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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: June 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: 1-13794
TRUMP HOTELS & CASINO RESORTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3818402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Mississippi Avenue and The Boardwalk
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
(609) 441-6060
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
----------------------
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 Hotels & Casino Resorts, Inc. as of August 14, 1996 was 24,140,090.
The number of outstanding shares of Class B Common Stock, par value $.01
per share, of Trump Hotels & Casino Resorts, Inc. as of August 14, 1996 was
1,000.
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<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
------------------
INDEX TO FORM 10-Q
Page No.
--------
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
Condensed Consolidated Balance Sheets of Trump Hotels &
Casino Resorts, Inc. as of June 30, 1996 (unaudited)
and December 31, 1995 ........................................... 1
Condensed Consolidated Statement of Operations of Trump
Hotels & Casino Resorts, Inc. for the Three Months and
Six Months Ended June 30, 1996 and Period from
Inception (June 12, 1995) through June 30, 1995
(unaudited) ..................................................... 2
Condensed Consolidated Statement of Capital (Deficit)
of Trump Hotels & Casino Resorts, Inc. for the Six
Months Ended June 30, 1996 (unaudited) .......................... 3
Condensed Consolidated Statements of Cash Flows of
Trump Hotels & Casino Resorts, Inc. for the Six Months
Ended June 30, 1996 and Period from Inception (June
12, 1995) through June 30, 1995 (unaudited) ..................... 4
Notes to Condensed Consolidated Financial Statements of
Trump Hotels & Casino Resorts, Inc. (unaudited) ................. 5-11
ITEM 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................... 12-18
PART II -- OTHER INFORMATION
ITEM 1 -- Legal Proceedings .......................................... 19
ITEM 2 -- Changes in Securities ...................................... 20
ITEM 3 -- Defaults Upon Senior Securities ............................ 20
ITEM 4 -- Submission of Matters to a Vote of Security Holders ........ 20
ITEM 5 -- Other Information .......................................... 20
ITEM 6 -- Exhibits and Reports on Form 8-K ........................... 21
SIGNATURES
Signature -- Trump Hotels & Casino Resorts, Inc. ..................... 22
i
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 181,750 $ 19,208
Restricted cash ............................................... -- 12,013
Receivables, net .............................................. 55,091 14,460
Inventories ................................................... 10,341 2,609
Other current assets .......................................... 18,688 5,171
Advances to affiliates, net ................................... 616 --
----------- -----------
Total current assets ........................................ 266,486 53,461
INVESTMENT IN TRUMP'S CASTLE .................................... 41,943 --
INVESTMENT IN BUFFINGTON HARBOR ................................. 40,771 21,823
PROPERTY AND EQUIPMENT, NET ..................................... 1,463,264 408,231
LAND RIGHTS ..................................................... 29,135 29,320
RESTRICTED CASH ................................................. 25,000 40,030
NOTE RECEIVABLE ................................................. -- 3,000
DEFERRED LOAN COSTS, NET ........................................ 52,319 20,026
OTHER ASSETS .................................................... 25,043 8,654
----------- -----------
Total Assets ................................................ $ 1,943,961 $ 584,545
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .......................... $ 9,914 $ 2,901
Accounts payable and accrued expenses ......................... 89,021 29,625
Accrued interest payable ...................................... 28,751 2,498
Due to affiliates, net ........................................ -- 278
----------- -----------
Total Current Liabilities ................................... 127,686 35,302
LONG-TERM DEBT, net of discount and current maturities .......... 1,391,531 494,471
DEFERRED INCOME TAXES PAYABLE ................................... 4,167 4,181
OTHER LONG TERM LIABILITIES ..................................... 5,640 --
----------- -----------
Total Liabilities ........................................... 1,529,024 533,954
----------- -----------
MINORITY INTEREST ............................................... 15,672 --
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, 50,000,000 shares authorized,
24,140,090 and 10,066,667 issued and outstanding, respectively 241 101
Class B Common Stock, $.01 par value, 1,000 shares
authorized, issued and outstanding ........................... -- --
Additional Paid in Capital .................................... 455,218 52,411
Accumulated Deficit ........................................... (56,194) (1,921)
----------- -----------
Total Stockholders' Equity .................................. 399,265 50,591
----------- -----------
Total Liabilities and Stockholders' Equity ...................... $ 1,943,961 $ 584,545
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated balance sheets.
1
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996
AND PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH JUNE 30, 1995
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Period from
Inception
Three Months Six Months (June 12, 1995)
Ended Ended Through
June 30, 1996 June 30, 1996 June 30, 1995
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Gaming ............................................ $ 214,091 $ 288,361 $ 16,446
Rooms ............................................. 18,356 24,154 1,130
Food and Beverage ................................. 27,140 38,523 2,352
Other ............................................. 6,253 8,353 455
------------ ------------ ------------
Gross Revenues .................................. 265,840 359,391 20,383
Less -- Promotional allowances ...................... 27,702 38,385 1,977
------------ ------------ ------------
Net Revenues .................................... 238,138 321,006 18,406
------------ ------------ ------------
COSTS AND EXPENSES
Gaming ............................................ 125,485 169,611 7,385
Rooms ............................................. 4,118 4,895 352
Food and Beverage ................................. 12,030 16,124 1,877
General and Administrative ........................ 45,985 65,652 4,991
Depreciation and Amortization ..................... 17,095 21,622 879
Pre-Opening ....................................... 7,856 9,966 --
Other ............................................. 1,061 1,861 224
------------ ------------ ------------
213,630 289,731 15,708
------------ ------------ ------------
Income from operations .......................... 24,508 31,275 2,698
------------ ------------ ------------
NON-OPERATING INCOME AND (EXPENSES):
Interest income ................................... 2,951 3,721 396
Interest expense .................................. (38,121) (54,147) (3,327)
Other non-operating income (expense) .............. 10,557 9,182 (193)
------------ ------------ ------------
(24,613) (41,244) (3,124)
------------ ------------ ------------
Loss before provision for state income taxes,
extraordinary loss and minority interest ........... (105) (9,969) (426)
Provision for state income tax ...................... -- -- 160
------------ ------------ ------------
Loss before extraordinary items and minority interest (105) (9,969) (586)
Extraordinary Loss .................................. (59,132) (59,132) --
Minority Interest ................................... 14,828 14,828 --
------------ ------------ ------------
NET LOSS ........................................... $ (44,409) $ (54,273) $ (586)
============ ============ ============
Loss per share ...................................... $ (2.06) $ (3.42 $ (.06)
============ ============ ============
Weighted average shares ............................. 21,577,655 15,887,108 10,133,333
============ ============ ============
</TABLE>
The accompanying notes are an integral part of this condensed
consolidated financial statement.
2
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CAPITAL (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Number of Shares
----------------------
Common Additional
Class B Stock Paid in Accumulated
Common Common Amount Capital Deficit Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 ....... 10,066,667 1,000 $ 101 $ 52,411 $ (1,921) $ 50,591
Proceeds from issuance of
Common Stock, net ............... 13,250,000 -- 132 385,930 -- 386,062
Issuance of shares pursuant to
Taj Merger Agreement ............ 323,423 3 9,316 9,319
Issuance of shares for acquisition
of the Specified Parcels ........ 500,000 5 10,495 10,500
Cancellation of Trump Note ....... -- -- -- (3,167) -- (3,167)
Accretion of Phantom Stock
Units ........................... -- -- -- 233 -- 233
Net Loss ......................... -- -- -- -- (54,273) (54,273)
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 1996 ........... 24,140,090 1,000 $ 241 $ 455,218 $ (56,194) $ 399,265
========== ========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this condensed
consolidated financial statement.
3
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND PERIOD FROM INCEPTION (JUNE 12, 1995) THROUGH JUNE 30, 1995
(unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) .............................................................. $ (54,273) $ (586)
Adjustments to reconcile net income to net cash flows from operating activities:
Extraordinary loss ........................................................... 59,132 --
Depreciation and amortization ................................................ 21,622 879
Minority interest ............................................................ (14,828) --
Accretion of discounts on mortgage notes ..................................... 132 21
Amortization of deferred loan costs .......................................... 2,582 --
Deferred income taxes ........................................................ (14) --
Provision for losses on receivables .......................................... 1,547 58
Valuation allowance of CRDA investments ...................................... 894 22
Issuance of stock grant awards and accretion of phantom stock units .......... 233 973
----------- -----------
17,027 1,367
Change in assets and liabilities, net of effects from purchase of Taj Mahal:
Increase in receivables ...................................................... (22,576) (199)
(Increase) decrease in inventories ........................................... (901) 13
Increase in other current assets ............................................. (11,349) (165)
Increase in advances from affiliates ......................................... (1,623) (425)
Increase in other assets ..................................................... (430) (840)
Increase in accounts payable & accrued expenses .............................. 14,320 440
(Decrease) increase in accrued interest payable .............................. (19,723) 2,765
Decrease in other long-term liabilities ...................................... (450) --
----------- -----------
Net cash flows (used) provided by operating activities ..................... (25,705) 2,956
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net ...................................... (196,043) (82,948)
Restricted cash for short-term operating needs ............................... (12,987) (24,517)
Cash restricted for future construction ...................................... 40,030 (79,345)
Investment in Buffington Harbor .............................................. (18,948) --
Investment in Trump's Castle ................................................. (41,943) --
CRDA Investments ............................................................. (1,862) --
Purchase of Taj Holding, net of cash acquired ................................ 46,714 --
----------- -----------
Net cash flows used in investing activities ................................ (185,039) (186,810)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net ................................................ 386,062 126,848
Cash investment in Plaza Associates, net ..................................... -- (70,452)
Issuance of Long Term Debt-other ............................................. 26,012 144,892
Repayment of Long Term Debt .................................................. (1,156,836)
Issuance of note receivable .................................................. -- (3,000)
Issuance of Trump AC Mortgage Notes .......................................... 1,200,000 --
Retirement of NatWest loan ................................................... (36,500) --
Payment of long-term debt-other .............................................. (4,410) --
Cost of issuing debt ......................................................... (41,042) --
----------- -----------
Net cash flows provided by financing activities ............................ 373,286 198,288
----------- -----------
Net increase in cash and cash equivalents .................................. 162,542 14,434
----------- -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................... 19,208 0
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..................................... $ 181,750 $ 14,434
=========== ===========
CASH INTEREST PAID ............................................................. $ 26,487 $ 22,495
=========== ===========
Supplemental Disclosure of Non-Cash Activities:
THCR purchased all of the capital stock of Taj Holding for $31,181 in cash and
323,423 shares of its common stock value 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 reflected 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
==========
</TABLE>
In connection with the purchase of the Specified Parcels, THCR issued 500,000
shares of its common stock valued at $10,500.
A note receivable from Trump in the amount $3,167 was forgiven.
The accompanying notes are an integral part of this condensed
consolidated financial statement.
4
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(unaudited)
(1) Organization and Operations
The accompanying condensed consolidated financial statements include those
of (i) Trump Hotels & Casino Resorts, Inc., a Delaware corporation ("THCR"), and
(ii) Trump Hotels & Casino Resorts Holdings, L.P., a Delaware limited
partnership ("THCR Holdings"), an entity which is currently owned approximately
75% by THCR, and its subsidiaries: Trump Hotels & Casino Resorts Funding, Inc.,
a Delaware corporation ("THCR Funding"), Trump Atlantic City Associates, a New
Jersey general partnership, formerly known as Trump Plaza Holding Associates
("Trump AC"), and Trump Indiana, Inc., a Delaware corporation ("Trump Indiana").
Trump AC, through its subsidiaries, Trump Plaza Associates, a New Jersey general
partnership ("Plaza Associates"), and Trump Taj Mahal Associates, a New Jersey
general partnership ("Taj Associates"), owns and operates the Trump Plaza Hotel
and Casino ("Trump Plaza") and Trump Taj Mahal Casino Resort ("Taj Mahal"),
respectively, located on The Boardwalk in Atlantic City, New Jersey. THCR, THCR
Holdings and THCR Funding commenced operations on June 12, 1995. Trump Indiana,
which commenced operations on June 8, 1996, owns and operates a riverboat gaming
facility at Buffington Harbor, on Lake Michigan, Indiana. THCR Holdings and THCR
Funding have no operations, other than to raise funds through the issuance and
sale of debt securities. The ability of THCR Holdings and THCR Funding to
service their debt is dependent on the successful operations of Trump AC and
Trump Indiana. THCR, through THCR Holdings and its subsidiaries, is the
exclusive vehicle through which Donald J. Trump ("Trump") engages in new gaming
activities in emerging or established gaming jurisdictions.
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 without audit. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments, necessary to present fairly the
financial position, the results of operations and cash flows for the periods
presented, have been made.
The accompanying condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and note disclosures normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted.
The casino industry in Atlantic City is seasonal in nature; accordingly,
results of operations for the period ended June 30, 1996 are not necessarily
indicative of the operating results for a full year.
(2) Public Offerings and Merger
On June 12, 1995, 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 "1995 Stock Offering") for gross proceeds of $140,000,000. Concurrent
with the 1995 Stock Offering, THCR Holdings and THCR Funding issued 15 1/2%
Senior Secured Notes due 2005 (the "THCR Senior Notes") for gross proceeds of
$155,000,000 (the "1995 Note Offering" and, together with the 1995 Stock
Offering, the "1995 Offerings"). THCR contributed $126,848,000 of the 1995 Stock
Offering to THCR Holdings in exchange for an approximately 60% general
partnership interest in THCR Holdings.
Prior to the 1995 Offerings, Trump was the sole stockholder of THCR and the
sole beneficial owner of THCR Holdings. Concurrent with the 1995 Offerings,
Trump contributed to THCR Holdings 100% of his interests in Plaza Associates.
Trump also contributed all of his existing interests and rights to new gaming
activities in both emerging and established gaming jurisdictions, including
Trump Indiana but excluding his interests in the Taj Mahal (see below) and
Trump's Castle Casino Resort ("Trump's Castle"), to THCR Holdings. In exchange
for Trump's contributions to THCR Holdings, Trump received an approximately 40%
limited partnership interest in THCR Holdings.
5
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
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 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. 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 Atlantic City Funding, Inc. ("Trump AC Funding"), Trump AC's wholly
owned finance subsidiary, of $1,200,000,000 aggregate principal amount of
11 1/4% First Mortgage Notes due 2006 (the "Trump AC Mortgage Notes") (the
"1996 Note Offering" and, 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 10 7/8% 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 (the "Trump Warrants") to
purchase an aggregate of 1.8 million shares of Common Stock, (i) 600,000
shares of which may be purchased on or prior to April 17, 1999, at $30 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.
6
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
As a result of the contribution by Trump to Trump AC (on behalf, and at the
direction, of THCR Holdings) of his direct and indirect ownership interests in
Taj Associates and the contribution by THCR to Trump AC (on behalf, and at the
direction, of THCR Holdings) of its indirect ownership interests in Taj
Associates acquired in the Taj Merger, together with THCR's contribution to THCR
Holdings of the proceeds from the 1996 Stock Offering, Trump's aggregate
beneficial equity interest in THCR Holdings decreased from approximately 40% to
approximately 25%, and THCR's aggregate beneficial equity interest in THCR
Holdings increased from approximately 60% to approximately 75%. Trump's limited
partnership interest in THCR Holdings represents his economic interest in the
assets and operations of THCR Holdings. Accordingly, as of June 30, 1996, such
limited partnership interest is convertible at Trump's option into 8,081,023
shares of Common Stock (subject to certain adjustments), representing
approximately 25.1% of the outstanding shares of Common Stock.
In addition, in connection with the 1995 Offerings and the Taj Merger
Transaction, Trump received shares of Class B Common Stock, par value $.01 per
share, of THCR (the "Class B Common Stock"). Generally, the Class B Common Stock
votes together with the Common Stock as a single class on all matters submitted
to stockholders of THCR for a vote or in respect of which consents are
solicited. The Class B Common Stock has voting power equivalent to the voting
power of the Common Stock into which a THCR Holdings limited partnership
interest is convertible. Upon conversion of all or any portion of a THCR
Holdings limited partnership interest into shares of Common Stock, the
corresponding voting power of the Class B Common Stock will be proportionately
diminished. The Class B Common Stock provides a THCR Holdings limited partner
with a voting interest in THCR which is proportionate to such holder's equity
interest in THCR Holdings' assets represented by such limited partnership
interest. Except for the right to receive par value upon liquidation, the Class
B Common Stock has no right to receive any dividend or other distribution in
respect of the equity of THCR. In addition, Trump has agreed to waive certain
state law rights to vote the Class B Common Stock as a separate class in the
event of a merger or sale of substantial assets.
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 298,739 shares of Taj Holding Class A Common Stock elected to receive
323,423 shares of Common Stock and holders of 1,051,261 shares of Taj
Holding Class A Common Stock elected to receive $31,181,000 in cash;
b) $40,500,000, representing the contribution by Trump to Trump AC (on
behalf, and at the direction, of THCR Holdings) of all of his direct and
indirect ownership interest in 50% of Taj Associates;
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 ("First
Fidelity") (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 Taj Merger
Agreement). 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.
7
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
Assuming that the Taj Merger Transaction had occurred on January 1, 1996,
unaudited pro forma information is as follows (in thousands):
Six Months Ended
June 30, 1996
----------------
Revenues .................................... $ 466,972
Income from operations ...................... 41,047
Loss before extraordinary loss
and minority interest ....................... (29,679)
Extraordinary loss .......................... (59,132)
Minority interest ........................... 22,215
Net loss .................................... $ (66,596)
------------
Loss per share .............................. $ (2.75)
============
Weighted average shares ..................... 24,206,756
============
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 Transition in fact occurred on January 1, 1996 or to project the
results of operations for any future period. As THCR was formed on June 12,
1995, pro forma information for the six months ended June 30, 1995 would not be
meaningful.
(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 located at the Taj Mahal (the "Atlantic Thermal
Agreement"). In consideration of the license, Atlantic Thermal will pay to Taj
Associates $10,000,000 no later than September 1, 1996, which amount has been
included in other non-operating income during the three months and six months
ended June 30, 1996.
(4) Long Term Debt
Long-term debt consists of the following:
June 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
THCR Senior Notes (C) .................... 155,000,000 155,000,000
Other mortgage notes payable ............. 3,631,000 2,953,000
Other .................................... 42,814,000 12,767,000
-------------- --------------
1,401,445,000 497,372,000
Less -- Current maturities ............... 9,914,000 2,901,000
-------------- --------------
$1,391,531,000 $ 494,471,000
============== ==============
- ----------
(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 to complete 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.
8
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
(B) On June 25, 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 Trump AC Mortgage Notes (See Note 2). The retirement of the
Plaza Notes and the write-off of related unamortized deferred financing
costs of $9,325,000 resulted in an extraordinary loss of $59,132,000.
(C) On June 12, 1995, THCR Holdings and THCR Funding issued $155,000,000
principal amount of THCR Senior Notes. The THCR Senior Notes are redeemable
in cash at the option of THCR Holdings and THCR Funding, in whole or in
part, at any time on or after June 15, 2000 at redemption prices specified
in the Indenture governing the THCR Senior Notes. Interest on these notes
is payable semi-annually in arrears on June 15 and December 15 of each
year, commencing December 15, 1995, and is secured by substantially all of
the assets of THCR Holdings. Costs associated with the issuance of these
notes, totaling approximately $10,742,000, have been deferred and are being
amortized over the life of the THCR Senior Notes.
(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) and (ii) certain promissory notes made by Trump and/or certain of his
affiliates and payable to Chemical (the "Chemical Notes") which are secured by
certain real estate assets located in New York, unrelated to Plaza Associates.
In connection with such Option Agreement, Trump assigned his rights to Plaza
Associates. On June 12, 1995, the option to purchase Trump World's Fair (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) Minority Interest
As part of the Taj Merger Transaction, Trump contributed all of his direct
and indirect ownership interest in Taj Associates for a deemed market value of
$40,500,000, which amount has been recorded as minority interest (See Note 2).
In addition, $10,000,000 was paid to Bankers Trust to obtain certain releases of
the liens and guarantees that Bankers Trust has in connection with certain
indebtedness owed by Trump to Bankers Trust. The obligation under this
indebtedness is a personal liability of Trump and, accordingly, the release of
indebtedness is considered a payment to Trump and a reduction of his minority
interest.
(7) Investment in Buffington Harbor
Trump Indiana and The Majestic Star Casino, LLC ("Barden") entered into an
agreement relating to the joint ownership, development and operation of all
common land-based and waterside operations in support of each of their separate
riverboat casinos at Buffington Harbor. Each of Trump Indiana and Barden are
equally responsible for the development and operating expenses at Buffington
Harbor, and THCR is dependent on the ability of Barden to pay for its share of
all future expenses.
(8) Note Receivable from Trump
Prior to consummation of the 1995 Offerings, Trump incurred $3,000,000
relating to expenditures for the development of Trump Indiana and other gaming
ventures. Concurrent with the 1995 Offerings, THCR Holdings loaned Trump
$3,000,000 and Trump issued to THCR Holdings a five-year promissory note (the
"Trump Note")
9
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
bearing interest at a fixed rate of 10% per annum, payable annually. Under its
terms, the Trump Note would be automatically canceled in the event that at any
time during the periods defined in the Trump Note, the Common Stock traded at a
price per share equal to or greater than the prices set forth in the Trump Note
(subject to adjustment in certain circumstances). The Trump Note was canceled on
March 27, 1996 in accordance with its terms.
(9) Note Receivable from Officer
Included in other assets is a loan amounting to approximately $344,000 due
from Nicholas L. Ribis, the Chief Executive Officer of THCR, in accordance with
the terms of his employment agreement, which provides for up to an aggregate of
$2,000,000 in loans to be used by him to pay his income tax liability in
connection with the stock bonus award, which loan, including interest, will be
forgiven in the event of a change in control, as defined in such employment
agreement.
(10) Commitments and Contingencies
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. ("Trump Services")
are required to maintain certain licenses.
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 a 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.
The operation of a gaming riverboat in Indiana is subject to Indiana's
Riverboat Gambling Act and the administrative rules promulgated thereunder. In
June 1996, the Indiana Gaming Commission (the "IGC") granted Trump Indiana a
riverboat owner's license, which must be renewed by June 2001.
Restricted Cash. As a condition to the 1995 Note Offering, THCR Holdings
and THCR Funding entered into a Cash Collateral and Disbursement Agreement (the
"Cash Collateral Agreement") with First Bank National Association, in its
respective capacities as Trustee and Disbursement Agent (each as defined in the
Cash Collateral Agreement). The Cash Collateral Agreement called for initial
deposits to custodial accounts which are restricted in use for (a) Trump Indiana
for the ship and land projects, (b) Trump Plaza construction projects, including
the exercise of the Trump World's Fair Purchase Option and construction projects
at a hotel located at Trump Plaza East which has been integrated into Trump
Plaza and Trump World's Fair, and (c) the first two interest payments on the
THCR Senior Notes. As of June 30, 1996, all funds were disbursed in accordance
with the Cash Collateral Agreement.
As of June 30, 1996, Trump Indiana has a $25,000,000 surety bond
outstanding which guarantees state mandated municipal infrastructure
improvements. The surety bond is secured by a $25,000,000 cash deposit with the
surety. The surety bond expires on April 19, 1997, but will automatically be
renewed on an annual basis unless notice is given sixty days in advance.
(11) Proposed Acquisition of Trump's Castle Associates
On May 21, 1996, Trump's Castle Associates ("Castle Associates") assigned
to THCR Holdings its rights under the Option Agreement with Hamilton Partners,
L.P. ("Hamilton"), dated as of June 23, 1995 ("the Option
10
<PAGE>
TRUMP HOTELS & CASINO RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
JUNE 30, 1996
(unaudited)
Agreement"), pursuant to which Castle Associates held an option (the "Castle
Option") to acquire certain of the Increasing Rate Subordinated Pay-in-Kind
Notes due 2005 of Trump's Castle Funding, Inc. (the "Castle PIK Notes") owned by
Hamilton. Immediately following the assignment of the Castle Option, THCR
Holdings exercised the Castle Option and acquired approximately $59.3 million of
the Castle PIK Notes (the "Acquired Castle PIK Notes") for a purchase price of
approximately $38.7 million (the "Castle PIK Note Purchase Price"). The Acquired
Castle PIK Notes represented approximately 90% of Castle PIK Notes outstanding
on such date. On June 24, 1996, THCR, THCR Holdings, TC/GP, Inc. ("TC/GP"),
Trump's Castle Hotel & Casino, Inc. ("TCHI") and Trump entered into an agreement
(the "Castle Agreement") pursuant to which THCR Holdings will acquire (the
"Castle Acquisition") from Trump 100% of the equity of Castle Associates, the
owner and operator of Trump's Castle. If an agreement with respect to the
acquisition by THCR Holdings of 100% of the equity interests of Castle
Associates had not been entered into by November 21, 1996, each of Castle
Associates and Trump would then have had the right to purchase the Acquired
Castle PIK Notes from THCR Holdings for successive periods of 90 days for an
amount in cash equal to the Castle PIK Note Purchase Price plus interest at a
rate of 16% per annum.
The Castle Acquisition contemplates that the following transactions will
take place:
(i) Trump will contribute to THCR Holdings his 61.5% equity interest
in Castle Associates, in consideration of which he will receive a 9.52854%
limited partnership interest in THCR Holdings, exchangeable into 3,626,450
shares of Common Stock (valuing each such share at $30.00 (the "THCR Stock
Contribution Value"));
(ii) TC/GP will contribute to THCR Holdings its 37.5% equity interest
in Castle Associates, in consideration of which it will receive a 5.81009%
limited partnership in THCR Holdings, exchangeable into 2,211,250 shares of
Common Stock (valuing each such share at the THCR Stock Contribution
Value); and
(iii) THCR-TCHI Merger Corp., a Delaware corporation and a
wholly-owned subsidiary of THCR Holdings ("Castle Merger Sub"), will merge
(the "TCHI Merger") with and into TCHI (holder of a 1.0% equity interest in
Castle Associates), whereupon (x) each share of common stock of TCHI, par
value $.01 per share (the "TCHI Common Stock"), outstanding immediately
prior to the TCHI Merger will be converted into the right to receive $.8845
in cash (the "TCHI Consideration") and each share of common stock of Castle
Merger Sub will be converted into the right to receive one share of common
stock of the surviving corporation of the TCHI Merger and (y) each holder
of the outstanding warrants (the "Castle Warrants") issued under the
Warrant Agreement, dated as of December 30, 1993, will be entitled to
receive for each former share of TCHI Common Stock for which each Castle
Warrant was exercisable an amount in cash equal to the TCHI Consideration.
The Castle Acquisition will be accounted for as a purchase.
11
<PAGE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital Resources and Liquidity
On June 12, 1995, THCR consummated the 1995 Stock Offering, resulting in
aggregate gross proceeds of $140,000,000. Concurrent with the 1995 Stock
Offering, THCR Holdings and THCR Funding completed the 1995 Note Offering,
resulting in aggregate gross proceeds of $155,000,000. The proceeds to THCR from
the 1995 Stock Offering were contributed by THCR to THCR Holdings for an
approximately 60% general partnership interest in THCR Holdings. THCR Holdings,
in turn, used the net proceeds from the 1995 Offerings, through June 30, 1996,
for the following purposes: (a) repurchase and redemption of the 12 1/2%
Pay-In-Kind Notes due 2003 of Trump AC (the "Plaza PIK Notes") (including
accrued interest payable) for $86,209,000, (b) exercise of the Trump World's
Fair Purchase Option for $58,150,000, (c) construction costs for Trump World's
Fair of $43,850,000, (d) construction costs for Trump Plaza East of $15,150,000,
(e) construction and land acquisition costs of $34,762,000 for the riverboat at
Buffington Harbor, on Lake Michigan, Indiana (the "Indiana Riverboat"), (f)
$5,688,000 for pre-opening costs at Trump Indiana and (g) payment of $24,225,000
for the first year of interest payments on the THCR Senior Notes. The balance of
the proceeds were for general corporate purposes.
The indenture pursuant to which the THCR Senior Notes were issued (the
"THCR Senior Note Indenture") restricts the ability of THCR Holdings and its
subsidiaries, as the case may be, to make distributions to partners or pay
dividends, as the case may be, unless certain financial ratios are achieved.
Further, given the rapidly changing competitive environment and the risks
associated with THCR's proposed expansion plan, THCR's future operating results
are highly conditional and could fluctuate significantly. Moreover, as a
condition to the 1995 Note Offering, THCR Holdings and THCR Funding entered into
the Cash Collateral Agreement, which called for initial deposits to custodial
accounts which were restricted in use for (a) Trump Indiana for the ship and
land projects, (b) Trump Plaza construction projects, including the exercise of
the Trump World's Fair Purchase Option and construction projects at Trump Plaza
East and the Trump World's Fair, and (c) the first two interest payments on the
THCR Senior Notes. As of June 30, 1996, all funds were disbursed in accordance
with the Cash Collateral Agreement.
In addition, the ability of Plaza Associates and Taj Associates to make
payments of dividends or distributions (except for payment of interest) through
Trump AC to THCR Holdings may be restricted by the CCC. Similarly, the ability
of Trump Indiana to make payments of dividends or distributions to THCR Holdings
may be restricted by the IGC.
Cash flows from operating activities are THCR's principal source of
liquidity. With the proceeds from the 1996 Offerings, THCR, among other things,
redeemed the outstanding Taj Bonds, retired the outstanding Plaza Notes,
satisfied the indebtedness of Taj Associates under its loan agreement with
NatWest, 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 12 1/2% Pay-in-Kind Notes due 2003 of
Trump Plaza Holding Associates (currently Trump AC) and warrants thereto
(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 six
months ended June 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 $158,865,000
for the six months ended June 30, 1996, an increase of approximately $84,677,000
or 114.1% from the comparable period in 1995. Capital expenditures attributable
to Trump Plaza East were approximately $37,028,000 and $7,201,000 for the six
months ended June 30, 1996 and 1995. Capital expenditures attributable to Trump
World's Fair were approximately $51,418,000 and $60,929,000 for the six months
ended June 30, 1996 and 1995, respectively. Capital expenditures for
improvements to Trump Plaza's existing facilities were $1,742,000 and $6,058,000
for the six months ended June 30, 1996 and 1995.
Capital expenditures attributable to the Taj Mahal were approximately
$68,677,000 for the period April 17, 1996 through June 30, 1996. Capital
expenditures for improvements to existing facilities were approximately
$6,040,000 for the period April 17, 1996 through June 30, 1996. Capital
expenditures for the purchase of property previously leased upon which a portion
of the casino hotel complex is situated and Taj Merger and closing costs
amounted to approximately $61,808,000. Capital expenditures attributable to the
expansion of the facility were approximately $829,000 for the period April 17,
1996 through June 30, 1996.
12
<PAGE>
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 $127,500,000 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.
In addition to the approximately $96 million spent prior to commencing the
operation of the Indiana Riverboat on June 8, 1996, during its initial five-year
license term, an additional $57 million of funds (consisting of approximately
$40 million for the construction of a hotel and other amenities and $17 million
for infrastructure improvements and other municipal uses) will be required to be
spent by Trump Indiana in connection with the Indiana Riverboat facility and
related commitments, including commitments required in connection with the
licensure process. The sources of the initial $96 million included: $62 million
from the proceeds of the 1995 Offerings and the 1996 Offerings, $17.5 million
from vessel financing, $14.2 million from equipment financing (including
approximately $9 million for slot machines) and $1.9 million from operating
leases. The remaining $57 million required to be spent over the initial
five-year license terms is expected to be funded with cash from operations
and/or proceeds from the 1996 Offerings.
Trump Indiana is a party to a loan and security agreement, as amended, with
debis Financial Services, Inc. ("dFS") pursuant to which dFS provided, subject
to the terms and conditions thereof, $17.5 million in financing for the gaming
vessel. As of June 30, 1996, dFS had provided Trump Indiana with $17.5 million
pursuant to such agreement.
At June 30, 1996, THCR had combined working capital of $138,800,000. 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.
Results of Operations: Operating Revenues and Expenses
THCR Holdings' partnership agreement provides that all business activities
of THCR must be conducted by THCR Holdings or subsidiary partnerships or
corporations. As a result of the 1995 Offerings, the Taj Merger Transaction and
the acquisition of Plaza Associates and Taj Associates by THCR Holdings in
connection therewith, THCR's results of operations are primarily those of Plaza
Associates, Taj Associates and Trump Indiana, and the results of operations
included in the Statement of Operations reflect Plaza Associates' results of
operations for the three and six month period ended June 30, 1996, Taj
Associates' results of operations for the period April 17, 1996 to June 30,
1996, and Trump Indiana's results of operations from June 8, 1996 to June 30,
1996.
As previously discussed, THCR and THCR Holdings commenced operations on
June 12, 1995 and, therefore, there are no comparable results. Neither THCR nor
any of its subsidiaries had any significant operating history, other than Plaza
Associates, although THCR Holdings has incurred certain expenses including
interest on the THCR Senior Notes, and Trump Indiana has incurred significant
expenses relating to the development of the Indiana Riverboat. In addition, THCR
acquired Taj Associates on April 17, 1996.
THCR had a loss per share of $3.42 for the six months ended June 30, 1996,
based on 15,887,108 weighted average shares outstanding. Assuming the conversion
of Trump's interest in THCR Holdings, which was convertible into 8,081,000
shares of Common Stock during such period, loss per share would have been $2.99
for the six months ended June 30, 1996, based on 23,132,020 weighted average
shares outstanding.
13
<PAGE>
Comparison of Three-Month Periods Ended June 30, 1996 and 1995. The
following table includes selected data of Plaza Associates and Taj Associates
(since the date of acquisition, April 17, 1996) and Trump Indiana (since the
opening date of the Indiana Riverboat, June 8, 1996) for the three months ended
June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------------------------------
1995 1996 1996 1996 1996 1996
Plaza Plaza Taj Trump AC Trump THCR
Associates Associates Associates Consolidated* Indiana Consolidated*
---------- ---------- ---------- ------------- --------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming .................... $ 73,589 $ 96,076 $ 109,684 $ 205,760 $ 8,331 $ 214,091
Other ..................... 17,522 27,144 24,357 51,501 248 51,749
--------- --------- --------- --------- --------- ---------
Gross Revenue ............ 91,111 123,220 134,041 257,261 8,579 265,840
Less: Promotional Allowances 8,960 13,837 13,865 27,702 -- 27,702
--------- --------- --------- --------- --------- ---------
Net Revenue .............. 82,151 109,383 120,176 229,559 8,579 238,138
--------- --------- --------- --------- --------- ---------
Costs & Expenses:
Gaming .................... 39,906 57,595 63,856 121,451 4,034 125,485
Pre-opening ............... -- 2,853 -- 2,853 5,003 7,856
General & Admin ........... 17,243 19,839 19,537 39,376 1,901 45,985
Depreciation & Amortization 3,744 5,923 10,756 16,679 356 17,095
Other ..................... 5,975 9,260 7,842 17,102 107 17,209
--------- --------- --------- --------- --------- ---------
Total Costs and Exp ...... 66,868 95,470 101,991 197,461 11,401 213,630
--------- --------- --------- --------- --------- ---------
Income from Operations ..... 15,283 13,913 18,185 32,098 (2,822) 24,508
Non-operating Income (Exp.) (12,684) (11,240) (9,634) (20,840) 5 (24,613)
Provision for Income Taxes . (206) -- -- -- -- --
Extraordinary Loss ......... (9,250) (59,132) -- (59,132) -- (59,132)
Minority Interest .......... -- -- -- -- -- 14,828
---------
Net Income (Loss) .......... $ (6,857) $ (56,459) $ 8,551 $ (47,874) $ (2,817) $ (44,409)
========= ========= ========= ========= ========= =========
</TABLE>
- ----------
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
Gaming revenues were $214,091,000 for the three months ended June 30, 1996,
an increase of $140,502,000 or 190.9% from gaming revenues of $73,589,000 for
the comparable period in 1995. The increase in gaming revenues consists of
$109,684,000 from Taj Associates since the date of acquisition, April 17, 1996,
and $8,331,000 from Trump Indiana since the opening of the Indiana Riverboat on
June 8, 1996, 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 management
marketing initiatives.
Slot revenues were $139,083,000 for the three months ended June 30, 1996,
an increase of $88,968,000 or 177.5% from slot revenues of $50,115,000 for the
comparable period in 1995. This increase is directly attributable to the
acquisition of Taj Associates, which contributed $61,261,000 in slot revenues,
and Trump Indiana, which contributed $6,623,000 in slot revenues. Plaza
Associates' slot revenues were $71,199,000 for the three months ended June 30,
1996, an increase of $21,084,000 or 42.1% from slot revenues of $50,115,000 for
the three months ended June 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 $70,742,000 for the three months ended June 30,
1996, an increase of $47,268,000 or 201.4% from $23,474,00 for the comparable
period in 1995. This increase is attributable to the acquisition of Taj
Associates, which contributed $44,157,000 in table games revenues with a
corresponding $261,024,000 in table games drop (i.e., the dollar value of chips
purchased). Trump Indiana contributed $1,708,000 to the increase in table games
revenues. Plaza Associates' table games revenues of $24,877,000 for the three
months ended June 30, 1996 increased by $1,403,000 or 6.0% from the comparable
period in 1995. Plaza Associates' increase is primarily due to an increase in
table games drop by 11.4% for the three months ended June 30, 1996, offset by a
slight decrease in the hold percentage to 14.1% from 14.9% for the comparable
period in 1995.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $3,647,000 in poker
revenues, $322,000 in race simulcasting revenues and $297,000 in keno revenues
since its acquisition date.
14
<PAGE>
Other revenues were $51,749,000 for the three months ended June 30, 1996,
an increase of $34,227,000 or 195.3% from other revenues of $17,522,000 for the
comparable period in 1995. Other revenues include revenues from rooms, food and
beverage, entertainment and miscellaneous items. The increase is directly
attributable to the acquisition of Taj Associates, which generated $24,357,000
in other revenues since its acquisition date, and $248,000, primarily beverage
revenues from Trump Indiana. Plaza Associates' other revenues were $27,144,000
for the three months ended June 30, 1996, an increase of $9,622,000 or 54.9%
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 and food and beverage revenues attendant to increased levels of gaming
activity due in part to increased promotional activities.
Promotional allowances were $27,702,000 for the three months ended June 30,
1996, an increase of $18,742,000 or 209.2% from promotional allowances of
$8,960,000 for the three months ended June 30, 1995. Taj Associates generated
$13,865,000 in promotional allowances since its acquisition date. Plaza
Associates experienced an increase in promotional allowances to $13,837,000 or
54.4% from promotional allowances of $8,960,000 in the comparable period in
1995. Plaza Associates' increase is primarily attributable to the additional
rooms at Trump World's Fair and Trump Plaza East as well as increases in
marketing initiatives during the three months ended June 30, 1996.
Gaming costs and expenses were $125,485,000 for the three months ended June
30, 1996, an increase of $85,579,000 or 214.5% from $39,906,000 for the
comparable period in 1995. This increase was primarily attributable to Taj
Associates' gaming costs and expenses of $63,856,000 since its acquisition as
well as $4,034,000 from Trump Indiana. Gaming costs and expenses for Plaza
Associates were $57,595,000, an increase of $17,689,000 or 44.3% from
$39,906,000 for the comparable period in 1995. Plaza Associates' increase is
primarily due to increased promotional and operational expenses as well as taxes
associated with increased levels of gaming during the comparable period in 1995.
General and administrative expenses were $45,985,000 for the three months
ended June 30, 1996, an increase of $27,541,000 or 149.3% from general and
administrative expenses of $18,444,000 for the comparable period in 1995. This
increase is primarily due to the acquisition of Taj Associates, which recorded
$19,537,000 in general and administrative expenses since its acquisition, and
$1,901,000 from Trump Indiana. Plaza Associates' increase of $2,596,000 over the
comparable period is due in part to expenses associated with Trump Plaza East
and Trump World's Fair. General and administrative expenses for THCR
(unconsolidated) were $4,708,000 for the three months ended June 30, 1996, an
increase of $3,507,000 from the period since inception, June 12, 1995, to June
30, 1995. This increase is primarily attributable to compensation awards.
Pre-opening expenses of $2,853,000 were recorded by Plaza Associates for
the three months ended June 30, 1996 and reflect the costs associated with
opening Trump World's Fair in May 1996. Trump Indiana recorded $5,003,000 in
pre-opening expenses for the three months ended June 30, 1996.
Other expenses were $17,209,000 for the three months ended June 30, 1996,
an increase of $11,234,000 or 188.0% from the comparable period in 1995. Other
expenses include costs associated with operating Trump Plaza and the Taj Mahal's
hotels with all of their amenities. The increase over the comparable period
reflects Taj Associates' $7,842,000 of other expenses since its date of
acquisition and $107,000 from Trump Indiana. Plaza Associates' other expenses
increased by $3,285,000 or 55.0% from the comparable period. This increase is
due to operating Trump World's Fair and Trump Plaza East, both having opening
dates in 1996.
Income from operations was $24,508,000 for the three months ended June 30,
1996, an increase of $10,505,000 or 75.0% from income from operations of
$14,003,000 for the comparable period in 1995. Taj Associates contributed
$18,185,000 of income from operations since its acquisition which was partially
offset by operating losses of $4,768,000 and $2,822,000 for the three months
ended June 30, 1996, from THCR (unconsolidated) and Trump Indiana, respectively.
Plaza Associates contributed $13,913,000 during the three months ended June 30,
1996, a decrease of $1,370,000 or 9.0% from the comparable period in 1995.
Interest expense was $38,121,000 for the three months ended June 30, 1996,
an increase of $24,805,000 or 186.3% from interest expense of $13,316,000 for
the comparable period in 1995. This increase is attributable to the acquisition
of Taj Associates, with an interest expense of $19,840,000 recorded at June 30,
1996. Plaza Associates reflects a decrease of $57,000 in interest expense due to
the redemption of the Plaza PIK Notes in 1995 offset by the retirement of the
Plaza Notes and the issuance of the Trump AC Mortgage Notes. THCR recorded an
increase of $5,027,000, primarily due to the issuance of the THCR Senior Notes
in June 1995.
15
<PAGE>
Other non-operating income was $10,557,000 for the three months ended June
30, 1996, an increase of $11,490,000 from the comparable period in 1995.
Non-operating income consists of a one-time $10,000,000 non-refundable licensing
fee resulting from the Atlantic Thermal Agreement. Plaza Associates reflects a
decrease in non-operating expense of $376,000 or 40.3% from $933,000 in 1995.
This decrease is attributable to a decrease in non-operating expenses associated
with Trump Plaza East.
The extraordinary loss of $59,132,000 for the three months ended June 30,
1996 is related 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 three months ended June 30, 1995 relates to the redemption
and write-off of unamortized deferred financing costs relating to the redemption
of Plaza PIK Notes and the warrants in connection with the Plaza PIK Notes (the
"Plaza PIK Note Warrants") on June 12, 1995.
Comparison of Six-Month Periods Ended June 30, 1996 and 1995. The following
table includes selected data of Plaza Associates and Taj Associates (since the
date of acquisition, April 17, 1996) and Trump Indiana (since the opening date
of the Indiana Riverboat, June 8, 1996) for the six months ended June 30, 1996
and 1995:
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------------------------------------------
1995 1996 1996 1996 1996 1996
Plaza Plaza Taj Trump AC Trump THCR
Associates Associates Associates Consolidated* Indiana Consolidated*
---------- ---------- ---------- ------------- --------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Gaming .................... $ 139,311 $ 170,346 $ 109,684 $ 280,030 $ 8,331 $ 288,361
Other ..................... 33,460 46,425 24,357 70,782 248 71,030
--------- --------- --------- --------- --------- ---------
Gross Revenue ............ 172,771 216,771 134,041 350,812 8,579 359,391
Less: Promotional Allowances 16,517 24,520 13,865 38,385 -- 38,385
--------- --------- --------- --------- --------- ---------
Net Revenue .............. 156,254 192,251 120,176 312,427 8,579 321,006
--------- --------- --------- --------- --------- ---------
Costs & Expenses:
Gaming .................... 76,691 101,721 63,856 165,577 4,034 169,611
Pre-opening ............... 3,332 3,332 6,634 9,966
General & Admin ........... 33,993 38,231 19,537 57,768 1,901 65,652
Depreciation & Amortization 7,836 10,446 10,756 21,202 356 21,622
Other ..................... 11,937 14,931 7,842 22,773 107 22,880
--------- --------- --------- --------- --------- ---------
Total Costs and Exp ...... 130,457 168,661 101,991 270,652 13,032 289,731
--------- --------- --------- --------- --------- ---------
Income from Operations ..... 25,797 23,590 18,185 41,775 (4,453) 31,275
Non-operating Income (Exp.) (25,947) (22,171) (9,634) (31,771) 6 (41,244)
Provision for Income Taxes . -- -- -- -- -- --
Extraordinary Loss ......... (9,250) (59,132) -- (59,132) -- (59,132)
Minority Interest .......... -- -- -- -- -- 14,828
--------- --------- --------- --------- --------- ---------
Net Income (Loss) .......... $ (9,400) $ (57,713) $ 8,551 $ (49,128) $ (4,447) $ (54,273)
========= ========= ========= ========= ========= =========
</TABLE>
- ----------
* Intercompany eliminations and expenses of THCR and THCR Holdings are not
separately shown.
Gaming revenues were $288,361,000 for the six months ended June 30, 1996,
an increase of $149,050,000 or 107.0% from gaming revenues of $139,311,000 for
the comparable period in 1995. The increase in gaming revenues consists of
$109,684,000 from Taj Associates since the date of acquisition and $8,331,000
from Trump Indiana since the opening of the Indiana Riverboat on June 8, 1996,
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 management marketing
initiatives.
Slot revenues were $188,915,000 for the six months ended June 30, 1996, an
increase of $95,496,000 or 102.2% from slot revenues of $93,419,000 for the
comparable period in 1995. This increase is directly attributable to the
acquisition of Taj Associates, which contributed $61,261,000 in slot revenues,
and Trump Indiana, which contributed $6,623,000 in slot revenues. Plaza
Associates' slot revenues were $121,031,000 for the six months ended June 30,
1996, an increase of $27,612,000 or 29.6% from slot revenues of $93,419,000 for
the six months ended June 30, 1995.
16
<PAGE>
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 $95,180,000 for the six months ended June 30,
1996, an increase of $49,288,000 or 107.4% from $45,892,000 for the comparable
period in 1995. This increase is attributable to the acquisition of Taj
Associates which contributed $44,157,000 in table games revenues with a
corresponding $26,024,000 in table games drop (i.e., the dollar value of chips
purchased). Trump Indiana contributed $1,708,000 to the increase in table games
revenues. Plaza Associates' table games revenues of $49,315,000 for the six
months ended June 30, 1996 increased by $3,423,000 or 7.5% from the comparable
period in 1995. Plaza Associates' increase is primarily due to an increase in
table games drop by 9.9% for the six months ended June 30, 1996, offset by a
slight decrease in the hold percentage to 15.4% from 15.7% for the comparable
period in 1995.
In addition to table games and slot revenues, Taj Associates' poker/race
simulcasting/keno operations generated approximately $3,647,000 in poker
revenues, $322,000 in race simulcasting revenues and $297,000 in keno revenues
since its acquisition date.
Other revenues were $71,030,000 for the six months ended June 30, 1996, an
increase of $37,570,000 or 112.3% from other revenues of $33,460,000 for the
comparable period in 1995. Other revenues include revenues from rooms, food and
beverage, entertainment and miscellaneous items. The increase is directly
attributable to the acquisition of Taj Associates, which generated $24,357,000
in other revenues since its acquisition date, and $248,000, primarily beverage
revenues from Trump Indiana. Plaza Associates' other revenues were $46,425,000
for the six months ended June 30, 1996, an increase of $12,965,000 or 38.7% 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 and food and beverage revenues attendant to increased levels of gaming
activity due in part to increased promotional activities.
Promotional allowances were $38,385,000 for the six months ended June 30,
1996, an increase of $21,868,000 or 132.4% from promotional allowances of
$16,517,000 for the six months ended June 30, 1995. Taj Associates generated
$13,865,000 in promotional allowances since its acquisition date. Plaza
Associates experienced an increase in promotional allowances to $24,520,000 or
48.5% from promotional allowances of $16,517,000 in the comparable period in
1995. Plaza Associates' increase is primarily attributable to the additional
rooms at Trump World's Fair and Trump Plaza East as well as increases in
marketing initiatives during the six months ended June 30, 1996.
Gaming costs and expenses were $169,611,000 for the six months ended June
30, 1996, an increase of $92,920,000 or 121.2% from $76,691,000 for the
comparable period in 1995. This increase was primarily attributable to Taj
Associates' gaming costs and expenses of $63,856,000 since its acquisition as
well as $4,034,000 from Trump Indiana. Gaming costs and expenses for Plaza
Associates were $101,721,000, an increase of $25,030,000 or 32.6% from
$76,691,000 for the comparable period in 1995. Plaza Associates' increase is
primarily due to increased promotional and operational expenses as well as taxes
associated with increased levels of gaming during the comparable period in 1995.
General and administrative expenses were $65,652,000 for the six months
ended June 30, 1996, an increase of $30,458,000 or 86.5% from general and
administrative expenses of $35,194,000 for the comparable period in 1995. This
increase is primarily due to the acquisition of Taj Associates, which recorded
$19,537,000 in general and administrative expenses since its acquisition, and
$1,901,000 from Trump Indiana. Plaza Associates' increase of $4,238,000 over the
comparable period is due in part to expenses associated with Trump Plaza East
and Trump World's Fair. THCR (unconsolidated) had general and administrative
expenses of $5,983,000 for the six months ended June 30, 1996, an increase of
$4,782,000 from the period since inception, June 12, 1995, to June 30, 1995.
This increase is primarily attributable to compensation awards.
Pre-opening expenses of $3,332,000 were recorded by Plaza Associates and
reflect the costs associated with opening Trump World's Fair in May 1996. Trump
Indiana recorded $6,634,000 of pre-opening expenses for the six months ended
June 30, 1996.
Other expenses were $22,880,000 for the six months ended June 30, 1996, an
increase of $10,943,000 or 91.7% from the comparable period in 1995. Other
expenses include costs associated with operating Trump Plaza and the Taj Mahal's
hotels with all of their amenities. The increase over the comparable period
reflects Taj Associates' $7,842,000 of other expenses since its date of
acquisition and $107,000 from Trump Indiana. Plaza Associates' other expenses
increased by $2,994,000 or 25.1% from the comparable period. This increase is
due to operating Trump World's Fair and Trump Plaza East, both having opening
dates in 1996.
17
<PAGE>
Income from operations was $31,275,000 for the six months ended June 30,
1996, an increase of $6,757,000 or 27.6% from income from operations of
$24,518,000 for the comparable period in 1995. Taj Associates contributed
$18,185,000 of income from operations since its acquisition which was partially
offset by operating losses of $6,047,000 and $4,453,000 for the six months ended
June 30, 1996 from THCR (unconsolidated) and Trump Indiana, respectively. Plaza
Associates contributed $23,590,000 during the six months ended June 30, 1996, a
decrease of $2,207,000 or 8.6% from the comparable period in 1995.
Interest expense was $54,147,000 for the six months ended June 30, 1996, an
increase of $28,304,000 or 109.5% from interest expense of $25,843,000 for the
comparable period in 1995. This increase is attributable to the acquisition of
Taj Associates, with an interest expense of $19,840,000 recorded at June 30,
1996. Plaza Associates reflects $21,742,000 of interest expense at June 30,
1996, a decrease of $2,833,000 or 11.5% in interest expense due to the
redemption of the Plaza PIK Notes in 1995 offset by the retirement of the Plaza
Notes and the issuance of the Trump AC Mortgage Notes. THCR recorded an increase
of $11,302,000 due to the issuance of the THCR Senior Notes in June 1995.
Other non-operating income was $9,182,000 for the six months ended June 30,
1996, an increase of $11,024,000 from the comparable period in 1995.
Non-operating income consists of a one-time $10,000,000 non-refundable licensing
fee resulting from the Atlantic Thermal Agreement. Plaza Associates reflects a
decrease in non-operating expense of $1,024,000 or 55.6% from $1,842,000 in
1995. This decrease is attributable to a decrease in non-operating expenses
associated with Trump Plaza East.
The extraordinary loss of $59,132,000 for the six months ended June 30,
1996 is related 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 six months ended June 30, 1995 relates to the redemption
and write-off of unamortized deferred financing costs relating to the redemption
of Plaza PIK Notes and Plaza PIK Note Warrants on June 12, 1995.
18
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1 -- LEGAL PROCEEDINGS
THCR and certain of its employees have been involved in various legal
proceedings. In general, THCR Holdings has agreed to indemnify such persons
against any and all losses, claims, damages, expenses (including reasonable
costs, disbursements and counsel fees) and liabilities (including amounts paid
or incurred in satisfaction of settlements, 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 THCR. THCR considers all
such proceedings to be ordinary litigation incident to the character of its
business and not material to its business or financial condition. THCR believes
that the resolution of these claims, to the extent not covered by insurance,
will not, individually or in the aggregate, have a material adverse effect on
its financial condition or results of operations of THCR.
With respect to the matter entitled Keshav D. Aggarwal, et al v. Donald J.
Trump, Trump Hotels & Casino Resorts, Inc., Trump Hotels & Casino Resorts
Holdings, L.P. and Trump Indiana, Inc., which was previously reported in the
Form 10-Q of THCR for the first quarter of 1996, Trump, THCR, THCR Holdings and
Trump Indiana have filed an answer to the complaint on May 31, 1996. THCR and
the other defendants intend to vigorously contest the allegations against them.
Further, THCR believes that the resolution of these claims will not have a
material adverse effect on THCR.
In Vera Coking, et al. v. Atlantic City Planning Board and Trump Plaza
Associates, the Atlantic City Planning Board's approval of the Trump Plaza East
renovation had been challenged on various grounds. In July 1994, a New Jersey
Superior Court judge upheld the Atlantic City Planning Board approvals with
respect to the hotel renovation component of Trump Plaza East and the new
roadway but invalidated the approval of the valet parking lot and the public
park because Plaza Associates lacked site control with respect to the small
parcels of land the CRDA sought to condemn. Plaintiffs appealed the court's
decision upholding the approval of the hotel renovation and new roadway and
Plaza Associates cross-appealed the court's decision invalidating the approval
of the public park and valet parking area. Plaza Associates withdrew its
cross-appeal and received land-use approval for and has constructed the valet
parking area after deletion of one of the small parcels. In June 1996, the
Superior Court of New Jersey, Appellate Division, affirmed the trial court's
ruling upholding the approvals for the hotel renovation and the new roadway.
In a related matter, Joseph Banin and Vera Coking v. Atlantic City Planning
Board and Trump Plaza Associates, the land-use approval for Trump Plaza East had
been challenged on various grounds. The land-use approval involved certain minor
amendments to the previously granted site plan approvals for the hotel
renovation component of Trump Plaza East and the new roadway. The amendments
included certain design changes with respect to Trump Plaza East and certain
design changes to the roadway. The amendments did not require any variance
relief and the amendments fully complied with the Land Use Ordinance of the City
of Atlantic City. The plaintiffs alleged that the Atlantic City Planning Board
acted in an arbitrary and capricious manner in approving the amendments and
further argue that the chairperson of the Atlantic City Planning Board had a
conflict of interest in hearing the matter because of her status as an employee
of the CRDA, the entity that had approved certain funding for the project. On
January 26, 1996, the New Jersey Superior Court upheld the approval of the
amendment by the Atlantic City Planning Board and rejected the plaintiffs' claim
with respect to the chairwoman's conflict of interest. The plaintiffs' time to
appeal this decision expired in June 1996.
On March 29, 1990, Taj Associates entered into a Lease Agreement (the
"Lease Agreement") with the City of Atlantic City for a term of seven years,
subject to the explicit, prior approval of the New Jersey Department of
Environmental Protection ("NJDEP") to continue use of the land beyond April 2,
1992, pursuant to which Taj Associates leased a parcel of land containing
approximately 1,300 spaces for employee intercept parking at a cost of
approximately $1,000,000 per year. In addition, Taj Associates has expended in
excess of $1,400,000 in improving the site. The permit under which the lease is
operated was issued by NJDEP on December 20, 1989 for five years and contains
several conditions, one of which required Taj Associates to find another
location "off-island" for employee parking by April 2, 1992. NJDEP extended this
condition for two successive one-year periods through April 2, 1994. On November
14, 1994, as a result of the non-renewal of the permit, Taj Associates notified
Atlantic City that the Lease Agreement had become inoperative and was therefore
being canceled as of December 20, 1994. Taj Associates subsequently obtained
"off-island" parking with Castle Associates sufficient to meet its employee
parking
19
<PAGE>
requirements. Atlantic City has indicated in a letter to Taj Associates that it
contests the cancellation of the lease agreement and claims certain extensions
to the permit apply, to which Taj Associates does not agree. No legal
proceedings have been commenced by Atlantic City to date.
Taj Associates was also a party to an administrative proceeding involving
allegations that it had violated certain provisions of the Casino Control Act.
In June 1996, Taj Associates entered into a stipulation and settlement with the
Division of Gaming Enforcement of the CCC. The final outcome of this proceeding
did not have a material adverse effect on Taj Associates or on its ability to
otherwise retain or renew any casino or other licenses required under the Casino
Control Act for the operation of the Taj Mahal.
ITEM 2 -- CHANGES IN SECURITIES
None.
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) THCR held a Special Meeting of Shareholders (the "Special Meeting") on
April 11, 1996. THCR held its 1996 Annual Meeting of Shareholders (the "Annual
Meeting") on June 12, 1996.
(b) The following persons were re-elected as Directors at the Annual
Meeting: Donald J. Trump, Nicholas L. Ribis, Wallace B. Askins, Don M. Thomas
and Peter M. Ryan.
(c) (i) At the Annual Meeting, the stockholders of THCR voted on the
following three proposals:
Proposal 1. The stockholders of THCR re-elected each of the Directors of
THCR. The number of votes cast for each of the nominees were as follows:
Common Stock
-----------------------
For Withheld
---------- --------
Donald J. Trump ............... 22,134,167 6,610
Nicholas L. Ribis ............. 22,134,938 5,839
Wallace B. Askins ............. 22,127,963 12,814
Don M. Thomas ................. 22,133,963 6,814
Peter M. Ryan ................. 22,134,757 6,020
All 1,000 shares of Class B Common Stock were voted in favor of Proposal 1.
Proposal 2. An amendment to THCR's 1995 Stock Incentive Plan to increase
the number of shares of Common Stock reserved for issuance thereunder from
1,000,000 to 4,000,000 was approved by a vote of 11,569,354 shares of Common
Stock for and 8,746,778 shares against, with 17,197 shares abstaining. All 1,000
shares of Class B Common Stock were voted in favor of Proposal 2.
Proposal 3. The appointment of Arthur Andersen LLP as the independent
public accountants of THCR for the fiscal year ending December 31, 1996 was
ratified by a vote of 22,132,822 shares of Common Stock for and 1,723 shares
against, with 6,232 shares abstaining. All 1,000 shares of Class B Common Stock
were voted in favor of Proposal 3.
(ii) At the Special Meeting, the stockholders of THCR approved the Taj
Merger Transaction, which approval constituted approval and adoption of the Taj
Merger Agreement, by a vote of 6,766,089 shares of Common Stock for and 88,224
shares against, with 5,562 shares abstaining. All 1,000 shares of Class B Common
Stock were voted in favor of approval of the Taj Merger Transaction.
(d) None.
ITEM 5 -- OTHER INFORMATION
Trump Services, a New Jersey limited liability company, was formed on June
27, 1996 for the purpose of realizing cost savings and operational synergies by
consolidating certain administrative functions of, and providing certain
services to, each of Plaza Associates and Taj Associates. Trump AC and Trump
Atlantic City Corporation, a
20
<PAGE>
wholly owned subsidiary of Trump AC, own a 99% and 1% interest, respectively, in
Trump Services. On July 8, 1996, Trump Services, Plaza Associates and Taj
Associates entered into an agreement pursuant to which Trump Services will
provide to each of Taj Associates and Plaza Associates certain management,
financial and other functions and services necessary and incidental to the
respective operations of each of their casino hotels (the "Services Agreement").
On June 30, 1996, Taj Associates and Atlantic Thermal entered into the
Atlantic Thermal Agreement, pursuant to which Atlantic Thermal has the exclusive
right to use the steam and chilled water production facilities located at the
Taj Mahal in order to sell to Taj Associates all of Taj Associates' heating and
cooling energy requirements for the Taj Mahal at a cost savings to Taj
Associates and to offer for sale to third parties such thermal energy
requirements as they may require, all on the terms and conditions set forth
therein.
Reference is made to (i) the Services Agreement and (ii) the Atlantic
Thermal Agreement, attached as Exhibits hereto. Both Exhibits are incorporated
herein by reference.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
2.1(1) Agreement, dated as of June 24, 1996, among Trump
Hotels & Casino Resorts, Inc., Trump Hotels &
Casino Resorts Holdings, L.P., TC/GP, Inc.,
Trump's Castle Hotel & Casino, Inc. and Donald J.
Trump.
10.46.1 Amendment to Executive Agreement, dated as of May
16, 1996 by and among Donald J. Trump, Trump
Hotels & Casino Resorts, Inc. and Trump Hotels &
Casino Resorts Holdings, L.P.
10.47.1 Amendment No. 1 to Trump Hotels & Casino Resorts,
Inc. 1995 Stock Incentive Plan.
10.65 Services Agreement, dated as of July 8, 1996,
among Trump Plaza Associates, Trump Taj Mahal
Associates and Trump Casino Services, L.L.C.
10.66 Thermal Energy Service Agreement, dated as of June
30, 1996, by and between Atlantic Jersey Thermal
Systems, Inc. and Trump Taj Mahal Associates.
27.1 Financial Data Schedule of Trump Hotels & Casino
Resorts, Inc.
- ----------
(1) Incorporated herein by reference to the Exhibit to the Current Report on
Form 8-K of Trump Hotels & Casino Resorts, Inc., dated June 25, 1996.
b. Current Reports on Form 8-K:
The Registrant filed a Current Report on Form 8-K, dated May 2, 1996,
reporting, under Item 2 thereto, the consummation of the Taj Merger Transaction.
Under Item 7 to such Form 8-K, the Registrant reported the financial statements
of the business acquired by THCR and pro forma financial information, including
(i) the consolidated balance sheets of Taj Holding and Subsidiary as of December
31, 1994 and 1995, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1995, (ii) the consolidated balance sheets of Taj
Associates and Subsidiary as of December 31, 1994 and 1995, and the related
consolidated statements of operations, capital (deficit) and cash flows for each
of the three years in the period ended December 31, 1995 and (iii) the Unaudited
Pro Forma Consolidated Balance Sheet of THCR as of December 31, 1995 and the
Unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 1995.
The Registrant filed a Current Report on Form 8-K, dated May 22, 1996,
reporting, under Item 5 thereto, the exercise by THCR Holdings of the Castle
Option and the execution of the agreement with Castle Associates and Trump,
which granted THCR Holdings a six-month exclusive right to negotiate with Trump
and Castle Associates, with respect to the acquisition of Trump's Castle. No
financial statements were filed in connection with such Form 8-K.
The Registrant filed a Current Report on Form 8-K, dated June 25, 1996,
reporting, under Item 5 thereto, the execution of the Castle Agreement. No
financial statements were filed in connection with such Form 8-K.
21
<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 HOTELS & CASINO RESORTS, INC.
(Registrant)
Date: August 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)
22
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
SEQUENTALLY
NUMBER
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- -----------
<S> <C> <C>
10.46.1 Amendment to Executive Agreement, dated as of
May 16, 1996 by and among Donald J. Trump, Trump
Hotels & Casino Resorts, Inc. and Trump Hotels &
Casino Resorts Holdings, L.P.
10.47.1 Amendment No. 1 to Trump Hotels & Casino Resorts, Inc.
1995 Stock Incentive Plan.
10.65 Services Agreement, dated as of July 8, 1996, among
Trump Plaza Associates, Trump Taj Mahal Associates and
Trump Casino Services, L.L.C.
10.66 Thermal Energy Service Agreement, dated as of June 30,
1996, by and between Atlantic Jersey Thermal Systems,
Inc. and Trump Taj Mahal Associates.
27.1 Financial Data Schedule of Trump Hotels & Casino
Resorts, Inc.
</TABLE>
EXHIBIT 10.46.1
AMENDMENT TO EXECUTIVE AGREEMENT
This AMENDMENT TO EXECUTIVE AGREEMENT (the "Amendment"), entered into as of
May 16, 1996, by and among DONALD J. TRUMP (the "Executive"), TRUMP HOTELS &
CASINO RESORTS, INC., a Delaware corporation (the "Company"), and TRUMP HOTELS
CASINO RESORTS HOLDINGS, L.P., a Delaware limited partnership ("Trump
Holdings"). Capitalized terms not otherwise defined herein shall have the same
meanings as ascribed to them in the Executive Agreement, dated as of June 12,
1995, by and among the parties hereto.
WHEREAS, the Executive, the Company and Trump Holdings wish to amend the
Agreement; and
WHEREAS, the Company's Board of Directors, Special Committee of the Board
of Directors and Compensation Committee of the Board of Directors have approved
this Amendment.
NOW THEREFORE, in consideration of the promises and mutual covenants
contained herein and in the Agreement, the parties hereto agree to amend the
Agreement in accordance with Section 4.13 thereof, as follows:
Article III of the Agreement is hereby amended to add a new Section 3.3 to
read as follows:
Section 3.3 Bonuses. The Compensation Committee of the Board of
Directors of the Company may, in its sole discretion, grant bonuses to
the Executive for Services and for any other services performed by the
Executive.
Except as modified herein, the Agreement shall remain unmodified and in
full force and effect. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
/s/ DONALD J. TRUMP
----------------------------------
Donald. J. Trump
TRUMP HOTELS & CASINO RESORTS, INC.
By: /s/ NICHOLAS L. RIBIS
--------------------------------
Name: Nicholas L. Ribis
Title: President and Chief
Executive Officer
TRUMP HOTELS & CASINO RESORTS
HOLDINGS, L.P.
By: Trump Hotels & Casino Resorts,
Inc., its general partner
By: /s/ NICHOLAS L. RIBIS
--------------------------------
Name: Nicholas L. Ribis
Title: President and Chief
Executive Officer
EXHIBIT 10.47.1
AMENDMENT NO. 1 TO THE
TRUMP HOTELS & CASINO RESORTS, INC.
1995 STOCK INCENTIVE PLAN
WHEREAS, Section 16 of the Trump Hotels & Casino Resorts, Inc. (the
"Company") 1995 Stock Incentive Plan (the "Plan") authorizes the Stock Incentive
Plan Committee (the "Committee") of the Board of Directors of the Company (the
"Board") to amend the Plan; and
WHEREAS, the Committee has authorized the amendment of the Plan to increase
the number of shares of common stock of the Company, par value $0.01 per share
(the "Common Stock"), available for issuance thereunder from 1,000,000 to
4,000,000 shares of Common Stock, subject to stockholder approval; and
WHEREAS, the Committee has instructed the officers of the Company to so
amend the Plan upon such stockholder approval;
NOW, THEREFORE, subject to approval by the stockholders of the Company, the
Plan is hereby amended as follows:
1. Section 5(a) of the Plan is hereby deleted in its entirety and the
following inserted in lieu thereof:
"(a) Subject to Section 13, the aggregate number of shares of Stock made
subject to all Awards may not exceed 4,000,000;"
* * *
As adopted by the Stock Incentive Plan Committee of the Board of Directors of
Trump Hotels & Casino Resorts, Inc. as of May 10, 1996.
EXHIBIT 10.65
SERVICES AGREEMENT
SERVICES AGREEMENT (the "Agreement") made as of the 8th day of July,
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") and TRUMP TAJ MAHAL ASSOCIATES, a New Jersey general
partnership ("Taj Associates").
W I T N E S S E T H:
WHEREAS, Plaza Associates and Taj Associates each require certain
management, financial and other functions necessary and incidental to the
respective operations of each of their casino hotels, together with all other
activities and services that may be reasonably necessary to carry out any of the
foregoing (the "Services"), as set forth herein, TCS desires to provide the
Services to Plaza Associates and Taj Associates, and Plaza Associates and Taj
Associates desire to receive the Services and to reimburse TCS for its expenses
as set forth herein.
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"), and Taj Associates, the owner and operator of the
Trump Taj Mahal Casino Resort (the "Taj Mahal"), each hereby appoint TCS to act
as provider of the Services to Plaza Associates and Taj 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 and/or Taj Associates as may be reasonably
requested from time to time by Plaza Associates or Taj Associates, as the case
may be. TCS shall provide the Services in the manner and at a level of service
consistent in all material respects with those performed by Plaza Associates and
Taj Associates 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 nor Taj Associates is
unfairly advantaged or discriminated against and (ii) neither Plaza Associates
nor Taj Associates realizes a competitive advantage over the other.
(b) The management of TCS in providing the Services hereunder shall
be directed by the Chief Executive Officer of TCS and the Operating Committee of
TCS 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 and Taj Associates,
each of whom shall retain the ability to direct
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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 reimbursements in accordance with
Section 4 of this Agreement, TCS shall receive no compensation for providing the
Services to Plaza Associates or Taj Associates.
Section 4. Reimbursement for Expenses. (a) With respect to the
Services provided, Plaza Associates and/or Taj Associates, as the case may be,
shall pay to TCS an amount sufficient to reimburse all of the costs and expenses
incurred by TCS in providing such Services to Plaza Associates and Taj
Associates, respectively ("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 and Taj 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 both Plaza Associates
and Taj Associates, Services Expenses shall be apportioned between Plaza
Associates and Taj Associates in accordance with their use of such Services.
(c) Services Expenses and Organizational Expenses (as defined) shall
be invoiced by TCS to Plaza Associates and/or Taj Associates, as the case may
be, in such manner and at such times as determined by mutual agreement of the
parties hereto. Plaza Associates and/or Taj Associates, as the case may be,
shall pay such Services Expenses and Organizational Expenses as invoiced
promptly upon receipt thereof.
(d) All organizational expenses incurred by TCS, 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
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("Organizational Expenses") shall be paid by Plaza Associates and Taj
Associates, each being individually responsible for 50% of the Organizational
Expenses.
(e) At the end of each calendar year, TCS, Plaza Associates and Taj
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) TCS shall for all
purposes herein be deemed to be an independent contractor of Plaza Associates
and/or Taj 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
or Taj Associates in the ownership and operation of Trump Plaza and the Taj
Mahal, respectively, it being hereby acknowledged and agreed that Plaza
Associates and Taj Associates are responsible for the entire operation of Trump
Plaza and the Taj Mahal, 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.
(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 and Taj
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 or Taj 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,
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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 AND TAJ
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 AND TAJ 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.
(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
Trump Hotels & Casino Resorts Holdings, L.P. 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.
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(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.
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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/ ROBERT M. PICKUS
-------------------------------------
Name: Robert M. Pickus
Title: Executive Vice President
TRUMP TAJ MAHAL ASSOCIATES
By: /s/ ROBERT M. PICKUS
-------------------------------------
Name: Robert M. Pickus
Title: Executive Vice President
EXHIBIT 10.66
THERMAL ENERGY SERVICE AGREEMENT
THIS THERMAL ENERGY SERVICE AGREEMENT ("Agreement") is entered into as
of the 30th day of June, 1996, by and between ATLANTIC JERSEY THERMAL SYSTEMS,
INC., a Delaware corporation ("Seller"), and TRUMP TAJ MAHAL 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 Taj Mahal Casino Resort located at
1000 Boardwalk at Virginia Avenue, Atlantic City, New Jersey as more
specifically described on Schedule A attached hereto and made a part hereof, as
the same may be expanded or improved from time to time ("Buyer's Facilities");
and
WHEREAS, Buyer presently produces its requirements of steam and
chilled water using steam and chilled water production facilities located
on-site at Buyer's Facilities; 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 a cost savings to Buyer and to offer for sale to third
parties such thermal energy requirements as they may require; and
WHEREAS, Buyer is willing to allow Seller to operate the steam and
chilled water production 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 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.
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(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) "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.
(d) "Metering Equipment" shall have the meaning set forth in Section
9.1 of this Agreement.
(e) "Points of Delivery" shall mean the physical point where Thermal
Energy is delivered to Buyer, as more specifically described on Schedule 1(e)
attached hereto and made a part hereof.
(f) "Points of Return" shall mean the physical point where Seller is
anticipated to receive the condensate from Buyer, as more specifically described
on Schedule 1(f) attached hereto and made a part hereof.
(g) "Service Commencement Date" shall have the meaning set forth in
Section 2.2 of this Agreement.
(h) "Thermal Energy" shall mean, as the context requires, quantities
of heating and cooling energy as measured in mmBtu's/hr. and tons, 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 7.4 of this Agreement.
(i) "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 8.1 of this Agreement.
(j) "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, all as more specifically identified on Schedule 1(j)
attached hereto and made a part hereof.
(k) "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 8.1 of this Agreement.
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2. TERM
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 June 30, 1996 and shall remain in effect for a term of twenty (20) years
following the Service Commencement Date, unless otherwise terminated as provided
herein (the "Term"). To the extent necessary, Seller shall obtain all necessary
corporate approvals by August 15, 1996 or shall notify Buyer by such date that
Seller is unable to do so. Upon the receipt of such notice, Buyer may elect to
terminate this Agreement and retain the payment received under Section 3.2(a)
above.
2.2 Service Commencement Date. Buyer and Seller shall mutually agree
upon a Service Commencement Date upon which Seller shall first make available
and deliver to Buyer's Facilities Thermal Energy as provided herein, but in no
event shall the Service Commencement Date occur any later than September 1,
1996, unless otherwise agreed to in writing by the parties.
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; (ii) an exclusive license commencing on the Service
Commencement Date and continuing thereafter throughout the Term of this
Agreement to use, operate and maintain the Thermal Energy Production 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 to
the extent necessary in the use, operation and maintenance of the Thermal Energy
Production 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.
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 Ten Million ($10,000,000.00)
Dollars (the "License Fee"). The License Fee shall be payable as follows:
(a) Upon the execution and delivery of this Agreement by the parties,
the sum of One Million ($1,000,000.00) Dollars shall be paid to Buyer from the
escrow previously established in accordance with the June 20, 1996 Letter of
Intent by and between Buyer and Seller; and
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(b) On the Service Commencement Date, but in no event later than
September 1, 1996, Seller shall pay to Buyer the sum of Nine Million
($9,000,000.00) Dollars in immediately available funds by wire transfer to an
account designated by Buyer.
3.3 Rights of Buyer. Notwithstanding anything herein contained to the
contrary, until and unless Seller commences delivery of the Thermal Energy to
Buyer as provided in this Agreement, Buyer shall retain the exclusive right to
use, operate and maintain the Thermal Energy Production Facilities and Seller
may not act in any way whatsoever so as to interfere with the use, operation and
maintenance by Buyer of the Thermal Energy Production Facilities, provided that
Buyer shall cooperate with Seller to permit the transition to Seller of the
operating responsibilities for the Thermal Energy Production Facilities by the
Service Commencement Date.
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 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 throughout the
Term of this Agreement at the agreed upon Points of Delivery.
5.2 Facility Operation. Seller will use, operate and maintain the
Thermal Energy Production Facilities in a manner which meets or exceeds good
industry practice. Throughout the Term of this Agreement, 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,
provided, however, that Buyer shall be responsible for complying with all
existing requirements with respect to improvements made or to be made to the
existing oil tanks located at Buyer's Facilities. As soon as practicable, but in
no event later than August 30, 1996, Buyer and Seller shall enter into a
definitive Operating Agreement on terms mutually acceptable to each of them
setting forth their
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respective responsibilities for the use, operation and maintenance of the
Thermal Energy Production Facilities.
5.3 Facility Ownership. Title to the Thermal Energy Production
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.
5.4 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 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 interruption of any
Thermal Energy services provided to Buyer hereunder.
5.5 Buyer's Rights During Interruption in Service. Notwithstanding
anything in this Agreement contained to the contrary, in the event Seller shall
fail to provide and deliver Buyer's Thermal Energy requirements at any time
during this Agreement, Buyer may elect, without being in default of its
obligations under this Agreement, to produce its own Thermal Energy (with or
without use of the Thermal Energy Production Facilities) or to purchase and
accept deliveries of Thermal Energy from any other source, and Buyer shall be
excused from making any payments to Seller required hereunder during such period
of interruption.
5.6 Buyer's Gas Requirements. Commencing on the 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 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 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
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for use in Buyer's Facilities until such time as Seller is able to effect such
transfer.
5.7 Buyer's Electric Requirements. Commencing on the 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.
5.8 Buyer's Water Requirements. Commencing on the 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.
5.9 Buyer's Oil Requirements. Buyer shall have the right throughout
the Term of this Agreement, but not the obligation, to use Seller's oil
inventories stored in Buyer's oil tanks for emergency electric energy generation
purposes, including the testing of the generators and equipment relating
thereto. In the event Buyer uses Seller's oil inventories, Buyer shall reimburse
Seller for the fair market value of the oil utilized.
6. IMPROVEMENTS TO BUYER'S FACILITIES
6.1 Improvements to Thermal Energy Production Facilities. Seller
hereby agrees to make improvements to Buyer's Thermal Energy Production
Facilities by no later than August 1, 1997 through direct capital expenditures
in accordance with Schedule 6.1 attached hereto and made a part hereof (the
"Improvements"). Seller shall submit to Buyer for Buyer's review true copies of
all preliminary and final mechanical plans and specifications, together with any
modifications or change orders relating thereto, for the Improvements prior to
commencing any improvement. All such plans and specification shall be the
property of Buyer and Seller shall execute, acknowledge and deliver such
documents and instruments as Buyer may reasonably require to give effect to or
evidence Buyer's ownership interest in such plans and specifications.
Seller shall complete the Improvements in a manner that meets or
exceeds industry standards for the use and operation of such Improvements.
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7. PURCHASE AND SALE OF THERMAL ENERGY
7.1 Purchase and Sale of Thermal Energy. Commencing on the 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. Provided Buyer's Thermal Energy requirements do not exceed
the levels of contract capacity specified in Schedule 8.1 attached hereto on
more than two (2) occasions within any two (2) consecutive billing periods, the
costs thereof shall be as set forth in Schedule 8.1. Subject to the provisions
of Section 8.2 hereof which shall control in the circumstances described
therein, if Buyer's Thermal Energy requirements exceed the levels of contract
capacity specified in Schedule 8.1 on more than two (2) occasions within any two
(2) consecutive billing periods, the contract capacity specified in Schedule 8.1
shall be increased to the maximum quantity of capacity delivered to Buyer and
the cost thereof shall be as set forth in Schedule 8.1.
7.2 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 same to Seller at the agreed upon
Points of Return.
7.3 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.
7.4 Delivery Specifications. The Thermal Energy delivered by Seller at
the Points of Delivery shall satisfy the conditions of temperature and pressure
specified in Schedule 7.4 attached hereto and made a part hereof.
7.5 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
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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.
8. CHARGES AND PAYMENTS
8.1 Charges for Heating and Cooling Service. For each Billing Month in
which Buyer receives Thermal Energy from Seller, Buyer shall pay Seller the
applicable Thermal Energy Capacity Charges for Thermal Energy set forth in
Schedule 8.1 attached hereto and made a part hereof, and shall pay Seller the
applicable Thermal Energy Usage Charges for Thermal Energy set forth in Schedule
8.1 attached hereto and made a part hereof.
8.2 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 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, provided, however, that Buyer shall have provided Seller
with such additional physical space at Buyer's Facilities as is necessary for
Seller to complete any required improvement to the Thermal Energy Production
Facilities as a result of such additional Thermal Energy requirements of Buyer.
8.3 Capacity Charge Payments; No Set-Off. Payment of the Thermal
Energy Capacity Charges and Thermal Energy Usage Charges are each conditioned on
Seller's ability to deliver to Buyer at the Points of Delivery the full Thermal
Energy requirements of Buyer under this Agreement, but, 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, the applicable Thermal Energy
Capacity Charges shall be adjusted to pro rate for such deficiency.
8.4 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
- 8 -
<PAGE>
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.
8.5 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 (1%) per annum.
8.6 Third Party Sales Rebates. If Seller shall sell or otherwise
transfer quantities of thermal energy produced from the Thermal Energy
Production Facilities to any third party, Seller shall provide Buyer with the
rebates set forth in Schedule 8.1 attached hereto for each unit of heating
energy, measured in mmBtu's, and each unit of cooling energy, measured in
tons/hr., so transferred.
9. METERING
9.1 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 data logging equipment
required to measure and record all charges payable by Buyer under this Agreement
(collectively, the "Metering Equipment").
9.2 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; 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.
9.3 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.
10. SALE OF THERMAL ENERGY TO THIRD PARTIES
10.1 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
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<PAGE>
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.
10.2 Sale of Third Party Thermal Energy Requirements. Provided that and
for so long as Seller has satisfied all of its obligations under this Agreement
and is not in breach of any of its obligations hereunder, including, without
limitation, the obligations and conditions set forth in Section 6 of this
Agreement, Seller may use Buyer's Thermal Energy Production Facilities to
generate thermal energy for sale to persons or entities other than Buyer ("Third
Party Thermal Energy Requirements").
11. REPRESENTATIONS AND WARRANTIES
11.1 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 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; 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
- 10 -
<PAGE>
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.
11.2 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 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.
(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.
12. INDEMNIFICATION/INSURANCE
12.1 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
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<PAGE>
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.
12.2 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.
12.3 Seller's Insurance. Seller shall maintain throughout the Term of
this Agreement, at its sole cost and expense, the policies of insurance meeting
the terms and conditions set forth on Schedule 12.3 attached hereto and made a
part hereof.
12.4 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 or surrounding premises and arising out of or
incident to the operation, maintenance, repair, construction, replacement or
modification of Buyer's Facilities.
12.5 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 12.3 and 12.4, 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 -
<PAGE>
13. DEFAULT
13.1 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 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, shall constitute an immediate Event of Default.
13.2 Buyer Default. Anyone 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,
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<PAGE>
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 thirty (30) days following
notice and written demand by Seller to cure the same.
14. REMEDIES
14.1 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.
14.2 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) and obtain reimbursement 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.
15. FORCE MAJEURE
15.1 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)
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<PAGE>
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.
15.2 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.
15.3 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 or fuel or power, order, changes in law, orders
of governmental authorities, and equipment failures that are not due to the
negligence of the non-performing party.
16. 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 15.2 of this Agreement, or (iv) by Buyer in the event of any increase in
the Thermal Energy Capacity Charges resulting from the imposition of any law or
regulation, whether now existing or hereafter enacted, (including without
limitation any rate regulation by the State of New Jersey Board of Regulatory
Commissions) or the administration or interpretation thereof by any Governmental
Authority.
17. MISCELLANEOUS
17.1 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,
- 15 -
<PAGE>
pledge or mortgage this Agreement as security for the obligations or
indebtedness of such party without the approval of the other party.
17.2 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 Highway, Route 40 & 32 Avenue, Mays
Landing, New Jersey 08330, Attention: President; and if to Buyer: Trump Taj
Mahal Associates, 1000 Boardwalk at Virginia Avenue, 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.
17.3 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 17.3, however, shall
limit either party's rights or remedies to recover any direct damages for a
breach of this Agreement.
17.4 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.
17.5 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.
17.6 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.
17.7 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
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<PAGE>
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.
17.8 Governing Law. This Agreement shall be construed in accordance
with and shall be enforceable under the laws of the State of New Jersey.
17.9 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.
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/ FRANK E. DICOLA
-------------------------
Name: Frank E. DiCola
Title: President
TRUMP TAJ MAHAL ASSOCIATES
By: TRUMP ATLANTIC CITY CORPORATION,
General Partner
By: /s/ BRUCE R. McKEE
--------------------------
Name: Bruce R. McKee
Title:
- 17 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TRUMP HOTELS & CASINO RESORTS, INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 181,750
<SECURITIES> 0
<RECEIVABLES> 74,240
<ALLOWANCES> 19,149
<INVENTORY> 10,341
<CURRENT-ASSETS> 266,486
<PP&E> 1,858,760
<DEPRECIATION> 395,496
<TOTAL-ASSETS> 1,943,961
<CURRENT-LIABILITIES> 127,686
<BONDS> 1,355,000
0
0
<COMMON> 241
<OTHER-SE> 399,024
<TOTAL-LIABILITY-AND-EQUITY> 1,943,961
<SALES> 321,006
<TOTAL-REVENUES> 359,391
<CGS> 0
<TOTAL-COSTS> 192,491 <F1>
<OTHER-EXPENSES> 97,240 <F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,147
<INCOME-PRETAX> (9,969)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,969)
<DISCONTINUED> 0
<EXTRAORDINARY> (59,132)
<CHANGES> 0
<NET-INCOME> (54,273)
<EPS-PRIMARY> (3.42)
<EPS-DILUTED> (3.42)
<FN>
<F1>Includes gaming, lodging, food & beverage and other
<F2>Includes general & administration and depreciation & amortization
</FN>
</TABLE>
