================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to______
-----------------------
Commission file number: 333-643
TRUMP ATLANTIC CITY ASSOCIATES
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-3213714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Boardwalk
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
Commission file number: 333-643
TRUMP ATLANTIC CITY FUNDING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3418939
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Boardwalk
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
-----------------------
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
The number of outstanding shares of Common Stock, par value $.01 per share,
of Trump Atlantic City Funding, Inc. as of November 14, 1996 was 100.
Trump Atlantic City Funding, Inc. meets the conditions set forth in General
Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form
with the reduced disclosure format.
================================================================================
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
------------------------------
INDEX TO FORM 10-Q
Page No.
--------
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Condensed Consolidated Balance Sheets of Trump Atlantic City
Associates and Subsidiaries as of September 30, 1996
(unaudited) and December 31, 1995 ............................... 1
Condensed Consolidated Statements of Operations of Trump Atlantic
City Associates and Subsidiaries for the Three Months and Nine
Months Ended September 30, 1996 and 1995 (unaudited) ............... 2
Condensed Consolidated Statement of Capital of Trump Atlantic
City Associates and Subsidiaries for the Nine Months Ended
September 30, 1996 (unaudited) ..................................... 3
Condensed Consolidated Statements of Cash Flows of Trump Atlantic
City Associates and Subsidiaries for the Nine Months Ended
September 30, 1996 and 1995 (unaudited) ............................ 4
Notes to Condensed Consolidated Financial Statements of Trump
Atlantic City Associates and Subsidiaries (unaudited) .............. 5-9
ITEM 2 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations ..................................10-15
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings ............................................ 16
ITEM 2 -- Changes in Securities ........................................ 16
ITEM 3 -- Defaults Upon Senior Securities .............................. 16
ITEM 4 -- Submission of Matters to a Vote of Security Holders .......... 16
ITEM 5 -- Other Information ............................................ 16
ITEM 6 -- Exhibits and Reports on Form 8-K ............................. 17
SIGNATURES
Signature -- Trump Atlantic City Associates ............................. 18
Signature -- Trump Atlantic City Funding, Inc. .......................... 19
i
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents .......................... $ 127,629 $ 15,937
Receivables, net ................................... 54,933 14,058
Inventories ........................................ 9,393 2,609
Due from affiliates, net ........................... 4,543 1,298
Other current assets ............................... 9,366 5,045
----------- --------
Total Current Assets ............................. 205,864 38,947
PROPERTY AND EQUIPMENT, NET .......................... 1,423,006 395,942
LAND RIGHTS .......................................... 29,043 29,320
DEFERRED LOAN COSTS, NET ............................. 40,899 9,866
OTHER ASSETS ......................................... 21,474 5,949
----------- --------
Total Assets ..................................... $ 1,720,286 $480,024
=========== ========
LIABILITIES AND CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt ............... $ 9,522 $ 2,901
Accounts payable and accrued expenses .............. 73,859 27,912
Accrued interest payable ........................... 61,792 1,497
----------- --------
Total Current Liabilities ........................ 145,173 32,310
LONG-TERM DEBT, net of discount and current
maturities ......................................... 1,208,765 332,721
OTHER LONG-TERM LIABILITIES .......................... 5,190 --
DISTRIBUTION PAYABLE TO PLAZA FUNDING ................ 3,822 3,822
DEFERRED STATE INCOME TAXES .......................... 387 359
----------- --------
Total Liabilities ................................ 1,363,337 369,212
----------- --------
CAPITAL:
Partners' Equity ................................... 363,646 94,087
Retained Earnings (Accumulated Deficit) ............ (6,697) 16,725
----------- --------
Total Capital ...................................... 356,949 110,812
----------- --------
Total Liabilities and Capital .................... $ 1,720,286 $480,024
=========== ========
The accompanying notes are an integral part of these
condensed consolidated balance sheets.
1
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Gaming ..................................... $ 261,981 $ 85,188 $ 542,011 $ 224,499
Rooms ...................................... 24,310 5,865 48,464 14,671
Food and Beverage .......................... 32,552 12,514 70,854 33,403
Other ...................................... 8,709 3,422 17,035 7,187
--------- --------- --------- ---------
Gross Revenues ........................... 327,552 106,989 678,364 279,760
Less--Promotional allowances ................. 36,251 12,094 74,636 28,611
--------- --------- --------- ---------
Net Revenues ............................. 291,301 94,895 603,728 251,149
--------- --------- --------- ---------
COSTS AND EXPENSES:
Gaming ..................................... 150,327 45,296 315,904 121,987
Rooms ...................................... 4,872 431 9,767 1,741
Food and Beverage .......................... 13,634 4,777 29,651 13,783
Pre-Opening ................................ 501 -- 3,833 --
General and Administrative ................. 44,129 17,080 101,897 51,073
Depreciation and Amortization .............. 20,255 3,956 41,457 11,792
Other ...................................... 1,205 935 3,066 2,556
--------- --------- --------- ---------
234,923 72,475 505,575 202,932
--------- --------- --------- ---------
Income from operations ................... 56,378 22,420 98,153 48,217
--------- --------- --------- ---------
NON-OPERATING INCOME AND (EXPENSES):
Interest income ............................ 854 219 1,483 689
Interest expense ........................... (36,495) (9,844) (78,077) (34,419)
Other non-operating income (expense) ....... 5,011 (2,005) 14,193 (3,847)
--------- --------- --------- ---------
(30,630) (11,630) (62,401) (37,577)
--------- --------- --------- ---------
Income before provision for state
income taxes and extraordinary loss ........ 25,748 10,790 35,752 10,640
Provision for state income taxes ............. 42 993 42 993
--------- --------- --------- ---------
Income before extraordinary loss ............. 25,706 9,797 35,710 9,647
Extraordinary Loss ........................... -- -- (59,132) (9,250)
--------- --------- --------- ---------
NET INCOME (LOSS) ............................ $ 25,706 $ 9,797 $ (23,422) $ 397
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
2
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
(in thousands)
Retained
Earnings
Partners' (Accumulated
Capital Deficit) Total
-------- -------- ---------
Balance, December 31, 1995 .............. $ 94,087 $ 16,725 $ 110,812
Net Loss ............................... -- (23,422) (23,422)
Contributed Capital-- Trump Hotels
& Casino Resorts Holdings, L.P. ....... 269,559 -- 269,559
-------- -------- ---------
Balance, September 30, 1996 ............. $363,646 $ (6,697) $ 356,949
======== ======== =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(unaudited)
(in thousands, except share data)
Nine Months Ended
September 30,
--------------
1996 1995
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (income) .................................... $ (23,422) $ 397
Adjustments to reconcile net loss to net cash
flows from operating activities --
Noncash charges --
Extraordinary loss ................................ 59,132 9,250
Depreciation and amortization ..................... 41,457 11,792
Accretion of discounts on indebtedness ............ 132 1,021
Provisions for losses on receivables .............. 3,213 734
Amortization of deferred loan offering costs ...... 3,842 1,344
Utilization of CRDA credits and donations ......... -- 445
Deferred income taxes ............................. 28 992
Valuation allowance of CRDA investments ........... 2,098 (790)
----------- ---------
86,480 25,185
Changes in assets and liabilities, net of effects
from purchase of Taj Mahal:
Increase in receivables ........................... (24,319) (6,258)
Decrease in inventories ........................... 47 382
Increase in advances from affiliates .............. (4,925) (609)
(Increase) decrease in other current assets ....... (1,236) 1,799
Decrease in other assets .......................... (1,641) 3,126
Increase in accounts payable and accrued expenses . 2,160 8,298
Increase in accrued interest payable .............. 14,319 2,773
Decrease in other long-term liabilities ........... (900) --
----------- ---------
Net cash provided by operating activities ............ 73,267 34,696
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net .............. (186,447) (86,612)
Purchase of CRDA investments ......................... (4,493) (2,284)
Purchase of Taj Holding, net of cash acquired ........ 46,714 --
----------- ---------
Net cash used in Investing Activities ................ (144,226) (88,896)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of other long-term debt ...... 5,906 1,928
Payments and current maturities of long-term debt ... (8,117) (3,906)
Redemption of Plaza PIK Notes ....................... -- (81,746)
Contributed capital ................................. 219,240 146,859
Retirement of long-term debt ........................ (1,156,836) --
Issuance of Trump AC Mortgage Notes ................. 1,200,000 --
Retirement of Nat West loan ......................... (36,500) --
Cost of issuing debt ................................ (41,042) --
----------- ---------
Net cash provided by financing activities ...... 182,651 63,135
----------- ---------
Net increase in cash & cash equivalents ........ 111,692 8,935
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..... 15,937 11,144
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ........... $ 127,629 $ 20,079
=========== =========
CASH INTEREST PAID ................................... $ 14,983 $ 22,848
=========== =========
Supplemental Disclosure of noncash activities:
THCR purchased all of the capital stock of Taj
Holding for $31,181 in cash and 323,423 shares
of its common stock valued at $9,319. In
addition, the contribution by Trump of his 50%
interest in Taj Associates amounting to
$40,500, net of the $10,000 payment to Bankers
Trust, was recorded as minority interest. In
conjunction with the acquisition, the
accumulated deficit amounting to $108,574 was
recorded as an increase to Property, Plant &
Equipment
Fair Value of net assets acquired .............. $ 1,005,816
Cash paid for the capital stock and payment
to Bankers Trust ............................. (41,181)
Minority interest of Trump ..................... (30,500)
-----------
Liabilities assumed .......................... $ 934,135
===========
In connection with the purchase of the Specified Parcels, THCR issued 500,000
shares of its common stock valued at $10,500.
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(UNAUDITED)
(1) Condensed Financial Statements
The accompanying condensed consolidated financial statements include those
of Trump Atlantic City Associates, a New Jersey general partnership formerly
known as Trump Plaza Holding Associates ("Trump AC"), and its subsidiaries,
Trump Plaza Associates, a New Jersey general partnership ("Plaza Associates"),
which owns and operates the Trump Plaza Hotel and Casino located in Atlantic
City, New Jersey ("Trump Plaza"), Trump Taj Mahal Associates, a New Jersey
general partnership ("Taj Associates"), which owns and operates the Trump Taj
Mahal Casino Resort located in Atlantic City, New Jersey (the "Taj Mahal"),
Trump Atlantic City Funding, Inc., a Delaware corporation ("Trump AC Funding"),
and Trump Atlantic City Corporation, a Delaware Corporation ("TACC"). Trump AC's
sole sources of liquidity are distributions in respect of its interest in Plaza
Associates and Taj Associates. Trump AC is owned by Trump Hotels & Casino
Resorts Holdings, L.P., a Delaware limited partnership ("THCR Holdings") (See
Note 2). Trump AC and Trump AC Funding have no independent operations and,
therefore, their ability to service debt is dependent upon the successful
operations of Plaza Associates and Taj Associates. There are no restrictions on
the ability of the Subsidiary Guarantors (as defined in Note 2) to distribute
funds to Trump AC.
All significant intercompany balances and transactions have been eliminated
in the accompanying condensed consolidated financial statements.
The accompanying condensed consolidated financial statements have been
prepared by Trump AC without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and note
disclosures normally included in financial statements prepared in conformity
with generally accepted accounting principles have been condensed or omitted. In
the opinion of Trump AC, all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and cash flows for the periods presented, have been made. Certain
prior year amounts have been reclassified to conform with the current period
presentation.
The casino industry in Atlantic City is seasonal in nature; therefore,
results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of the operating results for a full year.
The separate financial statements of the Subsidiary Guarantors have not
been included because (i) the Subsidiary Guarantors constitute all of Trump AC's
direct and indirect subsidiaries; (ii) the Subsidiary Guarantors have fully and
unconditionally guaranteed the Trump AC Mortgage Notes (as defined in Note 2) on
a joint and several basis; (iii) the aggregate assets, liabilities, earnings and
equity of the Subsidiary Guarantors are substantially equivalent to the assets,
liabilities, earnings and equity of Trump AC on a consolidated basis; and (iv)
the separate financial and other disclosures concerning the Subsidiary
Guarantors are not deemed material to investors.
(2) Public Offerings and Merger
On June 12, 1995, Trump Hotels & Casino Resorts, Inc. ("THCR") completed a
public offering of 10,000,000 shares of its common stock, par value $.01 per
share (the "Common Stock"), at $14.00 per share (the "June 1995 Stock Offering")
for gross proceeds of $140,000,000. Concurrent with the June 1995 Stock
Offering, THCR Holdings and its subsidiary Trump Hotels & Casino Resorts
Funding, Inc. issued 151 @ 2% Senior Secured Notes due 2005 for gross proceeds
of $155,000,000 (together with the June 1995 Stock Offering, the "June 1995
Offerings"). THCR contributed approximately $126,848,000 of the proceeds of the
June 1995 Stock Offering to THCR Holdings. THCR Holdings subsequently
contributed $146,859,000 of the proceeds of the June 1995 Offerings to Trump AC.
On April 17, 1996, pursuant to the Agreement and Plan of Merger, as amended
(the "Taj Merger Agreement"), among THCR, Taj Mahal Holding Corp., a Delaware
corporation now known as THCR Holding Corp. ("Taj Holding"), and THCR Merger
Corp., a wholly owned subsidiary of THCR ("Taj Merger Sub"), Taj Merger Sub was
merged with and into Taj Holding (the "Taj Merger"), and each outstanding share
of Class A Common Stock of Taj Holding, par value $.01 per share (the "Taj
Holding Class A Common Stock"), which in the aggregate represented
5
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(UNAUDITED)
50% of the economic interest in Taj Associates, was converted into the right to
receive, at each holder's election, either (a) $30 in cash or (b) that number of
shares of Common Stock having a market value equal to $30. Donald J. Trump
("Trump") held the remaining 50% interest in Taj Associates and contributed such
interest in Taj Associates to Trump AC in exchange for limited partnership
interests in THCR Holdings. In addition, the outstanding shares of Taj Holding's
Class C Common Stock, par value $.01 per share, all of which were held by Trump,
were canceled in connection with the Taj Merger. The following transactions
occurred in connection with the Taj Merger (collectively referred to as the "Taj
Merger Transaction"):
(a) the payment of an aggregate of $31,181,000 in cash and the
issuance of 323,423 shares of Common Stock to the holders of Taj Holding
Class A Common Stock pursuant to the Taj Merger Agreement;
(b) the contribution by Trump to Trump AC of all of his direct and
indirect ownership interests in Taj Associates, and the contribution by
THCR to Trump AC of all of its indirect ownership interests in Taj
Associates acquired in the Taj Merger;
(c) the public offerings by (i) THCR 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 opinion) (the "1996
Stock Offering") for net proceeds of $386,062,000 and (ii) Trump AC and
Trump AC Funding, Trump AC's wholly owned finance subsidiary, of
$1,200,000,000 aggregate principal amount of 111 @ 4% First Mortgage Notes
due 2006 (the "Trump AC Mortgage Notes"), guaranteed by Plaza Associates,
Taj Associates and TACC (collectively, the "Subsidiary Guarantors")
(together with the 1996 Stock Offering, the "1996 Offerings");
(d) the redemption of the outstanding shares of Taj Holding's Class B
Common Stock, par value $.01 per share, immediately prior to the Taj Merger
for $.50 per share 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. (the "Taj Bonds");
(f) the retirement of the outstanding 107 @ 8 Mortgage Notes due 2001
(the "Plaza Notes") of Trump Plaza Funding, Inc. ( "Plaza Funding");
(g) the satisfaction of the indebtedness of Taj Associates under its
loan agreement with National Westminster Bank USA ("Nat West");
(h) the purchase of certain real property used in the operation of the
Taj Mahal that was leased from a corporation wholly owned by Trump (the
"Specified Parcels");
(i) the purchase of certain real property used in the operation of
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 Trump to Bankers Trust; and
(k) the issuance to Trump of 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 per share, (ii) 600,000
shares of which may be purchased on or prior to April 17, 2000, at $35 per
share, and (iii) 600,000 shares of which may be purchased on or prior to
April 17, 2001, at $40 per share.
The Taj Merger Transaction has been accounted for as a "purchase" for
accounting and reporting purposes. Accordingly, the excess of the purchase price
over the fair value of the net assets acquired ($200,782,000), which was
allocated to land ($7,979,000) and building ($192,803,000) based on an appraisal
on a pro rata basis, consists of the following:
a) $40,500,000, representing the payment of $30.00 for each of the
1,350,000 outstanding shares of Taj Holding Class A Common Stock. Holders
of 323,423 shares of Taj Holding Class A Common Stock elected to
6
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(UNAUDITED)
receive 323,423 shares of Common Stock and holders of 1,051,000 shares of
Taj Holding Class A Common Stock elected to receive $31,181,243 in cash;
b) $40,500,000, representing the contribution by Trump to Trump AC (on
behalf, and at thedirection, of THCR Holdings) of all of his direct and
indirect ownership interest in 50% of Taj Associates;
c) $9,900,000 of fees and expenses associated with the Taj Merger
Transaction;
d) $108,574,000, representing the negative book value of Taj
Associates at the date of the Taj Merger Transaction; and
e) $1,308,000 of closing costs associated with the purchase of the
Specified Parcels.
In connection with the Taj Merger Transaction, THCR purchased the Specified
Parcels from Trump Taj Mahal Realty Corp., a corporation owned by Trump, and Taj
Associates was released from its guarantee to First Union National Bank (the
"Guarantee"). The aggregate cost of acquiring the Specified Parcels was
$50,600,000 in cash and 500,000 shares of Common Stock valued at $10,500,000 (an
average value of $21.00 per share based on the price of the Common Stock several
days before and after the date of the amended agreement governing the Taj
Merger). The obligation of Taj Associates which had been accrued with respect to
the Guarantee ($17,923,000) was eliminated. In addition, THCR exercised the
option to purchase a tower adjacent to Trump Plaza's main tower ("Trump Plaza
East") for $28,084,000, which amount has been included in land and building.
Unaudited pro forma information, assuming that the Taj Merger Transaction
had occurred on January 1, 1995,is as follows:
Nine Months Ended
-----------------------------
September 30, 1996 September 30, 1995
------------------ ------------------
Revenues $ 749,694 $ 668,445
Income from operations 107,925 125,555
Income before extraordinary loss 16,000 17,586
Extraordinary loss (59,132) (9,250)
Net income (loss) $ (43,132) $ 7,343
The pro forma information is presented for informational purposes only and
does not purport to present what the results of operations would have been had
the Taj Merger Transaction, in fact, occurred on January 1, 1995 or to project
the results of operations for any future period.
(3) License Revenue
On June 30, 1996, Taj Associates entered into a Thermal Energy Service
Agreement with Atlantic Jersey Thermal Systems, Inc. ("Atlantic Thermal")
pursuant to which Atlantic Thermal was granted an exclusive license for a period
of 20 years to use, operate and maintain certain steam and chilled water
production facilities at the Taj Mahal (the "Taj Thermal Agreement"). In
consideration of the license, Atlantic Thermal paid Taj Associates $10,000,000,
which amount has been included in other non-operating income during the nine
months endedSeptember 30, 1996.
On September 26, 1996, Plaza Associates entered into a similar service
agreement with respect to Trump Plaza with Atlantic Thermal (the "Plaza Thermal
Agreement") in which Atlantic Thermal paid Plaza Associates $5,000,000 on
September 30, 1996. This amount has been included in other non-operating income
during the three month and nine month periods ended September 30, 1996.
7
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(UNAUDITED)
(4) Long-Term Debt
Long-term debt consists of the following:
September 30, 1996 December 31, 1995
------------------ -----------------
Trump AC Mortgage Notes (A) .............. $1,200,000,000 $ --
Plaza Notes net of unamortized
discount of $3,348,000 (B) .............. -- 326,652,000
Other mortgage notes payable ............. 3,521,000 2,953,000
Other .................................... 14,766,000 6,017,000
------------- -----------
1,218,287,000 335,622,000
Less--Current maturities ................ 9,522,000 2,901,000
------------- -----------
$1,208,765,000 $332,721,000
============= ===========
(A) In connection with the Taj Merger Transaction, $1,200,000,000 of Trump
AC Mortgage Notes were issued by Trump AC and Trump AC Funding. The proceeds of
the offering of Trump AC Mortgage Notes were used tocomplete the Taj Merger
Transaction, as discussed in Note 2. Costs associated with the issuance of the
Trump AC Mortgage Notes, totalling approximately $44,200,000, have been deferred
and are being amortized over the life of the Trump AC Mortgage Notes.
(B) On June 24, 1993, Plaza Funding issued $330,000,000 principal amount of
Plaza Notes, net of discount of $4,313,000, and loaned the proceeds to Plaza
Associates. The Plaza Notes were subsequently retired with the proceeds of the
offering of the Trump AC Mortgage Notes (See Note 2). The retirement of the
Plaza Notes and the write-off of related unamortized deferred financing costs
resulted in an extraordinary loss of $59,132,000.
On June 24, 1993, Trump AC issued $60,000,000 principal amount of 12 1/2%
Pay-In-Kind Notes, due 2003 (the "Plaza PIK Notes"), together with warrants to
acquire an additional $12,000,000 of Plaza PIK Notes at no additional cost (the
"Plaza PIK Note Warrants"). The Plaza PIK Note Warrants were exercised prior to
June 12, 1995 and, with the proceeds from the June 1995 Offerings contributed by
THCR Holdings to Trump AC, the Plaza PIK Notes were repurchased and redeemed on
June 12, 1995. Such repurchase and redemption resulted in the recognition of an
extraordinary loss of $9,250,000 relating to the redemption and the write-off of
unamortized deferred financing costs.
(5) Trump World's Fair
Under an Option Agreement with Chemical Bank ("Chemical"), Trump had an
option to purchase (i) the former Trump Regency Hotel ("Trump World's Fair")
(including the land, improvements and personal property used in the operation of
the hotel) (the "Trump World's Fair Purchase Option") and (ii) certain
promissory notes made by Trump and/or certain of his affiliates and payable to
Chemical which were secured by certain real estate assets located in New York,
unrelated to Plaza Associates or Trump AC. In connection with such Option
Agreement, Trump assigned his rights to Plaza Associates. On June 12, 1995, the
Trump World's Fair Purchase Option was exercised. The option price of
$60,000,000 was funded with $58,150,000 from the capital contributed by THCR
Holdings (See Note 2) and $1,850,000 of option payments made by Plaza
Associates. In May 1996, Trump World's Fair was opened and integrated into Trump
Plaza.
(6) Casino Licenses
The operation of an Atlantic City casino hotel is subject to significant
regulatory controls which affect virtually all of its operations. Under the New
Jersey Casino Control Act (the "Casino Control Act"), Plaza Associates, Taj
Associates and Trump Casino Services, L.L.C., a New Jersey limited liability
company and a subsidiary of Trump AC ("Trump Services"), are required to
maintain certain licenses.
8
<PAGE>
TRUMP ATLANTIC CITY ASSOCIATES AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(UNAUDITED)
In June 1995, the New Jersey Casino Control Commission (the "CCC") renewed
Plaza Associates' license to operate Trump Plaza through June 1999. In May 1996,
the CCC granted Plaza Associates a license to operate Trump World's Fair through
May 1997. In June 1995, the CCC renewed Taj Associates' license to operate the
Taj Mahal through June 1999. In June 1996, the CCC also granted Trump Services a
license through July 1997. All these licenses are not transferable and their
renewal will include a financial review of the relevant operating entities. Upon
revocation, suspension for more than 120 days, or failure to renew the casino
license, the Casino Control Act provides for the appointment of a conservator to
take possession of the hotel and casino's business and property, subject to all
valid liens, claims and encumbrances.
9
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
Cash flows from operating activities are Trump AC's principal source of
liquidity. With the proceeds from the 1996 Offerings, Trump AC, among other
things, redeemed the outstanding Taj Bonds, retired the outstanding Plaza Notes,
satisfied the indebtedness of Taj Associates under its loan agreement with Nat
West, purchased certain real property used in the operation of Trump Plaza and
the Taj Mahal and paid Bankers Trust to release certain liens and guarantees.
With proceeds from the June 1995 Offerings, THCR Holdings made a capital
contribution of $146,859,000 to Trump AC and Plaza Associates. This contribution
was used to repurchase and redeem the Plaza PIK Notes and the Plaza PIK Notes
Warrants (together with related accrued interest), exercise the Trump World's
Fair Purchase Option and purchase Trump World's Fair and fund construction costs
incurred in the renovation and integration of Trump Plaza East. During the nine
months ended September 30, 1996, THCR Holdings made additional capital
contributions of $35,500,000 to Plaza Associates to fund such construction
costs. The renovations of Trump Plaza East were completed in February 1996 and
Trump World's Fair in May 1996. Capital expenditures for Trump AC were
$186,502,000 for the nine months ended September 30, 1996, an increase of
approximately $99,890,000 or 115.3% from the comparable period in 1995. Capital
expenditures attributable to Trump Plaza East were approximately $36,877,000 and
$14,296,000 for the nine months ended September 30, 1996 and 1995. Capital
expenditures attributable to Trump World's Fair were approximately $56,007,000
and $64,685,000 for the nine months ended September 30, 1996 and 1995,
respectively. Capital expenditures for improvements to Trump Plaza's existing
facilities were $2,769,000 and $7,631,000 for the nine months ended September
30, 1996 and 1995.
On September 30, 1996, Plaza Associates exercised its option to purchase
from Trump Seashore Associates, an entity benefically owned by Trump, one of the
parcels of land underlying Trump Plaza's main tower pursuant to the terms of a
lease, the payments under which were terminated upon the exercise of such
option. The exercise price of $14,500,000 was contributed by THCR.
Capital expenditures attributable to the Taj Mahal were $76,160,000 for the
period April 17, 1996 through September 30, 1996. Capital expenditures for
improvements to existing facilities were approximately $9,675,000 for the period
April 17, 1996 through September 30, 1996. Capital expenditures for the purchase
for property previously leased upon which a portion of the Taj Mahal is situated
and Taj Merger closing costs amounted to approximately $61,808,000. Capital
expenditures attributable to the expansion of the facility were approximately
$4,677,000 for the period April 17, 1996 through September 30, 1996.
Taj Associates has begun an expansion plan of its existing operations
involving the construction of an approximately 800 room hotel tower adjacent to
the existing hotel tower, a 2,000 space expansion of the existing self-parking
facilities and related hotel infrastructure improvements. It is expected that
the expansion budget of approximately $129,300,000 will be funded principally
out of cash from operations of the Taj Mahal and Trump Plaza and is scheduled to
be completed in phases from mid-1997 through the latter part of 1998.
At September 30, 1996, Trump AC had combined working capital of
$60,691,000. The combined working capital included a receivable from the New
Jersey Casino Reinvestment Development Authority (the "CRDA") of approximately
$7,400,000 for reimbursable improvements made to Trump Plaza East, which
receivable is currently the subject of litigation.
10
<PAGE>
Important Factors Relating to Forward Looking Statements
In connection with certain forward-looking statements contained in this
Quarterly Report on Form 10-Q and those that may be made in the future by or on
behalf of Trump AC and Trump AC Funding, Trump AC and Trump AC Funding note that
there are various factors that could cause actual results to differ materially
from those set forth in any such forward-looking statements. The forward-looking
statements contained in this Quarterly Report were prepared by management and
are qualified by, and subject to, significant business, economic, competitive,
regulatory and other uncertainties and contingencies, all of which are difficult
or impossible to predict and many of which are beyond the control of Trump AC
and Trump AC Funding. Accordingly, there can be no assurance that the
forward-looking statements contained in this Quarterly Report will be realized
or that actual results will not be significantly higher or lower. The statements
have not been audited by, examined by, compiled by or subjected to agreed-upon
procedures by independent accountants, and no third-party has independently
verified or reviewed such statements. Readers of this Quarterly Report should
consider these facts in evaluating the information contained herein. In
addition, the business and operations of Trump AC and Trump AC Funding are
subject to substantial risks which increase the uncertainty inherent in the
forward-looking statements contained in this Quarterly Report. The inclusion of
the forward-looking statements contained in this Quarterly Report should not be
regarded as a representation by Trump AC and Trump AC Funding or any other
person that the forward-looking statements contained in this Quarterly Report
will be achieved. In light of the foregoing, readers of this Quarterly Report
are cautioned not to place undue reliance on the forward-looking statements
contained herein.
Results of Operations: Operating Revenues and Expenses
The financial information presented below reflects the results of
operations of Trump AC. Because Trump AC has no business operations other than
its interest in Plaza Associates and Taj Associates at September 30, 1996, its
results of operations are not discussed below. Taj Associates was acquired on
April 17, 1996.
Comparison of Three-Month Periods Ended September 30, 1996 and 1995. The
following table includes selected data of Plaza Associates and Taj Associates
for the three months ended September 30, 1996 and of Plaza Associates for the
three months ended September 30, 1995:
Three Months Ended September 30,
-----------------------------------------------
1995 1996 1996 1996
Plaza Plaza Taj Total
Associates Associates Associates Trump AC
---------- ---------- ---------- ----------
(in thousands)
Revenues:
Gaming ....................... $ 85,188 $ 111,165 $ 150,816 $ 261,981
Other ........................ 21,801 33,230 32,341 65,571
Gross Revenues ............... 106,989 144,395 183,157 327,552
Less: Promotional Allowances ... 12,094 18,029 18,222 36,251
Net Revenues ................. 94,895 126,366 164,935 291,301
Costs and Expenses:
Gaming ....................... 45,296 66,745 83,582 150,327
Pre-opening .................. -- 501 -- 501
General & Administrative ..... 17,080 24,157 19,972 44,129
Depreciation & Amortization .. 3,956 6,206 14,049 20,255
Other ........................ 6,143 10,269 9,420 19,711
Total Costs and Expenses ..... 72,475 107,878 127,023 234,923
Income from Operations ......... 22,420 18,488 37,912 56,378
Non-Operating Income (Expense) (1,786) 5,197 252 5,865
Interest Expense .............. (9,844) (12,667) (23,828) (36,495)
Total Non-Operating Income
(Expense) .................... (11,630) (7,470) (23,576) (30,630)
Provision for Income Taxes .... (993) (42) -- (42)
Net Income (Loss) .............. $ 9,797 $ 10,976 $ 14,336 $ 25,706
11
<PAGE>
Gaming revenues were $261,981,000 for the three months ended September 30,
1996, an increase of $176,793,000 or 207.5% from gaming revenues of $85,188,000
for the comparable period in 1995. This increase in gaming revenues consists of
$150,816,000 from Taj Associates in addition to an increase in Plaza Associates'
table games and slot revenues. Management believes that Plaza Associates'
increase in gaming revenues is primarily due to the May 1996 opening of Trump
World's Fair, the February 1996 opening of Trump Plaza East, the availability of
additional hotel rooms at both Trump World's Fair and Trump Plaza East, as well
as marketing initiatives.
Slot revenues were $160,947,000 for the three months ended September 30,
1996, an increase of $102,048,000 or 173.3% from slot revenues of $58,899,000
for the comparable period in 1995. This increase is directly attributable to the
acquisition of Taj Associates which contributed $78,832,000 in slot revenues.
Plaza Associates' slot revenues were $82,115,000 for the three months ended
September 30, 1996, an increase of $23,216,000 or 39.4% from slot revenues of
$58,899,000 for the three months ended September 30, 1995. Plaza Associates'
increase is due to the addition of 1,924 slot machines at Trump World's Fair and
Trump Plaza East, as well as management's marketing programs.
Table games revenues were $95,499,000 for the three months ended September
30, 1996, an increase of $69,210,000 or 263.3% from $26,289,000 for the
comparable period in 1995. This increase is attributable to the acquisition of
Taj Associates which contributed $66,449,000 in table games revenues with a
corresponding $384,966,000 in table games drop (i.e., the dollar value of chips
purchased). Plaza Associates' table games revenues of $29,050,000 for the three
months ended September 30, 1996 increased by $2,761,000 or 10.5% from the
comparable period in 1995. Plaza Associates' increase is primarily due to an
increase in table games drop by 9.8% for the three months ended September 30,
1996.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $4,713,000 in poker
revenue, $400,000 in race simulcasting revenues, and $422,000 in keno revenues
for the three months ended September 30, 1996.
Other revenues were $65,571,000 for the three months ended September 30,
1996, an increase of $43,770,000 or 200.8% from other revenues of $21,801,000
for the comparable period in 1995. Other revenues include revenues from rooms,
food and beverage and miscellaneous items. The increase is directly attributable
to the acquisition of Taj Associates which generated $32,341,000 in other
revenues for the three months ended September 30, 1996. Plaza Associates' other
revenues were $33,230,000 for the three months ended September 30, 1996, an
increase of $11,429,000 or 52.4% from the comparable period in 1995. Plaza
Associates' increase reflects the additional rooms at Trump Plaza East and Trump
World's Fair as well as increases in room, and food and beverage revenues
attendant to increased levels of gaming activity due in part to increased
promotional activities.
Promotional allowances were $36,251,000 for the three months ended
September 30, 1996, an increase of $24,157,000 or 199.7% from promotional
allowances of $12,094,000 for the three months ended September 30, 1995. Taj
Associates generated $18,222,000 in promotional allowances for the three months
ended September 30, 1996. Plaza Associates experienced an increase in
promotional allowances to $18,029,000 or 49.1% from promotional allowances of
$12,094,000 in the comparable period in 1995. Plaza Associates' increase is
attributable primarily to the additional rooms at Trump World's Fair and Trump
Plaza East as well as the addition of three restaurants at Trump World's Fair,
and increases in marketing initiatives during the three months ended September
30, 1996.
Gaming costs and expenses were $150,327,000 for the three months ended
September 30, 1996, an increase of $105,031,000 or 231.9% from $45,296,000 for
the comparable period in 1995. This increase is primarily attributable to Taj
Associates' gaming costs and expenses of $83,582,000 for the three months ended
September 30, 1996. Gaming costs and expenses for Plaza Associates were
$66,745,000, an increase of $21,449,000 or 47.4% from $45,296,000 in the
comparable period in 1995. Plaza Associates' increase is primarily due to
increased promotional and operational expenses resulting from operating Trump
World's Fair and Trump Plaza East, both with opening dates in 1996, as well as
taxes associated with increased levels of gaming revenues from the comparable
periodin 1995.
General and administrative expenses were $44,129,000 for the three months
ended September 30, 1996, an increase of $27,049,000 or 158.4% from general and
administrative expenses of $17,080,000 for the comparable period in 1995. This
increase is primarily due to the acquisition of Taj Associates which incurred
$19,972,000 in general and administrative expenses since its acquisition. Plaza
Associates' increase of $7,077,000 over the comparable period is due in part to
expenses associated with Trump Plaza East and Trump World's Fair.
12
<PAGE>
Pre-opening expenses of $501,000 were incurred by Plaza Associates for the
three months ended September 30, 1996 and reflect the costs associated with
opening Trump World's Fair in May 1996.
Other expenses were $19,711,000 for the three months ended September 30,
1996, an increase of $13,568,000 or 220.9% from the comparable period in 1995.
Other expenses include costs associated with operating Trump Plaza's and the Taj
Mahal's hotels. The increase over the comparable period reflects Taj Associates'
$9,420,000 of other expenses since its date of acquisition. Plaza Associates'
other expenses increased by $4,126,000 or 67.2% from the comparable period. This
increase is due to operating Trump World's Fair and Trump East, both with
opening dates in 1996.
Income from operations was $56,378,000 for the three months ended September
30, 1996, an increase of $33,958,000 or 151.5% from income from operations of
$22,420,000 for the comparable period in 1995. Taj Associates contributed
$37,912,000 of income from operations for the three months ended September 30,
1996. Plaza Associates contributed $18,488,000 during the three months ended
September 30, 1996, a decrease of $3,932,000, or 17.5% from the comparable
period in 1995.
Interest expense was $36,495,000 for the three months ended September 30,
1996, an increase of $26,651,000 or 270.7% from interest expense of $9,844,000
for the comparable period in 1995. This increase is attributable to the
acquisition of Taj Associates, which has incurred $23,828,000 of interest
expense for the three months ended September 30, 1996. Plaza Associates reflects
an increase of $2,823,000 in interest expense due in part to the issuance of the
Trump AC Mortgage Notes.
Other non-operating income was $5,011,000 for the three months ended
September 30, 1996, an increase of $7,016,000 from the comparable period in
1995. Non-operating income consists of a $5,000,000 non-refundable licensing fee
from the Plaza Thermal Agreement.
Comparison of Nine-Month Periods ended September 30, 1996 and 1995. The
following table includes selected data of Plaza Associates and Taj Associates
(since date of acquisition) for the nine months endedSeptember 30, 1996 and of
Plaza Associates for the nine months ended September 30, 1995:
Nine Months Ended September 30,
-----------------------------------------------
1995 1996 1996 1996
Plaza Plaza Taj Total
Associates Associates Associates Trump AC
---------- ---------- ---------- ----------
(in thousands)
Revenues:
Gaming ....................... $ 224,499 $ 281,511 $ 260,500 $ 542,011
Other ........................ 55,261 79,655 56,698 136,353
Gross Revenues ............... 279,760 361,166 317,198 678,364
Less: Promotional Allowances ... 28,611 42,549 32,087 74,636
Net Revenues .................. 251,149 318,617 285,111 603,728
Costs and Expenses:
Gaming ....................... 121,987 168,466 147,438 315,904
Pre-opening .................. -- 3,833 -- 3,833
General & Administrative ..... 51,073 62,388 39,509 101,897
Depreciation & Amortization .. 11,792 16,652 24,805 41,457
Other ........................ 18,080 25,200 17,262 42,484
Total Costs and Expenses ..... 202,932 276,539 229,014 505,575
Income from Operations ......... 48,217 42,078 56,097 98,153
Non-Operating Income (Expense) (3,158) 4,768 10,458 15,676
Interest Expense .............. (34,419) (34,409) (43,668) (78,077)
Total Non-Operating Income
(Expense) .................... (37,577) (29,641) (33,210) (62,401)
Extraordinary Loss ............ (9,250) (59,132) -- (59,132)
Provision for Income Taxes .... (993) (42) -- (42)
Net Income (Loss) .............. $ 397 $ (46,737) $ 22,887 $ (23,422)
13
<PAGE>
Gaming revenues were $542,011,000 for the nine months ended September 30,
1996, an increase of $317,512,000 or 141.4% from gaming revenues of $224,499,000
for the comparable period in 1995. This increase in gaming revenues consists of
$260,500,000 from Taj Associates since the date of acquisition in addition to an
increase in Plaza Associates' table games and slot revenues. Management believes
that Plaza Associates' 25.4% increase in gaming revenues is primarily due to the
May 1996 opening of Trump World's Fair, the February 1996 opening of Trump Plaza
East, the availability of additional hotel rooms at both Trump World's Fair and
Trump Plaza East, as well as marketing initiatives.
Slot revenues were $343,239,000 for the nine months ended September 30,
1996, an increase of $190,921,000 or 125.3% from slot revenues of $152,318,000
for the comparable period in 1995. This increase is directly attributable to the
acquisition of Taj Associates which contributed $140,093,000 in slot revenues.
Plaza Associates' slot revenues were $203,146,000 for the nine months ended
September 30, 1996, an increase of $50,828,000 or 33.4% from slot revenues of
$152,318,000 for the nine months ended September 30, 1995. Plaza Associates'
increase is due to the addition of 1,924 slot machines at Trump World's Fair and
Trump Plaza East, as well as management's marketing programs.
Table games revenues were $188,971,000 for the nine months ended September
30, 1996, an increase of $116,790,000 or 161.8% from $72,181,000 for the
comparable period in 1995. This increase is attributable to the acquisition of
Taj Associates which contributed $110,606,000 in table games revenues with a
corresponding $645,990,000 of table games drop (i.e., the dollar value of chips
purchased). Plaza Associates' table games revenue of $78,365,000 for the nine
months ended September 30, 1996 increased by $6,184,000 or 8.6% from the
comparable period in 1995. Plaza Associates' increase is primarily due to an
increase in table games drop by 9.8% for the nine months ended September 30,
1996.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/ keno operations generated approximately $8,360,000 in poker
revenue, $722,000 in race simulcasting revenue, and $719,000 in keno revenue
since its acquisition date.
Other revenues were $136,353,000 for the nine months ended September 30,
1996, an increase of $81,092,000 or 146.7% from other revenues of $55,261,000
for the comparable period in 1995. Other revenues include revenues from rooms,
food and beverage and miscellaneous items. The increase primarily is
attributable to the acquisition of Taj Associates which generated $56,698,000 of
other revenue since its acquisition date. Plaza Associates' other revenue was
$79,655,000 for the nine months ended September 30, 1996, an increase of
$24,394,000 or 44.1% from the comparable period in 1995. Plaza Associates'
increase reflects the additional rooms at Trump Plaza East and Trump World's
Fair as well as increases in rooms, food and beverage revenues attendant to
increased levels of gaming activity due in part to increased promotional
activities.
Promotional allowances were $74,636,000 for the nine months ended September
30, 1996, an increase of $46,025,000 or 160.9% from promotional allowances of
$28,611,000 for the nine months ended September 30, 1995. Taj Associates
generated $32,087,000 in promotional allowances since its acquisition date.
Plaza Associates experienced an increase in promotional allowances to
$42,549,000 or 48.7% from promotional allowances of $28,611,000 in the
comparable period in 1995. Plaza Associates' increase is attributable primarily
to the additional rooms at Trump World's Fair and Trump Plaza East as well as
the addition of three restaurants at Trump World's Fair, and increases in
marketing initiatives during the nine months ended September 30, 1996.
Gaming costs and expenses were $315,904,000 for the nine months ended
September 30, 1996, an increase of $193,917,000 or 159.0% from $121,987,000 for
the comparable period in 1995. This increase was primarily attributable to Taj
Associates' gaming costs and expenses of $147,438,000 since its acquisition.
Gaming costs and expenses for Plaza Associates were $168,466,000, an increase of
$46,479,000 or 38.1% from $121,987,000 for the comparable period in 1995. Plaza
Associates' increase is primarily due to increased promotional and operational
expenses resulting from operating Trump World's Fair and Trump Plaza East, both
with opening dates in 1996, as well as taxes associated with increased levels of
gaming revenues from the comparable period in 1995.
General and administrative expenses were $101,897,000 for the nine months
ended September 30, 1996, an increase of $50,824,000 or 99.5% from general and
administrative expenses of $51,073,000 for the comparable period in 1995. This
increase is primarily due to the acquisition of Taj Associates which incurred
$39,509,000 in general and administrative expenses since its acquisition. Plaza
Associates' increase of $11,315,000 over the comparable period is due in part to
expenses associated with the Trump Plaza East and Trump World's Fair.
14
<PAGE>
Pre-opening expenses of $3,833,000 were incurred by Plaza Associates and
reflect the costs associated with opening Trump World's Fair in May 1996.
Other expenses were $42,484,000 for the nine months ended September 30,
1996, an increase of $24,404,000 or 135.0% from the comparable period in 1995.
Other expenses include costs associated with operating Trump Plaza's and the Taj
Mahal's hotels. The increase over the comparable period reflects Taj Associates'
$17,262,000 of other expenses since its date of acquisition. Plaza Associates'
other expenses increased by $7,120,000 or 39.4% from the comparable period. This
increase is due to operating Trump World's Fair and Trump Plaza East, both with
opening dates in 1996.
Income from operations was $98,153,000 for the nine months ended September
30, 1996, an increase of $49,936,000 or 103.6% from income from operations of
$48,217,000 for the comparable period in 1995. Taj Associates contributed
$56,097,000 of income from operations since its acquisition. Plaza Associates
contributed $42,078,000 during the nine months ended September 30, 1996, a
decrease of $6,139,000 or 12.7% from the comparable period in 1995.
Interest expense was $78,077,000 for the nine months ended September 30,
1996, an increase of $43,658,000 or 126.8% from interest expense of $34,419,000
for the comparable period in 1995. This increase is attributable to the
acquisition of Taj Associates, which has incurred $43,668,000 of interest
expense since its date of acquisition. Plaza Associates reflects $34,409,000
interest expense at September 30, 1996, compared to $34,419,000 for the
comparable period in 1995.
Other non-operating income was $14,193,000 for the nine months ended
September 30, 1996, an increase of $18,040,000 from the comparable period in
1995. Non-operating income includes $15,000,000 of non-refundable licensing fees
resulting from the Plaza Thermal Agreement and the Taj Thermal Agreement.
The extraordinary loss of $59,132,000 for the nine months ended September
30, 1996 relates to the redemption of the Plaza Notes and the write-off of
unamortized deferred financing costs on April 17, 1996. The extraordinary loss
of $9,250,000 for the nine months ended September 30, 1995 relates to the
redemption and write-off of unamortized deferred financing costs relating to the
redemption of the Plaza PIK Notes and the Plaza PIK Note Warrants onJune 12,
1995.
15
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
Plaza Associates and Taj Associates, their partners, certain members of
their former Executive Committee and certain of their employees, have been
involved in various legal proceedings. In general, Plaza Associates and Taj
Associates have agreed to indemnify such persons and entities, against any and
all losses, claims, damages, expenses (including reasonable costs, disbursements
and counsel fees) and liabilities (including amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties) incurred by them in
said legal proceedings. Such persons and entities are vigorously defending the
allegations against them and intend to vigorously contest any future
proceedings.
Various legal proceedings are now pending against Plaza Associates and Taj
Associates. Trump AC considers all such proceedings to be ordinary litigation
incident to the character of its business and not material to its business or
financial condition. The majority of such claims are covered by liability
insurance (subject to applicable deductibles), and Trump AC believes that the
resolution of these claims, to the extent not covered by insurance, will not,
individually or in the aggregate, have a material adverse effect on its
financial condition or results of operations of Plaza Associates or Taj
Associates.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 -- OTHER INFORMATION
On October 23, 1996, Trump Services, Plaza Associates, Taj Associates and
Trump's Castle Associates, L.P. entered into an Amended and Restated Services
Agreement (the "Services Agreement"), pursuant to which Trump Services, in order
to generate efficiencies and realize synergies through the consolidation of
operations, provides certain management, financial and other functions necessary
and incidental to the operations of each of Trump Plaza, the Taj Majal and
Trump's Castle Casino Resort. Trump Services, a wholly owned subsidiary of Trump
AC, will receive no compensation for providing the services, other than payments
to fund the costs and expenses incurred in connection therewith.
Reference is made to the Services Agreement, attached as an Exhibit hereto
and incorporated herein by reference.
16
<PAGE>
ITEM 6 --EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
10.65.1 Amended and Restated Services Agreement, dated as October 23,
1996, by and among Trump Plaza Associates, Trump Taj Mahal
Associates, Trump's Castle Associates, L.P. and Trump Casino
Services, L.L.C.
10.67 Thermal Energy Service Agreement, dated as of September 26,
1996, by and between Atlantic Jersey Thermal Systems, Inc.
and Trump Plaza Associates.
27.1 Financial Data Schedule of Trump Atlantic City Associates.
27.2 Financial Data Schedule of Trump Atlantic City Funding, Inc.
b. Current Reports on Form 8-K:
The Registrants did not file any Current Reports on Form 8-K during the
period beginning July 1, 1996 and ending September 30, 1996.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRUMP ATLANTIC CITY ASSOCIATES
(Registrant)
By: TRUMP HOTELS & CASINO RESORTS
HOLDINGS, L.P.,
its general partner
By: TRUMP HOTELS & CASINO RESORTS, INC.,
its general partner
Date: November 14, 1996
By: /s/ NICHOLAS L. RIBIS
-----------------------------------
Nicholas L. Ribis
President, Chief Executive Officer,
Chief Financial Officer and Director
(Duly Authorized Officer and
Principal Financial Officer)
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TRUMP ATLANTIC CITY FUNDING, INC.
(Registrant)
Date: November 14, 1996
By: /s/ NICHOLAS L. RIBIS
-----------------------------------
Nicholas L. Ribis
Chief Executive Officer and President
(Duly Authorized Officer and
Principal Financial Officer)
19
AMENDED AND RESTATED SERVICES AGREEMENT
SERVICES AGREEMENT (the "Agreement") made as of the 23rd day of October,
1996, by and among TRUMP CASINO SERVICES, L.L.C., a New Jersey limited liability
company ("TCS"), TRUMP PLAZA ASSOCIATES, a New Jersey general partnership
("Plaza Associates"), TRUMP TAJ MAHAL ASSOCIATES, a New Jersey general
partnership ("Taj Associates") and TRUMP'S CASTLE ASSOCIATES, L.P., a New Jersey
limited partnership ("Castle Associates").
W I T N E S S E T H:
WHEREAS, TCS, Plaza Associates and Taj Associates entered into that certain
Services Agreement, dated as of July 8, 1996 (the "Original Agreement"),
pursuant to which TCS has provided certain management, financial and other
functions necessary and incidental to the operations of each of Plaza
Associates' and Taj Associates' respective casino hotels, together with all
other activities and services reasonably necessary to carry out any of the
foregoing (the "Services");
WHEREAS, as of October 7, 1996, Trump Hotels & Casino Resorts Holdings,
L.P., a Delaware limited partnership that wholly owns Plaza Associates and Taj
Associates ("THCR Holdings"), acquired 100% of the outstanding equity interests
of Castle Associates (the "Castle Acquisition");
WHEREAS, TCS desires to provide the Services to Plaza Associates, Taj
Associates and Castle Associates, and Plaza Associates, Taj Associates and
Castle Associates desire to receive the Services and to reimburse TCS for its
expenses as set forth herein; and
WHEREAS, TCS, Plaza Associates and Taj Associates desire to amend and
restate the Original Agreement in order to, among other things, include Castle
Associates as a party.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
Section 1. Appointment. Plaza Associates, the owner and operator of the
Trump Plaza Hotel and Casino and Trump World's Fair Casino at Trump Plaza
(collectively, "Trump Plaza"); Taj Associates, the owner and operator of the
Trump Taj Mahal Casino Resort (the "Taj Mahal"); and Castle Associates, the
owner and operator of Trump's Castle Casino Resort ("Trump's Castle") each
hereby appoint TCS to act as provider of the Services to Plaza Associates, Taj
Associates and Castle Associates, respectively. TCS hereby accepts such
appointment and agrees to furnish the Services in accordance with the terms of
this Agreement.
Section 2. Services to be Provided. (a) TCS hereby agrees to render such
Services to Plaza Associates, Taj Associates and/or Castle Associates as may be
reasonably requested from time to time by Plaza Associates, Taj Associates
and/or Castle Associates, as the case
<PAGE>
may be. TCS shall provide the Services in the manner and at a level of
service consistent in all material respects with those furnished by TCS to Plaza
Associates and Taj Associates, and by Castle Associates on its own behalf,
immediately prior to the date hereof and in conformance with all applicable
statutes and regulatory requirements. TCS shall provide the Services in such a
manner that (i) neither Plaza Associates, Taj Associates nor Castle Associates
is unfairly advantaged or discriminated against and (ii) neither Plaza
Associates, Taj Associates nor Castle Associates realizes a competitive
advantage over the other.
(b) In providing the Services hereunder, the management of TCS shall be
directed by its Chief Executive Officer and its Operating Committee regarding
matters of policy, purpose, responsibility and authority. The Operating
Committee of TCS shall be comprised of the Executive Vice President of TCS and
the Chief Operating Officers of Plaza Associates, Taj Associates and Castle
Associates, each of whom shall retain the ability to direct management and
employees of TCS regarding administrative matters and daily operations with
respect to each of their respective casino hotel operations.
Section 3. Compensation. Except for payments made in accordance with
Section 4 of this Agreement, TCS shall receive no compensation for providing the
Services to Plaza Associates, Taj Associates and/or Castle Associates.
Section 4. Payment of Expenses. (a) With respect to the Services provided,
Plaza Associates, Taj Associates and/or Castle Associates, as the case may be,
shall pay to TCS an amount sufficient to fund all of the costs and expenses
incurred by TCS in providing such Services to Plaza Associates, Taj Associates
and/or Castle Associates, as the case may be ("Services Expenses"), including,
without limitation, the following:
(i) all payroll and employee benefits and related costs associated with the
employees utilized by TCS in providing the Services;
(ii) all secretarial, photocopying, telecommunications, office supplies and
other support services utilized by TCS in providing the Services;
(iii) all reasonable travel, food and lodging expenses incurred by TCS in
connection with providing the Services;
(iv) all fees and expenses of outside vendors and consultants utilized by
TCS in providing the Services;
(v) all overhead and other expenses incurred in the ordinary course of
providing the Services to Plaza Associates, Taj Associates and/or Castle
Associates; and
(vi) all insurance premiums and all expenses for legal and independent
accountants' services utilized by TCS in providing the Services.
(b) In the event that Services are provided to more than one of Plaza
Associates, Taj Associates and/or Castle Associates, Services Expenses shall be
apportioned
-2-
<PAGE>
among Plaza Associates, Taj Associates and/or Castle Associates in
accordance with their respective use of such Services.
(c) Services Expenses and Organizational Expenses (as defined) shall be
invoiced by TCS to Plaza Associates, Taj Associates and/or Castle Associates, as
the case may be, in such manner and at such times as determined by mutual
agreement of the parties hereto. Plaza Associates, Taj Associates and/or Castle
Associates, as the case may be, shall pay such Services Expenses and
Organizational Expenses as invoiced promptly upon receipt thereof.
Alternatively, accounts may be established with TCS in the name of Plaza
Associates, Taj Associates and/or Castle Associates, as the case may be, for
payment in respect of Services Expenses and Organizational Expenses incurred by
them.
(d) All organizational expenses incurred by TCS following the date of this
Agreement, including, without limitation, fees of the Secretary of State of the
State of New Jersey, the Casino Control Commission of the State of New Jersey
(the "CCC"), the New Jersey Division of Gaming Enforcement (the "NJDGE") and any
other fees or expenses that are or may be required to be paid or incurred in
order for TCS to preserve and keep in full force its existence as a limited
liability company ("Organizational Expenses") shall be paid by Plaza Associates,
Taj Associates and Castle Associates, each being individually responsible for
33-1/3% of the Organizational Expenses.
(e) At the end of each calendar year, TCS, Plaza Associates, Taj Associates
and Castle Associates shall, based upon the audited financial statements for
such prior calendar year, reconcile any overpayments or underpayments which may
have occurred during such prior calendar year.
Section 5. Independent Contractor Status. (a) For all purposes herein, TCS
shall be deemed to be an independent contractor of Plaza Associates, Taj
Associates and/or Castle Associates, as the case may be, and none of the parties
hereto shall act, represent or hold itself out as having authority to act as an
agent or partner of either of the other parties hereto. Nothing contained in
this Agreement shall be construed as creating a partnership, joint venture,
agency, trust or other association of any kind, each party to this Agreement
being individually responsible only for its own obligations as set forth in this
Agreement.
(b) Nothing in this Agreement shall in any way limit Plaza Associates, Taj
Associates or Castle Associates in the ownership and operation of Trump Plaza,
the Taj Mahal or Trump's Castle, respectively, it being hereby acknowledged and
agreed that Plaza Associates, Taj Associates and Castle Associates are
responsible for the entire operation of Trump Plaza, the Taj Mahal and Trump's
Castle, respectively.
Section 6. Term. This Agreement shall be deemed to have commenced on the
date hereof and shall continue for a term of ten years unless terminated earlier
by any party hereto upon ninety (90) days prior written notice to each of the
other parties hereto.
Section 7. Miscellaneous.
-3-
<PAGE>
(a) Waiver, Amendment. Neither this Agreement nor any provision hereof
shall be waived, amended, modified, changed, discharged or terminated except by
an instrument in writing executed by TCS, Plaza Associates, Taj Associates and
Castle Associates.
(b) Assignment. Neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable by TCS,
Plaza Associates, Taj Associates or Castle Associates, without the prior written
consent of each of the other parties hereto. Any such attempted assignment
without such prior written consent shall be void and of no force or effect.
(c) Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersedes any and all prior and contemporaneous
agreements and understandings relating to the subject matter hereof. No
representation, promise or statement of intention has been made by any party
hereto which is not embodied in this Agreement and no party hereto shall be
bound by or liable for any alleged representation, promise or statement of
intention not set forth herein.
(d) Severability. If any one or more of the provisions of this Agreement or
the application of any such provision or provisions to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect for
any reason, the validity, legality and enforceability of any such provision or
provisions in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being understood that all of the
provisions of this Agreement shall be enforceable to the full extent permitted
by law.
(e) Section Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PRINCIPLES THEREOF. TCS, PLAZA ASSOCIATES, TAJ ASSOCIATES
AND CASTLE ASSOCIATES HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
JERSEY STATE COURT SITTING IN ATLANTIC CITY, NEW JERSEY OR ANY FEDERAL COURT
SITTING IN CAMDEN, NEW JERSEY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPT FOR
THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. TCS, PLAZA ASSOCIATES, TAJ ASSOCIATES AND
CASTLE ASSOCIATES IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN ANY INCONVENIENT FORUM.
-4-
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original as against any party whose signature appears thereon and all of
which shall together constitute one and the same instrument.
(h) Gaming Laws. Each of the provisions of this Agreement is subject to and
shall be enforced in compliance with the provisions, regulations or approvals
required by any state gaming authority, including, without limitation, the CCC
and the NJDGE.
(i) Third Party Rights. Nothing in this Agreement is intended or shall be
construed to confer upon or give any person, other than the parties hereto,
Trump Atlantic City Associates, Trump Hotels & Casino Resorts, Inc. and THCR
Holdings and each of their respective successors and permitted assigns, any
rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
(j) Limitation on Damages. No party shall be liable to the other parties
for any consequential damages resulting from a breach of this Agreement.
(k) No Adverse Interpretation of Other Agreements. This Agreement may not
be used to interpret any other agreement of the parties hereto, and no such
agreement may be used to interpret this Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
TRUMP CASINO SERVICES, L.L.C.
By: Trump Atlantic City Corporation
member
By: /s/ NICHOLAS L. RIBIS
-------------------------------------
Name: Nicholas L. Ribis
Title: Vice President
TRUMP PLAZA ASSOCIATES
By: /s/ BARRY J. CREGAN
-------------------------------------
Name: Barry J. Cregan
Title: Chief Operating Officer
TRUMP TAJ MAHAL ASSOCIATES
By: /s/ RUDOLF E. PRIETO
-------------------------------------
Name: Rudolf E. Prieto
Title: Chief Operating Officer
TRUMP'S CASTLE ASSOCIATES, L.P.
By: Trump's Castle Hotel & Casino, Inc.
its general partner
By: /s/ R. BRUCE MCKEE
-------------------------------------
Name: R. Bruce McKee
Title: Chief Operating Officer
THERMAL ENERGY SERVICE AGREEMENT
THIS THERMAL ENERGY SERVICE AGREEMENT ("Agreement") is entered into as of
the 26th day of September 1996, by and between ATLANTIC JERSEY THERMAL
SYSTEMS, INC., a Delaware corporation ("Seller"), and TRUMP PLAZA ASSOCIATES, A
New Jersey general partnership ("Buyer").
WITNESSETH:
WHEREAS, Seller is engaged in the business of producing and selling heating
and cooling energy; and
WHEREAS, Buyer operates the Trump Plaza Hotel and Casino and Trump World's
Fair Casino at Trump Plaza located at Mississippi and Florida Avenues and the
Boardwalk, Atlantic City, New Jersey 08401, as the same may be expanded or
improved from time to time ("Buyer's Facilities"); and
WHEREAS, Buyer presently purchases from Seller and Seller presently sells
to Buyer all of Buyer's heating and cooling energy requirements for Buyer's
Facilities pursuant to that certain Thermal Energy Sale Agreement ("TESA") dated
as of February 1, 1995 between Seller and Buyer, as amended by that certain
letter agreement ("Letter Agreement") dated as of February 23, 1995 between
Seller and Buyer, as further amended by that certain Letter Agreement ("Second
Letter Agreement") dated as of September 15, 1995 between Seller and Buyer; and
WHEREAS, Seller presently operates and maintains "Seller's Required
Facilities", as that term is defined in the TESA, pursuant to that certain
Operating Agreement ("Operating Agreement") dated as of May 1, 1995 between
Seller and Buyer; and
WHEREAS, Seller desires to obtain the exclusive right to use the steam and
chilled water production facilities located on-site at Buyer's Facilities in
order to sell to Buyer all of Buyer's heating and cooling energy requirements
for Buyer's Facilities at an additional cost savings to Buyer; and
WHEREAS, Buyer is willing to allow Seller to operate the steam and chilled
water production facilities and emergency electric generating facilities located
on-site at Buyer's Facilities on an exclusive basis for the aforestated purposes
on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements hereinabove and hereinafter set forth and such other
good and valuable considerations, the receipt and sufficiency of which are
hereby
<PAGE>
acknowledged, Buyer and Seller, each intending to be legally bound, do hereby
agree as follows:
1. DEFINITIONS
Except as otherwise expressly provided herein, all capitalized terms used
in this Agreement shall have the respective meanings as set forth below:
(a) "Billing Month" shall mean any calendar month, or any portion
thereof, during which Buyer receives and Seller delivers Thermal Energy to
Buyer's Facilities in accordance with the terms and conditions of this
Agreement.
(b) "Contractual Obligation" shall mean, as to either party to this
Agreement, any contract, agreement, indenture, instrument or undertaking to
which such party is a party or by which any of its properties is bound or
affected.
(c) "Emergency Electric Generating Facilities" shall mean, the diesel
generators, motors, pumps, heat exchangers, piping, valves, day tanks and
starters ("Diesel Sets") and electric switchgear and transfer switches necessary
to start and operate the Diesel Sets, and all appurtenant equipment thereto,
together with any and all parts, supplies, meters and equipment installed or
added thereto, which constitute the emergency electric generating facilities
located at Buyer's Facilities, including but not limited to those more
specifically identified on Schedule 1(c) attached hereto and made a part hereof.
(d) "Emergency Electric Services" shall mean electric services
provided or which could be provided to Buyer by Seller from the Emergency
Electric Generating Facilities in the event of an interruption in electric
service to Buyer's Facilities by Atlantic City Electric Company or successor
thereto.
(e) "Governmental Authority" shall mean the federal government and
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any other governmental entity with authority over
any aspect of this Agreement or the performance of any of the obligations
hereunder.
(f) "Metering Equipment" shall have the meaning set forth in Section
8.1 of this Agreement.
(g) "Points of Delivery" shall mean the physical point where Thermal
Energy is delivered to Buyer, as more specifically described on Schedule 1(g)
attached hereto and made a part hereof.
2
<PAGE>
(h) "Points of Return" shall mean the physical point where Seller is
anticipated to receive the chilled water return and condensate from Buyer, as
more specifically described on Schedule 1 (h) attached hereto and made a part
hereof.
(i) "New Service Commencement Date" shall have the meaning set forth
in Section 2.2 of this Agreement.
(j) "Thermal Energy" shall mean, as the context requires, quantities
of heating and cooling energy as measured in mmBtu's and ton-hrs., respectively,
extracted from the circulating flows of the steam/condensate and chilled water
provided to Buyer at Buyer's Facilities in accordance with the delivery
specifications set forth on Schedule 1 (j) of this Agreement.
(k) "Thermal Energy Capacity Charges" shall mean the capacity charges
for Thermal Energy for each Billing Month determined in accordance with the
capacity charges set forth on Schedule 7.1 of this Agreement.
(l) "Thermal Energy Production Facilities" shall mean the chillers,
boilers, cooling towers, pumps and all appurtenant equipment thereto, together
with any and all parts, supplies and equipment installed or added thereto, and
all improvements, additions or replacements made thereto (on the primary side)
which constitute the steam and chilled water production facilities located at
Buyer's Facilities, and shall include Buyer Owned Thermal Energy Production
Facilities and Seller Owned Thermal Energy Production Facilities, all as more
specifically identified on Schedule 1(l) attached hereto and made a part hereof.
(m) "Thermal Energy Usage Charges" shall mean the usage charges for
Thermal Energy for each Billing Month determined in accordance with the usage
charges set forth on Schedule 7.1 of this Agreement.
(n) "Trump Plaza (East Expansion)" shall mean the building and
associated structures of the former Holiday Inn hotel property, owned by Buyer
and located on the parcel bounded by Missouri Avenue, Pacific Avenue, Columbia
Avenue and The Boardwalk in Atlantic City, New Jersey.
(o) "Trump Plaza (Main)" shall mean the building and associated
structures owned by Buyer and located on the parcel bounded by Mississippi
Avenue, Pacific Avenue, Columbia Avenue and The Boardwalk in Atlantic City, New
Jersey.
3
<PAGE>
2. TERM AND TERMINATION OF TESA
2.1 Term. This Agreement shall be in full force and effect and be legally
binding upon the parties and their permitted successors and assigns as of the
date hereof and shall remain in effect for a term of twenty (20) years following
the New Service Commencement Date, unless otherwise terminated as provided
herein (the "Term").
2.2 New Service Commencement Date. Buyer and Seller shall mutually agree
upon a New Service Commencement Date upon which Seller shall first make
available and deliver to Buyer's Facilities Thermal Energy and upon which
[Atlantic Operating Systems, Inc.], Seller's affiliate, assumes operation of
Buyer's Emergency Electric Generating Facilities as provided herein, but in no
event shall the New Service Commencement Date occur any later than October 15,
1996, unless otherwise agreed to in writing by the parties.
2.3 Termination of TESA. As of the New Service Commencement Date, the TESA,
Letter Agreement, Second Letter Agreement and Operating Agreement shall
terminate and be of no further force and effect, it being the intent of the
parties that each of such agreements be superseded and replaced by this
Agreement and the operating agreement more specifically described in Section 5.2
of this Agreement.
3. LICENSE AGREEMENT
3.1 Grant of License. Buyer hereby grants to Seller (i) a non-exclusive
license throughout the Term of this Agreement to enter upon Buyer's Facilities
in order to inspect and gain access to the Thermal Energy Production Facilities
and Emergency Electric Generating Facilities; (ii) an exclusive license
commencing on the New Service Commencement Date and continuing thereafter
throughout the Term of this Agreement to use, operate and maintain the Thermal
Energy Production Facilities and Emergency Electric Generating Facilities to the
extent and for the purposes set forth herein, which license shall be irrevocable
for so long as the Agreement remains in effect and Seller is not in default of
any of its obligations hereunder; and (iii) a non-exclusive license to use,
without interruption, the electrical service, makeup water lines and fire
control system which support the Thermal Energy Production Facilities and
Emergency Electric Generating Facilities to the extent necessary in the use,
operation and maintenance of the Thermal energy Production Facilities and
Emergency Electric Generating Facilities; provided, however, that Seller shall
at no time interfere with the business operations of Buyer's Facilities
including, without limitation, the operation of the casino-hotel located at
Buyer's Facilities.
4
<PAGE>
3.2 Consideration for Licenses. In consideration for the licenses granted
to Seller by Buyer pursuant to the provisions of Section 3.1 above, Seller
hereby agrees to pay to Buyer the sum of Five Million ($5,000,000.00) Dollars
(the "License Fee"). The License fee shall be payable on the New Service
Commencement Date, but in no event later than September 30, 1996, in immediately
available funds to an account designated by Buyer.
4. EASEMENTS
4.1 Easements and Rights-Of-Way; Access. Buyer shall grant, or cause to be
granted, to Seller all rights-of-way, access rights, easements, licenses and
other rights with respect to Buyer's Facilities as may be reasonably necessary
for Seller to perform its obligations and exercise its rights hereunder. Buyer
shall use commercially reasonable efforts to obtain, or cause to be obtained (in
form and substance reasonably satisfactory to Seller) non-disturbance agreements
or, if applicable, waivers and/or consents from each of its mortgagees or
landlords with respect to all rights of way, access rights, easements, licenses
and other property rights which Seller is obligated to provide or cause to be
provided to Seller pursuant to this Article 4.
5. THERMAL ENERGY PRODUCTION FACILITIES, EMERGENCY ELECTRIC GENERATING
FACILITIES AND RELATED REQUIREMENTS
5.1 Thermal Energy Production Facilities. Seller will engineer, permit,
construct, finance, operate and maintain the Thermal Energy Production
Facilities so as to produce and deliver Thermal Energy to Buyer at the agreed
upon Points of Delivery.
5.2 Emergency Electric Generating Facilities. Seller will engineer, permit,
construct, finance, operate and maintain the Emergency Electric Generating
Facilities so as to produce and deliver Emergency Electric Services to Buyer as
required.
5.3 Facility Operation. Seller will use, operate and maintain the Thermal
Energy Production Facilities and Emergency Electric Generating Facilities in a
manner which meets or exceeds good industry practice, and Seller shall secure
and maintain, at its sole cost and expense, all permits necessary for the use,
operation and maintenance of Buyer's Thermal Energy Production Facilities and
Emergency Electric Generating Facilities. As soon as practicable, but in no
event later than October 15, 1996, Buyer and Seller shall enter into a
definitive operating agreement on terms mutually acceptable to each of them
setting forth their respective responsibilities for the use, operation and
maintenance
5
<PAGE>
of the Thermal Energy Production Facilities and Emergency Electric Generating
Facilities.
5.4 Facility Ownership. Title to the Buyer Owned Thermal Energy Production
Facilities and Emergency Electric Generating Facilities shall remain with Buyer
and Seller shall not remove, alter (except as otherwise required or permitted
under this Agreement) or permit any lien to exist on such Thermal Energy
Production Facilities and Emergency Electric Generating Facilities.
5.5 Buyer's Gas Requirements. Commencing on the New Service Commencement
Date and continuing throughout the Term of this Agreement, Seller shall pay for
all natural gas requirements of Buyer, provided, however, that Buyer shall
reimburse Seller for the as-delivered cost of all gas quantities delivered to
Buyer for use in its kitchen facilities, on a firm basis. Seller shall maintain
a separate meter to measure and record gas delivered to Buyer's kitchen
facilities. Upon the execution and delivery of this Agreement, Seller shall
proceed with due diligence to transfer all natural gas service at Buyer's
Facilities to Seller as of the New Service Commencement Date or as soon as
practicable thereafter. If Seller is proceeding diligently with such transfer
but is unable to effect the same as of the New Service Commencement Date, Buyer
agrees to take gas service at such meters in its name and Seller shall reimburse
Buyer at cost for all gas service taken in Buyer's name for use in Buyer's
Facilities until such time as Seller is able to effect such transfer.
5.6 Removal of Temporary Facilities. No later than December 31, 1997,
Seller shall dismantle and remove the temporary building and the Thermal Energy
generating facilities in such building located on the Trump Plaza (East
Expansion) parcel and previously constructed and installed by Seller to enable
Seller on a temporary basis to provide all the Thermal Energy requirements of
the Trump Plaza (East Expansion) and the Trump Plaza (Main). Seller shall
reasonably restore the site of such temporary building to its prior condition.
5.7 Buyer's Electric Requirements. Commencing on the New Service
Commencement Date and continuing throughout the Term of this Agreement, Seller
shall be responsible for establishing and coordinating the electric submetering
of electric service to the Thermal Energy Production Facilities and Seller shall
grant a credit to Buyer on a monthly basis equal to the cost of such electricity
delivered to Buyer's Thermal Energy Production Facilities, provided, however,
that Buyer shall provide Seller with timely copies of its electric bills. The
parties intend that Buyer shall remain the customer of record for all electric
service to Buyer's Facilities.
6
<PAGE>
5.8 Buyer's Water Requirements. Commencing on the New Service Commencement
Date and continuing throughout the Term of this Agreement, Seller shall be
responsible for measuring the make-up water associated with the water
requirements of the Thermal Energy Production Facilities and Seller shall grant
to Buyer a credit on a quarterly basis equal to the cost of such water usage at
the currently applicable tariff rates.
6. PURCHASE AND SALE OF THERMAL ENERGY AND EMERGENCY ELECTRIC SERVICES
6.1 Purchase and Sale of Thermal Energy. Commencing on the New Service
Commencement Date and continuing thereafter throughout the Term of this
Agreement, Seller will produce and deliver for sale to Buyer, and Buyer will
purchase and receive from Seller, all of Buyer's Thermal Energy requirements for
Buyer's Facilities. Such Thermal Energy requirements will be produced by Seller
from the Thermal Energy Production Facilities; provided, however, that Seller,
at its sole reasonable discretion, may provide such Thermal Energy requirements
from a centralized thermal energy plant to be owned and operated by Seller or an
affiliate thereof, in which event Seller will maintain the Thermal Energy
Production Facilities in a moth-ball condition which meets or exceeds good
industry practice and in which event appropriate changes will be made to the
Points of Delivery and Points of Return. Provided Buyer's Thermal Energy
requirements do not exceed the levels of contract capacity specified in Schedule
7.1 attached hereto on more than two (2) occasions within any two (2)
consecutive billing periods or in any two (2) Billing Months within consecutive
calendar years, the costs thereof shall be as set forth in Schedule 7.1. Subject
to the provisions of Section 7.2 hereof which shall control in the circumstances
described therein, if Buyer's Thermal Energy requirements exceed the levels of
contract capacity specified in Schedule 7.1 on more than two (2) occasions
within any two (2) consecutive billing periods, the contract capacity specified
in Schedule 7.1 shall be increased to the maximum quantity of capacity delivered
to Buyer and the cost thereof shall be as set forth in Schedule 7.1.
6.2 Purchase and Sale of Emergency Electric Services. Commencing on the New
Service Commencement Date and continuing thereafter throughout the Term of this
Agreement, Seller will produce and deliver for sale to Buyer, and Buyer will
purchase and receive from Seller, Emergency Electric Services produced from the
Emergency Electric Generating Facilities that may be required in the event of an
interruption in electric services to Buyer by Atlantic City Electric Company or
successor thereto.
7
<PAGE>
6.3 Points of Delivery and Return. Buyer will obtain its Thermal Energy, in
the case of heating, by extracting heat from and, in the case of cooling, by
transferring heat to, the circulating flows of steam and chilled water that
Seller will make available to Buyer at the agreed upon Points of Delivery. Buyer
agrees to take and accept the flows of steam and chilled water at such Points of
Delivery and return the condensate and chilled water to Seller at the agreed
upon Points of Return.
6.4 Point of Transfer, Risk of Loss. The sale of Thermal Energy shall be
deemed to occur at the Points of Delivery and the risk of loss of the
circulating medium shall transfer to Buyer at such points and shall transfer
back to Seller at the Points of Return.
6.5 Delivery Specifications. The Thermal Energy delivered by Seller at the
Points of Delivery shall satisfy the conditions of temperature and pressure
specified in Schedule 1 (j) attached hereto and made a part hereof.
6.6 Treatment of Condensate and Chilled Water. Buyer shall not interfere
with, or restrict (other than to extract its Thermal Energy requirements), or
contaminate in any way the flows of steam, condensate or chilled water supplied
to or collected from Buyer hereunder. Buyer agrees to compensate Seller for the
reasonable costs of treating or replacing any condensate or chilled water that
is either contaminated or not returned, after making allowance for reasonable
losses occurring within normal operating conditions by Buyer, as reasonably
demonstrated by Seller to Buyer. Further, it is agreed that Seller may suspend
service if Buyer fails to cure any contamination of steam, condensate or chilled
water caused by Buyer, as reasonably demonstrated by Seller to Buyer, within
thirty (30) days after being advised in writing by Seller of such contaminating,
provided, however, that if the nature of such contamination is such that the
same cannot reasonably be cured within such thirty (30) day period, Buyer shall
not be deemed to be in default if it shall have commenced such cure within such
thirty (30) day period and thereafter diligently and continuously prosecutes
such cure to completion, and Seller may not suspend service to Buyer during such
period of cure.
6.7 Scheduled Outages. Whenever it shall become necessary for Seller to
schedule an outage so that Seller may make repairs, replacements or changes in
the Thermal Energy Production Facilities, both parties shall exercise reasonable
efforts to coordinate the timing of the scheduled outage, and, in any event,
Seller shall give Buyer not less than ten (10) days prior written notice of such
outage. Seller shall use reasonable means to limit the duration of the outage
and shall attempt to schedule chilled water outages during winter months and
steam outages during summer
8
<PAGE>
months. Both parties agree to act reasonably and in good faith, recognizing that
such outages will, from time to time, be required. Notwithstanding anything
herein contained to the contrary, Seller agrees that outages shall not and may
not result in the reduction of Thermal Energy services required to continue to
maintain and meet Buyer's Thermal Energy requirements within reasonable levels
hereunder.
6.8 Buyer's Rights During Interruption in Service. If at any time during
this Agreement, Seller shall fail to deliver Buyer's Thermal Energy requirements
and such failure is, in Buyer's reasonable judgment, attributable to Seller's
failure to diligently pursue and implement appropriate corrective actions
consistent with the facts and circumstances of the interruption, Buyer may at
its option elect to cure Seller's non performance, without being in default of
Buyer's obligations under this Agreement, by producing its own Thermal Energy
(with or without use of the Thermal Energy Production Facilities) or purchasing
and accepting deliveries of Thermal Energy from any other source. In such event,
Seller shall reimburse Buyer for the excess of any costs if incurred by Buyer to
cover over and above Seller's rates and charges hereunder.
7. CHARGES AND PAYMENTS
7.1 Charges for Heating and Cooling Service. For each Billing Month in
which Buyer receives Thermal Energy from Seller, Buyer shall pay Seller (i) the
applicable Thermal Energy Capacity Charges for Thermal Energy set forth in
Schedule 7.1 attached hereto and made a part hereof; (ii) the applicable Thermal
Energy Usage Charges for Thermal Energy set forth in Schedule 7.1 attached
hereto and made a part hereof; and (iii) the Supplemental Chilled Water Capacity
Charge.
7.2 Charges for Emergency Electric Services. For each billing month, Buyer
shall pay Seller a monthly fee, said monthly fee to escalate annually, as set
forth Schedule 7.1 attached hereto and made a part hereof, for Emergency
Electric Services which could be provided to Buyer by Seller from the Emergency
Electric Generating Facilities.
7.3 Adjustment in Thermal Energy Capacity Charges. In the event the Thermal
Energy required by Buyer increases at any time within five (5) years of the New
Service Commencement Date as the result of any expansion to Buyer's Facilities,
Seller shall, at Buyer's option exercisable within six (6) months of Buyer's
commencement of any expansion, provide such additional Thermal Energy
requirements to Buyer under the same rates, terms and conditions then applicable
under this Agreement.
9
<PAGE>
7.4 Capacity Charge Payments; No Set-Off. Unless excused by reason of Force
Majeure, payment of the Thermal Energy Capacity Charges and Thermal Energy Usage
Charges are conditioned on Seller's ability to deliver to Buyer at the Points of
Delivery the full Thermal Energy requirements of Buyer under this Agreement, and
subject to the provisions of this Agreement, shall not otherwise be subject to
any set-off, counterclaim, abatement, or diminution. If Seller is unable to
deliver to Buyer when required any quantity of Thermal Energy up to the levels
of Contract Capacity specified in Schedule 7.1 the applicable Thermal Energy
Capacity Charges shall be adjusted to on a pro rated basis to account for such
deficiency.
7.5 Supplemental Riser Capital Charge. For each Billing Month commencing
with October 1996 and continuing through and until May 2002, Buyer shall pay
Seller the charges set forth in Schedule 7.5 attached hereto, which changes are
independent of any other obligations hereunder and shall not be subject to
set-off, counter claim, abatement, or diminution.
7.6 Invoice and Payments. Within fifteen (15) days following the close of
each Billing Month, Seller shall send Buyer a detailed invoice setting forth all
charges for Thermal Energy delivered to Buyer by Seller during such calendar
month. Payment, less any credits or rebates due to Buyer pursuant to this
Agreement, will be due and payable within thirty (30) days of receipt by Buyer
of the invoice from Seller, or the first business day following such day if such
day is not a business day. Buyer shall have the right at reasonable hours to
examine the testing records and meter reading charts of Seller to the extent
reasonably necessary to verify the accuracy of any invoice. If any such
examination reveals any error or inaccuracy in Seller's invoice, than proper
adjustment and correction thereof shall be made as promptly as practicable
thereafter.
7.7 Delinquent Payments. Any invoice tendered for service rendered
hereunder shall be deemed delinquent if not paid within thirty (30) days after
becoming due and payable. The outstanding balance of any delinquent invoice
shall accrue interest from the date due until paid, at the prime rate then in
effect at Citibank, N.A., as published in the Wall Street Journal or comparable
publication, plus one percent (2%) per annum.
8. METERING
8.1 Metering Equipment. Seller will furnish, install, and maintain for the
Term of this Agreement without charge to Buyer all required meters, instruments,
recording devices, and other related
10
<PAGE>
data logging equipment required to measure and record all charges payable by
Buyer under this Agreement (collectively, the "Metering Equipment").
8.2 Testing. All Metering Equipment will be tested and calibrated by Seller
periodically in accordance with the manufacturer's instructions and good
industry practice. Test and calibration records will be issued to the Buyer upon
request. Further, Buyer may request additional meter tests at any time;
provided, however, if a meter is subsequently found to have a variance for
accuracy of less than three (3%) percent, Buyer will bear the reasonable cost of
such testing.
8.3 Adjustment to Prior Invoices. If any test establishes that a meter is
not accurately performing (i.e., in accordance with the manufacturer's variance
specifications), Seller shall make an adjustment in Buyer's invoices, measured
from the date it is determined by Seller or Buyer, in good faith, that the
inaccuracy began.
9. SALE OF THERMAL ENERGY TO THIRD PARTIES
9.1 Resale of Thermal Energy by Buyer. Thermal Energy may be resold by
Buyer to its tenants, provided such tenants occupy Buyer's Facilities and
provided that such resale does not subject Seller to any new or additional
governmental rules, regulations or laws, including but not limited to, tax laws
or regulations by any New Jersey regulatory authority. In case of any such
resale, Buyer shall remain primarily liable to Seller for all costs and charges
of Thermal Energy delivered to Buyer pursuant to this Agreement.
10. REPRESENTATIONS AND WARRANTIES
10.1 Seller Representations. Seller hereby represents and warrants that:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and has all requisite
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby;
(b) Seller has or will obtain all necessary corporate approvals for
the execution and delivery of this Agreement and the performance of its
obligations hereunder;
(c) This Agreement is a legal, valid and binding obligation of Seller
enforceable against Seller in accordance with
11
<PAGE>
its terms, subject to the qualification, however, that the enforcement of the
rights and remedies herein is subject to (i) bankruptcy and other similar laws
of general application affecting rights and remedies of creditors and (ii) the
application of general principals of equity (regardless of whether considered in
a proceeding in equity or at law);
(d) To the best knowledge of Seller, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or disclosed, in writing, to Buyer), is required
to authorize, or is required in connection with the execution, delivery and
performance of this Agreement or the performance of Seller's obligations
hereunder which Seller has reason to believe that it will be unable to obtain in
due course; and
(e) Neither the execution nor delivery of this Agreement by Seller nor
compliance by Seller with any of the terms and provisions hereof (i) conflicts
with, breaches or contravenes the provisions of the corporate charter or bylaws
of Seller or any Contractual Obligation of Seller or (ii) results in a condition
or event that constitutes (or that, upon notice or lapse of time or both, would
constitute) an event or default under any Contractual Obligation of the Seller.
10.2 Buyer Representations. Buyer hereby represents and warrants that:
(a) It is a general partnership duly formed, validly and existing and
in good standing under the laws of the state of its formation and has all
requisite power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
(b) The execution and delivery of this Agreement and the performance
of its obligations hereunder have been duly authorized by all necessary
partnership action;
(c) This Agreement is a legal, valid and binding obligation of Buyer
enforceable against Buyer in accordance with its terms, subject to the
qualification, however, that the enforcement of the rights and remedies herein
is subject to (i) bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and (ii) application of general
principals of equity (regardless of whether considered in a proceeding in equity
or at law);
(d) To the best knowledge of Buyer, as of the date of execution
hereof, no Governmental Approval (other than any Governmental Approvals which
have been previously obtained or
12
<PAGE>
disclosed, in writing, to Seller) is required to authorize, or is required in
connection with the execution, delivery and performance of this Agreement or the
performance of Buyer's obligations hereunder which Buyer has reason to believe
that it will be unable to obtain in due course.
(e) Neither the execution and delivery of this Agreement by Buyer nor
compliance by Buyer with any of the terms and provisions hereof (i) conflicts
with, breaches or contravenes the provisions of the Partnership Agreement of
Buyer or any Contractual Obligation of Buyer or (ii) results in a condition or
event that constitutes (or that, upon notice or lapse of time or both, would
constitute) an event of default under any Contractual Obligation of the Buyer.
11. INDEMNIFICATION/INSURANCE
11.1 Seller's Indemnity. Seller hereby agrees to defend, indemnify and hold
harmless Buyer, its employees, officers, shareholders, directors and agents from
and against any and all claims, demands, suits, actions, recoveries, judgments,
and costs and expenses in connection therewith (including, without limitation,
reasonable attorneys' fees and expenses), made, brought or obtained on account
of the loss of life, property, or injury or damage to the person or property of
any person or persons whomsoever, which loss of life or property, or injury or
damage to persons or property, shall arise out of or in connection with Seller's
or its employees' use, operation and maintenance of the Thermal Energy
Production Facilities, or any act required of or omission by Seller, or any
agent or employee of Seller under this Agreement or in connection therewith.
11.2 Buyer's Indemnity. Buyer hereby agrees to defend, indemnify and hold
harmless Seller, its employees, officers, shareholders, directors and agents
from and against any and all claims, demands, suits, actions, recoveries,
judgments, and costs and expenses in connection therewith (including, without
limitation, reasonable attorneys' fees and expenses), made, brought or obtained
on account of the loss of life, property, or injury or damage to the person or
property of any person or persons whomsoever, which loss of life or property, or
injury or damage to persons or property, shall arise out of or in connection
with Sellers or its employees' operation of Buyer's Facilities (exclusive of the
Thermal Energy Production Facilities), or any act required of or omission by
Buyer, or any agent or employee of Buyer, under this Agreement or in connection
therewith.
11.3 Seller's Insurance. Seller shall maintain throughout the Term of this
Agreement, at its sole cost and
13
<PAGE>
expense, the policies of insurance meeting the terms and conditions set forth on
Schedule 11.3 attached hereto and made a part hereof.
11.4 Buyer's Insurance. Commencing on the date of this Agreement and at all
times thereafter throughout the Term of this Agreement, Buyer shall maintain, at
is sole cost and expense, comprehensive general public liability (including
contractual) insurance, in an amount not less than $10,000,000, with respect to
any liability, losses, damages, expenses, claims, actions, judgments and
settlement for any personal injury, death or property or economic loss occurring
in Buyer's Facilities (exclusive of the Thermal Energy Production Facilities) or
surrounding premises and arising out of or incident to the operation,
maintenance, repair, construction, replacement or modification of Buyer's
Facilities (exclusive of the Thermal Energy Production Facilities).
11.5 Evidence of Insurance. Prior to commencing any construction or
delivering any Thermal Energy under this Agreement, Seller and Buyer shall each
furnish to the other one or more certificates of insurance evidencing the
existence of the coverages set forth in Sections 11.3 and 11.4, respectively.
Each certificate shall state that the insurance carrier will give Seller and
Buyer at least thirty (30) days written notice of any cancellation or material
change in the terms and conditions of such policy during the periods of
coverage.
12. DEFAULT
12.1 Seller Default. Anyone of the following events shall constitute an
"Event of Default" hereunder with respect to Seller:
(a) In connection with itself or its assets, Seller shall (i) apply
for or consent to the appointment of or taking of possession by a receiver or
liquidator, (ii) make a general assignment for the benefit of creditors, (ii)
file a petition for relief under the Federal Bankruptcy Code or similar state
law, or (iii) take similar action to commence a proceeding for relief under any
other law relating to the bankruptcy, insolvency, reorganization, or winding up
of itself or the composition or adjustment of its debts;
(b) An action or proceeding shall be commenced, without the
application or consent of Seller, in any court of competent jurisdiction for (i)
the liquidation, reorganization, dissolution, or winding up of Seller of the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Seller or substantially of all its assets,
or (iii) any similar relief under any law relating to Seller's bankruptcy or
insolvency, provided such proceeding shall
14
<PAGE>
continue undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continues unstayed for ninety (90) days;
(c) Any representation or warranty made by Seller and contained in
this Agreement shall prove to have been incorrect in any material respect when
made; or
(d) Seller shall fail to (i) timely make any payment required
hereunder, or (ii) comply with any non-payment obligation under this Agreement
and shall fail to cure or remedy such default within thirty (30) days following
notice and written demand by Buyer to cure the same; provided, however, that
Seller's failure to provide and deliver to Buyer the Thermal Energy required
pursuant to this Agreement for any period of three (3) consecutive days, unless
excused due to Force Majeure or actions or inactions of Buyer its agents
representatives or employees, shall constitute an immediate Event of Default.
12.2 Buyer Default. Any one of the following events shall constitute an
"Event of Default" hereunder with respect to Buyer.
(a) In connection with itself or its assets, Buyer shall (i) apply for
or consent to the appointment of or taking of possession by a receiver or
liquidator, (ii) make a general assignment for the benefit of creditors, (ii)
file a petition of relief under the Federal Bankruptcy Code or similar state
law, or (iii) take similar action to commence a proceeding for relief under any
other law relating to the bankruptcy, insolvency, reorganization, or winding up
of itself or the composition or adjustment of its debts;
(b) An action or proceeding shall be commenced, without the
application or consent of Buyer, in any court of competent jurisdiction for (i)
the liquidation, reorganization, dissolution, or winding up of the buyer or the
composition or adjustment of its debts, (ii) the appointment of a trustee,
receiver, liquidator or custodian of Buyer or substantially all of its assets,
or (iii) any similar relief under any law relating to Buyer's bankruptcy or
insolvency, provided such proceeding shall continue undismissed or order,
judgment or decree approving or ordering any of the foregoing shall be entered
and continue unstayed for ninety (90) days;
(c) Any representation or warranty made by Buyer and contained in this
Agreement shall prove to have been incorrect in any material respect when made
by Buyer; or
(d) Buyer shall fail to comply with any provision of this Agreement
and shall fail to cure or remedy such default within
15
<PAGE>
thirty (30) days following notice and written demand by Seller to cure the same.
13. REMEDIES
13.1 Seller's Remedies. Upon an Event of Default by Buyer, Seller may
declare the Buyer to be in material breach of this Agreement and (i) suspend
service until Buyer either cures the default or, in the case of nonpayment,
provides Seller with such assurances and security as Seller may reasonably
request, (ii) terminate this Agreement by written notice to Buyer, or (iii) seek
such other relief to which Seller may be entitled at law or equity.
13.2 Buyer's Remedies. Upon an Event of Default by Seller, Buyer may (i) to
the extent commercially practicable, cure the default by Seller and obtain
reimbursement (through direct cash payment, credit, offset or otherwise as Buyer
may elect) from Seller for all costs and expenses incurred by Buyer in
connection with such cure, (ii) terminate this Agreement by written notice to
Seller, or (iii) seek whatever relief to which Buyer may be entitled at law or
equity.
14. FORCE MAJEURE
14.1 Suspension of Performance. Neither Buyer nor Seller shall be in
default in respect of any obligation under this Agreement if the party is unable
to perform its obligation by reason of an event of Force Majeure, provided (i)
that the suspension of performance shall be commensurate with the nature and
duration of the event of Force Majeure and the non-performing party is using its
best efforts to restore its ability to perform, (ii) that for so long as an
event of Force Majeure relieves Seller of its obligation to deliver Thermal
Energy to Buyer as required under this Agreement, Buyer may elect, without being
in default of its obligations hereunder, to produce its own Thermal Energy or to
purchase and accept deliveries of Thermal Energy from any other source.
14.2 Termination by Reason of Force Majeure. Notwithstanding anything in
this Agreement contained to the contrary, if a party's performance is suspended
for more than one (1) year, the other party may terminate this Agreement upon
thirty (30) days written notice to the other, provided (with respect to an event
of Force Majeure by Seller) that upon such termination Buyer is able to generate
its own Thermal Energy or to obtain Thermal Energy from a third party.
16
<PAGE>
14.3 Force Majeure Defined. Force Majeure shall mean any event that
prevents or delays a party from performing in whole or in part any obligation
arising under this Agreement and neither was within the reasonable control of
the non-performing party nor could have been prevented by reasonable actions
taken by the non-performing party, including, without limitation, an act of God,
explosion, fire, lightening, earthquake, hurricane, storm, civil disturbance,
strike, lock-out, unavailability of fuel or power, changes in law, orders of
governmental authorities, and equipment failures that are not due to the
negligence of the non-performing party.
15. TERMINATION
This Agreement shall terminate at the end of the Term and may otherwise be
sooner terminated only: (i) by Buyer upon the occurrence of an Event of Default
by Seller, (ii) by Seller upon the occurrence of an Event of Default by Buyer,
(iii) by either party in accordance with the provisions of Section 14.2 of this
Agreement, or (iv) by Buyer in the event of any increase in the cost of Thermal
Energy hereunder by more than ten (10%) percent and actually paid or to be paid
by Buyer resulting solely from the assertion of rate jurisdiction and imposition
of any law or regulation respecting rates, whether now existing or hereafter
enacted, (including without limitation any rate regulation by the State of New
Jersey Board of Public Utilities) or directly resulting form the administration
or interpretation of any such law or regulation respecting rate regulation by
any Governmental Authority.
16. MISCELLANEOUS
16.1 Assignment. Neither Party shall assign this Agreement without first
having obtained the written consent of the other party, provided, however, that
either party may assign its rights and delegate its duties hereunder without
first obtaining the other party's consent to any subsidiary or affiliated entity
controlled by the assigning party, on the condition that the assignee agrees in
writing to assume all of the obligations of the assigning party hereunder,
further provided, however, that either party may assign, pledge or mortgage this
Agreement as security for the obligations or indebtedness of such party,
including Seller's financing of the District Thermal Energy Facilities, without
the approval of the other party.
16.2 Notice. All notices hereunder shall be sufficient if sent by
registered or certified mail postage prepaid, addressed, if to Seller: Atlantic
Jersey Thermal Systems, Inc., 5100 Harding
17
<PAGE>
Highway, Route 40 & 32 Avenue, Mays Landing, New Jersey 08330, Attention:
President; and if to Buyer: Trump Plaza Associates, Mississippi and Florida
Avenues and the Boardwalk, Atlantic City, New Jersey 08401, Attention: President
and Chief Operating Officer, provided that either Seller or Buyer may by like
notice designate any further or different address or addresses or person to
which notices shall be sent.
16.3 Limitation of Liability. Except in the case of willful misconduct or
gross negligence, neither Seller nor Buyer, nor their respective officers,
officials, partners, agents, employees, subsidiaries, parents or affiliates
shall be liable to the other party, or their respective officers, officials,
directors, partners, agents, employees, subsidiaries, parents or affiliates for
claims for incidental, special, direct or consequential damages of any nature,
including lost profits and opportunity costs in connection with or resulting
from performance or non-performance of their respective obligations under or in
connection with this Agreement. Nothing in this Section 16.3, however, shall
limit either party's rights or remedies to recover any direct damages for a
breach of this Agreement.
16.4 Confidentiality. Each of the parties agrees to hold in confidence any
information supplied to it by the other and designated in writing as
confidential unless the recipient is required to disclose the information as a
matter of law, in which case, the recipient shall give the other party prior
written notice.
16.5 Counterparts. This Agreement may be executed in separate and several
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
16.6 Severability. Any provision hereof that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction and to the fullest extent
permitted by applicable law, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of any provision in any other
jurisdiction.
16.7 Casino Control Commission Approval. During the Term of this Agreement,
all provisions of the New Jersey Casino Control Act shall be complied with by
Buyer and Seller, and Seller agrees to apply for a casino service industry
license, if required by the New Jersey Casino Control Commission. In addition,
Seller agrees to file a vendor registration if it has not already done so.
18
<PAGE>
16.8 Governing Law. This Agreement shall be construed in accordance with
and shall be enforceable under the laws of the State of New Jersey.
16.9 Entire Agreement. The Agreement constitutes the entire agreement
between the Parties with respect to the matters contained herein and all prior
agreements with respect thereto are superseded hereby. No amendment or
modification hereof shall be binding unless duly executed by both Parties.
19
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and day first above written.
ATLANTIC JERSEY THERMAL SYSTEMS, INC.
By: /s/ CARL H. FOGLER
---------------------------------
Name: Carl H. Fogler
Title: Vice President
TRUMP PLAZA ASSOCIATES
By: /s/ BARRY J. CREGAN
---------------------------------
Name: Barry J. Cregan
Title: Chief Operating Officer
20
<PAGE>
SCHEDULE 1(g)
POINTS OF DELIVERY
"Steam" point of delivery is defined as the point of exit from the
boiler mechanical room of the steam piping system located in Buyer's Facilities.
Metering of steam usage will occur within the boiler mechanical room.
"Chilled Water Supply" point of delivery is defined as the point of
exit from the chiller mechanical room of the chilled water supply piping system
located in Buyer's Facilities. Metering of chilled water usage will occur within
the chiller mechanical room.
21
<PAGE>
SCHEDULE 1(h)
POINTS OF RETURN
"Condensate" point of return is defined as the point of entry into the
boiler mechanical room of the condensate piping system located in Buyer's
Facilities.
"Chilled Water Return" point of return is defined as the point of
entry into the chiller mechanical room of the chilled water return piping system
located in Buyer's Facilities.
22
<PAGE>
SCHEDULE 1(j)
CONTRACT CAPACITIES AND THERMAL ENERGY SPECIFICATIONS
[Please see attached].
23
<PAGE>
SCHEDULE 1(l)
THERMAL ENERGY PRODUCTION FACILITIES
The "Thermal Energy Production Facilities" are defined as all
equipment identified on the following Chilled Water Piping Schematic and Steam
Piping Schematic. All equipment shown on these schematics reside in the
respective Chiller and Boiler Mechanical Rooms located within Buyer's
Facilities.
Also included is the entire condenser water system including pumps,
piping and cooling towers.
All associated electrical and controls equipment required for the
operation of the above-mentioned equipment is also included.
[To Be Completed].
24
<PAGE>
SCHEDULE 7.1
Thermal Energy Capacity Charges, Thermal Energy Usage Charges, and
Emergency Electric Services
I. CHARGES FOR HEATING SERVICE
The charges for heating service in any billing month shall equal the sum of
the Monthly Capacity Charges and Monthly Usage Charges.
A. MONTHLY CAPACITY CHARGES
The Monthly Steam Capacity Charge shall equal the product of the Steam
Contract Capacity times the sum of the Steam Capital Capacity Rate and the Steam
O&M Capacity Rate, i.e.,
MSCC = SCC x (SCCR + SOMCR)
where,
MSCC = Monthly Steam Capacity Charge ($)
SCC = Steam Contract Capacity (MMBtu/hr.), and
SCCR = Steam Capital Capacity Rate ($ per MMBtu/hr.)
SOMCR = Steam O&M Capacity Rate ($ per MMBtu/hr.)
The initial Steam Capital Capacity Rate shall equal $668.39 per MMBtu/hr
and the initial Steam O&M Capacity Rate shall equal $273.81 per MMBtu/hr. These
rates shall be adjusted annually commencing on January 1, 1997. The new rates
shall be determined by multiplying the old rates times the fraction whose
numerator shall equal the latest available "Consumer Price Index, All Items,
Urban Consumers, Wilmington - Philadelphia" as published by the U.S. Department
of Commerce and whose denominator shall equal the same index as of twelve months
immediately preceding, provided that with respect to the Steam Capital Capacity
Rate, such fraction shall be no less than 1.03 nor more than 1.04.
- ----------
Refer to Schedule 1(j) for the Steam Contract Capacities.
25
<PAGE>
B. MONTHLY USAGE CHARGE
The Monthly Steam Usage Charge shall equal the product of the Monthly Steam
Energy Deliveries times the quantity determined by adding the Monthly Steam Base
Usage Rate and the Monthly Steam Energy Usage Rate, i.e.,
MSUC = MSED x ( MSBUR + MSEUR )
where,
MSUC = Monthly Steam Usage Charge ($)
MSED = Monthly Steam Energy Deliveries (MMBtu)
MSBUR = Monthly Steam Base Usage Rate ($/MMBtu), and
MSEUR = Monthly Steam Energy Usage Rate ($/MMBtu)
The initial Monthly Base Usage Charge shall equal $0.750 per MMBtu. This
rate shall be adjusted annually commencing on January 1, 1997. The new rates
shall be determined by multiplying the old rate times the fraction whose
numerator shall equal the latest available "Consumer Price Index, All Items,
Urban Consumers, Wilmington - Philadelphia" as published by the U.S. Department
of Commerce and whose denominator shall equal the same index as of twelve months
immediately preceding.
The initial Monthly Energy Usage Charge shall equal $4.00 per MMBtu. This
charge shall be adjusted quarterly commencing on January 1, 1997. The new rate
shall be determined by multiplying the old rate times the fraction whose
numerator shall equal the latest available Energy Usage Index Steam, as defined
below, and whose denominator shall equal the same index as of the immediately
preceding quarter.
"Energy Usage Index Steam" shall mean, for any quarter, the quantity
obtained by performing the following calculation:
[80%(NG Index - Current Quarter) + 20%(No. 2 Fuel Oil Index - Current
Quarter)]
[80%(NG Index - Previous Quarter) + 20%(No. 2 Fuel Oil Index - Previous
Quarter)]
Where,
"NG Index" means, for any month, the arithmetic mean of the City Gate
Prices for NY/NJ for such month, as published in Inside FERC Gas Market Report
(or any successor publication mutually acceptable to Seller and Purchaser).
26
<PAGE>
"No. 2 Fuel Oil Index" means, for any month, the price on the first
business day of such month of the Philadelphia Reseller Tank Car Price of No. 2
Oil, as published daily in the Journal of Commerce (or any successor publication
mutually acceptable to Seller and Purchaser).
II. CHARGES FOR COOLING SERVICE
The charges for cooling service in any billing month shall equal the sum of
the Monthly Capacity Charges and Monthly Usage Charges.
A. MONTHLY CAPACITY CHARGES
The Monthly Chilled Water Capacity Charge shall equal the product of the
Chilled Water Contract Capacity times the sum of the Chilled Water Capital
Capacity Rate and the Chilled Water O&M Capital Rate, i.e.,
MCWCC = CWCC x (CWCCR + CWOMCR)
where,
MCWCC = Monthly Chilled Water Capacity Charge ($)
CWCC = Chilled Water Contract Capacity (Tons), and
CWCCR = Chilled Water Capital Capacity Rate ($ per Ton)
CWOMCR = Chilled Water O&M Capacity Rate ($ per Ton)
The initial Chilled Water Capital Capacity Rate shall equal $9.03 per Ton
and the initial Chilled Water O&M Capacity Rate shall equal $8.97 per Ton. This
rate shall be adjusted annually commencing on January 1, 1997. The new rates
shall be determined by multiplying the old rate times the fraction whose
numerator shall equal the latest available "Consumer Price Index, All Items,
Urban Consumers, Wilmington - Philadelphia" as published by the U.S. Department
of Commerce and whose denominator shall equal the same index as of twelve months
immediately preceding, provided that fraction with respect to Chilled Water
Capital Capacity Rate, such shall be no less than 1.03 nor more than 1.04.
- ----------
Refer to Schedule 1(j) for the Steam Contract Capacities.
27
<PAGE>
B. MONTHLY USAGE CHARGE
The Monthly Chilled Water Usage Charge shall equal the product of the
Monthly Chilled Water Energy Deliveries times the quantity determined by adding
the Monthly Chilled Water Base Usage Rate and the Monthly Chilled Water Energy
Usage Rate, i.e.,
MCWUC = MCWED x ( MCWBUR + MCWEUR )
where,
MCWUC = Monthly Chilled Water Usage Charge ($)
MCWED = Monthly Chilled Water Energy Deliveries (MMBtu)
MCWBUR = Monthly Chilled Water Base Usage Rate ($/MMBtu), and
MCWEUR = Monthly Chilled Water Energy Usage Rate ($/MMBtu)
The initial Monthly Chilled Water Base Usage Charge shall equal $0.0390 per
Ton-hr. This rate shall be adjusted annually commencing on January 1, 1997. The
new rates shall be determined by multiplying the old rate times the fraction
whose numerator shall equal the latest available "Consumer Price Index, All
Items, Urban Consumers, Wilmington Philadelphia" as published by the U.S.
Department of Commerce and whose denominator shall equal the same index as of
twelve months immediately preceding.
The initial Monthly Chilled Water Energy Usage Charge shall equal $0.0529
per Ton-hr. This charge shall be adjusted quarterly commencing on January 1,
1997. The new rate shall be determined by multiplying the old rate times the
Energy Usage Index Chilled Water, as defined below.
"Energy Usage Index Chilled Water" means, during any quarter, the
fraction whose numerator shall equal the currently applicable AE
Transmission Gen Service (TGS) Tariffed Rate for energy components only
as of the end of such quarter (including applicable riders or
adjustments) and whose denominator shall equal the same quantity for
the immediately preceding quarter.
III. Charges for Emergency Electric Service
28
<PAGE>
Commencing on the New Service Commencement Date, the charges for Emergency
Electric Services in any Billing Month shall equal thirty thousand dollars
($30,000). This monthly charge shall be adjusted annually commencing on January
1, 1997. The new monthly charges shall be determined by multiplying the old
charges times the fraction whose numerator shall equal the latest available
"Consumer Price Index, All Items, Urban Consumers, Wilmington - Philadelphia" as
published by the U.S. Department of Commerce and whose denominator shall equal
the same index as of twelve months immediately preceding.
29
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000897729
<NAME> TRUMP ATLANTIC CITY ASSOCIATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 127,629
<SECURITIES> 0
<RECEIVABLES> 69,131
<ALLOWANCES> 14,198
<INVENTORY> 9,393
<CURRENT-ASSETS> 205,864
<PP&E> 1,837,154
<DEPRECIATION> 414,148
<TOTAL-ASSETS> 1,720,286
<CURRENT-LIABILITIES> 145,173
<BONDS> 1,200,000
0
0
<COMMON> 0
<OTHER-SE> 356,949
<TOTAL-LIABILITY-AND-EQUITY> 1,720,286
<SALES> 603,728
<TOTAL-REVENUES> 678,364
<CGS> 0
<TOTAL-COSTS> 358,388<F1>
<OTHER-EXPENSES> 147,187<F2>
<LOSS-PROVISION> 3,192
<INTEREST-EXPENSE> 78,077
<INCOME-PRETAX> 35,752
<INCOME-TAX> 42
<INCOME-CONTINUING> 35,710
<DISCONTINUED> 0
<EXTRAORDINARY> (59,132)
<CHANGES> 0
<NET-INCOME> (23,422)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes gaming, lodging, food & beverage and other
<F2>Includes general & administration, depreciation & amortization, and
pre-opening expenses
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006918
<NAME> TRUMP ATLANTIC CITY FUNDING, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 61,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,500
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,261,500
<CURRENT-LIABILITIES> 61,500
<BONDS> 1,200,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,261,500
<SALES> 0
<TOTAL-REVENUES> 61,500
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,500
<INCOME-PRETAX> 0
<INCOME-TAX> 42
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
