-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FWdG3k0ZREtDtYs0HmazZFpE5OV5TpP+dIW8LK5Uy4d6r2NhaAih5lrk8fHZW5dO KdtyJEjkTmfDopULn94uqQ== 0000950130-96-001492.txt : 19960503 0000950130-96-001492.hdr.sgml : 19960503 ACCESSION NUMBER: 0000950130-96-001492 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960417 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960502 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRUMP HOTELS & CASINO RESORTS INC CENTRAL INDEX KEY: 0000943320 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 133818402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13794 FILM NUMBER: 96555600 BUSINESS ADDRESS: STREET 1: MISSISSIPPI AVE & THE BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 BUSINESS PHONE: 6094416060 MAIL ADDRESS: STREET 1: MISSISSIPPI AVE AND THE BOARDWALK CITY: ATLANTIC CITY STATE: NJ ZIP: 08401 8-K 1 FORM 8-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 17, 1996 TRUMP HOTELS & CASINO RESORTS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 1-13794 13-3818402 (STATE OR OTHER JURISDICTION(COMMISSION FILE NUMBER) (I.R.S. EMPLOYER OF INCORPORATION) IDENTIFICATION NO.) MISSISSIPPI AVENUE AND THE BOARDWALK 08401 ATLANTIC CITY, NEW JERSEY (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609) 441-6060 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On January 8, 1996, Trump Hotels & Casino Resorts, Inc. (the "Company"), THCR Merger Corp. ("Merger Sub"), a wholly owned subsidiary of the Company, and Taj Mahal Holding Corp. (now known as THCR Holding Corp. ("Taj Holding")), entered into an Agreement and Plan of Merger, which was amended by Amendment to Agreement and Plan of Merger, dated as of January 31, 1996 (as amended, the "Merger Agreement," a copy of which is attached hereto as Exhibit 99.1 and incorporated by reference herein), relating to the merger (the "Merger") of Merger Sub with and into Taj Holding. The Merger was part of a comprehensive plan (the "Merger Transaction") relating to the acquisition by the Company's subsidiary, Trump Hotels & Casino Resorts Holdings, L.P. ("THCR Holdings"), of Trump Taj Mahal Associates ("Taj Associates"), the owner and operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal") in Atlantic City, New Jersey. The Merger Agreement provided that at the effective time of the Merger (the "Effective Time"), each share of Class A Common Stock of Taj Holding ("Taj Holding Class A Common Stock") (which in the aggregate represented 50% of the economic interest in Taj Associates) would be converted into the right to receive, at each holder's election, (i) $30.00 in cash ("Cash Consideration") or (ii) that number of shares of the Company's Common Stock (the "Common Stock") as shall have a market value (as defined in the Merger Agreement) equal to $30.00 ("Stock Consideration"). Donald J. Trump, the Company's Chairman of the Board (and the beneficial owner prior to the consummation of the Merger Transaction of approximately 40% of the Company), held the other 50% interest in Taj Associates and contributed such interest in Taj Associates to Trump Atlantic City Associates ("Trump AC"), a wholly owned subsidiary of THCR Holdings, in exchange for limited partnership interests in THCR Holdings. In addition, the outstanding shares of Taj Holding Class C Common Stock, all of which were held by Mr. Trump, were canceled at the Effective Time. On April 11, 1996, at special meetings of the stockholders of the Company and Taj Holding, the Merger, and in the case of the Company's stockholders, certain aspects of the Merger Transaction, received the requisite stockholder approvals, including the approval of the unaffiliated stockholders. On April 17, 1996, the Company and its subsidiaries consummated the Merger Transaction. The Merger Transaction included: (a) the Merger and the payment of an aggregate of approximately $31,181,240 in cash and the issuance of 323,423 shares of the Company's Common Stock to the holders of Taj Holding Class A Common Stock pursuant to the Merger Agreement; (b) the contribution by Mr. Trump to Trump AC of all of his direct and indirect ownership interests in Taj Associates, and the contribution by the Company to Trump AC of all of its indirect ownership interests in Taj Associates acquired in the Merger; (c) the public offerings by (i) the Company of 12,500,000 shares of Common Stock (plus 750,000 shares of Common Stock issued in connection with the partial exercise of the underwriters' over-allotment option (together, the "Stock Offering")), and (ii) Trump AC and Trump Atlantic City Funding, Inc. ("Trump AC Funding") of $1,200,000,000 aggregate principal amount of 11 1/4% First Mortgage Notes due 2006 (the "Mortgage Notes") (the "Mortgage Note Offering"); (d) the redemption of the outstanding shares of Class B Common Stock of Taj Holding (the "Taj Holding Class B Common Stock") immediately prior to the Effective Time in accordance with its terms; (e) the redemption of the outstanding 11.35% Mortgage Bonds, Series A, due 1999 of Trump Taj Mahal Funding, Inc. ("Taj Funding") (the "Taj Bonds"); (f) the retirement of the outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding, Inc. ("Plaza Funding") (the "Plaza Notes"); (g) the satisfaction of the indebtedness of Taj Associates under its loan agreement with National Westminster Bank USA (the "NatWest Loan"); (h) the purchase of certain real property (the "Specified Parcels") used in the operation of the Taj Mahal that was leased from Trump Taj Mahal Realty Corp. ("Realty Corp."), a corporation wholly owned by Mr. Trump; 2 (i) the purchase of certain real property used in the operation of Trump Plaza Hotel and Casino ("Trump Plaza") that was leased from an unaffiliated third party; (j) the payment to Bankers Trust Company ("Bankers Trust") to obtain releases of liens and guarantees that Bankers Trust had in connection with indebtedness owed by Mr. Trump to Bankers Trust; and (k) the issuance to Mr. Trump of warrants (the "Trump Warrants") 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 April 17, 1999, at $30.00 per share, (ii) 600,000 shares of which may be purchased on or prior to April 17, 2000, at $35.00 per share, and (iii) 600,000 shares of which may be purchased on or prior to April 17, 2001, at $40.00 per share. The proceeds from the Stock Offering and the Mortgage Note Offering, together with available cash, will be used, in addition to the uses referred to above, to pay related fees and expenses and provide for working capital and other general corporate purposes. As a result of the contribution by Mr. Trump to Trump AC (on behalf, and at the direction, of THCR Holdings) of his direct and indirect ownership interests in Taj Associates and the contribution by the Company to Trump AC (on behalf, and at the direction, of THCR Holdings) of its indirect ownership interests in Taj Associates acquired in the Merger, together with the Company's contribution to THCR Holdings of the proceeds from the Stock Offering, Mr. Trump's aggregate beneficial equity interest in THCR Holdings decreased from approximately 40% to approximately 25%, and the Company's aggregate beneficial equity interest in THCR Holdings increased from approximately 60% to approximately 75%. As of the date of this report, Mr. Trump beneficially owns an aggregate of 9,881,548 shares of Common Stock (including shares underlying the Trump Warrants and limited partnership interests in THCR Holdings), representing an approximately 29% beneficial ownership interest in the Company. In connection with the transactions discussed above, (a) Plaza Funding and Trump Plaza Associates ("Plaza Associates"), the owner and operator of Trump Plaza and the guarantor of the Plaza Notes, solicited the consent of the holders of the Plaza Notes to amend certain provisions of the indenture pursuant to which the Plaza Notes were issued, and (b) THCR Holdings and Trump Hotels & Casino Resorts Funding, Inc. ("THCR Funding"), the issuers of the $155 million aggregate principal amount of 15 1/2% Senior Secured Notes due 2005 (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 requisite consents were obtained in connection with each of these consent solicitations. The assets acquired by the Company and its subsidiaries pursuant to the Merger Transaction (including equipment and other physical property) relate to the operation of a casino hotel facility and will continue to be used in this manner. 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial statements of the business acquired. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Taj Mahal Holding Corp. and Subsidiary: We have audited the accompanying consolidated balance sheets of Taj Mahal Holding Corp. (a Delaware corporation) and subsidiary as of December 31, 1994 and 1995, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the management of Taj Mahal Holding Corp. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taj Mahal Holding Corp. and subsidiary as of December 31, 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. Arthur Andersen LLP Roseland, New Jersey February 16, 1996 4 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY ASSETS AND LIABILITIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1995
DECEMBER 31, ------------------------ 1994 1995 ----------- ----------- ASSETS (Note 2) Cash................................................. $ 100 $ 100 ----------- ----------- Total Assets....................................... $ 100 $ 100 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Class B Common Stock; $.01 par value; 860,000 shares authorized, 765,130 and 780,242 issued and outstanding as of December 31, 1994 and 1995, respectively........................................ $ 20 $ 390,000 ----------- ----------- STOCKHOLDERS' EQUITY (Notes 1 and 2) Class A Common Stock; $.01 par value; 10,000,000 shares authorized, 1,350,000 issued and outstanding......................................... 40 40 Class C Common Stock; $.01 par value; 10,000,000 shares authorized, 1,350,000 issued and outstanding......................................... 40 40 Additional paid-in capital........................... 5,729,000 6,893,020 Accumulated deficit.................................. (5,729,000) (7,283,000) ----------- ----------- Total Stockholders' Equity (Deficit)............... 80 (389,900) ----------- ----------- Total Liabilities and Stockholders' Equity......... $ 100 $ 100 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 5 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
YEAR ENDED DECEMBER 31, ------------------------------------- 1993 1994 1995 ----------- ----------- ----------- Revenue................................ $ - $ - $ - Expenses (Note 2)-- Director fees, insurance and adminis- trative expenses.................... $ 1,733,000 $ 2,171,000 $ 1,554,000 ----------- ----------- ----------- Net loss............................... $(1,733,000) $(2,171,000) $(1,554,000) =========== =========== =========== Net loss per common share (Note 2)..... $ (1.28) $ (1.61) $ (1.44) =========== =========== =========== Weighted average number of shares out- standing (Note 2)..................... 1,350,000 1,350,000 1,350,000 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 6 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
COMMON STOCK --------------------------------- CLASS A CLASS C ---------------- ---------------- ADDITIONAL NUMBER NUMBER PAID-IN ACCUMULATED OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL DEFICIT TOTAL --------- ------ --------- ------ ---------- ----------- ----------- Balance, January 1, 1993................... 1,350,000 $40 1,350,000 $40 $1,825,000 $(1,825,000) $ 80 Additional issuance of common stock in connection with the Partnership's interest payment................ - - - - - - - Distribution from the Partnership for operating expenses..... - - - - 1,733,000 - 1,733,000 Net loss................ - - - - - (1,733,000) (1,733,000) --------- --- --------- --- ---------- ----------- ----------- Balance, December 31, 1993................... 1,350,000 40 1,350,000 40 3,558,000 (3,558,000) 80 Additional issuance of common stock in connection with the Partnership's interest payment................ - - - - - - - Distribution from the Partnership for operating expenses..... - - - - 2,171,000 - 2,171,000 Net loss................ - - - - - (2,171,000) (2,171,000) --------- --- --------- --- ---------- ----------- ----------- Balance, December 31, 1994................... 1,350,000 40 1,350,000 40 5,729,000 (5,729,000) 80 Additional issuance of common stock in connection with the Partnership's interest payment................ - - - - - - - Distribution from the Partnership for operating expenses..... - - - - 1,554,000 - 1,554,000 Accretion of Class B Common Stock to redemption value....... - - - - (389,980) - (389,980) Net loss................ - - - - - (1,554,000) (1,554,000) --------- --- --------- --- ---------- ----------- ----------- Balance, December 31, 1995................... 1,350,000 $40 1,350,000 $40 $6,893,020 $(7,283,000) $ (389,900) ========= === ========= === ========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 7 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
YEAR ENDED DECEMBER 31, ------------------------------------- 1993 1994 1995 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss............................... $(1,733,000) $(2,171,000) $(1,554,000) CASH FLOWS FROM FINANCING ACTIVITIES: Partnership distribution............... 1,733,000 2,171,000 1,554,000 ----------- ----------- ----------- NET CHANGE IN CASH AND CASH INVESTMENTS............................ - - - CASH AT BEGINNING OF PERIOD ............ 100 100 100 ----------- ----------- ----------- CASH AT END OF PERIOD .................. $ 100 $ 100 $ 100 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF NON-CASH ITEMS: Accretion of Class B Stock to redemption value...................... - - $ 389,980 =========== =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 8 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND BACKGROUND: The accompanying consolidated financial statements include those of Taj Mahal Holding Corp. ("Taj Holding") and its wholly owned subsidiary, TM/GP Corporation ("TM/GP"), the managing general partner of Trump Taj Mahal Associates, a New Jersey general partnership ("Taj Associates") which owns and operates the Trump Taj Mahal Casino Resort (the "Taj Mahal"). All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. Taj Holding was organized on December 18, 1990 as a Delaware corporation wholly owned by Donald J. Trump ("Trump"). Prior to January 1, 1992, Taj Holding had no activity. As described below, Taj Holding was formed for the purpose of consummating a plan of reorganization (the "1991 Taj Restructuring") involving Taj Associates and Trump Taj Mahal Funding, Inc. ("Taj Funding"), a New Jersey corporation that raised funds for Taj Associates. Prior to the consummation of the 1991 Taj Restructuring, both Taj Associates and Taj Funding were owned by Trump and affiliated entities. Taj Holding and its subsidiary have no business operations other than its investment in Taj Associates. As a result, its ability to pay operating expenses and dividends is completely dependent on the operations of Taj Associates. Upon consummation of the 1991 Taj Restructuring on October 4, 1991, Taj Associates issued to the holders of Taj Funding's 14% First Mortgage Bonds, Series A, Due 1998 (the "Old Taj Bonds"), a general partnership interest representing 49.995% of the equity of Taj Associates. Such holders in turn contributed such partnership interest to Taj Holding. Taj Funding also issued new 11.35% Mortgage Bonds, Series A, Due 1999 (the "Taj Bonds") in exchange for the Old Taj Bonds. Each $1,000 principal amount of Taj Bonds trades as a unit with one share of Class B Common Stock of Taj Holding (the "Taj Holding Class B Common Stock"), as described below. TM/GP, which has no other assets, received a 49.995% partnership interest in Taj Associates from Taj Holding. Trump also contributed to Taj Holding a 50% ownership interest in The Trump Taj Mahal Corporation, a Delaware Corporation, which owns a .01% interest in Taj Associates, in exchange for Taj Holding's Class C Common Stock (the "Taj Holding Class C Common Stock"), as described below. At the time of these transfers, Taj Holding issued 1,350,000 shares of its Class A Common Stock (the "Taj Holding Class A Common Stock") and 729,458 shares of its Taj Holding Class B Common Stock to the holders of the Old Taj Bonds and 1,350,000 shares of Taj Holding Class C Common Stock to Trump. Notwithstanding their par value, the various classes of common stock are recorded at stated value, which represents the value assigned to the shares of Taj Holding which were issued in connection with the consummation of the 1991 Taj Restructuring. In accordance with the terms of the indenture pursuant to which the Taj Bonds were issued (the "Indenture"), a portion of the interest on the Taj Bonds may be paid in cash or in additional Taj Bonds (the "Additional Amount"). On May 15, 1992, 8,844 units comprised of $8,844,000 of Taj Bonds and 8,844 shares of Taj Holding Class B Common Stock were issued by Taj Funding as payment of the Additional Amount. On May 15, 1993, 14,579 units comprised of Taj Bonds in the aggregate amount of approximately $14,579,000 and 14,579 shares of Taj Holding Class B Common Stock were issued as payment of the Additional Amount. On May 15, 1994, 12,249 units comprised of Taj Bonds in the aggregate principal amount of approximately $12,249,000 and 12,249 shares of Taj Holding Class B Common Stock were issued together with $2,621,000 in cash as payment of the Additional Amount. On May 15, 1995, 15,112 units comprised of Taj Bonds in the aggregate principal amount of approximately $15,112,000 and 15,112 shares of Taj Holding Class B Common Stock were issued as payment of the Additional Amount. 9 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Currently, the holders of the Taj Holding Class B Common Stock are entitled to elect four of the nine members of Taj Holding's Board of Directors and Trump, as holder of the Taj Holding Class C Common Stock is entitled to elect the remaining five directors. The Taj Holding Class A Common Stock has no voting rights during the time any of the Taj Holding Class B Common Stock is outstanding. However, upon Taj Holding's liquidation, all three classes of Taj Holding's common stock share ratably in the assets of Taj Holding to the extent of their par value, with the Taj Holding Class A Common Stock entitled to the residual. The Taj Holding Class B Common Stock must be redeemed at a price of $.50 per share when the Taj Bonds, with which they were issued, are paid, redeemed or purchased and canceled. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: INVESTMENT IN TAJ ASSOCIATES Taj Holding accounts for its investment in Taj Associates using the equity method of accounting. Under this method, Taj Holding reports as equity income 50% of Taj Associates' earnings, if any, from October 4, 1991. In addition, the difference between Taj Holding's equity in the underlying identifiable assets of Taj Associates as of October 4, 1991 ($91,703,000) and the cost basis of its investment in Taj Associates is being amortized into income over 40 years. For the period from October 4, 1991 to December 31, 1995, Taj Associates incurred a net loss of $136,474,000. Taj Holding's equity in this loss ($68,237,000) less amortization of the difference between the underlying identifiable assets of Taj Associates and the cost basis of its investments in Taj Associates for the period from October 4, 1991 to December 31, 1995, $9,743,000, will not be reflected in Taj Holding's financial statements until such time as Taj Associates generates earnings sufficient to offset the accumulated net loss. INCOME TAXES Taj Holding will record federal income taxes based on its allocable share of Taj Associates' earnings. The payment of any such taxes will be reimbursed by Taj Associates. Under New Jersey Casino Control Commission (the "CCC") regulations, Taj Associates is required to file a consolidated New Jersey corporation business tax return and pay all state taxes attributable to its earnings. Because, as noted above, Taj Holding has not reflected earnings of Taj Associates, no tax provision has been provided to date. In addition, no tax benefit for the accumulated losses will be reflected until such time as they are realized. OPERATING EXPENSES Expenses of Taj Holding consist of directors and officers liability insurance, board of director fees and expenses, and administrative expenses. Taj Holding is entitled to full reimbursement of such expenses by Taj Associates. Total expenses for the years ended December 31, 1993, 1994 and 1995 approximated $1,733,000, $2,171,000 and $1,554,000, respectively, all of which were reimbursed by Taj Associates. CLASS B COMMON STOCK As the redemption of the Taj Holding Class B Common Stock is outside of the control of Taj Holding, the Taj Holding Class B Common Stock is not shown as a component of stockholder's equity. In contemplation of the proposed recapitalization described in Note 3, the Taj Holding Class B Common Stock has been accreted to its full redemption value as of December 31, 1995. 10 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) EARNINGS PER SHARE For the calculation of net loss per share, Taj Holding Class A Common Stock was used since it is the only Class of participating stock. Net loss per share is determined by dividing the net loss and the accretion of Taj Holding Class B Stock by the weighted average number of shares of Taj Holding Class A Common Stock outstanding. 3. 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 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: (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 Plaza Holding Associates ("Trump Atlantic City") 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 Taj Holding Class B Common Stock 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 its loan agreement with National Westminster Bank USA, (vi) purchase certain real property used in the operation of the Taj Mahal that is currently leased from a corporation wholly owned by Trump, (vii) purchase certain real property used in the operation of Trump Plaza Hotel and Casino ("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 Atlantic City of all of his direct and indirect ownership interests in Taj Associates; and (c) the contribution by THCR to Trump Atlantic City of all 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 shareholder 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; 11 TAJ MAHAL HOLDING CORP. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (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 and other factors. 12 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. Arthur Andersen LLP Roseland, New Jersey February 16, 1996 13 TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1994 AND 1995 (DOLLARS IN THOUSANDS)
DECEMBER 31, -------------------- 1994 1995 --------- --------- 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 ========= =========
The accompanying notes to financial statements are an integralpart of these consolidated financial statements. 14 TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ------------------------------- 1993 1994 1995 --------- --------- --------- 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) ========= ========= =========
The accompanying notes to financial statements are an integralpart of these consolidated financial statements. 15 TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CAPITAL (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (DOLLARS IN THOUSANDS)
ACCUMULATED TOTAL CONTRIBUTED SURPLUS CAPITAL CAPITAL (DEFICIT) (DEFICIT) ----------- ----------- --------- 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 ======== ======== ========
The accompanying notes to financial statements are an integralpart of these consolidated financial statements. 16 TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ---------------------------- 1993 1994 1995 -------- -------- -------- 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 ======== ======== ========
The accompanying notes to financial statements are an integralpart of these consolidated financial statements. 17 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. 18 TRUMP TAJ MAHAL ASSOCIATES AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The cost of promotional allowances consisted of the following:
YEAR ENDED DECEMBER 31, ----------------------- 1993 1994 1995 ------- ------- ------- (IN THOUSANDS) 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 ======= ======= =======
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. 19 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:
1994 1995 --------- --------- (IN THOUSANDS) 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 ========= =========
- --------------------- (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. 20 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: 1996............................. $ 920,000 1997............................. 529,000 1998............................. 268,000 1999............................. 824,498,000 2000............................. 0 Thereafter....................... 0
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. 21 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:
1994 1995 ------- ------- (IN THOUSANDS) 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 ======= ======
- -------- (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 22 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:
1994 1995 ------- ------- (IN THOUSANDS) 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 ======= =======
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: 1996............................................................. $ 8,639,000 1997............................................................. $ 5,867,000 1998............................................................. $ 3,534,000 1999............................................................. $ 2,865,000 2000............................................................. $ 2,725,000 Thereafter....................................................... $62,675,000
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. 23 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. 24 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):
DECEMBER 31, ----------------- 1994 1995 -------- -------- (IN THOUSANDS) 11.35% Mortgage Bonds (a) Carrying Amount......................................... $611,533 $649,139 Fair Value.............................................. 512,638 750,983
- -------- (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. 25 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):
1994 1995 -------- -------- 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................................................... $ -- $ -- ======== ========
(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 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 $1,200,000,000 aggregate principal amount of first mortgage notes, the aggregate proceeds of which will be used, together with available cash, to (i) pay cash to those holders of Taj Holding Class A Common Stock electing to receive cash in the Merger, (ii) redeem the 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. 26 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 in refinancing and repaying indebtedness, and the need for additional financing; (iii) THCR's holding company structure and the likelihood that dividends will not be paid for the forseeable future; (iv) the restrictions imposed on certain activities by certain debt instruments; (v) the historical results of Trump Plaza and the Taj Mahal; and (vi) 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 Prospectus for a discussion of these other factors. (10) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS) 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)
27 (b) Pro forma financial information. 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 Services Agreement between Mr. Trump and Taj Associates (the "Taj Services Agreement"), (g) the cancellation of payments to Realty Corp. and First Fidelity Bank, National Association (now known as First Union National Bank) ("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 initial public offering by the Company of $140 million of Common Stock on June 12, 1995 and the related offering by THCR Holdings and THCR Funding of the Senior Notes (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 that the underwriters' over-allotment option is not exercised in the Stock Offering. 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 Corporation (now known as THCR/LP Corporation), Trump Taj Mahal, Inc. (now known as Trump Casinos, Inc.) and The Trump Taj Mahal Corporation (now known as Trump Atlantic City Corporation) 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. 28 UNAUDITED PRO FORMA FINANCIAL INFORMATION TRUMP HOTELS & CASINO RESORTS, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 (IN THOUSANDS)
MORTGAGE OTHER TAJ NOTE STOCK MERGER THE COMPANY ASSOCIATES OFFERING OFFERING TRANSACTIONS THE COMPANY ------------ ------------ ---------- -------- ------------ ----------- (HISTORICAL) (HISTORICAL) (PRO FORMA) Current Assets: Cash and cash equiva- $ 19,208 $ 88,941 $1,200,000 (a) $359,036(j) $ (9,900)(g) $ 282,994 lents................. (780,243)(b) (10,000)(k) (390)(c) (50,000)(l) (370,900)(d) (31,538)(m) (28,000)(e) (18,775)(f) (46,450)(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- 53,461 117,181 345,487 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 46,450 (g) 56,610 (9,866)(d) Other assets........... 8,654 13,625 22,279 -------- -------- ---------- Total assets.......... $584,545 $821,793 $1,863,429 ======== ======== ========== 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.......... 1,200,000 (a) 1,200,000 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 1,457,954 Minority interest....... 40,500 (m) 30,500 (10,000)(k) Capital: Common stock........... 101 125(j) 5 (l) 234 3(m) Contributed capital.... 52,411 123,765 358,911(j) 10,495 (l) 430,776 8,959(m) (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 39,635 374,975 -------- -------- ---------- Total Liabilities and Capital............. $584,545 $821,793 $1,863,429 ======== ======== ==========
See Notes to Unaudited Pro Forma Financial Information. 29 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)
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 ---------------- ---------------- --------------- ---------- ---------- ----------- ---------- 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) (169,112) 5,058(w) 15,743 (x) Other non-operating... (1,649) (4,094) (5,743) 3,120 (e) (2,623) -------- -------- ---------- -------- ---------- Loss before state income taxes, minority interest and extraordinary loss..... (1,944) (1,921) (9,912) (26,623) (13,854) Benefit for state income taxes ................. (161) -- (161) 161 (z) -- -------- -------- ---------- -------- ---------- Loss before minority interest and extraordinary loss..... (1,783) (1,921) (9,751) (26,623) (13,854) Minority Interest....... -- -- -- 3,300 (y) 3,300 -------- -------- ---------- -------- ---------- Loss before extraordinary loss..... $(1,783) $(1,921) $ (9,751) $(26,623) $ (10,554) ======== ======== ========== ======== ========== Loss per share before extraordinary loss (z).................. $ (0.45) ========== Weighted Average Shares Outstanding (aa)..... 23,444,384 ==========
See Notes to Unaudited Financial Information. 30 NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT SHARE INFORMATION) PRO FORMA ADJUSTMENTS: (a) To record the issuance of $1,200,000 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 option to purchase Trump Plaza East 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. (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 Mr. Trump to Bankers Trust. The obligation under this indebtedness is a personal liability of Mr. Trump and, accordingly, the release of indebtedness is considered a payment to Mr. 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 guarantee by Taj Associates of a portion of the loan by First Fidelity to Realty Corp. (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). Holders of 298,739 shares of Taj Holding Class A Common Stock have elected to receive Stock Consideration and holders of 1,051,261 shares of Taj Holding Class A Common Stock have elected to receive Cash Consideration. As Mr. 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. 31 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, Inc. ("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 Mr. Trump at prime plus 1%. On March 27, 1996, this note was cancelled in accordance with its terms based on a recent Common Stock trading price range. (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. (w) To eliminate interest expense (including amortization of deferred financing costs) on Plaza Associates' pay-in-kind 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:
DECEMBER 31, 1995 ------------ 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............................ 142,387 --------- Pro Forma Adjustment........................................ $ (15,743) =========
32 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 Incentive Plan and the shares to be issued in the Merger Transaction. (c) Exhibits. 2.1 Agreement and Plan of Merger, dated as of January 8, 1996, among Trump Hotels & Casino Resorts, Inc., THCR Merger Corp. and Taj Mahal Holding Corp., as amended by Amendment to Agreement and Plan of Merger, dated as of January 31, 1996. 23.1 Consent of Arthur Andersen LLP. 33 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Trump Hotels & Casino Resorts, Inc. /s/ JOHN P. BURKE May 2, 1996 By: _________________________________ Name: John P. Burke Title: Senior Vice President of Corporate Finance and Corporate Treasurer 34 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE ------- ---------------------- ---- 2.1 Agreement and Plan of Merger, dated as of January 8, 1996, among Trump Hotels & Casino Resorts, Inc., THCR Merger Corp. and Taj Mahal Holding Corp., as amended by Amendment to Agreement and Plan of Merger, dated as of January 31, 1996. 23.1 Consent of Arthur Andersen LLP.
EX-2.1 2 AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER BY AND AMONG TRUMP HOTELS & CASINO RESORTS, INC. TAJ MAHAL HOLDING CORP. AND THCR MERGER CORP. ------------------------- DATED AS OF JANUARY 8, 1996 ------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS * ARTICLE I DEFINITIONS.................................................... 2 Section 1.01. Definitions............................................ 2 ARTICLE II THE MERGER.................................................... 6 Section 2.01. The Merger............................................. 6 Section 2.02. Conversion of Outstanding Shares; Redemption........... 7 Section 2.03. Certificate of Incorporation........................... 7 Section 2.04. By-laws................................................ 7 Section 2.05. Directors and Officers................................. 7 Section 2.06. Exchange Agent......................................... 7 Section 2.07. Election Procedures.................................... 8 Section 2.08. Taj Holding Class A Common Stock Exchange Procedures... 8 Section 2.09. Dividends; Liability................................... 9 No Further Rights for Holders Electing Cash Section 2.10. Consideration......................................... 9 Section 2.11. No Fractional Shares................................... 10 Section 2.12. Dissenting Shares...................................... 10 ARTICLE III REPRESENTATIONS AND WARRANTIES OF TAJ HOLDING................ 10 Section 3.01. Corporate Organization................................. 10 Section 3.02. Capitalization......................................... 10 Section 3.03. Subsidiaries........................................... 11 Section 3.04. Financial Statements; SEC Reports...................... 11 Section 3.05. Absence of Certain Changes or Events................... 11 Section 3.06. Authorization and Validity of Agreements; Opinion of Financial Advisor..................................... 11 Section 3.07. No Conflict or Violation............................... 12 Section 3.08. Consents and Approvals................................. 12 Section 3.09. Litigation............................................. 13 Section 3.10. Taxes.................................................. 13 Section 3.11. Contracts and Leases................................... 13 Section 3.12. Joint Proxy Statement.................................. 13 Section 3.13. Takeover Provisions Inapplicable....................... 13 Section 3.14. Brokerage/Finder's Fees................................ 13 Section 3.15. Bond Redemption; Taj Funding Offering.................. 13 Section 3.16. THCR Offering.......................................... 14 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THCR....................... 14 Section 4.01. Corporate Organization................................. 14 Section 4.02. Capitalization......................................... 14 Section 4.03. Subsidiaries........................................... 14 Section 4.04. Financial Statements; SEC Reports...................... 14 Section 4.05. Absence of Certain Changes or Events................... 15 Authorization and Validity of Agreements; Opinion of Section 4.06. Financial Advisor..................................... 15 Section 4.07. No Conflict or Violation............................... 15 Section 4.08. Consents and Approvals................................. 16 Section 4.09. Litigation............................................. 16 Section 4.10. Taxes.................................................. 16 Section 4.11. Contracts and Leases................................... 16
- -------- * The Table of Contents is not part of this Merger Agreement. i Section 4.12. THCR Registration Statement............................ 16 Section 4.13. Takeover Provisions Inapplicable....................... 17 Section 4.14. Brokerage/Finder's Fees................................ 17 Section 4.15. Taj Funding Offering................................... 17 ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGER SUB.................... 17 Section 5.01. Corporate Organization; Subsidiaries................... 17 Section 5.02. Capitalization......................................... 17 Section 5.03. Authorization and Validity of Agreements............... 17 ARTICLE VI COVENANTS OF TAJ HOLDING....................................... 18 Section 6.01. Conduct Pending the Merger............................. 18 Section 6.02. Joint Proxy Statement.................................. 18 Section 6.03. Stockholders Meeting................................... 19 Section 6.04. Compliance with the Securities Act..................... 19 Section 6.05. No Solicitation........................................ 19 Section 6.06. Dividend Prohibition................................... 19 Section 6.07. Letters of Accountants................................. 19 ARTICLE VII COVENANTS OF THCR............................................. 19 Section 7.01. Conduct Pending the Merger............................. 19 Section 7.02. Joint Proxy Statement.................................. 20 Section 7.03. Stockholders Meeting................................... 20 Section 7.04. Indemnification and Insurance.......................... 20 Section 7.05. Letters of Accountants................................. 21 ARTICLE VIII OTHER AGREEMENTS............................................. 21 Section 8.01. Stock Exchange Listing................................. 21 Section 8.02. Additional Agreements; Consents and Permits............ 21 Section 8.03. Registration of Securities............................. 21 Section 8.04. Access to Information; Confidentiality................. 22 Section 8.05. Notification of Certain Matters........................ 22 Section 8.06. HSR Act................................................ 23 Section 8.07. Bond Redemption........................................ 23 ARTICLE IX CONDITIONS TO THE MERGER....................................... 23 Section 9.01. Conditions to the Obligations of Each Party............ 23 Section 9.02. Conditions to the Obligation of Taj Holding............ 24 Section 9.03. Conditions to the Obligations of THCR and Merger Sub... 24 ARTICLE X TERMINATION..................................................... 25 Section 10.01. Termination............................................ 25 Section 10.02. Effect of Termination.................................. 25 ARTICLE XI MISCELLANEOUS.................................................. 26 Section 11.01. Notices................................................ 26 Section 11.02. Survival............................................... 26 Section 11.03. Amendment.............................................. 26 Section 11.04. Waiver................................................. 26 Section 11.05. Successors and Assigns................................. 27
ii Section 11.06. Governing Law........................................... 27 Section 11.07. Gaming Laws............................................. 27 Section 11.08. Integration............................................. 27 Section 11.09. Third Party Beneficiaries............................... 27 Section 11.10. Specific Performance.................................... 27 Section 11.11. Remedies Cumulative..................................... 27 Section 11.12. Publicity............................................... 27 Section 11.13. Fees and Expenses....................................... 27 Section 11.14. Headings; Counterparts; Effectiveness................... 27
iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of January 8, 1996 (the "Merger Agreement"), by and among TRUMP HOTELS & CASINO RESORTS, INC., a Delaware corporation ("THCR"), TAJ MAHAL HOLDING CORP., a Delaware corporation ("Taj Holding"), and THCR MERGER CORP., a Delaware corporation and a wholly owned subsidiary of THCR ("Merger Sub"). WHEREAS, Taj Holding and certain of its affiliates and THCR and certain of its affiliates desire to effect the Merger Transaction, which includes (a) the merger of Merger Sub with and into Taj Holding upon the terms and subject to the conditions set forth herein (the "Merger"); (b) consummation of the offering by THCR (the "THCR Offering") of up to $140,000,000 of Common Stock of THCR, par value $.01 per share ("THCR Common Stock"), and the offering by Trump Taj Mahal Funding, Inc. ("Taj Funding") or its affiliate of up to $750,000,000 aggregate principal amount of debt securities (the "Taj Funding Offering"), the aggregate net proceeds of which will be used, together with available cash of Trump Taj Mahal Associates ("Taj Associates"), to, among other things, (i) pay cash, pursuant to this Merger Agreement, to those holders of Class A Common Stock of Taj Holding, par value $.01 per share (the "Taj Holding Class A Common Stock"), electing to receive cash in the Merger, (ii) redeem (the "Bond Redemption") Taj Funding's outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Bonds"), (iii) redeem the outstanding shares of Class B Common Stock of Taj Holding, par value $.01 per share (the "Taj Holding Class B Common Stock"), as required in connection with the Bond Redemption, (iv) purchase certain real property (collectively, the "Specified Parcels") that is currently leased by Taj Associates, the owner and operator of the Trump Taj Mahal Casino Resort (the "Taj Mahal"), from Trump Taj Mahal Realty Corp. ("Realty Corp."), a corporation wholly owned by Donald J. Trump ("Trump"), and (v) make a payment to Bankers Trust Company ("Bankers Trust") to obtain releases of the Liens (defined below) and guarantees that Bankers Trust has with respect to Taj Associates; (c) the contribution by Trump to Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of THCR ("THCR Holdings"), and Taj Mahal Holdings LLC ("Taj Holdings LLC") of all of his direct and indirect ownership interests in Taj Associates; and (d) the contribution by THCR to THCR Holdings and Taj Holdings LLC of all its indirect ownership interests in Taj Associates acquired in the Merger; WHEREAS, THCR and Trump have agreed that (a) in exchange for their contributions to THCR Holdings and Taj Holdings LLC, THCR's and Trump's beneficial equity interests in THCR Holdings will be adjusted pursuant to the terms of the Amended and Restated Agreement of Limited Partnership of THCR Holdings (the "Partnership Agreement"), and (b) as part of the Merger Transaction, THCR will issue to Trump a warrant to purchase 1.8 million shares of THCR Common Stock, one-third of which may be purchased on or prior to (i) the third anniversary of the issuance of the warrant at $30 per share, (ii) the fourth anniversary of the issuance of the warrant at $35 per share and (iii) the fifth anniversary of the issuance of the warrant at $40 per share (the Merger and the related transactions discussed above are collectively referred to as the "Merger Transaction"); WHEREAS, pursuant to the Class A Voting Agreement (defined below), the holders of approximately 52% of the outstanding shares of Taj Holding Class A Common Stock have agreed to vote in favor of the Merger; WHEREAS, pursuant to the Trump THCR Voting Agreement (defined below) Trump has agreed to vote all of the shares in THCR beneficially owned by him in favor of the Merger Transaction, and pursuant to the Trump Taj Voting Agreement (defined below) Trump has agreed to vote all of the shares beneficially owned by him in Taj Holding in favor of the Merger Agreement; WHEREAS, the THCR Special Committee of the Board of Directors of THCR (defined below), and the Taj Holding Class B Directors (defined below) and the Board of Directors of Taj Holding, have received the DLJ Fairness Opinion and the Rothschild Fairness Opinion (each defined below), respectively; WHEREAS, the THCR Special Committee and the Board of Directors of THCR have determined that the Merger Transaction is consistent with and in furtherance of the long-term business strategy of THCR; 1 WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj Holding have determined that the Merger is consistent with and in furtherance of the long-term business strategy of Taj Holding; WHEREAS, the THCR Special Committee and the Board of Directors of THCR have determined that the Merger Transaction is fair to, and in the best interests of, THCR; WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj Holding based on, among other things, the advice of the financial advisor to Taj Holding and existence of the Class A Voting Agreement (defined below), have determined that the Merger is fair to, and in the best interests of, Taj Holding and the holders of Taj Holding Class A Common Stock; WHEREAS, the THCR Special Committee and the Board of Directors of THCR have approved the Merger Transaction and this Merger Agreement; WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj Holding have approved the Merger and this Merger Agreement; and WHEREAS, the Board of Directors of Merger Sub has approved this Merger Agreement and THCR, as the sole stockholder of Merger Sub, has approved and adopted this Merger Agreement. NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Merger Agreement, the following terms shall have the respective meanings set forth below (terms defined in the singular shall have the same meanings when used in the plural and vice versa): "Acquisition Proposal" with respect to any Person shall mean any proposed (i) merger, consolidation, share exchange or similar transaction involving such Person or a Subsidiary of such Person, as a result of which the consolidated assets of such Person and its Subsidiaries taken as a whole, increase or decrease by 25% or more, (ii) sale, lease or other disposition directly or indirectly (other than by merger, consolidation, share exchange or similar transaction) of assets of such Person or its Subsidiaries representing 25% or more of the consolidated assets of such Person and its Subsidiaries, (iii) issue, sale, or other disposition (other than by merger, consolidation, share exchange or similar transaction) of securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 25% or more of the voting power of such Person or (iv) transaction in which any Person shall acquire beneficial ownership, or the right to acquire beneficial ownership or any "group" (as such term is defined under the Exchange Act) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of 25% or more of the outstanding common stock of such Person (other than Persons or groups having such beneficial ownership as of the date hereof). "Bankers Trust" shall have the meaning set forth in the Recitals. "Bond Indenture" shall mean the Amended and Restated Indenture, dated as of October 4, 1991, among Taj Funding, as issuer, Taj Associates, as guarantor, and First Bank National Association, as trustee, relating to the issuance of the Bonds. "Bond Redemption" shall have the meaning set forth in the Recitals. "Bonds" shall have the meaning set forth in the Recitals. 2 "Cash Consideration" shall have the meaning set forth in Section 2.02. "Certificate of Merger" shall have the meaning set forth in Section 2.01. "Class A Voting Agreement" means the letter agreement, dated as of October 6, 1995, among Taj Holding, Taj Associates, Taj Funding, Putnam Investment Management, Hamilton Partners, L.P., Prudential Securities, Grace Brothers Ltd., SC Fundamental Value Fund, L.P. and SC Fundamental Value BVI Ltd., relating to the voting of shares of Taj Holding Class A Common Stock, as such agreement may be amended from time to time. "Closing" shall have the meaning set forth in Section 2.01. "Confidential Information" shall mean all information about a party hereto, whether furnished before or after the date hereof, and regardless of the manner in which it is furnished, together with all analyses, compilations, studies, summaries, extracts or other documents, which contain or otherwise reflect such information. Confidential Information shall not include information which the recipient can clearly demonstrate falls within any of the following categories: (i) information which has come within the public domain through no fault or action of the recipient or its affiliates (including, without limitation, all information contained in publicly available documents filed with the SEC); (ii) information which was known to the recipient on a non-confidential basis prior to its disclosure by a party hereto; or (iii) information which becomes available to the recipient on a non-confidential basis from any third party, the disclosure of which to, or the receipt of which by, the recipient, to the knowledge of the recipient after due inquiry, does not violate any contractual or legal obligation said third party has to the disclosing party or any other Person with respect to such information. "Current D&O Premium" shall mean an amount not greater than 150% of the premium paid by Taj Holding (on an annualized basis) for directors' and officers' liability insurance during the period from January 1, 1996 to the Effective Time. "Debt S-1" shall have the meaning set forth in Section 3.15. "DGCL" shall mean the Delaware General Corporation Law. "Disclosing Party" shall mean any party to this Merger Agreement that discloses or provides Confidential Information to any other party to this Merger Agreement. "Dissenting Shares" shall have the meaning set forth in Section 2.12. "DLJ" shall have the meaning set forth in Section 4.06. "DLJ Fairness Opinion" shall have the meaning set forth in Section 4.06. "Effective Time" shall have the meaning set forth in Section 2.01. "Election Deadline" shall have the meaning set forth in Section 2.07. "Election Form" shall have the meaning set forth in Section 2.07. "Equity S-1" shall have the meaning set forth in Section 3.16. "Exchange Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder. "Exchange Agent" shall have the meaning set forth in Section 2.06. "Exchange Agreement" shall mean the Exchange and Registration Rights Agreement, dated as of June 12, 1995, between THCR and Trump. 3 "Exchange Fund" shall have the meaning set forth in Section 2.08. "First Fidelity" shall mean First Fidelity Bank, N.A. "Gaming Authority" shall mean the New Jersey Casino Control Commission, the New Jersey Division of Gaming Enforcement, the Indiana Gaming Commission, the Mississippi Gaming Commission and the Mississippi State Tax Commission or any other governmental agency which regulates gaming in a jurisdiction in which either THCR or its Subsidiaries or Taj Holding or its Subsidiaries conducts gaming activities. "Gaming Laws" shall mean any laws, rules, regulations or ordinances governing gaming activities and any administrative rules or regulations promulgated thereunder, and any other corresponding statutes, rules and regulations. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Joint Proxy Statement" shall mean the joint proxy statement of Taj Holding and THCR with respect to the Taj Holding Meeting and the THCR Meeting. "Lien" shall mean any mortgage, charge, pledge, lien (statutory or otherwise), privilege, security interest, hypothecation, or other encumbrance upon or with respect to any property of any kind, real or personal, movable or immovable, now owned or hereafter acquired. "Market Value" shall mean the average of the high and low per share sales prices of the THCR Common Stock during the fifteen trading days immediately preceding the Effective Time or, if THCR and Taj Holding mutually agree, during any such other period as agreed under the Class A Voting Agreement. "Merger" shall have the meaning set forth in Recitals. "Merger Agreement" shall have the meaning set forth in the Preamble. "Merger Consideration" shall have the meaning set forth in Section 2.02. "Merger Sub" shall have the meaning set forth in the Preamble. "Merger Sub Common Stock" shall mean the Common Stock, par value $.01 per share, of Merger Sub. "Merger Sub Material Adverse Effect" shall mean a material adverse effect with respect to the business, results of operations, properties, operations or financial condition of Merger Sub. "Merger Transaction" shall have the meaning set forth in the Recitals. "NYSE" shall mean the New York Stock Exchange. "Partnership Agreement" shall have the meaning set forth in the Recitals. "Permitted Investments" shall have the meaning set forth in Section 2.08. "Person" shall mean any individual, partnership, corporation, trust, association, limited liability company, governmental agency or any other entity. "Realty Corp." shall have the meaning set forth in the Recitals. "Receiving Party" shall mean any party to this Merger Agreement that receives or obtains Confidential Information from a Disclosing Party. "Rothschild" shall have the meaning set forth in Section 3.06. 4 "Rothschild Fairness Opinion" shall have the meaning set forth in Section 3.06. "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Special Counsel" shall mean Andrews & Kurth L.L.P., special counsel to the Taj Holding Class B Directors. "Specified Parcels" shall have the meaning set forth in the Recitals. "Stock Consideration" shall have the meaning set forth in Section 2.02. "Subsidiary" shall mean, with respect to any Person, any other Person in which such first Person, directly or indirectly, owns, controls or has the power to vote at least 50% of the outstanding securities generally entitled to vote upon the election of directors. For the purposes of this Merger Agreement the term "Subsidiary" shall also include, with respect to Taj Holding, Taj Associates and, with respect to THCR, THCR Holdings, Trump Plaza Holding Associates and Trump Plaza Associates. "Surviving Corporation" shall mean the surviving corporation in the Merger. "Taj Associates" shall have the meaning set forth in the Recitals. "Taj Funding" shall have the meaning set forth in the Recitals. "Taj Funding Offering" shall have the meaning set forth in the Recitals. "Taj Holding" shall have the meaning set forth in the Preamble. "Taj Holding Certificates" shall have the meaning set forth in Section 2.08. "Taj Holding Class A Common Stock" shall have the meaning set forth in the Recitals. "Taj Holding Class B Common Stock" shall have the meaning set forth in the Recitals. "Taj Holding Class C Common Stock" shall mean the Class C Common Stock, par value $.01 per share, of Taj Holding. "Taj Holding Class B Directors" shall mean the Class B Directors of Taj Holding. "Taj Holding Class C Directors" shall mean the Class C Directors of Taj Holding. "Taj Holding Indemnified Parties" shall have the meaning set forth in Section 7.04. "Taj Holding Material Adverse Effect" shall mean a material adverse effect with respect to the business, results of operations, properties, operations or financial condition of Taj Holding and its Subsidiaries, taken as a whole. "Taj Holding Meeting" shall have the meaning set forth in Section 6.03. "Taj Holding SEC Reports" shall have the meaning set forth in Section 3.04. "Taj Holdings LLC" shall have the meaning set forth in the Recitals. "Taj Mahal" shall have the meaning set forth in the Recitals. 5 "THCR" shall have the meaning set forth in the Preamble. "THCR Certificates" shall have the meaning set forth in Section 2.08. "THCR Class B Common Stock" shall mean the Class B Common Stock, par value $.01 per share, of THCR. "THCR Common Stock" shall have the meaning set forth in the Recitals. "THCR Dividends" shall have the meaning set forth in Section 2.08. "THCR Holdings" shall have the meaning set forth in the Recitals. "THCR Material Adverse Effect" shall mean a material adverse effect with respect to the business, results of operations, properties, operations or financial condition of THCR and its Subsidiaries, taken as a whole. "THCR Meeting" shall have the meaning set forth in Section 7.03. "THCR Offering" shall have the meaning set forth in the Recitals. "THCR Registration Statement" shall mean the Registration Statement on Form S-4 of THCR to be filed with the SEC in connection with the Merger, including the Prospectus with respect to the THCR Common Stock included therein. "THCR SEC Reports" shall have the meaning set forth in Section 4.04. "THCR Special Committee" shall mean the Special Committee of the Board of Directors of THCR. "TM/GP" shall mean TM/GP Corporation, a wholly owned subsidiary of Taj Holding. "TM/GP Class B Common Stock" shall mean the Class B Common Stock of TM/GP, par value $.01 per share. "Trump" shall have the meaning set forth in the Recitals. "Trump Taj Voting Agreement" shall have the meaning set forth in Section 3.06. "Trump THCR Voting Agreement" shall have the meaning set forth in Section 4.06. "TTMI Note" shall mean the promissory note from Trump Taj Mahal, Inc. to Trump, dated October 4, 1991. ARTICLE II THE MERGER Section 2.01. The Merger. (a) Upon the terms and subject to the conditions of this Merger Agreement, at the Effective Time, Merger Sub shall be merged with and into Taj Holding in accordance with the DGCL, whereupon the separate existence of Merger Sub shall cease, and Taj Holding shall be the Surviving Corporation. (b) Unless this Merger Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 10.01 and subject to the satisfaction or, if permissible, waiver of the conditions set forth in Article IX, the closing of the Merger (the "Closing") shall take place as promptly as practicable (and in any event within two business days) after satisfaction or waiver of the conditions set forth in Article IX, at the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, unless another date, time or place is agreed to in writing by the parties hereto. 6 (c) At the Closing, (i) Taj Holding will deliver to THCR and Merger Sub the opinion referred to in Section 6.04 and the various certificates, instruments and documents referred to in Section 9.03, (ii) THCR and Merger Sub will deliver to Taj Holding the various certificates, instruments and documents referred to in Section 9.02 and (iii) THCR will deliver to the Exchange Agent the Merger Consideration. (d) As soon as practicable after the Closing, Taj Holding and Merger Sub will file, or cause to be filed, with the Secretary of State of the State of Delaware, a certificate of merger for the Merger in accordance with the provisions of the DGCL (the "Certificate of Merger"). The Merger shall become effective at the time such filing is accepted for filing by the Secretary of State of the State of Delaware or at such other time as set forth in the Certificate of Merger (the "Effective Time"). (e) From and after the Effective Time, the Surviving Corporation, shall have all the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of Taj Holding and Merger Sub, all as provided under the DGCL. Section 2.02. Conversion of Outstanding Shares; Redemption. (a) At the Effective Time: (i) each share of Taj Holding Class A Common Stock outstanding immediately prior to the Effective Time shall, except as otherwise provided in this Section, be converted into and represent the right to receive, at the holder's election, either (x) $30.00 in cash (the "Cash Consideration") or (y) that number of fully paid and nonassessable shares of THCR Common Stock determined by dividing $30.00 by the Market Value (the "Stock Consideration" and together with the Cash Consideration, the "Merger Consideration"); (ii) all shares of Taj Holding Class C Common Stock outstanding immediately prior to the Effective Time shall be canceled; and (iii) each share of Merger Sub Common Stock outstanding immediately prior to the Effective Time shall be converted into and represent the right to receive one fully paid and nonassessable share of Common Stock, par value $0.01 per share, of the Surviving Corporation. (b) Immediately prior to the Effective Time, Taj Holding shall cause each share of Taj Holding Class B Common Stock outstanding immediately prior to such time to be redeemed at $.50 per share in accordance with the provisions of the certificate of incorporation of Taj Holding and the Bond Indenture. (c) Each share of Taj Holding Class A Common Stock held by Taj Holding as treasury stock immediately prior to the Effective Time or owned by any direct or indirect Subsidiary of Taj Holding immediately prior to the Effective Time shall be canceled, and no conversion or payment shall be made with respect thereto. Section 2.03. Certificate of Incorporation. The certificate of incorporation of Merger Sub in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation, until amended in accordance with the DGCL, except that Article Second thereof shall be amended to read as follows: "The name of the Corporation is Taj Mahal Holding Corp." Section 2.04. By-laws. The by-laws of Merger Sub in effect at the Effective Time shall be the by-laws of the Surviving Corporation, until amended in accordance with the DGCL and the certificate of incorporation of the Surviving Corporation. Section 2.05. Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed in accordance with the DGCL and the Surviving Corporation's certificate of incorporation and by-laws, (a) the directors of Merger Sub at the Effective Time shall be the directors of the Surviving Corporation and (b) the officers of Taj Holding at the Effective Time shall be the officers of the Surviving Corporation. Section 2.06. Exchange Agent. Prior to the Effective Time, THCR and Taj Holding shall designate Continental Stock Transfer & Trust Company, or another mutually acceptable bank or trust company, to act as exchange agent for the Merger (the "Exchange Agent"). 7 Section 2.07. Election Procedures. (a) Taj Holding shall, or shall cause the Exchange Agent to, send an election form (the "Election Form") in form satisfactory to THCR, to each holder of Taj Holding Class A Common Stock together with the Joint Proxy Statement. Each Election Form shall permit each holder of Taj Holding Class A Common Stock (or the beneficial owner through appropriate and customary documentation and instructions) to elect to receive either the Stock Consideration or the Cash Consideration. (b) Any holder of Taj Holding Class A Common Stock who wishes to receive Cash Consideration must send the Election Form properly completed to the Exchange Agent at the address set forth in the Election Form on or before 5:00 p.m. on the business day prior to the Taj Holding Meeting or at any other time and date as Taj Holding and THCR may mutually agree (the "Election Deadline"). (c) Holders of the Taj Holding Class A Common Stock who (i) fail to complete properly the Election Form, (ii) fail to send the Election Form to the Exchange Agent prior to the Election Deadline or (iii) make no election, shall be deemed to have elected to receive the Stock Consideration. (d) Taj Holding shall use its best efforts to make available one or more Election Forms as may be reasonably requested by all Persons who become holders (or beneficial owners) of Taj Holding Class A Common Stock between the record date established for purposes of the Taj Holding Stockholder Meeting and the Election Deadline. (e) Any Election Form may be revoked prior to the Election Deadline by submitting a new Election Form to the Exchange Agent. In addition, all Election Forms shall automatically be deemed revoked if the Exchange Agent is notified in writing by Taj Holding and THCR that the Merger has been abandoned or this Merger Agreement has been terminated. (f) Subject to the terms of this Merger Agreement, the determination of the Exchange Agent shall be binding and conclusive as to whether or not the Election Form has been properly or timely submitted or revoked. Neither the Exchange Agent, Taj Holding, THCR nor Merger Sub shall be under any obligation to notify any Person of any defect in an Election Form or the revocation thereof. Section 2.08. Taj Holding Class A Common Stock Exchange Procedures. (a) As soon as practicable after the Effective Time, THCR shall instruct the Exchange Agent to mail to each holder of a certificate or certificates evidencing shares of Taj Holding Class A Common Stock (other than Dissenting Shares) (the "Taj Holding Certificates") (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Taj Holding Certificates shall pass, only upon proper delivery of such Taj Holding Certificates to the Exchange Agent) and (ii) instructions to effect the surrender of the Taj Holding Certificates in exchange for Merger Consideration. Each holder of Taj Holding Class A Common Stock, upon surrender to the Exchange Agent of such holder's Taj Holding Certificates with the letter of transmittal, duly executed, and such other customary documents as may be required pursuant to such instructions, shall be given the amount to which such holder is entitled, pursuant to this Merger Agreement, of (i) certificates evidencing shares of THCR Common Stock (the "THCR Certificates") as payment of the Stock Consideration, (ii) cash as payment of the Cash Consideration (without any interest accrued thereon), (iii) dividends or distributions declared or made on the THCR Common Stock after the Effective Time and payable between the Effective Time and the time of such surrender (the "THCR Dividends") and/or (iv) cash for payment of fractional shares of THCR Common Stock. Until so surrendered, each Taj Holding Certificate shall after the Effective Time represent for all purposes only the right to receive THCR Certificates or cash, as the case may be. After the Effective Time, there shall be no further registration of transfers of Taj Holding Class A Common Stock. THCR shall establish reasonable procedures for the delivery of THCR Certificates or cash, as the case may be, to holders of Taj Holding Class A Common Stock whose Taj Holding Certificates have been lost, destroyed or mutilated. (b) At the Closing, THCR shall deposit in trust with the Exchange Agent, for the benefit of the holders of Taj Holding Class A Common Stock, the appropriate amount to which such holders are entitled, pursuant to this Merger Agreement, of THCR Certificates for payment of the Stock Consideration, cash for payment of the Cash 8 Consideration, THCR Dividends, if any, and cash for payment of fractional shares of THCR Common Stock (collectively, the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions, make the payments to the holders of Taj Holding Class A Common Stock as set forth in this Merger Agreement. The Exchange Agent shall not be entitled to vote or exercise any rights of ownership with respect to the THCR Common Stock held by it from time to time hereunder, except that it shall hold all THCR Dividends paid or distributed for the accounts of the Persons entitled thereto. (c) If any delivery of the Merger Consideration is to be made to a Person other than the registered holder of the Taj Holding Certificates surrendered in exchange therefor, it shall be a condition to such delivery that the Taj Holding Certificate so surrendered shall be properly endorsed or be otherwise in proper form for transfer and that the Person requesting such delivery shall (i) pay to the Exchange Agent any transfer or other taxes required as a result of delivery to a Person other than the registered holder or (ii) establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) Any portion of the Exchange Fund that remains undistributed to the holders of the Taj Holding Class A Common Stock for 180 days after the Effective Time shall be delivered to THCR upon demand. Any holder of Taj Holding Class A Common Stock who has not therefore complied with this Article within 180 days after the Effective Time shall have no further claim upon the Exchange Agent and shall thereafter look only to THCR for conversion or payment, as the case may be, of the Merger Consideration, THCR Dividends and fractional shares of THCR Common Stock. (e) If a Taj Holding Certificate has not been surrendered prior to the date on which any receipt of Merger Consideration, THCR Dividends or cash for payment of fractional shares of THCR Common Stock would otherwise escheat to or become the property of any governmental agency, such Taj Holding Certificate shall, to the extent permitted by applicable law, be deemed to be canceled and no money or other property will be due to the holder thereof. (f) The Exchange Agent shall invest cash in the Exchange Fund, as directed by THCR, on a daily basis, provided that all such investments shall be in obligations of or guaranteed by the United States of America with remaining maturities not exceeding 180 days, in commercial paper obligations receiving the highest rating from either Moody's Investors Services, Inc. or Standard & Poor's Corporation, or in certificates of deposit or banker's acceptances of commercial banks with capital exceeding $500 million (collectively, "Permitted Investments"). The maturities of Permitted Investments shall be such as to permit the Exchange Agent to make prompt payment to former stockholders of Taj Holding entitled thereto as contemplated by this Section. THCR shall promptly replenish the Exchange Fund to the extent of any losses incurred as a result of Permitted Investments. Any interest and other income resulting from such investments shall be paid to THCR. If for any reason (including losses) the Exchange Fund is inadequate to pay the amounts to which holders of Taj Holding Class A Common Stock shall be entitled under this Merger Agreement, THCR shall in any event be liable for payment thereof. The Exchange Fund shall not be used for any purpose not specifically provided for in this Merger Agreement. Section 2.09. Dividends; Liability. No THCR Dividend will be paid to Persons entitled to receive certificates representing THCR Common Stock pursuant to this Merger Agreement until such Persons surrender their Taj Holding Certificates. Upon such surrender, THCR Dividends shall be paid to the Person in whose name the THCR Certificate shall be issued. In no event shall the Person entitled to receive such dividends or distributions be entitled to receive interest on such dividends or distributions. Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be liable to a holder of Taj Holding Class A Common Stock for any shares of THCR Common Stock or dividends or distributions thereon delivered to a governmental agency pursuant to any applicable escheat or similar laws. Section 2.10. No Further Rights for Holders Electing Cash Consideration. Holders of Taj Holding Class A Common Stock who elect to receive the Cash Consideration or who shall receive cash for payment of fractional shares of THCR Common Stock shall, upon properly surrendering their Taj Holding Certificates, be deemed to have been paid in full satisfaction of all rights pertaining to the shares or fractions thereof exchanged for cash theretofore. 9 Section 2.11. No Fractional Shares. No fractional shares of THCR Common Stock will be issued in connection with the Merger. In lieu of any fractional shares, each holder of Taj Holding Class A Common Stock who would otherwise have been entitled to a fractional share of THCR Common Stock upon surrender of Taj Holding Certificates for exchange will be paid cash (without interest) in an amount equal to the Market Value of such fractional shares. As soon as practicable after the determination of the amount of cash to be paid to former holders of Taj Holding Class A Common Stock in lieu of any fractional shares, the Exchange Agent will make available such amounts to such former holders. Section 2.12. Dissenting Shares. (a) Notwithstanding any other provision of this Merger Agreement to the contrary, shares of Taj Holding Class A Common Stock that are outstanding immediately prior to the Effective Time and which are held by holders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have demanded properly in writing appraisal for such shares in accordance with Section 262 of the DGCL and who shall not have withdrawn such demand or otherwise have forfeited appraisal rights (collectively, the "Dissenting Shares") shall not be converted into or represent the right to receive the Merger Consideration. Such holders shall be entitled to receive payment of the appraised value of such shares, except that all Dissenting Shares held by holders who shall have failed to perfect or who effectively shall have withdrawn or lost their rights to appraisal of such shares under such Section 262 shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Stock Consideration, upon surrender of the Taj Holding Certificates evidencing such shares. (b) Taj Holding shall give THCR (i) prompt notice of any demands for appraisal received by Taj Holding, withdrawals of such demands, and any other instruments served pursuant to the DGCL and received by Taj Holding and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. Taj Holding shall not, except with the prior written consent of THCR, make any payment with respect to any demands for appraisal, or offer to settle, or settle, any such demands. ARTICLE III REPRESENTATIONS AND WARRANTIES OF TAJ HOLDING Taj Holding represents and warrants to THCR and Merger Sub that: Section 3.01. Corporate Organization. Taj Holding is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own its properties and assets and to conduct its businesses as now conducted. Taj Holding is duly qualified and in good standing in each jurisdiction in which the property owned, leased or operated by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not be reasonably expected to have a Taj Holding Material Adverse Effect. Section 3.02. Capitalization. The authorized capital stock of Taj Holding consists of (i) 1,000,000 shares of Preferred Stock, par value $1.00 per share, (ii) 10,000,000 shares of Taj Holding Class A Common Stock, (iii) 860,000 shares of Taj Holding Class B Common Stock and (iv) 10,000,000 shares of Taj Holding Class C Common Stock. 1,350,000, 780,242 and 1,350,000 shares of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common Stock, respectively, are issued and outstanding. The outstanding shares of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. The outstanding shares of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common Stock are the sole outstanding capital stock of Taj Holding. There are no options, warrants or other rights to purchase debt or equity securities of Taj Holding outstanding. 10 Section 3.03. Subsidiaries. Each Subsidiary of Taj Holding (i) is a corporation or other legal entity duly organized, validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization and has the full power and authority to own its properties and conduct its business and operations as currently conducted, except where the failure to be duly organized, validly existing or in good standing does not have, and would not be reasonably expected to have, a Taj Holding Material Adverse Effect, and (ii) is duly qualified and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified does not have and would not be reasonably expected to have a Taj Holding Material Adverse Effect. Section 3.04. Financial Statements; SEC Reports. Taj Holding has previously furnished THCR and Merger Sub with true and complete copies of the Taj Holding and Taj Associates (i) Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as filed with the SEC, (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995, and September 30, 1995, as filed with the SEC, (iii) proxy statements related to all meetings of stockholders (whether annual or special) since January 1, 1995 and prior to the date hereof and (iv) all other reports or registration statements filed with the SEC since January 1, 1995 (clauses (i) through (iv) being referred to herein collectively as the "Taj Holding SEC Reports"). As of their respective filing dates, the Taj Holding SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be. As of their respective dates, the Taj Holding SEC Reports, including, without limitation, any financial statements included therein, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements included in the Taj Holding SEC Reports comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods (except as may be indicated therein or in the notes thereto), present fairly the financial position of the entities to which they relate as of the dates thereof and the results of their operations and cash flows for the periods presented therein subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments, any other adjustments described therein and the fact that certain information and notes have been condensed or omitted in accordance with the Exchange Act, and are, in all material respects, in accordance with the books of account and records of Taj Holding. Section 3.05. Absence of Certain Changes or Events. Except as described in the Taj Holding SEC Reports, during the period since September 30, 1995, (i) the business of Taj Holding and its Subsidiaries has been conducted only in the ordinary course, consistent with past practice, (ii) neither Taj Holding nor any of its Subsidiaries has entered into any material transaction other than in the ordinary course, consistent with past practice, and (iii) there has not been any event or change that has had a Taj Holding Material Adverse Effect. Section 3.06. Authorization and Validity of Agreements; Opinion of Financial Advisor. (a) Taj Holding has the corporate power to enter into this Merger Agreement and to carry out its obligations hereunder and, subject to the approval of the holders of the Taj Holding Class B Common Stock and the Taj Holding Class C Common Stock, each voting as a separate class, has the corporate power to consummate the Merger and the other transactions contemplated by this Merger Agreement to be performed by Taj Holding. The execution and delivery of this Merger Agreement, the performance of Taj Holding's obligations hereunder and the consummation of the Merger and the other transactions contemplated by this Merger Agreement to be performed by Taj Holding have been duly authorized by all necessary corporate action by the Taj Holding Class B Directors and the Board of Directors of Taj Holding. Rothschild Inc. ("Rothschild") has delivered to the Taj Holding Class B Directors and to the Board of Directors of Taj Holding its opinion, dated January 8, 1996 (the "Rothschild Fairness Opinion"), that the consideration to be received by the holders of the Taj Holding Class A Common Stock in connection with the Merger Transaction is fair, from a financial point of view, to the holders of the Taj Holding Class A Common Stock. The Taj Holding Class B Directors and the Board of Directors of Taj Holding have unanimously approved the terms of the Merger and the other transactions contemplated by this Merger Agreement to be performed by Taj Holding (subject to, in the case of the Taj Funding Offering, the negotiation 11 of the terms relating thereto) and this Merger Agreement. This Merger Agreement has been duly executed and delivered by Taj Holding and constitutes the valid and binding obligation of Taj Holding enforceable against Taj Holding in accordance with its terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally, and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. (b) The Class B Directors of TM/GP and the entire board of directors of TM/GP have unanimously approved the terms of all the transactions relating to the Merger to the extent they contemplate action by TM/GP or Taj Associates. The Taj Holding Class B Directors have caused, pursuant to the certificate of incorporation of Taj Holding, all the shares of TM/GP Class B Common Stock to approve the terms of all the transactions relating to the Merger to the extent they contemplate action by TM/GP or Taj Associates. The Taj Holding Class B Directors and Taj Holding Class C Directors have caused, pursuant to the certificate of incorporation of Taj Holding, Taj Holding to approve, as the sole shareholder of TM/GP, the terms all the transactions relating to the Merger to the extent they contemplate action by TM/GP or Taj Associates. (c) Except for the approvals referred to in this Section, no other corporate proceedings on the part of Taj Holding are necessary to authorize this Merger Agreement and the transactions contemplated hereby to be performed by it (subject to, in the case of the Taj Funding Offering, the negotiation of the terms relating thereto); provided, however, that pursuant to Section 9.01 hereof, this Merger Agreement must also be approved and adopted by a majority of the outstanding shares of the Taj Holding Class A Common Stock, voting as a separate class. (d) Trump, the beneficial owner of all the outstanding shares of Taj Holding Class C Common Stock, has agreed to vote all of such shares in favor of the Merger pursuant to a voting agreement (the "Trump Taj Voting Agreement"), a copy of which has been delivered to each of the parties hereto. Section 3.07. No Conflict or Violation. The execution, delivery and performance by Taj Holding of this Merger Agreement, the consummation of the Merger, the Bond Redemption and the Taj Funding Offering do not and will not violate or conflict with any provision of the charter documents or by-laws of Taj Holding or its Subsidiaries and do not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate or result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which Taj Holding or its Subsidiaries are a party or by which they are bound or to which their respective properties or assets are subject, nor result in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever upon any of the properties or assets of Taj Holding or its Subsidiaries, nor adversely affect or result in the cancellation, modification, revocation or suspension of any of the licenses, franchises, permits, authorizations or approvals issued or granted to Taj Holding or its Subsidiaries by the United States, any state or local government, any foreign national or local government, or any department, agency, board, commission, bureau or instrumentality of any of the foregoing, except as would not be reasonably expected to have a Taj Holding Material Adverse Effect or as would not prevent consummation of the transactions contemplated by this Merger Agreement. Section 3.08. Consents and Approvals. The execution, delivery and performance of this Merger Agreement by Taj Holding do not and will not require any material consent, waiver, authorization or approval of any governmental or regulatory authority, domestic or foreign, or of any other Person, and no material declaration or notification to, or filing or registration with, or permit of, any governmental or regulatory authority, except as it (i) may be required in connection or compliance with applicable provisions of the DGCL, the Exchange Act, the Securities Act, the HSR Act, blue sky or other state securities laws or Gaming Laws, (ii) would not be reasonably expected to have a Taj Holding Material Adverse Effect, (iii) would not prevent consummation of the transactions contemplated by this Merger Agreement or (iv) is otherwise contemplated in this Merger Agreement. 12 Section 3.09. Litigation. Except as disclosed in the Taj Holding SEC Reports, there are no actions, suits, investigations or proceedings (adjudicatory, rulemaking or otherwise) pending or, to the knowledge of Taj Holding, threatened against Taj Holding or any of its Subsidiaries, or any property of Taj Holding or any such Subsidiary in any court or before any arbitrator of any kind or before or by any governmental or regulatory authority, domestic or foreign, except actions, suits, investigations or proceedings which, individually or in the aggregate, do not have and would not be reasonably expected to result in a Taj Holding Material Adverse Effect. Section 3.10. Taxes. Taj Holding and its Subsidiaries have filed all federal, state, county, local and foreign tax returns required to be filed by them, and have paid all taxes shown to be due thereon, other than taxes appropriate reserves for which have been made in the financial statements of Taj Holding and its Subsidiaries (and, to the extent material, such reserves have been accurately described to THCR). There are no assessments or adjustments that have been asserted in writing against Taj Holding or its Subsidiaries for any period for which Taj Holding has not made appropriate reserves in its financial statements. Section 3.11. Contracts and Leases. The Taj Holding SEC Reports contain a complete listing of all material contracts, leases, agreements or understandings, whether written or oral, required to be described therein or filed as exhibits thereto pursuant to the Exchange Act. Each of such contracts, leases, agreements and understandings is in full force and effect and (i) none of Taj Holding or its Subsidiaries or, to Taj Holding's best knowledge, any other party thereto, has breached or is in default thereunder, (ii) no event has occurred which, with the passage of time or the giving of notice would constitute such a breach or default, (iii) no claim of material default thereunder has, to Taj Holding's best knowledge, been asserted or threatened and (iv) none of Taj Holding or its Subsidiaries or, to Taj Holding's best knowledge, any other party thereto is seeking the renegotiation thereof or substitute performance thereunder, except where such breach or default, or attempted renegotiation or substitute performance, individually or in the aggregate, does not have and would not be reasonably expected to have a Taj Holding Material Adverse Effect. Section 3.12. Joint Proxy Statement. None of the information supplied or to be supplied by Taj Holding for inclusion or incorporation by reference in the THCR Registration Statement, the Joint Proxy Statement or the Schedule 13E-3 to be filed by Taj Holding and others in connection with the Merger Transaction, will at the time it becomes effective (in the case of the THCR Registration Statement) or it is mailed (in the case of the Joint Proxy Statement) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the Effective Time any event with respect to Taj Holding, its officers and directors or any of its Subsidiaries should occur which is required to be described in an amendment of, or a supplement to, such registration statement or proxy statement, Taj Holding shall notify THCR thereof. Section 3.13. Takeover Provisions Inapplicable. As of the date hereof and at all times on or prior to the Effective Time, Section 203 of the DGCL, is, and shall be, inapplicable to the Merger and the other transactions contemplated by the Merger Transaction. Section 3.14. Brokerage/Finder's Fees. Except for Rothschild, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of Taj Holding or its Subsidiaries, and the fees and commissions payable to Rothschild, as contemplated by this Section, will be paid in full by Taj Holding. Taj Holding hereby indemnifies THCR and Merger Sub for any fees owing as a result of a breach of this Section. Section 3.15. Bond Redemption; Taj Funding Offering. Taj Holding, Taj Associates and Taj Funding have the right under the Bond Indenture to effect the Bond Redemption. The Boards of Directors of Taj Holding and Taj Funding have authorized, subject to the consummation of the Merger and the other elements of the Merger Transaction, (a) the Bond Redemption and (b) the filing of a registration statement on Form S-1 with the SEC relating to the Taj Funding Offering (the "Debt S-1") and, subject to the negotiation of the terms relating thereto, the Taj Funding Offering. 13 Section 3.16. THCR Offering. None of the information supplied by Taj Holding with respect to Taj Holding and its Subsidiaries for inclusion in the registration statement on Form S-1 to be filed by THCR with the SEC relating to the THCR Offering (the "Equity S-1") will, at the time the Equity S-1 becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If any time prior to the Effective Time any event with respect to Taj Holding, its officers and directors or any of its Subsidiaries should occur which is required to be described in an amendment to or supplement to such registration statement, Taj Holding shall immediately notify THCR thereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THCR THCR represents and warrants to Taj Holding that: Section 4.01. Corporate Organization. THCR is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own its properties and assets and to conduct its businesses as now conducted. THCR is duly qualified and in good standing in each jurisdiction in which the property owned, leased or operated by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not be reasonably expected to have a THCR Material Adverse Effect. Section 4.02. Capitalization. The authorized capital stock of THCR consists of 50,000,000 shares of THCR Common Stock, 1,000 shares of THCR Class B Common Stock and 1,000,000 shares of Preferred Stock, par value $1.00 per share. 10,066,667 and 1,000 shares of the THCR Common Stock and the THCR Class B Common Stock, respectively, are issued and outstanding. All outstanding shares of THCR Class B Common Stock are owned by Trump. The outstanding shares of THCR Common Stock and THCR Class B Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. The outstanding shares of the THCR Common Stock and the THCR Class B Common Stock are the sole outstanding capital stock of THCR. THCR is the sole general partner of THCR Holdings, and, as of December 31, 1995, THCR held a 60% general partnership interest in THCR Holdings. As of December 31, 1995, Trump's 40% limited partnership interest in THCR Holdings was convertible, at Trump's option, into 6,666,667 shares of THCR Common Stock (subject to certain adjustments set forth in the Exchange Agreement). The shares of THCR Common Stock to be issued to holders of Taj Holding Class A Common Stock in connection with the Merger have been duly authorized and, when issued and delivered to such holders as provided in this Merger Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such shares of THCR Common Stock will not be subject to any preemptive or similar rights. Section 4.03. Subsidiaries. Each Subsidiary of THCR (i) is a corporation or other legal entity duly organized, validly existing and (if applicable) in good standing under the laws of the jurisdiction of its organization and has the full power and authority to own its properties and conduct its business and operations as currently conducted, except where the failure to be duly organized, validly existing or in good standing does not have, and would not be reasonably expected to have, a THCR Material Adverse Effect, and (ii) is duly qualified and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified does not have and would not be reasonably expected to have a THCR Material Adverse Effect. Section 4.04. Financial Statements; SEC Reports. THCR has previously furnished Taj Holding with true and complete copies of the THCR (i) Registration Statement on Form S-1 (File No. 33-90784), as filed with the SEC, (ii) Quarterly Reports on Form 10-Q for the quarters ended June 30, 1995 and September 30, 1995, as filed with the SEC, and (iii) all other reports or registration statements filed with the SEC since June 7, 1995 (clauses (i) through (iii) being referred to herein collectively as the "THCR SEC Reports"). As of their 14 respective filing dates, the THCR SEC Reports, including, without limitation, any financial statements included therein, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements included in the THCR SEC Reports comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods (except as may be indicated therein or in the notes thereto), present fairly the financial position of the entities to which they relate as of the dates thereof and the results of their operations and cash flows for the periods presented therein subject, in the case of the unaudited interim financial statements, to normal year-end audit adjustments, any other adjustments described therein and the fact that certain information and notes have been condensed or omitted in accordance with the Exchange Act, and are, in all material respects, in accordance with the books of account and records of THCR. Section 4.05. Absence of Certain Changes or Events. Except as described in the THCR SEC Reports, during the period since September 30, 1995, (i) the business of THCR and its Subsidiaries has been conducted only in the ordinary course, consistent with past practice, (ii) neither THCR nor any of its Subsidiaries has entered into any material transaction other than in the ordinary course, consistent with past practice, and (iii) there has not been any change or event that has had a THCR Material Adverse Effect. Section 4.06. Authorization and Validity of Agreements; Opinion of Financial Advisor. (a) THCR has the corporate power to enter into this Merger Agreement and to carry out its obligations hereunder and, subject to the approval by the affirmative vote of a majority of the outstanding shares of THCR Common Stock and THCR Class B Common Stock, voting as a single class, has the power to consummate the Merger and the other transactions contemplated by this Merger Agreement to be performed by THCR. The execution and delivery of this Merger Agreement, the performance of THCR's obligations hereunder and the consummation of the Merger have been duly authorized by all necessary corporate action by the THCR Special Committee and the Board of Directors of THCR. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") has delivered to the THCR Special Committee its opinion, dated January 8, 1996 (the "DLJ Fairness Opinion"), that the aggregate consideration to be paid by THCR pursuant to the transactions contemplated by this Merger Agreement, is fair, from a financial point of view, to THCR. The THCR Special Committee and the Board of Directors of THCR have unanimously approved the terms of the Merger Transaction and this Merger Agreement. This Merger Agreement has been duly executed and delivered by THCR and constitutes the valid and binding obligation of THCR enforceable against THCR in accordance with its terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally, and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. (b) Except for the approval of the Merger Transaction by the holders of THCR Common Stock and THCR Class B Common Stock as described in this Section and in Section 9.01 hereof (which approval shall constitute adoption of this Merger Agreement) and the required amendment to the Partnership Agreement, no other corporate proceedings on the part of THCR are necessary to authorize the Merger Transaction. (c) Trump, the beneficial owner of all the outstanding shares of THCR Class B Common Stock, has agreed to vote all of such shares and any shares of THCR Common Stock that he beneficially owns in favor of the Merger Transaction pursuant to a voting agreement (the "Trump THCR Voting Agreement"), a copy of which has been delivered to each of the parties hereto. Section 4.07. No Conflict or Violation. The execution, delivery and performance by THCR of this Merger Agreement, the consummation of the Merger and the other elements of the Merger Transaction, including, without limitation, the THCR Offering, do not, and will not violate or conflict with any provision of the charter documents or by-laws of THCR or its Subsidiaries and do not and will not violate any provision of law, or any order, judgment or decree of any court or other governmental or regulatory authority, nor violate or 15 result in a breach of or constitute (with due notice or lapse of time or both) a default under any contract, lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which THCR or its Subsidiaries are a party or by which they are bound or to which their respective properties or assets are subject, nor result in the creation or imposition of any lien, charge or encumbrance of any kind whatsoever upon any of the properties or assets of THCR or its Subsidiaries, nor adversely affect or result in the cancellation, modification, revocation or suspension of any of the licenses, franchises, permits, authorizations or approvals issued or granted to THCR or its Subsidiaries by the United States, any state or local government, any foreign national or local government, or any department, agency, board, commission, bureau or instrumentality of any of the foregoing, except as would not be reasonably expected to have a THCR Material Adverse Effect or as would not prevent consummation of the transactions contemplated by this Merger Agreement. Section 4.08. Consents and Approvals. The execution, delivery and performance of this Merger Agreement by THCR and Merger Sub do not and will not require any material consent, waiver, authorization or approval of any governmental or regulatory authority, domestic or foreign, or of any other Person, and no material declaration or notification to, or filing or registration with, or permit of, any governmental or regulatory authority, except as it (i) may be required in connection or compliance with applicable provisions of the DGCL, the Exchange Act, the Securities Act, the HSR Act, blue sky or other state securities laws or Gaming Laws, (ii) would not be reasonably expected to have a THCR Material Adverse Effect, (iii) would not prevent consummation of the transactions contemplated by this Merger Agreement or the payment of the Merger Consideration following consummation of the Merger or (iv) is otherwise contemplated in this Merger Agreement. Section 4.09. Litigation. Except as disclosed in the THCR SEC Reports, there are no actions, suits, investigations or proceedings (adjudicatory, rulemaking or otherwise) pending or, to the knowledge of THCR, threatened against THCR or any of its Subsidiaries, or any property of THCR or any such Subsidiary in any court or before any arbitrator of any kind or before or by any governmental or regulatory authority, domestic or foreign, except actions, suits, investigations or proceedings which, individually or in the aggregate, do not have and would not be reasonably expected to result in a THCR Material Adverse Effect. Section 4.10. Taxes. THCR and its Subsidiaries have filed all federal, state, county, local and foreign tax returns required to be filed by them, and have paid all taxes shown to be due thereon, other than taxes appropriate reserves for which have been made in the financial statements of THCR and its Subsidiaries (and, to the extent material, such reserves have been accurately described to Taj Holding). There are no assessments or adjustments that have been asserted in writing against THCR or its Subsidiaries for any period for which THCR has not made appropriate reserves in its financial statements. Section 4.11. Contracts and Leases. The THCR SEC Reports contain a complete listing of all material contracts, leases, agreements or understandings, whether written or oral, required to be described therein or filed as exhibits thereto pursuant to the Exchange Act. Each of such contracts, leases, agreements and understandings is in full force and effect and (i) none of THCR or its Subsidiaries or, to THCR's best knowledge, any other party thereto, has breached or is in default thereunder, (ii) no event has occurred which, with the passage of time or the giving of notice would constitute such a breach or default, (iii) no claim of material default thereunder has, to THCR's best knowledge, been asserted or threatened and (iv) none of THCR or its Subsidiaries or, to THCR's best knowledge, any other party thereto is seeking the renegotiation thereof or substitute performance thereunder, except where such breach or default, or attempted renegotiation or substitute performance, individually or in the aggregate, does not have and would not be reasonably expected to have a THCR Material Adverse Effect. Section 4.12. THCR Registration Statement. None of the information supplied or to be supplied by THCR with respect to THCR and its Subsidiaries for inclusion or incorporation by reference in the THCR Registration Statement and the Joint Proxy Statement will at the time it becomes effective (in the case of the THCR Registration Statement) or it is mailed (in the case of the Joint Proxy Statement) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order 16 to make the statements therein, in light of the circumstances under which they are made, not misleading. If at any time prior to the Effective Time any event with respect to THCR, its officers and directors or any of its Subsidiaries should occur which is required to be described in an amendment of, or a supplement to, such registration statement or proxy statement, THCR shall notify Taj Holding thereof. Section 4.13. Takeover Provisions Inapplicable. As of the date hereof and at all times on or prior to the Effective Time, Section 203 of the DGCL, is, and shall be, inapplicable to the Merger and the other transactions contemplated by the Merger Transaction. Section 4.14. Brokerage/Finder's Fees. Except for DLJ, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Merger based upon arrangements made by or on behalf of THCR or its Subsidiaries, and the fees and commissions payable to DLJ, as contemplated by this Section, will be paid in full by THCR. THCR indemnifies Taj Holding for any fees owing as a result of a breach of this Section. Section 4.15. Taj Funding Offering. None of the information supplied by THCR with respect to THCR and its Subsidiaries for inclusion in the Debt S-1 will, at the time the Debt S-1 becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. If any time prior to the Effective Time any event with respect to THCR, its officers and directors or any of its Subsidiaries should occur which is required to be described in an amendment to, or supplement to, such registration statement, THCR shall immediately notify Taj Holding thereof. ARTICLE V REPRESENTATIONS AND WARRANTIES OF MERGER SUB Merger Sub represents and warrants to Taj Holding that: Section 5.01. Corporate Organization; Subsidiaries. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own its properties and assets and to conduct its businesses as now conducted. Merger Sub is duly qualified and in good standing in each jurisdiction in which the property owned, leased or operated by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not be reasonably expected to have a Merger Sub Material Adverse Effect. Merger Sub has no Subsidiaries. Section 5.02. Capitalization. The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock, 100 of which are issued and outstanding. THCR is the owner of all the outstanding shares of the Merger Sub Common Stock. The outstanding shares of Merger Sub Common Stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights. The Merger Sub Common Stock is the sole outstanding capital stock of Merger Sub. Section 5.03. Authorization and Validity of Agreements. Merger Sub has the corporate power to enter into this Merger Agreement and to carry out its obligations hereunder and has the power to consummate the Merger. The execution and delivery of this Merger Agreement, the performance of Merger Sub's obligations hereunder and the consummation of the Merger have been duly authorized by all necessary corporate action by the Board of Directors of Merger Sub and by THCR as the sole holder of Merger Sub Common Stock. This Merger Agreement has been duly executed and delivered by Merger Sub and constitutes the valid and binding obligation of Merger Sub enforceable against Merger Sub in accordance with its terms, except (i) to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally, and (ii) that the availability of equitable remedies, including specific performance, is subject to the discretion of the court before which any proceeding therefor may be brought. No other corporate proceedings on the part of Merger Sub are necessary to authorize this Merger Agreement and the transactions contemplated hereby. 17 ARTICLE VI COVENANTS OF TAJ HOLDING Section 6.01. Conduct Pending the Merger. From and after the date of this Merger Agreement and until the Effective Time, Taj Holding shall, and shall cause each of its Subsidiaries to, conduct its business solely in the ordinary course consistent with past practice and, without the prior written consent of THCR, Taj Holding shall not, and shall cause each of its Subsidiaries not to, except as required or permitted pursuant to the terms hereof or as contemplated in the Taj Holding SEC Reports filed through the date hereof or by the terms of the Merger Transaction: (i) make any material change in the conduct of its businesses and operations or enter into any transaction, other than in the ordinary course of business consistent with past practice, or make any investment other than a Permitted Investment (as such term is defined in the Bond Indenture); (ii) make any change in its certificate of incorporation or by-laws, issue any additional shares of capital stock or equity securities, grant any option, warrant or right to acquire any capital stock or equity securities, issue any security convertible into or exchangeable for its capital stock, alter in any material respect the terms of any of its outstanding securities, or make any change in its outstanding shares of capital stock or in its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise; (iii) incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof; (iv) make any sale, assignment, transfer, abandonment or other conveyance of any of its assets or any part thereof, except in the ordinary course of business consistent with past practices; (v) subject any of its assets, or any part thereof, to any lien or suffer such to be imposed other than such liens as may arise in the ordinary course of business consistent with past practice or by operation of law; (vi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock or declare, set aside or pay any dividends or other distribution in respect of such shares; (vii) increase the compensation payable or to become payable to its executive officers or employees, except for increases in the ordinary course of business in accordance with past practices, or grant any severance or termination pay to, or enter into any employment or severance agreement (other than in the ordinary course of business) with, any director or executive officer, or establish, adopt, enter into or amend in any material respect or take action to accelerate any rights or benefits under any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust fund, policy or arrangement for the benefit of any director, executive officer or employee; (viii) take any other action that would cause any of the representations and warranties made in this Merger Agreement not to remain true and correct; or (ix) commit itself to do any of the foregoing. Section 6.02. Joint Proxy Statement. As promptly as reasonably practicable after the execution of this Merger Agreement, Taj Holding and THCR shall prepare and file with the SEC the preliminary Joint Proxy Statement, which will be included within the THCR Registration Statement. As promptly as reasonably practicable after comments are received from the SEC with respect to the THCR Registration Statement and after the satisfactory response thereto by Taj Holding and THCR, Taj Holding and THCR shall file with the SEC the definitive Joint Proxy Statement and any amendment to the THCR Registration Statement and shall use all reasonable efforts to cause the THCR Registration Statement to become effective as soon thereafter as it is reasonably practicable. Promptly thereafter, Taj Holding shall distribute the Joint Proxy Statement and related proxy card and the Election Form to its stockholders. 18 Section 6.03. Stockholders Meeting. Taj Holding shall take all action necessary, in accordance with applicable law and its certificate of incorporation and by-laws, to convene a special meeting of the holders of the Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common Stock (the "Taj Holding Meeting") as promptly as practicable for the purpose of approving and adopting this Merger Agreement. Subject to its fiduciary duties, as advised by Special Counsel, the Board of Directors of Taj Holding will recommend that holders of Taj Holding Class A Common Stock, Taj Holding Class B Common Stock and Taj Holding Class C Common Stock vote in favor of this Merger Agreement at the Taj Holding Meeting. Section 6.04. Compliance with the Securities Act. At the Closing, Taj Holding shall cause to be delivered to THCR a certificate (satisfactory to counsel for THCR) of the general counsel of Taj Associates identifying all holders of Taj Holding Class A Common Stock who were, to the best of his knowledge and after being advised by outside counsel, affiliates (for purposes of Rule 145 under the Securities Act) of Taj Holding at the time of the Taj Holding Meeting. Section 6.05. No Solicitation. (a) Subject to the fiduciary duties of the Board of Directors of Taj Holding, as advised by Special Counsel, neither Taj Holding nor any of its Subsidiaries shall, directly or indirectly, take (nor shall Taj Holding authorize or permit its Subsidiaries, officers, directors, employees, representatives, investment bankers, attorneys, accountants or other agents or affiliates, to take) any action (i) to knowingly encourage, solicit or initiate the submission of any Acquisition Proposal, (ii) to enter into any agreement with respect to any Acquisition Proposal or (iii) to participate in any way in discussions or negotiations with, or furnish any information to, any Person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal. Taj Holding will promptly communicate to the other parties hereto any solicitation by or of Taj Holding and the terms of any proposal or inquiry, including the identity of the Person and its affiliates making the same, that it may receive in respect of any such transaction, or of any such information requested from it or of any such negotiations or discussions being sought to be initiated with it. (b) Notwithstanding paragraph (a) above, Taj Holding may, directly or indirectly, furnish information and access, in each case in response to unsolicited requests therefor, to any Person pursuant to appropriate confidentiality agreements, and may participate in discussions and negotiate with such Person concerning any Acquisition Proposal involving Taj Holding or any direct or indirect Subsidiary of Taj Holding, if the Taj Holding Class B Directors by a majority vote determine in their good faith judgment that such action is appropriate in furtherance of the best interests of stockholders. Section 6.06. Dividend Prohibition. From the date of this Merger Agreement through the Effective Time, Taj Holding shall not, and shall cause its Subsidiaries not to, pay or declare any dividend or make any distribution with respect to any of their equity interests except as contemplated in connection with the Merger Transaction. Section 6.07. Letters of Accountants. Taj Holding shall use its reasonable best efforts to cause to be delivered to THCR "comfort letters" of Arthur Andersen LLP, Taj Holding's independent public accountants, dated and delivered the date on which the THCR Registration Statement shall become effective and as of the Effective Time, and addressed to THCR, in form and substance reasonably satisfactory to THCR and reasonably customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Merger Agreement. ARTICLE VII COVENANTS OF THCR Section 7.01. Conduct Pending the Merger. From and after the date of this Merger Agreement and until the Effective Time, THCR shall, and shall cause each of its Subsidiaries to, conduct its business solely in the 19 ordinary course consistent with past practice and, without the prior written consent of Taj Holding, THCR shall not, and shall cause each of its Subsidiaries not to, except as required or permitted pursuant to the terms hereof or as contemplated in the THCR SEC Reports filed through the date hereof or by the terms of the Merger Transaction: (i) make any material change in the conduct of its businesses and operations or enter into any transaction other than in the ordinary course of business consistent with past practice; (ii) make any change in its certificate of incorporation or by-laws, or make any material change in its outstanding shares of capital stock or in its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise; (iii) take any other action that would cause any of the representations and warranties made in this Merger Agreement not to remain true and correct; or (iv) commit itself to do any of the foregoing. Section 7.02. Joint Proxy Statement. As promptly as reasonably practicable after the execution of this Merger Agreement, THCR and Taj Holding shall prepare and THCR shall file with the SEC the THCR Registration Statement, which shall include the preliminary Joint Proxy Statement and the preliminary prospectus with respect to the THCR Common Stock to be issued in connection with the Merger. As promptly as reasonably practicable after comments are received from the SEC with respect to the THCR Registration Statement and after the satisfactory response thereto by THCR and Taj Holding, THCR and Taj Holding shall file with the SEC the definitive Joint Proxy Statement and THCR shall file with the SEC any amendment to the THCR Registration Statement and shall use all reasonable efforts to cause the THCR Registration Statement to become effective as soon thereafter as it is reasonably practicable. Promptly thereafter, THCR shall distribute the Joint Proxy Statement and related proxy card to its stockholders. Section 7.03. Stockholders Meeting. (a) THCR shall take all action necessary, in accordance with applicable law and its certificate of incorporation and by-laws, to convene a special meeting of the holders of the THCR Common Stock and the THCR Class B Common Stock (the "THCR Meeting") as promptly as practicable for the purpose of approving the Merger Transaction. Subject to its fiduciary duties, as advised by outside counsel, the Board of Directors of THCR will recommend that holders of THCR Common Stock vote in favor of and adopt the Merger Transaction (which approval will constitute adoption of this Merger Agreement) at the THCR Meeting. (b) THCR, as the sole stockholder of Merger Sub, has consented to the adoption of this Merger Agreement by Merger Sub and agrees that such consent shall be deemed for all purposes as a vote duly adopted at a meeting of the stockholders of Merger Sub held for such purpose. Section 7.04. Indemnification and Insurance. (a) For a period of six years from the Effective Time, each of the Surviving Corporation and TM/GP shall, and THCR shall cause the Surviving Corporation and TM/GP to, provide to the former officers and directors of Taj Holding (the "Taj Holding Indemnified Parties") indemnification as set forth in the certificate of incorporation and by-laws of THCR as in effect as of the date hereof. THCR agrees, and shall cause the Surviving Corporation and TM/GP to agree, that until six years from the Effective Time, unless otherwise required by law, the certificate of incorporation and by-laws of the Surviving Corporation and TM/GP shall not be amended, repealed or modified to reduce or limit the rights of indemnity afforded to the present and former directors, officers and employees of Taj Holding and TM/GP (including, without limitation, with respect to the transactions contemplated by this Merger Agreement), or the ability of the Surviving Corporation or TM/GP to indemnify them, nor to hinder, delay or make more difficult the exercise of such rights of indemnity or the ability to indemnify. (b) Should any claim or claims be made against any present or former director, officer, employee or agent of Taj Holding or TM/GP, arising from his services as such, within six years of the Effective Time, the provisions of this Section with respect to indemnification and the certificate of incorporation and the by-laws of the Surviving Corporation and TM/GP shall continue in effect until the final disposition of all such claims. 20 (c) In the event the Surviving Corporation or TM/GP or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation or TM/GP, as the case may be, shall assume all of its obligations set forth in this Section. (d) For a period of six years after the Effective Time, the Surviving Corporation and TM/GP shall, and THCR shall cause the Surviving Corporation and TM/GP to, purchase and maintain in effect directors' and officers' liability insurance policies covering the Taj Holding Indemnified Parties on terms no less favorable than the terms of the current insurance policies coverage. Notwithstanding the foregoing, if the directors' and officers' liability insurance referred to in this paragraph is unavailable for the Current D&O Premium, the Surviving Corporation and TM/GP shall obtain as much insurance as can be obtained for a premium not in excess (on an annualized basis) of the Current D&O Premium. (e) In the event any claim is made against present or former directors, officers or employees of Taj Holding or TM/GP that is covered or potentially covered by insurance, THCR agrees that it shall, and shall cause the Surviving Corporation and TM/GP to, do nothing that would forfeit, jeopardize, restrict or limit the insurance coverage available for that claim until the final disposition of that claim unless otherwise required by law or their respective certificate of incorporation or by-laws. (f) This Section 7.04 is intended to be for the benefit of, and shall be enforceable by, the Taj Holding Indemnified Parties, their heirs and personal representatives and shall be binding on THCR, the Surviving Corporation and TM/GP and their respective successors and assigns. Section 7.05. Letters of Accountants. THCR shall use its reasonable best efforts to cause to be delivered to Taj Holding "comfort letters" of Arthur Andersen LLP, THCR's independent public accountants, dated and delivered the date on which the THCR Registration Statement shall become effective and as of the Effective Time, and addressed to Taj Holding, in form and substance reasonably satisfactory to Taj Holding and reasonably customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Merger Agreement. ARTICLE VIII OTHER AGREEMENTS Section 8.01. Stock Exchange Listing. THCR shall, prior to the Effective Time, use its best efforts to list on the NYSE, subject to official notice of issuance, the THCR Common Stock to be issued pursuant to the Merger. Section 8.02. Additional Agreements; Consents and Permits. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Merger Agreement, including using all reasonable efforts to obtain all necessary waivers, consents and approvals, to effect all necessary registrations and filings (including, but not limited to, filings with all applicable governmental agencies) and to lift any injunction or other legal bar to the transactions contemplated by this Merger Agreement (and, in such case, to proceed with the transactions contemplated by this Merger Agreement as expeditiously as possible), subject, however, to the appropriate vote of the respective stockholders or stockholder, as the case may be, of Taj Holding, THCR and Merger Sub. Section 8.03. Registration of Securities. Each of the parties hereto shall use its reasonable efforts to prepare promptly and file with the SEC, shall furnish such information required to be included in, and shall 21 cooperate in the preparation of, such registration statements under the Securities Act and Schedules 13E under the Exchange Act, and to cause such registration statements to be declared effective, as applicable, as shall be required to finance the Merger Transaction and to register the shares of THCR Common Stock issuable pursuant to the terms of this Merger Agreement. Each of the parties hereto shall use its reasonable efforts to cause such registration statements and schedules to comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act, respectively. Section 8.04. Access to Information; Confidentiality. (a) Each of the parties hereto shall afford to the other parties hereto and to their accountants, counsel and other representatives full access during normal business hours (and at such other times as the parties may mutually agree) throughout the period until the Effective Time to all of its properties, books, contracts, commitments, records and personnel and, during such period, each shall furnish promptly to the others (i) a copy of each report, schedule and other document filed or received by it pursuant to the requirements of federal or state securities laws or Gaming Laws, and (ii) all other information concerning its business, properties and personnel, both past and present, as such party may reasonably request. (b) A Receiving Party shall (i) keep confidential and not disclose or reveal to any Person, other than those employed by the Receiving Party or acting on the Receiving Party's behalf and directly participating in the performance of such party's obligations under this Merger Agreement, all Confidential Information, (ii) cause their respective affiliates and the directors, officers, employees, agents, advisors and controlled or controlling Persons of such party and its affiliates to observe the terms of this Section and to keep confidential and not disclose or reveal to any Person all Confidential Information, and (iii) not use Confidential Information for any purpose other than in connection with the transactions contemplated by this Merger Agreement and in a manner approved by the Disclosing Party. (c) In the event that a Receiving Party is requested or required by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process or required (as advised in writing by its outside counsel) to disclose any of the Confidential Information, the Receiving Party shall provide the Disclosing Party with prompt written notice so that it may seek a protective order or other appropriate remedy. In the event such protection or other remedy is not obtained, the Receiving party may disclose such Confidential Information pursuant to such interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process or other law; provided, however, that the Receiving Party shall exercise best efforts to obtain assurance that confidential treatment will be accorded to such Confidential Information. (d) Without prejudice to the rights and remedies otherwise available to a Disclosing Party, a Disclosing Party shall be entitled to equitable relief by way of injunction if the Receiving Party or any of the Receiving Party's affiliates and the directors, officers, employees, agents, advisors and controlled or controlling Persons of such Receiving Party and its affiliates breach or threaten to breach any of the provisions of this Section. Section 8.05. Notification of Certain Matters. Taj Holding, THCR and Merger Sub shall give prompt notice to each other of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Merger Agreement; (ii) any notice or other communication from any governmental or regulatory agency or authority in connection with the transactions contemplated by this Merger Agreement; (iii) any action, suit, claim, investigation or proceeding commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting Taj Holding, THCR or any of their Subsidiaries, which is reasonably likely to (A) have a Taj Holding Material Adverse Effect, THCR Material Adverse Effect or Merger Sub Material Adverse Effect, as the case may be, or (B) prevent the consummation of the transactions contemplated by this Merger Agreement or cause any of such transactions to be rescinded following consummation; 22 (iv) the occurrence, or failure to occur, of any event or change in circumstances where such occurrence or failure to occur would be likely to cause any representation or warranty contained in this Merger Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time; and (v) any material failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that no such notification shall affect the representations or warranties of the parties or the conditions to the obligations of the parties hereunder. Section 8.06. HSR Act. The Parties shall use their best efforts to file or cause to be filed as soon as practicable notifications under the HSR Act in connection with the Merger, and to respond as promptly as practicable to any inquiries received from the Federal Trade Commission and the Antitrust Division of the Department of Justice for additional information or documentation and to respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other governmental authority in connection with antitrust matters. Section 8.07. Bond Redemption. Taj Holding shall take all necessary actions to cause the Bond Redemption to occur immediately after the Effective Time. ARTICLE IX CONDITIONS TO THE MERGER Section 9.01. Conditions to the Obligations of Each Party. The respective obligations of Taj Holding, THCR and Merger Sub to consummate the transactions contemplated by this Merger Agreement are subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any or all of which may be waived in whole or in part, to the extent permitted by applicable law: (i) this Merger Agreement shall have been duly approved and adopted by the affirmative vote of a majority of the outstanding shares of the Taj Holding Class B Common Stock and Taj Holding Class C Common Stock, each voting as a separate class, in accordance with the DGCL and the certificate of incorporation of Taj Holding; (ii) this Merger Agreement shall have been duly approved and adopted by the affirmative vote of a majority of the outstanding shares of Taj Holding Class A Common Stock, voting as a separate class; (iii) the Merger Transaction shall have been duly approved and adopted by the affirmative vote of a majority of the outstanding shares of THCR Common Stock and THCR Class B Common Stock, voting as a single class, in accordance with the DGCL and the certificate of incorporation of THCR; (iv) the Merger Transaction shall have been duly approved by the affirmative vote of a majority of the outstanding shares of THCR Common Stock (excluding officers and directors of THCR and their affiliates), voting as a separate class; (v) all filings required to be made prior to the Effective Time with, and all consents, approvals, permits and authorizations required to be obtained prior to the Effective Time from, governmental and regulatory authorities (including, without limitation, Gaming Authorities) in connection with the execution and delivery of this Merger Agreement and the consummation of the transactions contemplated hereby by Taj Holding, THCR and Merger Sub shall have been made or obtained (as the case may be) without restrictions, except where the failure to obtain such consents, approvals, permits and authorizations could not be reasonably be expected to have a Taj Holding Material Adverse Effect or a THCR Material Adverse Effect (assuming the merger has taken place); (vi) no court or governmental or regulatory authority of competent jurisdiction (including, without limitation, Gaming Authorities) shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) 23 or taken any action that prohibits the consummation of the transactions contemplated by this Merger Agreement; provided, however, that the parties invoking this condition shall use their best efforts to have any such judgment, decree, injunction or order vacated; (vii) the shares of THCR Common Stock to be issued pursuant to the Merger shall have been approved for listing on the NYSE, subject to official notice of issuance; and (viii) the waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. Section 9.02. Conditions to the Obligation of Taj Holding. The obligation of Taj Holding to consummate the transactions contemplated by this Merger Agreement is subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any or all of which may be waived in whole or in part by Taj Holding to the extent permitted by applicable law: (i) the Taj Funding Offering shall have been consummated on terms reasonably acceptable to Taj Holding; (ii) the consent of certain of Taj Associates' creditors necessary to consummate the Merger Transaction shall have been obtained; (iii) Taj Holding LLC or any other Person to which part or all of the assets of Taj Holding or any of its Subsidiaries has been or will be transferred shall have assumed (without releasing the Surviving Corporation or TM/GP) the indemnification and other obligations of the Surviving Corporation and TM/GP set forth in Section 7.04 hereof; (iv) each of THCR and Merger Sub shall have performed in all material respects all of its respective obligations hereunder required to be performed by them at or prior to the Effective Time; (v) each of the representations and warranties of each of THCR and Merger Sub contained in this Merger Agreement and in any certificate or other writing delivered by THCR and Merger Sub pursuant hereto shall be true in all material respects at and as of the Effective Time, as if made at and as of such time (except to the extent it relates to a particular date); and (vi) Taj Holding shall have received a certificate from THCR and Merger Sub, signed by an executive officer of THCR and Merger Sub, respectively, to the effect set forth in clauses (iv) and (v) of this Section. Section 9.03. Conditions to the Obligations of THCR and Merger Sub. The obligation of each of THCR and Merger Sub to consummate the transactions contemplated by this Merger Agreement is subject to the fulfillment at or prior to the Effective Time of each of the following conditions, any or all of which may be waived in whole or in part by THCR to the extent permitted by applicable law: (i) the Market Value of the THCR Common Stock shall be $20 or more; (ii) the THCR Offering and the Taj Funding Offering shall have been consummated on terms acceptable to THCR; (iii) the purchase of the Specified Parcels shall have been consummated on terms acceptable to THCR, the obligations relating to the outstanding indebtedness of Realty Corp. to First Fidelity shall have been satisfied and the releases of the Liens and guarantees relating to such indebtedness shall have been obtained; (iv) the payment to Bankers Trust of $10 million, contemplated as part of the Merger Transaction, shall have been made and the releases of the Liens and guarantees that Bankers Trust has with respect to Taj Associates (including Trump's direct and indirect ownership interest therein) and with respect to the TTMI Note shall have been obtained; (v) Trump shall have contributed, or caused to be contributed, to THCR Holdings and Taj Holdings LLC all of his direct and indirect ownership interests in Taj Associates on terms acceptable to THCR; 24 (vi) the number of shares of Taj Holding Class A Common Stock for which written demand for appraisal has been properly made pursuant Section 262 of the DGCL shall have not exceeded 5% of the total number of shares of Taj Holding Class A Common Stock outstanding immediately prior to the Effective Time; (vii) the THCR Registration Statement shall have been declared effective and no stop order suspending effectiveness shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness thereof shall have been initiated and be continuing, and all necessary approvals under blue sky or other state securities laws, the Securities Act or the Exchange Act relating to the issuance or trading of the THCR Common Stock shall have been received; (viii) the consent of certain of Trump's creditors necessary to consummate the Merger Transaction shall have been obtained; (ix) Taj Holding shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time; (x) each of the representations and warranties of Taj Holding contained in this Merger Agreement and in any certificate or other writing delivered by Taj Holding pursuant hereto shall be true in all material respects at and as of the Effective Time, as if made at and as of such time (except to the extent it relates to a particular date); and (xi) THCR and Merger Sub shall have received a certificate signed by an executive officer of Taj Holding to the effect set forth in clauses (ix) and (x) of this Section. ARTICLE X TERMINATION Section 10.01. Termination. This Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (whether before or after approval of this Merger Agreement by the respective stockholders of Taj Holding or THCR): (i) by joint written consent of Taj Holding and THCR; (ii) by Taj Holding if any of the conditions specified in Sections 9.01 or 9.02 have not been satisfied or waived by Taj Holding at such time as such condition is no longer capable of satisfaction; (iii) by THCR and Merger Sub if any of the conditions specified in Sections 9.01 or 9.03 have not been satisfied or waived by THCR and Merger Sub at such time as such condition is no longer capable of satisfaction; (iv) by Taj Holding, acting through the Taj Holding Class B Directors, if the Taj Holding Class B Directors shall have withdrawn or modified their approval or recommendation of this Merger Agreement or the Merger in order to permit Taj Holding to execute an agreement to effect an Acquisition Proposal determined by the Taj Holding Class B Directors to be more favorable to the Taj Holding stockholders than the transactions contemplated hereby; or (v) by either party if the Merger has not been consummated on or before June 30, 1996; provided, however, that a party may not terminate this Merger Agreement pursuant to this clause if the failure of such party to fulfill any of its obligations under this Merger Agreement shall have been the reason that the Merger shall not have been consummated on or before said date. Section 10.02. Effect of Termination. In the event of termination of this Merger Agreement pursuant this Article, this Merger Agreement shall forthwith terminate and (except for the willful breach of this Merger Agreement by any party hereto) there shall be no liability on the part of any party hereto; provided, however, that Sections 3.14, 4.14, 8.04(b), (c) and (d), 10.02, 11.05, 11.06, 11.07, 11.09, 11.11 and 11.13 shall survive the termination of this Merger Agreement. 25 ARTICLE XI MISCELLANEOUS Section 11.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile or similar writing) and shall be given: (i) if to Taj Holding to: Taj Mahal Holding Corp. 1000 The Boardwalk Atlantic City, New Jersey 08401 Facsimile: (609) 449-5593 Attention: Nicholas F. Moles, Esq. with copies to: Andrews & Kurth L.L.P. 425 Lexington Avenue New York, New York 10017 Facsimile: (212) 850-2929 Attention: Emanuel S. Cherney, Esq. (ii) if to THCR or Merger Sub to: Trump Hotels & Casino Resorts, Inc. Mississippi Avenue and The Boardwalk Atlantic City, New Jersey 08401 Facsimile: (609) 441-7926 Attention: Robert M. Pickus, Esq. with copies to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Facsimile: (212) 821-8111 Attention: Daniel D. Rubino, Esq. or such other address or facsimile number as such party may hereafter specify by notice to the other parties hereto. Each such notice, request or other communication shall be effective (i) if given by facsimile, when such facsimile is transmitted to the facsimile number specified in this Section and the appropriate confirmation is provided, (ii) if given via United States mail, three days after such notice is deposited in the mail in a postage pre- paid envelope or (iii) if given by any other means, when delivered at the address specified in this Section. Section 11.02. Survival. None of the representations, warranties, agreements or covenants contained herein shall survive the Effective Time, except for the agreements contained in Articles I and II, Sections 3.14, 4.14, 7.04, 8.02, 8.04(b), (c) and (d), 11.02, 11.05, 11.06, 11.07, 11.09, 11.11, 11.13 and the last sentence of Section 11.03. Section 11.03. Amendment. Any provision of this Merger Agreement may be amended by the parties hereto by action of each of their respective Boards of Directors, at any time prior to the Effective Time; provided, however, that any such amendment made after the adoption of this Merger Agreement by the stockholders of Taj Holding or THCR shall not, without further approval of such stockholders (i) alter or change the amount, kind or manner of payment of the Merger Consideration, (ii) alter or change any term of the certificate of incorporation of the Surviving Corporation (except as otherwise provided in this Merger Agreement) or (iii) change any other terms or conditions of this Merger Agreement, if any of such changes, alone or in the aggregate, would materially and adversely affect the stockholders of Taj Holding or THCR. Any amendment to this Merger Agreement shall be in writing signed by all the parties hereto. Section 11.04. Waiver. At any time prior to the Effective Time, Taj Holding, THCR and Merger Sub may, unless otherwise set forth in this Merger Agreement, (i) extend the time for the performance of any 26 agreement of the other party or parties hereto, (ii) waive any accuracy in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any agreement or condition of the other party or parties hereto contained herein. Any agreement on the part of any party to any such extension or waiver shall be effective only if set forth in a writing signed on behalf of such party and delivered to the other party or parties. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other right, power or privilege. Section 11.05. Successors and Assigns. The provisions of this Merger Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that no party may assign or otherwise transfer any of its rights under this Merger Agreement without the consent of each of the other parties hereto. Section 11.06. Governing Law. Except to the extent set forth in Section 11.07 or in the DGCL, this Merger Agreement shall be construed in accordance with and governed by the internal laws of the State of New York without regard to principles of conflict of laws. Section 11.07. Gaming Laws. Each of the provisions of this Merger Agreement is subject to and shall be enforced in compliance with the Gaming Laws. Section 11.08. Integration. This Merger Agreement embodies the entire agreement and understanding among the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. Section 11.09. Third Party Beneficiaries. This Merger Agreement (including the documents and instruments referred to herein) is not intended to confer upon any other Person any rights or remedies hereunder; provided, however, the Taj Holding Indemnified Parties shall be third party beneficiaries of Section 7.04 hereof. Section 11.10. Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Merger Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Merger Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Section 11.11. Remedies Cumulative. All rights, powers and remedies provided under this Merger Agreement otherwise available at law or in equity shall be cumulative and not alternative, and the exercise or beginning of any thereof by any party shall not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. Section 11.12. Publicity. So long as this Merger Agreement is in effect, each of the parties agrees to consult with each other in issuing any press release or otherwise making any public statement with respect to the Merger, and none of them shall issue any press release or make any public statement prior to such consultation, except as may be required by law or by obligations pursuant to any listing agreement with any national securities exchange. The commencement of litigation relating to this Merger Agreement or any proceedings in connection therewith shall not be deemed a violation of this Section. Section 11.13. Fees and Expenses. Whether or not the Merger is consummated, all costs and expenses incurred in connection with this Merger Agreement and the transactions contemplated hereby shall be paid equally by Taj Holding and THCR; provided, however, that all costs and expenses incurred in connection with (i) printing, filing and distributing the Equity S-1 and (ii) any filings pursuant to Section 8.06 hereof, shall be borne solely by THCR. Section 11.14. Headings; Counterparts; Effectiveness. The headings contained in this Merger Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Merger Agreement. This Merger Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Merger Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other parties hereto. 27 IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be duly executed by their respective authorized officers as of the day and year first above written. TAJ MAHAL HOLDING CORP. /s/ R. Bruce McKee _____________________________________ By: R. Bruce McKee Title: Assistant Treasurer and Acting Chief Operating Officer of Trump Taj Mahal Associates TRUMP HOTELS & CASINO RESORTS, INC. /s/ Nicholas L. Ribis _____________________________________ By: Nicholas L. Ribis Title: President and Chief Executive Officer THCR MERGER CORP. /s/ Nicholas L. Ribis _____________________________________ By: Nicholas L. Ribis Title: President and Chief Executive Officer 28 AMENDMENT TO AGREEMENT AND PLAN OF MERGER AMENDMENT TO AGREEMENT AND PLAN OF MERGER, dated as of January 31, 1996 (the "Amendment"), by and among TRUMP HOTELS & CASINO RESORTS, INC., a Delaware corporation ("THCR"), TAJ MAHAL HOLDING CORP., a Delaware corporation ("Taj Holding"), and THCR MERGER CORP., a Delaware corporation and a wholly owned subsidiary of THCR ("Merger Sub"). Capitalized terms not otherwise defined herein shall have the same meanings as ascribed to them in the Agreement and Plan of Merger, dated as of January 8, 1996, by and among the parties hereto. WHEREAS, THCR, Taj Holding and Merger Sub wish to amend the Merger Agreement; WHEREAS, the THCR Special Committee and the Board of Directors of THCR have approved the Merger Transaction, the Merger Agreement and this Amendment; WHEREAS, the Taj Holding Class B Directors and the Board of Directors of Taj Holding have approved the Merger, the Merger Agreement and this Amendment; and WHEREAS, the Board of Directors of Merger Sub has approved this Amendment and THCR, as the sole stockholder of Merger Sub, has approved and adopted this Amendment. NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein and in the Merger Agreement, the parties hereto agree to amend the Merger Agreement, in accordance with Section 11.03 thereof, as follows: 1. The first recital in the Merger Agreement immediately following the preamble is hereby deleted in its entirety and amended to read as follows: WHEREAS, Taj Holding and certain of its affiliates and THCR and certain of its affiliates desire to effect the Merger Transaction, which includes (a) the merger of Merger Sub with and into Taj Holding upon the terms and subject to the conditions set forth herein (the "Merger"); (b) consummation of the offering by THCR (the "THCR Offering") of up to $140 million (which amount may be increased at THCR's discretion) of Common Stock of THCR, par value $.01 per share ("THCR Common Stock"), and the offering by THCR Atlantic City Holdings ("Trump AC") and its wholly owned finance subsidiary, THCR Atlantic City Funding, Inc. (the "Mortgage Note Offering"), of up to $1.2 billion aggregate principal amount of mortgage notes (the "Mortgage Notes"), the aggregate proceeds of which will be used, together with available cash, to (i) pay cash, pursuant to this Merger Agreement, to those holders of Class A Common Stock of Taj Holding, par value $.01 per share (the "Taj Holding Class A Common Stock"), electing to receive cash in the Merger, (ii) redeem (the "Bond Redemption") Trump Taj Mahal Funding, Inc.'s outstanding 11.35% Mortgage Bonds, Series A due 1999 (the "Bonds"), (iii) redeem the outstanding shares of Class B Common Stock of Taj Holding, par value $.01 per share (the "Taj Holding Class B Common Stock"), as required in connection with the Bond Redemption, (iv) retire, by purchasing and/or defeasing, the outstanding 10 7/8% Mortgage Notes due 2001 of Trump Plaza Funding, Inc. (the "Plaza Note Purchase," and, together with the Mortgage Note Offering and the Bond Redemption, the "Debt Refinancing"), (v) satisfy the indebtedness of Trump Taj Mahal Associates ("Taj Associates") under its loan agreement with National Westminster Bank USA, (vi) purchase certain real property (collectively, the "Specified Parcels") used in the operation of the Trump Taj Mahal Casino Resort (the "Taj Mahal") that is currently leased from Trump Taj Mahal Realty Corp. ("Realty Corp."), a corporation wholly owned by Donald J. Trump ("Trump"), (vii) purchase certain real property used in the operation of Trump Plaza Casino Hotel and Casino that is currently leased from an unaffiliated third party, (viii) make a payment to Bankers Trust Company ("Bankers Trust") to obtain releases of the Liens (defined below) that Bankers Trust has with respect to certain equity interests of Taj Associates and related guarantees and (ix) pay related fees and expenses; (c) the contribution by Trump to Trump AC (on behalf, and at the direction, of Trump Hotels & Casino Resorts Holdings, L.P., a subsidiary of THCR ("THCR Holdings")), of all of his direct and indirect ownership interests in Taj Associates; and (d) the contribution by THCR to Trump AC (on behalf, and at the direction, of THCR Holdings) of all its indirect ownership interests in Taj Associates acquired in the Merger; 29 2. The words "THCR Holdings and Taj Holdings LLC" in part (a) of the second recital in the Merger Agreement are hereby deleted in their entirety and replaced with the following term: "Trump AC." 3. Section 1.01 of the Merger Agreement is hereby amended to add the following defined terms to the terms contained therein: "Trump AC" shall have the meaning set forth in the Recitals. "Consent Solicitation" shall mean the consents and waivers to be solicited from the holders of the Senior Notes to modify, in connection with the Merger Transaction, certain provisions of the indenture pursuant to which the Senior Notes were issued. "Debt Refinancing" shall have the meaning set forth in the Recitals. "Mortgage Note Offering" shall have the meaning set forth in the Recitals. "Mortgage Notes" shall have the meaning set forth in the Recitals. "Plaza Note Purchase" shall have the meaning set forth in the Recitals. "Senior Notes" shall mean the $155 million aggregate principal amount of 15 1/2% Senior Notes of THCR Holdings and Trump Hotels & Casino Resorts Funding, Inc. "Taj Associates Guarantee" shall mean the guarantee of Taj Associates with respect to the Mortgage Notes. 4. Section 1.01 of the Merger Agreement is hereby further amended (i) to delete the definitions of "Taj Funding Offering" and "Taj Holdings LLC" in their entirety and (ii) to amend the definitions of "Merger Agreement" and "Merger Transaction" to read as follows: "Merger Agreement" shall have the meaning set forth in the Preamble and shall also include any amendments pursuant to Section 11.03 hereof. "Merger Transaction" shall have the meaning set forth in the Recitals; provided, however, that for purposes of Section 7.03(a) and Paragraphs (iii) and (iv) of Section 9.01 hereof, the term shall not include the Debt Refinancing. 5. The clause in the third sentence of Section 3.06(a) of the Merger Agreement that reads "dated January 8, 1996 (the "Rothschild Fairness Opinion")" is hereby deleted in its entirety and amended to read as follows: "dated January 31, 1996 (the "Rothschild Fairness Opinion")." 6. The term "Taj Funding Offering" in Sections 3.06(a), 3.06(c) and 3.07 of the Merger Agreement is hereby deleted in its entirety and replaced with the following term: "Taj Associates Guarantee." 7. Section 3.15 of the Merger Agreement is hereby amended by (i) replacing the term "Taj Funding Offering" in the heading with the term "Mortgage Note Offering" and (ii) deleting clause (b) in its entirety and replacing it with the following language: (b) the filing of a registration statement on Form S-1 with the SEC jointly with the issuers of the Mortgage Note Offering to the extent required in order to register the Taj Associates Guarantee (the "Debt S-1"). 8. Section 3.16 of the Merger Agreement is hereby amended by replacing (i) the term "THCR Offering" in the heading with the words "Debt S-1 and Equity S- 1," (ii) the words "will, at the time the Equity S-1" in the first sentence with the words "and the Debt S-1 will, at the time each registration statement" and (iii) the word "statement" in the second sentence with the word "statements." 9. The clause in the third sentence of Section 4.06(a) of the Merger Agreement that reads "dated January 8, 1996 (the "DLJ Fairness Opinion")" is hereby deleted in its entirety and amended to read as follows: "dated January 31, 1996 (the "DLJ Fairness Opinion")." 30 10. The heading in Section 4.15 of the Merger Agreement is hereby deleted in its entirety and amended to read as follows: "Section 4.15. Mortgage Note Offering." 11. Section 9.01 of the Merger Agreement is hereby amended by (a) deleting the word "and" in Paragraph (vii), (b) replacing the period at the end of Paragraph (viii) with a semicolon and the word "and" and (c) inserting a new Paragraph at the end of the Section to read as follows: (ix) Taj Holding and THCR shall have received one or more solvency opinions with respect to the Mortgage Note Offering and related guarantees from a nationally recognized appraisal firm, in form and substance reasonably satisfactory to Taj Holding and THCR. 12. Paragraph (i) of Section 9.02 of the Merger Agreement is hereby deleted in its entirety and amended to read as follows: "(i) [intentionally omitted]." 13. Paragraph (iii) of Section 9.02 of the Merger Agreement is hereby deleted in its entirety and amended to read as follows: (iii) assuming consummation of the Merger Transaction, Trump AC shall have assumed the indemnification and other obligations of the Surviving Corporation and TM/GP set forth in Section 7.04 hereof with the understanding that any subsequent action on the part of Trump AC pursuant to Section 7.04(c) hereof shall not release Trump AC of such indemnification and other obligations; 14. Paragraph (ii) of Section 9.03 of the Merger Agreement is hereby deleted in its entirety and amended to read as follows: (ii) the THCR Offering, the Mortgage Note Offering, the Plaza Note Purchase and the Consent Solicitation shall have been consummated on terms acceptable to THCR; 15. Paragraph (v) of Section 9.03 of the Merger Agreement is hereby deleted in its entirety and amended to read as follows: (v) Trump shall have contributed, or caused to be contributed, to Trump AC (on behalf, and at the direction, of THCR Holdings) all of his direct and indirect ownership interests in Taj Associates on terms acceptable to THCR; Except as modified herein, the Merger Agreement shall remain unmodified and in full force and effect. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 31 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. TAJ MAHAL HOLDING CORP. /s/ R. Bruce McKee ------------------------------------- By: R. Bruce McKee Title: Assistant Treasurer and Acting Chief Operating Officer of Trump Taj Mahal Associates TRUMP HOTELS & CASINO RESORTS, INC. /s/ Nicholas L. Ribis ------------------------------------- By: Nicholas L. Ribis Title: President and Chief Executive Officer THCR MERGER CORP. /s/ Nicholas L. Ribis ------------------------------------- By: Nicholas L. Ribis Title: President and Chief Executive Officer 32 EX-23.1 3 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.1 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation of our reports on Taj Mahal Holding Corp. and Subsidiary dated February 16, 1996 and Trump Taj Mahal Associates and Subsidiary dated February 16, 1996 included in Trump Hotels & Casino Resorts, Inc.'s Form 8-K dated May 2, 1996, into its previously filed Registration Statement File No. 33-93374. Arthur Andersen LLP Roseland, New Jersey May 2, 1996 -----END PRIVACY-ENHANCED MESSAGE-----