-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q6e8ZGXLHX6bRh85dn16lm0WqYFbKgF3CyqTF1YN76+M7dKuINtsp85j2TmVEC51 ic4P+KWgxQNgj5cGgVpv1g== 0000912057-96-026162.txt : 19961118 0000912057-96-026162.hdr.sgml : 19961118 ACCESSION NUMBER: 0000912057-96-026162 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD GAMING CORP CENTRAL INDEX KEY: 0000914577 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 133738518 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-25244 FILM NUMBER: 96662623 BUSINESS ADDRESS: STREET 1: ONE PENN PLAZA STREET 2: STE 4303 CITY: NEW YORK STATE: NY ZIP: 10119-0002 BUSINESS PHONE: 2128263355 MAIL ADDRESS: STREET 1: ONE PENN PLAZA STREET 2: STE 4303 CITY: NEW YORK STATE: NY ZIP: 10119-0002 10QSB 1 10QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ____________ TRANS WORLD GAMING CORP. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 13-3738518 (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) ONE PENN PLAZA, NEW YORK, NEW YORK 10119 (Address of principal executive offices) (Zip Code) (212) 563-3355 (Issuer's telephone number including area code) Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO . --- --- Shares of the Registrant's Common Stock, par value $.001, outstanding as of June 30, 1996: 2,544,286. --------- TRANS WORLD GAMING CORP. FORM 10-QSB INDEX PART 1 - FINANCIAL INFORMATION PAGE ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 3 (UNAUDITED) AND DECEMBER 31, 1995 CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) FOR 4 THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR 5 THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 7 to 10 CONDITION OR PLAN OF OPERATIONS PART II - OTHER INFORMATION ITEM 5.OTHER INFORMATION 11 ITEM 6. EXHIBITS 11 2 FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED STATEMENTS TRANS WORLD GAMING CORP. CONDENSED CONSOLIDATED BALANCE SHEET ( IN THOUSANDS) ASSETS Sept 30, Dec 31, 1996 1995 --------- --------- CURRENT ASSETS (unaudited) Cash & equivalents $965 $216 Accounts/Notes receivable 417 282 Inventories 77 43 Other current assets 66 56 --------- --------- Total current assets 1,525 597 --------- --------- PROPERTY AND EQUIPMENT -net 1,329 1,413 --------- --------- OTHER ASSETS Investment at equity 75 75 Deferred facility costs - net 9,964 10,425 Goodwill - net 650 676 Deferred placement costs - net 701 0 Discount on convertible debt - net 990 0 Deferred income tax 264 320 Other deferred costs - net 35 40 --------- --------- Total other assets 12,679 11,536 --------- --------- TOTAL ASSETS $15,533 $13,546 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Current portion of long term debt $282 $3,913 Accounts payable and accrued expenses 590 334 --------- --------- Total current liabilities 872 4,247 --------- --------- LONG TERM DEBT, net of current portion 5,977 1,178 --------- --------- STOCKHOLDERS EQUITY Capital stock 3 3 Additional paid-in-capital 8,600 8,600 Stock warrants outstanding 1,502 0 Accumulated deficit (1421) (482) --------- --------- Total stockholders equity 8,684 8,121 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $15,533 $13,546 --------- --------- --------- --------- SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS 3 TRANS WORLD GAMING CORP. CONDENSED CONSOLIDATED STATEMENT OF EARNINGS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
Nine Months ended Three months ended September 30, September 30, 1996 1995 1996 1995 ---- ---- ---- ---- Revenues $4,963 $4,408 $1,703 $1,430 Costs and expenses Cost of revenue 2,556 2,073 962 715 Administrative 1,623 831 447 297 Depreciation and Amortization 734 413 346 106 -------------------- -------------------- Total costs and expenses 4,913 3,317 1,755 1,118 -------------------- -------------------- Earnings/(loss) from operations 50 1,091 (52) 312 Interest expense 926 439 189 152 -------------------- -------------------- Earnings/(loss) before taxes (876) 652 (241) 160 Provision for tax 64 180 20 33 -------------------- -------------------- Net earnings/(loss) ($940) $472 ($261) $127 -------------------- -------------------- -------------------- -------------------- Earnings/(loss) per share ($0.37) $0.19 ($0.10) $0.05 Common shares used in computing earnings per share 2,544 2,544 2,544 2,544
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS 4 TRANS WORLD GAMING CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) Nine Months Ended September 30, 1996 1995 -------- -------- Cash flows from operating activities ($413) $354 Cash flows from investing activities (7) (346) Cash flows from financing activities Proceeds from long term debt 4,800 0 Proceeds from short term notes 375 135 Repayment of outstanding debt (4,006) (686) -------- -------- Net cash from financing activities 1,169 (551) Net increase/(decrease) in cash 749 (543) Cash - beginning of period 216 812 -------- -------- Cash - end of period $965 $269 -------- -------- -------- -------- SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS 5 TRANS WORLD GAMING CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. Unaudited Statements. The accompanying consolidated financial statements for the three and nine months ended September 30, 1996 and September 30, 1995 are unaudited and reflect all adjustments of a normal and recurring nature to present fairly, and not misleading, the financial position and results of operation and cash flows for the interim periods. These unaudited statements have been prepared by the Company in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in such financial statements have been condensed or omitted. These financial statements should be read in conjunction with the financial statements and notes thereto, together with management's discussion and analysis of financial condition and results of operations, contained in the Company's Annual Report on Form 10K-SB/A for the year ended December 31, 1995. The results of operations for the nine months ended September 30, 1996 are not necessarily indicative of the results for the entire year ending December 31, 1996. 2. Earnings/(loss) per share were calculated based on 2,544,286 shares of common stock outstanding for the three and nine months ended September 30, 1996 and 1995 respectively. 3. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation", which encourages companies to recognize compensation expense in the income statement based on the fair value of the underlying common stock at the date the awards are granted. However, it will permit continued accounting under APB Option 25, "Accounting for Stock Issued to Employees" accompanied by disclosure of the pro forma effects on net income and earnings per share had the new accounting rules been applied. The statement is effective for calendar year 1996. The Company has not yet determined which method it will follow for measuring compensation cost attributed to stock operations or the impact of the new standard on its consolidated financial statements. 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Results of Operations THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 REVENUES. The consolidated revenue of Trans World Gaming Corp. "TWG" or the "Company" for the three months ended September 30, 1996 was $1,703,000, an increase of 19% over the revenues for the three months ended September 30, 1995. Video poker revenues for the third quarter totaled $969,000 representing a 12% increase over second quarter revenues in the prior fiscal year. Seven percent of the video poker revenue increase was due to the Toledo Palace video poker parlor located in DeRidder, LA which opened on October 19, 1995. Video poker revenues from the Company's other video poker parlor, the Gold Nugget located in Lafayette, LA, increased 5% to $909,000 during the three months ended September 30, 1996 as compared to the similar period in 1995. Revenues from fuel, food and beverage and convenience store operations at the Woodlands Truck Plaza located in DeRidder, LA in the second quarter of 1996 increased 30% to $734,000 over the revenues for the second quarter 1995. The Company believes that the revenues at the Gold Nugget will continue to be higher than the average video poker parlor at truck stops in Louisiana. Revenues at the Toledo Palace have increased steadily from an average daily revenue per device of $50 in the fourth quarter 1995 to an average of $66 through the third quarter 1996. The Company has received approval by the Louisiana authorities for the installation of eighteen additional devices in the video parlor at the Toledo Palace. The Louisiana authorities must activate the devices as part of the State-wide video poker system on-site in DeRidder. The Company cannot predict when the activation will take place. The Toledo Palace currently has fifteen devices installed and is licensed for up to fifty. COST OF REVENUE. Cost of Revenue as a percentage of revenues increased to 56% in the third quarter 1996 from 50% in the third quarter 1995, due primarily to a year-to-date accounting adjustment to the truck stop fuel and supplies inventory. ADMINISTRATIVE. Administrative expenses in the third quarter 1996 were $447,000 which is an increase of $150,000 over the third quarter 1995. This increase is comprised mainly of the following expense items: new business development costs of $32,000, consulting fees of $20,000 and office relocation costs of $80,000. INTEREST AND OTHER INCOME. As a result of the grant of warrants to purchase 499.925 shares of TWG common stock in connection with the Bridge and the subsequent repayment of the Bridge loans, interest expense increased by 24% in the third quarter 1996 to $189,000 compared with the third quarter 1995. The increase is due primarily to interest expense in connection with the $4.8 million 12% Secured Convertible Senior Bonds due June 30, 1999 (the "Senior Bonds") issued in the third quarter 1996 which refinanced the Chrysolith Note of $2.4 million at 15% interest. 7 Results of Operations NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 REVENUES. The Company's revenues for the nine months ended September 30, 1996 were $4,963,000 which is a 13% increase over the revenues for the nine months ended September 30, 1995. Video poker revenues for the nine months ended September 30, 1996 totaled $2,914,000 representing a 10% increase over nine months revenues in the corresponding prior fiscal year. Seven percent of this video poker revenue increase was due to the Toledo Palace video poker parlor located in DeRidder, LA, which opened on October 19, 1995. Video poker revenues from the Company's other video poker parlor, the Gold Nugget located in Lafayette, LA, increased 3% to $2,729,000 in 1996 over the corresponding nine months of 1995. Revenues from fuel, food and beverage and convenience store operations at the Woodlands Truck Plaza located in DeRidder, LA for the nine months ended September 30, 1996 increase 17% to $2,049,000 over the revenues for the nine months of 1995. COST OF REVENUE. Cost of Revenue as a percentage of revenues increased to 52% in the nine months of 1996 from 47% in the first nine months of 1995 with approximately 2% of the increase due to costs associated with the operation of Toledo Palace, which opened in October, 1995, and 2% due to a year-to-date accounting adjustment to the truck stop fuel and supplies inventory. ADMINISTRATIVE. Administrative expenses for the first nine months of 1996 were $1,623,000 which is an increase of $792,000 over the first nine months of 1995. This increase is the resignation of the Company's Chief Executive Officer in March, 1996; financing, legal and accounting costs of approximately $175,000 in connection with an unsuccessful effort to complete a proposed underwritten secondary offering of securities in March 1996; consulting fees for exploring potential acquisitions of approximately $50,000; and fees of approximately $43,000 and expenses of approximately $230,000 in connection with the Company's efforts to refinance the Chrysolith Note, the Monarch Note and the Woodlands Note, new business development expenses of $32,000, consulting fees of $20,000 and office relocation costs of $80,000. INTEREST AND OTHER INCOME. Interest expense increased by 111% or $487,500 in the first nine months of 1996 to $926,000 compared with the first nine months of 1995. LIQUIDITY AND CAPITAL RESOURCES The level of cash increased by $749,000 for the nine months ended September 30, 1996 due primarily to the receipt of the net proceeds of the private placement of $4.8 million in aggregate principal amount of the Senior Bonds. In June 1996, through C.P. Baker & Co., Ltd. ("Baker") as placement agent, the Company privately offered to selected accredited investors a minimum of 7 units and a maximum of 12 units, each unit (the "Unit") consisted of one $500,000 principal amount of Senior Bonds and a warrant to purchase 100,000 shares of common stock, par value $.001 per share of the Company (the "Common Stock") 8 at an exercise price of $1.00 per share (the "Warrant(s)"). The Warrants are exercisable at any time until June 30, 2001. The Senior Bonds are convertible at the option of the holder thereof at a conversion price of $5.00 per share of TWG common stock. The Company may at its option, redeem the Senior Bonds, in whole but not in part, a 100% of the principal amount together with the interest accrued thereon through the date fixed for redemption, within six months following a public offering by the Company of common stock that raises not less than $6,000,000 in gross proceeds. Holders of the Warrants are entitled to have their shares of TWG common stock subject to the Warrants registered as part of the next registered public offering of the common stock of the Company as permitted under the rules of the Securities and Exchange Commission. If no public offering of common stock has occurred by December 31, 1997, then upon written request of the holders of Warrants issued in connection with the Bonds and exercisable for not less than 700,000 shares of common stock, the Company will be obligated to file and use its reasonable efforts to cause to be declared effective a registration statement or post-effective amendment as permitted under the Securities Act of 1933. Interest on the Senior Bonds is payable by the Company semi-annually with the first payment due on December 15, 1996. The Company and Baker have agreed to extend the offering through November 30, 1996. As compensation to Baker, the Company paid a cash commission of 10% and a non-accountable expense allowance of 3% of the gross proceeds raised in this offering. Through October 31, 1996 the Company has issued Senior Bonds and received gross proceeds of $4.8 million. The net proceeds to the Company of this private placement after deducting commissions, non-accountable expenses, and offering expenses were approximately $4.1 million. The proceeds were used to retire the Chrysolith and Monarch Notes ($2.1 million) which were due on June 30, 1996, to repay the outstanding balance of the bridge financings due Baker ($220,000), to pay the scheduled quarterly payment of June 21, 1996 on the Prime Note ($292,000), to retire the Woodlands Note ($435,000), to pay trade payables ($300,000) and for general corporate purposes ($700,000). In connection with the issuance of the Senior Bonds, The Company has recorded a capital item the following items in the second quarter, 1996: placement costs through September 30, 1996 of $762,500 consisting of $624,000 in commissions and fees paid to Baker, and legal fees of $138,500, all of which will be amortized over the term of the debt in thirty-six (36) equal monthly installments. Also, the Company determined that the fair market value of the common stock underlying the issuance of the 960,000 Warrants to purchase 960,000 shares of TWG common stock to be $1,080,000 or $1 1/8 per share, based on daily trading prices as reported on the NASDAQ National Market System from December 1994 through June 1996, The Company has therefore recorded the fair market value as a Discount on Convertible Debt which will be amortized over a thirty-six (36) month period unless converted to common stock. The Company believes, although there can be no assurance, that existing cash and anticipated cash flow from current operations will be sufficient to satisfy its liquidity and capital requirements for the next twelve months. On November 5, 1996 the voters in Lafayette and Beauregard parishes in Louisiana where the Company currently has video poker operations, were among 35 of 64 Louisiana parishes that voted to eliminate video poker. As a result, the 9 Company must cease its video poker operations by June 30, 1999 in both of those parishes. The Company believes that cash flow generated from existing operations (barring any extraordinary circumstances) and assuming operations continue at or above current levels, should be sufficient to cover carrying interest and retire its existing debt over the next 32 months. Local gaming associations are evaluating their options to challenge the legality of local option gaming elections. The Company is evaluating the potential impact that this voter mandate has under FASB 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." NOTE ON FORWARD-LOOKING INFORMATION Certain statements in this Form 10-QSB and in the future filings by the Company with the Securities and Exchange Commission and in the Company's written and oral statements made by or with the approval of an authorized executive officer constitute "forward-looking statements" within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The words "believe", "expect" and "anticipate" and similar expressions identify forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, but are subject to many uncertainties and factors relations to the Company's operations and business environment which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Examples of such uncertainties included, but are not limited to, changes in customer demand and requirements, mix of leases written, new product announcements, interest rate fluctuations, changes in federal income tax laws and regulations, competition, industry specific factors and world wide economic and business conditions. The mix of leases written in a quarter is a result of a combination of factors, including, but not limited to, changes in customer demands and/or requirements, new product announcements, price changes, changes in delivery dates, changes in maintenance policies and the pricing policies of equipment manufacturers, and price competition from other lessors. The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. 10 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION On September 12, 1996, Mr. Roy Student, citing personal reasons, resigned from the Company's Board of Directors. Mr. Andrew Tottenham and Mr. Richard Taft will serve on both the Audit and Compensation Committees. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Item Method of Filing ---- ---------------- 3.1 Articles of Incorporation, Incorporated by reference to as amended Exhibit 3.1 contained in the registration statement on Form SB-2 (File No. 33-85446-A). 3.2 Bylaws Incorporated by reference to Exhibit contained in the registration statement on Form SB-2 (File No. 33-85446-A). 4.1 Form of 12% Secured Filed herewith Convertible Senior Bond due June 30, 1999 4.2 Form of Warrant dated Filed herewith. June 30, 1996. 27.1 Financial Data Schedule Filed herewith. 99.1 Press Release dated Filed herewith. November 6, 1996. (b) Reports on Form 8-K None. Signature: TRANS WORLD GAMING CORP. Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRANS WORLD GAMING CORP. ---------------------------------------- Dominick J. Valenzano Chief Financial Officer & Treasurer November 12, 1996 EX-4.1 2 EXHIBIT 4.1 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED. No. 8 $200,000 TRANS WORLD GAMING CORP. TRANS WORLD GAMING OF LOUISIANA, INC. 12% Secured Convertible Senior Bond Due 1999 Trans World Gaming Corp., a Nevada corporation ( TWG ), and its wholly-owned subsidiary, Trans World Gaming of Louisiana, Inc., a Louisiana corporation (collectively, the Issuer ), for value received hereby promises to pay jointly and severally to Fundamental Investors, L.P., or registered assigns, the principal sum of Two Hundred Thousand Dollars at the Issuer's office or agency for said purpose, on June 30, 1999, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest semi-annually on December 15 and June 15 (each an Interest Payment Date ) of each year, commencing with December 15, 1996, on said principal sum in like coin or currency at 12% per annum at said office or agency from the most recent Interest Payment Date to which interest on the Securities has been paid or duly provided for unless the date hereof is a date to which interest on the Securities is paid or duly provided for, in which case from the date of this Security, or unless no interest has been paid or duly provided for on the Securities, in which case from the date of issuance. The interest so payable on any Interest Payment Date will, except as otherwise provided in the Indenture referred to on the reverse hereof, be paid to the Person in whose name this Security is registered at the close of business on December 1 or June 1, whether or not a Business Day (each an Interest Record Date ) next preceding such Interest Payment Date, whether or not such day is a Business Day; provided that interest may be paid, at the option of the Issuer, by mailing a check therefor payable to the registered Holder entitled thereto at his last address as it appears on the Security register. Notwithstanding the foregoing, if the date hereof is after an Interest Record Date and before the immediately following Interest Payment Date, this Security shall bear interest from such Interest Payment Date; provided that if the Issuer shall default in the payment of interest due on such Interest Payment Date, then this Security shall bear interest at 18% per annum from the next preceding Interest Payment Date to which interest on the Securities has been paid or duly provided for, or, if no interest has been paid or duly provided for on the Securities since the original issue date of this Security, from such date. Interest on this Security will be calculated on the basis of a 360-day year, consisting of twelve 30-day months. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth in this place. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed under its corporate seal. [Seal] TRANS WORLD GAMING CORP. By: ________________________________________________ Stanley Kohlenberg President & CEO By: ________________________________________________ TRANS WORLD GAMING OF LOUISIANA, INC. By:_________________________________________________ Stanley Kohlenberg President & CEO By:_________________________________________________ [REVERSE OF SECURITY] TRANS WORLD GAMING CORP. TRANS WORLD GAMING OF LOUISIANA, INC. 12% Secured Convertible Senior Bond Due 1999 [NOTWITHSTANDING ANYTHING SET FORTH IN THIS BOND TO THE CONTRARY, THE ISSUER IS NOT REQUIRED TO APPOINT A TRUSTEE UNLESS THE HOLDERS OF 25% IN PRINCIPAL AMOUNT OF THE SECURITIES SHALL REQUEST AN APPOINTMENT IN WRITING OF U.S. TRUST COMPANY OF TEXAS, N.A. OR SUCH OTHER PERSON AS IS QUALIFIED UNDER THE TIA AND IS REASONABLY ACCEPTABLE TO THE HOLDERS OF A MAJORITY IN PRINCIPAL AMOUNT OF THE SECURITIES THEN OUTSTANDING. EXCEPT AS SET FORTH IN THE IMMEDIATELY FOLLOWING PARAGRAPH, UNTIL SUCH APPOINTMENT, ANY REFERENCE TO THE TRUSTEE SHALL BE GIVEN NO FORCE OR EFFECT, THE ISSUER SHALL ACT AS REGISTRAR, PAYING AGENT AND CONVERSION AGENT AND ANY NOTICE TO BE GIVEN, OR ACTION TO BE TAKEN (OTHER THAN ACTIONS TO BE TAKEN PURSUANT TO THE PROCEDURES RELATING TO THE REDEMPTION OF SECURITIES, WHICH MAY BE TAKEN BY THE ISSUER), BY THE TRUSTEE MAY BE GIVEN OR TAKEN BY HOLDERS OF A MAJORITY OF THE PRINCIPAL AMOUNT OF OUTSTANDING SECURITIES UNLESS ANY APPLICABLE PROVISION HEREOF OR OF THE INDENTURE EXPRESSLY SPECIFIES A DIFFERENT PERCENTAGE OF HOLDERS. PRIOR TO THE APPOINTMENT OF A TRUSTEE, THIS SECURITY REQUIRES NO CERTIFICATE OF AUTHENTICATION BUT WILL NOT BE VALID UNLESS MANUALLY SIGNED BY TWO OFFICERS OF THE ISSUER.] This Security is one of a duly authorized issue of debt securities of the Issuer, limited to the aggregate principal amount of $6,000,000 [, issued or to be issued pursuant to an indenture dated as of , (the Indenture ), duly executed and delivered by the Issuer to , as Trustee (herein called the Trustee )]. [The terms of the Securities include those set forth in the indenture attached hereto as Exhibit A (the Indenture ), which is incorporated herein by reference thereto.]* Reference is hereby made to the Indenture and all indentures supplemental thereto for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Issuer and the Holders (the words Holders or Holder meaning the registered holders or registered holder) of the Securities. The Securities are general secured obligations of the Issuer. Capitalized terms used in this Security and not defined herein shall have the meaning set forth in the Indenture. [All references in this Security or in the Indenture to the Trustee shall be deemed to be of no force and effect. Until such time as a Trustee is appointed, any notice, report, certificate or other document required to be issued to the Trustee shall be issued to the Holders and any notice to be given, or action to be taken (other than actions to be taken pursuant to the procedures relating to the redemption of Securities, which may be taken by the Issuer), by the Trustee may be given or taken by Holders of a majority of the principal amount of outstanding Securities unless any applicable provision hereof or of the Indenture expressly specifies a different percentage of Holders.]* In case an Event of Default (as defined in the Indenture) shall have occurred and be continuing, the principal and interest in respect of all of the Securities then outstanding may be declared due and payable in the manner and with the effect, and subject to the conditions, provided in the Indenture. The Indenture provides that the Holders of a majority in aggregate principal amount of the Securities then outstanding, by notice to the Trustee, may on behalf of the Holders of all of the Securities, waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium on, or the principal of, the Securities or in respect of a covenant or provision that cannot be modified or amended without the consent of all Holders of the Securities. Any such consent or waiver by the Holder of this Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Security and any Security which may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Security or such other Securities. The Indenture permits the Issuer and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time outstanding, evidenced as in the Indenture provided, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or modifying in any manner the rights of the Holders of the Securities; provided that no such supplemental indenture shall, without the consent of each Holder affected thereby (with respect to any Securities held by a non-consenting Securityholder) (i) reduce the principal amount of Securities whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Security or alter the provisions with respect to the redemption of the Securities, (iii) reduce the rate of or change the time for payment of interest on any Security, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Securities (except a rescission of acceleration of the Securities by the Holders of at least a majority in aggregate principal amount of the then outstanding Securities and a waiver of the payment default that resulted from such acceleration), (v) make any Security payable in money other than that stated in the Securities, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Securities to receive payments of principal of or interest on the Securities, (vii) waive a redemption payment with respect to any Security or (viii) make any change in the foregoing amendment and waiver provisions. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligations of the Issuer, which are absolute and unconditional, to pay the principal of and the interest on this Security at the place, times, and rate, and in the currency, herein prescribed. The Securities are issuable only as registered Securities without coupons. At the office or agency of the Issuer referred to on the face hereof and in the manner and subject to the limitations provided in the Indenture, Securities may be exchanged for a like aggregate principal amount of Securities of other authorized denominations. Upon due presentment for registration of transfer of this Security at the above-mentioned office or agency of the Issuer, a new Security or Securities of authorized denominations, for a like aggregate principal amount, will be issued to the transferee as provided in the Indenture. No service charge shall be made for any such transfer, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. As provided in the Indenture, the Securities may not be redeemed by the Issuer except the Issuer may redeem the Securities in whole, but not in part, within six months following a public offering by the Issuer of common stock in which the gross proceeds to the Issuer are not less than $6,000,000, upon mailing a notice of such redemption not less than 30 nor more than 60 days prior to the date fixed for redemption to the Holders of Securities to be redeemed, at a redemption price equal to 100% of the principal amount of the Securities redeemed, together with accrued and unpaid interest to the date fixed for redemption. Subject to payment by the Issuer of a sum sufficient to pay the amount due upon redemption, interest on this Security shall cease to accrue upon the date duly fixed for redemption of this Security. A holder of a Security may convert it into Common Stock of TWG at any time before the close of business on June 30, 1999. If the Security is called for redemption, the holder may convert it at any time before the close of business on the redemption date. The initial conversion price is $5.00 per share, subject to adjustment in certain events. To determine the number of shares issuable upon conversion of a Security, divide the principal amount to be converted by the conversion price in effect on the conversion date. On conversion no payment or adjustment for interest will be made. TWG will deliver a check for any fractional share. To convert a Security a holder must (1) complete and sign the conversion notice on the back of the Security, (2) surrender the Security to a Conversion Agent, (3) furnish appropriate endorsements and transfer documents if required by the Registrar or Conversion Agent, and (4) pay any transfer or similar tax if required. A holder may convert a portion of a Security if the portion is $1,000 or a whole multiple of $1,000. The conversion price will be adjusted for dividends or distributions on Common Stock payable in TWG stock; subdivisions, combinations or certain reclassifications of Common Stock; distributions to all holders of Common Stock of certain rights to purchase Common Stock at less than the current market price at the time; distributions to such holders of assets or debt securities of TWG or certain rights to purchase securities of TWG (excluding cash dividends or distributions from current or retained earnings). However, no adjustment need be made if Securityholders may participate in the transaction or in certain other cases. TWG from time to time may voluntarily reduce the conversion price for a period of time. The Issuer, the Trustee and any authorized agent of the Issuer or the Trustee may deem and treat the registered Holder hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon made by anyone other than the Issuer or the Trustee or any authorized agent of the Issuer or the Trustee), for the purpose of receiving payment of, or on account of, the principal hereof and premium, if any, and subject to the provisions on the face hereof, interest hereon and for all other purposes, and neither the Issuer nor the Trustee nor any authorized agent of the Issuer or the Trustee shall be affected by any notice to the contrary. No recourse shall be had for the payment of the principal of, premium, if any, or the interest on this Security, for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture or any indenture supplemental thereto, against any incorporator, shareholder, officer, employee or director, as such, past, present or future, of the Issuer or the Trustee or of any successor corporation, either directly or through the Issuer or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). [This Security shall not be valid or obligatory until the certificate of authentication hereon shall have been duly signed by an authorized signatory of the Trustee acting under the Indenture.]* [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities described in the within-mentioned Indenture. Dated: , as Trustee By: ______________________________________ Authorized Signatory ]** ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to: _______________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint _________________________________________ agent to transfer this Security on the books of the Issuer. The agent may substitute another to act for him. CONVERSION NOTICE To convert this Security into Common Stock of TWG, check the box: To convert only part of this Security, state the amount: $__________________ If you want the stock certificate made out in another person's name, fill in the form below: _______________________________________________________________________________ (insert other person's soc. sec. or tax I.D. no.) _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Print or type other person's name, address and zip code) Date:_______________________________ _____________________________________ Your Signature _________________________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guaranty _________________________________________ Notice: Signature must be guaranteed by an "Eligible Guarantor Institution" as defined by Securities Exchange Act Rule 17Ad-15. EX-4.2 3 EXHIBIT 4.2 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES ACT, AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED. WARRANT TO PURCHASE COMMON STOCK TRANS WORLD GAMING CORP. (a Nevada corporation) Dated: July 1, 1996 THIS CERTIFIES that Fundamental Investors, L.P. (together with its assigns, the "Holder") is entitled to purchase from Trans World Gaming Corp., a Nevada corporation ("Company") up to 40,000 shares of the Company's common stock, par value $.001 per share (the "Common Stock"), at a purchase price of $1.00 per share of Common Stock (the "Warrant Price"), subject to adjustment as hereafter provided. This Warrant is issued pursuant to a Subscription Agreement dated July 24, 1996 (the "Subscription Agreement"), among the Company, Trans World Gaming of Louisiana, Inc., the Holder and certain other subscribers. 1. Exercise of the Warrant. The rights represented by this Warrant may be exercised at any time on or before 5:00 p.m., New York time, on June 30, 2001, in whole or in part, by (i) the surrender of this Warrant (with the purchase form at the end of hereof properly executed) at the principal executive office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company); (ii) payment to the Company of the Warrant Price then in effect for the number of shares of Common Stock specified in the above-mentioned purchase form together with applicable stock transfer taxes, if any; and (iii) delivery to the Company of a duly executed agreement signed by the person(s) designated in the purchase form to the effect that such person(s) agree(s) to be bound by the provisions of Paragraph 5 and subparagraphs (b), (c) and (d) of Paragraph 6 hereof. This Warrant shall be deemed to have been exercised, in whole or in part to the extent specified, immediately prior to the close of business on the date this Warrant is surrendered and payment is made in accordance with the foregoing provisions of this Paragraph 1, and the person or persons in whose name or names the certificates for the Securities shall be issuable upon such exercise shall become the Holder or Holders of record of such Common Stock at that time and date. The Common Stock so purchased shall be delivered to the Holder within a reasonable time, not exceeding ten (10) business days, after the rights represented by this Warrant shall have been so exercised. 2. Transfer. This Warrant may be assigned in whole or in part by the Holder by (i) completing and executing the form of assignment at the end hereof and (ii) surrendering this Warrant with such duly completed and executed assignment form for cancellation, accompanied by funds sufficient to pay any transfer tax, at the office or agency of the Company referred to in Paragraph 1 hereof; whereupon the Company shall issue, in the name or names specified by the Holder (including the Holder) a new Warrant or Warrants of like tenor and representing in the aggregate rights to purchase the same number of shares of Common Stock as are then purchasable hereunder. 3. Covenants of the Company. (a) The Company covenants and agrees that all Common Stock and Common Stock issuable upon exercise of this Warrant will, upon issuance, be duly and validly issued, fully paid and nonassessable and no personal liability will attach to the holder thereof by reason of being such a holder, other than as set forth herein. (b) The Company covenants and agrees that during the period within which this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of this Warrant. (c) The Company covenants and agrees that for so long as the Common Stock shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrant to be listed on or quoted by The NASDAQ National Market System or on the NASDAQ Stock Market and the Boston Stock Exchange. 4. No Rights of Stockholder. This Warrant shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 5. Registration. (a) The Holder shall have the right to have the shares of Common Stock underlying this Warrant registered as part of the next public offering of the Common Stock. If no Common Stock offering has occurred by December 31, 1997, then upon the written request of the holders of Warrants issued on the date hereof and exercisable for not less than 600,000 shares of Common Stock (as such number may be adjusted under Paragraph 7), and on a one-time basis, the Company shall file and use its best efforts to cause to be declared effective by the Securities and Exchange Commission a registration statement or post-effective amendment thereto as permitted under the Securities Act of 1933, as amended (the "Act"), covering the sale by the Holder of (i) this Warrant or any portion hereof, (ii) the Common Stock issuable upon exercise of this Warrant or any portion hereof, or (iii) both, as the Holder may elect (the "Registerable Securities"). The Company shall supply prospectuses in order to facilitate the public sale or other disposition of the Registerable Securities, use its best efforts to register and qualify any of the Registerable Securities for sale in such states as such Holder reasonably designates and do any and all other acts and things which may be necessary to enable such Holder to consummate the public sale of the Registerable Securities, and furnish indemnification in the manner provided in Paragraph 6 hereof. The Holder shall furnish information reasonably requested by the Company in accordance with such post-effective amendments or registration statements, including its intentions with respect thereto, and shall furnish indemnification as set forth in Paragraph 6. (b) The Company will maintain such registration statement or post-effective amendment current and effective under the Act until the expiration of the exercisability of this Warrant; provided, however, that upon fifteen days' advance written notice to the Holder the Company may suspend the availability of such registration statement or post-effective amendment for not more than three periods of three months each (a "Suspension Period"), provided further, however, that no Suspension Period may commence sooner than three months after the termination of any other Suspension Period, and there may be no more than two three month Suspension Periods in any twelve month time period. (c) The Company shall bear the entire cost and expense of any registration of securities under Paragraph 5 hereof. Notwithstanding the foregoing, any Holder whose Registerable Securities are included in any such registration statement pursuant to this Paragraph 5 shall, however, bear the fees of any counsel retained by him and any transfer taxes or underwriting discounts or commissions applicable to the Registerable Securities sold by him pursuant thereto. 6. Indemnification. (a) Whenever pursuant to Paragraph 5 a registration statement relating to any Registerable Securities is filed under the Act, amended or supplemented, the Company will indemnify and hold harmless each Holder of the Registerable Securities covered by such registration statement, amendment or supplement (such holder hereinafter referred to as the "Distributing Holder"), each person, if any, who controls (within the meaning of the Act) the Distributing Holder, and each officer, employee, partner or agent of the Distributing Holder, and each underwriter (within the meaning of the Act) of such securities and each person, if any, who controls (within the meaning of the Act) any such underwriter and each officer, employee, agent or partner of such underwriter against any losses, claims, damages or liabilities, joint or several, to which the Distributing Holder, any such underwriter or any other person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement or alleged untrue statement of any material fact contained in any such registration statement or any preliminary prospectus or final prospectus constituting a part thereof or any amendment or supplement thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; and will reimburse the Distributing Holder and each such underwriter or such other person for any legal or other expenses reasonably incurred by the Distributing Holder, or underwriter or such other person, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case (i) to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, said preliminary prospectus, said final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished by such Distributing Holder, any other Distributing Holder or any such underwriter for use in the preparation thereof, and (ii) such losses, claims, damages or liabilities arise out of or are based upon any actual or alleged untrue statement or omission made in or from any preliminary prospectus, but corrected in the final prospectus, as amended or supplemented. (b) Whenever pursuant to Paragraph 5 a registration statement relating to the Registerable Securities is filed under the Act, or is amended or supplemented, the Distributing Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed said registration statement and such amendments and supplements thereto, and each person, if any, who controls the Company (within the meaning of the Act) against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in any such registration statement or any preliminary prospectus or final prospectus constituting a part thereof, or any amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent that such untrue statement or alleged untrue statement or omission was made in said registration statement, said preliminary prospectus, said final prospectus or said amendment or supplement in reliance upon and in conformity with written information furnished by such Distributing Holder for use in the preparation thereof; and will reimburse the Company or any such director, officer or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. (c) Promptly after receipt by an indemnified party under this Paragraph 6 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party, give the indemnifying party notice of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Paragraph 6. (d) In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnified part to such indemnified party of its election to so assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Paragraph 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. 7. Adjustment of Warrant Price and Number of Securities. (a) The Warrant Price shall be subject to adjustment from time to time as follows: (i) In case the Company shall at any time after the date hereof pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, then upon such dividend or distribution the Warrant Price in effect immediately prior to such dividend or distribution shall forthwith be reduced to a price determined by dividing: (a) an amount equal to the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution multiplied by the Warrant Price in effect immediately prior to such dividend or distribution, by (b) the total number of shares of Common Stock outstanding immediately after such issuance or sale. For the purposes of any computation to be made in accordance with the provisions of this clause (i), the following provisions shall be applicable: Common Stock issuable by way of dividend or other distribution on any stock of the Company shall be deemed to have been issued immediately after the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution. (ii) In case the Company shall at any time subdivide or combine the outstanding Common Stock, the Warrant Price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of combination to the nearest one cent. Any such adjustment shall become effective at the time such subdivision or combination shall become effective. (iii) Within a reasonable time after the close of each quarterly fiscal period of the Company during which the Warrant Price has been adjusted as herein provided, the Company shall: (a) Deliver to the Holder a certificate signed by the President or Vice President of the Company and by the Treasurer or Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, showing in detail the facts requiring all such adjustments occurring during such period and the Warrant Price after each such adjustment. (b) Notwithstanding anything contained herein to the contrary, no adjustment of the Warrant Price shall be made if the amount of such adjustment shall be less than $.01, but in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to not less than $.01. (b) In the event that the number of outstanding shares of Common Stock is increased by a stock dividend payable in Common Stock or by a subdivision of the outstanding Common Stock, then, from and after the time at which the adjusted Warrant Price becomes effective pursuant to Subsection (b) of this Section by reason of such dividend or subdivision, the number of shares of Common Stock issuable upon the exercise of the Warrant shall be increased in proportion to such increase in outstanding shares. In the event that the number of shares of Common Stock outstanding is decreased by a combination of the outstanding Common Stock, then, from and after the time at which the adjusted Warrant Price becomes effective pursuant to Subsection (b) of this Section by reason of such combination, the number of shares of Common Stock issuable upon the exercise of the Warrant shall be decreased in proportion to such decrease in the outstanding shares of Common Stock. (c) In case of any reorganization or reclassification of the outstanding Common Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination), or in case of any consolidation of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification of the outstanding Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the holder of the Warrant then outstanding shall thereafter have the right to purchase the kind and amount of shares of Common Stock and other securities and property receivable upon such reorganization, reclassification, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which the holder of the Warrant shall then be entitled to purchase; such adjustments shall apply with respect to all such changes occurring between the date of this Warrant Agreement and the date of exercise of the Warrant. (d) Subject to the provisions of this Section, in case the Company shall, at any time prior to the exercise of the Warrant, make any distribution of its assets to holders of its Common Stock as a liquidating or a partial liquidating dividend, then if the holder of the Warrant exercises his Warrant after the record date for the determination of those holders of Common Stock entitled to such distribution of assets as a liquidating or partial liquidating dividend, he shall be entitled to receive for the Warrant Price per Warrant, in addition to each share of Common Stock, the amount of such distribution (or, at the option of the Company, a sum equal to the value of any such assets at the time of such distribution as determined by the Board of Directors of the Company in good faith), which would have been payable to the holder had he been the holder of record of the Common Stock receivable upon exercise of his Warrant on the record date for the determination of those entitled to such distribution. (e) In case of the dissolution, liquidation or winding-up of the Company, all rights under the Warrant shall terminate on a date fixed by the Company, such date to be no earlier than ten (10) days prior to the effectiveness of such dissolution, liquidation or winding-up and not later than five (5) days prior to such effectiveness. Notice of such termination of purchase rights shall be given to the last registered holder of this Warrant, as the same shall appear on the books of the Company, by registered mail at least thirty (30) days prior to such termination date. (f) In case the Company shall, at any time prior to the expiration of this Warrant and prior to the exercise thereof, offer to the holders of its Common Stock any rights to subscribe for additional shares of any class of the Company, then the Company shall give written notice thereof to the last registered holder thereof not less than thirty (30) days prior to the date on which the books of the Company are closed or a record date is fixed for the determination of the stockholders entitled to such subscription rights. Such notice shall specify the date as to which the books shall be closed or record date fixed with respect to such offer of subscription and the right of the holder thereof to participate in such offer of subscription shall terminate if this Warrant shall not be exercised on or before the date of such closing of the books or such record date. (g) Any adjustment pursuant to the aforesaid provision shall be made on the basis of the number of shares of Common Stock which the holder thereof would have been entitled to acquire by the exercise of the Warrant immediately prior to the event giving rise to such adjustment. (h) Irrespective of any adjustments in the Warrant Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants previously or thereafter issued may continue to express the same price and number and kind of shares as are stated in this Warrant. (i) The Company may retain a firm of independent public accountants (who may be any such firm regularly employed by the Company) to make any computation required under this Section. (j) If at any time, as a result of an adjustment made pursuant to this Paragraph 7, the Holder of this Warrant shall become entitled to purchase any securities other than shares of Common Stock, thereafter the number of such securities so purchasable upon exercise of each Warrant and the Warrant Price for such shares shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock. 8. Fractional Shares. The Company shall not be required to issue fractions of shares of Common Shares on the exercise of this Warrant; provided, however, that if a Holder exercises all the Warrants held of record by such Holder, the fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of shares. 9. Miscellaneous. (a) This Warrant shall be governed by and in accordance with the laws of the State of New York. (b) All notices, requests, consents and other communications hereunder shall be made in writing and shall be deemed to have been duly made when delivered, or mailed by registered or certified mail, return receipt requested: (i) if to a Holder, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, One Penn Plaza, New York, NY 10119. (c) All the covenants and provisions of this Warrant by or for the benefit of the Company and the Holders inure to the benefit of their respective successors and assigns hereunder. (d) Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the registered Holder or Holders, any legal or equitable right, for the sole and exclusive benefit of the Company and the Holder or Holders. IN WITNESS WHEREOF, Trans World Gaming Corp. has caused this Warrant to be signed by its duly authorized officer and this Warrant to be dated July 1, 1996. TRANS WORLD GAMING CORP. By:___________________________ Stanley Kohlenberg President and Chief Executive Officer EX-99.1 4 EXHIBIT 99.1 Company Contact: Dominick J. Valenzano Chief Financial Officer 212-563-3355 From: TRANS WORLD GAMING CORP. One Penn Plaza Suite 4303 New York, NY 10119 TRANS WORLD GAMING CORP. ANNOUNCING RESULTS OF LOUISIANA LOCAL OPTION GAMING ELECTIONS *RESIDENTS IN 35 PARISHES VOTE TO ELIMINATE EXISTING GAMING BY JUNE 1999* NEW YORK, NEW YORK, NOVEMBER 6, 1996: Trans World Gaming Corp. (Nasdaq NM: IBET, IBETW) today announced that 35 of 64 Louisiana parishes, including Lafayette and Beauregard, in which the company operates facilities, voted yesterday to eliminate existing video poker machine operations in truck stops, restaurants, racetracks and bars. As a result, Trans World Gaming must cease its video poker operations in both Lafayette and Beauregard Parishes by June 30, 1999. The Company believes that cash flow generated from existing operations (barring any extraordinary circumstances) should be sufficient to cover carrying interest and retire its existing debt over the next 32 months. Local Louisiana gaming associations are evaluating their options to challenge the legality of local option gaming elections for a variety of reasons. Stanley Kohlenberg, President & CEO of Trans World Gaming Corp., stated, "Although we are not happy with the parishes' decision to eliminate gaming, we are hopeful that we will be debt-free by June 30, 1999 from the cash flow generated by our two Louisiana locations, assuming operations continue at or above current levels. In the meantime, Trans World Gaming is continually looking for business opportunities on an international level and is exploring financing alternatives that will enable us to create a new platform for growth." Trans World Gaming owns and operates two casinos featuring video poker in Louisiana and plans to specialize in small to medium casinos and gaming parlors in local venues worldwide. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts contain forward looking information with respect to plans, projections or future performance of the Company, the occurrence of which involve certain risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----