, Chief
Executive Officer, Chief Financial Officer, and a director of the Company and
THCR Funding and the Chief Executive Officer of THCR Holdings since their
formation in 1995. Mr. Ribis has been the Chief Executive Officer of Plaza
Associates since February 1991, was President from April 1994 to February
1995, was a member of the Executive Committee of Plaza Associates from April
1991 to May 29, 1992 and was a director and Vice President of Trump Plaza GP
from May 1992 until its merger into Plaza Funding in June 1993. Mr. Ribis has
been Vice President of Plaza Funding since February 1995 and Vice President of
Plaza Holding Inc. since February 1995. Mr. Ribis has served as a director of
Plaza Holding Inc. since June 1993 and of Plaza Funding since July 1993. Mr
Ribis has been Chief Executive Officer, President and director of Trump AC
Funding since its formation in January 1996. Mr. Ribis has been a Class C
Director of TM/GP and Taj Holding since October 1991 and was Vice President of
TM/GP and Taj Holding until June 1995; 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. Mr.
Ribis has been the President and Chief Executive Officer of Trump Indiana
since its formation. 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
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Representatives of TCA since May 1992; and has served as the Vice President
and Assistant Secretary of Trump's Castle Hotel & Casino, Inc., an entity
beneficially owned by Trump, since December 1993 and January 1991,
respectively. Mr. Ribis has served as Vice President of TC/GP, Inc. since
December 1993 and had served as Secretary of TC/GP, Inc. from November 1991 to
May 1992. Mr. Ribis has been Vice President of Trump Corp. since September
1991. From January 1993 to January 1995, Mr. Ribis served as the Chairman of
the Casino Association of New Jersey and has been a member of the Board of
Trustees of the CRDA since October 1993. From January 1980 to January 1991,
Mr. Ribis was Senior Partner in, and from February 1991 to December 1995, was
Counsel to, the law firm of Ribis, Graham & Curtin (now practicing as Graham,
Curtin & Sheridan, A Professional Association), which serves as New Jersey
legal counsel to all of the above-named companies and certain of their
affiliated entities.
Robert M. Pickus--Mr. Pickus, 41 years old, has been Executive Vice
President and Secretary of the Company since its formation in 1995. He has
also been the Executive Vice President of Corporate and Legal Affairs of Plaza
Associates since February 1995. From December 1993 to February 1995, Mr.
Pickus was the Senior Vice President and General Counsel of Plaza Associates
and, since April 1994, he has been the Vice President and Assistant Secretary
of Plaza Funding and Assistant Secretary of Plaza Holding Inc. Mr. Pickus has
been Secretary and a director of Trump AC Funding since its formation in
January 1996. Mr. Pickus has been the Executive Vice President of Corporate
and Legal Affairs of Taj Associates since February 1995, and a Class C
Director of Taj Holding and TM/GP since November 1995. Mr. Pickus has been the
Executive Vice President and Secretary of Trump Indiana since its formation.
He was the Senior Vice President and Secretary of Trump's Castle Funding, Inc.
from June 1988 to December 1993 and General Counsel of TCA from June 1985 to
December 1993. Mr. Pickus was also Secretary of Trump's Castle Hotel & Casino,
Inc., an entity beneficially owned by Trump, from October 1991 until December
1993. Mr. Pickus has been the Executive Vice President of Corporate and Legal
Affairs of TCA since February 1995 and a member of the Board of Partner
Representatives of TCA since October 1995.
John P. Burke--Mr. Burke, 48 years old, has been Senior Vice President of
Corporate Finance of the Company, THCR Holdings and THCR Funding since January
1996, and has been the Corporate Treasurer of the Company, THCR Holdings and
THCR Funding since their formation in 1995. He has also been Corporate
Treasurer of Plaza Associates and Taj Associates since October 1991. Mr. Burke
has been Treasurer of Trump AC since its formation in January 1996. Mr. Burke
has been a Class C Director of TM/GP and Taj Holding since October 1991 and
was Vice President of TM/GP until June 1995. Mr. Burke has been the Treasurer
of Trump Indiana since its formation. Mr. Burke has been the Corporate
Treasurer of TCA since October 1991, the Vice President of TCA, Trump's Castle
Funding, Inc., TC/GP and Trump's Castle Hotel & Casino, Inc. since December
1993, and the Vice President-Finance of The Trump Organization since September
1990. Mr. Burke was an Executive Vice President and Chief Administrative
Officer of Imperial Corporation of America from April 1989 through September
1990.
Wallace B. Askins--Mr. Askins, 65 years old, has been a director of the
Company and THCR Funding since June 1995. He has also been a director of Plaza
Funding and Plaza Holding Inc. since April 11, 1994, and was a partner
representative of the Board of Partner Representatives of TCA from May 1992 to
June 1995. Mr. Askins served as a director of TC/GP from May 1992 to December
1993. From June 1984 to November 1992, Mr. Askins served as Executive Vice
President, Chief Financial Officer and as a director of Armco Inc. Mr. Askins
also serves as a director of EnviroSource, Inc.
Don M. Thomas--Mr. Thomas, 65 years old, has been a director of the Company
and THCR Funding 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. 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.
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Peter M. Ryan--Mr. Ryan, 58 years old, has been a director of the Company
and THCR Funding since June 1995. He has also been the President of each of
The Marlin Group, LLC and The Brookwood Carrington Fund, LLC, real estate
financial advisory groups, since January 1995. Prior to that, Mr. Ryan was the
Senior Vice President of The Chase Manhattan Bank for more than five years.
Mr. Ryan has been a director of the Childrens Hospital FTD since October 1995.
The officers of the Company serve at the pleasure of the Board of Directors.
All of the persons listed above are citizens of the United States and are
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.
The Company is the general partner of THCR Holdings. As the sole general
partner of THCR Holdings, the Company generally has 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
limited partner of THCR Holdings. See "Description of the THCR Holdings
Partnership Agreement."
MANAGEMENT OF TRUMP PLAZA
Plaza Funding is, and until the consummation of the Merger Transaction will
remain, the managing general partner of Plaza Associates. The Board of
Directors of each of Plaza Funding and Plaza Holding Inc. consists of Messrs.
Trump, Ribis, Wallace B. Askins and Don M. Thomas. The Plaza Note Indenture
requires that two directors of each of Plaza Funding and Plaza Holding Inc. be
persons who would qualify as "Independent Directors" as such term is defined
by the rules of the American Stock Exchange ("Amex") (the "Independent
Directors"). The Amex rules define "independent directors" as those who are
not officers of the company, neither related to its officers nor represent
concentrated family holdings of its shares and who, in view of the company's
board of directors, are free of any relationship that would interfere with the
exercise of independent judgment.
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 the Company.
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
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worked for Hilton and Hyatt in executive capacities as well as working in Las
Vegas and Atlantic City in executive capacities.
Francis X. McCarthy, Jr.--Mr. McCarthy, 43 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.
Fred A. Buro--Mr. Buro, 39 years old, has been the Senior Vice President of
Marketing of Plaza Associates since May 1994. Mr. Buro previously served as
the President of Casino Resources, Inc., a casino marketing, management and
development organization from 1991 through 1994. Prior to that, Mr. Buro
served from 1984 through 1991 as the President of a professional services
consulting firm.
James A. Rigot--Mr. Rigot, 44 years old, has been Executive Vice President
of Casino Operations of Plaza Associates since November 1994. Mr. Rigot served
as Vice President of Casino Operations of TropWorld Casino and Entertainment
Resort from July 1989 through November 1994. From January 1989 through July
1989, Mr. Rigot was Assistant Casino Manager of Resorts Casino Hotel.
Kevin S. Smith--Mr. Smith, 39 years old, has been the Vice President,
General Counsel of Plaza Associates since February 1995. Mr. Smith was
previously associated with Cooper Perskie April Niedelman Wagenheim &
Levenson, an Atlantic City law firm specializing in trial litigation. From
1989 until February 1992, Mr. Smith handled criminal trial litigation for the
State of New Jersey, Department of Public Defender, assigned to the Cape May
and Atlantic County Conflict Unit.
Patrick J. O'Malley--Mr. O'Malley, 41 years old, has been the Executive Vice
President of Hotel Operations of Plaza Associates since September 1995. Prior
to joining Trump Plaza, from September 1994 until September 1995, Mr. O'Malley
was President of The Plaza Hotel in New York City. From December 1989 until
September 1994, Mr. O'Malley was the Vice President of Finance of the Plaza
Hotel in New York City. Prior to joining the Plaza Hotel in New York City,
from 1986 to 1989, Mr. O'Malley was a Regional Financial Controller for the
Four Seasons Hotel and Resorts, Ltd. From 1979 to 1986, Mr. O'Malley worked in
the Middle East and Europe as Hotel Controller for Marriot International
Hotels.
Steven C. Hann--Mr. Hann, 39 years old, has been the Executive Vice
President of Casino Sales and Marketing of Plaza Associates since May 1995.
Prior to joining Trump Plaza, Mr. Hann served in various marketing positions
at the Sands Hotel and Casino since 1989, most recently Vice President of
Casino Marketing and previously as Director of Casino Credit for Greate Bay
Hotel and Casino.
All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
MANAGEMENT OF THE TAJ MAHAL
Until the consummation of the Merger Transaction, TM/GP will be the managing
general partner of Taj Associates.
Set forth below are the names, ages, positions and offices, and a brief
account of the business experience during the past five years, of each of the
executive officers of Taj Holding and key employees of Taj Associates other
than those who are also directors or executive officers of the Company.
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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 September 1991; Vice
President of Finance of Elsinore Shore Associates, the owner and operator of
the Atlantis Casino Hotel, Atlantic City, from April 1984 to September 1990;
and Treasurer of Elsinore Finance Corp., Elsinore of Atlantic City and Elsub
Corp. from June 1986 to September 1990. The Atlantis Casino Hotel now
constitutes the portion of Trump Plaza known as Trump World's Fair.
Nicholas F. Moles--Mr. Moles, 42 years old, has been Assistant Secretary of
Taj Holding and TM/GP from October 1991 to February 1995; Secretary of Taj
Holding and TM/GP since February 1995; Senior Vice President, Law of Taj
Associates since January 1989 and General Counsel of Taj Associates since June
1993; Assistant Secretary of Taj Funding since September 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.
Larry W. Clark--Mr. Clark, 52 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 was Vice President, Casino Operations, Dunes Hotel & Country Club
from November 1990 to April 1991.
Rudolfo E. Prieto--Mr. Prieto, 52 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 December 1994 to April 1995 and Executive Vice
President and Assistant General Manager for the Tropicana Resort and Casino
from May 1988 to November 1994.
Walter Kohlross--Mr. Kohlross, 54 years old, has been Senior Vice President,
Food & Beverage of Taj Associates since June 1992 and Vice President
International Marketing of Taj Associates from June 1993 through October 1995;
Vice President, Hotel Operations of Taj Associates from June 1991 to June
1992, and was Vice President, Food & Beverage of Taj Associates from 1988 to
June 1991.
Nicholas J. Niglio--Mr. Niglio, 49 years old, has been Senior Vice
President, Casino Marketing of Taj Associates since November 1995. From
February 1995 to October 1995, Mr. Niglio was Vice President, International
Marketing of Taj Associates. Prior to joining Taj Associates, Mr. Niglio was
Executive Vice President of International Marketing/Player Development for
TCA, the partnership that owns and operates Trump's Castle from 1993 until
1995. Prior to that, Mr. Niglio served as Senior Vice President, Marketing of
Caesar's World Marketing Corporation from 1991 until 1993.
All of the persons listed above are citizens of the United States and are
qualified or licensed by the CCC.
Trump, Nicholas L. Ribis, John P. Burke, R. Bruce McKee, Nicholas F. Moles,
Larry W. Clark and Walter Kohlross served as either executive officers and/or
directors of Taj Associates and its affiliated entities when such parties
filed their petition for reorganization under Chapter 11 of the Bankruptcy
Code on July 17, 1991. The Second Amended Joint Plan of Reorganization of such
parties was confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Trump, Nicholas L. Ribis, John P. Burke and Robert M. Pickus
served as Executive Committee members, officers and/or directors of TCA and
its affiliated entities at the time such parties filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code on March 9, 1992. The
First
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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. Rudolfo E. Prieto
was an Executive Vice President and the Chief Operating Officer for Elsinore
Corporation when it filed a petition for reorganization under Chapter 11 of
the Bankruptcy Code on October 31, 1995. Elsinore Corporation filed a plan of
reorganization on February 28, 1996.
EXECUTIVE COMPENSATION
General. Because the Company was formed in 1995, there was no salary or
bonus paid to, deferred or accrued for the benefit of, the Company'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 the
Company 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 the Company 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 the Company since its inception was paid and
will continue to be paid by THCR Holdings in accordance with the THCR Holdings
Partnership Agreement. See "Description of the THCR Holdings Partnership
Agreement."
1995 Stock Incentive Plan. The Board of Directors of the Company adopted the
1995 Stock Incentive Plan (the "1995 Stock Plan"), pursuant to which,
directors, employees and consultants of the Company 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 the Company (the "Stock Incentive Plan Committee"). Subject to the
provisions of the 1995 Stock Plan, the Stock Incentive Plan Committee has sole
discretionary authority to interpret the 1995 Stock Plan and to determine the
type of awards to grant, when, if and to whom awards are granted, the number
of shares covered by each award and the terms and conditions of the award.
Options granted under the 1995 Stock Plan may be "incentive stock options"
("ISOs"), within the meaning of Section 422 of the Code, or nonqualified stock
options ("NQSOs"). The vesting, exercisability and exercise price of the
options are determined by the Stock Incentive Plan Committee when the options
are granted, subject to a minimum price in the case of ISOs of the Fair Market
Value (as defined in the 1995 Stock Plan) of the Common Stock on the date of
grant and a minimum price in the case of NQSOs of the par value of Common
Stock. In the discretion of the Stock Incentive Plan Committee, the option
exercise price may be paid in cash or in shares of Common Stock or other
property having a fair market value on the date of exercise equal to the
option exercise price, or by delivering to the Company a copy of irrevocable
instructions to a stockbroker to deliver promptly to the Company 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. A SAR entitles its holder
to be paid an amount equal to the fair market value of Common Stock subject to
the SAR on the date of exercise of the SAR, less the exercise price of the
related stock option in the case of a SAR granted in connection with a stock
option, or the fair market value of one
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share of stock on the date the SAR was granted, in the case of a SAR granted
independent of an option. Shares of Common Stock covered by a restricted stock
award are issued to the recipient at the time the award is granted, but are
subject to forfeiture in the event continued employment and/or other
restrictions and conditions established by the Stock Incentive Plan Committee
at the time the award is granted are not satisfied. Unless otherwise
determined by the Stock Incentive Plan Committee, a recipient of a restricted
stock award has the same rights as an owner of Common Stock, including the
right to receive cash dividends and to vote the shares. A performance unit or
phantom stock award provides for the future payment of cash or the issuance of
shares of Common Stock to the recipient if continued employment and/or other
performance objectives established by the Stock Incentive Plan Committee at
the time of grant are attained. The 1995 Stock Plan also provides that
performance unit and phantom stock awards may be settled in cash, in the
discretion of the Stock Incentive Plan Committee and if indicated in the
applicable award agreement, on each date on which shares of Common Stock
covered by the awards would otherwise have been delivered or become
unrestricted, in an amount equal to the fair market value of such shares on
such date. Except as provided in a particular award agreement, in the event of
a Change in Control (as defined in the 1995 Stock Plan), notwithstanding any
vesting schedule with respect to an award of options, SARs, phantom stock
units or restricted stock, such options or SARs 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.
The Company has reserved 1,000,000 shares of Common Stock for issuance under
the 1995 Stock Plan, provided, however, that in the event of changes in the
outstanding stock or the capital structure of the Company, adjustments will be
made by the Stock Incentive Plan Committee as to (i) the number, price or kind
of a share of stock or other consideration subject to outstanding awards and
(ii) the maximum number of shares of stock subject to all awards under the
1995 Stock Plan.
In 1995, the Stock Incentive Plan Committee granted to Nicholas L. Ribis,
under the 1995 Stock Plan: (a) a stock bonus award of 66,667 shares of Common
Stock, which was fully vested when issued, (b) a phantom stock unit award of
66,666 units, entitling Mr. Ribis to receive 66,666 shares of Common Stock on
June 12, 1997, subject to certain conditions and (c) an award of NQSOs
entitling Mr. Ribis to purchase 133,333 shares of 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 $14.00 per share.
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Summary Compensation Table. The following table sets forth information
regarding compensation paid to or accrued by all the executive officers of the
Company for each of the last three completed fiscal years. Compensation
accrued during one year and paid in another is recorded under the year of
accrual. Because the Company was formed in 1995, compensation for the years
ended December 31, 1994 and 1993 reflect solely the compensation paid to or
accrued by these individuals as executive officers of Plaza Associates and Taj
Associates. Compensation for the year ended December 31, 1995 includes
compensation paid to or accrued by these individuals as executive officers of
the Company, Plaza Associates and Taj Associates.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS ($) OPTIONS ($) COMPENSATION
- --------------------------- ---- ---------- --------- --------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald J. Trump......... 1995 $ 583,333 $ -- $ -- -- -- $3,064,000(/2/)
Chairman of the Board 1994 -- -- -- -- -- 2,641,000(/2/)(/3/)
1993 -- -- -- -- -- 2,813,000(/2/)
Nicholas L. Ribis(/4/).. 1995 $1,355,636 $ 933,338 $ -- 933,324(/5/) 133,333 $ --
Chief Executive Officer 1994 1,306,000 250,000 169,407 -- -- --
1993 748,253 500,000 383,497 -- -- --
Robert M. Pickus........ 1995 $ 198,972 $ 85,000 $ -- -- -- $ 4,004(/6/)
Executive Vice President 1994 163,759 32,500 -- -- -- 3,291(/6/)
and
Secretary 1993 5,808 -- -- -- -- --
John P. Burke........... 1995 $ 100,000 $ 51,666 $ -- -- -- $ --
Senior Vice President of 1994 100,000 -- 46,000 -- -- --
Corporate Finance and 1993 95,590 28,000 46,000 -- -- --
Corporate Treasurer
</TABLE>
- ---------------------
(1) Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for income
taxes. Following SEC (as defined) rules, perquisites and other personal
benefits are not included in this table because the aggregate amount of
that compensation is less than the lesser of $50,000 or 10% of the total
of salary and bonus for each member of the Executive Group.
(2) The amounts listed represent amounts paid to Trump and TPM, a corporation
wholly owned by Trump, pursuant to the services agreements with Taj
Associates and Plaza Associates, respectively. Payments received by TPM
under the TPM Services Agreement are currently pledged by TPM to secure
lease payments for a helicopter that TPM makes available to Plaza
Associates. See "--Compensation Committee Interlocks and Insider
Participation--Certain Related Party Transactions of Trump--Plaza
Associates" and "--Taj Associates and Affiliates." Trump is neither an
employee of Plaza Associates nor Taj Associates.
(3) In addition to the amount listed as payments under the TPM Services
Agreement and the Taj Services Agreement, during 1994, Plaza Associates
paid to Trump an aggregate of $1,572,000 under a construction service
agreement and as a commission to secure a retail lease at Trump Plaza. See
Note 8 to Consolidated Financial Statements of Trump AC and Plaza
Associates.
(4) Mr. Ribis devotes a majority of his time to the affairs of the Company.
See "--Employment Agreements."
(5) As of December 31, 1995, Mr. Ribis also held 66,666 phantom stock units
issued pursuant to the 1995 Stock Plan. These units had a value as of
December 31, 1995 of $1,433,319. These phantom stock units were issued to
Mr. Ribis in connection with his employment agreement with the Company.
Each phantom stock unit entitles Mr. Ribis to one share of Common Stock on
the vesting date of the phantom stock unit. All of the phantom stock units
are scheduled to vest on June 12, 1997. Vesting will accelerate in the
event of Mr. Ribis' termination of employment with the Company (i) because
of his death or disability, (ii) by the Company 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 the Company under circumstances which do
not constitute constructive termination or if he is terminated by the
Company with cause. Dividend equivalents with respect to the phantom stock
units will be credited to a bookkeeping account on behalf of Mr. Ribis and
will be paid out in cash at the time the phantom stock units vest or will
expire along with the phantom stock units.
(6) Represents vested and unvested contributions made by Plaza Associates to
the Trump Plaza Hotel and Casino Retirement Savings Plan. Funds
accumulated for an employee under this plan consisting of a certain
percentage of the employee's compensation plus Plaza Associates' employer
matching contributions equaling 50% of the participant's contributions,
are retained until termination of employment, attainment of age 59 1/2 or
financial hardship, at which time the employee may withdraw his or her
vested funds.
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The following table sets forth options granted to Mr. Ribis in 1995. No
other member of the Executive Group received stock options in 1995. The
Company 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 price appreciation of
5% and 10%. The actual future value of the options will depend on the market
value of the Common Stock, continued employment with the Company and other
factors.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
INDIVIDUAL STOCK APPRECIATION
GRANTS FOR OPTION TERM
----------------------------------------------------- ---------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- -------------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nicholas L. Ribis....... 133,333(1) 100% $14.00 June 12, 2005 $1,173,060 $2,960,580
</TABLE>
- ---------------------
(1) The options vest at the rate of 20% per year on each anniversary of the
date of the grant subject to acceleration in certain circumstances. See
"--Employment Agreements."
The following table sets forth the number of shares covered by options held
by Mr. Ribis and the value of the options as of December 31, 1995. Mr. Ribis
was the only member of the Executive Group who held options in 1995. None of
these options were exercisable in 1995.
FY-END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END(#) OPTIONS AT FY-END ($)(1)
-------------------------- --------------------------
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
---- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Nicholas L. Ribis........ N/A 133,333 N/A $2,866,660
</TABLE>
- ---------------------
(1) Based on a closing price of $21 1/2 per share of Common Stock on December
31, 1995.
EMPLOYMENT AGREEMENTS
Trump serves as the Chairman of the Board of Directors of the Company
pursuant to the Executive Agreement dated as of June 12, 1995, among Trump,
the Company and THCR Holdings (the "Executive Agreement"). In consideration
for Trump's services under the Executive Agreement, Trump receives a salary of
$1 million per year. Pursuant to the terms of the Executive Agreement, Trump
provides to the Company, from time to time, when reasonably requested,
marketing, advertising, professional and other similar and related services
with respect to the operation and business of the Company. The Executive
Agreement continues in effect (i) for an initial term of five years, and (ii)
thereafter, for a three-year rolling term until either Trump or the Company
provides notice to the other of its election not to continue extending the
term, in which case the term of the Executive Agreement will end three years
from the date such notice is given. The Executive Agreement also provides that
Trump may devote time and effort to the Taj Mahal and Trump's Castle and,
subject to the terms of the Contribution Agreement, to other business matters,
and that the Executive Agreement will not be construed to restrict Trump from
operating the Taj Mahal and Trump's Castle in a commercially reasonable manner
and/or having an interest therein or conducting any other activity not
prohibited under the Contribution Agreement. See "Risk Factors--Conflicts of
Interest" and "Description of the THCR Holdings Partnership Agreement--
Contribution Agreement."
Plaza Associates had an employment agreement with Nicholas L. Ribis (the
"Ribis Plaza Agreement") pursuant to which Mr. Ribis acted as Chief Executive
Officer of Plaza Associates. The Ribis Plaza Agreement
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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, the
Company 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 the Company 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 not less than 50% of his professional time to the affairs
of the Company, as measured on a quarterly basis, based on a 40-hour work
week. Under the Revised Ribis Plaza Agreement, Mr. Ribis's annual salary is
$998,250, which is 50% of the aggregate current annual base salary
($1,996,500) that Mr. Ribis receives as Chief Executive Officer of the Company
($998,250), Taj Mahal ($499,125) and Trump's Castle ($499,125). Following the
consummation of the Merger Transaction, Mr. Ribis will devote 75% of his
professional time to the operations of the Company, Plaza Associates and Taj
Associates, and his annual salary will be $1,497,375 per year with respect to
his services to these entities. Mr. Ribis will continue to receive $499,125
per year with respect to his services to Trump's Castle. In 1995, the Stock
Incentive Plan Committee granted to Mr. Ribis, under the 1995 Stock Plan: (a)
a stock bonus award of 66,667 shares of Common Stock, which was fully vested
when issued, (b) a phantom stock unit award of 66,666 units, entitling him to
receive 66,666 shares of Common Stock on June 12, 1997, subject to certain
conditions and (c) an award of NQSOs entitling Mr. Ribis to purchase 133,333
shares of the Common Stock (and associated registration rights) 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 the Company other than for
"cause" or if he incurs a "constructive termination without cause," Mr. Ribis
will receive a severance payment equal to one year's base salary, and the
phantom stock units and options will become fully vested. The Revised Ribis
Plaza Agreement defines (a) "cause" as Mr. Ribis's (i) conviction of certain
crimes, (ii) gross negligence or willful misconduct in carrying out his
duties, (iii) revocation of his casino key employee license or (iv) material
breach of the agreement, and (b) "constructive termination without cause" as
the termination of Mr. Ribis's employment at his initiative following the
occurrence of certain events, including (i) a reduction in compensation, (ii)
failure to elect Mr. Ribis as Chief Executive Officer or (iii) failure to
elect Mr. Ribis a director of the Company or (iv) a material diminution of his
duties. The phantom stock units will also automatically vest upon the death or
disability of Mr. Ribis. The 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." The Revised
Ribis Plaza Agreement defines "change of control" as the occurrence of any of
the following events: (i) any person (other than THCR Holdings, Trump or an
affiliate of either) becomes a beneficial owner of 50% or more of the voting
stock of the Company, (ii) the majority of the Board of Directors of the
Company consists of individuals that were not directors on June 12, 1995 (the
"June 12 Directors"), provided, however, that any person who becomes a
director subsequent to June 12, 1995, shall be considered a June 12 Director
if his election or nomination was supported by three-quarters of the June 12
Directors, (iii) the Company adopts and implements a plan of liquidation or
(iv) all or substantially all of the assets or business of the Company are
disposed of in a sale or business combination in which shareholders of the
Company would not beneficially own the same proportion of voting stock of the
successor entity. The Revised Ribis Plaza Agreement also provides certain
demand and piggyback registration rights for Common Stock issued pursuant to
the foregoing. Pursuant to the Revised Ribis Plaza Agreement, Mr. Ribis has
agreed that upon termination of his employment other than for "cause" or
following a "change of control," he would not engage in any activity
competitive with the Company for a period of up to one year.
Mr. Ribis also has an employment agreement with Taj Associates (the "Ribis
Taj Agreement") pursuant to which Mr. Ribis acts as Chief Executive Officer of
Taj Associates, the term of which expires on September 25, 1996. 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
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<PAGE>
arrangements to include equity participation for Mr. Ribis. Taj Associates may
at any time terminate Mr. Ribis's employment for "cause," which is defined in
the Ribis Taj Agreement as Mr. Ribis's (i) conviction of a felony or (ii)
revocation or termination of his casino key employee license issued by the
CCC. Pursuant to the Ribis Taj Agreement, Mr. Ribis has agreed that upon
termination of his employment for cause by Taj Associates or voluntarily by
Mr. Ribis (other than following a material breach of the agreement by Taj
Associates), he would not engage in employment for or on behalf of any other
casino hotel located in Atlantic City for the lesser of one year or the period
then remaining in the term of the agreement, provided that this covenant not
to compete shall not be applicable in the case there is a public offering of
common shares and Mr. Ribis voluntarily terminates his employment as the
result of his and Taj Associates' failure to negotiate mutually satisfactory
compensation arrangements. Taj Associates and Mr. Ribis expect to amend the
Ribis Taj Agreement, retroactive to June 12, 1995, pursuant to which, among
other things, Mr. Ribis's annual salary will change from $550,000 (with annual
increases of 10% on each anniversary) to $499,125.
Mr. Ribis is also Chief Executive Officer of TCA, the partnership that owns
Trump's Castle, and receives compensation from this entity for such services
as set forth above. Pursuant to the Revised Ribis Plaza Agreement, he is
required to devote the majority of his time to the affairs of the Company, and
following the consummation of the Merger Transaction, Mr. Ribis will devote
approximately 75% of his professional time to the Company. 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, the initial term of 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," which is defined in
the Pickus Agreement as Mr. Pickus's (i) revocation of his casino key employee
license, (ii) conviction of certain crimes, (iii) disability or death or (iv)
breach of his duty to THCR Holdings. Upon termination for cause, Mr. Pickus
will receive only compensation earned to the date of termination. Pursuant to
the Pickus Agreement, Mr. Pickus has agreed not to accept employment for or on
behalf of any other casino hotel located in Atlantic City during the term of
the Pickus Agreement.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees or consultants of the
Company and its affiliates receive no directors' fees. Non-employee directors
are paid an annual directors' fee of $50,000, plus $2,000 per meeting attended
plus reasonable out-of-pocket expenses incurred in attending these meetings,
provided that directors currently serving on the Board of Directors of Plaza
Funding or Plaza Holding Inc. receive no additional compensation. All such
fees are reimbursed to the Company by THCR Holdings in accordance with the
THCR Holdings Partnership Agreement.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company 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 the Company. 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 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
the Company, 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 the Company is
determined by the Compensation Committee of the Board of Directors of the
Company, which consists of Messrs. Trump, Ribis, Askins and
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<PAGE>
Thomas. No officer or employee of the Company, other than Messrs. Trump and
Ribis, who serve on the Board of Directors of the Company, participated in the
deliberations of the Board of Directors of the Company concerning executive
compensation.
Certain Related Party Transactions of Trump--The Company. Trump entered into
the Executive Agreement, the Contribution Agreement and the License Agreement
in June 1995, and is currently the sole limited partner of THCR Holdings. See
"--Employment Agreements," "Business--Trademark/Licensing" and "Description of
the THCR Holdings Partnership Agreement."
Upon consummation of the June 1995 Offerings, Trump contributed to the
capital of Trump Indiana and other new jurisdiction subsidiaries payments made
by him relating to expenditures for the development of the Indiana Riverboat
and other gaming ventures. As of June 12, 1995 these advances totaled
approximately $4.4 million. Of these amounts, approximately $3.0 million were
used to fund expenses related to the development of Trump Indiana. In order to
fund such expenses, THCR Holdings lent to Trump $3.0 million and Trump issued
to THCR Holdings a five-year promissory note bearing interest at a fixed rate
of 10%, payable annually. The promissory note provided that it would be
automatically canceled in the event that at any time during the periods set
forth below, the Common Stock traded on the NYSE, or any other applicable
national exchange or over-the-counter market, at a price per share equal to or
greater than the prices set forth below (subject to adjustment in certain
circumstances) for any ten trading days during any 15 consecutive trading day
period:
<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>
On March 27, 1996, the $3.0 million promissory note was canceled in accordance
with its terms.
The Company 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 the
Company may use for its general executive and administrative offices. The
fixed rent is $115,500 per year, paid in equal monthly installments, for the
period from July 1, 1995 to June 30, 2000, and will be $129,250 per year, paid
in equal monthly installments, for the period from July 1, 2000 to June 30,
2005. In addition, the Company will pay as additional rent, among other
things, a portion of the property taxes due each year. The Company has the
option to terminate this lease upon ninety days' written notice and payment of
$32,312.50.
In connection with the Merger Transaction, Trump and the Company 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
Common Stock and Class B Common Stock beneficially owned by Trump in favor of
the approval of the Merger Transaction. The Company agreed to use reasonable
efforts to fulfill, and cause to be fulfilled, those obligations owed to Trump
in connection with the Merger Transaction.
Certain Related Party Transactions of Trump--Plaza Associates. 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.
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
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<PAGE>
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 $950,000, $900,000 and $900,000 in 1995, 1994 and
1993, respectively, concerning rent owed to Seashore Four.
Trump Seashore is the fee owner of a parcel of land constituting a portion
of the Plaza Casino Parcel, which it leases to Plaza Associates pursuant to
the TSA Lease. In July 1988, Trump Seashore exercised a $10 million option to
purchase the fee title to such parcel from a non-affiliated third party. In
connection therewith, Trump Seashore was assigned the lessors' interest in the
Trump Seashore Lease, which interest has, however, been transferred to UST.
See "Business--Properties." Plaza Associates made rental payments to Trump
Seashore of approximately $1,175,000, $1.0 million and $1.0 million in 1995,
1994 and 1993, respectively.
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 Manufacturers Hanover
Trust Company, which has since been acquired by Chemical Bank ("Chemical"),
the assignee of rents payable under such lease, a promissory note in the
original principal amount of $17.5 million (the "Regency Note"). At such time,
title to the former Trump Regency Hotel was transferred by Trump to ACFH Inc.
("ACFH"), a wholly owned subsidiary of Chemical. From that time until June 12,
1995, the former Trump Regency Hotel was operated on behalf of ACFH as a non-
casino hotel by Sovereign Management, a third party unaffiliated with the
Company, Trump or their respective affiliates. Pursuant to an agreement
between Trump Crystal and ACFH, Trump Crystal granted ACFH a non-exclusive
license to use the "Trump" name in connection with such property. Plaza
Associates repaid the Regency Note with a portion of the proceeds from the
sale of the Plaza Notes and PIK Notes.
In December 1993, Trump entered into an option agreement (the "Original
Chemical Option Agreement") with Chemical and ACFH. The Original Chemical
Option Agreement granted to Trump an option to purchase (i) the former Trump
Regency Hotel (including the land, improvements and personal property used in
the operation 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.
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<PAGE>
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. The Company is currently in the process
of renovating and integrating Trump World's Fair into Trump Plaza. See
"Business--Atlantic City Properties--Trump Plaza--The Trump Plaza Expansion."
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
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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 approximately $18 million obligation to
Midlantic in full.
On June 24, 1993, Plaza Associates and TPM entered into the TPM Services
Agreement which amended and restated an earlier services agreement. Pursuant
to the TPM Services Agreement, TPM is required to provide to Plaza Associates,
from time to time when reasonably requested, consulting services on a non-
exclusive basis, relating to marketing, advertising, promotional and other
similar and related services (the "TPM Services") with respect to the business
and operations of Plaza Associates. In addition, the TPM Services Agreement
contains a non-exclusive "license" of the "Trump" name. TPM is not required to
devote any prescribed amount of time to the performance of its duties. In
consideration for the TPM Services, Plaza Associates pays TPM an annual fee of
$1.0 million in equal monthly installments. In addition to such annual fee,
Plaza Associates reimburses TPM on a monthly basis for all reasonable out-of-
pocket expenses incurred by TPM in performing its obligations under the TPM
Services Agreement. Plaza Associates paid TPM $1,321,000, $1,288,000 and
$1,247,000 in 1995, 1994 and 1993, respectively, for the TPM Services.
Pursuant to the TPM Services Agreement, Plaza Associates has agreed to hold
TPM, its officers, directors and employees harmless from and against any loss
arising out of or in connection with the performance of the TPM Services and
to hold Trump harmless from and against any loss arising out of the license of
the "Trump" name. The TPM Services Agreement provides that its term is
coextensive with the period during which any Plaza Notes remain outstanding.
Payments received under the TPM Services Agreement are currently pledged by
TPM to secure lease payments for a helicopter that TPM makes available to
Plaza Associates. Pending approval by the lessor of the helicopter, it is
currently contemplated that the stock of TPM will be transferred by Trump to
THCR Holdings, which will in turn assume the lease and related obligations, as
well as become entitled to all amounts payable under the TPM Services
Agreement.
John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to Plaza
Associates.
Certain Related Party Transactions of Trump--Taj Associates and
Affiliates. On January 8, 1996, as an inducement for Taj Holding, the Company
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.
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."
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
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maximum of $30 million. In connection with the purchase of the Specified
Parcels, First Fidelity will, among other things, release Taj Associates from
the Taj Associates-First Fidelity Guarantee. See "Business--Certain
Indebtedness--Taj Association--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 Associates and Trump have entered into the Taj Services Agreement, which
became effective in April 1991, and which provides that Trump will render to
Taj Associates marketing, advertising, promotional and related services with
respect to the business operations of Taj Associates through December 31,
1999. In consideration for the services to be rendered, Taj Associates pays an
annual fee (the "Annual Fee") equal to 1 1/2% of Taj Associates' earnings
before interest, taxes and depreciation less capital expenditures for such
year, with a minimum base fee of $500,000 per annum. The base fee is payable
monthly with the balance due April 15 of the following year. During 1993, 1994
and 1995, Trump earned approximately $1.6 million, $1.4 million and $1.7
million, respectively, in respect of the Annual Fee, including amounts paid to
a third party pursuant to an assignment agreement. In addition to the Annual
Fee, Taj Associates reimburses Trump on a monthly basis for all reasonable
out-of-pocket expenses up to certain aggregate amounts incurred by Trump in
performing his obligations under the Taj Services Agreement. During 1993, 1994
and 1995, Taj Associates reimbursed Trump $232,000, $224,000 and $261,000,
respectively, for expenses pursuant to the Taj Services Agreement, of which
$127,000, $148,000 and $164,000, 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.
On April 1, 1991, in connection with the Taj Services Agreement, Taj
Associates and Trump entered into an Amended and Restated License Agreement
(the "Taj License Agreement") which amended and restated an earlier license
agreement between the parties. Pursuant to the Taj License Agreement, Taj
Associates has the non-exclusive right to use the name and likeness of Trump,
and the exclusive right to use the name and related marks and designs of the
Trump Taj Mahal Casino Resort (collectively, the "Taj Marks"), in its
advertising, marketing and promotional activities through December 31, 1999.
All uses by Taj Associates of the names, marks, licenses and designs under the
Taj License Agreement are subject to the prior written approval of Trump.
Trump has agreed to indemnify Taj Associates against any liability for
trademark or copyright infringement (in connection with the use by Taj
Associates of the Taj Marks in accordance with the Taj License Agreement)
arising solely by reason of any license agreement or other agreement entered
into by Trump with respect to the Taj Marks. Taj Associates has collaterally
assigned its right under the Taj License Agreement to the Taj Bond Trustee.
Upon consummation of the Merger Transaction, the Taj License Agreement will be
terminated and the Taj Marks licensed to the Company.
John Barry, Trump's brother-in-law, is a partner of Barry & McMoran, a New
Jersey law firm which provides, from time to time, legal services to Taj
Associates.
Other Relationships. The Securities and Exchange Commission (the "SEC")
requires issuers to disclose the existence of any other corporation in which
both (i) an executive officer of the registrant serves on the board of
directors and/or compensation committee, and (ii) a director of the registrant
serves as an executive officer. Messrs. Ribis, Pickus and Burke, executive
officers of the Company, have served on the boards of directors of other
entities in which members of the Board of Directors (namely, Messrs. Trump and
Ribis) served and continue to serve as executive officers. Management believes
that such relationships have not affected the compensation decisions made by
the Board of Directors in the last fiscal year.
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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 the Company. 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 Trump is an executive officer.
Such persons also serve on the Board of Directors of TM/GP, the managing
general partner of Taj Associates, of which Messrs. Trump and Ribis are
executive officers. Mr. Ribis is compensated by Taj Associates for his
services as its Chief Executive Officer. See "--Employment Agreements."
Mr. Ribis also serves on the Board of Directors of Realty Corp., which
leases certain real property to Taj Associates, of which Trump is an executive
officer. Trump, however, does not receive any compensation for serving as an
executive officer of Realty Corp. Mr. Ribis receives compensation from TCA for
acting as its Chief Executive Officer. See "--Employment Agreements."
Prior to December 1995, Mr. Ribis was Counsel to the law firm of Ribis,
Graham and Curtin (now practicing as Graham, Curtin & Sheridan, A Professional
Association), which serves as New Jersey legal counsel to the Company, THCR
Holdings, Plaza Associates, Taj Holdings, Taj Associates and certain of their
affiliated entities.
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CERTAIN TRANSACTIONS
Payments to affiliates in connection with any such transactions are governed
by the provisions of the Plaza Note Indenture and the Senior Note Indenture,
and may also be governed by the provisions of the Mortgage 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 the Company for certain
affiliated transactions.
THE COMPANY
Trump and certain affiliates have engaged in certain related party
transactions with respect to the Company and Plaza Associates. See
"Management--Compensation Committee Interlocks and Insider Participation--
Certain Related Party Transactions of Trump--The Company, "--Plaza Associates"
and "--Other Relationships."
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 12
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; lease payments by TCA to Plaza
Associates totaled $6,000, $6,000 and $15,000 in 1995, 1994 and 1993,
respectively.
Indemnification Agreements. In addition to the indemnification provisions
in the Company's and its subsidiaries' employment agreements (see
"Management--Employment Agreements"), certain former and current directors of
Plaza Funding entered into separate indemnification agreements in May 1992
with Plaza Associates pursuant to which such persons are afforded the full
benefits of the indemnification provisions of the partnership agreement
governing Plaza Associates. Plaza Associates also entered into an
Indemnification Trust Agreement in November 1992 (the "Trust Agreement") with
Midlantic (the "Indemnification Trustee") pursuant to which the sum of
$100,000 was deposited by Plaza Associates with the Indemnification Trustee
for 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. Such directors are covered by
directors' and officers' insurance maintained by Plaza Associates.
TAJ HOLDING AND AFFILIATES
Trump and certain affiliates have engaged in certain related party
transactions with respect to Taj Associates. See "Management--Compensation
Committee Interlocks and Insider Participation--Certain Related Party
Transactions of Trump--Taj Associates and Affiliates" and "--Other
Relationships."
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During the fiscal years ended December 31, 1993, 1994 and 1995, Taj
Associates reimbursed Taj Holding $1,733,000, $2,171,000 and $1,554,000,
respectively, for all amounts necessary to permit TM/GP or Taj Holding (a) to
make payments that TM/GP or Taj Holding was required to make pursuant to the
terms of TM/GP's 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.
In April 1991, Taj Associates purchased from TCA for $1,687,000 two adjacent
parcels of land on the Pleasantville-Egg Harbor Township border, constituting
approximately ten acres. The first parcel contains two buildings, certain
fleet maintenance facilities and an office building and warehouse facility,
portions of which were leased to Plaza Associates. The lease expired in March
1993 and Plaza Associates has vacated. Taj Associates currently leases the
space to commercial tenants. The second parcel is unimproved.
In December 1994, Taj Associates entered into a one-year agreement with TCA
pursuant to which TCA leases to Taj Associates 300 parking spaces (500 parking
spaces during the months of May to September) at a rate of 50 cents per space
per day, to be used for employee parking. The agreement expired in December
1995, however, TCA and Taj Associates are currently negotiating an extension
of the agreement and have agreed to continue the lease on a month-to-month
basis.
Taj Associates engages in various transactions with Trump Plaza and Trump's
Castle. These transactions are charged at cost or normal selling price in the
case of retail items and include certain shared payroll costs as well as
complimentary services offered to customers. Expenses incurred by Taj
Associates payable to TCA for the years ended December 31, 1993, 1994 and 1995
were approximately $1,100,000, $1,167,000 and $1,072,000, respectively, of
which all but $69,000, $30,000, and $164,000, respectively, was paid or offset
against amounts owed to Taj Associates by TCA. Expenses incurred by Taj
Associates payable to Plaza Associates for the years ended December 31, 1993,
1994 and 1995 were approximately $83,000, $149,000 and $445,000, respectively,
all of which were offset against amounts owed to Taj Associates by Plaza
Associates, with the exception of $167,000 at December 31, 1995.
Indemnification Agreements. In addition to the indemnification provisions in
Taj Associates' 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.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 1, 1996 (without giving effect
to the transactions contemplated by the Merger Transaction), certain
information regarding the beneficial ownership of Common Stock by (i) each of
the Company's executive officers, (ii) each director of the Company, (iii)
each person who is known to the Company to own beneficially more than 5% of
the Common Stock and (iv) all officers and directors of the Company as a
group. Such information is based, in part, upon information provided by
certain stockholders of the Company. In the case of persons other than members
of the officers and directors of the Company, 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.......................................... 6,667,217(/1/) 39.8%
Nicholas L. Ribis........................................ 72,487(/2/) *
John P. Burke............................................ 400(/3/) *
Robert M. Pickus......................................... 200 *
Wallace B. Askins........................................ 3,000 *
Don M. Thomas............................................ 200 *
Peter M. Ryan............................................ -- --
INVESCO PLC.............................................. 527,300(/4/) 5.2
Hellman, Jordan Management Co., Inc. .................... 882,700(/5/) 8.8
The Capital Group Companies, Inc. ....................... 1,064,000(/6/) 10.6
State Street Research & Management Company............... 1,270,300(/7/) 12.6
Oppenheimer Group, Inc. ................................. 1,490,075(/8/) 14.8
All officers and directors of the Company (7 persons).... 6,743,504 40.2
</TABLE>
The above persons have sole voting and investment power, unless otherwise
indicated below.
- ---------------------
* Less than 1%.
(1) 725 Fifth Avenue, New York, New York 10022. These shares include 6,666,667
shares of Common Stock, into which Trump's limited partnership interest in
THCR Holdings is convertible, subject to certain adjustments. See
"Description of the THCR Holdings Partnership Agreement." These shares
include 300 shares of Common Stock held by his wife, Mrs. Marla M. Trump,
of which shares Trump disclaims beneficial ownership. Trump is also the
beneficial owner of the outstanding shares of the Class B Common Stock
(1,000 shares). The Class B Common Stock has voting power equivalent to
the voting power of the Common Stock into which Trump's limited
partnership interest is convertible. Upon conversion of all or any portion
of the THCR Holdings limited partnership interest into shares of Common
Stock, the corresponding voting power of the Class B Common Stock will be
proportionately diminished. See "Description of Capital Stock."
(2) Represents a stock bonus awarded to the President of the Company pursuant
to the 1995 Stock Plan. See "Management--Executive Compensation." These
shares include 3,081 shares and 2,739 shares held by Mr. Ribis as
custodian for his son, Nicholas L. Ribis, Jr., and his daughter,
Alexandria Ribis, respectively, of which shares Mr. Ribis disclaims
beneficial ownership.
(3) Mr. Burke shares voting and dispositive power of 100 of these shares with
his wife. These shares also include 100 shares beneficially owned solely
by his wife, of which shares Mr. Burke disclaims beneficial ownership.
(4) 11 Devonshire Square, London EC2M 4YR, England. INVESCO PLC ("Invesco"),
the parent holding company, shares voting and dispositive power over these
shares with four of its subsidiaries. Invesco and its subsidiaries
disclaim beneficial ownership of these shares, which are held by them on
behalf of other persons who have the right to receive (or direct the
receipt) of dividends and proceeds from the sale of such shares.
(5) 75 State Street, Suite 2420, Boston, Massachusetts 02109. Hellman, Jordan
Management Co., Inc. ("Hellman") is an investment adviser which has sole
dispositive power over all of these shares and sole voting power over
817,700 of these shares. Hellman's clients have the power to revoke
Hellman's dispositive power upon 30 days' written notice.
(6) 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 654,000 shares beneficially owned by Capital Guardian Trust
Company ("Capital Guardian"), respectively. Capital Group is the parent
holding company of Capital Guardian. Capital Group and Capital Guardian
disclaim beneficial ownership of these shares.
(7) One Financial Center, 30th Floor, Boston, Massachusetts 02111. State
Street Research & Management Company ("State Street") is an investment
adviser and disclaims beneficial ownership of these shares. Metropolitan
Life Insurance Company, One Madison Avenue, New York, New York 10010, is
the parent holding company of State Street.
(8) Oppenheimer Tower, World Financial Center, New York, New York 10281.
Oppenheimer Group, Inc. ("Oppenheimer") has shared voting and dispositive
power over these shares. These shares include 886,400 shares beneficially
owned by Oppenheimer Capital, an investment adviser, of which Oppenheimer
is the parent holding company.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company does
not purport to be complete and is qualified in its entirety by reference to
the Certificate of Incorporation and the By-Laws, copies of which are filed as
exhibits to this Registration Statement of which this Prospectus is a part.
GENERAL
The authorized capital stock of the Company consists of (i) 50,000,000
shares of Common Stock, of which 10,066,667 shares are currently issued and
outstanding, (ii) 1,000 shares of 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 "Preferred Stock"), none of which are
issued and outstanding.
COMMON STOCK AND CLASS B COMMON STOCK
Holders of 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 Class B Common Stock
described below, holders of a majority of the shares of Common Stock are
entitled to vote in any election of directors, may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock and Class B Common Stock will
share ratably, out of the assets of the Company 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 Common Stock will be
entitled to participate ratably in all of the remaining assets of the Company
available for distribution. Holders of Common Stock have no subscription,
redemption or conversion rights. Holders of Common Stock have no preemptive
rights to subscribe to any additional securities that the Company may issue,
nor is the Common Stock subject to calls or assessments by the Company. All
the outstanding shares of Common Stock are, and the shares of 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 Common Stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of Preferred Stock that the
Company may designate and issue in the future.
Trump currently is the beneficial owner of all 1,000 outstanding shares of
Class B Common Stock. The Class B Common Stock votes together with the Common
Stock as a single class on all matters submitted to stockholders of the
Company for a vote or in respect of which consents are solicited (other than
in connection with certain amendments of the Certificate of Incorporation
described below). The number of votes represented by the Class B Common Stock
held by any holder equals the number of shares of Common Stock issuable to the
holder upon the conversion of such holder's partnership interest in THCR
Holdings into Common Stock. Upon such conversion, the corresponding voting
power of shares of Class B Common Stock (equal in voting power to the number
of shares of Common Stock issued upon such conversion) will be proportionately
diminished. The Class B Common Stock provides Trump with a voting interest in
the Company 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 Class B Common Stock has no right
to receive any dividend or other distribution in respect of the equity of the
Company. In addition, the Certificate of Incorporation provides that the Class
B Common Stock is not entitled to a separate class vote on any matters
submitted to the stockholders of the Company for their approval, except for
any amendment of the terms of the Class B Common Stock, which require (x) the
affirmative vote of the Class B Common Stock, voting as a separate class, and
(y) the affirmative vote of a majority of the shares of Common Stock held by
persons who are not beneficial owners of Class B Common Stock, voting as a
separate class.
In accordance with the requirements of the Casino Control Act and the
Indiana Riverboat Gambling Act, the Certificate of Incorporation provides that
all securities of the Company are held subject to the condition that, if a
holder thereof is found to be disqualified, such holder shall: (a) dispose of
his interest in the Company; (b) not
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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 Certificate of
Incorporation further provides that the Company may redeem any shares of the
Company'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 the
Company. Such redemption shall be at the lesser of fair market value (as
defined in the Certificate of Incorporation), or the purchase price of such
capital stock. The Certificate of Incorporation may also contain other
provisions required by the gaming laws of other jurisdictions.
The Transfer Agent for the Company's Common Stock is Continental Stock
Transfer & Trust Company, Jersey City, New Jersey.
PREFERRED STOCK
The Board of Directors may, without further action by the Company's
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. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders
and may adversely affect the voting and other rights of the holders of Common
Stock. At present, the Company has no plans to issue any of the Preferred
Stock.
PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECTS
The Certificate of Incorporation and the 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 and in the policies formulated by the Board of Directors and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company 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 the Company. The provisions are also intended to
discourage certain tactics that may be used in proxy fights. The Board of
Directors believes that, as a general rule, such takeover proposals would not
be in the best interest of the Company and its stockholders. Set forth below
is a description of such provisions in the Certificate of Incorporation and
the By-Laws. The Board of Directors has no current plans to formulate or
effect additional measures that could have an anti-takeover effect.
The Certificate of Incorporation provides that directors, other than those,
if any, elected by the holders of the 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 ("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 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 Preferred Stock, the Certificate of Incorporation provides that the whole
Board of Directors will consist of that number of directors determined from
time to time by the Board of Directors.
The By-Laws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board of Directors 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 the Company. In general, notice must be received by
the Company 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.
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In addition, the Certificate of Incorporation provides that whenever any
vote of 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 Preferred Stock, the affirmative vote
of at least a majority of the combined voting power of the then-outstanding
shares of Voting Stock and approval by at least a majority of the then-
authorized number of directors of the Company is required to amend certain
provisions of the Certificate of Incorporation; provided, however, that if any
such amendment, alteration, repeal, or rescission (a "Change") relates to
those provisions or to removal of directors, such 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 Voting Stock, voting together
as a single class and, if at the time there exist one or more Related Persons
(as defined), such 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 Certificate of Incorporation as, to any
Related Person, shares of Voting Stock that are beneficially owned and owned
of record by stockholders other than such Related Person). A "Related Person"
means any person, entity or group which beneficially owns 10% or more of the
outstanding voting stock of the Company; provided, however, that Trump and his
affiliates are not deemed to be a Related Person.
The Certificate of Incorporation provides that the vote(s) required by the
immediately preceding provision shall not be required if such Change has been
first approved by at least two-thirds of the then- authorized number of
directors of the Company and, if at the time there exist one or more Related
Persons, by a majority of the Continuing Directors (as defined with respect to
any Related Person to be any member of the Board of Directors who (i) is
unaffiliated with and is not the Related Person and (ii) became a member of
the Board of Directors prior to the time that the Related Person became a
Related Person, and any successor of a Continuing Director who is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board of Directors).
The Certificate of Incorporation provides that the By-Laws may be adopted,
altered, amended or repealed by the stockholders of the Company or by a
majority vote of the entire Board of Directors.
The Certificate of Incorporation provides that, except as otherwise provided
for with respect to the rights of the holders of Preferred Stock, no action
that is required or permitted to be taken by the stockholders of the Company
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 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 Continuing Directors then in office.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company 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. 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 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 Certificate of
Incorporation and the By-Laws contain provisions to indemnify Company's
directors and
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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. The
Company believes that these provisions assist the Company in attracting and
retaining qualified individuals to serve as directors.
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DESCRIPTION OF THE THCR HOLDINGS PARTNERSHIP AGREEMENT
The following summary of the Amended and Restated Agreement of Limited
Partnership of THCR Holdings (the "THCR Holdings Partnership Agreement"), and
the description of certain provisions set forth elsewhere in this 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 Prospectus
is a part. THCR Holdings was formed in 1995 under the Delaware Revised Uniform
Limited Partnership Act, as amended (the "Delaware RULPA"). Stockholders of
the Company are neither general nor limited partners of THCR Holdings, and
influence or control THCR Holdings solely through their ownership of Common
Stock.
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, but in any case pro rata in accordance
with the Partners' percentage interests. THCR Holdings' ability to make
distributions (including tax distributions) is 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 Internal Revenue Code
(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 subject to cure
by special allocation except as specifically provided in the THCR Holdings
Partnership Agreement).
THCR Holdings has agreed that all expenses of the Company shall, to the
maximum extent practicable, be paid directly by THCR Holdings. Any other
expenses paid directly by the Company 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, the Company 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, Trump AC 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 the Company'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 Trump AC
(on behalf, and at the direction, of THCR Holdings).
The THCR Holdings Partnership Agreement provides that the Company 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 dissolution of THCR Holdings under the Delaware RULPA, the
institution of any proceedings for bankruptcy on
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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 the Company 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 the Company), 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 the Company 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) the Company
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 the Company, 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 the Company in exchange for a contribution of value
from the Company 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 the Company and who
are not affiliates of Trump or any of his affiliates.
The THCR Holdings Partnership Agreement currently provides that the Company
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 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 the Company may contribute to Trump AC the
indirect interests in Taj Associates that the Company acquires in the Merger
and the proceeds from the Stock Offering, rather than make such contributions
directly 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 Associates.
EXCHANGE AND REGISTRATION RIGHTS
The Company 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 Common
Stock and (ii) a majority of the Special Committee has the right to require
any holder of a limited partnership interest (other than
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Trump and his Permitted Holders) to exchange their Partnership interests for
Common Stock. The number of shares of Common Stock issuable upon exchange of
limited partnership interests is 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 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 Common Stock issuable upon the
exchange of limited partnership interests. The holders of
securities representing a majority of the Common Stock issuable upon the
exchange of limited partnership interests shall have the right to require the
Company, at the Company'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 Common
Stock.
In addition, in the event the Company proposes to register any of its 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 the Company, request that the Company, at the
Company's expense (other than with respect to underwriting discounts,
commissions and fees attributable to the sale of any such Common Stock),
include in such registered offering all or any part of their Common Stock. The
Company is required to include the securities covered by such notice or
notices in such registered offering unless the Company 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 Common Stock requested to be included in such
registration exceeds the amount which can be sold in such offering without
adversely affecting the distribution of the securities being offered.
In connection with the Merger Transaction, the Exchange Rights Agreement
will be amended to, among other things, extend to TTMI registration rights
with respect to the shares of Common Stock into which its limited partnership
interests will be convertible and to make certain accommodations of the
interests of certain of Trump's lenders should they foreclose on THCR Holdings
limited partnership interests. In addition, the shares of Common Stock
issuable upon the exercise of the warrant to be issued to Trump will have
registration rights similar to those currently held by Trump.
TAX MATTERS PARTNER
Pursuant to the THCR Holdings Partnership Agreement, the Company 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 the Company, (ii) the election of the Company 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
the Company, until the receipt of substantially all of the proceeds thereof,
or a determination by the Company 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
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the vote of a lesser percentage in interest of the Limited Partners, in which
event such election may be by such lesser percentage in 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
the Company. 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 the Company is for a term of the later of
(i) June 12, 2015, (ii) such time as Trump and his affiliates no longer hold a
15% or greater voting interest in the Company or (iii) such time as Trump
ceases to be employed or retained pursuant to an employment, management,
consulting or similar services agreement with the Company. 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 the Company and no other holder owns more voting power of the Company, or
such shorter period ending on the date on which no Plaza Notes remain
outstanding, to the extent required under the Plaza Note Indenture, Trump
shall retain the right (x) to designate for election a majority of the Board
of Directors of Plaza Funding and its successors and assigns and any other
managing general partner of Plaza Associates and (y) to control the management
of Plaza Associates. See "Risk Factors--Conflicts of Interest" and "--Control
and Involvement of Trump."
INDEMNIFICATION
THCR Holdings indemnifies and holds 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
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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.
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 the Company 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 the Company, 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
the Company as described above and under "--Contribution Agreement" and
"Management--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, the
Company (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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SHARES ELIGIBLE FOR FUTURE SALE
Immediately following completion of the Stock Offering there will be
23,066,667 shares of Common Stock outstanding (assuming all of the holders of
Taj Holding elect Cash Consideration and a Market Value of $24.00 per share in
connection with the Merger and as the public offering price in the Stock
Offering) (24,941,667 shares if the Underwriters' over-allotment options are
exercised in full), excluding (i) 8,354,167 shares of Common Stock (subject to
certain adjustment) issuable upon conversion of Trump's and TTMI's limited
partnership interest in THCR Holdings, (ii) the 66,666 shares of Common Stock
underlying phantom stock units issued to the Chief Executive Officer of the
Company, (iii) 133,333 shares of Common Stock issuable upon exercise of options
granted to the Chief Executive Officer of the Company pursuant to the 1995
Stock Plan (iv) an additional 933,334 shares of Common Stock reserved for
issuance pursuant to the 1995 Stock Plan, (v) 1.8 million shares of Common
Stock reserved for issuance in connection with the warrant to be issued Trump
and (vi) the Class B Common Stock, which shares are not entitled to dividends
or distributions and represent Trump's and TTMI's respective voting interest
and become nonvoting to the extent of a conversion of Trump's and TTMI's
respective interests in THCR Holdings. In the event that shares of Common Stock
are issued in the Merger, the Company may reduce the size of the Stock
Offering. Of the shares of Common Stock to be outstanding following
consummation of the Merger Transaction, the shares to be sold in the Stock
Offering and to be issued to First Fidelity, as well as the shares of Common
Stock issued in the June 1995 Stock Offering, will be freely tradable without
restriction (subject to any applicable lock-up) or future registration under
the Securities Act unless acquired by an "affiliate" (as defined in the
Securities Act) of the Company, which shares will be subject to resale
limitations of Rule 144. The remaining 66,667 shares outstanding upon
completion of the Stock Offering will not have been registered under the
Securities Act and are Restricted Shares, except that such shares, the shares
of Common Stock issuable upon conversion of Trump's and TTMI's limited
partnership interest in THCR Holdings and the shares issuable under the warrant
to be issued to Trump have or will have certain registration rights. See
"Description of the THCR Holdings Partnership Agreement--Exchange and
Registration Rights."
The 8,354,167 shares of Common Stock issuable upon conversion of limited
partnership interest in THCR Holdings are restricted securities, and may not be
resold except pursuant to an effective registration statement or an exemption
from registration, such as Rule 144. The Company has granted certain
registration rights with respect to such shares to the holders of limited
partnership interests in THCR Holdings. See "Description of THCR Holdings
Partnership Agreement--Exchange and Registration Rights."
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) including an affiliate of the Company who has
beneficially owned his or her Restricted Shares for at least two years from the
later of the date such securities were acquired from the Company or (if
applicable) the date they were acquired from an affiliate of the Company, would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of (i) one percent of the then outstanding shares of the
Common Stock (approximately 230,667 shares of Common Stock immediately after
the Stock Offering, or 249,417 shares assuming exercise of the Underwriters
over-allotment option) and (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the date on which notice of the
sale on Form 144 is filed with the SEC. Sales under Rule 144 are also subject
to certain manner-of-sale provisions, notice requirements and the availability
of current public information about the Company and certain other limitations
and restrictions. Under Rule 144, however, a person who is deemed not to have
been an affiliate of the Company at any time during the 90 days preceding a
sale of Restricted Shares by such person, and who has beneficially owned such
Restricted Shares for a minimum of three years from the later of the date such
securities were acquired from the Company or an affiliate of the Company, such
person is free to sell such shares in the public market under Rule 144(k)
without regard to the volume, manner-of-sale and certain other limitations
contained in Rule 144.
The Company, certain stockholders and the directors and executive officers of
the Company will agree not to sell or otherwise dispose of such shares or
securities convertible into or exercisable or exchangeable for Common Stock for
180 days after the date of this Prospectus without the prior written consent of
DLJ as the
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lead Underwriter of the Stock Offering. First Fidelity will agree not to sell
or otherwise dispose of 425,000 of the 500,000 shares of Common Stock to be
received by it for a period of 30 days after the date of this Prospectus
without the prior written consent of DLJ. Upon expiration of the applicable
lock-up period, the shares 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 Common Stock in the public market may have
an adverse impact on the market price of the shares and could make it more
difficult for the Company to sell equity securities in the future at a time
and place it deems appropriate.
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 the Company, 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 the Company 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 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 the Company is not so effectively connected.
The Company 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 the Company or (ii) the Non-
U.S. Shareholder files an IRS Form 4224 with the Company, claiming that the
distribution is "effectively connected" income.
DIVIDENDS
Generally, dividends paid by the Company 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 the Company'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 the Company'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 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.
The Company 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
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States. If the Company 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 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
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.
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 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 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 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 Common Stock could be
changed by future regulations.
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UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement,
a syndicate of underwriters named below (the "Underwriters"), for whom
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Salomon Brothers
Inc, BT Securities Corporation ("BT Securities") and Sands Brothers & Co.,
Ltd. ("Sands Brothers") are acting as representatives (the "Representatives"),
have severally agreed to purchase from the Company an aggregate of 12,500,000
shares of Common Stock. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ----------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...............
Salomon Brothers Inc .............................................
BT Securities Corporation.........................................
Sands Brothers & Co., Ltd. .......................................
----------
Total....................................................... 12,500,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay
for all the shares of Common Stock offered hereby (other than in connection
with the over-allotment option described below) if any are taken.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock directly to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per share.
Any Underwriter may allow, and such dealers may reallow, a discount not in
excess of $ per share to any other Underwriter and to certain other dealers.
After the initial public offering of the shares of Common Stock, the public
offering price and other selling terms may be changed by the Representatives.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to an additional 1,875,000 shares of Common Stock at the public
offering price less the underwriting discounts and commissions set forth on
the cover page hereof. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
made in connection with the sale of the shares of Common Stock offered hereby.
To the extent such over-allotment option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares
set forth on the cover page hereof.
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The Company, certain stockholders and the directors and officers of the
Company will agree with the Underwriters not to offer, sell, grant any other
option to purchase or otherwise dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for or warrants, rights or options to acquire Common Stock or
enter into any agreement to do any of the foregoing for a period of 180 days
after the date of this Prospectus without the prior written consent of DLJ.
First Fidelity will agree not to sell or otherwise dispose of 425,000 of the
500,000 shares of Common Stock to be received by it for a period of 30 days
after the date of this Prospectus without the prior written consent of DLJ.
The Company and its direct and indirect subsidiaries have agreed to
indemnify the Underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
Each of the Representatives from time to time performs investment banking
and other financial services for the Company and its affiliates for which such
Representatives receive advisory or transaction fees, as applicable, plus out-
of-pocket expenses, of the nature and in amounts customary in the industry for
such services. The Representatives (other than Sands Brothers) are also acting
as the underwriters for the Mortgage Note Offering. In addition, DLJ has acted
as the Company's financial advisor in connection with the Merger Transaction,
for which services the Company has agreed to pay DLJ a customary fee for
rendering a fairness opinion and a fee upon consummation of the Merger.
Following consummation of the Merger Transaction, it is expected that an
affiliate of DLJ will become a secured creditor of Trump in connection with a
loan proposed to be made to Trump by such DLJ affiliate, for which it will
receive a customary fee and reimbursement of its expenses. See "Risk Factors--
Control and Involvement of Trump." Bankers Trust, an affiliate of BT
Securities, is a significant secured creditor of Trump and certain of his
affiliates other than the Company. Bankers Trust held a $500,000 unsecured
demand note owed by Trump Indiana. Following demand by that lender, such
amount was paid in full by Trump on June 6, 1995, and is now owed by Trump
Indiana to Trump. In connection with the Merger Transaction, Bankers Trust
will receive $10 million in respect to the Trump Indebtedness. 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
related guarantees, and the pledge of the TTMI Note.
141
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the securities offered hereby are
being passed upon for the Company by Willkie Farr & Gallagher, New York, New
York. Certain legal matters in connection with the securities offered hereby
are being passed upon for the Underwriters by Skadden, Arps, Slate, Meagher &
Flom, Los Angeles, California.
The statements as to matters of law and legal conclusions concerning New
Jersey gaming laws included under the captions "Risk Factors--Strict Regulation
by Gaming Authorities," and "Regulatory Matters" (other than the subcaption
"Other Laws and Regulations") have been prepared by Sterns & Weinroth, Trenton,
New Jersey, gaming counsel for the Company. 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 subcaption "Other
Laws and Regulations") have been prepared by Tabbert Hahn & Zanetis, P.C.,
Indianapolis, Indiana, gaming counsel for the Company. 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 and schedules of Trump Hotels & Casino
Resorts, Inc., Trump Atlantic City Associates and Trump Plaza Associates and
Trump Taj Mahal Associates and Subsidiary included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the office of the SEC in Washington, D.C. a
Registration Statement on Form S-1 (the "Registration Statement") under the
Securities Act, with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the SEC. Such additional information can be inspected
at, and obtained from, the SEC in the manner set forth below. For further
information pertaining to the securities offered hereby and to the Company,
reference is made to the Registration Statement, including the exhibits filed
as parts thereof.
The Company, THCR Holdings, Plaza Associates, Taj Holding, Taj Funding and
Taj Associates are, and Trump AC and Trump AC Funding will be, subject to the
informational reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and, accordingly, have filed, and Trump AC and
Trump AC Funding will file, reports and other information with the SEC.
Reports, proxy statements and other information of the Company, THCR Holdings,
Trump AC, Trump Atlantic City Funding, Plaza Associates, Taj Holding, Taj
Funding and Taj Associates filed with the SEC, as well as the Registration
Statement, are available for inspection and copying at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549 and at certain regional offices of the SEC located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511, and 7 World Trade Center, New York, New York 10048. Copies
of such material can be obtained from the Public Reference Section of the SEC,
450 Fifth Street, N.W., Washington, DC 20549 at prescribed rates. It is
expected that upon consummation of the Merger Transaction, Plaza Associates,
Taj Holding, Taj Funding and Taj Associates will not be subject to the
informational reporting requirements of the Exchange Act. The Common Stock is
listed on the New York Stock Exchange, and reports and other information
concerning the Company and THCR Holdings can be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
142
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Trump Hotels & Casino Resorts, Inc.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheet as of December 31, 1995...................... F-3
Consolidated Statement of Operations for the period from inception (June
12, 1995) through December 31, 1995.................................... F-4
Consolidated Statement of Stockholders' Equity for the period from
inception (June 12, 1995) through December 31, 1995.................... F-5
Consolidated Statement of Cash Flows for the period from inception (June
12, 1995) through December 31, 1995.................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
Trump Atlantic City Associates and Trump Plaza Associates
Report of Independent Public Accountants................................ F-20
Consolidated Balance Sheets as of December 31, 1994 and June 12, 1995... F-21
Consolidated Statements of Operations for the years ended December 31,
1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-22
Consolidated Statements of Capital (Deficit) for the years ended
December 31, 1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-23
Consolidated Statements of Cash Flows for the years ended December 31,
1993 and 1994
and for the period from January 1, 1995 through June 12, 1995.......... F-24
Notes to Consolidated Financial Statements.............................. F-25
Trump Taj Mahal Associates and Subsidiary
Report of Independent Public Accountants................................ F-37
Consolidated Balance Sheets as of December 31, 1994 and 1995............ F-38
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995.................................................... F-39
Consolidated Statements of Capital (Deficit) for the years ended Decem-
ber 31, 1993, 1994
and 1995............................................................... F-40
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994
and 1995............................................................... F-41
Notes to Consolidated Financial Statements.............................. F-42
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited the accompanying consolidated balance sheet of Trump Hotels &
Casino Resorts, Inc. (a Delaware Corporation) and Subsidiaries as of December
31, 1995 and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from inception (June 12, 1995) through
December 31, 1995. These consolidated financial statements are the
responsibility of the management of Trump Hotels & Casino Resorts, Inc. Our
responsibility is to express an opinion on these financial statements based on
our 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Trump Hotels & Casino Resorts,
Inc. and Subsidiaries as of December 31, 1995 and the results of their
operations and their cash flows for the period from inception (June 12, 1995)
through December 31, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
F-2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents....................................... $ 19,208,000
Restricted cash (Note 8)...................................... 12,013,000
Trade receivables, net of allowances for doubtful accounts of
$8,077,000................................................... 7,576,000
Accounts receivable, other (Note 6)........................... 6,884,000
Inventories................................................... 2,609,000
Prepaid expenses and other current assets..................... 5,171,000
-------------
Total current assets........................................ 53,461,000
-------------
INVESTMENT IN BUFFINGTON HARBOR (Note 10)....................... 21,823,000
PROPERTY AND EQUIPMENT (Notes 4, 6 and 8):
Land and land improvements.................................... 48,308,000
Buildings and building improvements........................... 350,366,000
Furniture, fixtures and equipment............................. 91,033,000
Leasehold improvements........................................ 2,434,000
Construction in progress...................................... 63,379,000
Less--accumulated depreciation and amortization............... (147,289,000)
-------------
Net property and equipment.................................. 408,231,000
-------------
CASH RESTRICTED FOR FUTURE CONSTRUCTION (Note 8)................ 40,030,000
LAND RIGHTS, net of accumulated amortization of $4,149,000 (Note
2)............................................................. 29,320,000
NOTE RECEIVABLE (Note 9)........................................ 3,000,000
DEFERRED LOAN COSTS, net of accumulated amortization of
$5,827,000..................................................... 20,026,000
OTHER ASSETS.................................................... 8,654,000
-------------
Total assets................................................ $ 584,545,000
=============
LIABILITIES & CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3)................. $ 2,901,000
Accounts payable.............................................. 9,478,000
Accrued payroll............................................... 6,815,000
Accrued interest payable ..................................... 2,498,000
Due to affiliates (Note 8).................................... 278,000
Other accrued expenses........................................ 6,924,000
Self insurance reserves....................................... 3,750,000
Other current liabilities..................................... 2,658,000
-------------
Total current liabilities................................... 35,302,000
NON-CURRENT LIABILITIES:
Long-term debt, net of current maturities (Note 3)............ 494,471,000
Deferred income taxes......................................... 4,181,000
-------------
Total liabilities........................................... 533,954,000
-------------
COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 10)
STOCKHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 shares authorized,
none issued and outstanding.................................. --
Common Stock $.01 par value, 50,000,000 shares authorized,
10,066,667 issued and outstanding............................ 101,000
Class B Common Stock $.01 par value 1,000 shares authorized,
issued and outstanding --
Additional paid-in capital.................................... 52,411,000
Accumulated deficit........................................... (1,921,000)
-------------
Total stockholders' equity.................................. 50,591,000
-------------
Total liabilities & stockholders' equity.................... $ 584,545,000
=============
</TABLE>
The accompanying notes to financial statements are an integral part of this
consolidated financial statement.
F-3
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<S> <C>
REVENUES:
Gaming......................................................... $175,208,000
Rooms.......................................................... 12,310,000
Food and Beverage.............................................. 26,065,000
Other.......................................................... 6,284,000
------------
Gross Revenues............................................... 219,867,000
Less--Promotional allowances................................... 24,394,000
------------
Net Revenues................................................. 195,473,000
------------
COSTS AND EXPENSES:
Gaming......................................................... 95,533,000
Rooms.......................................................... 1,305,000
Food and Beverage.............................................. 11,178,000
General and Administrative..................................... 42,826,000
Depreciation and Amortization.................................. 9,219,000
Other.......................................................... 1,966,000
------------
162,027,000
------------
Income from operations....................................... 33,446,000
------------
NON-OPERATING INCOME AND (EXPENSES):
Interest income................................................ 3,741,000
Interest expense............................................... (35,014,000)
Other non-operating expense.................................... (4,094,000)
------------
(35,367,000)
------------
Net loss......................................................... $ (1,921,000)
============
Loss Per Share................................................... $ (.19)
============
Average Number of Shares Outstanding............................. 10,133,333
============
</TABLE>
The accompanying notes to financial statements are an integral part of this
consolidated financial statement.
F-4
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE PERIOD FROM INCEPTION
(JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------ ADDITIONAL
CLASS B PAID IN ACCUMULATED
COMMON COMMON AMOUNT CAPITAL DEFICIT TOTAL
---------- ------- -------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 12, 1995.. 1,000 $ -- $(75,543,000) $ -- $(75,543,000)
Proceeds from issuance
of Common Stock........ 10,000,000 -- 100,000 126,748,000 -- 126,848,000
Issuance of Stock Grant
Award.................. 66,667 -- 1,000 933,000 -- 934,000
Accretion of Phantom
Stock Units............ -- -- -- 273,000 -- 273,000
Net Loss................ -- -- -- -- (1,921,000) (1,921,000)
---------- ----- -------- ------------ ----------- ------------
Balance, December 31,
1995................... 10,066,667 1,000 $101,000 $ 52,411,000 $(1,921,000) $ 50,591,000
========== ===== ======== ============ =========== ============
</TABLE>
The accompanying notes to financial statements are an integral part of this
consolidated financial statement.
F-5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................... $ (1,921,000)
Adjustments to reconcile net income to net cash flows used in
operating activities:
Non Cash Charges:
Issuance of stock grant awards and phantom stock units....... 1,207,000
Depreciation and amortization................................ 9,219,000
Accretion of discount on mortgage notes and amortization of
loan costs.................................................. 818,000
Provisions for losses on receivables......................... 559,000
Deferred income taxes........................................ 161,000
Utilization of CRDA credits and donations.................... 320,000
Valuation allowance of CRDA investments...................... (1,249,000)
-------------
Sub-total................................................... 9,114,000
Increase in receivables...................................... (1,722,000)
Decrease in inventories...................................... 815,000
Increase in advances from affiliates......................... 367,000
Decrease in other current assets............................. 6,518,000
Decrease in other assets..................................... 346,000
Decrease in accounts payable, accrued expenses, and other
current liabilities......................................... (5,123,000)
Decrease in accrued interest payable......................... (19,534,000)
-------------
Net cash flows used in operating activities................. (9,219,000)
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net........................ (115,430,000)
Restricted cash for short-term operating needs................. (12,013,000)
Cash restricted for future construction........................ (40,030,000)
Purchase of CRDA investments................................... (1,677,000)
Investment in Buffington Harbor LLC............................ (21,823,000)
-------------
Net cash flows used in investing activities................. (190,973,000)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, net.................................. 126,848,000
Issuance of Senior Secured Notes, net.......................... 144,258,000
Retirement of PIK Notes........................................ (81,746,000)
Issuance of note receivable.................................... (3,000,000)
Payment of current maturities of long term debt................ (4,186,000)
Additional Borrowings.......................................... 9,040,000
-------------
Net cash flows provided by financing activities............. 191,214,000
-------------
Net decrease in cash and cash equivalents....................... (8,978,000)
-------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................ 28,186,000
=============
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1995.................. $ 19,208,000
=============
</TABLE>
The accompanying notes to financial statements are an integral part of this
consolidated financial statement.
F-6
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(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"), approximately 60.2% owned by
THCR , 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.
The accompanying consolidated financial statements include those of THCR and
THCR Holdings and its subsidiaries, Trump Atlantic City Associates ("Trump
AC"), Trump Indiana, Trump Plaza Funding, Inc. ("Plaza Funding") and Trump
Plaza Holding, Inc. ("Plaza Holding Inc."). Trump AC is the parent of Trump
Plaza Associates ("Plaza Associates"), which owns and operates Trump Plaza. All
significant intercompany balances and transactions have been eliminated in the
accompanying consolidated financial statements.
On June 12, 1995, THCR completed a public offering of 10,000,000 shares of
its common stock (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, Trump Hotels
& Casino Resorts Funding, Inc. ("THCR Funding"), issued 15 1/2% Senior Secured
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.
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 Trump AC and all of the outstanding
capital stock of Plaza Holding Inc., which owns the remaining 1% equity
interest in Trump AC. 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 (the "Taj Mahal") and Trump's Castle Casino Resort, to
THCR Holdings. In exchange for Trump's contributions to THCR Holdings, Trump
received an approximately 39.8% limited partnership interest in 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.
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 (the "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 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
F-7
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
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.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
THCR, through its subsidiaries operates, Trump Plaza, a luxury casino hotel,
located on The Boardwalk in Atlantic City which provides high quality amenities
and services to its casino patrons and hotel guests. A substantial portion of
Trump Plaza's revenues are derived from its gaming operations and in the past
Trump Plaza has targeted the higher-end drive-in slot customer. Competition in
the Atlantic City casino total market is intense and management believes that
this competition will continue as more casinos are opened and new entrants into
the gaming industry become operational.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenues from
hotel and other services are recognized at the time the related service is
performed.
THCR provides an allowance for doubtful accounts arising from casino, hotel
and other services, which is based upon a specific review of certain
outstanding receivables as well as historical collection information. In
determining the amount of the allowance, management is required to make certain
estimates and assumptions regarding the timing and amount of collection. Actual
results could differ from those estimates and assumptions.
PROMOTIONAL ALLOWANCES
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
FROM
INCEPTION
TO
DECEMBER 31,
1995
------------
<S> <C>
Rooms......................................................... $ 3,075,000
Food and Beverage............................................. 10,301,000
Other......................................................... 2,574,000
-----------
$15,950,000
===========
</TABLE>
F-8
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
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 of $88,000 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 the Plaza Associates. These rights are being amortized over the period of
the underlying operating leases which extend through 2078.
LONG LIVED ASSETS
During 1995, THCR adopted the provisions of Statement of Financial Accounting
Standard No. 121 "Accounting for the Impairment of Long-Lived Assets" ("SFAS
No. 121"). SFAS No. 121 requires, among other things, that an entity review its
long-lived assets and certain related intangibles for impairment whenever
changes in circumstances indicate that the carrying amount of an asset may not
be fully recoverable. Impairment of long-lived assets exist, if, at a minimum,
the future expected cash flows (undiscounted and without interest charges) from
an entity's operations are less than the carrying value of these assets. As a
result of its review, THCR does not believe that any impairment exists in the
recoverability of its long-lived assets.
INCOME TAXES
Income taxes are recorded under the provision of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
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.
Under the New Jersey Casino Control Commission (the "CCC") regulations, Plaza
Associates is required to file a New Jersey corporation business tax return. As
of December 31, 1995, Trump AC and Plaza Associates has state tax net operating
loss carryforwards of approximately $31,000,000 which are available to offset
future state taxable income. Such carryforwards expire from 1997 to 2001. The
net operating loss carryforwards result in a deferred tax asset of $2,800,000
which has been offset by a valuation allowance of $2,800,000 as utilization of
such carryforwards is not considered to be more likely than not.
Plaza Associates' deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
F-9
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, THCR considers all highly liquid
debt instruments purchased with a maturity of three months or less at the time
of acquisition to be cash equivalents. The following supplemental disclosures
are made to the statements of cash flows.
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Cash paid during the year for interest........................ $48,786,000
===========
Cash paid for state and Federal income taxes.................. $ --
===========
</TABLE>
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding (unless antidilutive),
including shares granted to the President, Chief Executive Officer and Chief
Financial Officer (See Note 5). The shares of the THCR Class B Common Stock
owned by Trump have no economic interest and are therefore not considered in
the calculation of weighted average shares outstanding. Stock options have not
been considered since their effect would be antidilutive.
MINORITY INTEREST
As there is no minority interest basis in THCR Holdings as of December 31,
1995, no benefit relating to minority interest in THCR Holdings' loss has been
reflected.
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
10 7/8% Mortgage Notes due 2001 net of unamortized discount of
$3,348,000 (A)............................................... $326,652,000
15 1/2% Senior Secured Notes due 2005 (B)..................... 155,000,000
Mortgage notes payable (C).................................... 2,953,000
Other (D)..................................................... 12,767,000
------------
497,372,000
Less--Current maturities...................................... 2,901,000
------------
$494,471,000
============
</TABLE>
- ---------------------
(A) On June 25, 1993, Plaza Funding issued $330,000,000 principal amount of
10 7/8% Mortgage Notes, due 2001 (the "Plaza Notes"), net of discount
of $4,313,000 and loaned the proceeds to Plaza Associates. 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)) to redeem all of Plaza Funding's stock
units, comprised of $75,000,000 liquidation preference participating
cumulative redeemable Preferred Stock with associated shares of Common
Stock, to repay $17,500,000 principal amount 9.14% Regency Notes due
2003, to make a portion of a distribution to Trump to pay certain
personal indebtedness, and to pay transaction expenses.
The Plaza Notes mature on June 15, 2001 and are redeemable at any time
on or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Plaza Notes bear interest at the stated rate of 10 7/8% per annum from
the date of issuance, payable semi-annually
F-10
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
on each June 15 and December 15, commencing December 15, 1993 and are
secured by substantially all of Plaza Associates' assets. The
accompanying consolidated financial statements reflect interest expense
at the effective interest rate of 11.12% per annum.
The indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25,000,000 of indebtedness to finance the expansion of its
facilities, which indebtedness may be secured by a lien on Trump Plaza
East (see Note 6) senior to the liens of one of the Plaza Mortgages
(the "Plaza Note Mortgage") and another of the Plaza Mortgages (the
"Plaza Guarantee Mortgage"). The Plaza Notes represent the senior
indebtedness of Plaza Funding. The note from Plaza Associates to Plaza
Funding in the same principle amount of the Plaza Notes (the "Plaza
Associates Note") and the guarantee of the Plaza Notes (the "Plaza
Guarantee") rank pari passu in right of payment with all existing and
future senior indebtedness of Plaza Associates.
The Plaza Notes, the Plaza Associates Note, the Plaza Note Mortgage,
the Plaza Guarantee and the Plaza Guarantee Mortgage are non-recourse
to the partners of Plaza Associates, to the shareholders of Plaza
Funding and to all other persons and entities (other than Plaza Funding
and Plaza Associates), including Trump. Upon an event of default,
holders of the Plaza Notes would have recourse only to the assets of
Plaza Funding and Plaza Associates.
(B) On June 12, 1995, THCR Holdings and THCR Funding issued $155,000,000
principal amount of Senior Notes. The Senior Notes are redeemable in
cash at the option of THCR Holdings and THCR Funding, in whole or in
part, at any time on or after June 15, 2000 at redemption prices, as
defined. Interest on these notes is 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 these notes totalling approximately
$10,742,000 have been deferred and are being amortized over the life of
the Senior Notes.
(C) Interest on these notes are payable with interest rates ranging from
10.0% to 11.0%. The notes are due at various dates between 1996 and
1998 and are secured by real property.
The aggregate maturities of long-term debt in each of the years
subsequent to 1995 are:
<TABLE>
<S> <C>
1996.................................................... $ 2,901,000
1997.................................................... 4,503,000
1998.................................................... 1,196,000
1999.................................................... 274,000
2000.................................................... 96,000
Thereafter.............................................. 491,750,000(1)
------------
$500,720,000
============
</TABLE>
---------------------
(1) Includes accretion to maturity of $3,348,000. However, this does
not give effect to the proposed Merger Transaction (See Note 12).
(D) Interest on these notes and leases are payable with interest rates
ranging from 7.9% to 13.5%. The notes and leases are due at various
dates between 1996 and 2000 and are secured by equipment.
The ability of Plaza Associates and Plaza Funding to repay their long-
term debt when due will depend on their ability to either generate cash
from operations sufficient for such purposes or to refinance such
indebtedness. Management does not currently anticipate that cash flow
will be sufficient and that repayment will likely depend upon the
ability to refinance such indebtedness. The future operating
performance and the ability to refinance such indebtedness will be
subject to the then prevailing economic conditions, industry conditions
and numerous other financial, business
F-11
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
and other factors, many of which are beyond the control of Plaza
Funding or Plaza Associates. There can be no assurance that the future
operating performance of Plaza Associates will be sufficient to meet
these repayment obligations or that the general state of the economy,
the status of the capital markets generally or the receptiveness of the
capital markets to the gaming industry will be conducive to refinancing
or other attempts to raise capital.
(4) LEASES
THCR leases property (primarily land), certain parking space, and various
equipment under operating leases. Rent expense for 1995 was $2,751,000, of
which $1,275,000 was paid 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>
1996............................................. $ 7,013,000 $ 2,450,000
1997............................................. 7,015,000 2,494,000
1998............................................. 5,370,000 2,494,000
1999............................................. 3,649,000 2,450,000
2000............................................. 3,647,000 2,525,000
Thereafter....................................... 484,507,000 404,925,000
------------ ------------
$511,201,000 $417,338,000
============ ============
</TABLE>
Certain of these leases contain options to purchase the leased properties at
various prices throughout the leased terms.
In October 1993, Plaza Associates assumed the lease to Trump of Trump Plaza
East (the "Trump Plaza East Lease") and related expenses which are included in
the above lease commitment amounts. On June 25, 1993, Plaza Associates acquired
a five-year option to purchase Trump Plaza East (See Note 6).
(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, 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
("ISO"), within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or nonqualified stock options ("NQSOs"). The
vesting, exercisability and exercise price of the options are determined by the
Stock Incentive Plan Committee when the options are granted, subject to a
minimum price, in the case of ISOs, of the Fair Market Value (as defined in the
1995 Stock Plan) of THCR Common Stock on the date of the grant and a minimum
price, in the case of NQSOs, of the par value of 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
F-12
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
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 $934,000 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 66,667 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 $273,000 for the period from inception to December 31, 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.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock Based
Compensation." The new standard specifies permissible methods of valuing
compensation attributable to stock options as well as certain required
disclosures. THCR is required to adopt the new standard no later than December
31, 1996. THCR has not yet determined which method it will follow for measuring
compensation cost attributable to stock options or the impact of the new
standard on its consolidated financial statements.
(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 June 1995, the CCC renewed Plaza Associates, license to operate Trump
Plaza. This license must be renewed in June 1999, is not transferable and will
require a determination 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.
F-13
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
LEGAL PROCEEDINGS
THCR and certain of its employees, have been involved in various legal
proceedings. In general, THCR has agreed to indemnify such persons against any
and all losses, claims, damages, expenses (including reasonable costs,
disbursements and counsel fees) and liabilities (including amounts paid or
incurred in satisfaction of settlements, judgements, fines and penalties)
incurred by them in said legal proceedings.
Various legal proceedings are now pending against THCR. THCR considers all
such proceedings to be ordinary litigation incident to the character of its
business. THCR believes that the resolution of these claims will not,
individually or in the aggregate, have a material adverse effect on its
financial condition or results of operations.
Plaza Associates 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
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.
SELF INSURANCE RESERVES
Self insurance reserves represent the estimated amount of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the normal course of business. These
reserves are established by management based upon a specific review of open
claims, with consideration of incurred but not reported claims as of the
balance sheet date. Actual results may differ from these reserve amounts.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Casino Control Act, Plaza Associates,
commencing in 1991 after the date of opening of Trump Plaza in May 1984, and
continuing for a period of thirty 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
depositing funds which may be converted to bonds by the Casino Reinvestment
Development Authority (the "CRDA"), both of which bear interest at below market
interest rates. Plaza Associates is required to make quarterly deposits with
the CRDA based on 1.25% of its gross revenue. For the period from inception
(June 12, 1995) through December 31, 1995, THCR charged to operations $670,000,
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.
Additionally, for the period from inception (June 12, 1995) through December
31, 1995, THCR credited operations for $1,737,000 resulting from the recapture
of the valuation allowance on the CRDA receivable. Bonds issued by the CRDA
will be accounted for under SFAS No. 121, as such bonds are not marketable.
In connection with Trump Plaza East (see below), the CRDA has approved the
use of up to $14,135,000 in deposits made by Plaza Associates for site
improvements. At December 31, 1995, Plaza Associates has recorded a receivable
from the CRDA of $6,022,000 which is included in Accounts Receivable, Other. A
lawsuit has been filed to prevent the CRDA from returning to Plaza Associates
such deposits. Although the court has ruled that such deposits cannot be
returned, Plaza Associates has appealed this decision. Management believes that
this decision will be overturned. In the event that the decision is not
overturned, the receivable will be reclassified as a CRDA deposit and a charge
to operations of approximately $2,000,000 would be required to reestablish the
valuation allowance.
F-14
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
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, 1995, approximately 27%
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 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 the fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease,
(ii) Boardwalk leased Trump Plaza East to Trump under 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 a five-year option to purchase
Trump Plaza East (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 a right of first refusal (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.
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.
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 1995, THCR incurred approximately
$2,340,000 of such expenses of which $2,045,000 are included in non-operating
expenses in the accompanying consolidated financial statements. Under the
Trump Plaza East Purchase Option, Plaza Associates has the right to acquire
Trump Plaza East for a purchase price of $28,000,000 through 1996, increasing
by $1,000,000 annually thereafter until expiration on June 30, 1998. The CCC
has required that Plaza Associates exercise the Trump Plaza East Purchase
Option or its right of first refusal no later than July 1, 1996.
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.
Plaza Associates has commenced construction at Trump Plaza East pursuant to
rights granted to Plaza Associates by its lessor. Plaza Associates has
received approximately $1,519,000 in CRDA credit as of December 31, 1995. As
of December 31, 1995, Plaza Associates had capitalized approximately
$35,700,000 in construction costs related to Trump Plaza East including a
$1,000,000 consulting fee paid to Trump (See Note 8). Plaza Associates'
ability to acquire Trump Plaza East pursuant to the Trump Plaza East Purchase
Option is dependent upon its ability to obtain financing to acquire the
property. The ability to incur such indebtedness is restricted by the Plaza
Note Indenture. Plaza Associates' ability to purchase 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
F-15
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
Plaza Associates for such purposes or that it will be able to generate
sufficient cash flow from operations. In connection with the Merger Transaction
(as defined) (See Note 12), Plaza Associates expects to exercise the Trump
Plaza East Purchase Option.
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. In connection with this Plan, THCR
recorded charges of $410,000 in 1995.
Plaza Associates provides no other material post-retirement or post-
employment benefits.
(8) TRANSACTIONS WITH AFFILIATES
DUE TO/FROM AFFILIATES
Plaza Associates leases warehouse facility space to Trump's Castle
Associates. Lease payments of $4,000 were received from Trump's Castle
Associates in 1995.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1995, THCR
expensed $553,000 to Seashore Four Associates and paid $723,000 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 Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 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 such services agreement, up to certain amounts. Under this
agreement, THCR charged approximately $718,000 to expense in 1995.
EXECUTIVE AGREEMENT
Trump serves as the Chairman of the Board of Directors pursuant to an
Executive Agreement entered into between Trump, THCR and THCR Holdings (the
"Executive Agreement"). In consideration for Trump's services under the
Executive Agreement, Trump receives a salary of $1,000,000 per year, payable in
equal monthly installments.
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.
F-16
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
RESTRICTED CASH
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 (the
"Trump World's Fair Purchase Option") to purchase the former Trump Regency
Hotel ("Trump World's Fair") 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 December 31, 1995, $12,013,000 is restricted for the 1996 interest
payment on the Senior Notes and is reflected as Restricted Cash in the
accompanying balance sheet. The balance of funds restricted for Trump Indiana,
Trump Plaza East and Trump World's Fair is approximately $40,030,000, at
December 31, 1995, and is reflected as Restricted Cash for Future Construction
in the accompanying balance sheet.
TRUMP WORLD'S FAIR
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) 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. In connection with such
Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the Trump World's Fair Purchase Option was exercised. The
option price of $60,000,000 was funded with $58,150,000 from the capital
contributed by THCR Holdings (See Note 1), and $1,850,000 of option payments
made by Plaza Associates.
(9) 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 December 31, 1995, the trading price of the THCR
Common Stock did not reach the defined prices.
(10) INVESTMENT IN BUFFINGTON HARBOR
Trump Indiana and The Majestic Star Casino, LLC ("Barden") 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 their separate riverboat casinos at Buffington Harbor. Each will be
equally responsible for the development and operating expenses at Buffington
Harbor 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, whether
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.
F-17
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments 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;
and (b) CRDA bonds and deposits are based on the allowances to give effect to
the below market interest rates.
The estimated fair values of other financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------
CARRYING
AMOUNT FAIR VALUE
------------ ------------
<S> <C> <C>
10 7/8% Mortgage Notes........................... $326,652,000 $341,550,000
15 1/2% Senior Secured Notes..................... 155,000,000 165,773,000
</TABLE>
The fair value of the Plaza Notes and the Senior Notes is based on quoted
market prices obtained by THCR 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.
(12) SUBSEQUENT EVENT
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by Amendment to Agreement and Plan of Merger, dated as of January 31,
1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with and
into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding (the "Taj Holding
Class A Common Stock") (other than Dissenting Shares (as defined in the Proxy
Statement-Prospectus)) 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. 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 (the "Merger Transaction"):
(a) the consummation of the offering by THCR of up to 12,500,000 shares 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 AC and its wholly owned finance subsidiary Trump
Atlantic City Funding, Inc. of up to $1,200,000,000 aggregate principal
amount of first mortgage notes, although it is currently contemplated to
aggregate $1,100,000,000, the aggregate proceeds of which will be used,
together with available cash, to (i) pay cash to those holders of Taj
Holding Class A Common Stock electing to receive cash in the Merger, (ii)
redeem the outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Taj
Bonds") of Trump Taj Mahal Funding, Inc. ("Taj Funding"), (iii) redeem the
outstanding shares of Class B Common Stock of Taj Holding as required in
connection with the redemption of the Taj Bonds, (iv) retire the outstanding
Plaza Notes, (v) satisfy the indebtedness of Trump Taj Mahal Associates
("Taj Associates"), the owner and operator of the Taj Mahal, under its loan
agreement with National Westminster Bank USA, (vi) purchase certain real
property used in the operation of the Taj Mahal that is currently leased
from a corporation wholly owned by Trump, (vii) purchase certain real
property used in the operation of Trump Plaza that is currently leased from
an unaffiliated third party, (viii) make a payment to Bankers Trust Company
("Bankers Trust") to obtain releases of liens and guarantees that Bankers
Trust has in connection with certain outstanding indebtedness owed by Trump
to Bankers Trust, and (ix) pay related fees and expenses and provide working
capital;
F-18
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1995
(b) the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to Trump AC (on behalf, and at the direction,
of THCR Holdings) of all of its indirect ownership interests in Taj
Associates acquired in the Merger.
To the extent that holders of Taj Holding Class A Common Stock elect to
receive shares of THCR Common Stock in the Merger, THCR may reduce the size of
the THCR Stock Offering. In addition to the shares of THCR Common Stock that
may be issued in the THCR Stock Offering, THCR may issue, as part of the THCR
Stock Offering, up to an additional 20% of such number of shares, to fund
working capital and other general corporate purposes.
The prospective transaction is subject to a number of conditions, including
stockholder approval. In addition, there are a number of risks that should be
considered, including: (i) the high leverage and fixed charges of THCR; (ii)
the risk in refinancing and repayment of indebtedness and the need for
additional financing; (iii) the restrictions imposed on certain activities by
certain debt instruments; (iv) the recent results of Trump Plaza and the Taj
Mahal; and (v) risks associated with the Indiana Riverboat and the expansions
at Trump Plaza and the Taj Mahal. There can be no assurance that the
expansions at Trump Plaza or the Taj Mahal 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-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Associates and
Trump Plaza Associates:
We have audited the accompanying consolidated balance sheets of Trump
Atlantic City Associates (a New Jersey general partnership) and Trump Plaza
Associates (a New Jersey general partnership) as of December 31, 1994 and June
12, 1995, and the related consolidated statements of operations, capital
(deficit) and cash flows for each of the two years in the period ended December
31, 1994 and for the period from January 1, 1995 through June 12, 1995. These
consolidated financial statements are the responsibility of the management of
Trump Atlantic City 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 Atlantic City Associates
and Trump Plaza Associates as of December 31, 1994 and June 12, 1995, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1994 and for the period from January 1, 1995
through June 12, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Roseland, New Jersey
February 21, 1996
F-20
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND JUNE 12, 1995
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 12,
1994 1995
ASSETS ------------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents...................... $ 11,144,000 $ 28,125,000
Trade receivables, net of allowances for
doubtful accounts of $8,493,000 and
$8,490,000, respectively...................... 6,685,000 7,295,000
Accounts receivable, other..................... 112,000 --
Inventories.................................... 2,477,000 3,424,000
Prepaid expenses and other current assets...... 4,280,000 4,419,000
Due from affiliates, net....................... -- 89,000
------------- -------------
Total current assets......................... 24,698,000 43,352,000
------------- -------------
Property and Equipment (Notes 4, 6 and 8):
Land and land improvements..................... 36,463,000 36,462,000
Buildings and building improvements............ 297,573,000 299,483,000
Furniture, fixtures and equipment.............. 84,709,000 84,989,000
Leasehold improvements......................... 2,404,000 2,404,000
Construction in progress....................... 14,864,000 21,263,000
------------- -------------
436,013,000 444,601,000
Less--Accumulated depreciation and amortiza-
tion.......................................... (137,659,000) (143,285,000)
------------- -------------
Net property and equipment................... 298,354,000 301,316,000
------------- -------------
Land Rights, net of accumulated amortization of
$3,780,000 and $3,945,000, respectively......... 29,688,000 29,524,000
------------- -------------
Other Assets:
Deferred bond issuance costs, net of
accumulated amortization of $3,270,000 and
$5,827,000, respectively (Note 3)............. 14,125,000 12,105,000
Other Assets................................... 8,778,000 7,788,000
------------- -------------
Total other assets........................... 22,903,000 19,893,000
------------- -------------
Total assets................................. $ 375,643,000 $ 394,085,000
============= =============
LIABILITIES AND CAPITAL
Current Liabilities:
Current maturities of long-term debt (Note 3).. $ 2,969,000 $ 87,797,000
Accounts payable............................... 9,156,000 9,303,000
Accrued payroll................................ 4,026,000 3,998,000
Self insurance reserves (Note 6)............... 4,039,000 4,041,000
Accrued interest payable (Note 3).............. 1,871,000 22,032,000
Other accrued expenses......................... 7,693,000 5,253,000
Other current liabilities...................... 1,868,000 1,112,000
Due to affiliates, net (Note 8)................ 206,000 --
------------- -------------
Total current liabilities.................... 31,828,000 133,536,000
------------- -------------
Non-Current Liabilities:
Long-term debt, net of discount and current ma-
turities (Note 3)............................. 403,214,000 331,142,000
Distribution payable to Trump Plaza Funding,
Inc........................................... 3,822,000 3,822,000
Deferred state income taxes.................... 359,000 198,000
------------- -------------
Total non-current liabilities................ 407,395,000 335,162,000
------------- -------------
Total liabilities............................ 439,223,000 468,698,000
------------- -------------
Commitments and Contingencies (Notes 4 and 6).... -- --
Capital (Deficit):
Partners' Deficit.............................. (78,772,000) (78,772,000)
Retained Earnings.............................. 15,192,000 4,159,000
------------- -------------
Total Capital (Deficit)...................... (63,580,000) (74,613,000)
------------- -------------
Total liabilities and capital................ $ 375,643,000 $ 394,085,000
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-21
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE PERIOD FROM JANUARY
1, 1995 THROUGH JUNE 12, 1995
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, FOR THE PERIOD
-------------------------- FROM JANUARY 1, 1995
1993 1994 THROUGH JUNE 12, 1995
------------ ------------ ---------------------
<S> <C> <C> <C>
Revenues:
Gaming..................... $264,081,000 $261,451,000 $122,865,000
Rooms...................... 18,324,000 18,312,000 7,676,000
Food and Beverage.......... 41,941,000 40,149,000 18,537,000
Other...................... 8,938,000 8,408,000 3,310,000
------------ ------------ ------------
Gross Revenues........... 333,284,000 328,320,000 152,388,000
Less--Promotional
allowances................ 32,793,000 33,257,000 14,540,000
------------ ------------ ------------
Net Revenues............. 300,491,000 295,063,000 137,848,000
------------ ------------ ------------
Costs and expenses:
Gaming..................... 136,895,000 139,540,000 69,467,000
Rooms...................... 2,831,000 2,715,000 958,000
Food and Beverage.......... 18,093,000 17,050,000 7,128,000
General and Administrative. 71,624,000 73,075,000 30,081,000
Depreciation and
Amortization.............. 17,554,000 15,653,000 6,999,000
Other...................... 3,854,000 3,615,000 1,397,000
------------ ------------ ------------
250,851,000 251,648,000 116,030,000
------------ ------------ ------------
Income from operations... 49,640,000 43,415,000 21,818,000
------------ ------------ ------------
Non-operating income
(expense):
Interest income............ 546,000 842,000 403,000
Interest expense (Note 3).. (40,435,000) (49,061,000) (22,516,000)
Other non-operating expense
(Note 5).................. (3,873,000) (4,931,000) (1,649,000)
------------ ------------ ------------
Non-operating expense,
net..................... (43,762,000) (53,150,000) (23,762,000)
------------ ------------ ------------
Income (loss) before
state income taxes and
extraordinary items..... 5,878,000 (9,735,000) (1,944,000)
Provision (benefit) for state
income taxes................ 660,000 (865,000) (161,000)
------------ ------------ ------------
Income (loss) before
extraordinary items......... 5,218,000 (8,870,000) (1,783,000)
Extraordinary gain (loss)
(Note 5).................... 4,120,000 -- (9,250,000)
------------ ------------ ------------
Net income (loss)............ $ 9,338,000 $ (8,870,000) $(11,033,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-22
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 1995
<TABLE>
<CAPTION>
PARTNERS' RETAINED
CAPITAL EARNINGS TOTAL
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1992.......... $ (3,362,000) $ 14,724,000 $ 11,362,000
Net Income.......................... -- 9,338,000 9,338,000
Preferred Trump Plaza Associates In-
terest 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 Trump Plaza
Associates Interest into General
Trump Plaza Associates 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)
Net Loss............................ -- (11,033,000) (11,033,000)
------------ ------------ ------------
Balance, June 12, 1995.............. $(78,772,000) $ 4,159,000 $(74,613,000)
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-23
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994
AND FOR THE PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 1995
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEARS ENDED FROM
DECEMBER 31, JANUARY 1, 1995
--------------------------- THROUGH
1993 1994 JUNE 12, 1995
------------- ------------ ---------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net Income (loss).................. $ 9,338,000 $ (8,870,000) $(11,033,000)
Adjustments to reconcile net income
(loss) to net cash flows provided
by operating activities:
Noncash charges:
Extraordinary loss (gain)....... (4,120,000) -- 9,250,000
Depreciation and amortization... 17,544,000 15,653,000 6,999,000
Accretion of discount on
indebtedness................... 862,000 1,916,000 894,000
Provision for losses on
receivables.................... 90,000 396,000 498,000
Deferred state income taxes..... 729,000 (865,000) (161,000)
Utilization of CRDA credits and
donations...................... -- 1,062,000 127,000
Valuation allowance of CRDA
investments.................... 1,047,000 394,000 67,000
------------- ------------ ------------
25,500,000 9,686,000 6,641,000
Decrease (increase) in
receivables.................... 823,000 (236,000) (996,000)
Decrease (increase) in
inventories.................... (498,000) (91,000) 233,000
Increase in prepaid expenses and
other current assets........... (199,000) (1,385,000) (139,000)
(Increase) decrease in other
assets......................... 2,530,000 1,504,000 (744,000)
Increase (decrease) in amounts
due to (from) affiliates....... 188,000 109,000 (295,000)
Increase (decrease) in accounts
payable, accrued expenses and
other current liabilities...... (6,524,000) 10,464,000 18,058,000
Decrease in distribution payable
to Trump Plaza Funding, Inc.... -- (101,000) --
------------- ------------ ------------
Net cash flows provided by
operating activities........... $ 21,820,000 $ 19,950,000 $ 22,758,000
------------- ------------ ------------
Cash flows from investing
activities:
Purchases of property and
equipment....................... $ (10,052,000) $(20,489,000) (7,364,000)
Purchases of CRDA investments.... (2,823,000) (2,525,000) --
Cash refund of CRDA deposits..... 196,000 1,323,000 --
Investment in TPA/THCR........... -- -- --
------------- ------------ ------------
Net cash flows used in investing
activities...................... (12,679,000) (21,691,000) (7,364,000)
------------- ------------ ------------
Cash flows from financing
activities:
Deferred financing costs......... (17,342,000) -- --
Distributions to Donald J. Trump. (87,500,000) -- --
Distributions to Trump Plaza
Funding, Inc. .................. (40,000,000) -- --
Preferred Trump Plaza Associates
Interest Distribution........... (6,282,000) -- --
Borrowings....................... 386,147,000 375,000 1,928,000
Payments and current maturities
of long-term debt............... (248,573,000) (1,883,000) (341,000)
------------- ------------ ------------
Net cash flows used in financing
activities...................... (13,550,000) (1,508,000) 1,587,000
------------- ------------ ------------
Net increase (decrease) in cash
and cash equivalents.......... (4,409,000) (3,249,000) 16,981,000
Cash and cash equivalents at
beginning of year................. 18,802,000 14,393,000 11,144,000
------------- ------------ ------------
Cash and cash equivalents at end of
year.............................. $ 14,393,000 $ 11,144,000 $ 28,125,000
============= ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-24
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
The accompanying financial statements include those of Trump Atlantic City
Associates ("Trump AC"), a New Jersey general partnership (formerly Trump Plaza
Holding Associates), 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. Trump AC'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 Trump AC since it is not material.
Plaza Funding was incorporated on March 14, 1986 and was originally formed
solely to raise funds through the issuance and sale of its debt securities for
the benefit of Plaza Associates. As part of a Prepackaged Plan of
Reorganization under Chapter 11 of the U.S. Bankruptcy Code consummated on
May 29, 1992, Plaza Funding became a partner of Plaza Associates and issued
approximately three million stock units, each comprised of one share of
Preferred Stock and one share of Common Stock of Plaza Funding. On June 25,
1993, the stock units were redeemed with a portion of the proceeds of Plaza
Funding's 10 7/8% First Mortgage Notes due 2001 (the "Plaza Notes") as well as
Trump AC's stock units.
Trump AC was formed in February, 1993 for the purpose of raising funds for
Plaza Associates. On June 25, 1993, Trump AC 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 Warrants") to acquire $1,000 principal amount of PIK Notes. The PIK Notes
and the PIK Note Warrants are separately transferable. Trump AC 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 (as defined), 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 Trump AC, and Plaza Funding and Trump AC,
each of which are wholly owned by Trump, became the sole partners of Plaza
Associates.
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
"Stock Offering") for gross proceeds of $140,000,000. Concurrently with the
Stock Offering, Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"),
a 60% subsidiary of THCR, together with its subsidiary, Trump Hotels & Casino
Resorts Funding, Inc. ("THCR Funding"), issued 15 1/2% Senior Secured Notes
(the "Senior Secured Notes") for gross proceeds of $155,000,000 (the "Note
Offering" and, together with the Stock Offerings, the "1995 Offerings"). From
the proceeds from the Stock Offering, THCR contributed $126,848,000 to THCR
Holdings. THCR Holdings subsequently contributed $172,859,000 to Trump AC.
Prior to the 1995 Offerings, Trump was the sole stockholder of THCR and sole
beneficial owner of THCR Holdings. Concurrent with the 1995 Offerings, Trump
contributed to THCR Holdings all of his beneficial interest in Plaza Associates
(consisting of all of the outstanding capital stock of Plaza Funding, a 99%
equity interest in Trump AC and all of the outstanding capital stock of Trump
Plaza Holding Inc. which owns the remaining 1% equity interest in Trump AC).
Trump also contributed to THCR Holdings all of his
F-25
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 (the "Taj Mahal") and Trump's
Castle Casino Resort.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Plaza Associates operates a luxury casino hotel, Trump Plaza Hotel and Casino
("Trump Plaza"), located on The Boardwalk in Atlantic City, which provides high
quality amenities and services to its casino patrons and hotel guests. A
substantial portion of Trump Plaza's revenues are derived from its gaming
operations and in the past Trump Plaza has targeted the higher-end drive-in
slot customer. Competition in the Atlantic City casino total market is intense
and management believes that this competition will continue as more casinos are
opened and new entrants into the gaming industry become operational.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Gaming revenues represent the net win from gaming activities which is the
difference between amounts wagered and amounts won by patrons. Revenues from
hotel and other services are recognized at the time the related service is
performed.
Plaza Associates provides an allowance for doubtful accounts arising from
casino, hotel and other services, which is based upon a specific review of
certain outstanding receivables as well as historical collection information.
In determining the amount of the allowance, management is required to make
certain estimates and assumptions regarding the timing and amount of
collection. Actual results could differ from those estimates and assumptions.
PROMOTIONAL ALLOWANCES
The retail value of accommodations, food, beverage and other services
provided to customers without charge is included in gross revenue and deducted
as promotional allowances. The estimated departmental costs of providing such
promotional allowances are included in gaming costs and expenses as follows:
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD FROM
DECEMBER 31, JANUARY 1, 1995
--------------- THROUGH
1993 1994 JUNE 12, 1995
------- ------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms............................. $ 4,190 $ 4,311 $ 1,761
Food and Beverage................. 14,726 15,373 6,866
Other............................. 3,688 4,169 1,502
------- ------- -------
$22,604 $23,853 $10,129
======= ======= =======
</TABLE>
During 1994, certain Progressive Slot Jackpot Programs were discontinued
which resulted in $585,000, of related accruals being taken into income.
F-26
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
LONG LIVED ASSETS
During 1995, Plaza Associates adopted the provisions of Statement of
Financial Accounting Standard No. 121 "Accounting for the Impairment of Long-
Lived Assets" ("SFAS"). SFAS No. 121 requires, among other things, that an
entity review its long-lived assets and certain related intangibles for
impairment whenever changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. Impairment of long-lived assets
exists, if, at a minimum the future expected cash flows (undiscounted and
without interest charges from an entity's operations are less than the carrying
value of these assets. As a result of its review, Plaza Associates does not
believe that any impairment exists in the recoverability of its long-lived
assets.
INCOME TAXES
Plaza Funding, Trump AC's and Plaza Associates' adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"), effective January 1, 1993. Adoption of this new standard did not
have a significant impact on the respective statements of financial condition
or results of operations. SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method deferred tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The accompanying consolidated financial statements of Trump AC 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 Act (the "Casino Control Act"), Plaza
Associates is required to file a New Jersey corporation business tax return. As
of June 12, 1995, Trump AC and Plaza Associates had state tax net operating
loss carryforwards of approximately $32,800,000 which are available to offset
future state taxable income. Such carryforwards expire from 1997 to 2001. The
net operating loss carryforwards result in a deferred tax asset of $2,900,000
which has been offset by a valuation allowance of $2,900,000 as utilization of
such carryforwards is not considered to be more likely than not.
Plaza Associates' deferred state income taxes result primarily from
differences in the timing of reporting depreciation for tax and financial
statement purposes.
F-27
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Plaza Funding, Trump AC and
Plaza Associates consider all highly liquid debt instruments purchased with a
maturity of three months or less at time of acquisition to be cash equivalents.
The following supplemental disclosures are made to the statements of cash
flows.
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE YEARS ENDED DECEMBER 31, JANUARY 1, 1995
--------------------------------- THROUGH
1993 1994 JUNE 12, 1995
---------------- ---------------- -------------------
<S> <C> <C> <C>
Cash paid during the year
for interest............ $ 41,118,000 $ 36,538,000 $265,000
================ ================ ========
Cash paid for state and
Federal income taxes.... $ 81,000 $ -- $ --
================ ================ ========
Issuance of debt in ex-
change for accrued in-
terest.................. $ 3,562,000 $ 8,194,000 $ --
================ ================ ========
</TABLE>
RECLASSIFICATIONS
Certain reclassifications have been made to prior year financial statements
to conform to the current year presentation.
(3) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 JUNE 12, 1995
----------------- -------------
<S> <C> <C>
Plaza Associates Note (10 7/8% Mortgage
Notes, due 2001 net
of unamortized discount of $3,766,000 and
$3,597,000,
respectively) (A)........................... $326,234,000 $326,403,000
Mortgage notes payable (C)................... 5,494,000 5,289,000
Other notes payable.......................... 468,000 3,501,000
PIK Notes (12 1/2% Notes, due 2003 net of
discount of $9,769,000 at December 31, 1994)
(B)......................................... 73,987,000 83,746,000
------------ ------------
406,183,000 418,939,000
Less--Current maturities..................... 2,969,000 87,797,000
------------ ------------
$403,214,000 $331,142,000
============ ============
</TABLE>
- ---------------------
(A) On June 25, 1993 Plaza Funding issued $330,000,000 principal amount of
10 7/8% Mortgage Notes, due 2001 (the "Plaza Notes"), net of discount
of $4,313,000. Net proceeds of the offering were used to redeem all of
Plaza Funding's outstanding $225,000,000 principal amount 12% Mortgage
Bonds, due 2002 and together with other funds (See (B) Pay-In-Kind
Notes) to redeem all of Plaza Funding's Stock Units, comprised of
$75,000,000 liquidation preference participating cumulative redeemable
Preferred Stock with associated shares of Common Stock, to repay
$17,500,000 principal amount 9.14% Regency Note due 2003, to make a
portion of a distribution to Trump to pay certain personal
indebtedness, and to pay transaction expenses.
The Plaza Notes mature on June 15, 2001 and are redeemable at any time
on or after June 15, 1998, at the option of Plaza Funding or Plaza
Associates, in whole or in part, at the principal amount plus a premium
which declines ratably each year to zero in the year of maturity. The
Plaza Notes bear interest at the stated rate of 10 7/8% per annum from
the date of issuance, payable semi-annually on each June 15 and
December 15, commencing December 15, 1993 and are secured by
substantially all of Plaza Associates assets. The accompanying
consolidated financial statements reflect interest expense at the
effective interest rate of 11.12% per annum.
F-28
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Indenture governing the Plaza Notes (the "Plaza Note Indenture")
contains certain covenants limiting the ability of Plaza Associates to
incur indebtedness, including indebtedness secured by liens on Trump
Plaza. In addition, Plaza Associates may, under certain circumstances,
incur up to $25,000,000 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) senior
to the liens of one of the Plaza Mortgages (the "Plaza Note Mortgage")
and another of the Plaza Mortgages (the "Plaza Guarantee Mortgage")
thereon. The Plaza Notes represent the senior indebtedness of Plaza
Funding. The note from Plaza Associates to Plaza Funding in the same
principal amount of the Plaza Notes (the "Plaza Associates Note") and
the guarantee of the Plaza Notes (the "Plaza Guarantee") rank pari
passu in right of payment with all existing and future senior
indebtedness of Plaza Associates.
The Plaza Notes, the Plaza Associates Note, the Plaza Note Mortgage,
the Plaza Guarantee and the Plaza Guarantee Mortgage are non-recourse
to the partners of Plaza Associates, to the shareholders of Plaza
Funding and to all other persons and entities (other than Plaza Funding
and Plaza Associates), including Trump. Upon an event of default,
holders of the Plaza Notes would have recourse only to the assets of
Plaza Funding and Plaza Associates.
(B) On June 25, 1993, Trump AC issued $60,000,000 principal amount of PIK
Notes, together with PIK Note Warrants to acquire an additional
$12,000,000 of PIK Notes at no additional cost. The PIK Note Warrants
were exercised prior to June 12, 1995. The PIK Notes and PIK Note
Warrants were subsequently redeemed with a portion of the proceeds
contributed to Trump AC by THCR Holdings (See Note 1). Such redemption
resulted in the recognition of an extraordinary loss of $9,250,000,
including the write-off of related unamortized deferred financing
costs.
(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.
The aggregate maturities of long-term debt for the period from June 12,
1995 through December 31, 1995 and in each of the years subsequent to
1995 are:
<TABLE>
<S> <C>
For the period from June 12, 1995 through December 31,
1995................................................. $ 87,797,000
1996.................................................. 921,000
1997.................................................. 3,335,000
1998.................................................. 483,000
1999.................................................. --
Thereafter............................................ 330,000,000
------------
$422,536,000(1)
============
</TABLE>
---------------------
(1) Includes accretion to maturity of $3,597,000.
The ability of Plaza Associates and Plaza Funding to repay their long-
term debt when due will depend on their ability to either generate cash
from operations sufficient for such purposes or to refinance such
indebtedness. Management does not currently anticipate that cash flow
will be sufficient and that repayment will likely depend upon the
ability to refinance such indebtedness. The future operating
performance and the ability to refinance such indebtedness will be
subject to the then prevailing economic conditions, industry conditions
and numerous other financial, business and other factors, many of which
are beyond the control of Plaza Funding or Plaza Associates. There can
be no assurance that the future operating performance of Plaza
Associates will be sufficient to meet these repayment obligations or
that the general state of the economy, the status of the capital
markets generally or the receptiveness of the capital markets to the
gaming industry will be conducive to refinancing or other attempts to
raise capital.
F-29
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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, 1993, 1994 and for the period from January 1, 1995 through June
12, 1995 was $4,338,000, $3,613,000 and $1,466,000, respectively, of which
$2,513,000, $1,900,000 and $850,000, 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>
For the period from June 12, 1995 through
December 31, 1995............................ $ 2,143,000 $ 1,276,000
1996.......................................... 6,770,000 2,450,000
1997.......................................... 6,814,000 2,494,000
1998.......................................... 5,254,000 2,494,000
1999.......................................... 3,533,000 2,450,000
Thereafter.................................... 487,450,000 407,450,000
------------ ------------
$511,964,000 $418,614,000
============ ============
</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 to Trump of Trump Plaza
East (the "Trump Plaza East Lease") and related expenses which are included in
the above lease commitment amounts. On June 25, 1993, 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 extraordinary loss of $9,250,000 for the period January 1, 1995 through
June 12, 1995 related to the redemption of the PIK Notes and the PIK Note
Warrants and the write-off of related deferred financing costs (See Note 10).
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.
Non-operating expense consists of costs associated with Trump Plaza East
(See Note 6). In 1993, 1994 and the period January 1, 1995 through June 12,
1995 these costs were $3,873,000, $4,931,000 and $1,533,000, respectively, net
of miscellaneous non-operating credits.
(6) COMMITMENTS AND CONTINGENCIES
CASINO LICENSE RENEWAL
The operation of an Atlantic City hotel and casino is subject to significant
regulatory controls which affect virtually all of its operations. Under the
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 will require a
F-30
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determination 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.
SELF INSURANCE RESERVES
Self insurance reserves represent the estimated amounts of uninsured claims
related to employee health medical costs, workmen's compensation and personal
injury claims that have occurred in the usual course of business. These
reserves are established by management based upon specific review of open
claims, with consideration of incurred but not reported claims as of the
balance sheet date. Actual results may differ from these reserve amounts.
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 gross revenue. For
the years ended December 31, 1993 and 1994 and for the period from January 1,
1995 through June 12, 1995, Plaza Associates charged to operations $1,047,000,
$838,000 and $471,000 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. Additionally, for the period from January 1,
1995 through June 12, 1995, Plaza Associates credited operations for $501,000
resulting from recapture of the valuation allowance on the CRDA receivable.
Bonds issued by the CRDA will be accounted for under SFAS No. 121, as such
bonds are not marketable.
F-31
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. At June 12, 1995, Plaza
Associates has recorded a receivable from the CRDA of $288,000, which is
included in Accounts Receivable Other.
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 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 the fair market value of Trump Plaza East and all
rent payments made to Boardwalk by Trump under the Trump Plaza East Lease, (ii)
Boardwalk leased Trump Plaza East to Trump under 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 a five-year option to purchase Trump Plaza East (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 a right of first refusal (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. 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.
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 1995, THCR incurred approximately $2,340,000 of
such expenses of which $2,045,000 are included in non-operating expenses in the
accompanying consolidated financial statements. Under the Trump Plaza East
Purchase Option, Plaza Associates has the right to acquire Trump Plaza East for
a purchase price of $28,000,000 through 1996, increasing by $1,000,000 annually
thereafter until expiration on June 30, 1998. The CCC has required that Plaza
Associates exercise the Trump Plaza East Purchase Option or its right of first
refusal no later than July 1, 1996.
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.
Plaza Associates has commenced construction at Trump Plaza East pursuant to
rights granted to Plaza Associates by its lessor. Plaza Associates has received
approximately $1,519,000 in CRDA credit as of December 31, 1995. As of December
31, 1995, Plaza Associates had capitalized approximately $35,700,000
F-32
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
in construction costs related to Trump Plaza East including a $1,000,000
consulting fee paid to Trump (See Note 8). Plaza Associates' ability to acquire
Trump Plaza East pursuant to the Trump Plaza East Purchase Option is dependent
upon its ability to obtain financing to acquire the property. The ability to
incur such indebtedness is restricted by the Plaza Note Indenture. Plaza
Associates' ability to purchase 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 connection with the Merger
Transaction (as defined) (See Note 12), Plaza Associates expects to exercise
the Trump Plaza East Purchase Option.
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
$765,000, $848,000 and $476,000 for matching contributions for the years ended
December 31, 1993 and 1994 and for the period from January 1, 1995 through June
12, 1995, respectively.
Plaza Associates provides no other material post-retirement or post-
employment benefits.
(8) TRANSACTIONS WITH AFFILIATES
DUE TO/FROM AFFILIATES
Plaza Associates leases warehouse facility space to Trump's Castle
Associates. Lease payments of $15,000, $6,000 and $6,000 were received from
Trump's Castle Associates in 1993, 1994 and 1995 respectively.
Plaza Associates leased office space from Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), which terminated on March 19, 1993. Lease payments of $30,000
were paid to Taj Associates in 1993.
Plaza Associates leases two parcels of land under long-term ground leases
from Seashore Four Associates and Trump Seashore Associates. In 1993, 1994 and
for the period from January 1, 1995 through June 12, 1995, Plaza Associates
paid $900,000, $900,000 and $227,000, respectively, to Seashore Four
Associates, and paid $1,000,000, $1,000,000 and $622,000 in 1993, 1994 and for
the period from January 1, 1995 through June 12, 1995, 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 Trump, in consideration for
services provided, Plaza Associates pays TPM each year an annual fee of
$1,000,000 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 such services agreement, up to certain amounts. Under such
services agreement, approximately $1,200,000, $1,300,000 and $582,000 was
charged to expense for the years ended December 31, 1993, 1994 and for the
period from January 1, 1995 through June 12, 1995, respectively.
F-33
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TRUMP WORLD'S FAIR OPTION
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) Trump World's Fair (including the land, improvements and
personal property used in the operation of the hotel) 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. In connection with such
Option Agreement, Trump assigned his rights to Plaza Associates.
On June 12, 1995, the Trump World's Fair Purchase Option was exercised. The
option price of $60,000,000 was funded with $58,150,000 from the capital
contributed by THCR Holdings (See Note 1), and $1,850,000 of option payments
made by Plaza Associates.
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 and June 12, 1995.
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,
Trump AC 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 JUNE 12, 1995
---------------------------- ----------------------------
CARRYING AMOUNT FAIR VALUE CARRYING AMOUNT FAIR VALUE
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
12 1/2% PIK Notes....... $ 73,987,000 $ 51,791,000 -- --
10 7/8% Mortgage Notes.. $326,234,000 $247,122,000 $326,403,000 $298,650,000
</TABLE>
The fair values of the PIK and Plaza Notes are based on quoted market prices
obtained by Plaza Associates from its investment advisor.
There are no quoted market prices for other notes payable and a reasonable
estimate could not be made without incurring excessive costs.
(10) SUBSEQUENT EVENTS
On June 12, 1995 three newly formed entities owned by Trump--THCR, THCR
Holdings and THCR Funding--completed the offering and sale of $155,000,000 of
15 1/2% 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 Trump
F-34
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AC 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 (Notes 3 and 5), finance the expansion of
Trump Plaza (Notes 6 and 8) as well as to fund casino development costs in
certain jurisdictions outside of Atlantic City.
On January 8, 1996, THCR, Taj Mahal Holding Corp. ("Taj Holding") and THCR
Merger Corp. ("Merger Sub") entered into the Agreement and Plan of Merger, as
amended by the Amendment to Agreement and Plan of Merger dated as of January
31, 1996 (the "Merger Agreement"), pursuant to which Merger Sub will merge with
and into Taj Holding (the "Merger"). The Merger Agreement provides that each
outstanding share of Class A Common Stock of Taj Holding (the "Taj Holding
Class A Common Stock") (other than Dissenting Shares (as defined in the Proxy
Statement-Prospectus)) will be converted into the right to receive, at each
holder's election, either (a) $30.00 in cash or (b) that number of shares of
Common Stock of THCR (the "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 (the "Merger Transaction"):
(a) the consummation of the offering by THCR of up to 12,500,000 shares 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 AC and its wholly owned finance subsidiary Trump
Atlantic City Funding, Inc. of up to $1,200,000,000 aggregate principal
amount of first mortgage notes, although it is currently contemplated to
aggregate $1,100,000,000, the aggregate proceeds of which will be used,
together with available cash, to (i) pay cash to those holders of Taj
Holding Class A Common Stock electing to receive cash in the Merger, (ii)
redeem the outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Taj
Bonds") Trump Taj Mahal Funding, Inc. ("Taj Funding"), (iii) redeem the
outstanding shares of Class B Common Stock of Taj Holding as required in
connection with the redemption of the Taj Bonds, (iv) retire the outstanding
Plaza Notes, (v) satisfy the indebtedness of Taj Associates under its loan
agreement with National Westminster Bank USA, (vi) purchase certain real
property used in the operation of the Taj Mahal that is currently leased
from a corporation wholly owned by Trump, (vii) purchase certain real
property used in the operation of Trump Plaza that is currently leased from
an unaffiliated third party, (viii) make a payment to Bankers Trust Company
("Bankers Trust") to obtain releases of liens and guarantees that Bankers
Trust has in connection with certain outstanding indebtedness owed by Trump
to Bankers Trust, and (ix) pay related fees and expenses and provide working
capital;
(b) the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of his direct and indirect ownership
interests in Taj Associates; and
(c) the contribution by THCR to Trump AC (on behalf, and at the direction,
of THCR Holdings) of all of its indirect ownership interests in Taj
Associates acquired in the Merger.
To the extent that holders of Taj Holding Class A Common Stock elect to
receive shares of THCR Common Stock in the Merger, THCR may reduce the size of
the THCR Stock Offering. In addition to the shares of THCR Common Stock that
may be issued in the THCR Stock Offering, THCR may issue, as part of the THCR
Stock Offering, up to an additional 20% of such number of shares, to fund
working capital and other general corporate purposes.
The prospective transaction is subject to a number of conditions, including
stockholder approval. In addition, there are a number of risks that should be
considered, including: (i) the high leverage and fixed
F-35
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES
AND TRUMP PLAZA ASSOCIATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
charges of THCR (following the consummation of the Merger Transaction); (ii)
the risk in refinancing and repayment of indebtedness and the need for
additional financing; (iii) the restrictions imposed on certain activities by
certain debt instruments; (iv) the recent results of Trump Plaza and the Taj
Mahal; and (v) risks associated with the riverboat casino at Buffington Harbor,
Indiana, to be operated by a subsidiary of THCR (the "Indiana Riverboat") and
the expansions at Trump Plaza and the Taj Mahal. There can be no assurance that
the expansions at Trump Plaza or the Taj Mahal will be completed or that the
Indiana Riverboat or any other gaming venture will open or that any of Trump
Plaza's or the Taj Mahal's operations will be successful. See "Risk Factors"
included elsewhere in this Proxy Statement-Prospectus for a discussion of these
and other factors.
F-36
<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, 1994 and 1995, and the related consolidated statements of
operations, capital (deficit) and cash flows for each of the three years in the
period ended December 31, 1995. 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, 1994 and 1995 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.
Roseland, New Arthur Andersen LLP
Jersey
February 16, 1996
F-37
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash investments.............................. $ 61,196 $ 88,941
Receivables, net of allowance of $4,059 and $5,042 for
doubtful accounts (Note 1)............................ 15,443 17,215
Inventory.............................................. 6,431 7,161
Prepaid expenses and other current assets.............. 7,806 3,864
--------- ---------
Total Current Assets................................. 90,876 117,181
--------- ---------
PROPERTY AND EQUIPMENT (Notes 1, 2, and 5):
Land................................................... 37,843 37,843
Building............................................... 656,702 665,161
Furniture, fixtures and equipment...................... 160,372 174,693
Leasehold improvements................................. 31,243 31,253
--------- ---------
886,160 908,950
Less: Accumulated depreciation and amortization...... (179,375) (217,963)
--------- ---------
706,785 690,987
--------- ---------
OTHER ASSETS............................................. 9,951 13,625
--------- ---------
Total Assets......................................... $ 807,612 $ 821,793
========= =========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Long-term debt due currently (Note 2).................. $ 743 $ 920
Accounts payable....................................... 3,256 8,335
Accrued interest payable............................... 8,977 9,154
Due to affiliates, net (Note 3)........................ 152 974
Other current liabilities (Note 4)..................... 37,059 35,210
--------- ---------
Total Current Liabilities............................ 50,187 54,593
--------- ---------
OTHER LIABILITIES (Notes 2 and 3)........................ 32,912 33,373
--------- ---------
LONG-TERM DEBT NET OF UNAMORTIZED DISCOUNT OF $153,597
AND $131,103 (Notes 2 and 9)............................ 656,701 694,192
--------- ---------
COMMITMENTS AND CONTINGENCIES (Note 5)
CAPITAL (Notes 6 and 9):
Contributed capital.................................... 123,765 123,765
Accumulated deficit.................................... (55,953) (84,130)
--------- ---------
Total Capital........................................ 67,812 39,635
--------- ---------
Total Liabilities and Capital........................ $ 807,612 $ 821,793
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-38
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUES (Note 1):
Gaming...................................... $ 442,064 $ 461,622 $ 501,378
Rooms....................................... 40,682 41,815 43,309
Food and beverage........................... 55,953 58,029 57,195
Other....................................... 16,656 17,894 15,864
--------- --------- ---------
Gross revenues............................ 555,355 579,360 617,746
Less--Promotional allowances (Note 1)....... 56,444 62,178 63,998
--------- --------- ---------
Net revenues.............................. 498,911 517,182 553,748
--------- --------- ---------
COST AND EXPENSES:
Gaming...................................... 237,566 260,472 283,786
Rooms....................................... 15,525 15,662 15,230
Food and beverage........................... 25,080 25,035 24,612
General and administrative.................. 99,424 99,629 96,843
Depreciation and amortization............... 36,858 39,750 43,387
--------- --------- ---------
414,453 440,548 463,858
--------- --------- ---------
Income from operations........................ 84,458 76,634 89,890
Interest income............................... 1,382 2,019 3,922
Interest expense.............................. (108,379) (115,311) (120,435)
--------- --------- ---------
Net loss...................................... $ (22,539) $ (36,658) $ (26,623)
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-39
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED TOTAL
CONTRIBUTED SURPLUS CAPITAL
CAPITAL (DEFICIT) (DEFICIT)
----------- ----------- ---------
<S> <C> <C> <C>
Balance, January 1, 1993..................... $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
Net loss..................................... -- (26,623) (26,623)
Partnership distribution (Note 6)............ -- (1,554) (1,554)
-------- -------- --------
Balance, December 31, 1995................... $123,765 $(84,130) $ 39,635
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-40
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $(22,539) $(36,658) $(26,623)
Adjustments to reconcile net loss to net cash
flows provided by
operating activities--
Depreciation and amortization.................. 36,858 39,750 43,387
Charges related to lease guarantee............. 1,763 2,047 2,375
Accretion of discount on Bond indebtedness..... 15,745 18,820 22,494
Other adjustments to reduce the carrying value
of non-current
assets........................................ 2,764 2,134 3,090
Utilization of CRDA credits.................... -- 1,500 --
Provision for doubtful accounts................ 3,472 2,974 4,508
-------- -------- --------
38,063 30,567 49,231
Changes in operating assets and liabilities:
Receivables, net............................... (2,281) (5,383) (6,280)
Inventory...................................... (1,612) (1,746) (730)
Other current assets........................... (39) (3,552) 3,603
Other assets................................... (766) (392) (584)
Due to affiliates, net......................... 98 (381) 822
Accounts payable............................... (2,225) (678) 5,079
Accrued interest payable....................... 14,900 12,537 16,175
Other liabilities.............................. 2,496 2,450 (4,417)
-------- -------- --------
Net cash flows provided by operating
activities................................... 48,634 33,422 62,899
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.............. (16,752) (23,030) (26,498)
Investment in CRDA obligations.................. (5,408) (4,201) (6,073)
-------- -------- --------
Net cash flows used in investing activities... (22,160) (27,231) (32,571)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings........................ (759) (868) (1,029)
Partnership distribution........................ (1,733) (2,171) (1,554)
-------- -------- --------
Net cash flows used in financing activities... (2,492) (3,039) (2,583)
-------- -------- --------
NET INCREASE IN CASH AND CASH INVESTMENTS........ 23,982 3,152 27,745
CASH AND CASH INVESTMENTS BEGINNING OF YEAR...... 34,062 58,044 61,196
-------- -------- --------
CASH AND CASH INVESTMENTS END OF YEAR............ $ 58,044 $ 61,196 $ 88,941
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for interest.......... $ 75,972 $ 79,121 $ 79,389
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS:
Issuance of PIK bonds in lieu of cash interest.. $ 14,579 $ 12,249 $ 15,112
======== ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
consolidated financial statements.
F-41
<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. The industry in which the Taj Mahal
operates is subject to intense competition and regulatory review (See Note 5).
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"), these were subsequently
exchanged for Taj Funding's 11.35% Mortgage Bonds, Series A, due 1999 (the "Taj
Bonds"). Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Taj Bonds is completely dependent on the
operations of Taj Associates.
Donald J. Trump ("Trump") beneficially owns 50% of Taj Associates and has
pledged his total ownership interest as collateral under various debt
agreements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
REVENUE RECOGNITION
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.
Taj Associates provides an allowance for doubtful accounts arising from
casino, hotel and other services. The allowance is based upon a specific review
of outstanding receivables as well as historical collection information. In
providing this allowance, management is required to make certain estimates and
assumptions regarding the timing and amount of account collections. Actual
results could differ from those estimates.
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.
F-42
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The cost of promotional allowances consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Rooms................................................ $ 8,733 $ 9,921 $ 9,913
Food and Beverage.................................... 28,973 29,653 30,458
Other................................................ 4,678 6,735 6,994
------- ------- -------
$42,384 $46,309 $47,365
======= ======= =======
</TABLE>
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 (the "CCC") regulations, Taj
Associates is required to file a New Jersey corporation business tax return. As
of December 31, 1995, Taj Associates had a net operating loss carry-forward of
approximately $150,000,000 for New Jersey State Income Tax purposes. No tax
benefit will be reflected in the accompanying financial statements for those
losses until such time that they are actually realized.
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.
LONG LIVED ASSETS
During 1995, Taj Associates adopted the provisions of Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets" ("SFAS 121"). SFAS 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstance indicate that the carrying amount of an asset
may not be fully recoverable. Impairment of long-lived assets exists, if, at a
minimum, the future expected cash flows (undiscounted and without interest
charges), from an entity's operations are less than the carrying value of these
assets. As a result of its review, Taj Associates does not believe that any
impairment exists in the recoverability of its long-lived assets as of December
31, 1995.
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.
F-43
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(2) LONG-TERM DEBT
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
First Mortgage Bonds (a)............................... $ 765,130 $ 780,242
Unamortized discount................................... (153,597) (131,103)
--------- ---------
Net.................................................... 611,533 649,139
Bank term loan (b)..................................... 45,138 44,944
Other.................................................. 773 1,029
--------- ---------
Total................................................ 657,444 695,112
Less: Current portion................................ (743) (920)
--------- ---------
$ 656,701 $ 694,192
========= =========
</TABLE>
- ---------------------
(a) Taj Bonds bear interest of 11.35% and are due November 15, 1999. Each Taj
Bond, together with one share of Taj Holding's Class B redeemable common
stock trade together as a unit ("Units"), and may not be transferred
separately. Interest on the Taj Bonds is due semi-annually on each
November 15 and May 15. Interest on the Taj Bonds must be paid in cash on
each interest payment date at the rate of 9.375% per annum (the "Mandatory
Cash Interest Amount"). In addition to the Mandatory Cash Interest Amount,
effective May 15, 1992 and annually thereafter, an additional amount of
interest (the "Additional Amount") in cash or additional Taj Bonds or a
combination thereof, is payable equal to the difference between 11.35% of
the outstanding principal amount of the Taj Bonds and the Mandatory Cash
Interest Amount previously paid. To the extent that there is excess
available cash flow ("EACF") of Taj Associates, as defined in the related
indenture, for the immediately preceding calendar year, Taj Funding will
pay the Additional Amount in cash up to 10.28% and the balance thereof may
be paid at the option of Taj Funding in cash or additional Units, provided
that an equivalent amount of cash is used to purchase or redeem Units.
Additional Taj Bonds issued on October 4, 1991 amounted to approximately
$7,208,000. For the period from the issuance of the Taj Bonds, October 4,
1991, through December 31, 1992, there was no EACF. Accordingly, Taj
Funding paid the Additional Amounts on May 15, 1993 and May 15, 1992
through the issuance of approximately $14,579,000 and $8,844,000,
respectively, in additional Taj Bonds. Of the $14,870,000 Additional
Amount due May 15, 1994, $2,621,000 was paid in cash and the $12,249,000
balance in Taj Bonds. Of the $15,112,000 Additional Amount due May 15,
1995, Taj Associates satisfied the entire obligation through the issuance
of Taj Bonds.
Since Taj Funding has no business operations, its ability to repay the
principal and interest on the Bonds is completely dependent on the
operations of Taj Associates. The Taj Bonds are guaranteed as to payment of
principal and interest by Taj Associates and are collateralized by
substantially all Taj Associates' property.
In accordance with AICPA Statement of Position 90-7, "Financial Reporting
By Entities in Reorganization Under the Bankruptcy Code," the Taj Bonds
when issued were stated at the present value of amounts to be paid,
determined at current interest rates (effective rate of approximately 18%).
The effective interest rate of the Taj Bonds was determined based on the
trading price of the Taj Bonds for a specific period. Stating the debt at
its approximate present value resulted in a reduction of approximately
$204,276,000 in the carrying amount of the Taj Bonds. This gain is being
offset by increased interest costs over the period of the Taj Bonds to
accrete such bonds to their face value at maturity. At December 31, 1995,
the unaccreted balance of this discount approximated $131,103,000. The
current interest rates of other borrowings approximated their stated
interest rates as of the effective date. The accretion amounted to
approximately $15,745,000 in 1993, $18,820,000 in 1994 and $22,494,000 in
1995, and is included in interest expense.
F-44
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) On November 3, 1989, Taj Associates entered into a loan agreement with
National Westminster Bank USA (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 1994 and 1995, no amounts were
outstanding under the line.
Aggregate annual maturities of long-term debt at accreted value are as
follows:
<TABLE>
<S> <C>
1996............................. $ 920,000
1997............................. 529,000
1998............................. 268,000
1999............................. 824,498,000
2000............................. 0
Thereafter....................... 0
</TABLE>
The above maturity schedule does not reflect the proposed recapitalization
described in Note 9.
The ability of Taj Associates and Taj Funding to repay their long-term debt
when due will depend on their ability to either generate cash from operations
sufficient for such purposes or to refinance such indebtedness. Management does
not currently anticipate that cash will be sufficient and that repayment will
likely depend upon the ability to refinance such indebtedness. The future
operating performance and ability to refinance such indebtedness will be
subject to the then prevailing economic conditions, industry conditions and
numerous other financial, business and other factors, many of which are beyond
the control of Taj Associates and Taj Funding. There can be no assurances that
the future operating performance of Taj Associates will be sufficient to meet
these repayment obligations or that the general state of the economy, the
status of the capital markets generally or the receptiveness of the capital
markets to the gaming industry will be conducive to refinancing or other
attempts to raise capital.
F-45
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Donald J. Trump (a)......................................... $ 253 $ 643
Trump Taj Mahal Realty Corp. ("Realty Corp.") (b)........... -- --
Trump's Castle Associates (c)............................... 30 164
Trump Plaza Associates (c).................................. (131) 167
------- ------
$ 152 $ 974
======= ======
</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 ("First Fidelity") in connection with the
First Fidelity Loan (as defined) to Realty Corp. which has been guaranteed
by Trump. For the years ended December 31, 1993, 1994 and 1995, Taj
Associates incurred $1,566,000, $1,353,000 and $1,743,000, respectively,
under the Services Agreement. In addition, during 1993, 1994 and 1995, Taj
Associates reimbursed Mr. Trump $232,000, $224,000 and $261,000,
respectively, for expenses pursuant to the Services Agreement, of which
$127,000, $149,000 and $164,000, 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 2).
The amended lease was assigned by Realty to 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 "First Fidelity Loan"). Any
additional sums paid will also reduce Taj Associates guarantee (see below)
and the principal amount of the First Fidelity Loan. The First Fidelity
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 First Fidelity Loan, up
to a maximum of $30,000,000, provided that First Fidelity first pursues its
first mortgage lien on the parcels, and provided further that the Taj Bonds
have been paid in full. Inasmuch as Taj Associates' lease payments are
Realty Corp's sole source of funds to satisfy the First Fidelity Loan and
the amount of the First Fidelity Loan exceeds the estimated fair market
value of the land by more than $30,000,000, Taj Associates recorded the
present value of the maximum guarantee amount as of October 4, 1991.
Discounted at 15%, a reasonable incremental cost of capital, the obligation
amounted to approximately $9,103,000. This obligation is being accreted as
interest expense over the life of the Taj Bonds and is included in Other
Liabilities in the accompanying consolidated balance sheets. The accretion
amounted to approximately $1,763,000, $2,047,000 and $2,375,000 for the
years ended December 31, 1993, 1994 and 1995, 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
F-46
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 1993, Taj Associates incurred approximately
$1,100,000 and $83,000 of costs for these services from Trump's Castle
Casino Resort ("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. During 1995, Taj Associates incurred
approximately $1,072,000 and $445,000 of costs for these services from
Trump's Castle and Trump Plaza, respectively. In addition, Taj Associates
charged $113,000 and $188,000 to Trump's Castle and Trump Plaza,
respectively, for similar services.
(4) OTHER CURRENT LIABILITIES
The components of other current liabilities at December 31 consisted of the
following:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payroll and related costs.................................... $12,632 $13,533
Self-insurance reserves...................................... 6,800 5,697
Advertising/Marketing costs.................................. 3,242 1,621
Advance deposits............................................. 3,022 1,236
Unredeemed chip liability.................................... 2,725 3,148
Other........................................................ 8,638 9,975
------- -------
$37,059 $35,210
======= =======
</TABLE>
Self insurance reserves represent the estimated amounts of uninsured claims
settlements related to employee health medical costs, workmen's compensation
and other legal proceedings in the normal course of business (see Note 5).
These reserves are established by management based upon a specific review of
open claims as of the balance sheet date as well as historical claims
settlement experience. Actual results may differ from those reserve amounts.
(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
noncancelable operating leases expiring at various dates through 2023. At
December 31, 1995, minimum commitments under these arrangements are as follows:
<TABLE>
<S> <C>
1996............................................................. $ 8,639,000
1997............................................................. $ 5,867,000
1998............................................................. $ 3,534,000
1999............................................................. $ 2,865,000
2000............................................................. $ 2,725,000
Thereafter....................................................... $62,675,000
</TABLE>
Rent expense was approximately $4,520,000, $5,027,000 and $4,546,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.
F-47
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 by
October 1992, which improvements were to be completed within 18 months of
commencement. Taj Associates initially proposed a concept to improve the Steel
Pier, the estimated cost of which was $30,000,000. Such concept was approved by
the New Jersey Department of Environmental Protection, the agency which
administers CAFRA. In March 1993, Taj Associates obtained a modification of its
CAFRA permit providing for the extension of the required commencement and
completion dates of the improvements to the Steel Pier for one year based upon
an interim use of the Steel Pier for an amusement park. In 1994, 1995 and
February 1996, Taj Associates received an additional one-year extension (most
recently through October 1996) 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, 1993, 1994 and 1995
were $870,000, $938,000 and $1,069,000, respectively.
CASINO LICENSE RENEWAL
Taj Funding and Taj Associates are subject to regulation and licensing by 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 New Jersey 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
extended Taj Associates' casino license for four years through March 31, 1999.
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
Taj Associates or Taj Funding's financial condition or results of operations.
FEDERAL INCOME TAX EXAMINATIONS
Taj Associates is currently involved in an examination with the Internal
Revenue Service ("IRS") concerning Taj Associates' federal partnership income
tax returns for the tax years 1989 through 1991. While any adjustment which
results from this examination could affect Taj Associates' state income tax
return, Taj Associates does not believe the resolution of the matter will have
a material adverse effect on its financial condition or results of operations.
F-48
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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
were allocated to leasehold improvements 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 $2,764,000, $2,134,000 and
$3,090,000 in 1993, 1994 and 1995, respectively. Taj Associates is required to
satisfy its obligations to the CRDA through deposits on a quarterly basis. Taj
Associates periodically reviews the carrying value of these deposits and
investments in accordance with its policies for all long-lived assets as
described in Note 1.
(6) TAJ ASSOCIATES 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, 1993, 1994 and 1995 approximated $1,733,000,
$2,171,000 and $1,554,000, 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 (See Note 5).
The estimated fair values of the other financial instruments are as follows
(Note 2):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
11.35% Mortgage Bonds (a)
Carrying Amount......................................... $611,533 $649,139
Fair Value.............................................. 512,638 750,983
</TABLE>
- ---------------------
(a) The fair value of the Taj Bonds is based on quoted market prices as of
December 31, 1994 and 1995.
There are no quoted market prices for the NatWest Loan and other debt and a
reasonable estimate of their value could not be made without incurring
excessive costs.
See Note 9 regarding the proposed redemption of these borrowings.
F-49
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) FINANCIAL INFORMATION--TAJ FUNDING
Financial information relating to Taj Funding as of and for the years ended
December 31, 1994 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Total Assets (including First Mortgage Note Receivable of
$765,130 and $780,242 and related interest receivable)...... $783,562 $799,037
======== ========
Total Liabilities and Capital (including Taj Bonds payable of
$765,130 and $780,242 and related interest payable)......... $783,562 $799,037
======== ========
Interest Income.............................................. $ 86,322 $ 87,914
======== ========
Interest Expense............................................. $ 86,322 $ 87,914
======== ========
Net Income................................................... $ -- $ --
======== ========
</TABLE>
(9) PROPOSED RECAPITALIZATION
On January 8, 1996, Trump Hotels & Casino Resorts, Inc. ("THCR"), Taj Holding
and THCR Merger Corp. ("Merger Sub") entered into the Agreement and Plan of
Merger, as amended by Amendment to Agreement and Plan of Merger, dated as of
January 31, 1996 (the "Merger Agreement"), pursuant to which Merger Sub will
merge with and into Taj Holding (the "Merger"). The Merger Agreement provides
that each outstanding share of Class A Common Stock of Taj Holding (the "Taj
Holding Class A Common Stock") (other than Dissenting Shares (as defined in the
Proxy Statement-Prospectus) will be converted into the right to receive, at
each 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. 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 12,500,000 shares 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 Atlantic City Associates ("Trump AC") and its wholly owned
finance subsidiary Trump Atlantic City Funding, Inc. of up to $1,200,000,000
aggregate principal amount of first mortgage notes, although it is currently
contemplated to aggregate $1,100,000,000, the aggregate proceeds of which will
be used, together with available cash, to (i) pay cash to those holders of Taj
Holding Class A Common Stock electing to receive cash in the Merger, (ii)
redeem the Taj Bonds, (iii) redeem the outstanding shares of Class B Common
Stock of Taj Holding as required in connection with the redemption of the Taj
Bonds, (iv) retire the outstanding 10 7/8% Mortgage Notes due 2001 of Trump
Plaza Funding, Inc., (v) satisfy the indebtedness of Taj Associates under the
NatWest Loan, (vi) purchase certain real property used in the operation of the
Taj Mahal that is currently leased from a corporation wholly owned by Trump,
(vii) purchase certain real property used in the operation of Trump Plaza Hotel
and Casino ("Trump Plaza") that is currently leased from an unaffiliated third
party, (viii) make a payment to Bankers Trust Company ("Bankers Trust") to
obtain releases of liens and guarantees that Bankers Trust has in connection
with certain outstanding indebtedness owed by Trump to Bankers Trust, and (ix)
pay related fees and expenses and provide working capital;
(b) the contribution by Trump to Trump AC of all of his direct and indirect
ownership interests in Taj Associates; and
(c) the contribution by THCR to Trump AC of all its indirect ownership
interests in Taj Associates acquired in the Merger.
F-50
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
To the extent that holders of Taj Holding Class A Common Stock elect to
receive shares of THCR Common Stock in the Merger, THCR may reduce the size of
the THCR Stock Offering. In addition to the shares of THCR Common Stock that
may be issued in the THCR Stock Offering, THCR may issue, as part of the THCR
Stock Offering, up to an additional 20% of such number of shares, to fund
working capital and other general corporate purposes.
The prospective transaction is subject to a number of conditions, including
stockholder approval. In addition, there are a number of risks that should be
considered, including, (i) the high leverage and fixed charges of THCR; (ii)
the risk to refinancing and repayment of indebtedness and the need for
additional financing; (iii) the restrictions imposed on certain activities by
certain debt instruments; (iv) the recent results of Trump Plaza and the Taj
Mahal; and (v) risks associated with the riverboat casino at Buffington Harbor,
Indiana, to be operated by a subsidiary of THCR (the "Indiana Riverboat") and
the expansions at Trump Plaza and the Taj Mahal. There can be no assurance that
the expansions at Trump Plaza or the Taj Mahal 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 other
factors.
(10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
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)
1995
- ----
Net Revenues............................. $117,595 $141,893 $157,808 $136,452
Income from Operations................... 10,298 26,986 35,120 17,486
Net Income (Loss)........................ (18,511) (1,642) 6,445 (12,915)
</TABLE>
F-51
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 22
Use of Proceeds.......................................................... 39
Price Range of Common Stock.............................................. 40
Dividend Policy.......................................................... 40
Capitalization........................................................... 41
Selected Historical Consolidated Financial Information................... 42
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 45
Unaudited Pro Forma Financial Information................................ 56
Business................................................................. 62
Regulatory Matters....................................................... 95
Management............................................................... 108
Certain Transactions..................................................... 125
Security Ownership of Certain Beneficial Owners and Management........... 127
Description of Capital Stock............................................. 128
Description of the THCR Holdings Partnership Agreement................... 132
Shares Eligible for Future Sale.......................................... 137
Special Tax Considerations for Foreign Shareholders...................... 138
Underwriting............................................................. 140
Legal Matters............................................................ 141
Experts.................................................................. 142
Available Information.................................................... 142
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
12,500,000 SHARES
TRUMP
HOTELS &
CASINO RESORTS
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
SANDS BROTHERS & CO., LTD.
APRIL , 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE COVER 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 APRIL 9, 1996
PROSPECTUS
APRIL , 1996
TRUMP
HOTELS &
CASINO RESORTS
500,000 SHARES
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
All of the shares of Common Stock ("Common Stock") offered hereby (the "Stock
Offering") are being sold by Trump Hotels & Casino Resorts, Inc. (the
"Company") in a non-underwritten sale.
The Stock Offering is part of a comprehensive plan (the "Merger Transaction")
relating to the acquisition (the "Merger") of Trump Taj Mahal Associates ("Taj
Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the
"Taj Mahal"), by Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of
the Company ("THCR Holdings"), the issuance of shares of Common Stock by the
Company of shares of Common Stock in an underwritten public offering (the
"Underwritten Offering"), and the refinancing of the debt obligations of Taj
Associates and Trump Plaza Associates ("Plaza Associates"), the owner and
operator of the Trump Plaza Hotel and Casino ("Trump Plaza"). Upon consummation
of the Merger Transaction, Trump Atlantic City Associates ("Trump AC"), a
wholly owned subsidiary of THCR Holdings, will wholly own Plaza Associates and
Taj Associates. In addition to the shares of Common Stock to be issued in the
Stock Offering and the Underwritten Offering, the Company may issue shares of
Common Stock pursuant to the Merger.
As part of the Merger Transaction and concurrently with the Stock Offering,
Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding"), a wholly
owned finance subsidiary of Trump AC, are offering $1.1 billion aggregate
principal amount of first mortgage notes (the "Mortgage Notes") (the "Mortgage
Note Offering"). Consummation of the Stock Offering and the Underwritten
Offering are conditioned upon the consummation of the other transactions
contemplated by the Merger Transaction (including the Mortgage Note Offering).
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "DJT." On April 8, 1996, the closing price of the Common Stock on the
NYSE was $33 3/8 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION, THE INDIANA GAMING
COMMISSION NOR ANY OTHER REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
<PAGE>
[ALTERNATE PAGE 7]
City. In addition, the New Jersey Casino Redevelopment Authority ("CRDA") is
currently overseeing the development of a new convention center. When
completed, the approximately $250 million convention center will be the largest
exhibition space between New York City and Washington, D.C. The new convention
center, currently scheduled to open in January 1997, will be located at the
base of the Atlantic City Expressway. Trump Plaza is adjacent to the existing
Atlantic City Convention Center and will also be one of the closest casino
hotels to the new convention center, which as currently planned would hold
approximately 500,000 square feet of exhibit and pre-function space, 45 meeting
rooms, food-service facilities and a 1,600-car underground parking garage. An
additional planned infrastructure improvement is the State of New Jersey's
approximately $125 million capital plan to upgrade and expand the Atlantic City
International Airport. The Company believes that, as leading Atlantic City
attractions, the Atlantic City Properties will attract a large portion of any
increase in the number of potential casino hotel patrons.
THE INDIANA RIVERBOAT
The Indiana Riverboat, currently scheduled to open for business in the second
quarter of 1996, will feature an approximately 288-foot luxury yacht with
approximately 37,000 square feet of gaming space with 1,500 slot machines, 73
table games and capacity for approximately 2,450 passengers and 300 employees
and will be one of the largest riverboat casinos in the United States. Trump
Indiana is one of 11 riverboat gaming projects permitted under current Indiana
law and one of only five to be located in northern Indiana.
The Indiana Riverboat's principal market will be the approximately 6.8
million people residing within 50 miles of Buffington Harbor in the greater
Chicago metropolitan area. Approximately 11.2 million and 24.2 million people
live within a 100- and 200-mile radius of Buffington Harbor, respectively,
encompassing portions of the states of Indiana, Illinois, Michigan, Ohio and
Wisconsin (the "Great Lakes Market"). Through the use of the "Trump" name and
systematic marketing programs, the Company will seek to attract drive-in
customers to the Indiana Riverboat. Casinos currently operating in the Great
Lakes Market have generally been very successful, achieving operating results
exceeding those of most new jurisdictional markets. The Company believes that
these operating results indicate that the Great Lakes Market should be capable
of absorbing significant capacity expansion in the future. Under current
regulations in Indiana, most games typically available in Atlantic City casinos
will be permitted on the Indiana Riverboat. 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.
THE STOCK OFFERING
<TABLE>
<C> <S>
Common Stock Offered.................. 500,000 shares
Common Stock to be outstanding after
the Merger Transaction............... 23,066,667 shares(/1/)
New York Stock Exchange Symbol........ DJT
</TABLE>
- --------------------
(1) Does not include (i) 6,666,836 shares of Common Stock (subject to certain
adjustments) issuable to Trump upon conversion of his limited partnership
interest in THCR Holdings; (ii) 1,687,331 shares of Common Stock (subject
to certain adjustments) issuable to Trump Taj Mahal, Inc. ("TTMI"), a
corporation wholly owned by Trump, upon conversion of its limited
partnership interests in THCR Holdings; (iii) 133,333 shares of Common
Stock issuable upon exercise of options granted to the Chief Executive
Officer of the Company pursuant to the 1995 Stock Plan; (iv) a phantom
stock unit award (representing the right to receive 66,666 shares of Common
Stock on June 12, 1997) granted to the Chief Executive Officer of the
Company pursuant to the 1995 Stock Plan; (v) 733,334 additional shares
reserved for issuance pursuant to the 1995 Stock Incentive Plan; (vi)
1,800,000 shares of Common Stock underlying the warrant to be issued to
Trump in connection with the Merger Transaction (a) 600,000 shares of which
may be purchased on or before the third anniversary of the issuance of the
warrant at $30.00 per share, (b) 600,000 shares of which may be purchased
on or before the fourth anniversary of the issuance of the warrant at
$35.00 per share, and (c) 600,000 shares of which may be purchased on or
before the fifth anniversary of the issuance of the warrant at $40.00 per
share; or (vii) any shares of Common Stock which may be issued in the
Merger. Also excludes shares of Class B Stock of the Company held and to be
held by Trump and TTMI which represent non-economic voting interest in the
Company. Assumes a Market Value (as defined) of $24.00 per share of Common
Stock in the Merger and as the public offering price in the Stock Offering.
In the event that shares of Common Stock are issued in the Merger, the
Company may reduce the size of the Stock Offering.
7
<PAGE>
[ALTERNATE PAGE 8]
THE MORTGAGE NOTE OFFERING
(Offered by Trump AC and Trump AC Funding exclusively pursuant to a separate
prospectus.)
Concurrently with and as a condition to consummation of the Stock Offering
and the Underwritten Offering, Trump AC and Trump AC Funding will issue $1.1
billion of Mortgage Notes pursuant to the Mortgage Note Offering. Trump AC
Funding, a Delaware corporation, was recently formed for the sole purpose of,
and will engage in no activities or business other than in connection with, the
issuance of the Mortgage Notes. Certain terms of the Mortgage Notes are
described under "Business--Certain Indebtedness."
The Mortgage Note Offering, the Stock Offering and the Underwritten Offering
(collectively, the "Offerings") are part of the comprehensive plan relating to
the Merger of a subsidiary of the company with and into Taj Mahal Holding Corp.
("Taj Holding"), which currently beneficially owns a 50% equity interest in Taj
Associates; the contribution by the Company to Trump AC (on behalf, and at the
direction, of THCR Holdings) of all of its direct and indirect ownership
interests in Taj Associates acquired in the Merger; the contribution by Trump
of the remaining 50% equity interest in Taj Associates to Trump AC (on behalf,
and at the direction, of THCR Holdings); and the refinancing of substantially
all of the outstanding indebtedness of Taj Associates and Plaza Associates.
The consummation of the Stock Offering and the Underwritten Offering are
conditioned upon the consummation of each transaction contemplated by the
Merger Transaction, including the Senior Note Consent Solicitation (as
defined), the Plaza Note Consent Solicitation (as defined), the Plaza Note
Purchase (as defined) and the Mortgage Note Offering.
RISK FACTORS
Prospective investors should carefully evaluate the matters set forth herein,
including those under the heading "Risk Factors." Factors to be considered
include:
. the high leverage and fixed charges of the Company
. the Company's holding company structure and the likelihood that dividends
will not be paid for the foreseeable future
. the risk in refinancing and repayment of indebtedness, and the need for
additional financing
. the restrictions on certain activities imposed by certain debt
instruments
. the historical results of Trump Plaza and the Taj Mahal, including past
net losses
. conflicts of interest
. control by and the involvement of Trump
. risks associated with the Trump Plaza Expansion and the Taj Mahal
Expansion
. risks relating to the Indiana Riverboat
. competition in the gaming industry
. reliance on certain key personnel
. the strict regulation by gaming authorities, including the potential
disqualification of holders of Common Stock
. considerations with respect to the acquisition and development of
additional gaming ventures
. limitations on the Company's license of the "Trump" name
. fraudulent transfer considerations
. the shares of Common Stock eligible for future sale
. the trading markets and potential volatility of the market price of the
shares of Common Stock.
8
<PAGE>
[ALTERNATE PAGE 9]
USE OF PROCEEDS
The Company will not receive any cash proceeds from the sale of the 500,000
shares of Common Stock offered hereby. Such shares are being issued directly to
First Fidelity in connection with the satisfaction of the First Fidelity Loan
(as defined). The proceeds from the Underwritten Offering, together with the
proceeds from the Mortgage Note Offering, and available cash, will be used as
set forth below to:
(i) pay cash to those holders of Class A Common Stock, par value $.01 per
share, of Taj Holding (the "Taj Holding Class A Common Stock") electing to
receive cash in the Merger;
(ii) redeem the outstanding 11.35% Mortgage Bonds, Series A, due 1999
(the "Taj Bonds") of Trump Taj Mahal Funding, Inc.'s ("Taj Funding") (the
"Taj Bond Redemption"), at a redemption price equal to 100% of the
principal amount thereof, plus accrued interest to the date of redemption;
(iii) redeem the outstanding shares of the Class B Common Stock, par
value $.01 per share, of Taj Holding (the "Taj Holding Class B Common
Stock"), as required in connection with the Taj Bond Redemption at the
redemption price of $.50 per share;
(iv) retire the outstanding 10 7/8% Mortgage Notes due 2001 (the "Plaza
Notes") of Trump Plaza Funding, Inc. ("Plaza Funding"), (the "Plaza Note
Purchase");
(v) satisfy the indebtedness of Taj Associates under a loan agreement
with National Westminster Bank USA ("NatWest") (the "NatWest Loan");
(vi) purchase certain real property used in the operation of the Taj
Mahal that is currently leased from a corporation wholly owned by Trump and
satisfy certain related indebtedness owed to First Fidelity Bank, National
Association (now known as First Union National Bank) ("First Fidelity")
(the "First Fidelity Loan");
(vii) purchase Trump Plaza East pursuant to the purchase option (the
"Trump Plaza East Purchase Option") held by Trump Plaza Associates ("Plaza
Associates"), the owner and operator of Trump Plaza;
(viii) pay Bankers Trust Company ("Bankers Trust") $10 million to obtain
releases of liens and guarantees that Bankers Trust has in connection with
certain outstanding indebtedness owed by Trump to Bankers Trust (the "Trump
Indebtedness"); and
(ix) pay related fees and expenses and provide for working capital.
9
<PAGE>
[ALTERNATE PAGE 39]
USE OF PROCEEDS
The Company will not receive any cash proceeds from the sale of the 500,000
shares of Common Stock offered hereby. Such shares are being issued directly
to First Fidelity in connection with the satisfaction of the First Fidelity
Loan. The net proceeds to the Company from the Underwritten Offering, after
payment of underwriting discounts and expenses, are estimated to be $
million ($ million if the Underwriters' over-allotment option is exercised
in full). In connection with the Merger Transaction, the proceeds from the
Underwritten Offering, together with the proceeds from the Mortgage Note
Offering and available cash, will be used as set forth below.
The following table sets forth the anticipated sources and uses of funds for
the Merger Transaction (assuming an April 15, 1996 consummation):
(DOLLARS IN MILLIONS)
ANTICIPATED SOURCES OF FUNDS
<TABLE>
<CAPTION>
CASH SOURCES
<S> <C>
Underwritten
Offering(a)(b)............. $ 300.0
Mortgage Note Offering...... 1,100.0
Available Cash.............. 9.8
--------
Total Cash Sources......... 1,409.8
--------
</TABLE>
ANTICIPATED USES OF FUNDS
<TABLE>
<CAPTION>
CASH USES
<S> <C>
Redeem Taj Bonds(c)........... $ 794.4
Retire Plaza Notes............ 370.0
Satisfy NatWest Loan.......... 36.5
Exercise Trump Plaza East
Purchase Option.............. 28.0
Financing Fees and Expenses... 49.4
Payment to First Fidelity..... 50.0
Payment to Bankers Trust...... 10.0
Acquisition of Taj Holding
Class A Common Stock(a)...... 40.5
Redeem Taj Holding Class B
Common Stock................. 0.4
Transaction Fees and Expenses
and
Working Capital ............. 30.6
--------
Total Cash Uses.............. 1,409.8
--------
</TABLE>
<TABLE>
<CAPTION>
NON-CASH SOURCES
<S> <C>
Common Stock Equivalents to be issued to Trump(d).. 40.5
Common Stock to be issued to
First Fidelity(b).............. 12.0
--------
Total Non-Cash Sources......... 52.5
--------
TOTAL SOURCES................... $1,462.3
========
</TABLE>
<TABLE>
<S> <C>
NON-CASH USES
Acquisition of Trump's direct
and indirect equity interests
in Taj Associates............. 40.5
Common Stock issued to First
Fidelity(b)................... 12.0
--------
Total Non-Cash Uses........... 52.5
--------
TOTAL USES..................... $1,462.3
========
</TABLE>
- ---------------------
(a) Assumes all holders of Taj Holding Class A Common Stock elect Cash
Consideration in the Merger. In the event that any holder of Taj Holding
Class A Common Stock elects Stock Consideration in lieu of Cash
Consideration, the Company may decrease the size of the Stock Offering.
(b) Assumes a price of $24.00 per share of Common Stock.
(c) Includes the Additional Amount (as defined) through April 15, 1996. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(d) Represents the value as of the effective time of the Merger of the shares
of Common Stock into which the limited partnership interests in THCR
Holdings to be issued to Trump and TTMI, a corporation wholly owned by
Trump, in connection with the Merger Transaction will be convertible.
39
<PAGE>
[ALTERNATE PAGE 140]
PLAN OF DISTRIBUTION
The shares of Common Stock offered in the Stock Offering will be sold by the
Company in a non-underwritten sale. Such shares are being issued directly to
First Fidelity in connection with the satisfaction of the First Fidelity Loan.
All expenses relating to the distribution of these shares will be borne by the
Company. There will be no underwriting discounts and commissions with respect
thereto.
140
<PAGE>
[ALTERNATE PAGE 141]
THIS PAGE INTENTIONALLY LEFT BLANK.
141
<PAGE>
[ALTERNATE BACK COVER PAGE]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE IN-
FORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 22
Use of Proceeds.......................................................... 39
Price Range of Common Stock.............................................. 40
Dividend Policy.......................................................... 40
Capitalization........................................................... 41
Selected Historical Consolidated Financial Information................... 42
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 45
Unaudited Pro Forma Financial Information................................ 56
Business................................................................. 62
Regulatory Matters....................................................... 95
Management............................................................... 108
Certain Transactions..................................................... 125
Security Ownership of Certain Beneficial Owners and Management........... 127
Description of Capital Stock............................................. 128
Description of the THCR Holdings Partnership Agreement................... 132
Shares Eligible for Future Sale.......................................... 137
Special Tax Considerations for Foreign Shareholders...................... 138
Plan of Distribution..................................................... 140
Legal Matters............................................................ 141
Experts.................................................................. 142
Available Information.................................................... 142
Index to Financial Statements............................................ F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
500,000 SHARES
TRUMP
HOTELS &
CASINO RESORTS
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
APRIL , 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, to be paid in connection with the sale
of the Common Stock being registered, all of which will be paid by THCR
Holdings. All amounts are estimates except the registration fee, the NASD
filing fee and the NYSE listing fee.
<TABLE>
<S> <C>
Registration Fee................................................. $ 171,191
NASD Filing Fee.................................................. 30,500
Blue Sky Fees and Expenses....................................... 54,500
New York Stock Exchange Listing Fee.............................. 52,063
Accounting Fees and Expenses..................................... 400,000
Legal Fees and Expenses.......................................... 1,900,000
Printing and Engraving Fees and Expense.......................... 266,000
Miscellaneous.................................................... 150,000
----------
Total.......................................................... $3,024,253
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides
that a corporation may indemnify directors and officers against liabilities
and expenses they may incur in such capacities provided certain standards are
met, including good faith and the belief that the particular action is in or
not opposed to the best interests of the corporation.
Article IX of Certificate of Incorporation provides that the Company 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 the Company) by reason of the fact
that he is or was a director, officer, incorporator, employee or agent of the
Company, or is or was serving at the request of the Company 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 the
Company, 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 the
Company, 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 the Company) or may (in the case of any action, suit or proceeding
against an officer, trustee, employee or agent) be paid by the Company 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 the Company as
authorized in Article IX.
No director or officer shall be personally liable to the Company 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
II-1
<PAGE>
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 the Company 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 the
Company shall be eliminated or limited to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as so amended.
Each of the Executive Agreement between Trump and the Company and the Ribis
Revised Plaza Agreement among Mr. Ribis, the Company and THCR Holdings,
provides for the indemnification of such respective executive officer in
connection with any claims made against the executive officer involving the
performance of his duties, unless the claim is result of the gross negligence,
willful conduct or bad faith of the executive officer.
Pursuant to the Merger Agreement, for a period of six years after the
Effective Time, each of Taj Holding, as the Surviving Corporation of the
Merger, and TM/GP will, and the Company will cause each of Taj Holding, as the
Surviving Corporation of the Merger, and TM/GP to, provide to the former
officers and directors of Taj Holding (the "Taj Holding Indemnified Parties")
indemnification as provided in the Certificate of Incorporation and By-Laws in
effect as of the date of the Merger Agreement. In addition, the Company has
agreed, and has agreed to cause Taj Holding, as the Surviving Corporation of
the Merger, 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 of the Merger 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 Taj Holding, as 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,
Taj Holding, as the Surviving Corporation of the Merger, and TM/GP shall, and
the Company shall cause Taj Holding, as the Surviving Corporation of the
Merger, 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, Taj
Holding, as the Surviving Corporation of the Merger, 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.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation and capitalization of the Company, on March
29, 1995, the Company sold to Donald J. Trump 100 shares of its Common Stock
for $300.00. In connection with the June 1995 public offering of its Common
Stock, on June 6, 1995, the Company issued to Donald J. Trump 1,000 shares of
its Class B Common Stock in exchange for Mr. Trump's contribution to THCR
Holdings.
On June 12, 1995, the Company issued to Nicholas L. Ribis, under its 1995
Stock Incentive Plan, (a) a stock bonus award of 66,667 shares of its Common
Stock, (b) a phantom stock unit award of 66,666 units, entitling Mr. Ribis to
receive 66,666 shares of its Common Stock and (c) an award of nonqualified
stock options entitling Mr. Ribis to purchase 133,333 shares of its Common
Stock. The options have an exercise price of $14.00 per share.
II-2
<PAGE>
The foregoing sales were exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement among Trump Hotels & Casino
Resorts, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, BT Securities Corporation, Salomon Brothers Inc and
Sands Brothers & Co., Ltd.
2.1(13) Agreement and Plan of Merger, dated January 8, 1996, between
Trump Hotels & Casino Resorts, Inc., Taj Mahal Holding Corp. and
THCR Merger Corp.
2.1.1(14) Amendment to Agreement and Plan of Merger, dated January 31,
1996, by and among Trump Hotels & Casino Resorts, Inc., Taj
Mahal Holding Corp. and THCR Merger Corp.
3.1(12) Amended and Restated Certificate of Incorporation of Trump
Hotels & Casino Resorts, Inc.
3.2(12) Amended and Restated By-Laws of Trump Hotels & Casino Resorts,
Inc.
4.1(7) Mortgage Note Indenture, among Trump Plaza Funding, Inc., as
issuer, Trump Plaza Associates, as guarantor, and First Bank
National Association, as trustee.
4.2(7) Indenture of Mortgage, between Trump Plaza Associates, as
mortgagor, and Trump Plaza Funding, Inc., as mortgagee.
4.3(7) Assignment Agreement between Trump Plaza Funding, Inc., and
First Bank National Association, as trustee.
4.4(7) Assignment of Operating Assets from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.5(7) Assignment of Leases and Rents from Trump Plaza Associates to
Trump Plaza Funding, Inc.
4.6(7) Indenture of Mortgage between Trump Plaza Associates and First
Bank National Association, as trustee.
4.7(7) Assignment of Leases and Rents from Trump Plaza Associates to
First Bank National Association, as trustee.
4.8(7) Assignment of Operating Assets from Trump Plaza Associates to
First Bank National Association, as trustee.
4.9(7) Trump Plaza Associates Note to Trump Plaza Funding, Inc.
4.10(7) Mortgage Note Certificate (included in Exhibit 4.1).
4.11(7) Pledge Agreement of Trump Plaza Funding, Inc., in favor and for
the benefit of First Bank National Association, as trustee.
4.12-4.16 Intentionally omitted.
4.17(12) Senior Secured Note Indenture between Trump Hotels & Casino
Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers, and First Bank National Association,
as trustee.
4.18(12) Senior Secured Note Certificate (included in Exhibit 4.17).
4.19.1(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as collateral agent, on behalf of First Bank
National Association in its respective capacities as trustees.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
4.19.2(12) Pledge Agreement, dated June 12, 1995, from Trump Hotels &
Casino Resorts Holdings, L.P., as pledgor to First Bank National
Association as trustee.
4.19.3(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding
Associates, as pledgor to First Bank National Association as
collateral agent, on behalf of First Bank National Association
in its respective capacities as trustees.
4.19.4(12) Pledge Agreement, dated June 12, 1995, from Trump Plaza Holding,
Inc. as pledgor to First Bank National Association as collateral
agent, on behalf of First Bank National Association in its
respective capacities as trustees.
4.20 Intentionally omitted.
4.21-4.23 Intentionally omitted.
4.24(12) Cash Collateral and Disbursement Agreement, dated June 12, 1995,
among First Bank National Association, as disbursement agent,
First Bank National Association, as trustee, and Trump Hotels &
Casino Resorts Holdings, L.P. and Trump Hotels & Casino Resorts
Funding, Inc., as issuers.
4.25(11) Certificate of Common Stock of Trump Hotels & Casino Resorts,
Inc.
4.26(16) Form of Indenture among Trump Atlantic City Associates and Trump
Atlantic City Funding, Inc., as issuers, Trump Plaza Associates,
Trump Taj Mahal Associates and The Trump Taj Mahal Corporation,
as guarantors, Trump Taj Mahal Funding, Inc., and First Bank
National Association, as trustee.
4.27(16) Form of First Mortgage Note Certificate (included in exhibit
4.26).
4.28(16) Form of Indenture of Mortgage and Security Agreement among Trump
Atlantic City Associates, Trump Atlantic City Funding, Inc.,
Trump Plaza Associates, Trump Taj Mahal Associates and The Trump
Taj Mahal Corporation, and First Bank National Association, as
trustee.
4.29(16) Form of Assignment of Leases and Rents among Trump Atlantic City
Funding, Inc., Trump Atlantic City Associates, Trump Plaza
Associates, Trump Taj Mahal Associates and The Trump Taj Mahal
Corporation, and First Bank National Association, as collateral
agent.
4.30(16) Form of Collateral Agency Agreement among First Bank National
Association, as collateral agent; First Bank National
Association, as trustee; Trump Atlantic City Associates; Trump
Atlantic City Funding, Inc.; the other secured parties signatory
thereto; and the guarantors under the First Mortgage Note
Indenture.
5.1* Opinion of Willkie Farr & Gallagher.
10.1-10.7 Intentionally omitted.
10.8-10.9 Intentionally omitted.
10.10(3) Agreement of Lease, dated as of July 1, 1980, by and between SSG
Enterprises, as lessor and Atlantic City Seashore 2, Inc., as
lessee, as SSG Enterprises' interest has been assigned to
Seashore Four Associates, and as Atlantic City Seashore 2,
Inc.'s interest has been, through various assignments, assigned
to Trump Plaza Associates (with schedules).
10.11(3) Agreement of Lease, dated July 11, 1980, by and between Plaza
Hotel Management Company, as lessor, and Atlantic City Seashore
3, Inc., as lessee, as Atlantic City Seashore 3, Inc.'s interest
has been, through various assignments, assigned to Trump Plaza
Associates (with schedules).
10.12(3) Agreement of Lease, dated as of July 1, 1980, by and between
Magnum Associates and Magnum Associates II, as lessor and
Atlantic City Seashore 1, Inc., as lessee, as Atlantic City
Seashore 1, Inc.'s interest has been, through various
assignments, assigned to Trump Plaza Associates (with
schedules).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.13-10.15 Intentionally omitted.
10.16(1) Trump Plaza Hotel and Casino Retirement Savings Plan effective
as of November 1, 1986.
10.17-10.20 Intentionally omitted.
10.21(4) Assignment of Lease, dated as of July 28, 1988, by and between
Magnum Associates and Magnum Associates II, as assignor, Trump
Seashore Associates, as assignee, and Trump Plaza Associates, as
lessee.
10.22-10.27 Intentionally omitted.
10.28(2) Option Agreement, dated as of February 2, 1993, between Donald
J. Trump and Trump Plaza Associates.
10.29 Intentionally omitted.
10.30(5) Amended and Restated Services Agreement between Trump Plaza
Associates and Trump Plaza Management Corp.
10.31-10.32 Intentionally omitted.
10.33(6) Mortgage from Donald J. Trump, as nominee, to Albert Rothenberg
and Robert Rothenberg, dated October 3, 1983.
10.34(6) Intentionally omitted.
10.35(6) Mortgage from Trump Plaza Associates to The Mutual Benefit Life
Insurance Company, dated October 5, 1990.
10.35.1(6) Collateral Assignment of Leases from Trump Plaza Associates to
The Mutual Benefit Life Insurance Company, dated October 5,
1990.
10.36-10.37 Intentionally omitted.
10.38(8) Employment Agreement between Trump Plaza Associates and Nicholas
L. Ribis.
10.38.1(12) Employment Agreement between Trump Hotels & Casino Resorts
Holdings, L.P. and Nicholas L. Ribis (with exhibits).
10.39(8) Severance Agreement between Trump Plaza Associates and Robert M.
Pickus.
10.39.1(15) Employment Agreement, dated July 7, 1995, between Trump Hotels &
Casino Resorts Holdings, L.P. and Robert M. Pickus.
10.40-10.41 Intentionally omitted.
10.42(10) Option and Right of First Offer Agreement between Trump Plaza
Associates and Missouri Boardwalk Inc., dated June 24, 1993.
10.43(10) Lease between Donald J. Trump and Missouri Boardwalk Inc., dated
June 24, 1993.
10.44(10) Sublease between Donald J. Trump and Missouri Boardwalk Inc.,
dated June 24, 1993.
10.45 Intentionally omitted.
10.46(12) Executive Agreement among Donald J. Trump, Trump Hotels & Casino
Resorts, Inc. and Trump Hotels & Casino Resorts Holdings, L.P.
10.47(12) 1995 Stock Incentive Plan of Trump Hotels & Casino Resorts, Inc.
10.48(11) Sales and Construction Agreement, dated May 1, 1995, between
Trump Indiana, Inc. and Atlantic Marine, Inc.
10.49(11) Agreement of Sale, dated May 10, 1995, between Trump Indiana,
Inc. and Lehigh Portland Cement Company.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
10.50(11) Acquisition Agreement, dated April 27, 1995, between Trump
Oceanview, Inc. and The New Jersey Sports and Exposition
Authority.
10.51(11) Amended and Restated Partnership Agreement of Trump Hotels &
Casino Resorts Holdings, L.P.
10.51.1(16) Form of Second Amended and Restated Partnership Agreement of
Trump Hotels & Casino Resorts Holdings, L.P.
10.52(12) Exchange and Registration Rights Agreement, dated June 12, 1995,
between Trump Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.52.1 Form of Amended and Restated Exchange and Registration Rights
Agreement among Trump Hotels & Casino Resorts, Inc., Donald J.
Trump and Trump Taj Mahal, Inc.
10.53(12) Contribution Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts Holdings, L.P. and Donald J. Trump.
10.53.1 Form of 1996 Contribution Agreement among Trump Hotels & Casino
Resorts Holdings, L.P., Donald J. Trump, TM/GP Corporation and
Trump Taj Mahal, Inc.
10.54(12) Trademark License Agreement, dated June 12, 1995, between Donald
J. Trump and Trump Hotels & Casino Resorts, Inc.
10.55(12) Trademark Security Agreement, dated June 12, 1995, between Trump
Hotels & Casino Resorts, Inc. and Donald J. Trump.
10.56(11) Agreement of Sublease between Donald J. Trump and Time Warner
Entertainment Company, L.P., as amended.
10.57 Intentionally omitted.
10.58(12) Promissory Note of Donald J. Trump in favor of Trump Hotels &
Casino Resorts Holdings, L.P.
10.59(15) 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(15) Form of Loan and Security Agreement, by and between debis
Financial Services, Inc. and Trump Indiana, Inc., dated August
30, 1995.
10.61(15) Voting Agreement between Donald J. Trump and Trump Hotels &
Casino Resorts, Inc., dated January 8, 1996.
10.62 Form of Warrant of Trump Hotels & Casino Resorts, Inc. to be
issued to
Donald J. Trump.
12 Statement re Computation of Ratio of Earnings to Fixed Charges
21 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.
23.1 Consent of Arthur Andersen LLP.
23.2 Intentionally omitted.
23.3* Consent of Willkie Farr & Gallagher.
23.4* Consent of Sterns & Weinroth.
23.5* Consent of Tabbert Hahn & Zanetis, P.C.
24.1* Power of Attorney.
</TABLE>
II-6
<PAGE>
- ---------------------
*Previously filed.
(1) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1986.
(2) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the year
ended December 31, 1992.
(3) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-4604, of Trump
Plaza Funding, Inc.
(4) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. for the fiscal
year ended December 31, 1990.
(5) Previously filed in the Registration Statement on Form S-1, Registration
No. 33-58608, of Trump Atlantic City Associates (formerly Trump Plaza
Holding Associates).
(6) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58602, of
Trump Plaza Funding, Inc. and Trump Plaza Associates.
(7) Incorporated herein by reference to the identically numbered Exhibit in
the Registration Statement on Form S-1, Registration No. 33-58608, of
Trump Atlantic City Associates (formerly Trump Plaza Holding Associates).
(8) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Atlantic City Associates (formerly Trump Plaza Holding Associates) for the
year ended December 31, 1993.
(9) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 1O-Q of Trump Plaza Funding, Inc. for the
quarter ended September 30, 1994.
(10) Incorporated herein by reference to the identically numbered Exhibit in
the Annual Report on Form 10-K of Trump Plaza Funding, Inc. and Trump
Atlantic City Associates (formerly Trump Plaza Holding Associates) for
the year ended December 31, 1994.
(11) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-1, Registration No. 33-90784, of
Trump Hotels & Casino Resorts, Inc.
(12) Incorporated herein by reference to the identically numbered Exhibit in
the Quarterly Report on Form 10-Q of Trump Hotels & Casino Resorts, Inc.,
Trump Hotels & Casino Resorts Holdings, L.P. and Trump Hotels & Casino
Resorts Funding, Inc. for the quarter ended June 30, 1995.
(13) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated January 10, 1996.
(14) Incorporated herein by reference to the identically numbered Exhibit on
the Current Report on Form 8-K of Trump Hotels & Casino Resorts, Inc.,
dated February 1, 1996.
(15) Incorporated herein by reference to the identically numbered Exhibit to
the Registration Statement on Form S-4, Registration No. 333-153, of
Trump Hotels & Casino Resorts, Inc.
(16) Incorporated herein by reference to the same document filed as an Exhibit
to the Registration Statement on Form S-1, Registration No. 333-643, of
Trump Atlantic City Associates, Trump Atlantic City Funding, Inc. and
Trump Plaza Associates.
(B) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II--Valuation and Qualifying Accounts of Trump Hotels & Casino
Resorts, Inc. for the period from inception (June 12, 1995) to
December 31, 1995.
SCHEDULE II--Valuation and Qualifying Accounts of Trump Atlantic City
Associates and Trump Plaza Associates for the years ended
December 31, 1993, 1994 and 1995.
SCHEDULE II--Valuation and Qualifying Accounts of Trump Taj Mahal
Associates and Trump Taj Mahal Funding, Inc. for the years
ended December 31, 1993, 1994 and 1995.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Hotels & Casino Resorts, Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Hotels & Casino Resorts, Inc. ("THCR")
included in this registration statement and have issued our report thereon
dated February 21, 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 THCR's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic 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 21, 1996
S-1
<PAGE>
SCHEDULE II
TRUMP HOTELS & CASINO RESORTS, INC.
VALUATION AND QUALIFYING ACCOUNTS FOR THE PERIOD FROM INCEPTION (JUNE 12, 1995)
TO
DECEMBER 31, 1995
<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>
PERIOD FROM INCEPTION (JUNE 12,
1995) TO DECEMBER 31, 1995
Allowances for doubtful
accounts...................... $8,490,000 $559,000 $ (972,000) $8,077,000
========== ======== =========== ==========
Valuation allowance for
interest differential on CRDA
bonds......................... $2,144,000 $670,000 $(1,737,000) $1,077,000
========== ======== =========== ==========
</TABLE>
S-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump Atlantic City Associates and Trump Plaza Associates:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Trump Atlantic City Associates and Trump Plaza
Associates (Partnerships) included in this registration statement and have
issued our report thereon dated February 21, 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 21, 1996
S-3
<PAGE>
SCHEDULE II
TRUMP ATLANTIC CITY ASSOCIATES AND TRUMP PLAZA ASSOCIATES VALUATION AND
QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND FOR THE
PERIOD FROM JANUARY 1, 1995 THROUGH JUNE 12, 1995
<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, 1993
Allowances for doubtful
accounts................. $14,402,000 $ 90,000 $(3,876,000)(A) $10,616,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 1,934,000 $1,047,000 -- $ 2,981,000
=========== ========== =========== ===========
YEAR ENDED DECEMBER 31, 1994
Allowances for doubtful
accounts................. $10,616,000 $ 323,000 $(2,446,000)(A) $ 8,493,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,981,000 $ 838,000 $(1,645,000)(B) $ 2,174,000
=========== ========== =========== ===========
FOR THE PERIOD FROM JANUARY
1, 1995 THROUGH JUNE 12,
1995
Allowances for doubtful
accounts................. $ 8,493,000 $ 498,000 $ (501,000)(A) $ 8,490,000
=========== ========== =========== ===========
Valuation allowance for
interest differential on
CRDA bonds............... $ 2,174,000 $ 471,000 $ (501,000)(B) $ 2,144,000
=========== ========== =========== ===========
</TABLE>
- ---------------------
(A) Write-off of uncollectible accounts.
(B) Adjustment of allowance applicable to contribution of CRDA deposits.
S-4
<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 February 16, 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
February 16, 1996
S-5
<PAGE>
TRUMP TAJ MAHAL ASSOCIATES AND TRUMP TAJ MAHAL FUNDING, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(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, 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
======= ====== ==== ====== =======
December 31, 1995:
Allowance for doubtful
receivables............ $ 4,059 $4,508 $-- $3,525(B) $ 5,042
Valuation allowance for
CRDA investments (A)... 4,514 3,090 -- -- 7,604
------- ------ ---- ------ -------
$ 8,573 $7,598 $-- $3,525 $12,646
======= ====== ==== ====== =======
</TABLE>
- ---------------------
(A) See Note 5 to financial statements.
(B) Uncollectible accounts written off, net of recoveries.
S-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement among Trump Hotels & Casino
Resorts, Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, BT Securities Corporation, Salomon Brothers Inc and
Sands Brothers & Co., Ltd.
10.52.1 Form of Amended and Restated Exchange and Registration Rights
Agreement among Trump Hotels & Casino Resorts, Inc., Donald J.
Trump and Trump Taj Mahal, Inc.
10.53.1 Form of 1996 Contribution Agreement among Trump Hotels & Casino
Resorts Holdings, L.P., Donald J. Trump, TM/GP Corporation and
Trump Taj Mahal, Inc.
10.62 Form of Warrant of Trump Hotels & Casino Resorts, Inc. to be
issued to Donald J. Trump.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
21 List of Subsidiaries of Trump Hotels & Casino Resorts, Inc.
23.1 Consent of Arthur Andersen LLP.
</TABLE>
<PAGE>
Exhibit 1.1
Trump Hotels & Casino Resorts, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
April , 1996
--
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
SANDS BROTHERS & CO., LTD.
As Representatives of the several
Underwriters listed on Schedule I
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Subject to the terms and conditions herein contained, Trump Hotels
& Casino Resorts, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
Salomon Brothers Inc, BT Securities Corporation, Sands Brothers & Co., Ltd.
(collectively, the "Representatives") and the several underwriters listed on
Schedule I hereto (collectively with the Representatives, the "Underwriters")
12,500,000 shares of its Common Stock, par value $.01 per share (the "Firm
Shares"). The Company also proposes to sell to the Underwriters up to an
additional 1,875,000 shares of Common Stock (the "Additional Shares" and,
together with the Firm Shares, the "Shares"), if requested by the Underwriters
as provided in Sections 2 and 3 hereof.
Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Prospectus (as hereinafter defined). Unless
the context otherwise requires, all references herein to "the Company" shall be
deemed to give effect to the acquisition by the Company or its subsidiaries
(collectively, the "Subsidiaries"), as applicable, of all of the direct and
indirect equity interests in
<PAGE>
Trump Taj Mahal Associates ("Taj Associates") pursuant to the Merger Agreement
and the Contribution Agreement dated April [11], 1996 between Trump, TTMI,
TM/GP and THCR Holdings (the "1996 Contribution Agreement"), at or prior to
consummation of the issuance of the Shares. All references herein to
"Subsidiaries" or "the Subsidiaries" shall be deemed to include Taj Associates,
TTMI, Trump Taj Mahal Corporation, Taj Funding and TM/GP, Inc. unless the
context otherwise requires. Concurrently with the issuance of the Shares,
Trump Atlantic City Associates ("TAC") and Trump Atlantic City Funding, Inc.
("Funding" and, together with TAC, the "Debt Issuers") are proposing to issue,
under an Indenture among the Debt Issuers and First Bank National Association,
as Trustee (the "Indenture"), and to sell to certain underwriters pursuant to
an underwriting agreement, to be dated as of the date hereof (the "Debt
Underwriting Agreement"), by and among the Debt Issuers, the guarantors
referred to therein and the underwriters listed on Schedule I thereto, an
aggregate of $1,100,000,000 principal amount of % First Mortgage Notes
---
due 2006 (the "Notes").
1. Registration Statement and Prospectus. The Company has
-------------------------------------
prepared and filed with the Securities and Exchange Commission (the
"Commission"), in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission promulgated
pursuant thereto (collectively, the "Act"), a registration statement on Form
S-1 (No. 333-639) with respect to the Shares, including a preliminary
prospectus, subject to completion, relating to the Shares. The registration
statement, as amended at the time it becomes effective (including a
registration statement (if any) filed pursuant to Rule 462(b) under the Act,
all financial statements and exhibits and the information, if any, contained in
a prospectus that is deemed to be a part of the registration statement at the
time of its effectiveness pursuant to Rule 430A or Rule 434 under the Act), is
hereinafter referred to as the "Registration Statement", and the prospectus
constituting a part of the Registration Statement, in the form first furnished
to the Underwriters and used to confirm sales of the Shares and including all
documents incorporated or deemed to be incorporated by reference therein, if
any, is hereinafter referred to as the "Prospectus."
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to the
terms and conditions contained in this Agreement, the Company agrees to issue
and sell to the Underwriters, and each Underwriter agrees, severally and not
jointly, to purchase from the Company the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto, plus such number,
if any, as they may individually become obligated to purchase pursuant to
Section 9 hereof at the price per share set forth in the table on the cover
page of the Prospectus under the heading "Proceeds to the Company" (the
"Purchase Price").
2
<PAGE>
On the basis of the representations and warranties contained in
this Agreement, and subject to its terms and conditions, the Company agrees to
issue and sell to the Underwriters, and the Underwriters shall have a right to
purchase, severally and not jointly, up to 1,875,000 Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased, as provided
in Section 3 hereof solely for the purpose of covering over-allotments made in
connection with the offering of the Firm Shares. If any Additional Shares are
to be purchased, each Underwriter, severally and not jointly, agrees to
purchase from the Company the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) which bears
the same proportion to the total number of Additional Shares to be purchased
from the Company as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I bears to the total number of Firm Shares.
The Company hereby agrees and, concurrently with the execution of
this Agreement, shall deliver an agreement executed by (i) each of the current
directors and officers of the Company and Taj Associates named in the
Prospectus, (ii) Trump Taj Mahal, Inc. ("TTMI"), and (iii) First Fidelity Bank,
National Association ("First Fidelity"), pursuant to which each such person
will agree, not to, directly or indirectly, offer, sell, contract to sell,
grant any warrant, right or option to purchase or sell or otherwise dispose of,
without the prior written consent of DLJ, any shares of Common Stock, or any
securities convertible into or exercisable or exchangeable for, or warrants,
options, or rights to purchase or acquire, Common Stock, or enter into any
agreement to do any of the foregoing, for a period of 180 days after the date
of the Prospectus, except in the case of First Fidelity, whose period shall be
30 days after the date of the Prospectus and shall exclude 75,000 shares of
Common Stock owned by such entity, except pursuant to this Agreement.
3. Delivery and Payment. Delivery to you of and payment for
--------------------
the Firm Shares shall be made at 10:00 A.M., New York City time, on the third
or fourth business day, unless otherwise permitted by the Commission pursuant
to Rule 15c6-1 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (such time and date being referred to as the "Closing Date")
following the date of the initial public offering of the Shares as advised by
DLJ to the Company, at the offices of Willkie Farr & Gallagher, 153 East 53rd
Street, New York, New York, 10022, or such other place as you shall reasonably
designate. The Closing Date and the location of delivery of and the form of
payment for the Firm Shares may be varied by agreement among DLJ and the
Company.
Delivery to the Underwriters of any payment for any Additional
Shares to be purchased by the Underwriters shall be made at such place as DLJ
shall designate, at 10:00 A.M., New York City time, on such date or dates
(each, an
3
<PAGE>
"Option Closing Date"), which may be the same as the Closing Date but shall in
no event be earlier than the Closing Date, as shall be specified in a written
notice from DLJ to the Company of the Underwriters' determination to purchase a
certain number, specified in said notice, of Additional Shares. Such notice
may be given at any time within 30 days after the date of this Agreement,
provided that no Option Closing Date shall be earlier than two business
- --------
days nor later than ten business days after such notice. Any Option Closing
Date and the location and delivery of any payment for any Additional Shares may
be varied by agreement between you and the Company.
Certificates for the Shares shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date, or, if applicable, each Option
Closing Date, and shall be made available to you at the offices of DLJ (or at
such other place as shall be acceptable to you) for inspection not later than
10:00 A.M., New York City time, no later than the business day next preceding
the Closing Date or, if applicable, such Option Closing Date. Certificates in
definitive form evidencing the Shares shall be delivered to you on the Closing
Date or, if applicable, such Option Closing Date, with any transfer taxes
payable upon initial issuance thereof duly paid by the Company, for your
respective accounts against payment of the Purchase Price by wire or similar
transfer of same-day funds to the order of the Company.
4. Agreements of the Company. The Company agrees with each
-------------------------
of you that:
(a) It will, if the Registration Statement has not heretofore
become effective under the Act, and, if necessary or required by law,
file an amendment to the Registration Statement or, if necessary pursuant
to Rule 430A under the Act, a post-effective amendment to the
Registration Statement, in each case as soon as practicable after the
execution and delivery of this Agreement, and will use its best efforts
to cause the Registration Statement or such post-effective amendment to
become effective at the earliest possible time. If the Registration
Statement has become effective and the Company, omitting from the
Prospectus certain information in reliance upon Rule 430A of the Act,
elects not to file a post-effective amendment pursuant to Rule 430A of
the Act, it will file the form of Prospectus required by Rule 424(b) of
the Act within the time period specified by Rule 430A and Rule 424(b) of
the Act. The Company will otherwise comply fully and in a timely manner
with the applicable provisions of Rule 424 and Rule 430A under the Act.
(b) It will advise you promptly and, if requested by any of you,
confirm such advice in writing, (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing pursuant
to
4
<PAGE>
Rule 424 under the Act and when any post-effective amendment to the
Registration Statement becomes effective, (ii) of the receipt of any
comments from the Commission or any state securities commission or any
other regulatory authority that relate to the Registration Statement or
requests by the Commission or any state securities commission or any
other regulatory authority for any amendment or supplements to the
Registration Statement or any amendment or supplement to the Prospectus
or for additional information, (iii) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement, or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by the Commission or any state securities commission or
other regulatory authority, and (iv) of the happening of any event during
the period referred to in paragraph (d) below which makes any statement
of a material fact made in the Registration Statement (as amended or
supplemented from time to time) untrue or which requires the making of
any additions to or changes in the Registration Statement (as amended or
supplemented from time to time) in order to make the statements therein
not misleading or that makes any statement of a material fact made in the
Prospectus (as amended or supplemented from time to time) untrue or which
requires the making of any addition to or change in the Prospectus (as
amended or supplemented from time to time) in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company shall use its best efforts to prevent
the issuance of any stop order or order suspending the qualification or
exemption of the Shares under any Federal or state securities or Blue Sky
laws, and, if at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of the Shares under any state
securities or Blue Sky laws, the Company shall use every reasonable
effort to obtain the withdrawal or lifting of such order at the earliest
possible time.
(c) Promptly after the Registration Statement becomes effective,
and from time to time thereafter for such period in your reasonable
judgment as a prospectus is required by the Act, the Exchange Act or any
state securities laws to be delivered in connection with sales of the
Shares by an Underwriter or a dealer, it will furnish to each Underwriter
and each dealer, without charge, as many copies of the Prospectus (and of
any amendment or supplement to the Prospectus) as such Underwriter or
dealer may reasonably request; provided, that the expense of any such
--------
delivery more than one year after the effective date of the Registration
Statement shall be borne by the Underwriter requesting to make such
delivery.
5
<PAGE>
(d) If during the period during which in your reasonable judgment
you are required to deliver a prospectus in connection with offers or
sales of Shares by you, any event shall occur as a result of which it
becomes necessary to amend or supplement the Prospectus in order to make
the statements therein, in the light of the circumstances existing as of
the date the Prospectus is delivered to an offeree or a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus
to comply with applicable law, it will promptly prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so
that the statements in the Prospectus, as so amended or supplemented,
will not, in the light of the circumstances existing as of the date the
Prospectus is so delivered, be misleading, and will comply with
applicable law and will promptly notify you of such event and amendment
or supplement and furnish to you without charge such number of copies
thereof as you may reasonably request.
(e) It will mail and make generally available to its security
holders as soon as practicable as specified by Rule 158 under the Act, a
consolidated earning statement which shall satisfy the provisions of
Section 11(a) of the Act and Rule 158 thereunder and advise you in
writing when such statement has been made available.
(f) It will furnish to each of the Underwriters, without charge,
two (2) signed copies (plus one additional signed copy to your legal
counsel) of the Registration Statement, as first filed with the
Commission, and of each amendment or supplement to it, including each
post-effective amendment and all exhibits filed therewith or incorporated
by reference therein, and will furnish to each of the Underwriters, such
number of conformed copies of the Registration Statement as so filed and
of each amendment to it, including each post-effective amendment, but
without exhibits, as you may reasonably request.
(g) It will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus, of
which you shall not previously have been advised and provided a copy of
within two business days prior to the filing thereof or to which you
shall reasonably object; and it will prepare and file with the
Commission, promptly upon your reasonable request, any amendment or
supplement to the Registration Statement or amendment or supplement to
the Prospectus which in your sole judgment may be necessary in connection
with the distribution of the Shares by you, and will use its best efforts
to cause the same to become effective as promptly as possible.
6
<PAGE>
(h) Prior to any public offering of the Shares, it will cooperate
with you and your counsel in connection with the registration or
qualification of the Shares for offer and sale by the Underwriters under
the state securities or Blue Sky laws of such jurisdictions as you may
request. The Company will continue such qualification in effect so long
as required by law for distribution of the Shares and will file such
consents to service of process or other documents as may be necessary in
order to effect such registration or qualification (provided, that
--------
the Company shall not be obligated to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified or to take any action
that would subject it to general consent to service of process in any
jurisdiction in which it is not now so subject).
(i) It will timely complete all required filings and otherwise
comply fully in a timely manner with all provisions of the Exchange Act
and will file all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Sections 13(a), 13(c), 14(a) or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the delivery
of a prospectus is required in connection with the offer or sale of
Shares.
(j) So long as any of the Shares are outstanding, it will
furnish to you, without charge, a copy of each report or other publicly
available information of the Company furnished to holders of the Shares
or filed with the Commission, whether or not required by law, and such
other publicly available information concerning the Company or the
Subsidiaries as you may reasonably request, at the same time as such
reports or other information are furnished to such holders.
(k) During the period beginning on the date of this Agreement and
continuing to and including the Closing Date and each Option Closing
Date, if applicable, except as described in the Prospectus with respect
to the Merger Transaction, there will be no transactions entered into by
the Company or any of the Subsidiaries, which are material with respect
to the Company or any of the Subsidiaries, taken individually or as a
whole, and there will be no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock
or other equity interests.
(l) It will use the proceeds from the sale of the Shares in the
manner described in the Prospectus under the caption "Use of Proceeds."
(m) It will cause Trump Indiana to use its best efforts to comply
with the conditions contained in the certificate of suitability (the
"Certificate of Suitability") issued to Trump Indiana by the Indiana
Gaming Commission
7
<PAGE>
(the "IGC"), to receive a riverboat owner's license from the IGC in a
timely manner and to comply with the terms and conditions of each.
(n) It will cause the Shares to be listed on the New York Stock
Exchange ("NYSE") and will use its best efforts to maintain such listing
while any of the Shares are outstanding.
(o) It will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to or
after the Closing Date and each Option Closing Date, if applicable, and
to satisfy all conditions precedent to the delivery of the Shares.
5. Payment of Expenses. The Company agrees with you that,
-------------------
whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated, it will pay and be responsible for all costs, charges,
liabilities, expenses, fees and taxes incurred in connection with or incident
to (i) the preparation, printing (including word processing), filing,
distribution and delivery under the Act of the Registration Statement
(including financial statements and exhibits), each preliminary prospectus, the
Prospectus and all amendments and supplements thereto, (ii) the registration
with the Commission and the issuance and delivery of the Shares, (iii) the
preparation, printing (including word processing), execution, distribution and
delivery of the documents listed on Schedule II to the Debt Underwriting
Agreement (the "Mortgage Documents"), this Agreement, the Indenture, the Notes,
the certificates representing the Shares, the [Amended License Agreement], the
[Amended Trademark Security Agreement], the 1996 Contribution Agreement, the
[Amended Trump Executive Agreement], the Second Amended and Restated Limited
Partnership Agreement of THCR Holdings, the Amended and Restated Partnership
Agreements of each of Plaza Associates, Taj Associates and Trump Atlantic City
Associates, the Amended and Restated Exchange Rights Agreement, the Merger
Agreement, the First and the Second Supplemental Indentures to the Plaza Note
Indenture, the First Supplemental Indenture to the Senior Note Indenture, the
agreement providing for satisfaction of the NatWest Loan, the agreement
providing for discharge of the First Fidelity Loan, the agreement providing for
the exercise of the Plaza East Purchase Option, the redemption notice for the
Taj Bonds, the letter agreements dated January 8, 1996 between Trump and
Taj Associates and the Company, respectively, the Debt Underwriting Agreement
and the letter agreement dated October 6, 1995 by and among Taj Associates, Taj
Funding, Taj Holdings and certain holders of Taj Holding Class A Common Stock
(collectively, the "Operative Documents"), the Preliminary and Final Blue Sky
Memoranda, and all other agreements, memoranda, reports, correspondence and
other documents printed, distributed and delivered in connection with the
offering of the Shares, (iv) the registration or qualification of the Shares
for offer and sale under the securities or Blue Sky laws of the jurisdictions
referred to in para-
8
<PAGE>
graph 4(h) above (including, in each case, the fees and disbursements of counsel
for the Underwriters relating to such registration or qualification and any
memoranda relating thereto and any filing fees in connection therewith), (v)
subject to paragraph 4(c) above, furnishing such copies of the Registration
Statement (including exhibits), Prospectus and preliminary prospectus, and all
amendments and supplements to any of them, including any document incorporated
by reference therein, as may be reasonably requested by the Underwriters or by
dealers, (vi) the filing, registration and clearance with the National
Association of Securities Dealers, Inc. (the "NASD") of the Underwriters'
compensation in connection with the offering of the Shares (including, without
limitation, any filing fees in connection therewith), (vii) the listing of the
Shares on the NYSE, (viii) the costs of distributing the terms of agreement
relating to the organization of the underwriting syndicate and selling group to
the members thereof by mail, telex or other means of communication, (ix) any
"qualified independent underwriter" as required by Schedule E to the Bylaws of
the NASD (including fees and disbursements of counsel for such qualified
independent underwriter) and (x) the performance by the Company and each of the
Subsidiaries of its other obligations under this Agreement and under each of the
other Operative Documents to which it is party, including (without limitation)
the fees and expenses of the Transfer Agent, the costs of its personnel and
other internal costs, the cost of printing and engraving the certificates
representing the Shares, and all expenses and taxes incident to the sale and
delivery of the Shares to you, including, without limitation, filing and
recording fees and expenses and fees and expenses of counsel for the Company for
providing such opinions as you may reasonably request. Subject to Section 9
below, the Underwriters will otherwise pay their own out-of-pocket expenses,
including the fees and disbursements of counsel (other than under clauses (iv),
(vi) and (ix) above and as may have been provided otherwise in separate
agreements with you).
6. Representations and Warranties. The Company represents
------------------------------
and warrants to each Underwriter that:
(a) When the Registration Statement became or becomes effective,
including on the date of any post-effective amendment, at the date of the
Prospectus (if different) and at the Closing Date and at each Option
Closing Date, as the case may be, the Registration Statement will comply
in all material respects with the provisions of the Act, and will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; the Prospectus and each supplement or
amendment thereto will not, at the date of the Prospectus, at the date of
any such supplement or amendment and at the Closing Date and at each
Option Closing Date, as the case may be, contain any untrue statement of
a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light
9
<PAGE>
of the circumstances under which they were made, not misleading, except
that the representations and warranties contained in this paragraph (a)
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplement or amendment to them) made
in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by or on behalf of such
Underwriter through DLJ expressly for use therein. The Company
acknowledges for all purposes under this Agreement (including this
paragraph and Section 7 hereof) that the statements set forth in the last
paragraph of the cover page of the Prospectus and the first (including
the table therein) and third paragraphs and the fourth and sixth
sentences of the seventh paragraph of the section entitled "Underwriting"
in the Prospectus constitute the only written information furnished to
the Company by or on behalf of any Underwriter through DLJ expressly for
use in the Registration Statement, the preliminary prospectus or the
Prospectus (or any amendment or supplement to any of them) and that the
Underwriters shall not be deemed to have provided any information (and
therefore are not responsible for any statements or omissions) pertaining
to any arrangement or agreement with respect to any party other than the
Underwriters. No contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement has not been described and
filed as required.
(b) Each preliminary prospectus and the Prospectus, filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 or 430A under the Act,
and each Registration Statement filed pursuant to Rule 462(b) under the
Act, if any, complied when so filed in all material respects with the
Act.
(c) No action has been taken and no statute, rule, regulation or
order has been enacted, adopted or issued by any governmental body,
agency or official which prevents the issuance of the Shares, suspends
the effectiveness of the Registration Statement, prevents or suspends the
use of any preliminary prospectus or suspends the sale of the Shares in
any jurisdiction referred to in Section 4(h) hereof; no injunction,
restraining order or order of any nature by any Federal or state court of
competent jurisdiction has been issued with respect to the Company or any
of the Subsidiaries which would prevent or suspend the issuance or sale
of the Shares, the effectiveness of the Registration Statement, or the
use of any preliminary prospectus or Prospectus or in any jurisdiction
referred to in Section 4(h) hereof; no action, suit or proceeding before
any court or arbitrator or any governmental body, agency or official,
domestic or foreign, is pending against or, to the best knowledge of the
Company, after due inquiry, threatened against, the
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Company or any of the Subsidiaries which, if adversely determined, could
interfere with or adversely affect the issuance of the Shares or in any
manner draw into question the validity of any of the Operative Documents
or this Agreement; and the Company has complied with every request of the
Commission, or any securities authority or agency of any jurisdiction for
additional information (to be included in the Registration Statement or
the Prospectus or otherwise).
(d) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by
this Agreement, will be validly issued, fully paid and nonassessable, and
the issuance of such Shares will not be subject to any preemptive or
similar rights.
(e) This Agreement has been duly authorized and validly executed
and delivered by the Company and constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent that
indemnification from liability in connection with the Federal securities
laws may be unenforceable.
(f) Each of the other Operative Documents (including, in the case
of an Operative Document which is being amended in connection with the
Merger Transaction (as defined below), the amendment thereto) has been or
on the Closing Date will have been duly and validly authorized by each of
the Company and the Subsidiaries, as applicable, and on the Closing Date
and on each Option Closing Date, as the case may be, will have been duly
executed and delivered by each of the Company and the Subsidiaries, as
applicable, in accordance with its respective terms and each will be a
legal, valid and binding agreement of the Company and each of the
Subsidiaries, as applicable, enforceable against the Company and each of
the Subsidiaries, as applicable, in accordance with its respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(g) Each of the Operative Documents and each of the elements of
the Merger Transaction described in the Prospectus conforms in all
material respects to the description thereof contained in the Prospectus.
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<PAGE>
(h) The Company and each of the Subsidiaries has all the requisite
corporate power or partnership power, as the case may be, to execute,
deliver and perform its obligations under each of the Operative Documents
to which it is a party, and to authorize, issue and sell the Shares. The
execution and delivery by the Company and each of the Subsidiaries of the
Operative Documents to which it is a party, the issuance and sale of the
Shares, the performance of the Operative Documents and the consummation
of the transactions contemplated hereby and thereby will not conflict
with or result in a breach or violation of (i) any of the respective
charters, bylaws or partnership agreements, as the case may be, of the
Company, any of the Subsidiaries or of any of the entities through which
ownership interests in Trump's Castle Associates are directly or
indirectly held (the "Castle Entities"), (ii) any of the terms or
provisions of, or constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose), any security interest, mortgage, pledge,
claim, lien, encumbrance or adverse interest of any nature (each, a
"Lien"), other than Liens permitted under the Indenture with respect to
any obligation, bond, agreement, note, debenture or other evidence of
indebtedness or any indenture, mortgage, deed of trust or other
agreement, lease or instrument to which the Company, any of the
Subsidiaries or any of the Castle Entities is a party or by which they or
any of them are bound, or to which any of the properties or assets of the
Company, any of the Subsidiaries or any of the Castle Entities is or may
be subject, or (iii) any Federal, state or local law, rule,
administrative regulation or ordinance or order of any court or
governmental agency, body or official having jurisdiction over the
Company or any of the Subsidiaries or any of their properties, except, in
the case of clause (ii) or (iii), for such conflicts, breaches,
violations, defaults or Liens that could not have a material adverse
effect on the properties, plans, business, results of operations, general
affairs, management, condition (financial or otherwise), prospects, or
business affairs of the Company or the Subsidiaries, singly or in the
aggregate (a "Material Adverse Effect").
(i) No authorization, approval, consent or order of, or filing
with, any court or governmental body, agency or official, including the
New Jersey Casino Control Commission (the "CCC"), the New Jersey
Department of Environmental Protection (the "NJDEP"), the IGC and the
Mississippi Gaming Commission (the "MGC") (the CCC, IGC and MGC
hereinafter collectively referred to as the "Gaming Authorities"), is
necessary in connection with the issuance of the Shares and the other
transactions contemplated by this Agreement, the other Operative
Documents and the Merger Transaction, except such as may be required by
the NASD or have been obtained and made under the Casino Control Act, the
Riverboat Gambling Act (together with the Casino Control Act, the "Gaming
Acts"), the Hart-
12
<PAGE>
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Act or state securities or Blue Sky laws or regulations.
Neither the Company nor any of its affiliates is presently doing business
with the government of Cuba or with any person or affiliate located in
Cuba.
(j) The Company and each of the Subsidiaries has been duly
incorporated or organized, as the case may be, and the Company and each
of the Subsidiaries is validly existing as a corporation, limited
partnership or general partnership, as the case may be, under the laws of
its jurisdiction of incorporation or organization, as the case may be,
and has the requisite power and authority to carry on its business as it
is currently being conducted or is proposed to be conducted (as discussed
in the Prospectus) and to own, lease and operate its properties, as
applicable, and each is duly qualified as a foreign corporation, foreign
limited partnership or foreign general partnership, as the case may be,
authorized to do business in each jurisdiction (each, a "Foreign
Jurisdiction") where the operation, ownership or leasing of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified could not have a Material Adverse Effect; each
of TAC, Taj Associates and Plaza Associates is in good standing in each
Foreign Jurisdiction, as applicable.
(k) The consolidated capitalization of the Company and Taj
Associates is as set forth in the Prospectus, under the caption
"Capitalization" in the column "Actual -- The Company" and "Actual -- Taj
Associates," respectively, and, after consummation of the Offerings, will
be as set forth in the column "Pro Forma." All of the issued and
outstanding shares of capital stock of the Subsidiaries which are
corporations have been and will be, on the Closing Date and at each
Option Closing Date, if any, duly authorized and validly issued and fully
paid and nonassessable and all of the partnership interests in the
Subsidiaries which are partnerships have been duly authorized and validly
issued. On the Closing Date and at each Option Closing Date, if
applicable, the Company will own, either directly or indirectly, the sole
general partnership interest in Trump Hotels & Casino Resorts Holdings,
L.P. ("THCR Holdings") and all of the outstanding capital stock of each
of Taj Holdings and TM/GP, Inc. and THCR Holdings will own, either
directly or indirectly, all of the outstanding capital stock or other
equity interests of the other Subsidiaries and all of Trump's existing
interests and rights to new gaming activities in both emerging and
established gaming jurisdictions, including but not limited to Trump
Indiana, free and clear of any Liens, restrictions on transfer,
agreements, voting trusts or other defects of title whatsoever, other
than (x) transfer restrictions which may be imposed under the
Gaming Acts, (y) conditions contained in the casino and gaming
licenses of Plaza Associates and Taj Associates,
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<PAGE>
respectively, or in the Certificate of Suitability of Trump
Indiana, as the case may be, and (z) in the case of Subsidiaries other
than Taj Holding, TM/GP, Inc. and THCR Holdings, the security documents
in respect of the Senior Notes (the "Security Documents"). There are
no outstanding subscriptions, rights, warrants, options, calls,
convertible or exchangeable securities or commitments of sale related to
or entitling any person to purchase or otherwise to acquire any shares of
the capital stock of, or other ownership interests in, any Subsidiary.
(l) Neither the Company nor any of the Subsidiaries is (i) in
violation of its respective charter, bylaws or partnership agreements or
(ii) in default in the performance of any obligation, bond, agreement,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or other contract, lease or other instrument to
which the Company or any of the Subsidiaries is a party or by which any
of them is bound, or to which any of the property or assets of the
Company or any of the Subsidiaries is subject, except, in the case of
clause (ii), for such defaults that could not have a Material Adverse
Effect.
(m) There is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, pending against or
affecting the Company or any of the Subsidiaries or any of their
respective assets or properties, which is required to be disclosed in the
Registration Statement or the Prospectus (except as disclosed therein),
or which could have a Material Adverse Effect, or which could materially
and adversely affect the performance by the Company of its obligations
pursuant to this Agreement and the Operative Documents or the
transactions contemplated hereby or thereby and, to the best knowledge of
the Company, after due inquiry, no such action, suit or proceeding is
contemplated or threatened.
(n) (i) Neither the Company nor any of the Subsidiaries is in
violation of any Federal, state or local laws and regulations relating to
pollution or protection of human health or the environment (including,
without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of toxic or hazardous substances, materials or wastes, or
petroleum and petroleum products ("Materials of Environmental Concern"),
or otherwise relating to the protection of human health and safety, or
the storage, disposal, transport or handling of Materials of
Environmental Concern (collectively, "Environmental Laws"), which
violation includes, but is not limited to, noncompliance with any permits
or other governmental authorizations, except to the extent that any such
violation could not have a Material Adverse Effect or otherwise
14
<PAGE>
require disclosure in the Prospectus; and (ii) to the best knowledge of
the Company, after due inquiry, (A) neither the Company nor any of the
Subsidiaries has received any communication (written or oral), whether
from a governmental authority or otherwise, alleging any such violation
or noncompliance, and there are no circumstances, either past, present or
that are reasonably foreseeable, that may lead to such violation in the
future, (B) there is no pending or threatened claim, action,
investigation or notice (written or oral) by any person or entity
alleging potential liability for investigatory, cleanup, or governmental
responses costs, or natural resources or property damages, or personal
injuries, attorney's fees or penalties relating to (x) the presence, or
release into the environment, of any Material of Environmental Concern at
any location owned or operated by the Company or any Subsidiary, now or
in the past, or (y) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law (collectively, "Environmental
Claims") that could have a Material Adverse Effect or otherwise require
disclosure in the Prospectus, and (C) there are no past or present
actions, activities, circumstances, conditions, events or incidents, that
could form the basis of any Environmental Claim against the Company or
any Subsidiary or against any person or entity whose liability for any
Environmental Claim the Company or any Subsidiary has retained or assumed
either contractually or by operation of law.
(o) Neither the Company nor any of the Subsidiaries is in
violation of any Federal, state or local law relating to discrimination
in the hiring, promotion or pay of employees nor any applicable wage or
hour laws, except as could not have a Material Adverse Effect. There is
(A) no significant unfair labor practice complaint pending against the
Company or any Subsidiary or, to the best knowledge of the Company, after
due inquiry, threatened against any of them, before the National Labor
Relations Board or any state or local labor relations board, and no
material grievance or material arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the
Company or any Subsidiary or, to the best knowledge of the Company, after
due inquiry, threatened against any of them, and (B) no labor dispute in
which the Company or any Subsidiary is involved nor, to the best
knowledge of the Company, after due inquiry, is any labor dispute
imminent, other than routine disciplinary and grievance matters. The
Company and the Subsidiaries are in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, and the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined
in ERISA has occurred with respect to any "pension plan" (as defined in
ERISA established or maintained by the Company or any of the Subsidiaries
or with respect to which the Company or the Subsidiaries are obligated to
make contributions. The
15
<PAGE>
Company and the Subsidiaries have not incurred and do not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "employee benefit plan" as such term is defined in
Section 3(3) of ERISA or (ii) Sections 4971, 4975, or 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"). Each "employee
benefit plan" established or maintained by the Company and the
Subsidiaries that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(p) Except as could not have a Material Adverse Effect, the
Company and each of the Subsidiaries has good and marketable title, free
and clear of all Liens (except for (x) Liens created by the Security
Documents, (y) Liens created by the Mortgage Documents and (z) Permitted
Liens (as defined in the Indenture)), to all property and assets
described in the Registration Statement as being owned by it and such
properties and assets are in the condition and suitable for use as so
described. All leases to which any of the Company or the Subsidiaries is
a party are valid and binding and no default has occurred and is
continuing thereunder (in the case of defaults by persons other than the
Company and the Subsidiaries, to the best knowledge of the Company and
the Subsidiaries, after due inquiry), which could result in a Material
Adverse Effect, and the Company and the Subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a
party as lessee with such exceptions as do not interfere with the use
made or proposed to be made by the Company or such Subsidiary.
(q) The Company and the Subsidiaries maintain insurance at least
in such amounts and covering at least such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar
businesses in similar industries.
(r) Arthur Andersen LLP, the firm of accountants that has
certified or shall certify the applicable consolidated financial
statements and supporting schedules of the Company, TAC and Plaza
Associates and Taj Associates filed or to be filed with the Commission as
part of the Registration Statement and the Prospectus, are independent
public accountants with respect to the Company and the Subsidiaries, as
required by the Act. The financial statements and the consolidated
financial statements, together with related schedules and notes, set
forth in the Prospectus and the Registration Statement, comply as to form
in all material respects with the requirements of the Act and fairly
present the consolidated financial position of such entities at the
respective dates indicated and the results of their operations and their
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cash flows, as applicable, for the respective periods indicated, in
accordance with generally accepted accounting principles in the United
States of America ("GAAP") consistently applied throughout such periods.
The pro forma financial statements contained in the Registration
--- -----
Statement have been prepared on a basis consistent with such historical
statements and give effect to assumptions made on a reasonable basis and
fairly present the historical and proposed transactions contemplated to
be addressed by the preliminary prospectuses, the Prospectus, the
Operative Documents and this Agreement. The historical and pro
---
forma ratios of earnings to fixed charges of TAC and Plaza
-----
Associates, the Company and Taj Associates, as applicable included in
the Prospectus under the caption "Prospectus Summary-Summary Financial
Information" have been calculated in compliance with Item 503(d) of
Regulation S-K promulgated by the Commission. The other financial and
statistical information and data included in the Prospectus and in the
Registration Statement, historical and pro forma, are accurately
--- -----
presented and prepared on a basis consistent with such financial
statements and the books and records of the Company and its subsidiaries,
the Debt Issuers, Plaza Associates and Taj Associates, as applicable.
(s) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus and up to the
Closing Date and at each Option Closing Date, if applicable, (i) neither
the Company nor any of the Subsidiaries has incurred any liabilities or
obligations, direct or contingent, which are material to the Company or
the Subsidiaries, singly or in the aggregate, nor entered into any
transaction not in the ordinary course of business, except as described
in the Prospectus with respect to the Merger Transaction, (ii) there has
been no decision or judgment in the nature of litigation, administrative
or regulatory proceedings or arbitration that could have a Material
Adverse Effect and (iii) there has not been any material adverse change
or any development which could involve, singly or in the aggregate, a
material adverse change, in the properties, plans, business, results of
operations, general affairs, management, condition (financial or
otherwise), prospects or business affairs of the Company or the
Subsidiaries, singly or in the aggregate (any of the items set forth in
clauses (i),(ii) or (iii) of this paragraph (s), a "Material Adverse
Change").
(t) All material Tax (as defined below) returns required to be
filed by the Company and the Subsidiaries have been filed and all such
returns are true, complete, and correct in all material respects. All
material Taxes that are due or claimed to be due from the Company and the
Subsidiaries have been paid other than those (i) currently payable
without penalty or interest or (ii) being contested in good faith and by
appropriate proceedings and, in either case, for which adequate reserves
have been established on the books
17
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and records of the Company and the Subsidiaries in accordance with GAAP.
The Company and the Subsidiaries are not parties to any pending action,
proceeding, inquiry, or investigation by any government authority for the
assessment or collection of Taxes, nor does the Company or any of the
Subsidiaries have any knowledge, after due inquiry, of any such proposed
or threatened action, proceeding, inquiry, or investigation. For
purposes of this agreement, the terms "Tax" and "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a
similar nature (whether imposed directly or through withholding),
including any interest, additions to tax, or penalties applicable
thereto.
(u) (i) Each of the Company, each of the Subsidiaries and each of
the persons listed under the caption "Management" in the Registration
Statement has all certificates, consents, exemptions, orders, permits,
licenses, authorizations or other approvals or rights (each, an
"Authorization") of and from, and has made all declarations and filings
with, all Federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals,
including, without limitation, all such Authorizations with respect to
engaging in gaming operations in the States of Indiana, New Jersey and
Mississippi or required to own, lease, license and use its properties and
assets and to conduct its current business in the manner described in or
contemplated by the Prospectus; (ii) all such Authorizations are valid
and in full force and effect; (iii) the Company and each of the
Subsidiaries and, to the best of the Company's knowledge, after due
inquiry, each of the persons listed under the caption "Management" in the
Registration Statement is in compliance in all material respects with the
terms and conditions of all such Authorizations and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto and (iv) neither the Company nor any
Subsidiary nor, to the best of the Company's knowledge, after due
inquiry, each of the persons listed under the caption "Management" in the
Registration Statement has received any notice of proceedings relating to
the revocation or modification of any such Authorization and no such
Authorization contains any restrictions that are materially burdensome to
any of them. Neither the Company nor any of the Subsidiaries has any
reason to believe that any Gaming Authority is considering modifying,
limiting, conditioning, suspending, revoking or not renewing any such
Authorizations of the Company, any of the Subsidiaries or any of the
persons listed under the caption "Management" in the Registration
Statement or that either the Gaming Authorities or any other governmental
agencies are investigating the Company or any of the Subsidiaries or
related parties (other than normal overseeing reviews of the Gaming
Authorities incident to the gaming, riverboat or casino activities, as
the case may be, of the Company and the Subsidiaries). Neither the
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<PAGE>
Company nor any of the Subsidiaries has any reason to believe that there
is an existing basis for the Gaming Authorities to deny the renewal of
the current casino and gaming licenses held by Plaza Associates and Taj
Associates, respectively, or the Certificate of Suitability held by Trump
Indiana nor to fail to grant Trump Indiana a riverboat owners' license by
any proposed commencement date operations thereof. The Company and the
Subsidiaries possess, or will promptly acquire on reasonable terms, the
licenses, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names,
including a grant to the Company (subject to the preexisting license to
Trump's Castle Associates, as described in the Prospectus) of an
exclusive royalty-free right and license to use worldwide, the names and
marks "TRUMP," "DONALD J. TRUMP," "DONALD TRUMP," "D.J. TRUMP," and "D.
TRUMP" (the "Trump Names") (including combinations thereof, and the U.S.
Registrations "Oysters Trump" and "Trump Plaza") in connection with
Casino Services and Products (as defined in the [Amended License
Agreement]) (collectively, the "Licensed Marks"), and the right to use
Trump's personal name (i.e., "Trump," "Donald Trump" or "Donald J.
----
Trump") and his likeness, in connection with Casino Services and Products
presently or proposed to be employed by them in connection with their
businesses as currently being conducted or as proposed to be conducted
(as discussed in the Prospectus). The Trump Names with respect to Casino
Services and Products, together with each of the marks, registrations and
applications listed on Schedule A of the [Amended License Agreement],
shall be referred to hereinafter, collectively, as the "Marks"). The
Licensed Marks are free of any Liens (other than the license granted by
Trump to Trump Plaza Hotel and Casino pursuant to the Amended and
Restated Services Agreement by and among Plaza Associates, Trump Plaza
Management Corp. and Trump, dated June 24, 1993, and the security
interest in the registration "Trump Plaza" as October 3, 1990 in favor of
Bankers Trust Company). To the best knowledge of the Company and each of
the Subsidiaries, after due inquiry, there is no material claim, suit,
action or proceeding pending and served or threatened in the United
States with respect to the validity of any of the Marks, Trump's
ownership of any of the Marks, the infringement of any of the Marks by
any third party or the infringement of the rights of any third party
arising out of the use of any of the Marks. To the best knowledge of the
Company and each of the Subsidiaries, after due inquiry, the use of the
Marks, as provided in the [Amended License Agreement], does not infringe
on the rights of any person.
(v) The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transac-
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tions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(w) The CCC has issued declaratory rulings determining that the
Company is a qualified holding company, financial source and entity
qualifier of each of Plaza Associates and Taj Associates and that each of
Plaza Associates and Taj Associates continues to be a qualified casino
licensee under the Casino Control Act. Such rulings have not been
revoked, modified or rescinded. Each of this Agreement and the other
Operative Documents has been presented to the Gaming Authorities to the
extent required by law, and such documents and the transactions
contemplated hereby or thereby have been approved by or on behalf of the
Gaming Authorities to the extent required by law and such approvals have
not been revoked, modified or rescinded.
(x) Neither the Company nor any agent acting on their behalf has
taken or will take any action that is reasonably likely to cause the
issuance or sale of the Shares to violate Regulation G, T, U, or X of the
Board of Governors of the Federal Reserve System, in each case as in
effect on the Closing Date and at each Option Closing Date, if
applicable.
(y) Neither the Company nor any of the Subsidiaries is (i) an
"investment company" or a company "controlled" by an investment company
within the meaning of the Investment Company Act of 1940, as amended, or
(ii) a "holding company" or a "subsidiary company" of a holding company,
or an "affiliate" thereof within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(z) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(aa) The Company has registered the Common Stock pursuant to
Section 12(b) of the Exchange Act and has filed all requisite documents
necessary to list the Shares on the NYSE, and has received notification
that the listing has been approved, subject to official notice of
issuance of the Shares.
20
<PAGE>
(ab) No holder of any security of the Company has any right to
require registration of any security of the Company (other than as
provided in the Amended and Restated Exchange Rights Agreement and the
Revised Ribis Plaza Agreement). No holder of any security of the Company
has or will have any right to require the registration of such security
by virtue of any transaction contemplated by this Agreement.
(ac) The authorized capital stock of the Company conforms to the
description thereof contained in the Prospectus under the caption
"Description of Capital Stock".
(ad) Except as would not be unlawful, neither the Company nor any
of the Subsidiaries has (i) taken, directly or indirectly, any action
designed to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the Company
or any of the Subsidiaries to facilitate the sale or resale of the Shares
or (ii) since the date of the preliminary prospectus (A) sold, bid for,
purchased or paid any person any compensation for soliciting purchases
of, the Shares or (B) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(ae) Each certificate signed by any officer of the Company and
delivered to the Underwriters or counsel for the Underwriters in
connection therewith shall be deemed to be a representation and warranty
by the Company to each Underwriter as to the matters covered thereby.
7. Indemnification.
---------------
(a) The Company and each of the Subsidiaries, jointly and
severally, agree to indemnify and hold harmless, (i) each of the
Underwriters, (ii) each person, if any, who controls (within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act) any of the
Underwriters (any of the persons referred to in this clause (ii) being
hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and
agents of any of the Underwriters or any controlling person (any person
referred to in clause (i), (ii) or (iii) may hereinafter be referred to
as an "Indemnified Person") to the fullest extent lawful, from and
against any and all losses, claims, damages, judgments, actions, costs,
assessments, expenses and other liabilities (collectively,
"Liabilities"), including without limitation and as incurred,
reimbursement of all reasonable costs of investigating, preparing,
pursuing, or defending any claim or action, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
including the
21
<PAGE>
reasonable fees and expenses of counsel to any Indemnified Person
directly or indirectly caused by, related to, based upon, arising out of
or in connection with any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement (or any amendment
or supplement thereto) or the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus, or any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they were made) not
misleading, except insofar as such Liabilities are caused by an untrue
statement or omission or alleged untrue statement or omission that is
made in reliance upon and in conformity with information relating to any
Underwriter furnished in writing to the Company by or on behalf of any
such Underwriter through DLJ expressly for use in the Registration
Statement (or any amendment or supplement thereto) or the Prospectus (or
any amendment or supplement thereto) or any preliminary prospectus. The
Company shall notify you promptly of the institution, threat or assertion
of any claim, proceeding (including any governmental investigation) or
litigation in connection with the matters addressed by this Agreement
which involves the Company or an Indemnified Person.
(b) In case any action or proceeding (for all purposes of this
Section 7, including any governmental investigation) shall be brought or
asserted against any of the Indemnified Persons with respect to which
indemnity may be sought against the Company or any Subsidiary, such
Underwriter (or the Underwriter controlled by such controlling person)
shall promptly notify the Company in writing; provided, that the
--------
failure to give such notice shall not relieve the Company or any of the
Subsidiaries of their obligations pursuant to this Agreement. Upon
receiving such notice, the Company shall be entitled to participate in
any such action or proceeding and to assume, at its sole expense, the
defense thereof, with counsel reasonably satisfactory to such Indemnified
Person and, after receipt of written notice from the Company to such
Indemnified Person of its election so to assume the defense thereof made
within ten business days after receipt of the notice from the Indemnified
Person of such action or proceeding, the Company and the Subsidiaries
shall not be liable to such Indemnified Person hereunder for legal
expenses of other counsel subsequently incurred by such Indemnified
Person in connection with the defense thereof, other than costs of
investigation, unless (i) the Company or such Subsidiary, as the case may
be, agrees to pay such fees and expenses, or (ii) the Company fails
promptly to assume such defense or fails to employ counsel reasonably
satisfactory to such Indemnified Person or (iii) the named parties to any
such action or proceeding (including any impleaded parties) include both
such Indemnified Person and the Company or an affiliate of the Company
and either (x) there may be
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one or more legal defenses available to such Indemnified Person that are
different from or additional to those available to the Company or such
affiliate or (y) a conflict may exist between such Indemnified Person and
the Company or such affiliate. In the event of any of clause (i), (ii)
and (iii) of the immediately preceding sentence, if such Indemnified
Person notifies the Company in writing, the Company shall not have the
right to assume the defense thereof and such Indemnified Person shall
have the right to employ its own counsel in any such action and the
reasonable fees and expenses of such counsel shall be paid, as incurred,
by the Company and the Subsidiaries, regardless of whether it is
ultimately determined that an Indemnified Person is not entitled to
indemnification hereunder, it being understood, however, that the Company
and the Subsidiaries shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstances,
be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) at any time for each such
Indemnified Person. Each of the Company and the Subsidiaries agrees to be
liable for any settlement of such action or proceeding effected with the
Company's prior written consent, which consent will not be unreasonably
withheld, and the Company and each of the Subsidiaries agree to indemnify
and hold harmless any Indemnified Person from and against any liabilities
by reason of any settlement of any action effected with the written
consent of the Company. The Company and each of the Subsidiaries agrees
to be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 20
business days after receipt by the Company of the aforesaid request for
payment in respect of an indemnification obligation pursuant hereto and
(ii) the Indemnified Person shall not have been reimbursed in accordance
with such request prior to the date of such settlement. Neither the
Company nor any of the Subsidiaries shall, without the prior written
consent of each Indemnified Person, settle or compromise or consent to
the entry of any judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought pursuant hereto (whether or
not any Indemnified Person is a party thereto), unless such settlement,
compromise, consent or termination includes an unconditional release of
each Indemnified Person from all liability arising out of such action,
claim, litigation or proceeding.
(c) Each of the Underwriters agrees, severally and not jointly,
to indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, to the same extent as the foregoing indemnity from the
Company and the
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Subsidiaries to each of the Indemnified Persons, but only with respect to
claims and actions based on information relating to such Underwriter and
conforming to information furnished in writing by or on behalf of such
Underwriter through DLJ expressly for use in the Registration Statement,
Prospectus or any preliminary prospectus, as applicable. In case any
action or proceeding (including any governmental investigation) shall be
brought or asserted against the Company, any of its directors, any such
officer, or any such controlling person based on the Registration
Statement, the Prospectus or any preliminary prospectus in respect of
which indemnity is sought against any Underwriter pursuant to the
foregoing sentence, the Underwriter shall have the rights and duties
given to the Company (except that if the Company shall have assumed the
defense thereof, such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officers and each
such controlling person shall have the rights and duties given to the
Indemnified Person by Section 7(b) above.
(d) If the indemnification provided for in this Section 7 is
finally determined by a court of competent jurisdiction to be unavailable
to an indemnified party in respect of any Liabilities referred to herein,
then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such Liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and
the Subsidiaries, on the one hand, and the Underwriter, on the other
hand, from the offering of the Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above, but also the relative fault of the
indemnifying parties and the indemnified party, as well as any other
relevant equitable considerations. The relative benefits received by the
Company and the Subsidiaries, on the one hand, and any of the
Underwriters (and its related Indemnified Persons), on the other hand,
shall be deemed to be in the same proportion as the total proceeds from
the Shares (net of underwriting discounts and commissions but before
deducting expenses) received by the Company bears to the total
underwriting discounts and commissions received by such Underwriter, in
each case as set forth in the Prospectus. The relative fault of the
Company and the Subsidiaries, on the one hand, and the Underwriters, on
the other hand, shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to
information supplied by the Company and the Subsidiaries, on the one
hand, or by the Underwriters, on the other, and the parties' relative
intent,
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knowledge, access to information and opportunity to correct or prevent
such statement or omission. The indemnity and contribution obligations
of the Company and the Subsidiaries set forth herein shall be in addition
to any liability or obligation the Company and the Subsidiaries may
otherwise have to any Indemnified Person.
The Company, the Subsidiaries and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section
7(d) were determined by pro rata allocation (even if the
--- ----
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, judgments, liabilities or expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7, none of the Underwriters (and its related Indemnified
Persons) shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the total underwriting discount applicable
to the Shares purchased by such Underwriter exceeds the amount of any
damages and related expenses which such of the Underwriters (and its
related Indemnified Persons) has otherwise been required to pay or incur
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant
to this Section 7(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
8. Conditions to Underwriters' Obligations. The respective
---------------------------------------
obligations of the several Underwriters to purchase any Shares under this
Agreement are subject to the satisfaction of each of the following conditions
on the Closing Date and, as applicable, each Option Closing Date:
(a) All the representations and warranties of the Company
contained in this Agreement shall be true and correct on the Closing Date
and each Option Closing Date, if applicable, with the same force and
effect as if made on and as of the Closing Date and each such Option
Closing Date, if applicable. All of the representations and warranties
of the Company and the Subsidiaries, as applicable, made in the other
Operative Documents (i) on the date made to the extent previously made
and (ii) on the Closing Date and
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each Option Closing Date to the extent such document contains a
representation or warranty made or to be made on the Closing Date or an
Option Closing Date, was and shall be true and correct on such date. The
Company and the Subsidiaries shall have performed or complied with all of
their obligations and agreements herein and therein contained and
required to be performed or complied with by them at or prior to the
Closing Date and such Option Closing Date, if applicable.
(b) (i) The Registration Statement (including a registration
statement (if any) filed pursuant to Rule 462(b) under the Act) shall
have become effective (or, if a post-effective amendment is required to
be filed pursuant to Rule 430A under the Act, such post-effective
amendment shall have become effective (or, if any Shares are sold in
reliance upon Rule 430A of the Act and no post-effective amendment is so
required to be filed, the Prospectus shall have been timely filed with
the Commission in accordance with Section 4(a) hereof) not later than
5:30 p.m. New York City time, on the date of this Agreement or at such
later date and time as you may approve in writing, (ii) at the Closing
Date and each Option Closing Date, if applicable, no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been commenced
or shall be pending before or, to the best knowledge of the Company,
after due inquiry, threatened by the Commission and every request for
additional information on the part of the Commission shall have been
complied with in all respects, and (iii) no stop order suspending the
sale of the Shares in any jurisdiction referred to in Section 4(h) shall
have been issued and no proceeding for that purpose shall have been
commenced or shall be pending or, to the best knowledge of the Company,
after due inquiry, threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency, body or official (including, without limitation, the
Gaming Authorities), which would, as of the Closing Date and each Option
Closing Date, if applicable, prevent the issuance of the Shares or have a
Material Adverse Effect; and no injunction, restraining order or order of
any nature by any Federal or state court shall have been issued as of the
Closing Date or any Option Closing Date, if applicable, which would
prevent the issuance of the Shares or have a Material Adverse Effect.
Subsequent to the execution and delivery of this Agreement and prior to
the Closing Date and each Option Closing Date, if applicable, there shall
not have been any downgrading, or indication that such securities have
been placed on any "watch list" for possible downgrading, nor shall any
review for a possible change that does not indicate the direction of the
possible change, in the rating
26
<PAGE>
accorded any of the Company's or any Subsidiary's securities by any
nationally recognized statistical rating organization, as such term is
defined for purposes of Rule 436(g)(2) of the Act.
(d) (i) Since the earlier of the date hereof or the dates of
which information is given in the Registration Statement and the
Prospectus, there shall not have been any Material Adverse Change, (ii)
since the date of the latest balance sheet included in the Registration
Statement and the Prospectus, there shall not have been any material
adverse change, or any development involving a prospective material
adverse change, in the capital stock or debt, of the Company or any of
the Subsidiaries, (iii) the Company and each of the Subsidiaries shall
have no liability or obligation, direct or contingent, that is material
to the Company and the Subsidiaries, taken as a whole, and which is not
disclosed in the Registration Statement and the Prospectus.
(e) You shall have received a certificate of the Company, dated
the Closing Date and each Option Closing Date, if applicable, executed on
behalf of the Company by the Chief Executive Officer and the Senior Vice
President of Corporate Finance of the Company, in their capacities as
officers of the Company, confirming the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 8.
(f) You shall have received an opinion (satisfactory to you and
your counsel), dated the Closing Date and each Option Closing Date, if
applicable, of Willkie Farr & Gallagher, counsel for the Company, to the
effect that:
(i) the Registration Statement was declared effective in
compliance with the Act; any required filing of the Prospectus, and any
amendments or supplements thereto, pursuant to Rule 424(b), have been
made in the manner and within the time period required by Rule 424(b); to
the best of such counsel's knowledge, after due inquiry, no stop order
suspending the effectiveness of the Registration Statement or any part
thereof has been issued and no proceedings therefor have been instituted
or to the best of such counsel's knowledge, after due inquiry, are
pending or contemplated under the Act;
(ii) at the time it became effective and on the Closing Date
and on each Option Closing Date, if applicable, the Registration
Statement, including all documents incorporated by reference therein
(except for financial statements, the notes thereto and related schedules
and other financial, numerical and statistical data included therein or
incorporated by reference
27
<PAGE>
therein, as to which no opinion need be expressed) complied as to form in
all material respects with the applicable requirements of the Act;
(iii) the Company and each of the Subsidiaries, other than
Taj Associates, TAC, Plaza Funding and Plaza Associates (collectively,
the "New Jersey Subsidiaries"), has the requisite corporate or
partnership power and authority to execute, deliver and perform all of
its obligations pursuant to this Agreement and each of the other
Operative Documents to which it is a party and, in the case of the
Company, to authorize, issue and sell the Shares as contemplated by this
Agreement; each of this Agreement and the other Operative Documents has
been duly authorized, executed and delivered by the Company and each of
the Subsidiaries, as applicable, and constitutes a valid and legally
binding obligation of the Company and each of the Subsidiaries, as
applicable, enforceable against the Company and each of the Subsidiaries,
as applicable, in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
and similar laws and to general principles of equity (regardless of
whether enforcement is sought in a proceeding of law or in equity);
(iv) the recordation of the [Amended Trademark Security
Agreement] in the United States Patent and Trademark Office, together
with the filing of financing statements on Form UCC-1 naming "Trump,
Donald J.," as debtor and the Company, as secured party, in the office of
the Secretary of State of New York and the New York City Register of New
York County, is effective, under applicable law, to perfect the security
interest granted to the Company in the Collateral (as defined in the
Trademark Security Agreement);
(v) this Agreement and each of the other Operative Documents
which is described in the Registration Statement and the Prospectus
conforms in all material respects to the descriptions thereof contained
in the Registration Statement and the Prospectus; the descriptions in the
Registration Statement and the Prospectus of statutes, regulations, legal
and governmental proceedings and contracts to which any of the Company or
the Subsidiaries is a party have been reviewed by such counsel and are
accurate summaries thereof in all material respects (except for financial
data included therein or omitted therefrom, as to which counsel need
express no opinion); the material Federal income tax consequences to a
non-U.S. holder of the Shares will generally be as described in the
section of the Registration Statement under the caption "Special Tax
Considerations for Foreign Shareholders";
(vi) the Company and each of the Subsidiaries, other than
New Jersey Subsidiaries, is duly organized, and the Company and each of
the
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Subsidiaries, other than the New Jersey Subsidiaries, is a validly
existing corporation, limited partnership or general partnership, as the
case may be, under the laws of its jurisdiction of incorporation or
organization and has the requisite corporate or partnership power and
authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and Prospectus; each
of THCR Holdings, TAC, Taj Associates and Plaza Associates has been
classified for treatment as a partnership since its inception and will be
classified as a partnership for Federal income tax purposes on the
Closing Date and on each Option Closing Date, if applicable; the Company
and each of the Subsidiaries is duly qualified as a foreign corporation,
foreign limited partnership or foreign general partnership, as the case
may be, in each Foreign Jurisdiction, except where the failure to be so
qualified could not have a material adverse effect on the properties,
plans, business, results of operation, general affairs, management,
condition (financial or otherwise) or business affairs of the Company and
the Subsidiaries, in the aggregate; the Company and each of the
Subsidiaries, other than the New Jersey Subsidiaries, which is not a
general partnership is in good standing under the laws of its
jurisdiction of incorporation or organization, as the case may be, and in
each Foreign Jurisdiction, as applicable.
(vii) neither the Company nor any of the Subsidiaries is (a)
an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as
amended, or (b) a "holding company" or a "subsidiary company" of a
holding company, or an "affiliate" thereof within the meaning of the
Public Utility Holding Company Act of 1935, as amended;
(viii) to the best of such counsel's knowledge after due
inquiry, there are no legal or governmental proceedings required to be
described in the Registration Statement or Prospectus which are not
described as required, or any contracts or agreements to which any of the
Company or any of the Subsidiaries is a party or by which any of them may
be bound that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement other than those described therein or filed or incorporated by
reference as exhibits thereto; to the best of such counsel's knowledge,
after due inquiry, there is no current, pending or threatened action,
suit or proceeding before any court or governmental agency, authority or
body or any arbitrator involving any of the Company or any of the
Subsidiaries or to which any of their respective properties are subject
of a character required to be disclosed in the Registration Statement
which is not adequately disclosed in the Prospectus;
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<PAGE>
(ix) to the best of such counsel's knowledge, after due
inquiry, no authorization, approval, consent or order of any court or
governmental body, agency or official, is necessary in connection with
the issuance of the Shares, the issuance of the Notes and the other
transactions contemplated by this Agreement or the other Operative
Documents, except such as may be required by the NASD or have been
obtained and made under the HSR Act, the Gaming Acts, the Act, or state
securities or Blue Sky laws or regulations;
(x) the execution and delivery of this Agreement and the
other Operative Documents by the Company, as applicable, the issuance and
sale of the Shares, the performance of the Company's obligations pursuant
to the Operative Documents, as applicable, and the consummation of the
transactions contemplated hereby and thereby will not conflict with or
result in a breach or violation of or constitute a default or cause an
acceleration of any obligation under, or result in the imposition or
creation of (or the obligation to create or impose) any Lien (other than
under the Security Documents) with respect to (A) any of the respective
charters, by-laws and partnership agreements, as the case may be, of any
of the Company or the Subsidiaries other than the New Jersey
Subsidiaries, (B) any agreement or instrument filed as an Exhibit to the
Registration Statement, (C) any applicable statute, rule or regulation
under New York law, United States Federal law or the Corporation Law of
the State of Delaware other than the securities or Blue Sky laws of the
various states, as to which such counsel need express no opinion, or (D)
any order of any court or governmental agency, body or official having
jurisdiction over any of the Company or any of the Subsidiaries or any of
their properties except, in the case of clauses (B), (C) or (D), for such
conflicts, breaches, violations or defaults that could not have a
material adverse effect on the properties, plans, business, results of
operation, general affairs, management, condition (financial or
otherwise) or business affairs of the Company and the Subsidiaries, in
the aggregate;
(xi) to the best of such counsel's knowledge, after due
inquiry, no default exists in the due performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument
described in or filed as an Exhibit to the Registration Statement, except
for defaults which could not have a material adverse effect on the
properties, plans, business, results of operation, general affairs,
management, condition (financial or otherwise) or business affairs of the
Company and the Subsidiaries, in the aggregate;
30
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(xii) to the best of such counsel's knowledge, after due
inquiry, the Company and each of the Subsidiaries has the right to use
the Licensed Marks presently or proposed to be employed by it in
connection with its businesses as currently being conducted or as
proposed to be conducted (as discussed in the Prospectus), and, to the
best of such counsel's knowledge, after due inquiry, the Licensed Marks
are free and clear of Liens (other than the license granted by Trump to
Trump Plaza Hotel and Casino pursuant to the Amended and Restated
Services Agreement by and among Plaza Associates, Trump Plaza Management
Corp. and Trump dated June 24, 1993, and the security interest in the
registration "Trump Plaza" as of October 3, 1990 in favor of Bankers
Trust Company) and any other rights of third parties and neither the
Company nor any of the Subsidiaries has received any notice, or has any
knowledge, of infringement or of conflict with asserted rights of others
with respect to any of the Licensed Marks;
(xiii) neither the consummation of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Shares will violate Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System;
(xiv) to the best of such counsel's knowledge, after due
inquiry, there are no outstanding subscriptions, rights, warrants,
options, calls, convertible securities, commitments of sale or Liens
related to or entitling any person to purchase or otherwise to acquire
any shares of capital stock of, or other ownership interest in, any
Subsidiary, other than (w) the warrants to be issued to Trump, (x)
Trump's and TTMI's rights as the sole holders of limited partnership
interests in THCR Holdings which are convertible into shares of Common
Stock of the Company, (y) Liens created by the Security Documents and (z)
rights of participants in the 1995 Stock Plan;
(xv) all of the issued and outstanding shares of capital
stock of Trump Indiana, TTMC, THCR Funding, TM/GP, Inc., Taj Holding and
AC Funding have been duly authorized and validly issued, and are fully
paid and nonassessable, all of the partnership interests in THCR Holdings
have been duly authorized and validly issued and the Company owns the
sole general partner interest in THCR Holdings free and clear of any
Liens; the shares of capital stock of, or other ownership interests in,
each other Subsidiary are owned, either directly or indirectly, by the
Company, free and clear of any Liens (other than, in the case of
subsidiaries of THCR Holdings, Liens created by the Security Documents);
(xvi) the Merger has become effective under Delaware Law;
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(xvii) all of the equity interests held directly or
indirectly by Trump in Taj Associates have been contributed to the
Company or the Subsidiaries and are owned by THCR or the Subsidiaries
free and clear of any Lien, other than the Liens created by the Security
Documents;
(xviii) the Taj Bonds have been redeemed in accordance with
the terms of the Indenture under which the Taj Bonds were issued, and
the lien on the collateral securing the Taj Bonds in favor of trustee
under the indenture under which the Taj Bonds were issued has been
released;
(xix) the Offer to Purchase and Consent Solicitation comply
with Regulation 14E under the Exchange Act and all outstanding Plaza
Notes not purchased pursuant to the Offer to Purchase and Consent
Solicitation have been defeased in accordance with Section 403 of the
Plaza Note Indenture and the lien of the trustee under the Plaza Note
Indenture on the collateral securing the Plaza Notes has been released;
and
(xx) the Senior Note Indenture has been amended as provided
for in the Senior Note Indenture and in the Senior Note Consent
Solicitation.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company and the Subsidiaries, representatives of Arthur Andersen LLP,
independent public accountants for the Company, Taj Associates and the other
Subsidiaries, your representatives and your counsel in connection with the
preparation of the Registration Statement and Prospectus and has considered the
matters required to be stated therein and the statements contained therein, and
such counsel shall advise you that, although (without limiting the opinions
provided) such counsel has not independently verified the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that the Registration
Statement (including any Registration Statement filed under Rule 462(b) of the
Act (if any)), as amended or supplemented, at the time such Registration
Statement or any post-effective amendment became effective and as of the date
of such opinion, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading (other than information omitted therefrom in
reliance on Rule 430A under the Act), or the Prospectus, as amended or
supplemented, as of its date and the Closing Date and at each Option Closing
Date, if applicable, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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Without limiting the foregoing, such counsel may further state that
it assumes no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements, notes and
schedules and other financial and statistical data included in the Registration
Statement. Such counsel may also state that it has assumed in its examination
of all relevant documents the genuineness of all signatures, has relied, in
part, as to factual matters upon the statements of officers and other
representatives of the Company and as to matters relating to the laws of other
jurisdictions, on the opinions of local counsel for the Company in such
jurisdictions, as to which laws such counsel needs express no opinion. In
addition such counsel may state that its opinion is limited by the fact that
the (i) enforceability of the Operative Documents, (ii) the rights of the
trustee for the Notes to the collateral thereunder and (iii) the rights of the
trustee for the Senior Notes to the collateral thereunder, may be limited by
Gaming Laws, as to which such counsel needs express no opinion.
(g) You shall have received a signed opinion of Graham, Curtin &
Sheridan, New Jersey counsel for the Company, dated as of the Closing
Date and each Option Closing Date, if applicable, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) Plaza Funding has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
New Jersey and each of Plaza Associates, Taj Associates and TAC is
validly existing as a general partnership under the laws of the State of
New Jersey; each of Plaza Funding, Plaza Associates, Taj Associates and
TAC has the requisite corporate or partnership power and authority, as
applicable, to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and Prospectus;
(ii) all of the issued and outstanding capital stock of
Plaza Funding has been duly authorized and validly issued and is fully
paid and nonassessable, and the shares of capital stock and the
partnership interests of Plaza Funding, TAC, Taj Associates and Plaza
Associates are owned, either directly or indirectly, by THCR Holdings;
(iii) to the best knowledge of such counsel, no
authorization, approval, consent or order of the NJDEP or any other
governmental body, agency or official of the State of New Jersey ("New
Jersey Authorities") is necessary in connection with the issuance of the
Shares and the Notes and the other transactions contemplated by this
Agreement and the other Operative Documents or any other transactions
described in the Registration Statement to be entered into prior to or
contemporaneously with such agreements, except as disclosed in the
Registration Statement or such authorizations,
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approvals, consents or licenses of the NJDEP and such other New Jersey
Authorities that have been obtained; such counsel need express no opinion
regarding authorizations, approvals, consents or orders of the CCC;
(iv) to the best knowledge of such counsel, the Company and
each of the Subsidiaries is in possession of all Authorizations of and
from all New Jersey Authorities which are material and required to be
held by any of them in connection with the present operation of its
business, all of which are in full force and effect;
(v) the 1% equity interest held by Plaza Funding in Plaza
Associates has been contributed to TTMC;
(vi) the separate corporate existence of Taj Funding has
been dissolved upon the filing of a Certificate of Dissolution with the
Secretary of State of the state of New Jersey.
With respect to opinions expressed in paragraphs (iii) and
(iv), such counsel need express no opinion regarding authorizations of,
or declarations or filings with, the CCC or with respect to state
securities or Blue Sky laws. In addition, such counsel may state that it
has relied, as to factual matters, upon the statements of officers and
other representatives of the Company. Such opinion shall be to such
further effect with respect to other legal matters relating to this
Agreement as counsel for the Underwriters may reasonably request.
(h) You shall have received an opinion of Sterns & Weinroth, New
Jersey regulatory counsel for the Company, dated as of the Closing Date
and each Option Closing Date, if applicable, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) (a) the statements in the Prospectus under the captions
"Risk Factors--Control and Involvement of Trump", "Risk Factors--Atlantic
City Prospectus Expansion", "Risk Factors--Strict Regulation by Gaming
Authorities", "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital
Resources--Plaza Associates", "Management's Discussion and Analysis --
Taj Associates" Regulatory Matters--New Jersey Gaming Regulations",
insofar as such statements constitute a summary of New Jersey gaming laws
("New Jersey Gaming Laws") and proceedings thereunder, fairly present the
information with respect to such New Jersey Gaming Laws and proceedings
thereunder; and (b) no facts have come to the attention of such counsel
that would lead such counsel to believe that the statements listed in
clause (a) of this paragraph (i)
34
<PAGE>
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make such
statements, in light of the circumstances under which they are made, not
misleading, or that the statements listed in clause (a) of this paragraph
(i), as contained in the Prospectus at the time of filing thereof or on
the date of such counsel's opinion, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make such statements, in light of the
circumstances under which they were made, not misleading;
(ii) no authorization, approval, consent or order of the CCC
is necessary in connection with the issuance of the Shares and the Notes
and the due and valid execution, delivery and performance by the Company
or the Subsidiaries, as the case may be, of this Agreement or the other
Operative Documents, as applicable, or any other transactions described
in the statements listed in clause (a) of paragraph (i) above to be
entered into prior to or contemporaneously with such agreements, except
(a) as disclosed in the Registration Statement; (b) such approvals,
consents or orders, or conditional approvals, consents or orders of the
CCC that have been obtained prior to the date of such opinion; (c) such
additional approvals, consents or orders of the CCC that may be deemed
necessary under existing orders, consents or conditional approvals and
(d) the periodic and other filings and reporting requirements to which
the Company and the Subsidiaries are subject generally. Each of the
Operative Documents has been presented to the CCC to the extent required
by New Jersey Gaming Laws, and such documents and the transactions
described therein have been approved by the CCC to the extent required by
New Jersey Gaming Laws. Such counsel has received no notice that such
approvals have been revoked, modified or rescinded as of the date of such
opinion;
(iii) the CCC has issued declaratory rulings determining
that THCR Holdings is a qualified holding company, financial source and
entity qualifier of Plaza Associates and Taj Associates, subject to the
filing of applicable business entity disclosure forms by the Company and
the Subsidiaries by April , 1996, and that each of Plaza Associates
--
and Taj Associates continues to be a qualified casino licensee under the
New Jersey Gaming Laws, subject to the filing of business entity
disclosure forms, as set forth above. Such counsel has received no
notice that such rulings and the casino licensure of each of Plaza
Associates and Taj Associates have been revoked, modified or rescinded as
of the date of such opinion;
(iv) except as disclosed in the Registration Statement, (a)
to the best knowledge of such counsel, the Company and each of the
Subsidiar-
35
<PAGE>
ies has made all declarations and filings with the CCC necessary
to use its properties and assets and to conduct its business pursuant to
New Jersey Gaming Laws, as of the date of such opinion; (b) no facts have
come to the attention of such counsel that would lead such counsel to
believe that all authorizations of and from the CCC are not valid and in
full force and effect as of the date of such opinion; (c) no facts have
come to the attention of such counsel that would lead such counsel to
believe that the Company and each of the Subsidiaries is not in
compliance in all material respects with the terms and conditions of all
authorizations of and from CCC and with the New Jersey Gaming Laws, as of
the date of such opinion; and (d) as of the date of such opinion, such
counsel has received no notice of any proceedings relating to the
revocation or modification of any authority granted by the CCC to the
Company and the Subsidiaries, and such counsel is aware of no
restrictions imposed by the CCC which would have a material adverse
effect on the properties, plans, results of operations, management,
condition (financial or otherwise) or business affairs of the Company or
the Subsidiaries, in the aggregate; no facts have come to the attention
of such counsel that would lead such counsel to believe that the CCC is
considering modifying, limiting, conditioning, suspending, revoking or
not renewing the licenses, permits, certificates, consents, orders,
approvals and other authorizations from the CCC ("Gaming Licenses") of
the Company or any of the Subsidiaries, except where such modification,
revocation, suspension, limitation or condition would not have a material
adverse effect on the properties, plans, results of operations,
management, condition (financial or otherwise) or business affairs of the
Company or the Subsidiaries, in the aggregate; such counsel is aware of
no notice given to the Company or any of the Subsidiaries that New Jersey
gaming authorities are investigating the Company or any of the
Subsidiaries (other than normal overseeing reviews incident to the gaming
activities of the Company and the Subsidiaries); and such counsel has
received no notice that the Company, any of the Subsidiaries or Trump has
any reason to believe there is an existing basis for the CCC to deny the
renewal of the Gaming Licenses held by Plaza Associates and Taj
Associates; and
(v) each of the persons listed under the caption
"Management" in the Prospectus has been qualified or licensed by the CCC,
as required by New Jersey Gaming Laws.
Such counsel may rely on the resolutions of the CCC in giving
its opinions in paragraphs (ii) and (v) above.
(i) You shall have received an opinion of Tabbert, Hahn &
Zanetis, Indiana counsel for the Company, dated as of the Closing Date
and
36
<PAGE>
each Option Closing Date, if applicable, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) the statements in the Prospectus under the captions
"Risk Factors--Strict Regulation by Gaming Authorities--Indiana and Other
Jurisdictions", and "Regulatory Matters--Indiana Gaming Regulations,"
insofar as such statements constitute a summary of Indiana state
statutes, regulations, legal and governmental proceedings, have been
reviewed by such counsel and are accurate in all material respects
(except for financial data included therein or omitted therefrom, as to
which counsel need express no opinion); and such counsel does not know of
any legal or governmental proceedings in the State of Indiana required to
be described in the Registration Statement or Prospectus which are not
described as required;
(ii) no authorization, approval, consent or license issued
by the IGC or any other governmental body, agency or official of the
State of Indiana ("Indiana Authorities") is necessary in connection with
the issuance of the Shares and the Notes and the due authorization,
execution, delivery and performance by the Company and the Subsidiaries
of this Agreement and each of the other Operative Documents, as
applicable, and other transactions described in the Registration
Statement to be entered into prior to or contemporaneously with such
agreements, except as disclosed in the Registration Statement or such
authorizations, approvals, consents or licenses of the IGC and such other
Indiana Authorities that have been obtained; each of the Operative
Documents has been presented to the IGC to the extent required by law,
and such documents and the transactions contemplated hereby or thereby
have been approved by or on behalf of the IGC to the extent required by
law and such approvals have not been revoked, modified or rescinded; and
(iii) such counsel has received no notice that the
Certificate of Suitability of Trump Indiana has been revoked.
(j) You shall have received an opinion, dated the Closing Date and
each Option Closing Date, if applicable, of Skadden, Arps, Slate, Meagher
& Flom ("Skadden Arps"), counsel for the Underwriters, in form and
substance reasonably satisfactory to you.
(k) You shall have received letters on and as of the date hereof
as well as on and as of the Closing Date and each Option Closing Date, if
any (in the latter cases constituting an affirmation of the statements
set forth in the former, based on limited procedures), in form and
substance satisfactory to you, from Arthur Andersen LLP, independent
public accountants for the
37
<PAGE>
Company and the Subsidiaries, with respect to the financial statements,
and certain other financial information contained in the Registration
Statement and the Prospectus.
(l) You shall have received a certificate of a financial officer
of the Company as to certain agreed upon accounting matters, in
substantially the form previously delivered to you.
(m) Prior to the Closing Date and each Option Closing Date, if
applicable, the Company shall have furnished to you or caused to be
furnished to you such further information, certificates and documents as
you may reasonably request including, without limitation, satisfactory
evidence (i) from the trustee for the Taj Bonds that the indenture
governing the Taj Bonds has been fully satisfied and discharged (ii) from
the trustee under the Plaza Note Indenture that such notes and the
indenture governing such notes have been defeased in accordance with
Section 403 thereof, (iii) the NatWest Loan has been satisfied and (iv)
the First Fidelity Loan has been satisfied.
(n) The Company and the Subsidiaries shall not have failed, at or
prior to the Closing Date and each Option Closing Date, if applicable, to
perform or comply with any of the agreements herein contained and
required to be performed or complied with by the Company or the
Subsidiaries at or prior to the Closing Date and such Option Closing
Date, if applicable.
(o) The Merger shall have become effective under the Delaware
General Corporation Law.
(p) The Debt Offering shall have been consummated.
(q) The Taj Holdings Class B Common Stock shall have been redeemed
in accordance with the Taj Holding Certificate of Incorporation.
(r) The Taj Bonds shall have been redeemed.
(s) At least 90% of the outstanding Plaza Mortgage Notes shall have
been purchased by Plaza Funding and Plaza Associates and thereafter shall
be cancelled in accordance with the Plaza Note Indenture and all
remaining Plaza Notes shall have been defeased as described in Plaza
Funding and Plaza Associates Offer to Purchase and Solicitation of
Consents dated March 13, 1996, as supplemented to date.
38
<PAGE>
(t) All of Taj Associates indebtedness to National Westminster Bank
USA shall have been satisfied and the liens securing such indebtedness
shall have been released.
(u) Taj Associates shall have acquired the Specified Parcels free
and clear of all liens and encumbrances, all indebtedness of Taj
Associates to First Fidelity shall have been satisfied and the liens
securing such indebtedness shall have been released.
(v) Trump Plaza Associates shall have exercised the Trump Plaza
East Option and shall have acquired Trump Plaza East free and clear of
all liens and encumbrances.
(w) Bankers Trust shall have released all liens and other security
interests on Trump's interest in Taj Associates.
(x) THCR shall have acquired all of Trump's direct and indirect
ownership interests in Taj Associates free and clear of any liens or
adverse interests.
(y) The Senior Note Indenture shall have been amended in accordance
with the Senior Note Consent Solicitation; the transactions described in
clauses (o) through (y), inclusive, shall constitute the "Merger
Transaction" for the purpose of this Agreement.
(z) All legal opinions and accountants "comfort letters" received
in connection with any aspect of the Merger Transaction, shall be
addressed to and shall be delivered to the Underwriters or, in lieu
thereof, certificates entitling the Underwriters to rely thereon shall
have been delivered.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to satisfaction on and as of each Option Closing
Date of the conditions set forth in paragraphs (a) through (z), above, except
that the opinions called for and the letters referred to shall be revised to
reflect the sale of Additional Shares.
9. Effective Date of Agreement, Defaults and Termination.
-----------------------------------------------------
This Agreement shall become effective upon the later of (i) the execution and
delivery of this Agreement by the parties hereto, (ii) unless the Company
intends to rely on Rule 430A of the Act, the effectiveness of the Registration
Statement (including, if applicable, the registration statement filed pursuant
to Rule 462(b) under the Act) and (iii) if the Company intends to rely on Rule
430A of the Act, the earlier of the effectiveness of a post-effective amendment
filed in compliance with Rule 430A of
39
<PAGE>
the Act or the filing of a final prospectus pursuant to Rule 424(b) of the Act.
Notwithstanding the foregoing, this Agreement shall not become effective prior
to the effectiveness of the Debt Underwriting Agreement.
This Agreement may be terminated at any time on or prior to the
Closing Date by DLJ by notice to the Company if any of the following has
occurred: (i) subsequent to the date the Registration Statement is declared
effective or the date of this Agreement, any Material Adverse Change which, in
the judgment of DLJ, impairs the investment quality of the Shares, (ii) any
outbreak or escalation of hostilities or other national or international
calamity or crisis or material adverse change in the financial markets of the
United States or elsewhere or any other substantial national or international
calamity or emergency if the effect of such outbreak, escalation, calamity,
crisis or emergency would, in DLJ's judgment, make it impracticable or
inadvisable to market the Shares or to enforce contracts for the sale of the
Shares, (iii) any suspension or limitation of trading generally in securities
on NYSE, the American or Pacific Stock Exchanges or the National Association of
Securities Dealers Automatic Quotation Market, or the over-the-counter markets
or any setting of minimum prices for trading on such exchanges or markets, (iv)
any declaration of a general banking moratorium by either Federal or New York
state authorities, (v) the taking of any action by any Federal, state or local
government or agency in respect of its monetary or fiscal affairs that in DLJ's
judgment has a material adverse effect on the financial markets in the United
States, and would, in DLJ's judgment, make it impracticable or inadvisable to
market the Shares or to enforce contracts for the sale of the Shares, (vi) any
securities of the Company or any of the Subsidiaries shall have been downgraded
or placed on any "watch list" for possible downgrading or reviewed for a
possible change that does not indicate the direction of the possible change by
any "nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) of the Act, (vii) the delisting of the
Shares from the NYSE, (viii) the enactment, publication, decree or other
promulgation of any Federal, state or local statute, regulation, rule or order
of any court or other governmental authority which in the judgment of DLJ could
have a Material Adverse Effect or make it inadvisable or impractical to market
the Shares or (ix) the occurrence, scheduling of or the announcement of, or
published discussion regarding any proposed, pending, threatened or
contemplated investigation or inquest by a court or other governmental
authority in respect of the Company, the Subsidiaries or any persons required
to be licensed in connection therewith.
If this Agreement shall be terminated by the Underwriters pursuant
to clause (i), (vi), (vii), (viii) or (ix) of the second paragraph of this
Section 9 or because of the failure or refusal on the part of the Company or
the Subsidiaries to comply with the terms or to fulfill any of the conditions
of this Agreement, the Company and the Subsidiaries jointly and severally agree
to reimburse you for all reasonable out-of-pocket expenses (including the
reasonable fees and disbursements
40
<PAGE>
of counsel) incurred by the Underwriters, and (without duplication) to fulfill
the obligations of that certain engagement letter, dated January 3, 1996, as
amended and supplemented through the date hereof, among the Company its
existing and future subsidiaries and DLJ. Notwithstanding any termination of
this Agreement, the Company and the Subsidiaries shall be liable, jointly and
severally, for all expenses which they agree to pay pursuant to Section 5
hereof. If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any Underwriter to the Company or any
of the Subsidiaries.
If on the Closing Date or on an Option Closing Date, as the case
may be, any of the Underwriters shall fail or refuse to purchase the Firm
Shares or the Additional Shares, as the case may be, which it has agreed to
purchase hereunder on such date, and the number of such Firm Shares or
Additional Shares, as the case may be, that such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase does
not exceed 10% of the total number of such Shares to be purchased on such date
by all Underwriters, each non-defaulting Underwriter shall be obligated
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule I hereto bears to the number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase, or in
such other proportion as you (at your option) may specify, to purchase the Firm
Shares or Additional Shares that such defaulting Underwriter or Underwriters,
as the case may be, agreed but failed or refused to purchase on such date;
provided that in no event shall the number of Firm Shares or Additional
- --------
Shares, as the case may be, that any Underwriter has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 9 by an
number in excess of one-ninth of such number of Firm Shares or Additional
Shares without the written consent of such Underwriter. If, on the Closing
Date or on the Option Closing Date, as the case may be, any of the Underwriters
shall fail or refuse to purchase the Firm Shares or the Additional Shares, as
the case may be, and the total number of Firm Shares or Additional Shares with
respect to which such default occurs exceeds 10% of the total number of Shares
to be purchased on such date by all Underwriters and arrangements satisfactory
to you and the Company for the purchase of such Shares are not made within 48
hours after such default, this Agreement shall terminate without liability on
the part of the non-defaulting Underwriters and the Company, except as
otherwise provided in this Section 9. In any such case that does not result in
termination of this Agreement, either you or the Company may postpone the
Closing Date or such Option Closing Date, as the case may be, for not longer
than seven (7) days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve a defaulting Underwriter from liability in respect of any default of
any such Underwriter under this Agreement.
41
<PAGE>
10. Notices. Notices given pursuant to any provision of this
-------
Agreement shall be addressed as follows: (a) if to the Company, to it at
Mississippi Avenue and The Boardwalk, Atlantic City, New Jersey 08401,
Attention: Robert M. Pickus, Esq., with a copy to Willkie Farr & Gallagher at
153 East 53rd Street, New York, New York 10022, Attention: Daniel D. Rubino,
Esq. (b) if to any Underwriter, to Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, with a copy to Skadden, Arps, Slate, Meagher & Flom at 300 South
Grand Avenue, Suite 3400, Los Angeles, California 90071, Attention: Nicholas
P. Saggese, Esq. or (c) in any case to such other address as the person to be
notified may have requested in writing.
11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AS
APPLIED TO CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY, ON BEHALF OF
ITSELF AND ITS SUBSIDIARIES, HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF
NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS
AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY
DEFENSE OF LACK OF PERSONAL JURISDICTION AND IRREVOCABLY AGREE THAT ALL CLAIMS
IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
SUCH COURT. THE COMPANY, ON BEHALF OF ITSELF AND THE SUBSIDIARIES, IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
12. Severability. Any determination that any provision of
------------
this Agreement may be, or is, unenforceable shall not affect the enforceability
of the remainder of this Agreement.
13. Successors. Except as otherwise provided, this Agreement
----------
has been and is made solely for the benefit of and shall be binding upon the
Company, the Subsidiaries, the Underwriters, any Indemnified Person referred to
herein and their respective successors and assigns, all as and to the extent
provided in this
42
<PAGE>
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors and assigns" shall not include
a purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.
14. Certain Definitions. For purposes of this Agreement, (a)
-------------------
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the
Securities Act.
15. Counterparts. This Agreement may be executed in one or
------------
more counterparts and, if executed in one or more counterparts, the executed
counterparts shall each be deemed to be an original, and all such counterparts
shall together constitute one and the same instrument.
16. Headings. The headings herein are inserted for
--------
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
17. Survival. The indemnity and contribution provisions and
--------
the other agreements, representations and warranties of the Company, its
officers and directors and of the Underwriters set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Shares, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
any of the Underwriters or by or on behalf of the Company or the officers or
directors of the Company or any controlling person of the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination
of this Agreement.
43
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company and you.
Very truly yours,
TRUMP HOTELS & CASINO RESORTS, INC., on behalf of
itself and its subsidiaries (only with respect to
indemnification and related matters)
By:
-------------------------------
Name:
Title:
The foregoing Underwriting Agreement
is hereby confirmed and accepted
as of the date first above written.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
SANDS BROTHERS & CO., LTD.
Acting severally on behalf of
themselves and the several
Underwriters named in Schedule I
hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
----------------------------
Name:
Title:
<PAGE>
SCHEDULE I
Number of Firm
Shares to be
Purchased
------------
Donaldson, Lufkin & Jenrette Securities Corporation ...
Salomon Brothers Inc ..................................
BT Securities Corporation .............................
Sands Brothers & Co., Ltd. ............................
__________
Total 12,500,000
==========
<PAGE>
EXHIBIT 10.52.1
WF&G Draft 4/5/96
-----------------
AMENDED AND RESTATED EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
---------------------------------------------------------------
AMENDED AND RESTATED EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as
of April __, 1996, by and among Trump Hotels & Casino Resorts, Inc., a Delaware
corporation (the "Company"), Donald J. Trump ("Trump") and Trump Taj Mahal,
Inc., a New Jersey corporation wholly owned by Trump ("TTMI").
WHEREAS, the Company and Trump are parties to that certain Exchange and
Registration Rights Agreement (the "Initial Agreement"), dated as of June 12,
1995, relating to the conversion of limited partnership interests in Trump
Hotels & Casino Resorts Holdings, L.P. (the "Partnership") into shares of Common
Stock (as defined below) of the Company and registration rights with respect
thereto;
WHEREAS, in connection with the acquisition by the Partnership of Trump Taj
Mahal Associates ("Taj Associates") and the other transactions related thereto
(the "Merger Transaction"), (i) Trump is contributing to Trump Atlantic City
Associates ("Trump AC") (on behalf, and at the direction, of the Partnership)
shares of capital stock of The Trump Taj Mahal Corporation, ("TTMC"), which
holds a .01% general partnership interest in Taj Associates, and (ii) TTMI is
contributing to Trump AC (on behalf, and at the direction, of the Partnership)
its 49.995 general partnership interest in Taj Associates;
WHEREAS, as consideration of such contributions by Trump and TTMI, the
Partnership is issuing limited partnership interests to each of Trump and TTMI;
WHEREAS, in connection with the issuance of, and with respect to, such
limited partnership interests, the Company has agreed to grant Trump and TTMI
the exchange rights and registration rights set forth below, and pursuant to the
Initial Agreement, Trump was issued certain exchange rights and registration
rights; and
WHEREAS, the Company and Trump have agreed to amend and restate the Initial
Agreement in its entirety and to add TTMI as a party;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
ARTICLE I.
Definitions
-----------
Section 1.1. Reference to Partnership Agreement. Capitalized terms
----------------------------------
used herein and not otherwise defined herein shall have the meaning ascribed to
them in the Second Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement").
Section 1.2. Certain Definitions. Except as otherwise herein
-------------------
expressly provided, the following terms and phrases shall have the meanings as
set forth below:
"Agreement" means this Amended and Restated Exchange and Registration
Rights Agreement.
"Common Stock" means the common stock, par value $.01 per share of the
Company, and any securities into which the Common Stock has been converted or
exchanged whether pursuant to a Recapitalization Event, Merger or otherwise.
"Company" has the meaning ascribed thereto in the introduction hereto.
"Conversion Number" means the aggregate number of shares of Common
Stock issuable upon the exercise of an Optionee's entire Exchange Right, which
number shall initially be _______ with respect to Trump, and ______ with respect
to TTMI, and which numbers shall be adjusted as provided in Article II.
"Conversion Partner" means an Optionee other than (i) Trump, (ii) TTMI
and (iii) any Permitted Holder with respect to Trump.
"Conversion Right" has the meaning set forth in Section 2.2 hereof.
"Determination" has the meaning ascribed thereto in Section 2.7
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
"Exchange Right" has the meaning set forth in Section 2.1 hereof.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Letter of Transmittal" means the form of letter attached hereto and
made a part hereof pursuant to which an
-2-
<PAGE>
Optionee may tender his Partnership Interests in exchange for shares of Common
Stock.
"Option" means, collectively, the Conversion Right and the Exchange
Right.
"Optionee" means (i) Trump, (ii) TTMI and (iii) each assignee of
Partnership Interests of Trump and TTMI and any subsequent assignee.
"Partnership" has the meaning ascribed thereto in the recitals hereto.
"Partnership Agreement" has the meaning ascribed thereto in the
recitals hereto.
"Recapitalization Event" has the meaning set forth in Section 2.4(b).
"Registrable Securities" shall mean, collectively, (i) the Common
Stock issued or issuable upon exercise of the Options and (ii) any securities
issued or issuable with respect to such shares of Common Stock by way of stock
dividend, stock split, in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"Registration Expenses" means all expenses required to be disclosed in
Item 13 of Part II of the Form S-1 registration statement, or in a comparable
section of any similar form permitting an underwritten public offering, as well
as expenses of underwriters customarily reimbursed by issuers for selling
stockholders and reasonable fees and expenses of one counsel for all selling
stockholders (in respect of a demand registration) and any underwriter (for both
a demand and piggyback registration), but not including underwriting discounts
and commissions and transfer taxes.
"Rights" means any rights, options, warrants or convertible securities
(or rights, options or warrants to purchase convertible securities) containing
the right to subscribe for or purchase shares of Common Stock.
"SEC" means the Securities and Exchange Commission and any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
"Settlement Date" has the meaning ascribed thereto in Section 4.1(a)
hereof.
-3-
<PAGE>
"Special Dividend Record Date" has the meaning set forth in the
Company's Amended and Restated Certificate of Incorporation.
"Stop Order" means, with respect to any registration of the
Registrable Securities or any portion thereof effected pursuant to this
Agreement, any stop order, injunction or other order or requirement of the SEC
or any other governmental or administrative agency, or any act by any court
preventing or otherwise limiting the sale of any Registrable Securities pursuant
to such registration.
"Trump" has the meaning ascribed thereto in the introduction hereto.
"TTMI" has the meaning ascribed thereto in the introduction hereto.
Section 1.3. Rules of Construction. In this Agreement, whenever
---------------------
the context so indicates, the singular or plural number, and the masculine,
feminine or neuter gender shall each be deemed to include the other, and the
terms "he" and "him" shall refer to an Optionee. Words such as "herein,"
"hereinafter," and "hereunder" refer to this Agreement as a whole and not merely
to a subdivision in which such words appear unless the context otherwise
requires.
ARTICLE II.
The Option
Section 2.1. The Exchange Right. Each Optionee shall have the
------------------
right (the "Exchange Right"), exercisable at any time, to require the Company to
exchange shares of Common Stock for all or any portion of the properly tendered
Partnership Interests owned by such Optionee.
Section 2.2. The Conversion Right. The Company (acting through a
--------------------
majority of the Special Committee) shall have the right (the "Conversion
Right"), exercisable at any time, to require a Conversion Partner to exchange
all or any portion of the Partnership Interests owned by such Conversion Partner
for shares of Common Stock.
Section 2.3. Shares Issuable Upon Exchange. The number of shares
-----------------------------
of Common Stock to be issued by the Company to an Optionee upon exercise of an
Option shall be equal to the product of (a) a fraction, (i) the numerator of
which is the Percentage Interest of the Partnership Interests with respect to
which the Option is exercised and (ii) the denominator of which is the aggregate
Percentage Interest of the outstanding Partnership Interests held by such
Optionee immediately prior to such exercise, multiplied by (b) such Optionee's
Conversion Number.
-4-
<PAGE>
Section 2.4. Adjustment of the Conversion Number. The Conversion
-----------------------------------
Number shall be adjusted as provided in this Section 2.4 as follows:
(a) An Optionee's Conversion Number shall be reduced by the number of
shares of Common Stock issued upon any exercise its Option. Upon an
assignment of Partnership Interests by an Optionee in accordance with the
terms of the Partnership Agreement, such Optionee's Conversion Number shall
be reduced appropriately, and the Conversion Number of the assignee of such
Partnership Interests shall be equal to the amount of such reduction, or in
the case of an assignee who is also a holder of Partnership Interests, such
assignee's Conversion Number shall increase by the amount of such
reduction.
(b) Except in respect of transactions described in paragraph (c)
below, in case the Company shall (i) pay a dividend on the Common Stock in
additional shares of equity securities of the Company, (ii) subdivide or
reclassify its Common Stock, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv) issue by
reclassification of its Common Stock other securities of the Company (each
a "Recapitalization Event"), each Optionee's Conversion Number immediately
prior to the Recapitalization Event shall be adjusted such that the
Conversion Number after the Recapitalization Event shall equal, the kind
and amount of shares and other securities and property which the Optionees
would have owned or have been entitled to receive after the happening of
such Recapitalization Event had all of the Options been exercised
immediately prior to such Recapitalization Event (or any record date with
respect thereto). Any adjustment made pursuant to this paragraph (b) shall
become effective immediately after the effective date of such event and
such adjustment shall be retroactive to the record date, if any, for such
event.
(c) In case the Company shall issue Rights pro rata to all holders of
Common Stock, and the consideration payable upon exercise or conversion of
any such Right to acquire one share of Common Stock is less than the
Current Market Price on the date of and immediately prior to such issuance
of Rights, then upon the expiration of the period during which such Rights
may be exercised or converted (the "Rights Exercise Period") each
Optionee's Conversion Number immediately prior to such expiration shall be
adjusted to be that number of shares of Common Stock equal to the product
of (i) such Optionee's Conversion Number immediately prior to such
expiration and (ii) a fraction, (A) the numerator of which is equal to the
sum of the (I) number of shares of Common Stock outstanding immediately
prior to such issuance and the (II) number of shares issued upon exercise
or conversion of such Rights and (B) the denominator of which is equal to
the sum of (I) the total number of shares of Common Stock outstanding
immediately prior to such issuance and (II) the number of shares of Common
Stock which the aggregate consideration payable upon exercise or
-5-
<PAGE>
conversion of such Rights would purchase at the Current Market Price on the
date of issuance of the Rights; provided, however, in no event shall such
fraction be less than one. If an Option is exercised during the period
commencing on the record date for the issuance of the Rights and ending on
the expiration of Rights Exercise Period, then (r) the Conversion Number
upon such exercise shall be adjusted as provided in Section 2.4(c), as if
such exercise date were the end of the Rights Exercise Period, utilizing
for purposes of clause (ii)(A)(II) the number of shares of Common Stock
issued upon exercise or conversion of Rights as of such date; provided,
however, that in no event shall the fraction in clause (ii) be less than
one; and (s) at the end of the Rights Exercise Period, the Optionee shall
be issued an additional number of shares equal to the excess, if any, of
the number of shares of Common Stock which would have been issued had such
Option been exercised at the end of the Rights Exercise Period over the
number of shares actually issued upon exercise of the Option.
(d) In case the Percentage Interest of the Partnership Interests
held by an Optionee shall increase as the result of the contribution by
such Optionee of additional consideration or otherwise to the Partnership
(a "Contribution"), then the Conversion Number shall be adjusted such that
(i) such Optionee's Conversion Number immediately after the Contribution
divided by the sum of the number of outstanding shares of Common Stock plus
such new Conversion Number shall equal (ii) the product of (A) a fraction,
(I) the numerator of which is the aggregate Percentage Interest of such
Optionee immediately after the Contribution, and (II) the denominator of
which is the aggregate Percentage Interest of such Optionee immediately
prior to the Contribution, and (B) a fraction, (I) the numerator of which
is such Optionee's Conversion Number immediately prior to the Contribution,
and (II) the denominator of which is the sum of such Optionee's Conversion
Number immediately prior to the Contribution and the number of outstanding
shares of Common Stock. [For purposes of this Section 2.4(d), in the event
that more than one Optionee (or the Company and one or more Optionees)
makes a concurrent contribution to the Partnership, the calculation to
adjust the Conversion Number with respect to each contributing Optionee
shall be made with respect to each Optionee as if no other Optionee or the
Company, as applicable, was making a concurrent contribution.]
(e) In case of any consolidation or merger of the Company with or
into another entity as a result of which the
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<PAGE>
holders of Common Stock become holders of other shares or securities of the
Company or of another entity or person, or such holders receive cash or
other assets, or in case of any sale or conveyance to another person of the
property, assets or business of the Company as an entirety or substantially
as an entirety, the Company or such successor or purchasing entity or
person, as the case may be, shall execute with the Optionees an agreement
that (i) the Optionees shall have the right thereafter to receive upon
exercise of their Options the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or
conveyance had its Option been exercised immediately prior to such action
and (ii) that this Agreement including the registration rights in Article V
hereof, shall continue in full force and effect notwithstanding the
consummation of such transaction and that such person or entity shall
assume the obligations of the Company hereunder. The agreements referred to
in this Section 2.4(e) shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in
the other provisions in this Section 2.4. The provisions of this Section
2.4(e) shall similarly apply to successive consolidations, mergers, sales
or conveyances.
Section 2.5. Company's Covenant Regarding Certain Rights Offerings.
-----------------------------------------------------
The Company covenants and agrees that it shall not issue Rights pro rata to all
holders of Common Stock, unless such Rights are exercisable or convertible for a
period not in excess of sixty (60) days from their date of issuance.
Section 2.6. Reservation. The Company shall at all times reserve
-----------
and keep available out of its authorized but unissued Common Stock the full
number of shares of Common Stock deliverable at such time upon the exercise of
the Options and shall take all such action and obtain all such permits or orders
as may be necessary to enable the Company lawfully to issue such Common Stock
upon the exercise of the Option and to cause such Common Stock to be fully paid
and nonassessable.
Section 2.7. Determination of Number of Shares. The Company shall
---------------------------------
calculate (each, a "Determination") the number of shares of Common Stock to be
issued upon the exercise of an Option pursuant to this Agreement in connection
with such exercise. After each exercise of an Option, the Company shall
promptly provide the Optionees a report, certified by the Chief Financial
Officer of the Company and its independent public accountants, setting forth the
Determination, and setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based. Each Determination will be
made by the Company in good faith and in accordance with the provisions hereof.
The Company shall, at any time upon the written request of an Optionee, furnish
to such Optionee a like report setting forth the number of shares of Common
Stock
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<PAGE>
issuable upon the exercise of an Option and showing in reasonable detail the
derivation of such number of shares of Common Stock.
Section 2.8. Continuous Offer. This Agreement is a continuous
----------------
offer and may not be withdrawn, changed or modified by the Company or a
Conversion Partner without the prior written consent of the Company and each
Optionee.
ARTICLE III.
Procedure for Exercising the Option
Section 3.1 The Exercise of the Exchange Right.
----------------------------------
(a) Each Optionee desiring to exercise his Exchange Right with
respect to all or a portion of his Partnership Interests may do so by
delivering to the Company, at The Boardwalk and Mississippi Avenue,
Atlantic City, New Jersey 08401, Attn: Corporate Secretary (or such other
address as the Company shall provide in writing to each Optionee) a
completed and duly executed Letter of Transmittal and any other documents
required by the Letter of Transmittal.
(b) The tender of Partnership Interests pursuant to this Section 3.1
shall constitute a binding agreement between the tendering Optionee and the
Company and will not be subject to withdrawal or change except with the
consent of the Company.
(c) All questions as to the validity and form of any tender of
Partnership Interests upon the exercise of the Option will be determined in
good faith by the Company.
Section 3.2. Representation of Optionee. Any exercise of an
--------------------------
Exchange Right hereunder by an Optionee shall constitute a representation by
such Optionee that it is acquiring the Common Stock to be issued upon the
exercise of the Exchange Right for purposes of investment and not with a view to
distribution (without any limitation of any rights such Person may have under
Article V hereof) in violation of any federal or state securities laws.
Section 3.3. The Exercise of the Conversion Right.
------------------------------------
If the Company exercises the Conversion Right with respect to all or
a portion of the Partnership Interests of a Conversion Partner, the Company
may do so by delivering to the Conversion Partner at his address appearing
on the books of the Partnership, a notice setting forth (i) the Company's
election to exercise the Conversion Right, (ii) the portion of the
Partnership Interest with respect to which the Conversion Right is
exercised, and (iii) that delivery of shares of Common Stock as the
consideration for the Partnership Interest subject to the Conversion Right
shall
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<PAGE>
not be made until the Conversion Partner has submitted a duly completed
Letter of Transmittal and any other documents required by the Letter of
Transmittal, which Letter of Transmittal and other documents shall be
completed and delivered promptly to the Company.
(b) All questions as to the validity and form of any tender of
Partnership Interests upon the exercise of the Conversion Right will be
determined in good faith by the Company.
ARTICLE IV
Settlement of the Option
Section 4.1. Settlement of the Option.
------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
the Company will issue shares of Common Stock for Partnership Interests
properly tendered on that date (the "Settlement Date") which is the later
of: (i) the expiration of three (3) Business Days from the date that the
Company receives the tender of the Partnership Interests in proper form and
meeting all of the requirements of this Agreement, which requirements may
be waived by the Company in connection with a Conversion Right, (ii) the
earlier of (A) ten (10) Business Days after the exercise of the Exchange
Right, or (B) one day after the Special Dividend Record Date, and (iii) the
expiration or termination of the waiting period applicable to each tender,
if any, under HSR. The Optionee shall be deemed to be the record holder of
the Common Stock issuable upon exercise of the Option on the Settlement
Date, notwithstanding the fact that certificates with respect to such
shares of Common Stock may not have been issued on such date.
(b) Upon the exercise of an Option, the General Partner shall use its
reasonable best efforts (including, without limitation, forming and
properly capitalizing a subsidiary for the purpose of holding all or a
portion of the Partnership Interests being transferred upon exercise of the
Option) and cooperate with the remaining Optionees to the extent necessary
to preserve the treatment of the Partnership as a pass-through entity for
federal tax purposes.
(c) Each tender and the issuance of Common Stock with respect thereto
will be subject to any change in securities or other applicable law
imposing limits or conditions on such tender or the issuance of Common
Stock with respect thereto.
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<PAGE>
(d) Payment for the Partnership Interests tendered pursuant to this
Agreement will be made only after timely receipt by the Company of (i)
Certificates of Interest with respect to such Partnership Interests, duly
completed and executed by the Partnership in the name of the Optionee and
duly endorsed by the Optionee for transfer to, or accompanied by stock
powers duly executed by the Optionee in favor of, the Company, (ii) a
properly completed and duly executed Letter of Transmittal and (iii) any
other documents required by the Letter of Transmittal.
Section 4.2. Tax Withholding. Unless an exception applies under
---------------
applicable law and regulations, the Company will be required to withhold, and
will withhold, 31 percent (or such other amount as applicable law may require)
of the gross proceeds (including dollar equivalent of shares of Common Stock)
paid to a tendering Optionee unless the Optionee provides his tax identification
number (employer identification number or Social Security Number) and certifies
that such number is correct.
Section 4.3. Rights as Partner/Stockholder.
-----------------------------
(a) No Optionee shall, by virtue of this Agreement, have any rights as
a stockholder of the Company until such time as that person becomes a
holder of record of shares of Common Stock.
(b) The Company, effective as of the Settlement Date with respect to
any tendered Partnership Interest, assumes all obligations related to the
tendered Partnership Interest and will hold the Person tendering that
Partnership Interest harmless from any such obligations other than with
respect to any breach of any representation contained in the Letter of
Transmittal to be delivered in connection with the exercise of rights
pursuant to this Agreement.
(c) Until the Settlement Date, each tendering Optionee shall continue
to own his respective tendered Partnership Interests, and will continue to
be treated as the holder of such tendered Partnership Interests for all
purposes of the Partnership Agreement, including, without limitation, for
purposes of voting, consent, allocations and distributions (subject only to
reasonable accounting conventions adopted by the Partnership for purposes
of determining the partners' varying percentage interests in the
Partnership during the taxable year). Tendered Partnership Interests will
be transferred to the Company only upon receipt by the tendering Optionee
of Common Stock in payment in full therefor.
Section 4.4. HSR. If in connection with the exercise of an
---
Option, such Optionee is required to file a notification form pursuant to the
HSR, then as promptly as practicable, and in any event within ten (10) Business
Days following the exercise of
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<PAGE>
the Option, such Optionee and the Company shall each prepare and file, or shall
cause its "ultimate parent" (as defined in the HSR) to prepare and file, any
required notification and report form under the HSR, in connection with the
transactions contemplated hereby, the filing fees for which shall be borne by
the Company. Such Optionee and the Company shall, or shall cause their ultimate
parents to, request early termination of the waiting period with respect to such
filing and to respond with reasonable diligence to any request for additional
information made in response to such filings.
ARTICLE V.
Registration Rights
Section 5.1. Registration on Demand.
----------------------
(a) Upon written notice to the Company from holders of at least twenty
percent (20%) of the Registrable Securities, determined as if the Exchange
Right had been fully exercised, of their desire to cause a registration of
the Registrable Securities, the Company shall (i) inform the other holders
of Registrable Securities (at least 30 days prior to the proposed filing of
any registration statement), such notice to state the identity of the
holders requesting registration and the number of Registrable Securities
proposed to be sold thereby, and take appropriate action, on a reasonably
timely basis, to file with the SEC a registration statement on the
appropriate form covering all Registrable Securities specified in such
demand and by such other holders (by notice given to the Company within 15
days after the date the Company notified them of such demand), (ii) use
best efforts to cause such registration statement to become effective under
the Securities Act and (iii) use best efforts to qualify such resale under
those state securities laws reasonably requested by the holders of a
majority of Registrable Securities to be included in such registration;
provided, however, that such effort shall not require the Company to
qualify as a foreign corporation or subject itself to taxation in any
jurisdiction where it is not already so qualified or subject. The Company
shall be obligated to effect four (4) registrations pursuant to this
Section 5.1. The Company shall be obligated to effect any registration
pursuant to this Section 5.1 as promptly as practicable upon receipt from
the requisite number of holders of Registrable Securities of the notice
requesting such registration; provided, however, that the Company shall
have the right to delay any registration pursuant to this Section 5.1 for
one period of up to thirty (30) days if the Board of Directors of the
Company shall have determined (and passed a resolution to such effect) that
to effectuate such registration at such time would materially and adversely
affect the Company and be materially detrimental to the business and
operations thereof (a "Blackout
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<PAGE>
Determination"), which period may be extended for an additional thirty (30)
days upon a second Blackout Determination upon the expiration of the first
thirty (30) day period.
(b) The Company will be obligated to pay all Registration Expenses
with respect to the registrations pursuant to this Section 5.1.
(c) Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has been
declared effective and they have been disposed of pursuant to such
effective registration statement, (ii) such Registrable Securities shall
have been otherwise transferred, and the Company shall have delivered new
certificates or other evidences of ownership for them not subject to any
stop transfer order or other restriction on transfer and not bearing a
legend restricting transfer in the absence of an effective registration or
an exemption from the registration requirements of the Securities Act and
subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law
then in force, or (iii) such Registrable Securities shall have ceased to be
outstanding.
(d) A registration requested pursuant to this Section 5.1 will not be
deemed to have been effected unless it has been declared effective by the
SEC and the Company has complied with all of its obligations under this
Agreement with respect thereto (without regard to the use of best efforts
or the like); provided that such registration will be deemed not to have
been effected if after such registration has become effective, the offering
of the Registrable Securities (or any portion thereof) pursuant to such
registration is withdrawn or is or becomes the subject of any Stop Order.
If (i) a registration requested pursuant to this Section 5.1 is deemed not
to have been effected or (ii) the registration requested pursuant to this
Section 5.1 does not remain effective for a period of at least 360 days,
then (x) such requested registration shall not be deemed to be an effective
registration pursuant to this Section 5.1 and (y) such requested
registration shall not reduce the number of registrations the Company shall
be obligated to effect pursuant to this Section 5.1.
(e) Any offering of Registrable Securities contemplated by this
Section 5.1 shall, unless the holders of a majority of the Registrable
Securities to be included in such offering determine otherwise, be a firm
commitment underwritten offering and the managing underwriter for such
offering shall be chosen by the holders of a majority of the Registrable
Securities to be included therein, which managing underwriter shall be
reasonably acceptable to the Company.
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<PAGE>
(f) The Company shall not, without the prior written consent of the
holders of a majority of the Registrable Securities to be included in any
registration requested pursuant to this Section 5.1, include in such
registration, any other securities of the Company; provided, however, that
the Company may include in any such registration any securities to the
extent that the inclusion of such securities does not have the effect
referred to in Section 5.1(g) hereof and so long as the sale of such
securities is included in the underwriting of the Registrable Securities
and the same underwriters are used.
(g) If the managing underwriter in a public offering to be effected
pursuant to the provisions of this Section 5.1 advises the Company and the
holders of the Registrable Securities in writing that in its opinion
inclusion in the registration of the total amount of securities requested
to be registered will materially and adversely affect the offering price of
such securities or will materially and adversely affect the market for such
securities, then, to the extent necessary, up to the entire amount of any
securities proposed to be included in such registration which are not
Registrable Securities shall be eliminated.
(h) The Company shall not be required to register Registrable
Securities which, together with any other securities to be included in such
registration, have a value, based on the proposed offering price, of less
than $2,000,000.
Section 5.2. Incidental Registration.
-----------------------
(a) If the Company intends to file a registration statement on Form
S-1, S-2 or S-3 (or other appropriate form) for the registration of an
offering of equity securities with the SEC, the Company shall notify each
of the holders of record of Registrable Securities at least 30 days prior
to each such filing of the Company's intention to file such a registration
statement, such notice shall state the number of shares of equity
securities proposed to be registered thereby. If any holder of Registrable
Securities notifies the Company within ten days after receipt of such
notice from the Company of its desire to have included in such registration
statement any of its Registrable Securities, then the Company shall cause
the Company to include such shares in such registration statement. The
Company shall pay all the Registration Expenses of such registration.
(b) The Company may in its discretion withdraw any registration
statement filed pursuant to this Section 5.2 subsequent to its filing
without liability to the holders of Registrable Securities.
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<PAGE>
(c) In the event that the managing underwriter for any such offering
described in this Section 5.2 notifies the Company that, in good faith, it
is able to proceed with the proposed offering only with respect to a
smaller number of securities (the "Maximum Number") than the total number
of Registrable Securities proposed to be offered by such holders and
securities proposed to be offered by the Company and all others entitled to
registration rights under such registration statement, then the Company
shall reduce the number of securities held by persons (the "Piggyback
Holders") other than the Company and persons exercising demand registration
rights to be included in such registration, to the extent necessary to
reduce the number of securities to be included in such registration to an
amount equal to the Maximum Number. Such amount will be allocated pro rata
in accordance with the number of securities proposed to be offered by each
Piggyback Holder (including the holders of Registrable Securities).
Section 5.3. Indemnity and Contribution.
--------------------------
(a) In connection with a registration statement filed with the
Commission pursuant to this Article V, the Company shall provide each
holder of Registrable Securities included in such registration statement,
and each officer and director of any thereof, and each person who controls
such holder within the meaning of Section 15 of the Securities Act, and
Section 20 of the Exchange Act, with indemnification against any losses,
claims, damages or liabilities, reasonable attorneys fees, costs or
expenses and costs and expenses of investigating and defending any such
claims (collectively "Damages"), joint or several, to which any of them may
become subject under the federal securities laws, or otherwise, in form and
substance as is customarily given to underwriters in an underwritten
offering of securities. Each holder including Registrable Securities in
any such registration statement agrees that it shall indemnify the Company,
and each officer and director thereof, and each person who controls the
Company within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act, against any Damages, in form and substance as is
customarily given by selling shareholders to publicly held corporation in
an underwritten public offering of securities, but only to the extent that
such Damages (or proceedings in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement
under which such securities are registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein or in any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary
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<PAGE>
to make the statements therein not misleading, which, in each such case,
has been made in or omitted from such registration statement, said
preliminary or final prospectus or said amendment or supplement solely in
reliance upon, and in conformity with, written information furnished to the
Company by such holder of Registrable Securities.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section
5.3(a) is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, each of the
Company and the holders of the Registrable Securities included in such
registration shall contribute to the aggregate Damages contemplated by said
indemnity agreement incurred by each of the Company and such holders of the
Registrable Securities, as incurred, in such proportions as is appropriate
to reflect the relative fault of the Company and such holders of the
Registrable Securities in connection with the statements or omissions which
resulted in such Damages. The relative fault of the Company and such
holders of Registrable Securities shall be determined by reference to,
among other things, whether the untrue or alleged untrue statements of a
material fact or the omission or alleged omission to state a material fact
was supplied by the Company or one or more of the holders of Registrable
Securities, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
(c) In no event shall a holder of Registrable Securities be liable for
indemnification or contribution pursuant to this Article V in excess of the
net proceeds received upon the sale of such Registrable Securities.
Section 5.4. Certain Procedures. The Company shall provide each
------------------
holder of Registrable Securities included in any registration with a "cold
comfort" letter from the Company's independent public accountants, in customary
form covering those matters customarily covered by a "cold comfort" letter with
respect to any such registration statement and addressed to such holder, and the
Company shall use its best efforts to execute and deliver with underwriters for
the offering covered by any such registration statement, an underwriting
agreement in form and substance customarily executed for public offerings of
common stock. Any holder of Registrable Securities that includes shares in the
registration shall also be a party to such underwriting agreement.
Section 5.5. Rule 144 Reporting. With a view to making available
------------------
to the holders of Registrable Securities the benefits of certain rules and
regulations of the SEC which may permit the sale of the Registrable Securities
to the public without registration, the Company agrees to, at all times:
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<PAGE>
(1) make and keep available current public information concerning
the Company as those terms are understood and defined in Rule 144
under the Securities Act ("Rule 144");
(2) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(3) furnish to each holder of Registrable Securities forthwith
upon such holder's request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and
documents so filed by the Company as such holder may reasonably
request in availing itself of any rule or regulation of the SEC
allowing it to sell any such securities without registration.
Section 5.6. Lock-Ups. After receipt of any notice pursuant to
--------
Section 5.1 or 5.2 hereof, each holder of Registrable Securities and the Company
shall not demand or request a registration of securities of the Company or
otherwise offer or sell securities until the later of (i) 90 days after the
effective date of the registration statement in respect of which such notice was
given, (ii) 150 days after the date such notice was given [or (iii) the date
such registration statement is withdrawn by the Company]. To the extent
requested by the managing underwriter in respect of an offering of securities of
the Company described in this Article V, each holder of Registrable Securities
and the Company shall agree to refrain from selling or offering to sell any
securities of the Company within 120 days after the effective date of any
registration statement described herein. Nothing in this Section 5.6 shall
preclude the Company from issuing shares of Registrable Securities upon exercise
of an Option.
Section 5.7. No Inconsistent Provisions. The Company shall not,
--------------------------
without the prior written consent of the holders of a majority of the
Registrable Securities include, or grant to any Person the right to request the
Company to include, in such registration, any other securities of the Company
that are inconsistent with the priorities, rights and privileges of the holders
of Registrable Securities contained in this Agreement.
ARTICLE VI.
Miscellaneous
Section 6.1. Waiver, Amendment. Neither this Agreement nor any
-----------------
provisions hereof shall be waived, modified,
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<PAGE>
changed, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, modification, change, discharge or
termination is sought.
Section 6.2. Assignability. Neither this Agreement nor any right,
-------------
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by either an Optionee or the Company, without the prior written
consent of the other parties; provided, however, that the rights granted to an
Optionee hereunder shall automatically be assigned in connection with an
assignment of Partnership Interests or Registrable Securities; provided further,
however, the rights granted hereunder may be assigned to a secured creditor to
whom an Optionee has pledged Partnership Interests or Registrable Securities.
Section 6.3. Entire Agreement. This Agreement sets forth the
----------------
entire agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby and supersedes any and all prior agreements and
understandings relating to the subject matter hereof. No representation,
promise or statement of intention has been made by any party hereto which is not
embodied in this Agreement or the written statements, certificates, exhibits or
other documents delivered pursuant hereto or in connection with the transactions
contemplated hereby, and no party hereto shall be bound by or liable for any
alleged representation, promise or statement of intention not set forth herein
or therein. The documents referred to in the immediately preceding sentence are
incorporated by reference herein and shall be deemed a part of this Agreement.
By executing and delivering this Agreement, the Company and Trump agree to the
termination of the Initial Agreement and to the amendment and restatement
thereof by this Agreement.
Section 6.4. Severability. If any provision of this Agreement or
------------
the application of any such provision to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, this Agreement shall continue in full force and effect without
said provision; provided that no such severance of provision shall be effective
if it materially changes the economic benefit of this Agreement to any Person.
Section 6.5. Section and Other Headings. The section headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Section 6.6. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of New York, regardless
of the law that might be applied under principles of conflicts of law.
-17-
<PAGE>
Section 6.7. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall be deemed to be one and
the same agreement.
Section 6.8. Specific Performance. Without limiting or waiving in
--------------------
any respect any rights or remedies of an Optionee under this Agreement, or now
or hereinafter existing at law or in equity or by statute, the Company agrees
that the Optionees shall be entitled to seek specific performance of the
obligations to be performed by the Company in accordance with the provisions of
this Agreement.
Section 6.9. Notice. Each notice, demand, request, request for
------
approval, consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a "notice") required or
desired to be given or made under this Agreement shall be in writing (except as
otherwise provided in this Agreement), and shall be effective and deemed to have
been received (i) when delivered in person, (ii) when sent by facsimile
transmission with receipt acknowledged, (iii) three (3) days after having been
mailed by certified or registered United States mail, postage prepaid, return
receipt requested, or (iv) the next business day after having been sent by a
nationally recognized overnight mail or courier service, receipt requested (a)
if to any Optionee, at such address or to the telefax number as such Optionee
shall have furnished the Company in writing, or (b) if to the Company, at the
address of its principal executive offices and addressed to the attention of the
Corporate Secretary, or at such other address or to the telefax number as the
Company shall have furnished to each Optionee.
-18-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and date first set forth above.
TRUMP HOTELS & CASINO RESORTS, INC.
By:
---------------------------------
Robert M. Pickus
Executive Vice President
TRUMP TAJ MAHAL, INC.
By:
---------------------------------
Donald J. Trump
President
---------------------------------
Donald J. Trump
<PAGE>
LETTER OF TRANSMITTAL
To Tender Partnership Interests
Pursuant to the Amended and Restated Exchange and
Registration Rights Agreement
Dated as of April __, 1996
of
Trump Hotels & Casino Resorts, Inc.
TO: Trump Hotels & Casino Resorts, Inc.
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Corporate Secretary
Description of Partnership Interests
_____________________________________________________________________________
Names(s) and Address(es) Partnership Interest Certificate(s)
of Registered Owners Enclosed (Attach additional list if
necessary)
Partnership Partnership Partnership
Interest Interests Interests
Certificate Represented Being
Number(s) by Tendered
Partnership
Interest
Certificate(s)
______________________________________
Total
Unless otherwise indicated, it will be assumed that all Partnership Interests
evidenced by any Partnership Interest Certificate(s) delivered to the Company
are being tendered. If, for any reason, Partnership Interest Certificates are
not being issued by Trump Hotels & Casino Resorts Holdings, L.P., all provisions
in this Letter of Transmittal referring thereto shall be of no effect. See
instruction 4.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
The undersigned hereby tenders to Trump Hotels & Casino Resorts, Inc., a
Delaware corporation (the "Company"), the above-described Partnership Interests
as defined in the Company's Amended and Restated Exchange and Registration
Rights Agreement dated as of April __, 1996 (the "Agreement") in accordance with
the terms and conditions of the Agreement and this Letter of Transmittal (which
together constitutes the "Tender"), receipt of which is hereby acknowledged.
All terms used herein but not defined herein are used as defined in the
Agreement.
Subject to, and effective upon, payment (i.e., issuance of shares of Common
----
Stock) for the Partnership Interests tendered herewith, the undersigned hereby
assigns and transfers to the Company all right, title and interest in and to all
the Partnership Interests that are being tendered hereby and irrevocably
constitutes and appoints the Company (the "Agent"), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) present such Partnership Interests for
transfer on the Partnership's books and (b) receive all rights, privileges and
benefits, and any and all obligations and liabilities appertaining thereto and
otherwise exercise all rights of beneficial ownership of such Partnership
Interests, all in accordance with the terms of the Tender.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Partnership Interests and that upon payment, the Company will acquire
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute any additional documents deemed by the
Agent or the Company to be reasonably necessary or desirable to complete the
sale, assignment and transfer of the tendered Partnership Interests. If not
sold pursuant to an effective registration statement, the shares of Common Stock
issued will bear an appropriate legend indicating that such shares have not been
registered under the Securities Act and resale of such Common Stock is
restricted under applicable securities laws.
<PAGE>
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators and legal
representatives of the undersigned. Except as stated in the Agreement, this
Tender is irrevocable.
The undersigned understands that a tender of Partnership Interests pursuant
to the Agreement constitutes a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Agreement.
Unless otherwise indicated under "Special Delivery Instructions", please
mail the shares of Common Stock for the purchase price and/or return the
Partnership Interest Certificate for Partnership Interests not tendered (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Partnership Interests."
In the event that the Special Delivery Instructions are completed, please
issue the shares of Common Stock for the purchase price and any Certificate for
Partnership Interests not tendered in the name of the registered holder(s) and
transmit the same to the person or persons so indicated.
The Company, effective as of the Settlement Date (as defined in the
Agreement), will assume all obligations related to the tendered Partnership
Interests and will hold the undersigned harmless from such obligations,
including any liabilities, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and expenses as a result
of or arising out of the ownership of such tendered Partnership Interests.
The Company and the undersigned agree that they will cooperate with each
other and will make, execute, acknowledge, deliver, record and file, or cause to
be made, executed, acknowledged, delivered, recorded and filed, at such times
and places as the other may reasonably deem necessary, all other and further
documents and instruments, and will take all other and further actions, as the
other may reasonably request from time to time in order to effectuate the
purposes and provisions of the tender made pursuant to this Letter of
Transmittal.
-2-
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5 and 6)
To be completed ONLY if (a) the Certificate of Interests includes Partnership
Interests not tendered and/or (b) shares of Common Stock for the purchase price
of Partnership Interests purchased are to be sent (i) to someone other than the
undersigned or (ii) to the undersigned at an address other than that above.
Mail / / Certificate(s) for shares of Common Stock
/ / Certificate of Interests for Partnership
Interests not tendered
To:
Name _________________________________________________________
(please print)
Address ______________________________________________________
______________________________________________________________
(include Zip Code)
______________________________________________________________
______________________________________________________________
(Tax Identification or Social Security Number)
<PAGE>
SIGN HERE
Complete Substitute Form W-9 included
_________________________________________________________________
_________________________________________________________________
(Signature(s) of holder of Partnership Interests)
(Must be signed by registered holder(s) as name(s) appear(s) on Partnership
Interest Certificate(s). If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 5.
Dated___________________________________________________________
Name(s)_________________________________________________________
(please print)
Capacity
(Full Title)____________________________________________________
Address_________________________________________________________
________________________________________________________________
(include Zip Code)
Area Code and Tel. No.__________________________________________
Tax Identification or
Social Security No._____________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature_______________________________________________________
Name of
Firm____________________________________________________________
Dated___________________________________________________________
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Amended and Restated Exchange and Registration Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this Letter of
Transmittal is required unless the registered holder of the Partnership
Interests has completed the box entitled "Special Delivery Instructions". In
such case all signatures on this Letter of Transmittal must be guaranteed by a
member firm of any registered national securities exchange in the United States
or of the National Association of Securities Dealers, Inc. or by a commercial
bank or trust company (not a savings bank or a savings and loan association)
having an office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PARTNERSHIP INTEREST
CERTIFICATE(S). This Letter of Transmittal is to be completed by the holder of
Partnership Interests. Partnership Interest Certificate(s) for all Partnership
Interests as well as a properly completed and duly executed Letter of
Transmittal, and any other documents required by this Letter of Transmittal,
must be received by the Agent.
No alternative, conditional or contingent tenders will be accepted.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
Partnership Interest Certificate numbers and/or other information required
should be listed on a separate schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all the Partnership Interests evidenced
by any Certificate submitted are to be tendered, fill in the Percentage Interest
represented by the Partnership Interests which are to be tendered in the box
entitled "Units of Partnership Interests Being Tendered." In such case, a new
Partnership Interest Certificate for the remainder of the Partnership Interests
that was evidenced by old certificate(s) will be sent to the registered holder,
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable. All Partnership Interests represented by Partnership
Interest Certificate(s) delivered to the Agent will be deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must correspond
with the name as written on the face of the Partnership Interest Certificate(s)
without any change whatsoever.
If any of the Partnership Interests tendered hereby are owned of record by
two or more joint owners, all such owners must sign the Letter of Transmittal.
<PAGE>
If any tendered Partnership Interests are registered in different names on
several Partnership Interest Certificates, it will be necessary to complete,
sign and submit as many separate Letters of Transmittal as there are different
registrations of Partnership Interest Certificates.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, each person should so indicate
when signing, and proper evidence satisfactory to the Agent of their authority
so to act must be submitted.
6. SPECIAL DELIVERY INSTRUCTIONS. If Partnership Interest Certificate(s)
for unpurchased Partnership Interests are to be returned to a person other than
the signer of this Letter of Transmittal or if a certificate for shares of
Common Stock is to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this letter of Transmittal should be completed.
7. WAIVER OF CONDITIONS. The Company reserves the right to waive any of
the specified conditions of the Tender in the case of the Partnership Interests
tendered.
8. BACK-UP WITHHOLDING. Under the Federal income tax law, a person
surrendering Partnership Interests must provide the Agent with his correct
taxpayer identification number ("TIN") on Substitute Form W-9 below unless an
exemption applies. If the correct TIN is not provided, a $50 penalty may be
imposed by the Internal Revenue Service and payments made in exchange for the
surrendered Partnership Interests may be subject to back-up withholding of that
rate provided by the Federal income tax law (such rate being at the date hereof,
31%).
The TIN that must be provided is that of the registered holder of the
Partnership Interests. The TIN for an individual is his social security number.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Agreement and the Letter of
Transmittal may be directed to the Agent at the address set forth above.
-2-
<PAGE>
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered Partnership
interests are accepted for payment is required by law to provide the Agent (as
payer) with his correct taxpayer identification number on Substitute Form W-9
below. If such holder is an individual, the taxpayer identification number is
his social security number. If the Agent is not provided with the correct
taxpayer identification number, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such holder with respect to Partnership Interests purchased pursuant to the
Tender may be subject to back-up withholding.
If back-up withholding applies, the Agent is required to withhold that rate
provided by the Federal income tax law (such rate being at the date hereof, 31%)
of any such payments made to the holder of Partnership Interests. Shares of
Common Stock otherwise deliverable hereunder may, at the expense (and with all
risk of loss for the account) of the undersigned, be sold to pay such amounts.
Back-up withholding is not an additional tax. Rather, the tax liability of
persons subject to back-up withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a holder of
Partnership Interests purchased pursuant to the Tender, the holder is required
to notify the Agent of his correct taxpayer identification number by completing
the form below certifying that the taxpayer identification number provided on
Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Agent the social security number or
employer identification number of the record owner of the Partnership Interests.
<PAGE>
PAYER'S NAME: Trump Hotels & Casino Resorts, Inc.
Substitute Part 1 - Please provide Social Security
Form W-9 your TIN in the box at Number/Employer
right and certify by Identification Number
signing and dating below ____________
- --------------------------------------------------------------------------------
Department of the Certification - Under the
Treasury/ Internal penalties of Perjury, (i)
Revenue Service I certify that the
information provided on
this form is true, correct
and complete and (ii) I am
not subject to backup
withholding because: (a) I
am exempt from backup
withholding, or (b) I have
not been notified by the
Internal Revenue Service
(IRS) that I am subject to
backup withholding as a
result of a failure to
report all interest or
dividends, or (c) the IRS
has notified me that I am
no longer subject to
backup withholding.
- --------------------------------------------------------------------------------
Signature Date __________
____________________
================================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING
OF THAT RATE PROVIDED BY THE FEDERAL INCOME TAX LAW (SUCH RATE BEING AT
THE DATE HEREOF, 31%) OF ANY PAYMENTS MADE TO YOU UNDER THE AMENDED AND
RESTATED EXCHANGE AND REGISTRATION RIGHTS AGREEMENT OF TRUMP HOTELS &
CASINO RESORTS, INC.
<PAGE>
EXHIBIT 10.53.1
WF&G Draft
4/3/96
1996 CONTRIBUTION AGREEMENT
---------------------------
1996 CONTRIBUTION AGREEMENT, dated as of April __, 1996, between
Donald J. Trump ("Trump"), Trump Taj Mahal, Inc., a New Jersey corporation
wholly owned by Trump ("TTMI"), TM/GP Corporation, a New Jersey corporation
("TM/GP" and collectively with Trump and TTMI, the "Transferors"), and Trump
Hotels & Casino Resorts Holdings, L.P., a Delaware limited partnership (the
"Transferee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, each of TTMI and TM/GP holds a 49.995% general partnership
interest in Trump Taj Mahal Associates ("Taj Associates, and each of Trump and
Taj Mahal Holding Corp. ("Taj Holding") owns 50% of the capital stock of The
Trump Taj Mahal Corporation ("TTMC"), which holds a .01% general partnership
interest in Taj Associates;
WHEREAS, concurrently with the execution of this Agreement, the
Transferors and Transferee are entering into a Second Amended and Restated
Agreement of Limited Partnership of the Transferee, dated as of the date hereof
(the "Partnership Agreement"), pursuant to which Trump will continue as a
Limited Partner (as defined therein) of the Transferee and each of TM/GP and
TTMI will become Limited Partners of the Transferee on the terms and subject to
the conditions set forth therein; and
WHEREAS, in connection with the acquisition of Taj Associates by the
Transferee and the other transactions related thereto (the "Merger
Transaction"), Trump Hotels & Casino Resorts, Inc. ("THCR") will cause Taj
Holding to contribute the shares of capital stock of TTMC to TM/GP, and each of
Trump, TTMI and TM/GP will then contribute their respective interests in Taj
Associates and TTMC to the Transferee on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and the other agreements being entered in connection
with the Merger Transaction and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
ARTICLE I.
The Contribution
----------------
Section 1.1. The Capital Contribution. Effective as of the date
------------------------
hereof and in fulfillment of the obligation of the Transferors to make the
capital contributions pursuant to Section [4.1] of the Partnership Agreement,
each of the Transferors hereby contributes, transfers, assigns and conveys to
the Transferee all right, title and interest in and to those assets of the
respective Transferor set forth opposite its name on Schedule A hereto (the
foregoing being referred to collectively as the "Assets").
Section 1.2. Direction of Transfer. Transferee hereby directs that
---------------------
the Transferors effect the transfer of the Assets by contributing, transferring,
assigning and conveying such Assets, on behalf of the Transferee, directly to
the Transferee's wholly owned subsidiary, Trump Atlantic City Associates.
ARTICLE II.
The Consideration
-----------------
Section 2.1. Obligations of the Transferee. In further
-----------------------------
consideration for the contribution of the Assets pursuant to Section 1.1, the
Transferee, on behalf of itself and its subsidiaries now existing and hereafter
acquired, hereby:
(i) accepts all right, title and interest in and to the Assets and
does hereby assume and agree to promptly and fully pay, perform and
discharge when due all obligations and liabilities associated with the
Assets (collectively, the "Assumed Liabilities," including, without
limitation, all obligations and liabilities of each of TTMI, TM/GP and TTMC
as a general partner of Taj Associates, but excluding any liabilities
arising out of breaches of the representations and warranties of the
Transferors contained in Article III hereof); and
(ii) agrees to indemnify the Transferors against all actions,
proceedings, costs, damages, claims and demands arising in connection with
the Assumed Liabilities subsequent to the date hereof except insofar as
such actions, proceedings, costs, damages, claims and demands arise out of
the gross negligence or willful misconduct of such Transferor.
2
<PAGE>
ARTICLE III.
Representations and Warranties
------------------------------
Each Transferor hereby severally represents and warrants to the
Transferee that, as of the date hereof:
Section 3.1. Due Execution and Delivery; Enforceability. This
------------------------------------------
Agreement has been duly executed and delivered by such Transferor in accordance
with its terms and is a legal, valid and binding agreement of such Transferor
enforceable against such Transferor in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
Section 3.2. No Conflicts. The execution, delivery and performance
------------
of this Agreement by such Transferor, and the consummation of the transactions
contemplated hereby, do not and will not conflict with or result in a breach or
violation of (i) any of the respective charters or by-laws of such Transferor or
any of its subsidiaries, as applicable, (ii) any of the terms or provisions of,
or constitute a default or cause an acceleration or any obligation under, or
result in the imposition or creation of (or the obligation to create or impose),
any security interest, mortgage, pledge, claim, lien, encumbrance or adverse
interest of any nature (each, a "Lien") with respect to any obligation, bond
agreement, note, debenture or other evidence of indebtedness or any indenture,
mortgage, deed of trust or other agreement, lease or instrument to which such
Transferor or any of its Affiliates is a party or by which such Transferor or
any of its Affiliates is bound or to which any of the properties or assets of
such Transferor or any of its Affiliates (including, without limitation, the
Assets transferred by such Transferor) may be subject or (iii) any Federal,
state or local law, rule, administrative regulation or ordinance or order of any
court or governmental agency, body or official having jurisdiction over such
Transferor or any of the Assets transferred by such Transferor, except, in the
case of clauses (ii) and (iii), for such conflicts, breaches, violations,
defaults or Liens that would not have a material adverse effect on the Assets
transferred by such Transferor (a "Material Adverse Effect").
Section 3.3. No Consents or Approvals. No authorization, approval,
------------------------
consent or order of, or filing with, any court or governmental body, agency or
official, including the New Jersey Casino Control Commission, the New Jersey
Department of Environmental Protection and the Indiana Gaming Commission, is
necessary in connection with the transactions contemplated by this Agreement,
except those of which have been obtained or made on or prior to the date hereof.
3
<PAGE>
Section 3.4. Title to Assets. Such Transferor has good title to
---------------
the Assets that it is transferring pursuant to this Agreement, free and clear of
any Liens.
ARTICLE IV.
Further Documents
-----------------
Each of the Transferors and the Transferee hereby undertakes that it
will, and will cause its Affiliates to, execute and undertake to perform at the
Transferee's expense all such further agreements, documents and other actions as
may be reasonably necessary for vesting the Assets in the Transferee and Trump
AC and otherwise for giving full effect to this Agreement.
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Waiver, Amendment. Neither this Agreement nor any
-----------------
provision hereof shall be waived, amended, modified, changed, discharged or
terminated except by an instrument in writing executed by the Transferors and
the Transferee.
Section 5.2. Assignability. Neither this Agreement nor any right,
-------------
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by the Transferors or the Transferee, without the prior written
consent of each other parties.
Section 5.3. Entire Agreement. This Agreement, together with the
----------------
schedule hereto, sets forth the entire agreement and understanding of the
parties hereto with respect to the transactions contemplated hereby and
supersedes any and all prior agreements and understandings relating to the
subject matter hereof. No representation, promise or statement of intention has
been made by any party hereto which is not embodied in this Agreement or the
written schedules or other documents delivered pursuant hereto or in connection
with the transactions contemplated hereby, and no party hereto shall be bound by
or liable for any alleged representation, promise or statement of intention not
set forth herein or therein. All of the documents referred to in the
immediately preceding sentence are hereby incorporated by reference and shall be
deemed a part of this Agreement with the same effect as if set forth in full
herein.
4
<PAGE>
Section 5.4. Severability. If any provision of this Agreement or
------------
the application of any such provision to any person or circumstance shall be
held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, this Agreement shall continue in full force and effect without
said provision.
Section 5.5. Section and Other Headings. The section headings
--------------------------
contained in this Agreement and the schedules thereto are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
Section 5.6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. THE TRANSFERORS AND
THE TRANSFEREE HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW JERSEY
STATE COURT SITTING IN ATLANTIC CITY, NEW JERSEY OR ANY FEDERAL COURT SITTING IN
ATLANTIC CITY, NEW JERSEY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR THEMSELVES AND
IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS. THE TRANSFERORS AND THE TRANSFEREE IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION
WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN ANY
INCONVENIENT FORUM.
Section 5.7. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which together shall be deemed to be one and
the same agreement.
Section 5.8. Notice. Each notice, demand, request, request for
------
approval, consent, approval, disapproval, designation or other communication
(each of the foregoing being referred to herein as a "notice") required or
desired to be given or made under this Agreement shall be in writing (except as
otherwise provided in this Agreement), and shall be effective and deemed to have
been received (i) when delivered in person, (ii) when sent by facsimile
transmission with receipt acknowledged, (iii) three (3) days after having been
mailed by certified or registered United States mail, postage prepaid, return
receipt requested, or (iv) the next business day after having been sent by a
nationally recognized overnight mail or courier service, receipt requested (a)
if to Trump or TTMI, at 725 Fifth Avenue, 26th Floor, New York, NY 10022 or (b)
if to TM/GP or the Transferee, at Mississippi Avenue and The Boardwalk, Atlantic
City, New Jersey 08401 and addressed to the attention of the Corporate
Secretary.
5
<PAGE>
Section 5.9. Compliance with State Gaming Regulations. Each of
----------------------------------------
the provisions of this Agreement is subject to and shall be enforced in
compliance with the provisions, regulations or approvals required by any state
gaming authority, including, without limitation, the New Jersey Casino Control
Commission and the Indiana Gaming Commission.
Section 5.10. Third Party Rights. Except as otherwise set forth
------------------
herein, nothing in this Agreement is intended or shall be construed to confer
upon or give any Person, other than the parties hereto, Trump AC and THCR, and
each of their respective successors, any rights or remedies under or by reason
of this Agreement or any transaction contemplated hereby.
Section 5.11. Limitation on Damages. No party shall be liable to
---------------------
the other parties for any consequential damages resulting from a breach of this
Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
--------------------------------
DONALD J. TRUMP
TRUMP TAJ MAHAL, INC.
By:-----------------------------
Donald J. Trump
President
TM/GP CORPORATION
By:-----------------------------
Nicholas F. Moles
Secretary
TRUMP HOTELS & CASINO RESORTS
HOLDINGS, L.P.
By: Trump Hotels & Casino Resorts, Inc.,
its general partner
By:------------------------
Robert M. Pickus
Executive Vice President
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SCHEDULE A
ASSETS
TRANSFEROR ASSETS TRANSFERRED
- -----------------------------------------------------------------
Donald J. Trump 20 shares of Common Stock of
The Trump Taj Mahal Corporation
Trump Taj Mahal, Inc. 49.995% general partnership
interest in Trump Taj Mahal
Associates
TM/GP Corporation 20 shares of Common Stock of
The Trump Taj Mahal Corporation
and
49.995% general partnership
interest in Trump Taj Mahal
Associates
A-1
<PAGE>
EXHIBIT 10.62
WF&G DRAFT 4/2/96--Alt Page 1 $30
Warrant No. W-001
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO TRUMP HOTELS & CASINO RESORTS, INC., QUALIFIES AS AN
EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK PURCHASE WARRANT
TRUMP HOTELS & CASINO RESORTS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, DONALD J. TRUMP
("Trump"), or his assigns, is entitled, subject to the terms set forth below, to
purchase from the Company, at any time and from time to time during the period
beginning on April 17, 1996 and ending on April 17, 1999 in whole or in part, an
aggregate of six hundred thousand (600,000) fully paid and non-assessable shares
of the Common Stock of the Company, par value $ .01 per share, at a purchase
price, subject to the provisions of Section 3 hereof, of $30.00 per share (the
"Purchase Price"). The Purchase Price and the number and character of such
shares are subject to adjustment as provided below, and the term "Common Stock"
shall mean, unless the context otherwise requires, the stock or other securities
or property at the time deliverable upon the exercise of this Warrant. This
Warrant is herein called the "Warrant."
1. EXERCISE OF WARRANT. The purchase rights evidenced by this
Warrant shall be exercised by the holder surrendering this Warrant, with the
form of subscription at the end hereof duly executed by such holder, to the
Company at its office in Atlantic City, New Jersey, accompanied by payment, of
an amount (the "Exercise Amount") equal to the Purchase Price multiplied by the
number of shares being purchased pursuant to such exercise, payable as follows:
(i) by payment to the Company in cash, by certified or official bank check, or
by wire transfer of the Exercise Amount, (ii) by surrender to the Company for
cancellation of securities of the Company having a Market Price (as hereinafter
defined) on the date of exercise equal to the Exercise Amount; or (c) by a
combination of the methods described in clauses (a) and (b) above. In lieu of
exercising the Warrant, the holder may elect to receive a payment equal to the
difference between (i) the Market Price multiplied by the number of shares as to
which the payment is then being elected and (ii) the exercise price with respect
to such shares, payable by the Company to the holder of this Warrant only in
shares of Common Stock valued at the Market Price on the date of exercise. For
purposes hereof, the term "Market Price" shall mean the average closing price of
a share of Common Stock for the 15 consecutive trading days preceding such day
on the principal national securities exchange on which the shares of Common
Stock or securities are listed or admitted to trading or, if not listed or
admitted to trading on any national securities exchange, the average of the
reported bid and asked prices during such 15 trading day period in the over-the-
counter market as furnished by the National Quotation Bureau, Inc., or, if such
firm is not then engaged in the business of reporting such prices, as furnished
by any member of the National Association of Securities Dealers, Inc. selected
by the Company or, if the shares of Common Stock or securities are not publicly
traded, the Market Price for such day shall be the fair market value thereof
determined jointly by the Company and the holder of this Warrant; provided,
however, that if such parties are unable to reach agreement within a reasonable
period of time, the Market Price shall be determined in good faith by the
independent investment banking firm selected jointly by the Company and the
holder of this Warrant or, if that selection cannot be made within 15 days, by
an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules.
<PAGE>
1.1 Partial Exercise. This Warrant may be exercised for less than
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the full number of shares of Common Stock, in which case the number of shares
receivable upon the exercise of this Warrant as a whole, and the sum payable
upon the exercise of this Warrant as a whole, shall be proportionately reduced.
Upon any such partial exercise, the Company at its expense will forthwith issue
to the holder hereof a new Warrant or Warrants of like tenor calling for the
number of shares of Common Stock as to which rights have not been exercised,
such Warrant or Warrants to be issued in the name of the holder hereof or his
nominee (upon payment by such holder of any applicable transfer taxes).
2. DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant and payment of the Purchase
Price, and in any event within ten (10) days thereafter, the Company, at its
expense, will cause to be issued in the name of and delivered to the holder
hereof a certificate or certificates for the number of fully paid and non-
assessable shares or other securities or property to which such holder shall be
entitled upon such exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash in an amount determined in accordance
with Section 3.9 hereof. The Company agrees that the shares so purchased shall
be deemed to be issued to the holder hereof as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid.
3. ANTI-DILUTION PROVISIONS AND OTHER ADJUSTMENTS. In order to
prevent dilution of the right granted hereunder, the Purchase Price shall be
subject to adjustment from time to time in accordance with this Section 3. Upon
each adjustment of the Purchase Price pursuant to this Section 3, the registered
holder of this Warrant shall thereafter be entitled to acquire upon exercise, at
the Purchase Price resulting from such adjustment, the number of shares of the
Company's Common Stock obtainable by multiplying the Purchase Price in effect
immediately prior to such adjustment by the number of shares of the Company's
Common Stock acquirable immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such adjustment.
3.1. Adjustment for Issue or Sale of Common Stock at less than Market
----------------------------------------------------------------
Price.
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(a) Except as provided in Section 3.2 or 3.5 below, if and whenever on after
the date of issuance hereof the Company shall issue or sell, or shall in
accordance with subsections 3.1(1) to (9), inclusive, be deemed to have issued
or sold, any shares of its Common Stock for a consideration per share less than
the Purchase Price in effect immediately prior to the time of such issue or
sale, then forthwith upon such issue or sale (the "Triggering Transaction"), the
Purchase Price shall, subject to subsections (1) to (9) of this Section 3.1, be
reduced to the lower of the prices (calculated to the nearest tenth of a cent)
determined as follows:
(i) by dividing (a) an amount equal to the sum of (x) the product
derived by multiplying the Number of Common Shares Deemed Outstanding
immediately prior to such Triggering Transaction by the Purchase Price then
in effect, plus (y) the consideration, if any, received by the Company upon
consummation of such Triggering Transaction, by (b) an amount equal to the
sum of (x) the Number of Shares Deemed Outstanding immediately prior to
such Triggering Transaction plus (y) the number of shares of Common Stock
issued (or deemed to be issued in accordance with subsections 3.1(1) to
(9)) in connection with the Triggering Transaction; and
(ii) by multiplying the Purchase Price in effect immediately
prior to the time of such issue or sale by a fraction, the numerator of
which shall be the sum of (x) the Number of Shares Deemed Outstanding
immediately prior to such Triggering Transaction multiplied by the Market
Price immediately prior to such Triggering Transaction plus (y) the
consideration received by the Company upon such Triggering Transaction, and
the denominator of which shall be the product of (x) the Number of Shares
Deemed Outstanding immediately after such issue or sale, multiplied by (y)
the Market Price immediately prior to such issue or sale.
(b) For purposes of this Section 3, the term "Number of Common Shares
Deemed Outstanding" at any given time shall mean the sum of (i) the number of
shares of the Company's Common Stock
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outstanding at such time, and (ii) the number of shares of the Company's Common
Stock deemed to be outstanding under subsections 3.1(1) to (9), inclusive, at
such time.
(c) For purposes of determining the adjusted Purchase Price under
this Section 3.1, the following subsections (1) to (9), inclusive, shall be
applicable:
(1) In case the Company at any time shall in any manner
grant (whether directly or by assumption in a merger or otherwise) any
rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or other securities convertible
into or exchangeable for Common Stock (such rights or options being
herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether or
not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable and the price per
share for which the Common Stock is issuable upon exercise, conversion
or exchange (determined by dividing (x) the total amount, if any,
received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by
(y) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or the conversion or exchange of such
Convertible Securities) shall be less than the Purchase Price in
effect immediately prior to the time of the granting of such Option,"
then the total maximum amount of Common Stock issuable upon the
exercise of such Options, or, in the case of Options for Convertible
Securities, upon the conversion or exchange of such Convertible
Securities, shall (as of the date of granting of such Options) be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. No adjustment of the Purchase Price
shall be made upon the actual issue of such shares of Common Stock or
such Convertible Securities upon the exercise of such Options, except
as otherwise provided in subsection (3) below.
(2) In case the Company at any time shall in any manner
issue (whether directly or by assumption in a merger or otherwise) or
sell any Convertible Securities, whether or not the rights to exchange
or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (x) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Purchase Price in
effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities) be
deemed to be outstanding and to have been issued and sold by the
Company for such price per share. No adjustment of the Purchase Price
shall be made upon the actual issue of such Common Stock upon exercise
of the rights to exchange or convert under such Convertible
Securities, except as otherwise provided in subsection (3) below.
(3) If the purchase price provided for in any Options
referred to in subsection (1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities
referred to in subsections (1) or (2), or the rate at which any
Convertible Securities referred to in subsection (1) or (2) are
convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect
against dilution of the type set forth in Section 3.1 or 3.3), the
Purchase Price in effect at the time of such change shall forthwith be
readjusted to the Purchase Price
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which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Option referred to in subsection
(1) or the rate at which any Convertible Securities referred to in
subsections (1) or (2) are convertible into or exchangeable for Common
Stock, shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise of any such
Option or upon conversion or exchange of any such Convertible
Security, the Purchase Price then in effect hereunder shall forthwith
be adjusted to such respective amount as would have been obtained had
such Option or Convertible Security never been issued as to such
Common Stock and had adjustments been made upon the issuance of the
shares of Common Stock delivered as aforesaid, but only if as a result
of such adjustment the Purchase Price then in effect hereunder is
hereby reduced.
(4) On the expiration of any Option or the termination of
any right to convert or exchange any Convertible Securities, the
Purchase Price then in effect hereunder shall forthwith be increased
to the Purchase Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with
the issue or sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued without consideration.
(6) In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor. In case any
shares of Common Stock, Options or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be the
fair value of such consideration as determined in good faith by the
Board of Directors of the Company. In case any shares of Common
Stock, Options or Convertible Securities shall be issued in connection
with any merger in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value
of such portion of the net assets and business of the non-surviving
corporation as shall be attributed by the Board of Directors of the
Company in good faith to such Common Stock, Options or Convertible
Securities, as the case may be.
(7) The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the
account of the Company, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock for the
purpose of this Section 3.1.
(8) In case the Company shall declare a dividend or make
any other distribution upon the stock of the Company payable in Common
Stock, Options, or Convertible Securities, then in such case any
Common Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed
to have been issued or sold without consideration.
(9) For purposes of this Section 3.1, in case the Company
shall take a record of the holders of its Common Stock for the purpose
of entitling them (x) to receive a dividend or other distribution
payable in Common Stock, Options or in Convertible Securities, or (y)
to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed
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to have been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the granting of
such right or subscription or purchase, as the case may be.
3.2. Dividends Not Paid Out of Earnings or Earned Surplus. In the
----------------------------------------------------
event the Company shall declare a dividend upon the Common Stock (other than a
dividend payable in Common Stock covered by subsection 3.1(8)) payable otherwise
than out of earnings or earned surplus, determined in accordance with generally
accepted accounting principles, including the making of appropriate deductions
for minority interests, if any, in subsidiaries (herein referred to as
"Liquidating Dividends"), then, as soon as possible after the exercise of this
Warrant, the Company shall pay to the person exercising such Warrant an amount
equal to the aggregate value at the time of such exercise of all Liquidating
Dividends (including but not limited to the Common Stock which would have been
issued at the time of such earlier exercise and all other securities which would
have been issued with respect to such Common Stock by reason of stock splits,
stock dividends, mergers or reorganizations, or for any other reason). For the
purposes of this Section 3.2, a dividend other than in cash shall be considered
payable out of earnings or earned surplus only to the extent that such earnings
or earned surplus are charged an amount equal to the fair value of such dividend
as determined in good faith by the Board of Directors of the Company.
3.3. Subdivisions and Combinations. In case the Company shall at any
-----------------------------
time subdivide (other than by means of a dividend payable in Common Stock
covered by subsection 3.1(8)), its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and, conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased.
3.4. Reorganization, Reclassification, Consolidation, Merger or Sale
---------------------------------------------------------------
of Assets. If any capital reorganization or reclassification of
---------
the capital stock of the Company, or consolidation or merger of the Company with
another corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or other property with
respect to or in exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holder of this Warrant shall have
the right to acquire and receive upon exercise of this Warrant such shares of
stock, securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, consolidation, merger or sale) with respect to
or in exchange for such number of outstanding shares of the Company's Common
Stock as would have been received upon exercise of this Warrant at the Purchase
Price then in effect. The Company will not effect any such consolidation, merger
or sale, unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument mailed or
delivered to the holder of this Warrant at the last address of such holder
appearing on the books of the Company, the obligation to deliver to such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase. If a purchase, tender or
exchange offer is made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock of the Company, the Company shall not effect
any consolidation, merger or sale with the person having made such offer or with
any Affiliate of such person, unless prior to the consummation of such
consolidation, merger or sale the holder of this Warrant shall have been given a
reasonable opportunity to then elect to receive upon the exercise of this
Warrant either the stock, securities or assets then issuable with respect to the
Common Stock of the Company or the stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer. For purposes hereof the term "Affiliate" with respect to any given
person shall mean any person controlling, controlled by or under common control
with the given person.
3.5. No Adjustment for Exercise of Certain Options, Warrants, Etc.
-------------------------------------------------------------
The provisions of this Section 3 shall not apply to any Common Stock issued,
issuable or deemed outstanding under subsections 3.1(1) to (9) inclusive: (i)
to any person pursuant to any stock option, stock purchase or similar plan or
arrangement for the benefit of employees, consultants or directors of the
Company or its subsidiaries in effect on the date of
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issuance hereof, (ii) pursuant to options, warrants and conversion rights in
existence on the date of issuance hereof or (iii) pursuant to the Exchange and
Registration Rights Agreement, dated June 12, 1995, between the Company and
Trump, as it may be amended from time to time.
3.6. Notices of Record Date, Etc. In the event that:
---------------------------
(1) the Company shall declare any cash dividend upon its Common
Stock, or
(2) the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock, or
(3) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights, or
(4) there shall be any capital reorganization or reclassification
of the capital stock of the Company, including any subdivision or
combination of its outstanding shares of Common Stock, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the holder of
this Warrant:
(i) at least twenty (20) days' prior written notice of the date
on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least twenty (20) days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (i)
shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause
(ii) shall also specify the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Each such written notice shall be given by first class mail, postage
prepaid, addressed to the holder of this Warrant at the address of such
holder as shown on the books of the Company.
3.7. Grant, Issue or Sale of Options, Convertible Securities, or
-----------------------------------------------------------
Rights. If at any time or from time to time on or after the
------
date of issuance hereof, the Company shall grant, issue or sell any Options,
Convertible Securities or rights to purchase property (the "Purchase Rights")
pro rata to the record holders of any class of Common Stock of the Company and
such grants, issuances or sales do not result in an adjustment of the Purchase
Price under Section 3.1 hereof, then the holder of this Warrant shall be
entitled to acquire (within thirty (30) days after the later to occur of the
initial exercise date of such Purchase Rights or receipt by such holder of the
notice concerning Purchase Rights to which such holder shall be entitled under
Section 3.6) and upon the terms applicable to such Purchase Rights either:
(i) the aggregate Purchase Rights which such holder could have
acquired if it had held the number of shares of Common Stock acquirable
upon exercise of this Warrant immediately before the grant, issuance or
sale of such Purchase Rights; provided that if any Purchase Rights were
distributed to holders of Common Stock without the payment of additional
consideration by such holders, corresponding Purchase Rights shall be
distributed to the exercising holder of this Warrant as
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soon as possible after such exercise and it shall not be necessary for the
exercising holder of this Warrant specifically to request delivery of such
rights; or
(ii) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said thirty (30) day period,
the number of shares of Common Stock or the amount of property which such
holder could have acquired upon such exercise at the time or times at which
the Company granted, issued or sold such expired Purchase Rights.
3.8. Adjustment by Board of Directors. If any event occurs as to
--------------------------------
which, in the opinion of the Board of Directors of the Company, the provisions
of this Section 3 are not strictly applicable or if strictly applicable would
not fairly protect the rights of the holder of this Warrant in accordance with
the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid, but in no event shall any adjustment have the effect of
increasing the Purchase Price as otherwise determined pursuant to any of the
provisions of this Section 3 except in the case of a combination of shares of a
type contemplated in Section 3.3 and then in no event to an amount larger than
the Purchase Price as adjusted pursuant to Section 3.3.
3.9. Fractional Shares. The Company shall not issue fractions of
-----------------
shares of Common Stock upon exercise of this Warrant or scrip in lieu thereof.
If any fraction of a share of Common Stock would, except for the provisions of
this Section 3.9, be issuable upon exercise of this Warrant, the Company shall
in lieu thereof pay to the person entitled thereto an amount in cash equal to
the current value of such fraction, calculated to the nearest one-hundredth
(1/100) of a share, to be computed (i) if the Common Stock is listed on any
national securities exchange on the basis of the last sales price of the Common
Stock on such exchange (or the quoted closing bid price if there shall have been
no sales) on the date of conversion, or (ii) if the Common Stock shall not be
listed, on the basis of the mean between the closing bid and asked prices for
the Common Stock on the date of conversion as reported by NASDAQ, or its
successor, and if there are not such closing bid and asked prices, on the basis
of the fair market value per share as determined by the Board of Directors of
the Company.
3.10. Officers' Statement as to Adjustments. Whenever the Purchase
-------------------------------------
Price shall be adjusted as provided in Section 3 hereof, the Company shall
forthwith file at each office designated for the exercise of this Warrant, a
statement, signed by the Chairman of the Board, the President, any Vice
President or Treasurer of the Company, showing in reasonable detail the facts
requiring such adjustment and the Purchase Price that will be effective after
such adjustment. The Company shall also cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to the record
holder of this Warrant at his or its address appearing on the stock register.
If such notice relates to an adjustment resulting from an event referred to in
Section 3.6, such notice shall be included as part of the notice required to be
mailed and published under the provisions of Section 3.6 hereof.
4. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of
its charter or through reorganization, consolidation, merger, dissolution, sale
of assets or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder hereof against dilution or other impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of any
shares of stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise, and at all times will take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable stock upon the exercise of this
Warrant.
5. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
Company shall at all times reserve and keep available out of its authorized but
unissued stock, solely for the issuance and delivery upon the exercise of this
Warrant and other similar Warrants, such number of its duly
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authorized shares of Common Stock as from time to time shall be issuable upon
the exercise of this Warrant and all other similar Warrants at the time
outstanding.
6. REGISTRATION RIGHTS. The holder of this warrant shall have the
following registration rights with respect to the Common Stock:
6.1. Registration on Demand. (a) Upon written notice to the Company
----------------------
from holders of at least twenty-five percent (25%) of the Registrable Securities
(as hereinafter defined), determined as if the Warrant had been fully exercised,
of their desire to cause a registration of the Registrable Securities, the
Company shall (i) inform the other holders of Registrable Securities (at least
30 days prior to the proposed filing of any registration statement), such notice
to state the identity of the holders requesting registration and the number of
Registrable Securities proposed to be sold thereby, and take appropriate action,
on a reasonably timely basis, to file with the Securities and Exchange
Commission (the "SEC") a registration statement on the appropriate form covering
all Registrable Securities specified in such demand and by such other holders
(by notice given to the Company within 15 days after the date the Company
notified them of such demand), (ii) use best efforts to cause such registration
statement to become effective under the Securities Act and (iii) use best
efforts to qualify such resale under those state securities laws reasonably
requested by the holders of a majority of Registrable Securities to be included
in such registration; provided, however, that such effort shall not require the
Company to qualify as a foreign corporation or subject itself to taxation in any
jurisdiction where it is not already so qualified or subject. The Company shall
be obligated to effect two (2) registrations pursuant to this Section 6.1. The
Company shall be obligated to effect any registration pursuant to this Section
6.1 as promptly as practicable upon receipt from the requisite number of holders
of Registrable Securities of the notice requesting such registration; provided,
however, that the Company shall have the right to delay any registration
pursuant to this Section 6.1 for one period of up to thirty (30) days if the
Board of Directors of the Company shall have determined (and passed a resolution
to such effect) that to effectuate such registration at such time would
materially and adversely affect the Company and be materially detrimental to the
business and operations thereof (a "Blackout Determination"), which period may
be extended for an additional thirty (30) days upon a second Blackout
Determination upon the expiration of the first thirty (30) day period. For
purposes hereof, the term "Registrable Securities" shall mean, collectively, (i)
the Common Stock issued or issuable upon exercise of the Warrant and (ii) any
securities issued or issuable with respect to such shares of Common Stock by way
of stock dividend, stock split, in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
(b) The Company will be obligated to pay all Registration Expenses
with respect to the registrations pursuant to this Section 6.1.
(c) Registrable Securities will cease to be such when (i) a
registration statement covering such Registrable Securities has been declared
effective and they have been disposed of pursuant to such effective registration
statement, (ii) they shall have been otherwise transferred, and the Company
shall have delivered new certificates or other evidences of ownership for them
not subject to any stop transfer order or other restriction on transfer and not
bearing a legend restricting transfer in the absence of an effective
registration or an exemption from the registration requirements of the
Securities Act and subsequent disposition of them shall not require registration
or qualification of them under the Securities Actor any similar state law then
in force, or (iii) they shall have ceased to be outstanding.
(d) A registration requested pursuant to this Section 6.1 will not be
deemed to have been effected unless it has been declared effective by the SEC
and the Company has complied with all of its obligations under this Warrant with
respect thereto (without regard to the use of best efforts or the like);
provided that such registration will be deemed not to have been effected if
after such registration has become effective, the offering of the Registrable
Securities (or any portion thereof) pursuant to such registration is withdrawn
or is or becomes the subject of any Stop Order (as hereinafter defined). If (i)
a registration requested pursuant to this Section 6.1 is deemed not to have been
effected or (ii) the registration requested pursuant to this Section 6.1 does
not remain effective for a period of at least 360 days, then (x) such requested
registration shall
8
<PAGE>
not be deemed to be an effective registration pursuant to this Section 6.1 and
(y) such requested registration shall not reduce the number of registrations the
Company shall be obligated to effect pursuant to this Section 6.1. For the
purposes hereof, the term "Stop Order" shall mean, with respect to any
registration of the Registrable Securities or any portion thereof effected
pursuant to this Warrant, any stop order, injunction or other order or
requirement of the SEC or any other governmental or administrative agency, or
any act by any court preventing or otherwise limiting the sale of any
Registrable Securities pursuant to such registration.
(e) Any offering of Registrable Securities contemplated by this
Section 6.1 shall, unless the holders of a majority of the Registrable
Securities to be included in such offering determine otherwise, be a firm
commitment underwritten offering and the managing underwriter for such offering
shall be chosen by the holders of a majority of the Registrable Securities to be
included therein, which managing underwriter shall be reasonably acceptable to
the Company.
(f) The Company shall not, without the prior written consent of the
holders of a majority of the Registrable Securities to be included in any
registration requested pursuant to this Section 6.1, include in such
registration, any other securities of the Company; provided, however, that the
Company may include in any such registration any securities to the extent that
the inclusion of such securities does not have the effect referred to in
subsection 6.1(g) hereof and so long as the sale of such securities is included
in the underwriting of the Registrable Securities and the same underwriters are
used.
(g) If the underwriter in a public offering to be effected pursuant
to the provisions of this Section 6.1 advises the Company and the holders of the
Registrable Securities in writing that in its opinion inclusion in the
registration of the total amount of securities requested to be registered will
materially and adversely affect the offering price of such securities or will
materially and adversely affect the market for such securities, then, to the
extent necessary, up to the entire amount of any securities proposed to be
included in such registration which are not Registrable Securities shall be
eliminated.
(h) The Company shall not be required to register Registrable
Securities which, registration together with any other securities to be included
in such, have a value, based on the proposed offering price, of less than
$2,000,000.
6.2. Incidental Registration. (a) If the Company intends to file a
-----------------------
registration statement on Form S-1, S-2 or S-3 (or other appropriate form) for
the registration of an offering of equity securities with the SEC, the Company
shall notify each of the holders of record of Registrable Securities at least 30
days prior to each such filing of the Company's intention to file such a
registration statement, such notice shall state the number of shares of equity
securities proposed to be registered thereby. If any holder of Registrable
Securities notifies the Company within ten days after receipt of such notice
from the Company of its desire to have included in such registration statement
any of its Registrable Securities, then the Company shall cause the Company to
include such shares in such registration statement. The Company shall pay all
the Registration Expenses (as hereinafter defined) of such registration. For
the purposes hereof, the term "Registration Expenses" shall mean all expenses
required to be disclosed in Item 13 of Part II of the Form S-1 registration
statement, or in a comparable section of any similar form permitting an
underwritten public offering, as well as expenses of underwriters customarily
reimbursed by issuers for selling stockholders and reasonable fees and expenses
of one counsel for all selling stockholders (in respect of a demand
registration) and any underwriter (for both a demand and piggyback
registration), but not including underwriting discounts and commissions and
transfer taxes.
(b) The Company may in its discretion withdraw any registration
statement filed pursuant to this Section 6.2 subsequent to its filing without
liability to the holders of Registrable Securities.
(c) In the event that the managing underwriter for any such offering
described in this Section 6.2 notifies the Company that, in good faith, it is
able to proceed with the proposed offering only with respect to a smaller number
of securities (the "Maximum Number") than the total number of Registrable
Securities proposed to be offered by such holders and securities proposed to be
offered by the Company and all others
9
<PAGE>
entitled to registration rights under such registration statement, then the
Company shall reduce the number of securities held by persons (the "Piggyback
Holders") other than the Company and persons exercising demand registration
rights to be included in such registration, to the extent necessary to reduce
the number of securities to be included in such registration to an amount equal
to the Maximum Number. Such amount will be allocated pro rata in accordance with
the number of securities proposed to be offered by each Piggyback Holder
(including the holders of Registrable Securities).
6.3. Indemnity and Contribution. (a) In connection with a
--------------------------
registration statement filed with the SEC pursuant to this Section 6, the
Company shall provide each holder of Registrable Securities included in such
registration statement, and each officer and director of any thereof, and each
person who controls such holder within the meaning of Section 15 of the
Securities Act, and Section 20 of the Securities Exchange Act of 1934 (the
"Exchange Act") , with indemnification against any losses, claims, damages or
liabilities, reasonable attorneys fees, costs or expenses and costs and expenses
of investigating and defending any such claims (collectively "Damages"), joint
or several, to which any of them may become subject under the federal securities
laws, or otherwise, in form and substance as is customarily given to
underwriters in an underwritten offering of securities. Each holder including
Registrable Securities in any such registration statement agrees that it shall
indemnify the Company, and each officer and director thereof, and each person
who controls the Company within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act, against any Damages, in form and substance
as is customarily given by selling shareholders to publicly held corporation in
an underwritten public offering of securities, but only to the extent that such
Damages (or proceedings in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained, on
the effective date thereof, in any registration statement under which such
securities are registered under the Securities Act, in any preliminary
prospectus or final prospectus contained therein or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
case, has been made in or omitted from such registration statement, said
preliminary or final prospectus or said amendment or supplement solely in
reliance upon, and in conformity with, written information furnished to the
Company by such holder of Registrable Securities.
(b) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in subsection 6.3(a)
is for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, each of the Company and the holders of
the Registrable Securities shall contribute to the aggregate Damages
contemplated by said indemnity agreement incurred by each of the Company and the
holders of the Registrable Securities, as incurred, in such proportions as is
appropriate to reflect the relative fault of the Company and the holders of the
Registrable Securities in connection with the statements or omissions which
resulted in such Damages. The relative fault of the Company on one hand and the
holders of the Registrable Securities on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statements of a material fact or the omission or alleged omission to state a
material fact was supplied by the Company on one hand and the holders of the
Registrable Securities on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(c) In no event shall a holder of Registrable Securities be liable
for indemnification or contribution pursuant to this Section 6 in excess of the
net proceeds received upon the sale of such Registrable Securities.
6.4. Certain Procedures. The Company shall provide each holder of
------------------
Registrable Securities included in any registration with (i) a "cold comfort"
letter from the Company's independent public accountants, in customary form
covering those matters customarily covered by a "cold comfort" letter with
respect to any such registration statement and addressed to such holder; and
(ii) use its best efforts to execute and deliver with underwriters for the
offering covered by any such registration statement, an underwriting agreement
in form and substance customarily executed for public offerings of common stock.
10
<PAGE>
6.5. Rule 144 Reporting. With a view to making available to the
------------------
holders of Registrable Securities the benefits of certain rules and regulations
of the SEC which may permit the sale of the Registrable Securities to the public
without registration, the Company agrees to, at all times:
(1) make and keep available current public information
concerning the Company as those terms are understood and defined in Rule
144 under the Securities Act("Rule 144");
(2) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(3) furnish to each holder of Registrable Securities forthwith
upon such holder's request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so
filed by the Company as such holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration.
6.6. Lock-Ups. After receipt of any notice pursuant to Section 6.1
--------
or 6.2 hereof, each holder of Registrable Securities and the Company shall not
demand or request a registration of securities of the Company or otherwise offer
or sell securities until the later of (i) 90 days after the effective date of
the registration statement in respect of which such notice was given, (ii) 150
days after the date such notice was given or (iii) the date such registration
statement is withdrawn by the Company. To the extent requested by the managing
underwriter in respect of an offering of securities of the Company described in
this Section 6, each holder of Registrable Securities and the Company shall
agree to refrain from selling or offering to sell any securities of the Company
within 120 days after the effective date of any registration statement described
herein. Nothing in this Section 6.6 shall preclude the Company from issuing
shares of Registrable Securities upon exercise of the Warrant.
6.7. No Inconsistent Provisions. The Company shall not, without the
--------------------------
prior written consent of the holders of a majority of the Registrable Securities
include, or grant to any person or entity the right to request the Company to
include, in such registration, any other securities of the Company that are
inconsistent with the priorities, rights and privileges of the holders of
Registrable Securities contained in this Warrant.
7. REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to it, or (in the case of mutilation) upon surrender and
cancellation thereof, the Company will issue, in lieu thereof, a new Warrant of
like tenor.
8. REMEDIES. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that the same may be specifically enforced.
9. NEGOTIABILITY, ETC. This Warrant is issued upon the following
terms, to all of which each taker or owner hereof consents and agrees:
(a) Subject to the legend appearing on the first page hereof,
title to this Warrant may be transferred by endorsement (by the holder
hereof executing the form of assignment at the end hereof including
guaranty of signature) and delivery in the same manner as in the case of a
negotiable instrument transferable by endorsement and delivery.
(b) Any person in possession of this Warrant properly endorsed
is authorized to represent himself as absolute owner hereof and is granted
power to transfer absolute title hereto by
11
<PAGE>
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or
rights in this Warrant in favor of every such bona fide purchaser, and
every such bona fide purchaser shall acquire title hereto and to all rights
represented hereby.
(c) Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder of this Warrant as the
absolute owner hereof for all purposes without being affected by any notice
to the contrary.
(d) Prior to the exercise of this Warrant, the holder hereof
shall not be entitled to any rights of a shareholder of the Company with
respect to shares for which this Warrant shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Company, except as
provided herein.
(e) The Company shall not be required to pay any Federal or
state transfer tax or charge that may be payable in respect of any transfer
involved in the transfer or delivery of this Warrant or the issuance or
conversion or delivery of certificates for Common Stock in a name other
than that of the registered holder of this Warrant or to issue or deliver
any certificates for Common Stock upon the exercise of this Warrant until
any and all such taxes and charges shall have been paid by the holder of
this Warrant or until it has been established to the Company's satisfaction
that no such tax or charge is due.
10. SUBDIVISION OF RIGHTS. This Warrant (as well as any new warrants
issued pursuant to the provisions of this Section) is exchangeable, upon the
surrender hereof by the holder hereof, at the principal office of the Company
for any number of new warrants of like tenor and date representing in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock of the Company which may be subscribed for and purchased hereunder.
11. MAILING OF NOTICES, ETC. All notices and other communications
from the Company to the holder of this Warrant shall be mailed by first-class
certified mail, postage prepaid, to the address furnished to the Company in
writing by the last holder of this Warrant who shall have furnished an address
to the Company in writing.
12. HEADINGS, ETC. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect the meaning hereof.
13. CHANGE, WAIVER, ETC. Neither this Warrant nor any term hereof
may be changed, waived, discharged or terminated orally but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
14. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
12
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Warrant as of this 17th day of April, 1996.
--
TRUMP HOTELS & CASINO RESORTS, INC.
By:___________________________________
Name: Nicholas L. Ribis
Title: President and Chief Executive Officer
Attest:
__________________________
Name: Robert M. Pickus
Title: Executive Vice President
and Secretary
13
<PAGE>
Alt Page 1 $35
Warrant No. W-002
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO TRUMP HOTELS & CASINO RESORTS, INC., QUALIFIES AS AN
EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK PURCHASE WARRANT
TRUMP HOTELS & CASINO RESORTS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, DONALD J. TRUMP
("Trump"), or his assigns, is entitled, subject to the terms set forth below, to
purchase from the Company, at any time and from time to time during the period
beginning on April 17, 1996 and ending on April 17, 2000 in whole or in part, an
aggregate of six hundred thousand (600,000) fully paid and non-assessable shares
of the Common Stock of the Company, par value $ .01 per share, at a purchase
price, subject to the provisions of Section 3 hereof, of $35.00 per share (the
"Purchase Price"). The Purchase Price and the number and character of such
shares are subject to adjustment as provided below, and the term "Common Stock"
shall mean, unless the context otherwise requires, the stock or other securities
or property at the time deliverable upon the exercise of this Warrant. This
Warrant is herein called the "Warrant."
1. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall be
exercised by the holder surrendering this Warrant, with the form of subscription
at the end hereof duly executed by such holder, to the Company at its office in
Atlantic City, New Jersey, accompanied by payment, of an amount (the "Exercise
Amount") equal to the Purchase Price multiplied by the number of shares being
purchased pursuant to such exercise, payable as follows: (i) by payment to the
Company in cash, by certified or official bank check, or by wire transfer of the
Exercise Amount, (ii) by surrender to the Company for cancellation of securities
of the Company having a Market Price (as hereinafter defined) on the date of
exercise equal to the Exercise Amount; or (c) by a combination of the methods
described in clauses (a) and (b) above. In lieu of exercising the Warrant, the
holder may elect to receive a payment equal to the difference between (i) the
Market Price multiplied by the number of shares as to which the payment is then
being elected and (ii) the exercise price with respect to such shares, payable
by the Company to the holder of this Warrant only in shares of Common Stock
valued at the Market Price on the date of exercise. For purposes hereof, the
term "Market Price" shall mean the average closing price of a share of Common
Stock for the 15 consecutive trading days preceding such day on the principal
national securities exchange on which the shares of Common Stock or securities
are listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the average of the reported bid and asked
prices during such 15 trading day period in the over-the-counter market as
furnished by the National Quotation Bureau, Inc., or, if such firm is not then
engaged in the business of reporting such prices, as furnished by any member of
the National Association of Securities Dealers, Inc. selected by the Company or,
if the shares of Common Stock or securities are not publicly traded, the Market
Price for such day shall be the fair market value thereof determined jointly by
the Company and the holder of this Warrant; provided, however, that if such
parties are unable to reach agreement within a reasonable period of time, the
Market Price shall be determined in good faith by the independent investment
banking firm selected jointly by the Company and the holder of this Warrant or,
if that selection cannot be made within 15 days, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules.
<PAGE>
Alt Page 1 $40
Warrant No. W-003
WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER
THE SECURITIES ACT OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO TRUMP HOTELS & CASINO RESORTS, INC., QUALIFIES AS AN
EXEMPT TRANSACTION UNDER THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
TRUMP HOTELS & CASINO RESORTS, INC.
COMMON STOCK PURCHASE WARRANT
TRUMP HOTELS & CASINO RESORTS, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, DONALD J. TRUMP
("Trump"), or his assigns, is entitled, subject to the terms set forth below, to
purchase from the Company, at any time and from time to time during the period
beginning on April 17, 1996 and ending on April 17, 2001 in whole or in part, an
aggregate of six hundred thousand (600,000) fully paid and non-assessable shares
of the Common Stock of the Company, par value $ .01 per share, at a purchase
price, subject to the provisions of Section 3 hereof, of $40.00 per share (the
"Purchase Price"). The Purchase Price and the number and character of such
shares are subject to adjustment as provided below, and the term "Common Stock"
shall mean, unless the context otherwise requires, the stock or other securities
or property at the time deliverable upon the exercise of this Warrant. This
Warrant is herein called the "Warrant."
1. EXERCISE OF WARRANT. The purchase rights evidenced by this Warrant shall be
exercised by the holder surrendering this Warrant, with the form of subscription
at the end hereof duly executed by such holder, to the Company at its office in
Atlantic City, New Jersey, accompanied by payment, of an amount (the "Exercise
Amount") equal to the Purchase Price multiplied by the number of shares being
purchased pursuant to such exercise, payable as follows: (i) by payment to the
Company in cash, by certified or official bank check, or by wire transfer of the
Exercise Amount, (ii) by surrender to the Company for cancellation of securities
of the Company having a Market Price (as hereinafter defined) on the date of
exercise equal to the Exercise Amount; or (c) by a combination of the methods
described in clauses (a) and (b) above. In lieu of exercising the Warrant, the
holder may elect to receive a payment equal to the difference between (i) the
Market Price multiplied by the number of shares as to which the payment is then
being elected and (ii) the exercise price with respect to such shares, payable
by the Company to the holder of this Warrant only in shares of Common Stock
valued at the Market Price on the date of exercise. For purposes hereof, the
term "Market Price" shall mean the average closing price of a share of Common
Stock for the 15 consecutive trading days preceding such day on the principal
national securities exchange on which the shares of Common Stock or securities
are listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the average of the reported bid and asked
prices during such 15 trading day period in the over-the-counter market as
furnished by the National Quotation Bureau, Inc., or, if such firm is not then
engaged in the business of reporting such prices, as furnished by any member of
the National Association of Securities Dealers, Inc. selected by the Company or,
if the shares of Common Stock or securities are not publicly traded, the Market
Price for such day shall be the fair market value thereof determined jointly by
the Company and the holder of this Warrant; provided, however, that if such
parties are unable to reach agreement within a reasonable period of time, the
Market Price shall be determined in good faith by the independent investment
banking firm selected jointly by the Company and the holder of this Warrant or,
if that selection cannot be made within 15 days, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules.
<PAGE>
WARRANT EXERCISE FORM
To: Trump Hotels & Casino Resorts, Inc.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________ shares of Common Stock of Trump Hotels &
Casino Resorts, Inc. and herewith makes payment of $ _____________ therefor,
and requests that the certificates for such shares be issued in the name of, and
be delivered to ______________, whose address is _______________________.
Dated:
________________________
<PAGE>
TRANSFER OF WARRANT FORM
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _____________________ the right represented by the within Warrant
to purchase the ________ shares of the Common Stock of Trump Hotels & Casino
Resorts, Inc. to which the within Warrant relates, and appoints
______________ attorney to transfer said right on the books of Trump Hotels &
Casino Resorts, Inc. with full power of substitution in the premises.
Dated:
________________________
In the presence of
_________________________
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
----------
RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands)
RATIO EARNINGS TO FIXED CHARGES CALCULATION:
Trump AC and Plaza Associates The Company The Company
----------------------------------------- ----------------- (Pro Forma)
From From Inception ------------
Year Ended December 31, January 1, 1995 (June 12, 1995) Year Ended
----------------------------------------- through to December 31, December 31,
EARNINGS: 1991 1992 1993 1994 June 12, 1995 1995 1995
-------- -------- -------- -------- --------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME (LOSS) before
income taxes and
extraordinary items (32,094) 2,185 5,878 (9,735) (1,944) (1,921) 684
PLUS:
FIXED CHARGES 38,135 40,191 48,198 50,265 23,050 36,020 157,381
LESS:
CAPITALIZED INTEREST 0 0 0 0 0 (89) (89)
-------- -------- -------- -------- -------- -------- --------
EARNINGS 6,041 42,376 54,076 40,530 21,106 34,010 157,976
-------- -------- -------- -------- -------- -------- --------
FIXED CHARGES
INTEREST EXPENSE 34,395 31,843 40,435 49,061 22,516 35,014 154,574
PLUS:
CAPITALIZED INTEREST 0 0 0 0 0 89 89
PREFERRED PARTNERSHIP
DIST. 0 6,894 6,317 0 0 0
INTEREST ELEMENT OF
RENTAL EXPENSE 3,740 1,454 1,446 1,204 534 917 2,718
-------- -------- -------- -------- -------- -------- --------
FIXED CHARGES 38,135 40,191 48,198 50,265 23,050 36,020 157,381
-------- -------- -------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED
CHARGES (DEFICIENCY) (32,094) 1.1 1.1 (9,735) (1,944) (2,010) 1.0
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
----------
RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands)
RATIO EARNINGS TO FIXED CHARGES CALCULATION:
Taj Associates
------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
EARNINGS: 1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME (LOSS) before income taxes
and extraordinary items (71,105) (35,099) (22,539) (36,658) (26,623)
PLUS:
FIXED CHARGES 86,111 107,521 111,619 119,158 123,504
LESS:
CAPITALIZED INTEREST 0 0 0 0 0
-------- -------- -------- -------- --------
EARNINGS 15,006 72,422 89,080 82,500 96,881
-------- -------- -------- -------- --------
FIXED CHARGES
INTEREST EXPENSE 84,918 104,049 108,379 115,311 120,435
PLUS:
CAPITALIZED INTEREST 0 0 0 0 0
PREFERRED PARTNERSHIP DIST 0 1,825 1,733 2,171 1,554
INTEREST ELEMENT OF RENTAL EXPENSE 1,193 1,647 1,507 1,676 1,515
-------- -------- -------- -------- --------
FIXED CHARGES 86,111 107,521 111,619 119,158 123,504
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED
CHARGES (DEFICIENCY) (71,105) (35,099) (22,539) (36,658) (26,623)
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF TRUMP HOTELS & CASINO RESORTS, INC.*
-----------------------------------------------------------
<TABLE>
<CAPTION>
Name of Subsidiaries State of Incorporation/Organization
-------------------- -----------------------------------
<S> <C>
1. Taj Mahal Holding Corp. Delaware
2. TM/GP Corporation New Jersey
3. Trump Hotels & Casino Resorts Holdings, L.P. Delaware
4. Trump Hotels & Casino Resorts Funding, Inc. Delaware
5. Trump Plaza Holding, Inc. Delaware
6. Trump Atlantic City Associates New Jersey
7. Trump Atlantic City Funding, Inc. Delaware
8. Trump Taj Mahal Corporation Delaware
9. Trump Plaza Associates New Jersey
10. Trump Taj Mahal Associates New Jersey
11. Trump Indiana, Inc. Delaware
12. Trump Plaza Funding, Inc. New Jersey
13. Trump Taj Mahal Funding, Inc. New Jersey
</TABLE>
- --------------------
* After giving effect to the Merger Transactions.
<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
April 9, 1996
