-----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, IhJhkGtQDBo/Vs63IjilLrs4OG3RCEsHbXpHI2m2dLPHwUvwj5om14yF8XkQsgmb MnIqjAAd1no3egv9EIjnGA== 0001104659-02-002252.txt : 20020514 0001104659-02-002252.hdr.sgml : 20020514 ACCESSION NUMBER: 0001104659-02-002252 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD 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: 02645404 BUSINESS ADDRESS: STREET 1: 545 FIFTH AVE STREET 2: STE 940 CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129833355 MAIL ADDRESS: STREET 1: 545 FIFTH AVE STREET 2: STE 940 CITY: NEW YORK STATE: NY ZIP: 10017 FORMER COMPANY: FORMER CONFORMED NAME: TRANS WORLD GAMING CORP DATE OF NAME CHANGE: 19941027 10QSB 1 j3453_10qsb.htm 10QSB SECURITIES AND EXCHANGE COMMISSION

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

 

FORM 10-QSB

 

ý

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2002

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                    .

 

Commission File No.:  0-25244

 


 

TRANS WORLD CORPORATION

(Exact name of small business issuer as specified in its charter)

 

Nevada

 

13-3738518

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

545 Fifth Avenue, Suite 940

 

 

New York, NY

 

10017

(Address of principal executive offices)

 

(Zip Code)

 

 

 

Issuer’s telephone number, including area code:  (212) 983-3355

 


 

Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934 during the preceding 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   ý      NO  o

 

Shares of the Registrant’s Common Stock, par value $.001, outstanding as of May 10, 2002:  11,022,902

 

Transitional Small Business Disclosure Format (check one:   YES   o                NO   ý)

 

 



 

TRANS WORLD CORPORATION AND SUBSIDIARIES

 

FORM 10-QSB

 

FOR THE QUARTER ENDED MARCH 31, 2002

 

INDEX

 

PART 1 — FINANCIAL INFORMATION

 

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

Condensed Consolidated Balance Sheet as of March 31, 2002

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2002 and 2001

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001

 

 

 

Notes to Condensed Consolidated Financial Statements

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

 

PART II — OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

 

ITEM 2.

CHANGES IN SECURITIES AND USE OF PROCEEDS

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

 

ITEM 4.

SUBSMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

 

ITEM 5.

OTHER INFORMATION

 

 

ITEM 6.

EXHIBITS AND REPORTS ON FORM 8-K

 

 

 

SIGNATURE

 



 

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

March 31, 2002

(in thousands, except for per share data)

 

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash

 

$

2,752

 

Prepaid expenses and other current assets

 

119

 

 

 

 

 

Total current assets

 

2,871

 

 

 

 

 

PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $1,860

 

5,201

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

 

 

 

Goodwill, less accumulated amortization of $4,415

 

3,579

 

Deposits and other assets

 

868

 

 

 

 

 

 

 

4,447

 

 

 

 

 

 

 

$

12,519

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Short-term debt

 

$

592

 

Accounts payable

 

227

 

Short-term interest payable

 

4,148

 

Accrued expenses and other current liabilities

 

1,432

 

 

 

 

 

Total current liabilities

 

6,399

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

Long-term debt, net of unamortized debt discount of $2,554

 

18,861

 

 

 

 

 

LIABILITIES TO BE SETTLED WITH COMMON STOCK

 

6,702

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT:

 

 

 

 

 

 

 

Preferred stock, $.001 par value, 2,000 shares authorized, none issued

 

 

 

Common stock $.001 par value, 50,000 shares authorized, 11,023 shares issued and outstanding

 

11

 

Additional paid-in capital

 

15,066

 

Accumulated other comprehensive income

 

66

 

Accumulated deficit

 

(34,586

)

 

 

 

 

Total stockholders’ deficit

 

(19,443

)

 

 

 

 

 

 

$

12,519

 

 

See accompanying notes to condensed consolidated financial statements

 

1



 

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS (Unaudited)

Three Months Ended March 31, 2002 and 2001

(in thousands, except for per share data)

 

 

 

2002

 

2001

 

 

 

 

 

 

 

REVENUES

 

$

3,416

 

$

3,206

 

 

 

 

 

 

 

COSTS AND EXPENSES

 

 

 

 

 

Cost of revenues

 

1,673

 

1,389

 

Depreciation and amortization

 

139

 

437

 

Selling, general and administrative

 

1,168

 

1,159

 

 

 

2,980

 

2,985

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

436

 

221

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

Interest expense

 

(905

)

(944

)

Foreign exchange gain

 

3

 

6

 

 

 

(902

)

(938

)

 

 

 

 

 

 

LOSS FROM CONTINUING OPERATIONS

 

(466

)

(717

)

 

 

 

 

 

 

DISCONTINUED OPERATIONS, loss from operations of discontinued Casino De Zaragoza

 

 

 

(221

)

 

 

 

 

 

 

NET LOSS

 

$

(466

)

$

(938

)

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, basic and diluted

 

11,023

 

7,628

 

 

 

 

 

 

 

LOSS PER COMMON SHARE, basic and diluted

 

 

 

 

 

From continuing operations

 

$

(0.04

)

$

(0.09

)

From discontinued operations

 

 

 

(0.03

)

Net loss

 

$

(0.04

)

$

(0.12

)

 

 

 

 

 

 

COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(466

)

$

(938

)

 

 

 

 

 

 

Other comprehensive income, foreign currency translation adjustment

 

4

 

323

 

 

 

 

 

 

 

Comprehensive loss

 

$

(462

)

$

(615

)

 

See accompanying notes to condensed consolidated financial statements

 

2



 

TRANS WORLD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Three Months Ended March 31, 2002 and 2001

(in thousands)

 

 

 

2002

 

2001

 

 

 

 

 

 

 

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

$

(322

)

$

717

 

 

 

 

 

 

 

NET CASH USED IN INVESTING ACTIVITIES, purchases of property and equipment

 

(1,474

)

(348

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from short-term debt

 

 

 

1,589

 

Payments of short-term debt

 

(118

)

(82

)

Proceeds from long-term debt

 

1,416

 

 

 

Proceeds from exercise of warrants

 

 

 

56

 

 

 

 

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

1,298

 

1,563

 

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

0

 

(102

)

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH

 

(498

)

1,830

 

 

 

 

 

 

 

CASH

 

 

 

 

 

Beginning of period

 

3,250

 

1,285

 

 

 

 

 

 

 

End of period

 

$

2,752

 

$

3,115

 

 

See accompanying notes to condensed consolidated financial statements

 

3



 

TRANS WORLD CORPORATION AND SUBSIDIARIES

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

1.               Unaudited Statements.

 

The accompanying condensed consolidated financial statements of Trans World Corporation and subsidiaries (collectively, the “Company” or “TWC”) for the three-month periods ended March 31, 2002 and 2001 are unaudited and reflect all adjustments of a normal and recurring nature to present fairly the consolidated financial position, results of operations and cash flows for the interim periods.  These unaudited condensed, consolidated financial statements have been prepared by the Company pursuant to the instructions to Form 10-QSB.  Pursuant to such instructions, certain financial information and footnote disclosures normally included in such financial statements have been condensed or omitted.

 

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, together with management’s discussion and analysis or plan of operations, contained in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2001.  The results of operations for the three-month period ended March 31, 2002 are not necessarily indicative of the results that may occur for the year ending December 31, 2002.

 

2.               Liquidity.

 

At March 31, 2002, the Company had a working capital deficit of $3.5 million and a stockholders’ deficit of $19.4 million.  Further, in spite of the recent sale of Casino de Zaragoza (“CDZ”) and the debt conversion initiative discussed below, the Company is highly leveraged and has been unable to meet its interest payments in full since September 2000. Waivers of default for non-payment of interest have been received from the majority holder of the Company’s 12% Senior Secured Notes (“Senior Notes”) through the earlier of: (i) ten days subsequent to the receipt of in excess of $5.0 million from any source by TWC or any of its subsidiaries; or (ii) January 1, 2003.  Under the conditions of the waivers, if the Company receives a sum in excess of $5.0 million on or before September 17, 2002, the accrued and unpaid interest as of September 17, 2002 shall become due on September 17, 2002.

 

The Company has taken several steps to improve its consolidated financial position, including (i) the December 2001 sale of its under-performing Spanish casino, CDZ ($1.3 million of the net proceeds have been earmarked for potential investment in a hotel or casino project); (ii) the execution of an Exchange Agreement in March 2002 with the holders of certain debt (the “March 2002 Exchange Agreement”) which will result in the conversion of such debt (and related accrued interest) to equity (hence reducing liabilities by $6.7 million); (iii) the 2001 expansion of its casino in Hate near Znojmo, Czech Republic (“Znojmo”) (from 11 to 17 gaming tables, five of which were added in May 2001);  (iv) the renovation of the bar/restaurant and gaming areas of its casino in  Ceska, Czech Republic (“Ceska”), which were completed in July 2001; and (v) the March 2002 buyout (purchase) of the Znojmo casino building lease.  Additionally, the Company is studying proposed projects to develop a fourth casino and a hotel in Europe.  There can be no assurances that management’s plans will be realized.

 

Liquidity is dependent on the Company’s ability to attain profitable operations and to secure additional financing.

 

3.               Earnings (loss) per common share.

 

Basic earnings (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per common share incorporate the dilutive effect of common stock equivalents on an average basis during the period.  The Company’s common stock equivalents currently include stock options and warrants.  Dilutive earnings (loss) per common share have not been presented for the three-month periods ended March 31, 2002 and 2001, since the inclusion of common stock equivalents would have been antidilutive.

 

4



 

4.               Other items.

 

(a)          Spain - In December 2001, as a result of excessive delays by the local Spanish authorities in granting CDZ final permission to relocate, together with the business unit’s mounting losses, the Company divested itself of the casino by selling its interest in CDZ to a local Spanish casino operator.

 

(b)         Debt defaults - The Company has, from time to time, been in default of certain covenants of certain indebtedness.  The Company relies upon the forbearance and waivers on the defaults of certain covenants from Value Partners, Ltd. (“Value Partners”), which represents a majority in interest of the holders of the indebtedness.  In March 2002, the Company received waivers on payment of interest related defaults under certain indebtedness through the earlier of: (i) ten days subsequent to the receipt of in excess of $5 million from any source, including borrowing or the sale of equity; or (ii) January 1, 2003.  In the event that the Company obtains funds in excess of $5 million on or before September 17, 2002, the accrued unpaid interest due on September 17, 2002 shall be due on September 17, 2002.  Further, in March 2002, the Company received waivers on incurrence of additional indebtedness related defaults under certain indebtedness.

 

(c)          Litigation - On October 6, 2000, the Company’s former President and Chief Operating Officer, Andrew Tottenham (“former President”), commenced an action against the Company in the United States District Court for the Southern District of New York.  The former President seeks to recover for alleged wrongful conduct in connection with his separation of employment from the Company.  The former President has amended his complaint twice, most recently on January 26, 2001 to interpose a Second Amended Complaint.  In the Second Amended Complaint, the former President alleges claims for (1) Approximately $1.2 million for breach of an employment contract, (2) Approximately $93,000 for breach of an oral contract, (3) equitable and monetary damages in an unspecified amount based on a derivative stockholder’s suit/breach of fiduciary duty, (4) monetary damages in an unspecified amount for conversion, (5) monetary damages in an unspecified amount for fraud, and (6) indemnification in an unspecified amount.  On February 23, 2001, the Company answered denying the material allegations of the former President’s claims, as well as asserting several counterclaims.  Discovery is ongoing.  The Company believes it has meritorious defenses to the former President’s claims and intends to defend against them vigorously.  Accordingly, no provision for liability to the Company that may result upon adjudication has been made in the accompanying condensed consolidated financial statements.

 

In July 2001, TWC commenced an action in Spanish court against the Company’s former President (“Juicio Verbal 530/01”) claiming ownership and demanding the return of one CDZ share that was transferred to him for administration purposes in conjunction with the Company’s April 1998 acquisition of CDZ.  In this case, the “First Instance Court” declared on July 31, 2002 that it does not have territorial competence to decide the matter, and that court resolution was appealed by TWC.  The Company won its appeal on February 28, 2002, and a decision on the share ownership dispute by the “First Instance Court” is expected sometime later in 2002.  The Company, based on advice of its Spanish legal counsel, believes its case against the Company’s former President is strong and accordingly, no provision for liability to the Company that may result upon adjudication has been made in the accompanying condensed consolidated financial statements.

 

In October 2001, the Company’s former President filed a suit in Spanish court against the Company, CDZ, and CDZ’s former President (“Juicio Ordinario 878/01”) applying for the annulment of the recapitalization of CDZ agreed in September 2000 and executed in April 2001 and claiming for his right as holder and alleged owner of one CDZ share to subscribe and pay all the shares subscribed and paid by the Company and CDZ’s former president.   This case has been suspended until a final sentence has been announced in Juicio Verbal 530/01.  However, the former President appealed the decision, and the Company has contested that appellation.  The Company, based on advice of its Spanish legal counsel, believes that a favorable outcome of Juicio Verbal 530/01 will impact Juicio Ordinario 878/01 in that Juicio Ordinario 878/01 would also be ruled in the Company’s favor.  Nevertheless, the Company believes it has meritorious defenses to the former President’s claims with respect to Juicio Ordinario 878/01 and intends to defend against them vigorously as well as to vigorously pursue its claims against the former President.  Accordingly, no provision for liability to the Company that may result upon adjudication has been made in the accompanying condensed consolidated financial statements.

 

5



 

In October 2001, the Company filed a “Complaint for Damages” against Choice Capital Corporation, a/k/a Choice International Corporation (“Choice”) and Jude Onukuwa in the Superior Court of Fulton County, Georgia.  The Company seeks to recover payments made to Choice in connection with a potential financing deal that Choice did not consummate.  In addition, the Company seeks to win awards for interest, attorney fees, damages for lost profits, and punitive damages.  In November 2001, Choice answered the complaint, denying the material allegations of the complaint.  Further, Choice’s response includes a counterclaim against the Company, which seeks punitive damages of $1.2 million for lost commissions related to the unconsummated deal.  The discovery period is underway and will run until June 1, 2002.  The Company believes that it has a strong case against Choice and that it has meritorious defenses to Choice’s counterclaims and intends to pursue the Company’s claims vigorously as well as to defend against Choice’s claims vigorously.  Accordingly, no provision for liability to the Company that may result upon adjudication has been made in the accompanying condensed consolidated financial statements.

 

The Company is not currently involved in any other material legal proceeding nor was it involved in any other material litigation during the three months ended March 31, 2002.

 

(d)         Liabilities to be settled with common stock - The Company executed the March 2002 Exchange Agreement with the holders of $4.8 million 12% Secured Senior Bonds whereby this debt, together with $1.9 million of accrued and unpaid interest, will be exchanged for approximately 37.2 million shares of the Company’s common stock at a conversion price of $0.18 per share.   Upon issuance of the approximately 37.2 million shares, which is expected to occur by the end of May 2002, this item will be reclassified to equity.

 

(e)          Recent Accounting Pronouncements - In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)  Nos. 141 and 142, “Business Combinations” and “Goodwill and Other Intangibles”.  SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method.  Under SFAS No. 142, effective the first quarter of the year ending December 31, 2002, goodwill is no longer subject to amortization over its estimated useful life; rather, goodwill is subject to at least an annual assessment for impairment applying a fair-value based test. Additionally, an acquired intangible asset is to be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of the acquirer’s intent to do so.  The Company is in the process of determining the impact of these pronouncements on its consolidated financial position and results of operations.

 

In August 2001, FASB issued SFAS No 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”.  This statement established a single accounting model, based on the framework established in SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets to be Disposed of”, for long-lived assets to be disposed of by sale and to address significant implementation issues.  In light of the December 2001 sale of CDZ, the Company has presented the operations of CDZ as discontinued operations for the three-month period ended March 31, 2001.

 

6



 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 
RESULTS OF OPERATIONS

 

Three Months Ended March 31, 2002 and 2001:

 

Total Company

 

The Company’s current operations include the Ceska casino, a casino in Rozvadov, Czech Republic (“Rozvadov”), and the Znojmo casino (collectively, the “Business Units”).

 

The variances between the consolidated results of the three months ended March 31, 2002 and those of the three months ended March 31, 2001 are depicted in the following table.

 

 

 

Three Months
Ended
March 31, 2001

 

Variance

 

Three Months
Ended
March 31, 2002

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(615

)

 

 

 

 

Revenues

 

 

 

210

 

 

 

Cost of revenues

 

 

 

(284

)

 

 

Depreciation and amortization

 

 

 

298

 

 

 

Selling, general and administrative

 

 

 

(9

)

 

 

Interest expense

 

 

 

39

 

 

 

Foreign exchange loss

 

 

 

(3

)

 

 

Discontinued operations (CDZ)

 

 

 

221

 

 

 

Foreign currency translation adjustment

 

 

 

(319

)

 

 

Comprehensive loss

 

 

 

153

 

(462

)

 

Total revenue for the quarter ended March 31, 2002 was $3.4 million, which represents an increase of $210,000 versus the same period in 2001.  The revenue growth was due, primarily, to improvement of the Win Percentage (“WP”), the ratio of table game revenues to the value of all gaming chips purchased, particularly in Znojmo, and Drop per Head (“DpH”), the per guest average dollar value of gaming chips purchased, gains in Rozvadov and Znojmo, which were attributable, in part, to the increases to betting minimums in conjunction with conversion to the Euro in January 2002.  Znojmo’s DpH also benefited from an influx of high volume players as a result of the Company’s advertising campaign in the city of Vienna, Austria.  Collectively, these improvements allowed the casinos to overcome attendance declines in the Business Units, which were due to economic factors and uncertainty related to the Euro conversion.  The transition to the Euro appeared to impact attendance and play volume more dramatically in Ceska as the casino’s DpH declined in the first quarter of 2002 versus the first quarter of 2001.  Further, intense competition in the region continued to dilute Ceska’s market share.

 

Cost of revenues increased by $284,000 in the first quarter of 2002 versus the same period in 2001.  The primary contributors to this increase were approximately $36,000 in volume related gaming taxes; approximately $80,000 in increased gaming taxes related to a reception revenue treatment change mandated by the Czech Republic Ministry of Finance, which went into effect in June 2001; approximately $81,000 in profit share expense related to new Novomatic slot machines in the casinos; and approximately $87,000 in chip stock replacement costs in conjunction with the January 2002 transition to the Euro.  Depreciation and amortization expense in the quarter ended March 31, 2002 decreased $298,000 versus the quarter ended March 31, 2001 due, primarily, to the sale of CDZ and the Company’s adoption of SFAS No. 142.  A net savings of $9,000 was realized in selling, general, and administrative expenses in the quarter ended March 31, 2002 versus the same period in 2001 as savings, related to the elimination of overhead labor positions and the purchase of the Znojmo casino building, were partially offset by vacation accrual expenses, other employee benefit related costs, and bank fee and value added tax expenses associated with the Znojmo building purchase.  Discontinued operations improved due to the December 2001 sale of CDZ, which had incurred a net loss of $221,000 in the first quarter of 2001.  The foreign currency translation adjustment decreased by $319,000 in the first quarter of 2002 versus the same period in 2001 as a result of the divestiture of CDZ.  As a result, the Company incurred a comprehensive loss of $462,000 for the quarter ended March 31, 2002, which represented an improvement of $153,000 versus the same period in 2001.

 

7



 

Business Units

 

The following discussion and analysis relates to the consolidated financial condition and results of continuing operations of the Company for the three-month period ended March 31, 2002 and comparison of those results to the three-month period ended March 31, 2001 (“2001”, “previous year” or “prior year”).  In December 2001, as a result of excessive delays by the local Spanish authorities in granting CDZ final permission to relocate, together with CDZ’s mounting losses, the Company divested itself of the casino by selling its interest in CDZ to a local Spanish casino operator; therefore, CDZ is not included in the following discussion and analysis.

 

Information relative to the Business Units and the management company, which is located in New York, for the three-month periods ended March 31, 2002 and 2001, is as follows:

 

 

 

Three Months Ended March 31

 

 

 

2002

 

2001

 

Variance

 

 

 

Ceska, Czech Republic

 

Total drop ($000) (1)

 

3,880

 

4,674

 

(794

)

Total revenue ($000)

 

1,005

 

1,204

 

(199

)

Operating expenses ($000)

 

(805

)

(898

)

93

 

Management fees ($000) (2)

 

(134

)

(165

)

31

 

Income from operations exclusive of interest and depreciation and amortization ($000)

 

65

 

141

 

(76

)

 

 

Rozvadov, Czech Republic

 

Total drop ($000) (1)

 

2,443

 

2,528

 

(85

)

Total revenue ($000)

 

768

 

579

 

189

 

Operating expenses ($000)

 

(488

)

(433

)

(55

)

Management fees ($000) (2)

 

(105

)

(81

)

(24

)

Income from operations exclusive of interest and depreciation and amortization ($000)

 

176

 

65

 

111

 

 

 

Znojmo, Czech Republic

 

Total drop ($000) (1)

 

6,074

 

5,737

 

337

 

Total revenue ($000)

 

1,643

 

1,414

 

230

 

Operating expenses ($000)

 

(1,165

)

(900

)

(265

)

Management fees ($000) (2)

 

(206

)

(184

)

(22

)

Income (loss) from operations exclusive of interest and depreciation and amortization ($000)

 

273

 

330

 

(57

)

 

 

Management Company, New York

 

Total revenue ($000)

 

 

9

 

(9

)

Eliminations ($000) (3)

 

14

 

126

 

(112

)

Operating expenses ($000)

 

(397

)

(443

)

46

 

Management fees ($000) (2)

 

444

 

430

 

15

 

Income from operations exclusive of interest and depreciation and amortization ($000)

 

61

 

122

 

(61

)

 

 

Grand Total

 

Total drop ($000) (1)

 

12,397

 

12,939

 

(542

)

Total revenue ($000)

 

3,416

 

3,206

 

210

 

Operating expenses ($000)

 

(2,841

)

(2,548

)

(293

)

Management fees ($000) (2)

 

 

 

 

Income from operations exclusive of interest and depreciation and amortization ($000)

 

575

 

658

 

(83

)

 


(1)  The total value of all gaming chips purchased.

(2)  Eliminated in consolidation.

(3)  Consists of gaming equipment leases and other business unit billbacks that are eliminated in consolidation.

Notes:  The above table contains variances that can be attributed to the rounding of numbers.

For comparision purposes, the year 2001 total drop has been adjusted to include reception revenue.

 

8



 

Ceska

 

In the three months ended March 31, 2002, Ceska generated total revenue of $1.0 million dollars, which represented a decrease of $199,000 versus the same period in 2001.  The casino experienced a 12.2% decline in attendance in the period due to increased competition in the region, the negative impact of the changeover to the Euro in January 2002, and the ongoing economic recession in Germany.  The negative impact of the attendance decrease was compounded by a 5.4% decline in DpH.  The decreased activity resulted in some volume related expense savings in the casino’s operating departments.  Despite the revenue decline, gaming taxes were almost in line with the prior year due to the inclusion of reception revenue in the calculation base pursuant to a tax law change mandated by the Czech Republic Ministry of Finance, which went into effect in June 2001.  In an effort to control expenses, management was selective with regard to sales and marketing activities in the period.  This savings was somewhat offset by exceptional general and administrative expenses of $30,000 related to the Euro conversion, and the casino finished the quarter ended March 31, 2002 with income from operations exclusive of interest and depreciation and amortization of $65,000, which represented a decrease of $76,000 versus the same period in 2001 and equaled 6.5% of total revenue.

 

Rozvadov

 

Total revenue in the first quarter of 2002 was $768,000, which represented an improvement of $189,000, or 32.6%, over the same period in 2001.   The revenue growth came in a quarter in which attendance declined by 10.2% and was the result of DpH growth and an exceptional WP of 28.2%.  The strength of two key revenue drivers reflected management’s strategy to reinforce the facility’s private club atmosphere, as the number of novice players in the attendance mix was relatively small.  Over the last nine months, management has focused on improved service and special attention to its core group of high stakes gamblers.  Table game limits were increased in deference to these key clients, which is reflected in the improved DpH.  Further, internal promotional events have been limited and have been tailored to the interests of these individuals.  Operating expenses increased $55,000 in the first quarter of 2002 versus the same period in 2001 mainly due to increased gaming taxes as a result of the revenue growth and inclusion of reception revenue in the calculation base as well as exceptional general and administrative expenses of $21,000 related to the January 2002 Euro conversion.  Due to the fact that the increased revenue was driven by WP rather than increased activity, the casino did not incur volume related expense increases, and as a percentage of revenue, expenses decreased by 11.3 percentage points versus the first quarter of 2001.  As a result, the casino retained $111,000, or 58.7%, of the $189,000 revenue improvement at the income from operations exclusive of interest and depreciation and amortization level, which finished the quarter at $176,000, or 22.9% of revenue, versus $65,000, or 11.2% of revenue, in the first quarter of 2001.

 

Znojmo

 

As in Rozvadov, improvements in DpH and WP helped the casino overcome a significant decline in attendance in the first quarter of 2002 versus the same period in 2001, and the casino finished the period with total revenue of $1.6 million, which was an improvement of $229,000 over the first quarter of 2001.  At $433, Znojmo’s DpH in the first quarter of 2002 improved by 27.0% over the same period in 2001.  The large increase was due, in part, to the attendance decline, which reflected reduced visitation frequency by novice players, something that was partly the result of the January 2002 Euro conversion.  Further, as a direct result of marketing efforts and word of mouth advertising, the casino has become increasingly popular with higher stakes Viennese gamblers.  Unfortunately, operating expense increases outpaced revenue gains in the first quarter of 2002 versus the same period in 2001 due, in large part, to the gaming tax base change, which contributed to a $111,000 increase in gaming taxes in the period versus the same period in 2001.  Further, despite the decline in attendance in the first quarter of 2002 versus the first quarter of 2001, labor expenses increased due to the staffing of five additional gaming tables in busy periods.  In addition, the casino incurred exceptional expenses, including $36,000 in Euro conversion costs as well as loan processing fees and value added taxes related to the Znojmo casino building purchase loan.  At $273,000, income from operations exclusive of interest and depreciation and amortization in the first quarter of 2002 decreased by $57,000 versus the same period in 2001 and represented 16.6% of total revenue, which was well below the 23.3% that was realized in the first quarter of the prior year.

 

Management Company

 

Operating expenses of the management company were $397,000 in the three months ended March 31, 2002, which represented a decrease of $46,000 versus the first quarter of 2001.  The decreased expenditure levels in the first quarter of 2002 can be attributed, primarily, to savings related to the elimination of two corporate level positions in the last quarter of the year ended December 31, 2001, a portion of the savings from which was offset by increases to employee benefits expenses and other payroll related accruals.

 

9



 

Exchange Rates

 

Due to the fact that the Company’s operations are located in Europe, the financial results are subject to the influence of fluctuations in foreign currency exchange rates.  In contrast to the first quarter of 2001, a period in which the Euro and other European currencies lost significant value versus the United States (“US”) Dollar, a trend that negatively impacted the Company’s performance, these currencies stabilized against the US Dollar in the first quarter of 2002 versus the first quarter of 2001.

 

The actual 2002 and 2001 operating results in local currency for the Business Units were converted to US Dollars using the average exchange rates of the quarters, which are depicted in the following table.

 

Period

 

US Dollar

 

Czech Koruna

 

Euro

 

January 2002 through March 2002

 

$

1.00

 

36.2297

 

1.1405

 

 

 

 

 

 

 

 

 

 

January 2001 through March 2001

 

$

1.00

 

37.6635

 

1.0826

 

 

The Balance Sheet totals of the Company’s foreign subsidiaries at March 31, 2002 were converted to US Dollars using the prevailing exchange rates at March 31, 2002, which are depicted in the following table.

 

As Of

 

US Dollar

 

Czech Koruna

 

Euro

 

March 31, 2002

 

$

1.00

 

36.0950

 

1.1494

 

 

Administrative Issues:

 

Total Company

 

In January 2002, the currencies of the member countries of the European Economic Community (“EEC”), which had previously tied their currencies to the Euro, were phased out, and the Euro became the sole currency of these nations.  In conjunction with this process, the Company’s Business Units, which previously operated with gaming chips in various denominations of German Marks and Austrian Schillings switched to Euro-based playing chips in denominations of 1, 2.5, 5, 25, 100, and 500 Euros.  Although the governing body of the EEC had granted member nations a six-week period in which to make the transition to Euros, management successfully implemented the conversion to Euros on January 17, 2002 with no disruption in service.

 

Ceska

 

An extensive renovation of the casino’s gaming area was completed in July 2001 and followed renovation of the casino’s bar/restaurant area in year 2000.  The third, and final, phase of the property’s renovation is underway and includes the casino’s entrance and reception areas.  The estimated completion date for the work is late May 2002.  In conjunction with renovation of the facility, a 1920’s Chicago theme was introduced, which is consistent with the casino’s American Chance Casinos (“ACC”) branding.

 

The Ceska casino operates in the most competitive environment of any of the Company’s casinos.  Subsequent to the recent closure of the Casino Game, which was unable to survive amid the intense competition in the area, Ceska currently competes with three casinos in the immediate vicinity and two additional casinos in the greater region, one of which is located in Germany.

 

The Ceska Kubice casino currently has 15 gaming tables, including seven card tables, seven roulette tables, and one electro-mechanical, eight-position roulette game.  It also has 60 slot machines, including 28 newer-style Novomatic machines; and parking for approximately 60 cars.

 

10



 

Rozvadov

 

Due to its limited size, the Company intends to move forward with a project to relocate Rozvadov’s lower level slot machines to existing staff facility space located on the casino’s main gaming level, which will make the machines more accessible to casino patrons.  As part of this project, which is scheduled to be completed in August 2002, the staff facilities will be moved to the casino’s lower level.  Management also intends to replace the carpet/flooring on the casino’s main level.  Further, staff uniforms will be replaced and a Hawaiian theme will be introduced to the casino in conjunction with this project.  In addition, management plans to expand the casino’s parking lot by 15 spaces in June 2002.

 

Rozvadov currently operates 11 gaming tables, including five card tables, five roulette tables, and one electro-mechanical roulette game; 30 slot machines, six of which are newer-style Novomatics; and parking for 40 cars.

 

Znojmo

 

In the year ended December 31, 2001, the Znojmo casino was expanded from 11 to 16 live gaming tables and an electro-mechanical roulette game was introduced along with 36 Novomatic slot machines, which replaced some of the casino’s older Aristocrat machines. Also, a large sign was erected along the border road and the lighting and landscaping on the main access road to the casino were enhanced.  Further, the access road was extended, giving potential clients a secondary ingress to the casino.

 

In March 2002, the Company received waivers on incurrence of additional indebtedness related defaults under the March 1998 Senior Notes and exercised its right to buyout (purchase) the Znojmo building lease.  The building lease buyout (purchase), the cost of which was approximately $1.4 million, was financed by a loan from a local Czech Republic bank.

 

Management’s future plans include the addition of four card tables to the casino in June 2002.  Further, management has moved forward with its plan to develop an employee housing building on TWC’s land adjacent to the casino building with construction expected to get underway in July 2002.  In addition, management is in the process of evaluating a proposed project to build a mid-size hotel next to, and connected to, the casino, which, if pursued, would be constructed in the year 2003, assuming that the Company is able to secure the necessary financing for the project.

 

In Znojmo, there are 17 gaming tables, which consist of eight card tables, eight roulette tables, and one electro-mechanical roulette game; 50 slot machines, 36 of which are newer-style Novomatic machines; and parking for approximately 120 cars.

 

Management Company

 

The Company executed the March 2002 Exchange Agreement with the holders of $4.8 million 12% Secured Senior Bonds whereby this debt, together with $1.9 million of accrued and unpaid interest, will be exchanged for approximately 37.2 million shares of the Company’s common stock at a conversion price of $0.18 per share.

 

Sales and Marketing

 

In the first quarter of 2002, marketing activities for ACC’s Business Units included various theme parties, participation in community events, direct mail advertising, advertising in various print and electronic media, and bus and tram advertising.  Promotional parties in Ceska in the period included Carnival Brazil, a repeat event which has become, according to the Company’s local Director of Sales and Marketing, “almost legendary;” a Valentine’s Day party; and an Easter party, the entertainment for which included a magician and an acrobat.  In Rozvadov, where promotional events are limited due to the casino’s restrictive size and the desires of its core gamblers, an Easter party was the only event held in the first quarter of 2002.  In Znojmo, casino anniversary, Carnival Brazil, Valentine’s Day, and Easter events were held in the first quarter of 2002, with the Easter party attracting the largest single day attendance since the casino’s December 1999 opening.

 

11



 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company’s working capital deficit, defined as current assets minus current liabilities, decreased $3.6 million to a deficit of $3.5 million at March 31, 2002 from a working capital surplus of $94,000 at December 31, 2001.  The decrease was due, primarily, to increases in accrued interest on bonds at March 31, 2002.  For the three months ended March 31, 2002, the Company had net cash used in operations of $322,000.  This was primarily a result of a $466,000 net loss offset by $139,000 of depreciation and amortization, $195,000 of non-cash interest related to the amortization of debt discount and a $190,000 net decrease in cash attributable to changes in operating assets and liabilities.  For the three months ended March 31, 2002, net cash used in investing activities of $1.5 million related to the purchase of property and equipment, primarily, the purchase of the Znojmo casino building.  For the three months ended March 31, 2002, net cash provided by financing activities of $1.3 million included proceeds of approximately $1.4 million from a loan to purchase the Znojmo casino building and $118,000 of payments of a short-term operating loan in the Czech Republic.

 

The Company has, from time to time, been in technical default of the indentures related to the Senior Notes, which were amended in conjunction with the 1998 restructuring of the Company’s Czech subsidiaries and legal entities (the “Amended Indentures”), and is so as of March 31, 2002.  TWC relies upon the forbearance and waivers on the default of certain covenants from Value Partners, which represents a majority in interest of the holders of the Senior Notes. The Company has borrowed other amounts from Value Partners from time to time (some of which have been in technical default for which forbearance or waivers have been granted).  On February 23, 2001, Value Partners converted 5,657,453 of $0.01 warrants held by it.  With the exercise of those Warrants, Value Partners holds a controlling 51.32% of the Company’s issued and outstanding Common Stock with warrants to acquire up to 60.6% of such Common Stock.  At March 31, 2002, Value Partners owned 66% of the Company’s long-term debt.

 

Further, in spite of the recent sale of CDZ and the debt conversion initiative, the Company is highly leveraged and, from time to time, has been unable to pay its interest and accounts payable obligations when they become due.  The Company was unable to meet its interest payments in full since September 2000. Waivers of default for non-payment of interest have been received from the majority holder of the Senior Notes through the earlier of: (i) ten days subsequent to the receipt of in excess of $5.0 million from any source by TWC or any of its subsidiaries; or (ii) January 1, 2003.  Under the conditions of the waivers, if the Company receives a sum in excess of $5.0 million on or before September 17, 2002, the accrued and unpaid interest as of September 17, 2002 shall become due on September 17, 2002.

 

The Company has taken several steps to improve its consolidated financial position, including (i) the December 2001 sale of its under-performing Spanish casino ($1.3 million of the net proceeds have been earmarked for potential investment in a hotel or casino project); (ii) the execution of the March 2002 Exchange Agreement which will result in the conversion of such debt (and related accrued interest) to equity (hence reducing liabilities by $6.7 million); (iii) the 2001 expansion of Znojmo (from 11 to 17 gaming tables, five of which were added in May 2001);  (iv) the renovation of the bar/restaurant and gaming areas of Ceska, which was completed in July 2001; and (v) the March 2002 buyout (purchase) of the Znojmo casino building lease.  Additionally, the Company is studying proposed projects to develop a fourth casino and a hotel in Europe.  There can be no assurances that management’s plans will be realized.

 

In March 2002, the Company received waivers on incurrence of additional indebtedness related defaults under the March 1998 Senior Notes and exercised its right to buyout (purchase) the Znojmo building lease.  The building lease buyout (purchase), the cost of which was approximately $1.4 million, was financed by a loan from a local Czech Republic bank.  The bank note, which is payable in monthly installments through December 2006, bears interest at 6.2% per annum and is collateralized by the Znojmo casino building, the Company’s Rozvadov casino and employee housing buildings, and the Company’s land in Folmava.

 

12



 

PLAN OF OPERATIONS

 

TWC management will continue to develop marketing and operational strategies designed to increase attendance and revenues at its existing locations in the Czech Republic.  Management will strive to maximize the performance of its existing Business Units through a combination of revenue enhancement strategies and improved efficiencies.

 

In Ceska, the focus will continue to be on differentiating the casino from its current and future competition.  Management is striving to transform the casino’s image to that of a higher end, exclusive club.  The recent renovation of the gaming and bar areas has allowed the casino to create an ambience that is consistent with this objective.  Rozvadov, the greatest challenge of which has been its size limitations, will seek to retain its existing base of quality players and to build this base through guest relations programs and target specific marketing initiatives.  Further, relocation of slot machines to the main gaming floor, replacement of the main gaming floor’s carpet, and introduction of a Hawaiian theme should help the casino maintain and enhance its market position.  Znojmo, which has the greatest future growth potential of all of TWC’s Business Units, will be expanded by four gaming tables in 2002 and will be promoted via marketing campaigns that continue to target the vast Vienna, Austria market.  Other future development plans for the Company in the Czech Republic include the possible construction of a fourth casino and the potential development of a hotel adjacent to the Znojmo casino.

 

Long Range Objective

 

The Company’s senior corporate-level management, some of whose backgrounds are in the hotel industry, has endeavored to rid the Company of unprofitable business units, maximize the potential of the Company’s Czech Republic operations, and explore expansion of the Company through the addition of new business units, including hotels.  In addition to evaluating expansion opportunities in Europe, management is pursuing several potential acquisition projects in the United States, subject to the availability of the necessary financing.  Management intends to use the greater part of the net proceeds from the sale of CDZ as investment capital for an expansion project.

 

Management’s long-term goal is to create two hotel divisions, a Europe-based division and a U.S.-based division, while pursuing expansion of the casino division.  Acquisitions will be based on an evaluation of the potential return of projects that arise and the availability of financing to purchase additional assets.

 

Development

 

The Company has earmarked approximately $1.3 million in net cash proceeds from the sale of CDZ for investment in an expansion project and is currently evaluating several possible acquisition prospects in addition to the aforementioned potential casino and hotel development projects in the Czech Republic.  Management intends to move forward with what it believes to be the project with the highest potential return based on detailed analyses of all potential investment opportunities.  Details of development projects being considered outside the Czech Republic have been intentionally omitted from this report.

 

Note on Forward-Looking Information

 

This Form 10-QSB contains certain forward-looking statements.  For this purpose, any statements contained in this Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements.  Without limiting the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipates,” “estimates,” or “continue” or comparable terminology or the negative thereof are intended to identify certain forward-looking statements.  These statements by their nature involve substantial risks and uncertainties, both known and unknown, and actual results may differ materially from any future results expressed or implied by such forward-looking statements.  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.

 

13



 

PART II - OTHER INFORMATION

 

ITEM 1.          LEGAL PROCEEDINGS

 

Litigation - On October 6, 2000, the Company’s former President and Chief Operating Officer, Andrew Tottenham (“former President”), commenced an action against the Company in the United States District Court for the Southern District of New York.  The former President seeks to recover for alleged wrongful conduct in connection with his separation of employment from the Company.  The former President has amended his complaint twice, most recently on January 26, 2001 to interpose a Second Amended Complaint.  In the Second Amended Complaint, the former President alleges claims for (1) Approximately $1.2 million for breach of an employment contract, (2) Approximately $93,000 for breach of an oral contract, (3) equitable and monetary damages in an unspecified amount based on a derivative stockholder’s suit/breach of fiduciary duty, (4) monetary damages in an unspecified amount for conversion, (5) monetary damages in an unspecified amount for fraud, and (6) indemnification in an unspecified amount.  On February 23, 2001, the Company answered denying the material allegations of the former President’s claims, as well as asserting several counterclaims.  Discovery is ongoing.  The Company believes it has meritorious defenses to the former President’s claims and intends to defend against them vigorously.

 

In July 2001, TWC commenced an action in Spanish court against the Company’s former President (“Juicio Verbal 530/01”) claiming ownership and demanding the return of one CDZ share that was transferred to him for administration purposes in conjunction with the Company’s April 1998 acquisition of CDZ.  In this case, the “First Instance Court” declared on July 31, 2002 that it does not have territorial competence to decide the matter, and that court resolution was appealed by TWC.  The Company won its appeal on February 28, 2002, and a decision on the share ownership dispute by the “First Instance Court” is expected sometime later in 2002.  The Company, based on advice of its Spanish legal counsel, believes its case against the Company’s former President is strong.

 

In October 2001, the Company’s former President filed a suit in Spanish court against the Company, CDZ, and CDZ’s former President (“Juicio Ordinario 878/01”) applying for the annulment of the recapitalization of CDZ agreed in September 2000 and executed in April 2001 and claiming for his right as holder and alleged owner of one CDZ share to subscribe and pay all the shares subscribed and paid by the Company and CDZ’s former president.   This case has been suspended until a final sentence has been announced in Juicio Verbal 530/01.  However, the former President appealed the decision, and the Company has contested that appellation.  The Company, based on advice of its Spanish legal counsel, believes that a favorable outcome of Juicio Verbal 530/01 will impact Juicio Ordinario 878/01 in that Juicio Ordinario 878/01 would also be ruled in the Company’s favor.  Nevertheless, the Company believes it has meritorious defenses to the former President’s claims with respect to Juicio Ordinario 878/01 and intends to defend against them vigorously as well as to vigorously pursue its claims against the former President.

 

In October 2001, the Company filed a “Complaint for Damages” against Choice Capital Corporation, a/k/a Choice International Corporation (“Choice”) and Jude Onukuwa in the Superior Court of Fulton County, Georgia.  The Company seeks to recover payments made to Choice in connection with a potential financing deal that Choice did not consummate.  In addition, the Company seeks to win awards for interest, attorney fees, damages for lost profits, and punitive damages.  In November 2001, Choice answered the complaint, denying the material allegations of the complaint.  Further, Choice’s response includes a counterclaim against the Company, which seeks punitive damages of $1.2 million for lost commissions related to the unconsummated deal.  The discovery period is underway and will run until June 1, 2002.  The Company believes that it has a strong case against Choice and that it has meritorious defenses to Choice’s counterclaims and intends to pursue the Company’s claims vigorously as well as to defend against Choice’s claims vigorously.

 

The Company is not currently involved in any other material legal proceeding nor was it involved in any other material litigation during the quarter ended March 31, 2002.

 

ITEM 2.          CHANGES IN SECURITIES AND USE OF PROCEEDS

 

None.

 

14



 

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES

 

The Company has, from time to time, been in technical default of the Amended Indentures and is so as of December 31, 2001.  TWC relies upon the forbearance and waivers on the default of certain covenants from Value Partners, which represents a majority in interest of the holders of the Senior Notes. The Company has borrowed other amounts from Value Partners from time to time (some of which have been in technical default for which forbearance or waivers have been granted).  At March 31, 2002, Value Partners holds a controlling 51.32% of the Company’s issued and outstanding Common Stock with warrants to acquire up to 60.6% of such Common Stock.  At March 31, 2002, Value Partners owned 66% of the Company’s long-term debt.

 

Despite improvement in the results over the past three years, including net income of $2.4 million for the year ended December 31, 2001, the Company has a working capital deficit of $3.5 million and a stockholders’ deficit of $19.4 million as of March 31, 2002.  Further, the Company is highly leveraged and, from time to time, has been unable to pay its interest and accounts payable obligations when they become due.  The Company was unable to meet its interest payments in full since September 2000. Waivers of default for non-payment of interest have been received from the majority holder of the Senior Notes through the earlier of: (i) ten days subsequent to the receipt of in excess of $5.0 million from any source by TWC or any of its subsidiaries; or (ii) January 1, 2003.  Under the conditions of the waivers, if the Company receives a sum in excess of $5.0 million on or before September 17, 2002, the accrued and unpaid interest as of September 17, 2002 shall become due on September 17, 2002.

 

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

ITEM 5.          OTHER INFORMATION

 

None.

 

ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K

 

a.                                       Exhibits

 

10.1         Exchange Agreement by and between Trans World Corporation and Value Partners, Ltd., Anasazi Partners Limited Partnership, New Generation Limited Partnership, Lucille Friedson, Christopher Baker, Adrienne Baker, and the Baker Venture Fund I.

 

b.                                      Reports on Form 8-K

 

The Registrant filed Form 8-K on January 9, 2002.  The report contained the text of a press release issued by the Registrant concerning the sale of a subsidiary in Spain.

 

15



 

SIGNATURE

 

In accordance with the requirements of Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

TRANS WORLD CORPORATION

 

 

 

 

 

 

 

 

Date:

May 14, 2002

 

By:

/s/ Rami S. Ramadan

 

 

 

 

President,

 

 

 

Chief Executive Officer, and

 

 

 

Chief Financial Officer

 

16


EX-10.1 3 j3453_ex10d1.htm EX-10.1 Exhibit 10

Exhibit 10.1

 

EXCHANGE AGREEMENT

 

BY AND BETWEEN

 

TRANS WORLD CORPORATION

 

AND

 

VALUE PARTNERS, LTD.,

 

ANASAZI PARTNERS LIMITED PARTNERSHIP,

 

NEW GENERATION LIMITED PARTNERSHIP,

 

LUCILLE FRIEDSON, CHRISTOPHER BAKER,

 

ADRIENNE BAKER,

 

THE BAKER VENTURE FUND I

 

 



 

i)                      TABLE OF CONTENTS

 

1.

Exchange of Bonds for Common.

 

 

 

 

2.

Conditions to Closing of the Exchange.

 

 

 

 

3.

Representations and Warranties of the Company.

 

 

 

 

4.

Representations and Warranties of the Bondholders.

 

 

 

 

5.

Covenants of the Company.

 

 

 

 

6.

Notices.

 

 

 

 

7.

Choice of Law/Jurisdiction.

 

 

 

 

8.

Survival of Representations.

 

 

 

 

9.

Assignment.

 

 

 

 

10.

Entire Agreement; Amendments and Waivers.

 

 

 

 

11.

Invalidity.

 

 

 

 

12.

Further Assurances.

 

 

 

 

13.

Counterparts.

 

 

 

 

14.

Indemnification.

 

 

 

 

15.

Counterparts; Facsimile; Amendments.

 

 

 

 

16.

Title and Subtitles.

 

 

 

 

17.

Replacement of Certificates.

 

 

 

 

18.

Restrictive Legend on Certificates

 

 

 

 

SCHEDULE A

 

 

 

 

SCHEDULE B

 

 

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 PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.

 

ii)                   EXCHANGE AGREEMENT

 

This Exchange Agreement (the “Agreement”) is made as of the 31st day of December, 2001, (the “Effective Date”) by and between Trans World Corporation, a Nevada corporation (the “Company”) and Value Partners, Ltd., Anasazi

 

2



 

Partners Limited Partnership, New Generation Limited Partnership, Lucille Friedson, Christopher Baker, Adrienne Baker and Baker Venture Fund I (collectively the “Bondholders”).

 

Whereas the Company and its wholly-owned subsidiary, Trans World Gaming of Louisiana, Inc., a Louisiana corporation (collectively the “Company”), have issued the 12% senior secured bonds due December 31, 2005 in the principal sum of $4.8 million dollars (the “Bonds”) to the Bondholders in the principal amounts together with unpaid interest due as indicated on Schedule A; and

 

Whereas the Bondholders now desire to surrender and exchange their Bonds for 37,233,334 shares of common stock, par value $.001 per share of the Company, in the aggregate, (the “Common”);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.   Exchange of Bonds for Common.

 

The Company and the Bondholders agree to exchange the Bonds for the Common as set forth on Schedule A.  The exchange shall be deemed effective on the Closing Date, as defined below. On the Closing Date, each outstanding Note shall be deemed to represent the number of shares of Common into which it may be exchanged and shall no longer represent debt of the Company.  Each Bondholder agrees to surrender its Note to the Company not less than ten (10) Business Days following written notification that all conditions (other than delivery of Notes) set forth in Section 2 have been met.  The number of shares of Common to be received shall be determined by dividing the sum of the Bond Amount for each Bondholder and the Accrued Interest therefore as of December 31, 2001, as set forth on Schedule A hereto, by $.18 (the “Exchange Price”).

 

2.  Conditions to Closing of the Exchange.

 

Upon the terms and satisfaction of each of the following conditions, and in reliance upon the representations and warranties contained in this Agreement and the Schedules attached and made a part of this Agreement, the Company and the Bondholders agree to exchange the Bonds for the Common on the Business Day which is the last day the conditions set forth in this Section 2 are satisfied (the “Closing Date”). The Company may waive the timely delivery of Notes as a condition to Closing. In the event the Closing Date has not occurred by February 28, 2002, this Agreement shall be deemed terminated at the written election of any Bondholder or the Company.  For purposes of this Agreement, a “Business Day” shall be any day other than Saturday or Sunday or other day on which commercial banks in the city of New York are authorized or required by law to remain closed.

 

(a)           Acceptance by the Company and all of the Bondholders of a satisfactory Agreement (including the Schedules annexed hereto), due execution by all parties of this Agreement and the delivery of each Note;

 

(b)           All representations and warranties of the Company and the Bondholders contained herein and in all Exhibits annexed hereto shall remain true and correct in all material respects as of the Closing Date;

 

(c)           The Company shall have obtained all permits and qualifications required by any applicable state law for the issuance of the Common, or shall have the availability of exemptions therefrom.  At the Closing Date, all laws and regulations to which Bondholders and the Company are subject shall legally permit the issuance of the Common and cancellation of the Bonds;

(d)           Delivery of any third party consents and satisfactory evidence of the resolution of any conflicts as set forth on Schedule B.

 

On the Closing Date, the Bondholders will cease to have any right to payment of principal and interest on the Bonds in whole or in part or any claim to the security for the Bonds, and will become the holders of the Common with all rights and preferences in connection therewith.

 

3.    Representations and Warranties of the Company.

 

(a)           Organization and Good Standing.  The Company is a corporation duly incorporated and validly existing and in good standing under the laws of the State of Nevada, with the full authority to issue the Common and

 

3



 

complete the exchange as set forth herein and to carry out the provisions hereof, and has all requisite corporate authority to carry on its business as now being conducted. The Company is not in violation of any material terms of its Articles of Incorporation, as amended or its Bylaws.

 

(b)           Common. The Common, when issued pursuant to the terms of this Agreement will be duly authorized, and validly issued, fully paid and nonassessable and will be subject to no lien or encumbrance.

 

(c)           Registration Rights. The Common shall not be entitled to registration rights except as set forth in Section 5 hereof.

 

(d)           Execution of this Agreement. The Company has the full right, power and authority to enter into, deliver and to perform its obligations under this Agreement and all other agreements, certificates and documents executed and delivered, or to be executed and delivered, by the Company in connection herewith and to issue the Common and this Agreement has been duly authorized, executed and delivered by the Company.  This Agreement has been duly executed and delivered by the Company and constitutes the valid and binding agreement of the Company enforceable against the Company in accordance with its terms. Upon the Closing, the Common issuable in connection with the exchange of the Bonds will be duly authorized and validly issued and outstanding, fully paid and nonassessable and free from all taxes, liens and charges.

 

(e)           Contravention.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not contravene or constitute a default under or violate (i) any provision of applicable law or regulation the violation of which would have a material adverse effect on the Company or on the Common, (ii) the Articles of Incorporation and Bylaws of the Company, or (iii) any agreements, judgment, injunction, order, decree or other instrument binding upon the Company or any of its assets or properties, the violation of which would have a Material Adverse Effect on the Company or on the Common.  For purposes of this Agreement, a “Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Company, (b) the ability of the Company to perform its obligations under this Agreement, or any related agreement, or (c) the validity or enforceability of this Agreement or the Common.

 

(f)            Governmental Regulations.  Except as required pursuant to the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and State securities laws, the Company is not subject to any Federal or state law or regulation limiting its ability to enter into this Agreement to issue the Common or to perform its obligations required thereby.

 

(g)           Capitalization. As of January 15, 2002, the authorized capital stock of the Company consists of 50,000,000 shares of common stock, of which 11,022,902 shares are outstanding, and 2,000,000 shares of preferred stock, of which none are outstanding.  All of the outstanding shares of the Company’s capital stock have been duly and validly authorized and issued and are fully paid and nonassessable.

 

(h)           The Company.  The Company has registered its Common pursuant to Section12(g) of the Exchange Act and is in full compliance with all reporting requirements of the Exchange Act, and such Common is currently listed or quoted, and trades, on the NASD OTC Bulletin Board.

 

(i)            No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its affiliates, nor any distributor or any person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising in connection with the issuance of the Common, or (ii) has made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Common under the Securities Act, except as contemplated by this Agreement.

 

(j)            No Material Adverse Change.  No Material Adverse Effect has occurred or exists with respect to the Company, except as disclosed in filings with the SEC or as publicly announced as of or since January 15, 2001.

 

(k)           Board Approval. The Board of Directors of the Company has concluded, in its good faith business

 

4



 

judgment that the issuance of the securities of the Company in connection with this Agreement are in the best interests of the Company and its stockholders.

 

(l)                                     Information True and Correct.  All the information that is set forth in this Agreement with respect to the Company is correct and complete as of the date of this Agreement.

 

4.              REPRESENTATIONS AND WARRANTIES OF THE BONDHOLDERS.

 

(a)           Title. Each Bondholder is the owner, beneficially and of record, of all the bonds set forth beside each such Bondholder’s name on Schedule A, to be exchanged hereby, free and clear of all liens, encumbrances, security agreements, equities, options, claims, charges and restrictions except as set forth on such Schedule B.  Any encumbrance shall be released on or before the Exchange Date.  Each Bondholder has full power to transfer the Bonds exchanged hereby with the Company without obtaining the consent or approval of any other person, entity or governmental authority. The Bonds being exchanged hereby constitute all of the Bonds owned by the Bondholder in this series.

 

(b)           Information True and Correct. All the information that is set forth in this Agreement with respect to each Bondholder is correct and complete as of the date of this Agreement.

 

(c)           Knowledge and Experience. Each Bondholder has such knowledge and experience in financial and business matters that each such Bondholder, together with each such Bondholder’s representatives and advisors, if any, is capable of evaluating the merits and risks of an investment in the Common.

 

(d)           Execution of this Agreement. Each Bondholder has the full right, power and authority to enter into and to perform this Agreement and all other agreements, certificates and documents executed and delivered, or to be executed and delivered, by each Bondholder in connection herewith (collectively, with this Agreement, the “Bondholder Documents”). This Agreement has been duly authorized, executed and delivered by each Bondholder, and the Bondholder Documents are (or when executed and delivered will be) legal, valid and binding obligations of each Bondholder, enforceable against such bondholder in accordance with their respective terms.

 

(e)           Intent. Without limiting the ability to resell the Common pursuant to an effective registration statement or an exemption from registration, each Bondholder has no present arrangement (whether or not legally binding) at any time to sell the Common to or through any person or entity; provided, however, that by making the representations herein, each Bondholder does not agree to hold the securities for any minimum or other specific term and reserves the right to dispose of the securities at any time in accordance with federal and state securities laws applicable to such disposition. Without limiting its ability to resell the securities, each Bondholder represents that the Common are acquired for each Bondholder’s own account, for investment purposes only and not for distribution or resale to others.  Each Bondholder agrees not to sell the securities unless they are registered under the Securities Act or unless an exemption from such registration is available.

 

(f)            Accredited Investor/Investment Experience. Each Bondholder is an accredited investor (as defined in Rule 501 of Regulation D), and has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Common.  As of the Closing Date, each Bondholder (i) has adequate means of providing for current needs and possible personal contingencies, (ii) has no need for liquidity in this investment, (iii) is able to bear the substantial economic risk of an investment in the Common for an indefinite period, and (iv) can afford the complete loss of its investment. Each Bondholder recognizes the highly speculative nature of this investment.

 

(g)           Not an Affiliate. Except for Value Partners, Ltd., none of the Bondholders are either an officer, director or “affiliate” (as that term is defined in Rule 405 of the Securities Act) of the Company.

 

(h)           Absence of Conflicts.  Except as disclosed on Schedule B, the execution and delivery of this Agreement and any other document or instrument executed in connection herewith, and the consummation of the transactions contemplated hereby and thereby, and compliance with the requirements thereof, will not (a) violate the organizational documents of any of the Bondholders; (b) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on each Bondholder, or, to the knowledge of each Bondholder; (c) violate any

 

5



 

provision of any indenture, instrument or agreement to which each Bondholder is a party or is subject, or by which any Bondholder or any of its assets is bound which violations have not been waived hereby; (d) conflict with or constitute a material default thereunder; (e) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by any Bondholder to any third party; or (f) require the approval of any third-party (which has not been obtained) pursuant to any material contract, agreement, instrument, relationship or legal obligation to which each Bondholder is subject or to which any of its assets, operations or management may be subject.  With respect to this subsection (h), the terms “indenture, instrument and agreement” or allusion thereto shall specifically exclude any such indenture, agreement or instrument between or among the Company and/or any of its affiliates on the one hand and any Bondholder on the other hand.   The consummation of this Agreement shall constitute a waiver by the Bondholders and the Company (or any affiliate thereof ) of any and all violations or breaches by the other under the Bonds resulting from this Agreement or any other indenture, instrument or agreement.

 

(i)            Disclosure; Access to Information. Each Bondholder has received all documents, records, books and other information pertaining to Bondholder’s investment in the Company that have been requested by each Bondholder. Each Bondholder has had the opportunity to ask questions of, and receive answers from, the Company and its management.

 

(j)            Manner of Sale. At no time was any Bondholder presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising in connection with the exchange or offer of the Common.

 

(k)           Exemption from Registration. Each Bondholder acknowledges and understands that the Common has not been registered under the Securities Act due to an exemption under the provisions of the Securities Act.

 

(l)            No Legal, Tax or Investment Advice. Each Bondholder understands that nothing in this Agreement or any other materials presented by the Company to each Bondholder in connection with the Exchange constitutes legal, tax or investment advice. Each Bondholder has relied on, and has consulted with, such legal, tax and investment advisors as any Bondholder, in its sole discretion, has deemed necessary or appropriate in connection with its exchange of the Bonds for the Common.

 

(m)          Bondholder Responsibility.  The Company acknowledges that (i) all of the obligations of each Bondholder are several and not joint (it being the parties’ intent that each Bondholder will be responsible only for its own obligations), and (ii) each representation and warranty made herein by or as to each Bondholder relates only to such Bondholder, and that no Bondholder is liable for breach of any representation or warranty made by or as to any other Bondholder.

 

5.              COVENANTS OF THE COMPANY.

 

The Company hereby covenants as follows:

 

(a)           Registration Rights.

(1)           Demand Registration

The holder shall have the right to have the shares of Common registered as part of the next public offering of the Common.  If no such public offering has occurred by January 1, 2003, then upon the written request of any combination of the holders of not less than 100,000 shares of Common, and on a one-time basis, the Company shall file, within ninety (90) days after written request for such registration, and use its best efforts to cause to be declared effective ninety (90) days thereafter, 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 “1933 Act”), covering the sale by the holder of the Common to be issued as a result of the exchange of the Bonds (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 Section 14 hereto.  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 Section 14.

 

6



 

(2)           Termination, Fees and Expenses

The Company will maintain such registration statement or post-effective amendment current and effective under the 1933 Act for two years, or until the Registerable Securities would otherwise be eligible for sale without restriction under Rule 144 promulgated pursuant to the 1933 Act.

The Company shall bear the entire cost and expense of any registration of securities under this Section 5(a) hereof.  Notwithstanding the foregoing, any holder whose Registerable Securities are included in any such registration statement pursuant to this Section 5(a) shall, however, bear the fees of any counsel maintained by him and any transfer taxes or underwriting discounts or commissions applicable to the Registerable Securities sold by him pursuant thereto.

 

In addition the Company shall:

(A)  furnish to the holder such numbers of copies of a summary prospectus or other prospectus, including a preliminary prospectus or any amendment or supplement to any prospectus, in conformity with the requirements of the 1933 Act, and such other documents, as the holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by the holder.

(B)   use its best efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as the holder shall reasonably request, and do any and all other acts and things which may be necessary or advisable to enable such holder to consummate the public sale or other disposition in such jurisdictions of the securities owned by such holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process;

(C)   use its best efforts to list such securities on any securities exchange on which any securities of the Company is then listed, if the listing of such securities is then permitted under the rules of such exchange;

(D)  enter into and perform its obligations under an underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering;

(E)   notify the holder of Registerable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the 1933 Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; and

(F)   furnish, at the request of the holder on the date such Registerable Securities are delivered to the underwriters for sale pursuant to such registration or, if such Registerable Securities are not being sold through underwriters, on the date the registration statement with respect to such Registerable Securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purpose of such registration, addressed to the underwriters, if any, and to the holder making such request, covering such legal matters with respect to the registration in respect of which such opinion is being given as the holder of such Registerable Securities may reasonably request and are customarily included in such an opinion and (ii) letters, dated, respectively, (1) the effective date of the registration statement and (2) the date such Registerable Securities are delivered to the underwriters, if any, for sale pursuant to such registration, from a firm of independent certified public accountants of recognized standing selected by the Company, addressed to the underwriters, if any, and to the holder making such request, covering such financial, statistical and accounting matters with respect to the registration in respect of which such letters are being given as the holder of such Registerable Securities may reasonably request and are customarily included in such letters; and

(G)   take such other actions as shall be reasonably requested by any holder to facilitate the registration and sale of the Registerable Securities.

 

(b)           Reservation of Common Stock. As of the Closing Date, the Company will have reserved free of preemptive rights, the Common to be exchanged for the Bonds.  Such number of shares of Common to be reserved shall be calculated based upon the aggregate Exchange Price set forth in Section 1 of this Agreement and on Schedule A hereto.

 

(c)           Notice of Breaches. The Company on the one hand, and each Bondholder on the other, shall give prompt written notice to the other of any breach by it of any representation, covenant, warranty or other agreement

 

7



 

contained in this Agreement or any Exhibit annexed hereto, as well as any events or occurrences arising after the date hereof, which would reasonably be likely to cause any representation, covenant, or warranty or other agreement of such party, as the case may be, contained in this Agreement or any Exhibit annexed hereto, to be incorrect or breached as of such Closing Date. However, no disclosure by either party pursuant to this Section shall be deemed to cure any breach of any representation, warranty or other agreement contained in this Agreement or any Exhibit annexed hereto.

 

(d)           Rule 144 Compliance. The Company covenants and agrees that for so long as any of the Common remain outstanding and continue to be “restricted securities” within the meaning of Rule 144 under the Securities Act (“Rule 144”), the Company shall cooperate in order to permit resales of the Underlying Common pursuant to Rule 144. The Company shall provide its transfer agent any and all papers necessary to complete the transfer under Rule 144, including, but not limited to, letters of counsel to its transfer agent, and the Company shall continue to file all material required to be filed pursuant to Sections 13(a) or 15(d) of the Exchange Act.

 

6.              NOTICES.

 

All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable overnight courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. where such notice is to be received), (b) on the second Business Day following the date of mailing by reputable courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur, or (c) five calendar days after sent by regular mail. The addresses for such communications shall be:

 

If to the Company:

 

Address

Trans World Gaming

 

Rami Ramadan, President, Trans World Corporation, 545 Fifth Avenue, Suite 940, New York, NY 10017

 

 

 

 

 

With a copy (which shall not constitute notice) to: Jeffrey A. Koeppel or Sheryl Jones Alu, Elias, Matz Tiernan & Herrick, 12th Floor, 734 15th Street, NW, Washington, DC 20005

 

If to the Bondholders:

 

Address

Value Partners, Ltd.

 

Ewing & Partners, c/o Timothy Ewing
4514 Cole Avenue, Suite 808, Dallas, TX 75205

 

 

 

Anasazi Partners Limited Partnership

 

CP Baker Co., Ltd., c/o Christopher Baker
303 Congress Street, Suite 301, Boston, MA 02210

 

 

 

New Generation Limited Partnership

 

New Generation Ltd. Partnership
c/o George Putnam, 225 Friend Street, Suite 801, Boston, MA 02114

 

 

 

Lucille Friedson

 

9125 SW 56 Court
Miami, FL 33156

 

 

 

Christopher Baker

 

CP Baker Co., Ltd., c/o Christopher Baker
303 Congress Street, Suite 301, Boston, MA 02210

 

 

 

Adrienne Baker

 

CP Baker Co., Ltd., c/o Christopher Baker
303 Congress Street, Suite 301, Boston, MA 02210

 

 

 

Baker Venture Fund I

 

CP Baker Co., Ltd., c/o Christopher Baker
303 Congress Street, Suite 301, Boston, MA 02210

 

8



 

7.              CHOICE OF LAW/JURISDICTION.

 

This Agreement and all transactions contemplated by this Agreement shall be exclusively governed by, and construed and enforced in accordance with, the internal laws of the State of New York without regard to principles of conflicts of laws. Each party consents to the exclusive jurisdiction of the United States District Court of the Southern District of New York in connection with any dispute arising under this Agreement and hereby waive, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.  EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO REQUEST A TRIAL BY JURY FOR ANY MATTER LITIGATED ARISING FROM OR IN CONNECTION WITH THIS AGREEMENT.

 

8.              SURVIVAL OF REPRESENTATIONS.

 

All statements contained in any certificate or instrument or conveyance delivered by or on behalf of the parties pursuant to this Agreement or in connection with the transactions contemplated hereby shall be deemed to be additional representations and warranties of the parties making such disclosure. All representations and warranties shall survive the Exchange as contemplated herein.

 

9.              ASSIGNMENT.

 

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder.

 

10.       ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.

 

This Agreement, together with all exhibits, attachments and schedules hereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. No supplement, amendment, modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

11.       INVALIDITY.

 

In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall for any reason be held invalid, illegal or unenforceable in any respect, then such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other instrument.

 

12.       FURTHER ASSURANCES.

 

The parties shall cooperate and take such actions, and execute such other documents, in connection with the transactions contemplated herein, as either may reasonably request in order to carry out the provisions or purpose of this Agreement.

 

13.       COUNTERPARTS.

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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14.       INDEMNIFICATION.

 

The Company agrees to indemnify and hold harmless each Bondholder and each agent and affiliate of each Bondholder against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable and documented costs of defense and investigation and all reasonable and documented attorneys’ fees), to which any of the Bondholder may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the breach by the Company of any term of this Agreement. Each Bondholder agrees that it will indemnify and hold harmless the Company, and each officer, director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all reasonable and documented costs of defense and investigation and all reasonable and documented attorneys’ fees) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the breach by such person of any term of this Agreement.

 

Promptly after receipt by an indemnified party under this section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party unless the indemnifying party is prejudiced thereby. In case any such action is brought against any indemnified party, and it notifies the 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, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for all of the indemnified parties, which firm shall be designated in writing by the indemnified parties).  No settlement of any action against an indemnified party shall be made without the prior written consent of such indemnified party, which consent shall not be unreasonably withheld.

 

Each party hereby agrees that if another party to this Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in any courts having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

 

15.       COUNTERPARTS; FACSIMILE; AMENDMENTS.

 

This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. Except as otherwise stated herein, in lieu of the original documents, a facsimile transmission or copy of the original documents

 

10



 

shall be as effective and enforceable as the original.  This Agreement may be amended only by a writing executed by the Company on the one hand, and all of the Bondholders on the other hand.

 

16.       TITLE AND SUBTITLES.

 

The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

17.       REPLACEMENT OF CERTIFICATES.

 

Upon (i) receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of any of the Common and (ii) in the case of any such loss, theft or destruction of such certificate, upon delivery of an indemnity agreement and security or a bond reasonably satisfactory in form and amount to the Company, and to the Company’s transfer agent, or (iii) in the case of any such mutilation, on surrender and cancellation of such certificate, the Company at its expense will execute and deliver, in lieu thereof, a new certificate of like tenor.

 

18.       RESTRICTIVE LEGEND ON CERTIFICATES

 

The Common share certificates shall bear the following restrictive legend:  “These shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws or any other applicable securities law.  These shares may not be reoffered, sold, assigned, transferred, or otherwise disposed of in the absence of such registration or unless such transaction is exempt from, or not subject to such registration.” The holder of these shares by its acceptance hereof agrees to offer, sell or otherwise transfer these shares, only (a) to the Company, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) so long as these shares are eligible for resale pursuant to Rule 144a under the Securities Act (“Rule 144a”), to a person it reasonably believes is a “qualified institutional buyer” (as defined in Rule 144a) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144a, (d) to an “accredited investor” within the meaning of subparagraph (a) of Rule 501 under the Securities Act that is acquiring these shares for its own account, or for the account of such an accredited investor, for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act, or (e) pursuant to any other available exemption from the registration requirements under the Securities Act, subject to the right of the Company prior to any such offer, sale or transfer pursuant to clause (c), (d) or (e) to require the delivery of an opinion of counsel, certifications and/or other information reasonably satisfactory to it.  Such holder further agrees that it will deliver to each person to whom these shares are transferred a notice substantially to the effect of this legend.  Additional restrictions may be applicable to these shares as provided in the Certificate.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement to be duly executed, on the day and year first above written.

 

 

 

Signature

 

Date

Value Partners, Ltd.

 

 

 

 

 

 

 

 

 

Anasazi Partners Limited Partnership

 

 

 

 

 

 

 

 

 

New Generation Limited Partnership

 

 

 

 

 

 

 

 

 

Lucille Friedson

 

 

 

 

 

 

 

 

 

Christopher Baker

 

 

 

 

 

 

 

 

 

Adrienne Baker

 

 

 

 

 

 

 

 

 

Baker Venture Fund I

 

 

 

 

 

 

 

 

 

Trans World Corporation

 

 

 

 

 

12



 

19.       SCHEDULE A

 

Trans World Corporation

Summary of $4.8 million bond issue (“Bonds”)

 

Bondholder Name

 

Contact

 

Address

 

Bond
Amount

 

Accrued Interest
As of December 31, 2001

 

Total

 

Amount of
Common

 

Value Partners Ltd

 

Tim Ewing

 

Ewing & Partners
4514 Cole Avenue, Suite 808
Dallas, TX  75205

 

3,000,000

62.5

%

1,188,750

 

4,188,750

 

23,270,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anasazi Partners

 

Chris Baker

 

Anasazi Partners LP
303 Congress Street, Suite 301
Boston, MA  02210

 

1,250,000

26.0

%

495,350

 

1,745,350

 

9,696,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Generation LP

 

George Putnam

 

New Generation Ltd. Partnership
225 Friend St., Suite 801
Boston, MA  02114

 

250,000

5.2

%

 

99,070

 

349,070

 

1,939,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Friedson

 

Lucille Friedson

 

Lucille Friedson
9125 SW 56 Court
Miami, FL  33156

 

100,000

2.1

%

 

39,610

 

139,610

 

775,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chris Baker

 

Chris Baker

 

CP Baker Co., Ltd.
303 Congress Street, Suite 301
Boston, MA  02210

 

50,000

1.0

%

 

19,805

 

69,805

 

 

387,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adrienne Baker

 

Chris Baker

 

CP Baker Co., Ltd.
303 Congress Street, Suite 301
Boston, MA  02210

 

50,000

1.0

%

 

19,805

 

69,805

 

387,806

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CP Baker Venture Fund I

 

Chris Baker

 

CP Baker Co., Ltd.
303 Congress Street, Suite 301
Boston, MA  02210

 

100,000

2.1

%

 

39,610

 

139,610

 

775,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

4,800,000

100

%

1,902,000

 

6,702,000

 

37,233,334

 

Total Converted Shares

 

 

 

26,666,667

 

 

10,566,667

 

37,233,334

 

 

 

 

13


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