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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended December 31, 1999
American Gaming & Entertainment, Ltd.
______________________________________________________________________________
(Name of small business issuer in its charter)
0-19049
__________________________
Commission file number
Delaware 74-2504501
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 Beech Road
Glen Rock, New Jersey 07452 07452
_________________________________________ ______________
(Address of principal executive offices) (Zip Code)
(201) 447-5360
________________________________________________
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock ($0.01 par value per share) ("Common Stock")
_________________________________________________________
(Title of Class)
Check whether the Company (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
No
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [x]
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The Company's revenues for the fiscal year ended December 31, 1999 were
approximately $11,743,000.
On February 29, 2000 the aggregate market value of the voting stock of the
Company held by non-affiliates of the Company was approximately $595,000.
On February 29, 2000 there were 12,532,102 shares of the Company's Common
Stock outstanding.
_____________________________________________________
Additional Information
For the purpose of calculating the aggregate market value of the Company's
Common Stock held by non-affiliates, it has been assumed that only the
outstanding Common Stock legally or beneficially held by the directors and
executive officers of the Company and the two stockholders indicated in
"Security Ownership" with the largest holdings of the Company's Common Stock
are held by affiliates of the Company. However, this should not be deemed to
constitute an admission that all of such persons are, in fact, affiliates or
that there are no other persons who may be deemed to be affiliates of the
Company.
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AMERICAN GAMING & ENTERTAINMENT, LTD.
1999 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1. Description of Business .............................. 4
Item 2. Description of Property ..............................11
Item 3. Legal Proceedings ....................................11
Item 4. Submission of Matters to a Vote of Security Holders .12
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters ..................................12
Item 6. Management's Discussion and Analysis or
Plan of Operation ....................................15
Item 7. Financial Statements .................................17
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ...............17
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Section 16(a) Beneficial
Ownership Report Compliance ..........................18
Item 10. Executive Compensation ...............................19
Item 11. Security Ownership of Certain Beneficial
Owners and Management ...............................21
Item 12. Certain Relationships and Related Transactions .......24
Item 13. Exhibits and Reports on Form 8-K .....................26
SIGNATURES .......................................................52
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PART I
Item 1. Description of Business
GENERAL
Prior to 2000, the Company owned equity interests in various properties that,
at the respective times of purchase, the Company anticipated could be utilized
in casino gaming projects. The Company still owns a 4.9% interest in a
riverboat gaming and entertainment complex in Rising Sun, Indiana (the "RSR
Interest"), but has agreed to transfer to Shamrock Holdings Group, Inc.
(collectively with affiliated entities, "Shamrock") all payments,
distributions, dividends and proceeds of any type to which the Company is
entitled pursuant to or in connection with the RSR Interest (see " -
Restructuring"). Shamrock is the Company's majority stockholder and, prior to
the restructuring discussed below, was the Company's primary creditor. The
Company is currently seeking financing from sources independent of Shamrock.
The Company has no present commitments or other alternatives for such
financing.
The Company has conducted its business directly and through wholly-owned
subsidiaries. The term "Company" as used herein refers to American Gaming &
Entertainment, Ltd. and such subsidiaries unless the context otherwise
requires. The Company's principal executive offices are located at 51 Beech
Road, Glen Rock, New Jersey 07452; telephone: (201) 447-5360. The Company was
incorporated in 1988 under the laws of the State of Delaware.
RESTRUCTURING
In accordance with a Letter Agreement dated November 23, 1999 between the
Company and Shamrock (the "Letter Agreement"), the Company agreed to transfer
to Shamrock (a) substantially all of the Company's right, title and interest
under the First Amended Joint Plan of Liquidation (the "Mississippi Plan") for
AMGAM Associates ("AMGAM") and American Gaming and Resorts of Mississippi,
Inc. ("AGRM") and (b) all payments, distributions, dividends and proceeds of
any type to which the Company is entitled pursuant to or in connection with an
Irrevocable Proxy and Consent Agreement (the "Proxy Agreement") relating to
the RSR Interest (collectively, the "Transferred Assets"). On December 16,
1999, the Letter Agreement was approved by the United States Bankruptcy Court
for the Northern District of New York (the "NYBC"), the court in which
Shamrock was a debtor in bankruptcy from June 1998 through February 2000.
However, pursuant to an order (the "Order") by the NYBC dated December 23,
1999, the release by Shamrock of the Company is conditioned upon the Company's
fulfillment of its obligations under the Letter Agreement, and the release of
Mr. J. Douglas Wellington, the President and Chief Executive Officer ("CEO")
of the Company, by Shamrock was effective as of December 23, 1999, except for
his obligations under his employment contract dated as of December 31, 1999
(the "Employment Agreement").
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The Transferred Assets constituted substantially all of the assets of the
Company as of December 16, 1999. The amount of the Transferred Assets reduced
the Company's indebtedness to Shamrock. The Company was to retain cash of
$464,000 as of January 1, 2000, less legal retainers plus accounts payable
incurred in the ordinary course of business to bona fide third parties and
mutually agreed upon by the Company and Shamrock. (As of December 31, 1999,
approximately $376,000 was due from Shamrock from excess cash distributions to
Shamrock, which amount was received in April 2000). Such retained amount
represents the Company's budgeted costs through January 31, 2001. As of
January 31, 2001, after paying any and all outstanding expenses, the Company
will transfer all remaining cash to Shamrock.
In accordance with the Letter Agreement, the Company executed a security
agreement in favor of Shamrock relating to the RSR Interest in exchange for
Shamrock agreeing to forebear from the exercise of any rights or remedies in
respect of all obligations owing by the Company to Shamrock. Prior to December
16, 1999, the Company was indebted to Shamrock in the amount of approximately
$64,315,000.
Pursuant to the Letter Agreement but subject to the Order, Shamrock released
the Company from all debts and liabilities in excess of the amount of the
Transferred Assets, and shall cause the dismissal with prejudice of the
adversary proceeding captioned Richard C. Breeden, Trustee of the Bennett
Funding Group, Inc. et al v. Gamma International, American Gaming &
Entertainment, Ltd. and John Does 1 to 100 (AP 98-70465 A) (United States
Bankruptcy Court for the Northern District of New York).
Subject to the Order, Shamrock has waived all accrued dividends, whether
declared or undeclared, on the Company's Series C Cumulative Preferred Stock
("Series C Stock") and Series D Cumulative Preferred Stock ("Series D Stock").
Although undeclared dividends do not constitute legal obligations of the
Company, the Company accrued for such dividends because, under the terms of
the Series C Stock and the Series D Stock, dividends are cumulative whether or
not declared and the Company was prohibited from paying dividends on,
purchasing or redeeming any of its Series A Preferred Stock ("Series A Stock")
or Common Stock so long as any such cumulated dividends were unpaid. Shamrock
has agreed to waive any future dividends on such preferred stock so long as
Shamrock owns such preferred stock, provided, however, that if the Company
declares any dividends on its Common Stock or redeems any of its Common Stock
or Series A Stock, other than Common Stock or Series A Stock owned by
Shamrock, then the holders of Series C Stock and Series D Stock shall be
entitled to participate in such dividend or redemption on the same basis as if
such Series C Stock and Series D Stock had been converted into Common Stock in
accordance with the terms of such Series C Stock and Series D Stock. All other
provisions of the Series C Stock and Series D Stock shall remain in effect,
including, without limitation, provisions regarding voting and conversion.
Shamrock, as the majority stockholder of the Company and the sole owner of the
Series A Stock, Series C Stock and Series D Stock, has consented to an
amendment to the Company's certificate of incorporation changing the dividend
rights of the Series C Stock and Series D Stock as discussed above. Such
amendment shall become effective twenty days after mailing an information
statement discussing such amendment, among other matters, to the Company's
stockholders.
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In accordance with the Letter Agreement, the Company released Shamrock from
all debts and liabilities and withdrew all claims in the bankruptcy cases of
Shamrock and Bennett Funding Group, Inc. et al. The Company shall endeavor to
find a buyer of its stock and/or remaining assets during the term ending
January 31, 2001.
As a result of the transactions agreed to in the Letter Agreement, the Company
recorded a decrease in assets of approximately $9,915,000 and a decrease in
liabilities of approximately $64,347,000 as of December 16, 1999.
Additionally, net income increased by approximately $51,279,000 and net income
for common stockholders increased by approximately $54,432,000 for the year
ended December 31, 1999.
Mr. Wellington shall continue his employment with the Company through the term
ending January 31, 2001 at an annual compensation of $125,000. At the end of
such term, assuming that there has been no intervening voluntary bankruptcy
filing by the Company without Shamrock's consent and assuming that the
provisions of the Letter Agreement and the Employment Agreement are met, Mr.
Wellington shall be entitled to a severance payment of $125,000 from a reserve
account set aside and controlled by Shamrock. See "Executive Compensation -
Employment Contracts and Termination of Employment."
LIQUIDITY AND CONTINUATION OF BUSINESS
Prior to 1999, the Company had sustained recurring operating losses. The
Company also has had a history of insufficient liquidity and has been
dependent upon Shamrock for both working capital and project related
financing. The Company had available cash of approximately $86,000 as of
February 29, 2000.
The Company's ability to continue in business is primarily dependent upon its
ability to obtain sufficient funds for its operations. However, the Company
has no current commitments or prospects for additional funds. If the Company
does not receive additional funds prior to January 31, 2001, it would then
need to pursue a formal plan of reorganization or liquidation. A formal plan
of reorganization or liquidation would generally result in the sale of the
Company's assets to satisfy outstanding obligations. There can be no assurance
that if either action is required to be pursued that all such obligations
would be completely satisfied. Further, in the event of either action, it is
unlikely that the stockholders of the Company will recover any of their
investment in the Company.
INVESTMENTS
Indiana. Pursuant to the Proxy Agreement, RSR, LLC ("RSR"), a limited
liability company formed by the Company and a group of non-affiliated
individuals, is currently obligated to purchase the RSR Interest from NBD
Bank, N.A., as trustee ("NBD"), for the benefit of the Company, at an average
appraised fair market value. Additionally, RSR and the Company are currently
obligated to close on the sale of the RSR Interest at the lower of the two
appraisal
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amounts, with the balance due upon the completion of an independent third
appraisal. The Company has obtained an appraisal valuing the RSR Interest at
$6 million. The Company understands that RSR has obtained an appraisal that
values the RSR Interest significantly lower.
On September 9, 1999, RSR alleged that the Company and its principal
stockholders fraudulently induced RSR and the other members of RSR
(collectively, the "Remaining Members") to enter into the operating agreement
for RSR and the Proxy Agreement. RSR has offered to release the Company from
such alleged claims in exchange for the RSR Interest and all distributions
received by the Company with respect to the RSR Interest. The Company has
rejected RSR's offer and has filed suit against RSR for damages arising from
RSR's failure to comply with the provisions of the Proxy Agreement and
purchase the RSR Interest (see "Legal Proceedings").
In accordance with the Letter Agreement, the Company has agreed to transfer to
Shamrock all payments, distributions, dividends and proceeds of any type to
which the Company is entitled pursuant to or in connection with the RSR
Interest and the Company and Shamrock executed a security interest in the RSR
Interest in exchange for Shamrock agreeing to forebear from the exercise of
any rights or remedies in respect of all obligations owing by the Company to
Shamrock (see " - Restructuring").
DISCONTINUED VENTURES
Mississippi. Prior to 1997, an involuntary petition for liquidation under
Chapter 7 of the Code was filed with the United States Bankruptcy Court,
Southern District of Mississippi (the "Mississippi Bankruptcy Court") against
AMGAM, which operated the Gold Shore Casino in Biloxi, Mississippi. The case
was subsequently converted into a reorganization under Chapter 11 of the Code.
Additionally prior to 1997, AGRM, which owned and leased certain property in
Vicksburg, Mississippi, filed a voluntary petition for reorganization under
Chapter 11 of the Code with the Mississippi Bankruptcy Court.
Prior to 1997 and the bankruptcy proceedings of AGRM and AMGAM, the Gold Coast
Barge, on which AMGAM had previously operated the Gold Shore Casino, had been
transferred to the Company from AGRM in exchange for the cancellation of
AGRM's guaranty to the Company of certain unpaid lease obligations of AMGAM to
the Company.
Pursuant to a Charter Agreement (the "Charter Agreement") entered into prior
to 1997 between the Company and President Mississippi Charter Corporation
("PMCC"), PMCC leased the Gold Coast Barge from the Company. PMCC made charter
payments, excluding certain setoffs, through May 1997 totaling approximately
$6,378,000. From such amount, the Company received approximately $6,025,000,
excluding setoffs. The remainder of the payments, and all payments after May
1997, were deposited into an escrow account (the "Escrow Account") for the
benefit of the creditors of AMGAM and AGRM. Effective October 30, 1998, PMCC
and the Company entered into an amendment to the Charter Agreement (the
"Charter Amendment"). Pursuant to the Charter Amendment, among other things,
(i) PMCC paid $4,105,000 (the "Amendment Payments") into the Escrow Account,
(ii) PMCC agreed to pay into the Escrow Account a
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monthly charter payment of $215,000 for the period from December 1, 1998
through April 15, 2000 (and made all such payments through July 31, 1999). On
August 10, 1999, the Company sold the Gold Coast Casino barge to The President
Riverboat Casino-Mississippi, Inc. (the "Purchaser"), an affiliate of PMCC,
for $6,827,500, calculated as $5,000,000 plus all remaining charter payments.
Upon closing the Purchaser paid $1,000,000 into the Escrow Account and
delivered a promissory note in the amount of $5,827,500 to an escrow agent,
who will disburse all amounts paid by the Purchaser pursuant to the
Mississippi Plan.
On July 23, 1999, the Mississippi Bankruptcy Court confirmed the Mississippi
Plan. Pursuant to the Mississippi Plan, the Company's and Shamrock's claims
will be paid from (a) 70% of all escrowed charter payments, including the
Amendment Payments, (b) 72% of the first $3,000,000 of net proceeds from the
sale of the Gold Coast Barge, and (c) 75% of the net proceeds in excess of
$3,000,000 from the sale of the Gold Coast Barge. Additionally, all equity
interests of the Company in AMGAM and AGRM were canceled as of the effective
date of the Mississippi Plan.
In accordance with the Letter Agreement, the Company agreed to transfer to
Shamrock substantially all of the Company's right, title and interest under
the Mississippi Plan (See " - Restructuring" and " - Liquidity and
Continuation of Business").
Nevada. Prior to 1997, pursuant to an agreement between Shamrock and the
Company under which Shamrock provided the necessary funds to the Company to
close the purchase of the Harolds Club casino in Reno, Nevada, the Company
transferred to Shamrock title to the land and the building related to the
Harolds Club. Shamrock assumed responsibility for all carrying costs of the
Harolds Club property including, but not limited to, lease payments under
certain land leases held by the Company related to the Harolds Club, taxes,
insurance and utilities. Such land leases were assigned by the Company to
Shamrock as of September 29, 1998.
On June 25, 1999, Shamrock sold the Harolds Club in Reno, Nevada. All five
land leases held by Shamrock related to the Harolds Club terminated at
closing. The Company was released from all obligations under such leases,
except that the Company agreed to indemnify the five lessors of the Harolds
Club property against any environmental liabilities resulting from intentional
or negligent conduct on the part of the Company. (The Company is unaware of,
and no claim has been asserted related to, adverse environmental conditions at
Harolds Club resulting from intentional or negligent conduct on the part of
the Company.) Additionally, lawsuits filed against the Company by the five
lessors of the Harolds Club property and cross-claims filed against the
Company by co-defendants were dismissed upon closing, and any judgments which
were entered have been withdrawn and set aside as if not entered.
Due to certain lease guarantees, the Company had recorded unpaid Harolds Club
lease payments and property taxes from April 1996 through March 1999,
collectively totaling approximately $2,307,000 (the "Unpaid Harolds
Obligations"), as current liabilities. The Company had recorded the amount of
the Unpaid Harolds Club Obligations as a receivable due from Shamrock, but, as
a result of the Company's determination that there was a substantial
likelihood that such amounts would be uncollectible, the Company fully
reserved for such amounts at the same time such
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amounts were recorded as a receivable. As a result of the sale of the Harolds
Club, and the consequent release of the Company from all obligations under
such leases and the dismissal of all related lawsuits and cross-claims against
the Company, the Company reversed the Unpaid Harolds Obligations as of June
30, 1999.
Prior to 1997, Shamrock and the Company entered into an agreement pursuant to
which Shamrock agreed, upon the sale of the Harolds Club, to reimburse the
Company for (i) all costs and expenses, in an amount not to exceed $15,000,
incurred by the Company in connection with such sale, (ii) all reasonable
attorneys' fees incurred by the Company in connection with litigation
commenced against, among others, the Company by the five lessors of the
Harolds Club property, and (iii) all reasonable costs and expenses incurred by
the Company in connection with the operation and maintenance of the Harolds
Club. The Company had recorded the amount of such costs and expenses as a
receivable due from Shamrock, but, as a result of the Company's determination
that there was a likelihood that the Harolds Club would not be sold, the
Company fully reserved for such amounts at the same time such amounts were
recorded as a receivable. As a result of the sale of the Harolds Club, the
Company set off such amounts, collectively totaling approximately $524,000 as
of June 30, 1999, against the Company's indebtedness due to Shamrock.
Mobile, Alabama. Prior to 1997, the Company acquired the GM&O Building for
$1,006,000 in cash and subsequently recognized writedowns in the value of such
investment to reflect its fair market value. On March 1, 1999, the Company
sold the GM&O Building in Mobile, Alabama to the City of Mobile for
approximately $423,000. The Company used the net sales proceeds of
approximately $415,000 for working capital purposes.
Prichard, Alabama. Prior to 1997, the Company purchased seven adjoining
parcels of real estate in Prichard, Alabama for a total of approximately
$676,000 for possible development in connection with a casino gaming facility.
On March 27, 1997, the Company sold such parcels to the City of Prichard for
$110,000. The net sales proceeds of approximately $98,000 were used to repay a
portion of a promissory note payable to a former employee of the Company
related to expenses that such employee incurred during his employment with the
Company, which note was secured by such parcels. In addition, the Company had
a lease through July 1997 for another parcel of real estate in Prichard,
Alabama at a rent of approximately $22,000 per year, which lease was not
renewed.
Keno. Prior to 1997, the Company entered into an assignment and transfer
agreement with American Heartland Corporation ("AHC"), and Big Red Keno, Ltd.,
a licensed keno operator in Omaha, Nebraska ("BRK"), pursuant to which: (i)
the Company assigned, and AHC assumed, all of the Company's rights and
obligations under a certain financing agreement with BRK to provide equipment,
services and financing for the operation of a multiple parlor keno game in the
City of Omaha in exchange for a revenue participation equal to 50% of cash net
income of BRK after deduction of certain cash payments by BRK: (ii) the
Company transferred and assigned to AHC all of the Company's right, title and
interest to all of the assets utilized by the Company in the conduct of its
keno gaming activities, including, without limitation, the Company's
computerized keno system and all maintenance and servicing agreements with the
licensed operators for stations and locations at which the Company's
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computerized keno system is utilized; (iii) the Company agreed not to compete,
directly or indirectly, with AHC or BRK as a distributor, manufacturer or
maintainer of keno equipment or software, other than in the normal course of
any casino operations of the Company for a period of five years; (iv) AHC paid
the Company $500,000 on March 29, 1996; and (v) AHC issued and delivered its
promissory note to the Company in the principal amount of approximately
$1,112,000 (the "Keno Note"). On September 22, 1998, AHC asserted set offs
against the Keno Note aggregating approximately $198,000. The Company received
principal and interest payments on the Keno Note totaling $850,000 through
December 31, 1998. On January 8, 1999, the Company agreed to the payment of
$300,000 from AHC in full satisfaction of the Keno Note and accordingly
recorded a writedown in the value of the Keno Note in the amount of $165,000.
COMPETITION AND GOVERNMENT REGULATION
To the extent the Company continues to do business in the gaming industry, if
at all, competition and government regulation could have an adverse effect on
the Company's business by increasing competition, by increasing costs, by
making gaming a relatively less attractive activity for its customers as
compared with other competing activities, and by imposing restrictions on the
Company's business activities. To the extent the Company's activities in a
particular jurisdiction are regulated, the Company has complied, or has taken
the appropriate steps to comply, with any applicable regulations. To the
extent the Company commences gaming operations in other jurisdictions, it will
become subject to the regulatory systems in effect in those jurisdictions.
No material portion of the business of the Company is seasonal. No portion of
the Company's business is subject to termination of contracts or renegotiation
of profits at the election of the government. Compliance with federal, state
and local environmental regulations has not had and is not expected to have a
material effect upon the capital expenditures, earnings (or losses) or
competitive position of the Company. Inflation has not had and is not expected
to have a material effect on the Company's business.
EMPLOYEES
As of February 29, 2000, the Company had 2 employees, consisting of 1
executive officer and 1 office employee. All of the Company's personnel are
employed full-time. Pursuant to the Letter Agreement, the Company anticipates
that the Company's President and CEO will be the only employee of the Company
as of April 1, 2000.
For additional information concerning the Company and its business and
operations, see "Management's Discussion and Analysis."
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Item 2. Description of Property
Headquarters. The Company's operations are located in Glen Rock, New Jersey.
The property is currently in operative condition and is sufficient for the
Company's current administrative and known operating needs. The property is
leased from the Company's President for $100 per month on a month to month
basis. See "Executive Compensation - Employment Contracts and Termination of
Employment."
Item 3. Legal Proceedings
On September 9, 1999, RSR alleged that the Company and its principal
stockholders fraudulently induced RSR and the Remaining Members to enter into
the operating agreement for RSR and the Proxy Agreement by failing to disclose
the existence or substance of the securities fraud investigation by the
federal government against The Bennett Funding Group, Inc. and Bennett
Management and Development Corp., affiliates of Shamrock Holdings Group, Inc.
RSR has offered to release the Company from such alleged claims in exchange
for the RSR Interest and all distributions received by the Company with
respect to the RSR Interest. The Company has advised RSR that it disclosed
such federal investigation as soon as the Company became aware of such
investigation. The Company has rejected RSR's offer and has filed suit against
RSR in the Superior Court of New Jersey, Law Division, Bergen County for
damages arising from RSR's failure to comply with the provisions of the Proxy
Agreement and purchase the RSR Interest. On November 24, 1999, RSR filed a
notice of removal to transfer the suit to the United States District Court for
the District of New Jersey (the "NJDC") and a notice of motion with the NJDC
seeking dismissal of the suit for lack of jurisdiction over RSR. The Company
has filed an opposition to RSR's motion to dismiss with the NJDC. See
"Description of Business - Investments - Indiana".
In addition to the items set forth above, the Company is involved in other
legal proceedings and claims of various types. While any litigation contains
an element of uncertainty, it is the opinion of management, after consultation
with counsel, that the outcome of each such other proceeding or claim which is
pending or known to be threatened, or all of them combined, can be
successfully defended or resolved. In addition, management is unable, with any
degree of certainty, to predict the outcome, or to estimate the amount of the
liability, if any, that may result from these actions. However, management
believes that none of such other proceedings or claims will have a material
adverse effect on the Company's business or financial condition.
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Item 4. Submission Of Matters To A Vote Of Security Holders
Not Applicable. The last annual meeting of stockholders of the Company was
held on October 12, 1995. No meeting of stockholders has been held since such
date and the Company has no present intention of holding a meeting of
stockholders in 2000.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information. From 1997 through October 4, 1999, the Common Stock
traded under the symbol "AGEL" on the OTC Bulletin Board. Effective October 4,
1999, the Common Stock has traded under the symbol "AGELE" on the OTC Bulletin
Board. The Company has been informed by the OTC Bulletin Board that the symbol
was changed because the report of the Company's independent public accountants
on the Company's financial statements for the fiscal year ended December 31,
1998 contained a disclaimer of opinion. As a result of such disclaimer, the
OTC Bulletin Board can decide to remove the Common Stock from the OTC Bulletin
Board. In such event, there would be no public trading market for the Common
Stock. The report of the Company's independent public accountants on the
Company's financial statements for the fiscal year ended December 31, 1999
contains an unqualified opinion with a going-concern explanation, but not an
adverse opinion or disclaimer of opinion, and therefore the Company intends to
apply to the OTC Bulletin Board to ensure that the Common Stock is not removed
from the OTC Bulletin Board and to have the symbol reversed to "AGEL".
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The following table sets forth, for the calendar periods indicated, the high
and low bid prices (which prices are interdealer prices without retail markup,
markdown or commissions, and may not necessarily represent actual
transactions).
Bid Price Per Share
_______________________
Calendar Periods High Low
________ ________
1998
First Quarter $ 0.0313 $ 0.0156
Second Quarter 0.0156 0.0156
Third Quarter 0.0156 0.0156
Fourth Quarter 0.0156 0.0156
1999
First Quarter $ 0.1094 $ 0.0156
Second Quarter 0.0313 0.0156
Third Quarter 0.0600 0.0200
Fourth Quarter 0.0200 0.0050
2000
First Quarter (through February 29, 2000) $ 0.1500 $ 0.0090
(b) Holders. At February 29, 2000, there were approximately 295 holders
of record of the Common Stock.
(c) Dividends.
(1) The Company has never declared or paid any dividends on its
Common Stock. The Board of Directors presently intends to retain any and all
earnings for use in the Company's business and therefore does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future.
(2) The shares of Series A Stock are convertible at the holder's
option into 25 shares of Common Stock per share of Series A Stock and receive
dividends as one class with the Common Stock as if converted into Common
Stock.
(3) The Series C Stock has a cumulative dividend rate of 7.5%. The
terms of the Series C Stock provide that the Company shall not declare or pay
any dividends on the Common Stock or Series A Stock if there are, at such
time, any cumulative accrued but unpaid dividends on the Series C Stock. The
Series C Stock ranks equally as to dividends with all shares of the Series D
Stock. Pursuant to the Letter Agreement, Shamrock waived all accrued
dividends, whether declared or undeclared, on the Series C Stock. Accordingly,
the Company reversed accrued dividends on the Series C Stock totaling
approximately $1,627,000 as of December 16, 1999. Pursuant to the Letter
Agreement, Shamrock waived any future dividends on the Series C
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Stock so long as Shamrock owns such preferred stock, provided, however, that
if the Company declares any dividends on its Common Stock or redeems any of
its Common Stock or Series A Stock, other than Common Stock or Series A Stock
owned by Shamrock, then the holders of Series C Stock shall be entitled to
participate in such dividend or redemption on the same basis as if such Series
C Stock had been converted into Common Stock in accordance with the terms of
such Series C Stock.
(4) The Series D Stock has a cumulative dividend rate of 7.5%. The
terms of the Series D Stock provide that the Company shall not declare or pay
any dividends on the Common Stock or Series A Stock if there are, at such
time, any cumulative accrued but unpaid dividends on the Series D Stock. The
Series D Stock ranks equally as to dividends with all shares of the Series C
Stock. Pursuant to the Letter Agreement, Shamrock waived all accrued
dividends, whether declared or undeclared, on the Series D Stock. Accordingly,
the Company reversed accrued dividends on the Series D Stock totaling
approximately $1,527,000 as of December 16, 1999. Pursuant to the Letter
Agreement, Shamrock waived any future dividends on the Series D Stock so long
as Shamrock owns such preferred stock, provided, however, that if the Company
declares any dividends on its Common Stock or redeems any of its Common Stock
or Series A Stock, other than Common Stock or Series A Stock owned by
Shamrock, then the holders of Series D Stock shall be entitled to participate
in such dividend or redemption on the same basis as if such Series D Stock had
been converted into Common Stock in accordance with the terms of such Series D
Stock.
(5) Shamrock, as the majority stockholder of the Company and the sole
owner of the Series A Stock, Series C Stock and Series D Stock, has consented
to an amendment to the Company's certificate of incorporation changing the
dividend rights of the Series C Stock and Series D Stock as discussed above.
Such amendment shall become effective twenty days after mailing an information
statement discussing such amendment, among other matters, to the Company's
stockholders.
(6) The Company's Series E Preferred Stock ("Series E Stock") has no
stated dividend rate.
<PAGE 15>
Item 6. Management's Discussion and Analysis or Plan of Operation
The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the Company's financial
statements, including the notes thereto, contained elsewhere in this report.
Results of Operations: Comparison of the years ended December 31, 1999 and
December 31, 1998
Revenues
As a result of the confirmation of the Mississippi Plan and the dismissal of
an adversary complaint filed by the Official Committee of Unsecured Creditors
of AMGAM Associates challenging the transfer of the Gold Coast Barge from AGRM
to the Company, the Company recognized "Deferred Charter Revenue" of
approximately $11,743,000 as revenue for the year ended December 31, 1999.
The Company has not received any financial statement information or payments
relating to the RSR Interest for the year ended December 31, 1999 and
therefore has not recorded any revenues attributable to the RSR Interest for
the year ended December 31, 1999. For the year ended December 31, 1998, the
Company recorded revenues of approximately $445,000 attributable to the RSR
Interest.
Costs and Expenses
Selling, general and administrative expenses were approximately $910,000 for
the year ended December 31, 1999, representing a decrease of approximately
$723,000 or approximately 44% when compared to the year ended December 31,
1998. Such decrease was primarily due to a decrease of approximately $609,000
related to the Harolds Club in Nevada, which was sold in June 1999, a decrease
in insurance expense of approximately $67,000, a decrease in legal fees of
approximately $40,000 and a decrease in directors fees of approximately
$32,000.
Depreciation and amortization costs were approximately $526,000 for the year
ended December 31, 1999, representing a decrease of approximately $818,000 or
approximately 61% when compared to the year ended December 31, 1998, as a
result of the sale of the Gold Coast Barge in August 1999.
For the year ended December 31, 1999, the Company recorded a reversal of bad
debt expense related to lease expenses of approximately $2,785,000 based on
the sale of the Harolds Club and approximately $7,000 based on a settlement
for management services rendered prior to 1998. The Company also recorded a
reversal of net liabilities for subsidiaries in bankruptcy of approximately
$75,000 based upon the sale of the Gold Coast Barge and the anticipated
distributions under the Mississippi Plan. For the year ended December 31,
1998, the Company recorded a reversal of net liabilities for subsidiaries in
bankruptcy of $781,000 based upon the
<PAGE 16>
anticipated distributions under the then proposed joint plan of liquidation
for AMGAM and AGRM.
For the year ended December 31, 1998, the Company wrote down the value of a
note receivable by approximately $165,000, to reflect the agreement by the
Company to accept the payment of $300,000 from AHC in full satisfaction of the
Keno Note.
Net interest expense for the year ended December 31, 1999 was approximately
$4,410,000, an increase of approximately $1,473,000 or approximately 50%
compared to the year ended December 31, 1998. Interest expense increased
approximately $1,444,000 while interest income decreased approximately $29,000
during the year ended December 31, 1999 compared to the year ended December
31, 1998. Interest expense for the year ended December 31, 1998 included (i)
the reversal of interest expense of approximately $2,120,000 on charter
payments received by the Company that were recorded as indebtedness to
Shamrock, (ii) a reversal of previously recorded interest expense in the
amount of approximately $160,000 on indebtedness due Shamrock on which the
Company has determined no interest was due and (iii) a reversal of previously
recorded interest expense in the amount of approximately $62,000 due to a
refund of such interest pursuant to a legal settlement.
The Company recorded a net gain of approximately $4,098,000 resulting from the
cancellation of indebtedness to Shamrock in exchange for all payments,
distributions, dividends and proceeds of any type to which the Company is
entitled pursuant to or in connection with the Proxy Agreement relating to the
RSR Interest, in accordance with the terms of the Letter Agreement. The
Company valued the RSR Interest, exclusive of distributions being escrowed for
the benefit of the Company, as the average of the appraisal of the value of
the RSR Interest obtained by the Company and the value the Company understands
an appraiser for RSR placed on the RSR Interest. The Company also recorded a
net gain of approximately $48,000 for the year ended December 31, 1999 related
to the sale of the GM&O Building in Mobile, Alabama. Additionally, for the
year ended December 31, 1999, the Company recorded a net gain of approximately
$40,000 as the result of the settlement of a lawsuit brought by the Company
against the purchaser of one of the Company's keno systems. The associated
account receivable had been written off in 1996. No such gains were recorded
for the year ended December 31, 1998.
Pursuant to the Letter Agreement, Shamrock released the Company from all debts
and liabilities in excess of the amount of the Transferred Assets.
Accordingly, the Company recorded an extraordinary item of approximately
$47,181,000 resulting from the extinguishment of indebtedness to Shamrock.
Liquidity and Capital Resources
For a discussion of liquidity and capital resources, see "Description of
Business - Liquidity and Continuation of Business."
<PAGE 17>
Risk Factors; Forward Looking Statements
Management's Discussion and Analysis contains forward-looking statements
regarding the Company's future plans, objectives and expected performance.
These statements are based on assumptions that the Company believes are
reasonable, but are subject to a wide range of risks and uncertainties, and a
number of factors could cause the Company's actual results to differ
materially from those expressed in the forward-looking statements. These
factors include, specifically, the uncertainties related to the Company's
ability to obtain sufficient funds for its operations.
Item 7. Financial Statements
See pages 29 through 51 following Item 13 below.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On June 14, 1999, the Registrant appointed Mintz Rosenfeld & Company LLC as
the Company's independent public accountants and such firm accepted such
appointment effective as of that date. Mintz Rosenfeld & Company LLC had not
been previously engaged by the Company. The Company also notified Deloitte &
Touche LLP that the Company was changing accountants as of such date. The
change of accountants was approved by the Audit Committee of the Board of
Directors of the Company and the Board of Directors of the Company.
The report of Deloitte & Touche LLP on the Company's financial statements for
the fiscal year ended December 31, 1998 contained a disclaimer of opinion
because of the possible material effects of the Company's recurring losses,
negative working capital, available cash, stockholders' deficiency, defaults
under the Company's debt agreements, uncertainties relating to the liquidation
of certain of the Company's subsidiaries, uncertainties relating to the
bankruptcy of, and charges relating to affiliates of, the Company's major
stockholder and creditor. For the fiscal year ended December 31, 1998 and the
subsequent interim period, there were no disagreements with Deloitte & Touche
LLP on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which, if not resolved to the
satisfaction of Deloitte & Touche LLP, would have caused Deloitte & Touche LLP
to make reference to the matter in its audit report.
Deloitte & Touche LLP has furnished a letter to the Company addressed to the
Securities and Exchange Commission stating that it agrees with the foregoing
statements.
<PAGE 18>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Section
16(a) Beneficial Ownership Compliance Report.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Executive Officers and Directors
The executive officers and directors of the Company are as follows:
DIRECTOR
NAME AGE SINCE POSITION
J. Douglas Wellington 45 1996 President and CEO, General Counsel,
Secretary, Director
The Company's current director serves until the next annual meeting of
stockholders and until his successor is duly elected and qualified. The
holders of the Series A Preferred Stock are entitled to elect one director to
the Board of Directors, but have not elected a director. Mr. Wellington was
elected to the Board of Directors on April 11, 1996.
J. Douglas Wellington was elected CEO of the Company in September 1996, after
being elected President and Chief Operating Officer in August 1996. Mr.
Wellington joined the Company in 1993. In April 1996, Mr. Wellington was
elected to the Board of Directors. Mr. Wellington was elected Controller
(which position he held until September 1996) and Principal Accounting Officer
in May 1996 and was elected interim President and Chief Operating Officer in
July 1996.
(b) Significant Employees. None.
(c) Family Relationships. None.
(d) Involvement in Certain Legal Proceedings. None.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file an initial report of ownership of such
securities on Form 3 and changes in ownership of such securities on Form 4 or
5 with the Commission. Such officers, directors and 10% stockholders are
required to furnish the Company with copies of all Section 16(a) forms they
file with the Commission.
Based solely on its review of the copies of such forms received by it, or
written representations from certain such reporting persons that no Form 5's
were required for such persons, the
<PAGE 19>
Company believes that, for the fiscal year ended December 31, 1999, its
officers, directors and 10% stockholders complied with all applicable Section
16(a) filing requirements.
Item 10. Executive Compensation
The following tables set forth certain information respecting the compensation
awarded to, earned by, or paid to the sole individual serving as the Company's
CEO during 1999. No other individual had a total annual compensation exceeding
$100,000 for the year ended December 31, 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Other Annual Securities All Other
Name and Principal Year Salary Bonus Compensation Underlying Compensation
Position ($) ($) ($) Options (#) ($)
__________________ ____ _______ ______ ____________ _____________ ____________
<S> <C> <C> <C>
J. Douglas 1999 125,000 ___ ___ ___ 18,422 (1)
Wellington, CEO 1998 125,000 ___ ___ ___ 23,432 (2)
1997 125,000 62,500 ___ ___ 21,275 (3)
(1) Consists of $12,022 for accrued vacation and sick time, $6,000 for car allowance and $400
for home office expenses.
(2) Consists of $17,432 for accrued vacation and sick time and $6,000 for car allowance.
(3) Consists of $15,148 for accrued vacation and sick time, $6,000 for car allowance and $127
for interest on a letter of credit (discussed below).
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Value of
Unexercised in-
Number of the-money
Unexercised Options Options at FY-
At FY-End (#) End ($)
Shares Acquired Value Realized Exercisable / Exercisable /
Name on Exercise (#) ($) Unexercisable Unexercisable
_____________________ _______________ ______________ __________________ _______________
<S> <C> <C> <C> <C>
J. Douglas Wellington 0 $0 518,750/0 $0/$0
</TABLE>
<PAGE 20>
Compensation of Directors
The Company's non-employee directors were each paid a fee of $4,000 per month
in 1999 as compensation for services as a director. Directors who are employed
by the Company receive no such compensation. Every director is reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of
the Board of Directors and other Company business.
Employment Contracts and Termination of Employment
The Company and Mr. Wellington executed an employment agreement dated as of
December 31, 1999 (the "Employment Agreement") in connection with the
execution of the Letter Agreement. The Employment Agreement has a term of
thirteen months, and provides for compensation payable to Mr. Wellington of
$135,417. The Employment Agreement also provides for a severance payment of
$125,000 to be paid to Mr. Wellington from a reserve account set aside and
controlled by Shamrock in the event (a) there is no intervening voluntary
bankruptcy by the Company prior to January 31, 2001 without Shamrock's consent
and the terms and conditions of the Employment Agreement and the Letter
Agreement are satisfied, (b) Mr. Wellington is terminated "without cause", (c)
a "substantial breach" occurs or (d) Mr. Wellington resigns after a "change of
control" (as such terms are defined in the Employment Agreement).
The Employment Agreement supercedes a prior employment agreement dated as of
September 12, 1996 (the "Prior Agreement"). The Prior Agreement provided for
annual compensation payable to Mr. Wellington of $125,000. The Prior Agreement
also provided for (i) a signing bonus of $62,500, which amount was paid to Mr.
Wellington upon execution of the Prior Agreement, (ii) a severance payment of
$250,000 to be paid to Mr. Wellington upon the occurrence of certain events,
(iii) the issuance of an irrevocable letter of credit in the amount of
$62,500, which amount was paid to Mr. Wellington in 1997, (iv) the grant of
options to purchase 350,000 shares of Common Stock, and (v) a car allowance of
$500 per month.
The Company and Mr. Wellington have entered into an expense reimbursement
agreement dated as of September 1, 1999 in connection with Mr. Wellington
using his residence as the executive office of the Company. So long as Mr.
Wellington's residence is used in such manner, the Company will pay Mr.
Wellington $100 per month, provided, however, that if non-Company personnel
use such residence for more than three days in a month, the Company will pay
Mr. Wellington an additional $450 for such month. Additionally, the budget for
the Company through January 2001 under the Letter Agreement provides for a
$500 per month car allowance for Mr. Wellington.
<PAGE 21>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 29, 2000 with
respect to the only persons or groups known to the Company who may be deemed
to own beneficially more than 5% of the Company's voting securities (i.e.
Common Stock or Series A Preferred Stock). Unless otherwise noted, each
holder has sole voting and investment power with respect to the shares of the
listed securities.
Title of Class Name and Address Amount and Nature Percent of Class
of Beneficial Owner of Beneficial
Ownership (1)
_______________ ____________________ _________________ ________________
Common Stock Shamrock Holdings 5,823,019 (2) 41.8%
Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Common Stock Richard C. Breeden, 325,000,380 (3) 98.0%
Trustee
C/o Shamrock
Holdings Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Series A Preferred Shamrock Holdings 55,982.61 (4) 100%
Stock Group, Inc.
2 Clinton Square
Syracuse, NY 13202
Series A Preferred Richard C. Breeden, 55,982.61 (5) 100%
Stock Trustee
C/o Shamrock Holdings
Group, Inc.
2 Clinton Square
Syracuse, NY 13202
(1) Based on information supplied by persons listed or as reported on the
most recent Schedule 13D filed by any such persons. As used in this table,
"beneficial ownership" of securities means the sole or shared power to vote,
or to direct the voting of, such securities, or the sole or shared investment
power with respect to such securities, including the power to dispose of, or
to direct the disposition of, such securities. In addition, for purposes of
this table, a person is deemed to have "beneficial ownership" of any security
that such person had the right to acquire within 60 days after February 29,
2000 (see "- Changes in Control").
(2) Includes 1,399,565 shares of Common Stock issuable upon the conversion
of Series A Preferred Stock.
<PAGE 22>
(3) Includes the 5,823,019 shares of Common Stock beneficially owned by
Shamrock. The Company understands that Mr. Breeden (the "Bennett Funding
Trustee") is sole stockholder and President of Shamrock. Includes,
collectively, 317,677,361 shares of Common Stock issuable upon conversion of
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock, assuming that those conversions took place on February 29, 2000 and
that the Company amended its Certificate of Incorporation by increasing the
number of authorized shares of Common Stock to 3,000,000,000 shares (see "-
Changes in Control").
(4) Each share of Series A Preferred Stock is convertible into 25 shares
of Common Stock.
(5) Includes the 55,982.61 shares of Series A Preferred Stock beneficially
owned by Shamrock. The Company understands that the Bennett Funding Trustee is
sole stockholder and President of Shamrock.
<PAGE 23>
Security Ownership of Management
The following table sets forth information as of February 29, 2000 with
respect to (i) each director, (ii) all individuals serving as the Company's
CEO during 1999, and (iii) all directors and all such executive officers as a
group. Unless otherwise noted, each holder has sole voting and investment
power with respect to the shares of the listed securities. An asterisk (*)
indicates beneficial ownership of less than 1%.
COMMON STOCK
Name and Address Amount and Nature of Percent of Class
of Beneficial Owner Beneficial Ownership
(1)
J. Douglas Wellington 518,750 3.97%
c/o American Gaming &
Entertainment, Ltd.,
51 Beech Road,
Glen Rock, New Jersey,
07452
Executive Officers and 518,750 3.97%
Directors as a group (1
person)
(1) As used in this table, "beneficial ownership" of securities means the
sole or shared power to vote, or to direct the voting of, such securities,
and/or the sole or shared investment power with respect to such securities
(i.e., the power to dispose of, or to direct the disposition of, such
securities). In addition, for purposes of this table, a person is deemed to
have "beneficial ownership" of any security which such person had the right to
acquire within 60 days after February 29, 2000.
Changes in Control
Except as described below, the Company knows of no arrangements the operation
of which may at a subsequent date result in a change of control.
Shamrock, of which the Company understands that the Bennett Funding Trustee is
the sole stockholder, owns (i) 5,923,454 shares of Common Stock, (ii) all of
the outstanding Series A Stock, convertible into, and voting as, 1,399,565
shares of Common Stock and (iii) all of the outstanding Series C Stock, Series
D Stock and Series E Stock, convertible as of February 29, 2000 into
317,677,361 shares of Common Stock. The Company does not have a sufficient
number of authorized shares of Common Stock to enable the conversion of all of
the Series C Stock, the Series D Stock and the Series E Stock. On November 11,
1999 the Board of Directors voted to request the stockholders of the Company
to approve an amendment to the Company's Restated Certificate of Incorporation
increasing the number of authorized shares of Common
<PAGE 24>
Stock to 3,000,000,000 shares. Shamrock, as the majority stockholder of the
Company, has consented to such amendment. Such amendment shall become
effective twenty days after mailing an information statement discussing such
amendment, among other matters, to the Company's stockholders.
Assuming that Shamrock converted as of February 29, 2000 that number of shares
of Series C Stock, Series D Stock and Series E Stock convertible into the
total number of the Company's presently authorized but unissued shares of
Common Stock (i.e. 37,467,898 shares), Shamrock would own approximately 86.8%
of the total outstanding shares of Common Stock and approximately 87.1% of the
total voting power represented by the total outstanding voting securities of
the Company. Assuming the Company's stockholders approve the amendment to the
Company's Restated Certificate of Incorporation increasing the number of
authorized shares of Common Stock to 3,000,000,000 shares and Shamrock
converted as of February 29, 2000 all of the shares of the Series C Stock, the
Series D Stock and the Series E Stock (i.e. resulting in a total of
317,677,361 shares of Common Stock being issued to Shamrock as of such date),
Shamrock would own approximately 98.0% of both the total outstanding shares of
Common Stock and the total voting power represented by the total outstanding
voting securities of the Company. As of March 2000, Shamrock has not asserted
any rights it may have against the Company for the Company's failure to
maintain a sufficient number of authorized shares of Common Stock to enable
Shamrock to convert all of the Series C Stock, the Series D Stock and the
Series E Stock.
Item 12. Certain Relationships and Related Transactions
See "Security Ownership of Certain Beneficial Owners and Management" for those
persons or groups known to the Company who may be deemed to own beneficially
more than 5% of the Company's voting securities (i.e. Common Stock or Series A
Preferred Stock).
See "Description of Business - Investments - Indiana" for a description of
certain relationships and related transactions related to the RSR Interest.
The shares of Series A Stock, all of which outstanding shares are held by
Shamrock, are convertible at the holder's option into 25 shares of Common
Stock per share of Series A Stock, and bear the right to elect, but Shamrock
has not so elected, one director to the Board of Directors. The shares of
Series A Stock otherwise vote, and receive dividends, as one class with the
Common Stock as if converted into Common Stock, are non-redeemable, and do not
accrue or pay dividends or bear any liquidation preference.
The shares of Series C Stock, Series D Stock and Series E Stock, all of which
outstanding shares are held by Shamrock, are senior to all other classes of
the Company's outstanding stock. Each of the Series C Stock, Series D Stock
and Series E Stock is convertible by the holder thereof into the number of
shares of Common Stock equal to the then-applicable redemption price for each
such Series (as described below) divided by an amount equal to 75% of the
average market price of Common Stock for the ten consecutive business days
prior to the conversion date. Conversion
<PAGE 25>
of each of the Series C Stock, Series D Stock or Series E Stock could result
in significant dilution to the ownership interest of the Company's
stockholders (see "Security Ownership of Certain Beneficial Owners and
Management - Changes in Control"). The Company has the right to redeem all
three series of Preferred Stock at any time. The redemption price for each
share of the three series of Preferred Stock (which price is also used to
determine the conversion price) increases quarterly as follows: (i) for the
Series C Stock, from a redemption price of $1,528.03 per share as of January
1, 2000, $29.17 per share per quarter; (ii) for the Series D Stock, from a
redemption price of $1,473.84 per share as of January 1, 2000, $29.17 per
share per quarter; and (iii) for the Series E Stock, from a redemption price
of $1,361.23 per share as of January 1, 2000, $20.83 per share per quarter.
<PAGE 26>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits.
EXHIBIT
NO. DESCRIPTION LOCATION
_______ ___________ ____________
3.1 Restated Certificate of Incorporation (1) Exh. 3.1
3.2 Certificate of Amendment of Restated Certificate of
Incorporation (2) Exh. 3.3
3.3 Bylaws, as amended (3)
4.1 Specimen Common Stock Certificate (3)
10.1 Stock Option Plan (3)(8)
10.2 Employment Agreement dated December 31, 1999 between
the Company and J. Douglas Wellington (3)(8)
10.3 Agreement dated September 1, 1999 between the Company
and J. Douglas Wellington (3)(8)
10.4 Settlement Agreement dated as of August 21, 1998 by and (4) Exh. 10.12
between the Company, AMGAM Associates, American Gaming
and Resorts of Mississippi, Inc., Shamrock Holdings
Group, Inc., Bennett Management and Development Co.,
the Official Committee of Unsecured Creditors of AMGAM
Associates, and the Official Unsecured Creditors
Committee of American Gaming and Resorts of
Mississippi, Inc.
10.5 Sale Agreement dated as of July 2, 1999 between The (5) Exh. 10.27
President Riverboat Casino-Mississippi, Inc., President
Casinos, Inc., President Mississippi Charter Corporation,
the Company, AMGAM Associates, American Gaming & Resorts
of Mississippi, Inc., the Committee for the Unsecured
Creditors of AMGAM, the Committee for the Unsecured
Creditors of AGRM, International Game Technology, Inc.,
and Shamrock Holdings Group, Inc.
10.6 Irrevocable Proxy and Consent Agreement dated as of (6) Exh. 10.72
August 23, 1996 by and between Paul L. Partridge,
Patrick F. Daly, James A. Everatt, Charles E. Reisert, Jr.,
Eric C. Jackson, the Company and RSR, LLC
10.7 Trust Agreement dated as of August 23, 1996 by and (6) Exh. 10.73
between the Company and NBD Bank, N.A.
10.8 Letter agreement dated October 21, 1998 by and between (4) Exh. 10.26
Shamrock Holdings Group, Inc., Bennett Management and
Development Co., AMGAM Associates, American Gaming and
Resorts of Mississippi, Inc., and the Company
<PAGE 27>
10.9 Letter Agreement dated November 23, 1999, by and between (7) Exh. 10.28
Shamrock Holdings Group, Inc., Bennett Funding Group, Inc.,
American Gaming & Entertainment, Ltd., Emerald Gaming,
Inc., AMGAM Associates and American Gaming and Resorts
of Mississippi, Inc.
10.10 Security Agreement dated as of December 16, 1999 made by (3)
the Company in favor of Shamrock Holdings Group, Inc.
11 Statement re computations of per share earnings (3)
23.1 Consent of Mintz Rosenfeld & Company LLC (3)
23.2 Consent of Deloitte & Touche LLP (3)
27 Financial Data Schedule (3)
(1) This exhibit is incorporated by reference to the Company's Current
Report on Form 8-K dated June 24, 1994.
(2) This exhibit is incorporated by reference to the Company's Current
Report on Form 8-K dated November 30, 1994.
(3) Enclosed herewith.
(4) Each of these exhibits is incorporated by reference to the Quarterly
Report on Form 10-QSB for the period ended September 30, 1998.
(5) This exhibit is incorporated by reference to the Company's Quarterly
Report on Form 10-QSB for the period ended June 30, 1999.
(6) Each of these exhibits is incorporated by reference to the Company's
Current Report on Form 8-K dated December 15, 1995.
(7) This exhibit is incorporated by reference to the Company's Current
Report on Form 8-K dated November 23, 1999.
(8) Each of these exhibits is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form 10-KSB.
(b) Reports on Form 8-K.
The Company filed the following report during the fourth quarter of 1999:
Form 8-K dated November 23, 1999 with respect to the Letter Agreement.
<PAGE 28>
American Gaming & Entertainment, Ltd.
Form 10-KSB - Item 7
List of Financial Statements
The following financial statements are included in Item 7:
Independent Auditors' Reports......................................29 - 30
Consolidated Balance Sheets at December 31, 1999 and 1998 .........31 - 32
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 ...................................33 - 34
Consolidated Statements of Stockholders' Equity (Deficiency) for
the years ended December 31, 1999 and 1998 ........................35
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 ........................................36
Notes to Consolidated Financial Statements ........................37 - 51
<PAGE 29>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Gaming & Entertainment, Ltd.
Glen Rock, New Jersey
We have audited the accompanying consolidated balance sheet of American Gaming
& Entertainment, Ltd. and subsidiaries as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity
(deficiency), and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Gaming & Entertainment, Ltd. and subsidiaries as of December 31, 1999, and the
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Notes 1, 3 and 4,
the Company has had a history of insufficient liquidity and has been dependent
upon its majority stockholder and certain related entities for both working
capital and project related financing. Although the Company has sufficient
funds to operate until January 31, 2001, it has no current commitments or
prospects for additional funds. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ MINTZ ROSENFELD & COMPANY LLC
Certified Public Accountants
March 17, 2000
Fairfield, New Jersey
<PAGE 30>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
American Gaming & Entertainment, Ltd.
Glen Rock, New Jersey
We have audited the accompanying consolidated balance sheet of American Gaming
& Entertainment, Ltd. and subsidiaries as of December 31, 1998, and the
related consolidated statement of operations, stockholders' deficiency and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
(or disclaim) an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our report.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company's recurring losses,
negative working capital, stockholders' deficiency, defaults under its debt
agreements, uncertainties relating to the liquidation of its subsidiaries,
uncertainties relating to the bankruptcy of, and charges relating to
affiliates of, its major stockholder and creditor and available cash raise
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans concerning these matters are discussed in Notes 3,
4 and 7. The financial statements do not include any additional adjustments
that might result from the outcome of these uncertainties.
Because of the possible material effects of the uncertainties referred to in
the preceding paragraph, we are unable to express, and we do not express, an
opinion on the financial statements for 1998.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
April 14, 1999
<PAGE 31>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1999 1998
____________ ____________
ASSETS
Current assets
Cash $ 127,000 $ 123,000
Restricted cash - charter payments - 4,320,000
Restricted cash - Rising Sun - 1,119,000
Prepaid expenses 58,000 71,000
Due from stockholder 376,000 -
Other current assets 7,000 801,000
____________ ____________
Total current assets 568,000 6,434,000
Casino barge and improvements, subject to lease,
net of accumulated depreciation of
$5,243,000 - 1998 - 7,350,000
Furniture, fixtures and equipment, net of
accumulated depreciation
of $83,000 - 1999 and $79,000 - 1998 5,000 9,000
____________ ____________
$ 573,000 $ 13,793,000
============ ============
See Notes to Consolidated Financial Statements
<PAGE 32>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1999 1998
____________ ____________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Amounts due to related parties:
Accrued interest $ - $19,882,000
Dividends payable - 2,553,000
Accrual for lease costs - 2,701,000
Current portion of long term debt - 34,592,000
____________ ____________
- 59,728,000
Accounts payable 47,000 86,000
Accrued payroll and related expenses 3,000 3,000
Accrued expenses and other current liabilities 52,000 2,241,000
Short term portion of estimated net liabilities
for subsidiaries in bankruptcy - 2,070,000
Deferred charter revenue - 10,238,000
____________ ____________
Total current liabilities 102,000 74,366,000
Long term portion of estimated net liabilities for
subsidiaries in bankruptcy - 1,640,000
____________ ____________
102,000 76,006,000
____________ ____________
Commitments and contingencies
Stockholders' equity (deficiency)
Preferred stock, 1,000,000 shares authorized:
Series A preferred stock, par value $.01 per
share, 55,983 shares issued 1,000 1,000
Series C and D cumulative preferred stock, and
Series E preferred stock, par value $.01 per
share, 4,000 shares authorized and issued for
each series 17,136,000 15,869,000
Common stock, par value $.01 per share; 50,000,000
shares authorized, 12,556,137 shares issued
(including 24,035 shares held in treasury) 126,000 126,000
Additional paid-in capital 42,707,000 41,421,000
Cost of shares held in treasury (25,000) (25,000)
Accumulated deficit (59,474,000) (119,605,000)
____________ ____________
471,000 (62,213,000)
____________ ____________
$ 573,000 $13,793,000
============ ============
See Notes to Consolidated Financial Statements
<PAGE 33>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
___________________________
1999 1998
____________ ____________
Revenues
Equity interests in gaming projects $ 11,743,000 $ 445,000
____________ ____________
Total revenues 11,743,000 445,000
____________ ____________
Costs and expenses
Selling, general and administrative 910,000 1,633,000
Depreciation and amortization 526,000 1,344,000
Reversal of bad debt expense related to
lease expenses (2,792,000) -
Reversal of net liabilities for subsidiaries
in bankruptcy (75,000) (781,000)
Writedown of impaired assets - 165,000
____________ ____________
Total costs and expenses (1,431,000) 2,361,000
____________ ____________
Operating income (loss) 13,174,000 (1,916,000)
____________ ____________
Other income (expense)
Interest income 66,000 95,000
Interest expense (4,476,000) (3,032,000)
Net gain on sale of assets 4,186,000 -
____________ ____________
Total other income (expense) (224,000) (2,937,000)
____________ ____________
Net income (loss) before extraordinary item 12,950,000 (4,853,000)
Extraordinary item - extinguishment of debt 47,181,000 -
____________ ____________
Net income (loss) 60,131,000 (4,853,000)
Dividends and accretion on preferred stock
Dividends and accretion (1,867,000) (1,867,000)
Reversal of previously accrued dividends 3,153,000 -
____________ ____________
Total dividends and accretion on preferred stock 1,286,000 (1,867,000)
____________ ____________
Net income (loss) for common stockholders $61,417,000 $(6,720,000)
=========== ============
See Notes to Consolidated Financial Statements
<PAGE 34>
AMERICAN GAMING & ENTERTAINMENT LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
_____________________________
1999 1998
______________ _____________
Net income (loss) for common stockholders $ 61,417,000 $ (6,720,000)
============== =============
Basic income (loss) per share:
Before extraordinary item $ 1.14 $ (0.54)
Extraordinary item 3.76 -
______________ _____________
Total $ 4.90 $ (0.54)
============== =============
Diluted income (loss) per share:
Before extraordinary item $ 0.01 $ (0.54)
Extraordinary item 0.02 -
______________ _____________
Total $ 0.03 $ (0.54)
============== =============
Shares outstanding:
Basic weighted average number of common
shares outstanding 12,532,102 12,532,102
Dilutive effect of conversion of preferred
stock Series A, C, D & E 1,816,508,248 -
______________ _____________
Diluted weighted average number of common
shares outstanding 1,829,040,350 12,532,102
============== =============
See Notes to Consolidated Financial Statements
<PAGE 35>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
1999 1998
______________ _____________
Series A Preferred Stock
Balance at beginning and end of year $ 1,000 $ 1,000
============== =============
______________________________________________________________________________
Series C, D & E Preferred Stock
Balance at beginning of year $ 15,869,000 $ 14,602,000
Accretion 1,267,000 1,267,000
______________ _____________
Balance at end of year $ 17,136,000 $ 15,869,000
============== =============
______________________________________________________________________________
Common Stock
Balance at beginning and end of year $ 126,000 $ 126,000
============== =============
______________________________________________________________________________
Additional Paid-In Capital
Balance at beginning of year $ 41,421,000 $ 43,288,000
Accrual of dividends on preferred stock (600,000) (600,000)
Reversal of previously accrued dividends
on preferred stock 3,153,000 -
Accretion of preferred stock (1,267,000) (1,267,000)
______________ _____________
Balance at end of year $ 42,707,000 $ 41,421,000
============== =============
______________________________________________________________________________
Treasury Stock
Balance at beginning and end of year ($25,000) ($25,000)
============== =============
______________________________________________________________________________
Accumulated Deficit
Balance at beginning of year ($119,605,000) ($114,752,000)
Net income (loss) 60,131,000 (4,853,000)
______________ _____________
Balance at end of year ($ 59,474,000) ($119,605,000)
============== =============
See Notes to Consolidated Financial Statements
<PAGE 36>
AMERICAN GAMING & ENTERTAINMENT, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
1999 1998
______________ _____________
Operating Activities
Net income (loss) $ 60,131,000 $ (4,853,000)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Equity interests in gaming projects (11,743,000) (445,000)
Depreciation and amortization 526,000 1,344,000
Reversal of bad debt expense related to
lease expenses (2,792,000) -
Reversal of net liabilities for
subsidiaries in bankruptcy (75,000) -
Interest income from restricted cash (53,000) (44,000)
Accrued interest 4,476,000 3,094,000
Net gain on sale of assets (4,186,000) -
Extraordinary item - extinguishment of debt (47,181,000) -
Equity in losses of subsidiaries in
bankruptcy - (781,000)
Writedown of impaired assets - 165,000
Other changes in operating assets and liabilities
Restricted proceeds from sale of barge (1,562,000) -
Restricted cash - charter payments 376,000 (4,320,000)
Deferred charter revenue - 4,320,000
Other current assets 60,000 132,000
Other non-current assets - 1,000
Accounts payable, accrued expenses and
other current liabilities 125,000 846,000
______________ _____________
Net cash used in operating activities (1,898,000) (541,000)
______________ _____________
Investing Activities
Transfer of assets to Shamrock pursuant to
restructuring 14,013,000 -
Due from stockholder (376,000) -
Proceeds from sale of barge 723,000 -
Proceeds from disposition of building 416,000 -
______________ _____________
Net cash provided by investing
activities 14,776,000 -
______________ _____________
Financing Activities
Reduction of indebtedness to Shamrock (14,013,000) -
Proceeds from note receivable - barge 839,000 -
Proceeds from notes receivable - keno assets 300,000 283,000
______________ _____________
Net cash provided by (used in)
financing activities (12,874,000) 283,000
______________ _____________
Increase (decrease) in cash 4,000 (258,000)
Cash at beginning of year 123,000 381,000
______________ _____________
Cash at end of period $ 127,000 $ 123,000
============== =============
See Notes to Consolidated Financial Statements
<PAGE 37>
AMERICAN GAMING & ENTERTAINMENT, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Note 1 - Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization
of assets and liquidation of liabilities in the ordinary course of business.
As described in Note 4, prior to 1999 the Company had sustained recurring
operating losses. The Company has also had a history of insufficient liquidity
and has been dependent upon Shamrock Holdings Group, Inc. and certain related
entities (collectively, "Shamrock") for both working capital and project
related financing.
The Company's recurring losses raise substantial doubt about the ability of
the Company to continue as a going concern. Management's plans concerning
these matters are discussed in Notes 3 and 4. The financial statements do not
include any additional adjustments that might result from the outcome of these
uncertainties.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
(except as described below) its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. These financial
statements reflect significant related party transactions which are described
throughout the notes to the consolidated financial statements.
As a result of the bankruptcy proceedings under Chapter 11 of the U.S.
Bankruptcy Code (the "Code") affecting the Company's wholly owned
subsidiaries, AMGAM Associates, a Mississippi partnership ("AMGAM") and
American Gaming and Resorts of Mississippi, Inc., ("AGRM"), AMGAM and AGRM are
not included in the consolidated financial statements for financial reporting
purposes. The Company followed the equity method of accounting for its
investment in AMGAM and AGRM (see Note 7).
Revenues
Revenues are principally from the charter of the Gold Coast Barge (see Note 7)
and an equity interest in a riverboat gaming entertainment complex (see Note
6).
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization are
provided over the estimated useful lives of the assets using the straight-line
method based on the following:
Furniture, fixtures and equipment 3-10 years
Software 5 years
<PAGE 38>
Leased assets at December 31, 1998 consisted of the Gold Coast Barge, net of
accumulated depreciation (see Note 7), calculated on the straight-line method
over a 10 year life.
Income (Loss) For Common Stockholders Per Common Share
Income (loss) per share has been computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Under
SFAS No. 128, basic income per share is computed based on income applicable to
common stock divided by the weighted average number of common shares
outstanding for the period. Diluted income per share is computed based on
income applicable to common stock divided by the weighted average number of
shares of common stock outstanding during the period after giving effect to
securities considered to be dilutive common stock equivalents. For the year
ended December 31, 1999, the Company's Series A Preferred Stock, Series C
Cumulative Preferred Stock ("Series C Preferred Stock"), Series D Cumulative
Preferred Stock ("Series D Preferred Stock") and Series E Preferred Stock are
considered to be dilutive common stock equivalents. For the years ended
December 31, 1999 and 1998, Common Stock options and warrants which are
considered to be potential shares of common stock are excluded from the
calculation of diluted loss for common stockholders per common share because
they have an antidilutive effect.
Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse (see Note 12).
Asset Impairment
Long-lived assets are reviewed for impairment on an annual basis in
conjunction with the preparation of the annual budget or when a specific event
indicates that the carrying value of an asset may not be recoverable.
Recoverability is assessed based on estimates of future cash flows expected
to result from the use and eventual disposition of the asset. If the sum of
expected undiscounted cash flows is less than the carrying value of the asset,
an impairment loss is recognized. The impairment loss is measured as the
amount by which the carrying amount of the asset exceeds its estimated fair
value (See Note 7).
Fair Market Value of Financial Instruments
The amounts reported in the Consolidated Balance Sheets for cash and cash
equivalents, receivables, and payables approximate fair value. Because of the
related party nature of the Company's debt, determination of fair value would
be impractical.
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of management's estimates and
assumptions. Management believes the estimates and assumptions used in the
preparation of these consolidated financial statements
<PAGE 39>
are reasonable based upon currently available facts and known circumstances
but recognizes that actual results may differ from those estimates and
assumptions. Such differences, if any, could have a material impact on the
Company's financial condition, results of operations or liquidity.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement, which establishes accounting and reporting standards for
derivatives and hedging activities, was to be effective for fiscal years
beginning after June 15, 1999. In June 1999, the FASB issued SFAS No. 137,
which defers the effective date of SFAS No. 133 to fiscal quarters of all
fiscal years beginning after June 15, 2000. Upon the adoption of SFAS No. 133,
all derivatives are required to be recognized in the statement of financial
position as either assets or liabilities and measured at fair value. The
Company is currently evaluating the impact the adoption of SFAS No. 133 will
have on its financial position and results of operations.
Supplemental Cash Flow Information
The Consolidated Statements of Cash Flows exclude the effects of certain
noncash financing activities, as follows:
1999 1998
___________ ____________
Dividends on Series C and D Preferred
Stock $600,000 $600,000
Accretion on Series C, D and E
Preferred Stock 1,267,000 1,267,000
Reversal of Previously Accrued
Dividends on Series C, D and E
Preferred Stock (see Note 3) 3,153,000 -
Pursuant to the Letter Agreement (defined below, see Note 3), Shamrock has
waived all accrued dividends, whether declared or undeclared, on the Series C
Preferred Stock and the Series D Preferred Stock. Accordingly, The Company
reversed such accrued dividends for the year ended December 31, 1999. The
Company paid no interest or income taxes (see Note 12) for the years ended
December 31, 1999 and 1998.
Note 2 - Nature of Business
Prior to 2000, the Company owned equity interests in various properties that,
at the respective times of purchase, the Company anticipated could be utilized
in casino gaming projects. The Company still owns a 4.9% interest in a
riverboat gaming and entertainment complex in Rising Sun, Indiana (the "RSR
Interest"), but has agreed to transfer to Shamrock all payments,
distributions, dividends and proceeds of any type to which the Company is
entitled pursuant to or in connection with the RSR Interest (see Notes 3 and
6). Shamrock is the Company's majority stockholder and, prior to the
restructuring discussed in Note 3, was the Company's primary
<PAGE 40>
creditor. The Company is currently seeking financing from sources independent
of Shamrock. The Company has no present commitments or other alternatives for
such financing.
To the extent the Company continues to do business in the gaming industry, if
at all, competition and government regulation could have an adverse effect on
the Company's business by increasing competition, by increasing costs, by
making gaming a relatively less attractive activity for its customers as
compared with other competing activities, and by imposing restrictions on the
Company's business activities. To the extent the Company's activities in a
particular jurisdiction are regulated, the Company has complied, or has taken
the appropriate steps to comply, with any applicable regulations. To the
extent the Company commences gaming operations in other jurisdictions, it will
become subject to the regulatory systems in effect in those jurisdictions.
Note 3 - Restructuring
In accordance with a Letter Agreement dated November 23, 1999 between the
Company and Shamrock (the "Letter Agreement"), the Company agreed to transfer
to Shamrock (a) substantially all of the Company's right, title and interest
under the First Amended Joint Plan of Liquidation (the "Mississippi Plan") for
AMGAM and AGRM and (b) all payments, distributions, dividends and proceeds of
any type to which the Company is entitled pursuant to or in connection with an
Irrevocable Proxy and Consent Agreement (the "Proxy Agreement") relating to
the RSR Interest (collectively, the "Transferred Assets"). On December 16,
1999, the Letter Agreement was approved by the United States Bankruptcy Court
for the Northern District of New York (the "NYBC"), the court in which
Shamrock was a debtor in bankruptcy from June 1998 through February 2000.
However, pursuant to an order (the "Order") by the NYBC dated December 23,
1999, the release by Shamrock of the Company is conditioned upon the Company's
fulfillment of its obligations under the Letter Agreement, and the release of
Mr. J. Douglas Wellington, the President and Chief Executive Officer ("CEO")
of the Company, by Shamrock was effective as of December 23, 1999, except for
his obligations under his employment contract dated as of December 31, 1999
(the "Employment Agreement").
The Transferred Assets constituted substantially all of the assets of the
Company as of December 16, 1999. The amount of the Transferred Assets reduced
the Company's indebtedness to Shamrock. The Company was to retain cash of
$464,000 as of January 1, 2000, less legal retainers plus accounts payable
incurred in the ordinary course of business to bona fide third parties and
mutually agreed upon by the Company and Shamrock (see Note 5). Such retained
amount represents the Company's budgeted costs through January 31, 2001. As of
January 31, 2001, after paying any and all outstanding expenses, the Company
will transfer all remaining cash to Shamrock.
In accordance with the Letter Agreement, the Company executed a security
agreement in favor of Shamrock relating to the RSR Interest in exchange for
Shamrock agreeing to forebear from the exercise of any rights or remedies in
respect of all obligations owing by the Company to Shamrock. Prior to December
16, 1999, the Company was indebted to Shamrock in the amount of approximately
$64,315,000.
<PAGE 41>
Pursuant to the Letter Agreement but subject to the Order, Shamrock released
the Company from all debts and liabilities in excess of the amount of the
Transferred Assets, and shall cause the dismissal with prejudice of the
adversary proceeding captioned Richard C. Breeden, Trustee of the Bennett
Funding Group, Inc. et al v. Gamma International, American Gaming &
Entertainment, Ltd. and John Does 1 to 100 (AP 98-70465 A) (United States
Bankruptcy Court for the Northern District of New York).
Subject to the Order, Shamrock has waived all accrued dividends, whether
declared or undeclared, on the Series C Preferred Stock and the Series D
Preferred Stock. Although undeclared dividends do not constitute legal
obligations of the Company, the Company accrued for such dividends because,
under the terms of the Series C Preferred Stock and the Series D Preferred
Stock, dividends are cumulative whether or not declared and the Company was
prohibited from paying dividends on, purchasing or redeeming any of its Series
A Preferred Stock or Common Stock so long as any such cumulated dividends were
unpaid. Shamrock has agreed to waive any future dividends on such preferred
stock so long as Shamrock owns such preferred stock, provided, however, that
if the Company declares any dividends on its Common Stock or redeems any of
its Common Stock or Series A Preferred Stock, other than Common Stock or
Series A Preferred Stock owned by Shamrock, then the holders of Series C
Preferred Stock and Series D Preferred Stock shall be entitled to participate
in such dividend or redemption on the same basis as if such Series C Stock and
Series D Stock had been converted into Common Stock in accordance with the
terms of such Series C Preferred Stock and Series D Preferred Stock. All other
provisions of the Series C Preferred Stock and Series D Preferred Stock shall
remain in effect, including, without limitation, provisions regarding voting
and conversion. Shamrock, as the majority stockholder of the Company and the
sole owner of the Series A Stock, Series C Stock and Series D Stock, has
consented to an amendment to the Company's certificate of incorporation
changing the dividend rights of the Series C Stock and Series D Stock as
discussed above. Such amendment shall become effective twenty days after
mailing an information statement discussing such amendment, among other
matters, to the Company's stockholders.
In accordance with the Letter Agreement, the Company released Shamrock from
all debts and liabilities and withdrew all claims in the bankruptcy cases of
Shamrock and Bennett Funding Group, Inc. et al. The Company shall endeavor to
find a buyer of its stock and/or remaining assets during the term ending
January 31, 2001.
As a result of the transactions agreed to in the Letter Agreement, the Company
recorded a decrease in assets of approximately $9,915,000 and a decrease in
liabilities of approximately $64,347,000 as of December 16, 1999.
Additionally, net income increased by approximately $51,279,000 and net income
for common stockholders increased by approximately $54,432,000 for the year
ended December 31, 1999.
Mr. Wellington shall continue his employment with the Company through the term
ending January 31, 2001 at an annual compensation of $125,000. At the end of
such term, assuming that
<PAGE 42>
there has been no intervening voluntary bankruptcy filing by the Company
without Shamrock's consent and assuming that the provisions of the Letter
Agreement and the Employment Agreement are met, Mr. Wellington shall be
entitled to a severance payment of $125,000 from a reserve account set aside
and controlled by Shamrock.
Note 4 - Liquidity and Continuation of Business
The Company has sustained recurring operating losses since its inception. The
Company also has had a history of insufficient liquidity and has been
dependent upon Shamrock for both working capital and project related
financing. The Company had available cash of approximately $127,000 as of
December 31, 1999 (see Note 5).
The Company maintains its cash accounts at a bank located in New Jersey. Total
cash balances are insured by the Federal Deposit Insurance Corporation
("FDIC") up to $100,000 per bank. The Company had cash balances on deposit
with the New Jersey bank at December 31, 1999 that exceeded the balance
insured by the FDIC in the amount of approximately $31,000.
The Company's ability to continue in business is primarily dependent upon its
ability to obtain sufficient funds for its operations. However, the Company
has no current commitments or prospects for additional funds. If the Company
does not receive additional funds prior to January 31, 2001, it would then
need to pursue a formal plan of reorganization or liquidation. A formal plan
of reorganization or liquidation would generally result in the sale of the
Company's assets to satisfy outstanding obligations. There can be no assurance
that if either action is required to be pursued that all such obligations
would be completely satisfied. Further, in the event of either action, it is
unlikely that the stockholders of the Company will recover any of their
investment in the Company.
Note 5 - Due from Stockholder
Pursuant to the Letter Agreement, the Company was to retain cash of $464,000
as of January 1, 2000, less legal retainers plus accounts payable incurred in
the ordinary course of business to bona fide third parties and mutually agreed
upon by the Company and Shamrock (see Note 3). As of December 31, 1999,
approximately $376,000 was due from Shamrock from excess cash distributions to
Shamrock. The Company received such amount in April 2000.
Note 6 - Investment in Gaming Project
Pursuant to the Proxy Agreement, RSR, LLC ("RSR"), a limited liability company
formed by the Company and a group of non-affiliated individuals, is currently
obligated to purchase the RSR Interest from NBD Bank, N.A., as trustee
("NBD"), for the benefit of the Company, at an average appraised fair market
value. Additionally, RSR and the Company are currently obligated to close on
the sale of the RSR Interest at the lower of the two appraisal amounts, with
the balance due upon the completion of an independent third appraisal. The
Company has obtained an appraisal
<PAGE 43>
valuing the RSR Interest at $6 million. The Company understands that RSR has
obtained an appraisal that values the RSR Interest significantly lower.
On September 9, 1999, RSR alleged that the Company and its principal
stockholders fraudulently induced RSR and the other members of RSR
(collectively, the "Remaining Members") to enter into the operating agreement
for RSR and the Proxy Agreement. RSR has offered to release the Company from
such alleged claims in exchange for the RSR Interest and all distributions
received by the Company with respect to the RSR Interest. The Company has
rejected RSR's offer and has filed suit against RSR for damages arising from
RSR's failure to comply with the provisions of the Proxy Agreement and
purchase the RSR Interest (see Note 3).
In accordance with the Letter Agreement, the Company has agreed to transfer to
Shamrock all payments, distributions, dividends and proceeds of any type to
which the Company is entitled pursuant to or in connection with the RSR
Interest and the Company and Shamrock executed a security interest in the RSR
Interest in exchange for Shamrock agreeing to forebear from the exercise of
any rights or remedies in respect of all obligations owing by the Company to
Shamrock (see Note 3).
The Company has not received any financial statement information or payments
relating to the RSR Interest for the year ended December 31, 1999 and
therefore has not recorded any revenues attributable to the RSR Interest for
such period. For the year ended December 31, 1998, the Company recorded
revenues of approximately $445,000 attributable to the RSR Interest.
Note 7 - Discontinued Ventures
Mississippi
Prior to 1998, an involuntary petition for liquidation under Chapter 7 of the
Code was filed with the United States Bankruptcy Court, Southern District of
Mississippi (the "Mississippi Bankruptcy Court") against AMGAM, which operated
the Gold Shore Casino in Biloxi, Mississippi. The case was subsequently
converted into a reorganization under Chapter 11 of the Code. Additionally,
prior to 1998, AGRM, which owned and leased certain property in Vicksburg,
Mississippi, filed a voluntary petition for reorganization under Chapter 11 of
the Code with the Mississippi Bankruptcy Court.
Prior to 1998 and the bankruptcy proceedings of AGRM and AMGAM, the Gold Coast
Barge, on which AMGAM had previously operated the Gold Shore Casino, had been
transferred to the Company from AGRM in exchange for the cancellation of
AGRM's guaranty to the Company of certain unpaid lease obligations of AMGAM to
the Company.
Pursuant to a Charter Agreement (the "Charter Agreement") entered into prior
to 1998 between the Company and President Mississippi Charter Corporation
("PMCC"), PMCC leased the Gold Coast Barge from the Company. Effective October
30, 1998, PMCC and the Company entered into an amendment to the Charter
Agreement (the "Charter Amendment"). Pursuant to the Charter Amendment, among
other things, (i) PMCC paid $4,105,000 (the "Amendment
<PAGE 44>
Payments") into an escrow account (the "Escrow Account") for the benefit of
the creditors of AMGAM and AGRM, (ii) PMCC agreed to pay into the Escrow
Account a monthly charter payment of $215,000 for the period from December 1,
1998 through April 15, 2000 (and made all such payments through July 31,
1999). On August 10, 1999, the Company sold the Gold Coast Casino barge to The
President Riverboat Casino-Mississippi, Inc. (the "Purchaser"), an affiliate
of PMCC, for $6,827,500, calculated as $5,000,000 plus all remaining charter
payments. Upon closing the Purchaser paid $1,000,000 into the Escrow Account
and delivered a promissory note in the amount of $5,827,500 to an escrow
agent, who will disburse all amounts paid by the Purchaser pursuant to the
Mississippi Plan.
On July 23, 1999, the Mississippi Bankruptcy Court confirmed the Mississippi
Plan. Pursuant to the Mississippi Plan, the Company's and Shamrock's claims
will be paid from (a) 70% of all escrowed charter payments, including the
Amendment Payments, (b) 72% of the first $3,000,000 of net proceeds from the
sale of the Gold Coast Barge, and (c) 75% of the net proceeds in excess of
$3,000,000 from the sale of the Gold Coast Barge. Additionally, all equity
interests of the Company in AMGAM and AGRM were canceled as of the effective
date of the Mississippi Plan.
As a result of the confirmation of the Mississippi Plan, as of July 23, 1999,
the Company set off "Short Term Portion of Estimated Net Liabilities for
Subsidiaries in Bankruptcy", totaling approximately $3,635,000, against the
"Restricted Cash - Mississippi" and "Note Receivable" amounts (totaling
approximately $2,024,000 and $1,611,000, respectively) to be received by
creditors of AMGAM and AGRM other than the Company. Additionally, as a result
of the confirmation of the Mississippi Plan and the dismissal of an adversary
complaint filed by the Official Committee of Unsecured Creditors of AMGAM
Associates challenging the transfer of the Gold Coast Barge from AGRM to the
Company, the Company recognized "Deferred Charter Revenue" of approximately
$11,743,000 as revenue.
In accordance with the Letter Agreement, the Company agreed to transfer to
Shamrock substantially all of the Company's right, title and interest under
the Mississippi Plan (See Note 3).
Harolds Club Casino
Prior to 1998, pursuant to an agreement between Shamrock and the Company under
which Shamrock provided the necessary funds to the Company to close the
purchase of the Harolds Club casino in Reno, Nevada, the Company transferred
to Shamrock title to the land and the building related to the Harolds Club.
Shamrock assumed responsibility for all carrying costs of the Harolds Club
property including, but not limited to, lease payments under certain land
leases held by the Company related to the Harolds Club, taxes, insurance and
utilities. Such land leases were assigned by the Company to Shamrock as of
September 29, 1998.
On June 25, 1999, Shamrock sold the Harolds Club in Reno, Nevada. All five
land leases held by Shamrock related to the Harolds Club terminated at
closing. The Company was released from all obligations under such leases,
except that the Company agreed to indemnify the five lessors of the Harolds
Club property against any environmental liabilities resulting from intentional
or
<PAGE 45>
negligent conduct on the part of the Company. (The Company is unaware of, and
no claim has been asserted related to, adverse environmental conditions at the
Harolds Club resulting from intentional or negligent conduct on the part of
the Company.) Additionally, lawsuits filed against the Company by the five
lessors of the Harolds Club property and cross-claims filed against the
Company by co-defendants were dismissed upon closing, and any judgments which
were entered have been withdrawn and set aside as if not entered.
Due to certain lease guarantees, the Company had recorded unpaid Harolds Club
lease payments and property taxes from April 1996 through March 1999,
collectively totaling approximately $2,307,000 (the "Unpaid Harolds
Obligations"), as current liabilities. The Company had recorded the amount of
the Unpaid Harolds Club Obligations as a receivable due from Shamrock, but, as
a result of the Company's determination that there was a substantial
likelihood that such amounts would be uncollectible, the Company fully
reserved for such amounts at the same time such amounts were recorded as a
receivable. As a result of the sale of the Harolds Club, and the consequent
release of the Company from all obligations under such leases and the
dismissal of all related lawsuits and cross-claims against the Company, the
Company reversed the Unpaid Harolds Obligations as of June 30, 1999.
Prior to 1998, Shamrock and the Company entered into an agreement pursuant to
which Shamrock agreed, upon the sale of the Harolds Club, to reimburse the
Company for (i) all costs and expenses, in an amount not to exceed $15,000,
incurred by the Company in connection with such sale, (ii) all reasonable
attorneys' fees incurred by the Company in connection with litigation
commenced against, among others, the Company by the five lessors of the
Harolds Club property, and (iii) all reasonable costs and expenses incurred by
the Company in connection with the operation and maintenance of the Harolds
Club. The Company had recorded the amount of such costs and expenses as a
receivable due from Shamrock, but, as a result of the Company's determination
that there was a likelihood that Harolds Club would not be sold, the Company
fully reserved for such amounts at the same time such amounts were recorded as
a receivable. As a result of the sale of the Harolds Club, the Company set off
such amounts, collectively totaling approximately $524,000 as of June 30,
1999, against the Company's indebtedness due to Shamrock.
GM&O Building
Prior to 1998, the Company acquired the GM&O Building for approximately
$1,006,000 in cash and subsequently recognized writedowns in the value of such
investment to reflect its fair market value. The value of the GM&O Building in
the amount of $375,000 is included in "Other current assets" in the
accompanying Consolidated Balance Sheet at December 31, 1998.
On March 1, 1999, the Company sold the GM&O Building in Mobile, Alabama to the
City of Mobile for approximately $423,000. The Company used the net sales
proceeds of approximately $415,000 for working capital purposes.
<PAGE 46>
Keno
Prior to 1998, the Company entered into an assignment and transfer agreement
with American Heartland Corporation ("AHC") and Big Red Keno, Ltd., a licensed
keno operator in Omaha, Nebraska, pursuant to which the Company transferred
and assigned to AHC all of the Company's right, title and interest to all of
the assets utilized by the Company in the conduct of its keno gaming
activities in exchange for $500,000 in cash and a promissory note to the
Company in the principal amount of approximately $1,112,000 (the "Keno Note").
The Company received principal and interest payments on the Keno Note totaling
approximately $300,000 for each of the years ended December 31, 1998 and 1997,
respectively. On September 22, 1998, AHC asserted set offs against the Keno
Note aggregating approximately $198,000. On January 8, 1999, the Company
agreed to the payment of $300,000 from AHC in full satisfaction of the Keno
Note and accordingly recorded a writedown in the value of the Keno Note in the
amount of $165,000 for the year ended December 31, 1998.
Note 8 - Long Term Debt
In accordance with the Letter Agreement, the Company agreed to transfer the
Transferred Assets to Shamrock. The amount of the Transferred Assets reduced
the Company's indebtedness to Shamrock. Additionally, pursuant to the Letter
Agreement, Shamrock released the Company from all debts and liabilities in
excess of the amount of the Transferred Assets, and waived all accrued
dividends, whether declared or undeclared, on the Series C Preferred Stock and
the Series D Preferred Stock (see Note 3).
At December 31, 1998, debt consisted of approximately $34,592,000 payable to
Shamrock. The Company was delinquent in the payment of interest due on its
obligations to Shamrock and certain related entities and accordingly
classified all of the outstanding debt to Shamrock as current as of December
31, 1998. Additionally, at December 31, 1998, the Company was indebted to
Shamrock for approximately $19,882,000 of accrued interest, approximately
$2,553,000 of accrued dividends (see Note 10) and approximately $2,701,000 in
rent due under a lease for a gaming vessel.
The weighted average rate of interest (stated or accrued) on all outstanding
amounts due to Shamrock as of December 31, 1998 was 13.49%.
Note 9 - Other Transactions with Shamrock
As of December 31, 1999, Shamrock owns 100% of the outstanding shares of the
Company's Series A Preferred Stock and approximately 47.3% of the outstanding
shares of the Common Stock, thereby owning approximately 52.6% of the total
voting power represented by the Company's outstanding voting securities.
Additionally, Shamrock owns all of the outstanding shares of the Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (see
Note 10).
<PAGE 47>
The Company does not have a sufficient number of authorized shares of Common
Stock to enable the conversion of all of the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock. On November 11,
1999 the Board of Directors voted to request the stockholders of the Company
to approve an amendment to the Company's Restated Certificate of Incorporation
increasing the number of authorized shares of Common Stock to 3,000,000,000
shares. Shamrock, as the majority stockholder of the Company, has consented to
such amendment. Such amendment shall become effective twenty days after
mailing an information statement discussing such amendment, among other
matters, to the Company's stockholders.
Assuming that Shamrock converted as of December 31, 1999 that number of shares
of Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock convertible into the total number of the Company's presently authorized
but unissued shares of Common Stock (i.e. 37,467,898 shares), Shamrock would
own approximately 86.8% of the total outstanding shares of Common Stock and
approximately 87.1% of the total voting power represented by the total
outstanding voting securities of the Company. Assuming the Company's
stockholders approve the amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Common Stock to
3,000,000,000 shares and Shamrock converted as of December 31, 1999 that
number of shares of the Series C Preferred Stock, the Series D Preferred Stock
and the Series E Preferred Stock convertible into the total number of the
Company's authorized but unissued shares of Common Stock immediately after
giving effect to such amendment (i.e. resulting in a total of 2,987,467,898
shares of Common Stock being issued to Shamrock as of such date), Shamrock
would own approximately 99.8% of both the total outstanding shares of Common
Stock and the total voting power represented by the total outstanding voting
securities of the Company. As of March 2000, Shamrock has not asserted any
rights it may have against the Company for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock to enable Shamrock to
convert all of the Series C Preferred Stock, the Series D Preferred Stock and
the Series E Preferred Stock.
Note 10 - Stockholders' Equity
The shares of Series A Preferred Stock, all of which outstanding shares are
held by Shamrock, are convertible at the holder's option into 25 shares of
Common Stock per share of Series A Preferred Stock, and bear the right to
elect, but Shamrock has not so elected, one director to the Board of
Directors. The shares of Series A Preferred Stock otherwise vote, and receive
dividends, as one class with the Common Stock as if converted into Common
Stock, are non-redeemable, and do not accrue or pay dividends or bear any
liquidation preference.
The shares of Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, all of which outstanding shares are held by the Bennett
Trustee, are senior to all other classes of the Company's outstanding stock.
Each of the Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock is convertible by the holder thereof into the number of shares
of Common Stock equal to the then-applicable redemption price for each such
Series (as described below) divided by an amount equal to 75% of the average
market price of Common Stock for the ten consecutive business days prior to
the conversion date. Conversion of each of the Series C
<PAGE 48>
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock could
result in significant dilution to the ownership interest of the Company's
stockholders. The Company has the right to redeem all three series of
Preferred Stock at any time. The redemption price for each share of the three
series of Preferred Stock (which price is also used to determine the
conversion price) increases quarterly as follows: (i) for the Series C
Preferred Stock, from a redemption price of $1,498.86 per share as of December
31, 1999, $29.17 per share per quarter; (ii) for the Series D Preferred Stock,
from a redemption price of $1,444.67 per share as of December 31, 1999, $29.17
per share per quarter; and (iii) for the Series E Preferred Stock, from a
redemption price of $1,340.40 per share as of December 31, 1999, $20.83 per
share per quarter.
The Series C Preferred Stock and the Series D Preferred Stock each have a
current cumulative dividend rate of 7.5%. The Series E Preferred Stock has no
stated dividend rate. However, pursuant to the Letter Agreement, Shamrock has
waived all accrued dividends, whether declared or undeclared, on the Series C
Preferred Stock and the Series D Preferred Stock. Additionally, Shamrock
waived any future dividends on such preferred stock so long as Shamrock owns
such preferred stock, provided, however, that if the Company declares any
dividends on its Common Stock or redeems any of its Common Stock or Series A
Preferred Stock, other than Common Stock or Series A Preferred Stock owned by
Shamrock, then the holders of Series C Preferred Stock and Series D Preferred
Stock shall be entitled to participate in such dividend or redemption on the
same basis as if such Series C Stock and Series D Stock had been converted
into Common Stock in accordance with the terms of such Series C Preferred
Stock and Series D Preferred Stock. Accordingly, the Company reversed accrued
dividends on the Series C Preferred Stock and Series D Preferred Stock
totaling approximately $1,627,000 and approximately $1,527,000, respectively,
as of December 16, 1999.
Shamrock, as the majority stockholder of the Company and the sole owner of the
Series A Stock, Series C Stock and Series D Stock, has consented to an
amendment to the Company's certificate of incorporation changing the dividend
rights of the Series C Stock and Series D Stock as discussed above. Such
amendment shall become effective twenty days after mailing an information
statement discussing such amendment, among other matters, to the Company's
stockholders.
The Company had accrued and declared on the outstanding shares of Series C
Preferred Stock and Series D Preferred Stock, but had not paid as of December
31, 1998, dividends which were due and payable as of December 31, 1994
totaling approximately $152,000 and approximately $152,000, respectively. The
Company had accrued on the outstanding shares of Series C Preferred Stock and
Series D Preferred Stock, but had not declared or paid as of December 31,
1998, dividends from January 1, 1995 through December 31, 1998 totaling
approximately $1,175,000 and approximately $1,075,000, respectively.
Note 11 - Stock Options, Warrants and Other Compensation
The Company maintains a stock option plan (the "Stock Option Plan") for
employees which provides for the issuance of both incentive and nonqualified
stock options to purchase shares of
<PAGE 49>
Common Stock at exercise prices not less than the fair market value of the
Common Stock on the date of grant. These options expire up to ten years from
the date of grant. At December 31, 1999 and 1998 the Company has reserved
5,250,000 shares for the exercise of options granted under the Stock Option
Plan. Transactions related to the Stock Option Plan were as follows:
Weighted Weighted
Average Average
1999 Exercise 1998 Exercise
Price Per Price Per
__________ __________ _________ ___________
Options
outstanding at
beginning of year 1,505,406 $3.12 1,505,406 $3.12
Options granted - - - -
Options exercised - - - -
Options canceled 74,516 $10.41 - $3.12
__________ __________ _________ ___________
Options
outstanding at end
of year 1,403,890 $2.74 1,505,406 $3.12
========== ========== ========= ===========
At December 31, 1999, all options were exercisable under the Stock Option
Plan. Significant option groups outstanding at December 31, 1999 were as
follows:
Weighted
Average Weighted
Exercise Price Average
Per Share of Remaining
Options Options Contractual
Outstanding Outstanding Life of
and Exercise Price and Options
Grant Dates Exercisable Range Exercisable Outstanding
___________ ___________ ______________ ___________ ___________
Pre-1993 317,765 $7.75 to $8.00 $8.00 3 months
1994 583,125 $2.3125 $2.31 5 years
1996 530,000 $0.0625 to $0.08 $0.07 7 years
_________
Total 1,430,890
=========
The Company has determined that it will continue to account for employee
stock-based transactions under APB No. 25. Accordingly, no compensation cost
has been recognized for options issued with an exercise price equal to the
market value of the Common Stock at the date of grant. The Company has adopted
the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value method of accounting for
stock options and other equity instruments. Under the fair value method,
<PAGE 50>
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period. The Company believes that had compensation cost been determined based
on the fair value at the grant dates consistent with the provisions of SFAS
No. 123 there would have been no material effect on the Company's net income
(loss) and net income (loss) for common stockholders per common share for the
years ended December 31, 1999 and 1998. No options were granted during the
years ended December 31, 1999 and 1998.
The Company issues warrants on a one for one basis, from time to time, for the
purchase of shares of Common Stock. The exercise prices of the warrants are no
less than the fair market values of the Common Stock on the dates of grant.
The estimated fair market value of the warrants are measured on the date of
grant (measurement date), if any, and accounted for as part of the related
transaction.
Transactions related to stock purchase warrants are summarized and more fully
discussed below:
Exercise Price Exercise Price
1999 Range 1998 Range
____ ______________ ____ ______________
Warrants outstanding
at beginning
of year 178,750 $3.00 to $16.25 182,813 $3.00 to $16.25
Warrants expired or
canceled 178,750 $3.00 to $16.25 4,063 $6.76
_______ _______
Warrants outstanding
at end of year - 178,750 $3.00 to $16.25
======= =======
No warrants were issued or exercised in 1999 or 1998.
Note 12 - Income Taxes
The partial repayment of debt to Shamrock pursuant to the Letter Agreement,
which for tax purposes will be effective for the year ending December 31,
2000, will be effectuated by the transfer of the Transferred Assets and is a
non-taxable event. Under Section 108 of the Internal Revenue Code of 1986, as
amended, if a company is "insolvent", as the Company is, any forgiveness of
debt will not result in taxable income to the extent of insolvency. In the
instant situation, the release by Shamrock of the remaining debt owed by the
Company to Shamrock, effective for tax purposes for the year ending December
31, 2000, should not result in any taxable gain, although the Company's net
operating loss carryforwards and other tax attributes will be reduced by the
amount of such forgiveness. The Company anticipates that after such repayment
of debt to Shamrock and release of debt by Shamrock, the Company will no
longer have any net operating loss carryforwards. At December 31, 1999, the
Company has net operating loss carryforwards for income tax purposes of
approximately $34,164,000. At
<PAGE 51>
December 31, 1998, the Company had net operating loss carryforwards for income
tax purposes of approximately $52,640,000.
Note 13 - Other Commitments and Contingencies
Leases
Rental expenses under operating leases amounted to approximately $5,000 and
approximately $8,000 in 1999 and 1998, respectively. There are no future
minimum lease payments as of December 31, 1999.
Litigation
On September 9, 1999, RSR alleged that the Company and its principal
stockholders fraudulently induced RSR and the Remaining Members to enter into
the operating agreement for RSR and the Proxy Agreement by failing to disclose
the existence or substance of the securities fraud investigation by the
federal government against The Bennett Funding Group, Inc. and Bennett
Management and Development Corp., affiliates of Shamrock Holdings Group, Inc.
RSR has offered to release the Company from such alleged claims in exchange
for the RSR Interest and all distributions received by the Company with
respect to the RSR Interest. The Company has advised RSR that it disclosed
such federal investigation as soon as the Company became aware of such
investigation. The Company has rejected RSR's offer and has filed suit against
RSR in the Superior Court of New Jersey, Law Division, Bergen County for
damages arising from RSR's failure to comply with the provisions of the Proxy
Agreement and purchase the RSR Interest. On November 24, 1999, RSR filed a
notice of removal to transfer the suit to the United States District Court for
the District of New Jersey (the "NJDC") and a notice of motion with the NJDC
seeking dismissal of the suit for lack of jurisdiction over RSR. The Company
has filed an opposition to RSR's motion to dismiss with the NJDC (see Note 6).
In addition to the items set forth above, the Company is involved in other
legal proceedings and claims of various types. While any litigation contains
an element of uncertainty, it is the opinion of management, after consultation
with counsel, that the outcome of each such other proceeding or claim which is
pending or known to be threatened, or all of them combined, can be
successfully defended or resolved. In addition, management is unable, with
any degree of certainty, to predict the outcome, or to estimate the amount of,
the liability, if any, that may result from these actions. However,
management believes that none of such other proceedings or claims will have a
material adverse effect on the Company's business or financial condition.
<PAGE 52>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
American Gaming & Entertainment, Ltd.
Date: 4/4/00 By: J. DOUGLAS WELLINGTON
_________________________ ___________________________
J. Douglas Wellington
President and Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.
J. DOUGLAS WELLINGTON Date: 4/4/00
___________________________________________
J. Douglas Wellington, President and Chief
Executive Officer, General Counsel and
Secretary, Principal Financial Officer and
Principal Accounting Officer and Director
<PAGE 53>
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION PAGE
________ ___________ ____
3.1 Restated Certificate of Incorporation *
3.2 Certificate of Amendment of Restated Certificate of
Incorporation *
3.3 Bylaws, as amended 55
4.1 Specimen Common Stock Certificate 65
10.1 Stock Option Plan 67
10.2 Employment Agreement dated December 31, 1999 between
the Company and J. Douglas Wellington 72
10.3 Agreement dated September 1, 1999 between the Company
and J. Douglas Wellington 81
10.4 Settlement Agreement dated as of August 21, 1998 by and
between the Company, AMGAM Associates, American Gaming
and Resorts of Mississippi, Inc., Shamrock Holdings Group,
Inc., Bennett Management and Development Co., the Official
Committee of Unsecured Creditors of AMGAM Associates, and
the Official Unsecured Creditors Committee of American
Gaming and Resorts of Mississippi, Inc. *
10.5 Sale Agreement dated as of July 2, 1999 between The
President Riverboat Casino-Mississippi, Inc., President
Casinos, Inc., President Mississippi Charter Corporation,
the Company, AMGAM Associates, American Gaming & Resorts
of Mississippi, Inc., the Committee for the Unsecured
Creditors of AMGAM, the Committee for the Unsecured
Creditors of AGRM, International Game Technology, Inc.,
and Shamrock Holdings Group, Inc. *
10.6 Irrevocable Proxy and Consent Agreement dated as of
August 23, 1996 by and between Paul L. Partridge, Patrick
F. Daly, James A. Everatt, Charles E. Reisert, Jr.,
Eric C. Jackson, the Company and RSR, LLC *
10.7 Trust Agreement dated as of August 23, 1996 by and
between the Company and NBD Bank, N.A. *
10.8 Letter agreement dated October 21, 1998 by and between
Shamrock Holdings Group, Inc., Bennett Management and
Development Co., AMGAM Associates, American Gaming and
Resorts of Mississippi, Inc., and the Company *
<PAGE 54>
10.9 Letter Agreement dated November 23, 1999, by and between
Shamrock Holdings Group, Inc., Bennett Funding Group, Inc.,
American Gaming & Entertainment, Ltd., Emerald Gaming, Inc.,
AMGAM Associates and American Gaming and Resorts of
Mississippi, Inc. *
10.10 Security Agreement dated as of December 16, 1999 made by
the Company in favor of Shamrock Holdings Group, Inc. 82
11 Statement re computations of per share earnings 100
23.1 Consent of Mintz Rosenfeld LLC 101
23.2 Consent of Deloitte & Touche LLP 102
27 Financial Data Schedule 103
* Incorporated by reference.
10K Edgar final full.doc
<PAGE 55>
Exhibit 3.3
BY-LAWS
of
American Gaming & Entertainment, Ltd.
(a Delaware Corporation)
Section 1. MEETINGS OF STOCKHOLDERS
Section 1.01. Place. Date and Time of Meeting. Meetings of the
stockholders of the Corporation shall be held on such date arid at such time
and place, either within or without the State of Delaware, as may be
specified by the Board of Directors.
Section 1.02. Annual and Special Meetings. The annual meeting of
stockholders, for the election of directors and the transaction of any other
business which may be brought before the meeting, shall be held on such date
and at such time and place, either within or without the State of Delaware,
as may be specified by the Board of Directors.
Special Meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Chairman, the Chief Executive Officer or
the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors. Any such request
shall state the purpose or purposes of the proposed meeting.
Section 1.03. Notice of Meetings. Notice of all meetings of stockholders
shall be given to each stockholder of record entitled to vote at the meeting,
at least ten days prior to the day named for the meeting, unless a greater
period of notice is by law required in a particular case.
Section 1.04. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence, the Chief Executive Officer, the
President, or a Vice President designated by the Board of Directors,
respectively, or in the absence of the Chairman, the Chief Executive Officer,
the President or any Vice President so designated, a chairman chosen by the
stockholders, shall act as chairman of the meeting; and the Secretary, or in
his absence, a person appointed by the chairman of the meeting, shall act as
secretary of the meeting.
Section 1.05. Quorum: Voting. Except as otherwise specified herein or in
the Certificate of Incorporation or provided by law, (a) a quorum shall
consist of the holders of one-third of the stock issued and outstanding and
entitled to vote, and (b) when a quorum is present, all matters shall be
decided by the vote of the holders of a majority of the stock having voting
power present in person or by proxy.
In each election of directors, the candidates receiving the highest
number of votes, up to the number of directors to be elected in such
election, shall be elected.
<PAGE 56>
Section 1.06. Procedure for Nomination of Candidates for Director and
Pronosal of Business. Subject to the rights of holders of any outstanding
preferred stock, nominations for election of directors at an annual meeting
or a special meeting called for the purpose of electing directors may be made
either by the Board of Directors or by any stockholder of record entitled to
vote for the election of directors who gives advance notice as hereafter
provided.
Any such stockholder may nominate persons for election as directors only
if written notice of such stockholder's intent to make such nomination is
transmitted to, and received by, the Secretary of the Corporation at the
principal place of business of the Corporation not later than (a) in the case
of an annual meeting, the earlier of (i) the 10th day prior to the
forthcoming meeting date or (ii) the close of business on the 10th day
following the date on which the Corporation first makes public disclosure of
the meeting date and (b) in the case of a special meeting (provided that the
Board of Directors has determined that directors shall be elected at such
special meeting), the close of business on the 10th day following the date on
which the Corporation first makes public disclosure of the meeting date. Each
notice given by such stockholder shall set forth: (a) the name and address of
the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
(or if the record date for such meeting is subsequent to the date required
for such stockholder notice, a representation that the stockholder is a
holder of record at the time of such notice and intends to be a holder of
record on the date for such meeting), and setting forth the class and number
of shares so held (including shares held beneficially), (c) a representation
that such stockholder intends to appear in person or by proxy as a holder of
record at the meeting to nominate the person or persons specified in the
notice; (d) a description of all arrangements or understandings between such
stockholder and each nominee proposed by the stockholder and any other person
or persons (identifying such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (e) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission; and (f) the consent of each
nominee to serve as a director of the Corporation if so elected.
If the facts show that a nomination was not made in accordance with the
foregoing provisions, the Chairman of the meeting shall so determine and
declare to the meeting, whereupon the defective nomination shall be
disregarded. Public disclosure of the date of a forthcoming meeting may be
made by the Corporation for purposes of this Section 1.06 not only by the
giving of the formal notice of the meeting but also (a) by notice to a
national securities exchange or to the National Association of Securities
Dealers, Inc. (if the Corporation's common stock is then listed on such
exchange or quoted on NASDAQ or the OTC Bulletin Board), (b) by filing a
report under Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (if the Corporation is then subject thereto) or
(c) by a mailing to stockholders or general press release.
All business properly brought before an annual meeting or a special
meeting shall be
<PAGE 57>
transacted at such meeting. Business shall be deemed properly brought only if
it is (a) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors or (c) in the case of an annual meeting, (i) brought before the
meeting by a stockholder or record present and entitled to vote at such
meeting, (ii) upon prior written notice transmitted to, and received by, the
Secretary of the Corporation at the principal place of business of the
Corporation not later than the earlier of (A) the 10th day prior to the
forthcoming meeting date or (B) the close of business on the 10th day
following the date on which the Corporation first makes public disclosure of
the meeting date and (iii) each such notice given by such stockholder sets
forth: (A) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (B)
the name and address of the stockholder who intends to propose such business;
(C) a representation that the stockholder is a holder of record of stock of
the Corporation entitled to vote at such meeting (or if the record date for
such meeting is subsequent to the date required for such notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the date of such meeting) and
intends to appear in person or by proxy at such meeting to propose such
business; and (D) any material interest of the stockholder in such business.
The Chairman of the meeting may refuse to transact any business at any
meeting made without compliance with the foregoing procedure.
Notwithstanding the foregoing provisions of this Section 1.06, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 1.06. Nothing in this Section 1.06 shall be
deemed to affect any rights of stockholders to request inclusion of proposals
in the Corporation's proxy statement pursuant to Rule 14a-S under the
Exchange Act.
Section 1.07. Participation in Meetings. One or more stockholders may
participate in a meeting of the stockholders by means of conference telephone
or similar communications equipment by which all persons participating in the
meeting can hear each other.
Section 2. DIRECTORS
Section 2.01. Number and Term of Office. The number of directors of the
Corporation shall be two. Each director shall be elected to serve until the
next annual meeting of stockholders and until his successor is elected and
qualified, or until his earlier death, resignation or removal.
Section 2.02. Resignations. Any director may resign at any time by
giving written notice to the Board of Directors, to the Chairman, the Chief
Executive Officer, the President, or to the Secretary. Such resignation shall
take effect at the time of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Any vacancy in the Board of Directors, resulting from death,
resignation, increase in the authorized number of directors or otherwise, may
be filled for the unexpired term by a majority
<PAGE 58>
vote of the remaining directors in office, although less than a quorum.
Section 2.03. Annual Meeting. As promptly as practicable after each
annual election of directors, the Board of Directors shall meet for the
purpose of organization, election of officers, and the transaction of other
business, at the place where such election of directors was held. Notice of
such meeting need not be given. In the absence of a quorum at said meeting,
the same may be held at any other time and place which shall be specified in
a notice given as hereinafter provided for special meetings of the Board of
Directors.
Section 2.04. Regular Meetings. Regular meetings of the Board of
Directors or any committee designated under Section 2.09 hereof may be held
without notice at such time and place as shall from time to time be
determined by the Board.
Section 2.05. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman, the Chief Executive Officer or two
or more of the directors, and special meetings of any committee designated
under Section 2.09 hereof may be called by any regular member thereof, and in
either case shall be held at such time and place as shall be designated in
the call for the meeting.
Notice of each special meeting shall be given by mail, telegram,
telephone, or orally, by or at the direction of the person or persons
authorized to call such meeting, to each director, at least two days prior to
the day named for the meeting.
Section 2.06. Organization. Every meeting of the Board of Directors
shall be presided over by the Chairman, or in his absence, the Chief
Executive Officer, or in the absence of the Chairman and the Chief Executive
Officer, by a chairman of the meeting chosen by a majority of the directors
present. The Secretary, or in his absence, a person appointed by the chairman
of the meeting, shall act as secretary of the meeting.
Section 2.07. Participation in Meetings. One or more directors may
participate in a meeting of the Board of Directors or a committee of the
Board by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other.
Section 2.08. Quorum: Voting. One-third of the total number of directors
shall constitute a quorum for the transaction of business by the Board of
Directors, and one third of the total number of directors who are members of
any committee designated under Section 2.09 hereof shall constitute a quorum
for the transaction of business by said committee. The vote of a majority of
the directors present at any meeting of the Board of Directors or of any
aforesaid committee at which there is a quorum shall be the act of the Board
of Directors or said committee, as the case may be, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board
of Directors or of any aforesaid committee, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall
<PAGE 59>
be present.
Section 2.09. Committees. The Board of Directors may, by resolution
passed by the entire Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation, which, to the
extent provided in the resolution and permitted by law, shall have and may
exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
Section 2.10. Compensation of Directors. Each director shall be entitled
to receive such compensation, if any, as may from time to time be fixed by
the Board of Directors. Directors may also be reimbursed by the Corporation
for all reasonable expenses incurred in attending meetings of the Board or
any committee thereof of which they are members or otherwise incurred in the
performance of their duties as directors.
Section 3. OFFICERS
Section 3.01. Number and Qualifications. The officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a President, one
or more Vice Presidents, a Secretary, a Treasurer, and may include such other
officers as may be elected or appointed in accordance with the provisions of
Section 3.02 herein. One person may bold more than one office. Officers shall
be natural persons of full age.
Section 3.02. Additional Officers and Agents. The Board of Directors
may, from time to time, elect such other officers and appoint such other
agents as it deems necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as are provided in these
By-laws, or as the Board may, from time to time, determine. The Board also
may delegate to any officer the power to appoint and remove subordinate
officers and to retain, appoint and remove other agents, and to prescribe the
authority, term of office and duties of such subordinate officers and other
agents.
Section 3.03. Election and Term of Office. The officers of the
Corporation, except those appointed by delegated authority pursuant to
Section 3.02 herein, shall be elected by the Board of Directors at its annual
meeting, but the Board may elect officers or fill vacancies among the
officers at any other meeting. Subject to earlier termination of office and
without prejudice to the contract rights, if any, which he may have under a
written agreement between him and the Corporation, each elected officer shall
hold office until the next annual meeting of directors and until his
successor shall have been elected and qualified.
Section 3.04. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, or to the Chairman, the Chief
Executive Officer, the President, or to the
<PAGE 60>
Secretary of the Corporation. Any such resignation shall take effect at the
time of the receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 3.05. Removal. Any officer may be removed at any time, either
with or without cause, by the vote of a majority of the Board of Directors.
Section 3.06. The Chairman of the Board. The Chairman of the Board shall
preside at the meetings of the Board and shall also perform such other duties
as may be specified by these By-Laws or as from time to time may be assigned
to him by the Board.
Section 3.07. The Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the Corporation and shall have
overall responsibility for the supervision of the business and operations of
the Corporation, subject, however, to the control of the Board. The Chief
Executive Officer shall preside at meetings of the Board in the absence of
the Chairman and also shall perform such other duties as may be specified by
these By-Laws or as from time to time may be assigned to him by the Board.
Section 3.08. The President. The President shall be the chief operating
officer of the Corporation and shall have the responsibility for the day-to-
day operations of the Corporation, subject, however, to the control of the
Chief Executive Officer. The President, (or the Chairman, or the Chief
Executive Officer) shall sign, execute, and acknowledge, in the name of the
Corporation, deeds, mortgages, bonds, contracts, and other instruments
authorized by the Board, ..except in cases where the signing and execution
hereof shall be expressly delegated by the Board to some other officer or
agent of the Corporation. The President shall perform all duties as may be
specified by these By-Laws or as from time to time may be assigned to him by
the Chief Executive Officer.
Section 3.09. Vice Presidents. In the absence of the President or when
so directed by the President, any Vice President may perform all the duties
of the President, and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President. The Vice Presidents also
shall perform such other duties as, from time to time, may be assigned to
them by the President.
Section 3.10. The Secretary. The Secretary shall record all the votes of
the stockholders and of the directors and the minutes of the meetings of the
stockholders and of the Board of Directors in a book or books to be kept for
that purpose; he shall see that notices of the meetings of the stockholders
and the Board are given and that all records and reports are properly kept
and filed by the Corporation as required by law; he shall be the custodian of
the seal of the Corporation and shall see that it is affixed to all documents
to be executed on behalf of the Corporation under its seal; and, in general,
he shall perform all duties as may from time to time be assigned to him by
the President.
Section 3.11. Assistant Secretary. In the absence or disability of the
Secretary or when so
<PAGE 61>
directed by the Secretary, any Assistant Secretary may perform all the duties
of the Secretary, and, when so acting, shall have all the powers of; and be
subject to all the restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be
assigned to them respectively by the President or the Secretary.
Section 3.12. The Treasurer. The Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for
the custody of its funds and securities; he shall have full authority to
receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts, and warrants in its name and on its behalf and
to give full discharge for the same; he shall deposit all funds of the
Corporation, except such as may be required for current use, in such banks or
other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the
office of Treasurer and such other duties as may from time to time be
assigned to him by the President.
Section 3.13. Assistant Treasurers. In the absence or disability of the
Treasurer or when so directed by the Treasurer, any Assistant Treasurer may
perform all the duties of the Treasurer, and, when so acting, shall have all
the powers of; and be subject to all the restrictions upon, the Treasurer.
The Assistant Treasurers shall perform such other duties as from time to time
may be assigned to them respectively by the Board of Directors, the Chief
Executive Officer, the President or the Treasurer.
Section 3.14. Compensation of Officers and Others. The compensation of
all officers shall be determined by the Board of Directors, or any committee
or officer authorized by the Board so to do. No officer shall be precluded
from receiving such compensation by reason of the fact he is also a director
of the Corporation.
Additional compensation, determined as above provided, may be paid to
any officers or employees for any year or years, based upon the success of
the operations of the Corporation during such period.
Section 4. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 4.01. Right to Indemnification. The Corporation shall indemnify,
to the full extent permissible under Delaware law, any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
officer of the Corporation, or while a director or officer of the Corporation
is or was serving at the request of the Corporation as a director or officer
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise, against expenses (including attorney's fees),
judgments, fines, excise taxes and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
preceding.
Section 4.02. Payment of Expenses in Advance. Expenses incurred in
defending an
<PAGE 62>
action, suit or proceeding referred to in Section 4.01 shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding in the manner and to the frill extent permissible under Delaware
law upon request of any person requesting indemnification under Section 4.01.
Section 4.03. Procedure. On the request of any person requesting
indemnification under Section 4.01 or any advance under Section 4.02, the
Board of Directors or a committee thereof shall determine whether such
indemnification or advance is permissible or such determination shall be made
by independent legal counsel if the Board or committee so directs or if the
Board or committee is not empowered by statute to make such determination.
Section 4.04. Other Rights. The indemnification provided by these By-
Laws shall not be deemed exclusive of any other rights to which a person
seeking indemnification may be entitled under any statute, agreement, vote of
stockholders or disinterested directors, or otherwise both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Without limiting the generality of the
foregoing, by action of the Board of Directors (notwithstanding the interest
of its members in the transaction) the Corporation may enter into agreements
with persons indemnified under this Section 4 and other providing for
indemnification of such persons by the Corporation either under the
provisions of this Section 4 or otherwise, and, in the event of any conflict
between the provisions of this Section 4 and the provisions of any such
indemnification agreement, the provisions of such indemnification agreement
shall prevail.
Section 4.05. Insurance. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director or
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under the provisions of these By-Laws.
Section 4.06. Effect: Benefit: Modification. The obligations of the
Corporation to indemnify and to advance expenses to a party under the
provisions of this Section 4 shall be in the nature of a contract between the
Corporation and each such party. No amendment or repeal of any provision of
this Section 4 shall alter, to the detriment of such party, the right of such
party to indemnification or the advancement of expenses with respect to any
claim based on an actual or alleged act or failure to act which took place
prior to such amendment, repeal or termination.
Section 5. STOCK CERTIFICATES; TRANSFERS
Section 5.01. Stock Certificates. Every stockholder shall be entitled to
a stock certificate or certificates in such form as the Board of Directors
shall prescribe certifying the number of shares of capital stock of the
Corporation owned by such stockholder. Stock certificates shall be
<PAGE 63>
signed by the Chairman, the Chief Executive Officer, the President or a Vice
President and by the Secretary or the Treasurer or an Assistant Secretary or
an Assistant Treasurer of the Corporation, but, to the extent permitted by
law, such signatures may be facsimiles, engraved or printed.
Section 5.02. Transfer of Stocks. Transfer of stock certificates and the
shares represented thereby shall be made only upon surrender to the
Corporation or a transfer agent of the Corporation of a certificate for the
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer.
Section 5.03. Fixing Date for Determination of Stockholders of Record.
The Board of Directors may fix in advance a date, which shall not be more
than sixty or less than ten days before the date of any meeting of
stockholders, nor more than sixty days prior to any other action as a record
date for the determination of the stockholders entitled to notice of; and to
vote at, any such meeting, and any adjournment thereof; or entitled to
receive payment of any dividend or other distribution, or any allotment of
rights, or to exercise the rights in respect of any change or conversion or
exchange of capital stock, or to give any consent of stockholders for any
purpose, and in such case such stockholders of record on the date so fixed
shall be entitled to such notice of; and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend or other
distribution, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 5.04. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of stock to receive dividends and to vote as such owner and shall not
be bound to recognize any equitable or other claim to or interest in such
stock on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of
Delaware.
Section 5.05. Transfer Agent and Registrar: Regulations. The Corporation
may, if and whenever the Board of Directors so determines, maintain, in the
State of Delaware, or any other state of the United States, one or more
transfer offices or agencies, each in charge of a Transfer Agent designated
by the Board, where the stock of the Corporation shall be transferable. If
the Corporation maintains one or more such transfer offices or agencies, it
also may, if and whenever the Board of Directors so determines, maintain one
or more registry offices each in charge of a Registrar designated by the
Board, where such stock shall be registered. No certificates for stock of the
Corporation in respect of which a Transfer Agent shall have been designated
shall be valid unless countersigned by such Transfer Agent, and no
certificates for stock of the Corporation in respect of which both a Transfer
Agent and a Registrar shall have been designated shall be valid unless
countersigned by such Transfer Agent and registered by such Registrar. To the
extent permitted by law, such signatures may be facsimiles, engraved or
printed. The Board may also make such additional rules and regulations as it
may deem expedient concerning the issue, transfer and registration of stock
certificates.
Section 5.06. Lost, Destroyed and Mutilated Certificates. The Board of
Directors, by
<PAGE 64>
standing resolution or by resolutions with respect to particular cases, may
authorize the issuance of new stock certificates in lieu of stock
certificates allegedly lost, destroyed or mutilated, upon such terms and
conditions as the Board may direct.
Section 6. AMENDMENTS
Section 6.01. Bv Stockholders or Directors. Any or all of the provisions
of these By-Laws, whether contractual in nature or merely regulatory of the
internal affairs of the Corporation, may be amended or repealed, except as
otherwise provided by law or by the Certificate of Incorporation: (a) by a
majority vote of the total number of directors; (b) by vote of the
stockholders entitled to cast at least a majority of the votes which all
stockholders are entitled to cast thereon, in either case at any regular or
special meeting duly convened after notice of such purpose to the directors
or stockholders, as the case may be; (c) or by consent of the directors or
stockholders, as the case may be, as and to the extent permitted by the
Delaware General Corporation Law.
Amended by Resolution of the Board of Directors November 11, 1999.
<PAGE 65>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
GAMMA INTERNATIONAL, LTD.
CUSIP 026325 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFIES THAT
SPECIMEN
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE $.01 PAR VALUE
COMMON STOCK OF
GAMMA INTERNATIONAL, LTD.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned and registered
by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
SEAL
NAME CHANGED TO
AMERICAN GAMING &
ENTERTAINMENT, LTD.
Dated:
J. DOUGLAS WELLINGTON ALFRED J. LUCIANI
SECRETARY PRESIDENT/CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE 66>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ..... Custodian .....
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right Act ......................
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For value received _________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
____________ shares of the capital stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
______________________________ Attorney to transfer the said Stock on the
books of the within-named Company with full power of substitution in the
premises.
Dated, ______________
_________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
10K Edgar final full.doc
<PAGE 67>
Exhibit 10.1
GAMMA INTERNATIONAL, LTD.
STOCK OPTION PLAN
AS AMENDED
1. Purpose of the Plan. Under this Stock Option Plan (the "Plan") of
Gamma International, Ltd. (the "Company") options may be granted to eligible
persons to purchase shares of the Company's capital stock. The Plan is
designed to enable the Company to attract, retain and motivate its employees
and independent contractors by providing for or increasing the proprietary
interests of such persons in the Company. The Plan provides for options which
qualify as incentive stock options ("Incentive Options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), as well as options
which do not so qualify.
2. Stock Subject to Plan. The maximum number of shares of stock for
which options granted hereunder may be exercised shall be 5,250,000 shares of
common stock with one cent ($.01) par value, subject to the adjustments
provided in Sections 7 and 12. Shares of stock subject to the unexercised
portions of any options granted under this Plan which expire or terminate or
are canceled may again be subject to options under the Plan. However, if
stock appreciation rights are granted with respect to any options under this
Plan, the total number of shares of stock for which further options may be
granted under this Plan shall be irrevocably reduced not only when there is an
exercise of an option granted under this Plan, but also when such option is
surrendered upon an exercise of a stock appreciation right granted under this
Plan, in either case by the number of shares covered by the portion of such
option which is exercised or surrendered.
3. Eligible Persons. The employees eligible to be considered for the
grant of Incentive Options hereunder are any persons employed by the Company
or its parent or subsidiaries. The persons eligible to be considered for the
grant of non-qualified options hereunder are any persons employed by the
Company or its parent or subsidiaries, or any persons having an independent
contractor relationship with the Company or its parent or subsidiaries
including any employee of such independent contractor.
4. $100,000 Incentive Stock Option Exercise Limitation. The aggregate
fair market value of the stock for which Incentive Options granted to any one
eligible employee under this Plan and under all stock option plans of the
Company, its parent(s) and subsidiaries may by their terms first become
exercisable during any calendar year shall not exceed $100,000, determining
fair market value of the stock subject to any option as of the time that
option is granted.
5. Minimum Exercise Price. The exercise price for each option granted
hereunder shall be not less than 100% of the fair market value of the stock at
the date of the grant of the option and not less than the par value of such
stock.
<PAGE 68>
6. No Transferability. Any option granted under this Plan shall by its
terms be nontransferable by the optionee other than by will or the laws of
descent and distribution and shall be exercisable during the optionee's
lifetime only by him or by his guardian or legal representative.
7. Adjustments. If the outstanding shares of stock of the class then
subject to this Plan are increased or decreased, or are changed into or
exchanged for a different number or kind of shares or securities, as a result
of one or more reorganizations, recapitalizations, stock splits, reverse stock
splits, stock dividends or the like, appropriate adjustments shall be made in
the number and/or kind of shares or securities for which options may
thereafter be granted under this Plan and for which options then outstanding
under this Plan may thereafter be exercised. Any such adjustment in
outstanding options shall be made without changing the aggregate exercise
price applicable to the unexercised portions of such options.
8. Maximum Option Term. No option granted under this Plan may be
exercised in whole or in part more than ten years after its date of grant.
9. Plan Duration. Options may not be granted under this Plan after
November 17, 2004.
10. Payment. Payment for stock purchased under any exercise of an option
granted under this Plan shall be made in full in cash concurrently with such
exercise, except that, if and to the extent the instrument evidencing the
options so provides and if the Company is not then prohibited from purchasing
or acquiring shares of such stock, such payment may be made in whole or in
part with shares of the same class of stock as that then subject to the
option, delivered in lieu of cash concurrently with such exercise, the shares
so delivered to be valued on the basis of the fair market value of the stock
(determined in a manner specified in the instrument evidencing the option) on
the day preceding the date of exercise.
11. Administration. The Plan shall be administered by a committee (the
"Committee") of not less than two members of the Company's board of directors
(the "Board") each of whom shall be a "disinterested person" as such term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934,
as amended.
The interpretation and construction by the Committee of any term or
provision of the Plan or of any option granted under it shall be final. The
Committee may from time to time adopt rules and regulations for carrying out
this Plan and, subject to the provisions of this Plan, may prescribe the form
or forms of the instruments evidencing any option granted under this Plan.
Subject to the provisions of this Plan, the Committee shall have full and
final authority in its discretion to select the persons to be granted options,
to grant such options and to determine the number of shares to be subject
thereto, the exercise prices, the terms of exercise, expiration dates and
other pertinent provisions thereof.
<PAGE 69>
12. Corporate Reorganizations. Upon the dissolution or liquidation of
the Company, or upon a reorganization, merger or consolidation of the Company
as a result of which the outstanding securities of the class then subject to
options hereunder are changed into or exchanged for cash or property or
securities not of the Company's issue, or upon a sale of substantially all of
the property of the Company to, or the acquisition of stock representing more
than eighty percent (80%) of the voting power of the stock of the Company then
outstanding by, another corporation or person, the Plan shall terminate, and
all options theretofore granted hereunder shall terminate, unless provision be
made in writing in connection with such transaction for the continuance of the
Plan and/or for the assumption of options theretofore granted, or the
substitution for such options of options covering the stock of a successor
employer corporation, or a parent or a subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices, in which event the
Plan and options theretofore granted shall continue in the manner and under
the terms so provided. If the Plan and unexercised options shall terminate
pursuant to the foregoing sentence, all persons entitled to exercise any
unexpired portions of options then outstanding shall have the right, at such
time prior to the consummation of the transaction causing such termination as
the Committee shall designate, to exercise the unexercised portions of their
options, including the portions thereof which would, but for this paragraph
entitled "Corporate Reorganizations", not yet be exercisable.
13. Stock Appreciation Rights. If the instrument evidencing the option
so provides, an option granted under this Plan (herein sometimes referred to
as the "corresponding option") may include the right (a "Stock Appreciation
Right") to receive an amount equal to some or all of the excess of the fair
market value (determined in a manner specified in the instrument evidencing
the corresponding option) of the shares subject to unexercised portions of the
corresponding option over the aggregate exercise price for such shares under
the corresponding option as of the date the Stock Appreciation Right is
exercised. The amount payable upon exercise of a Stock Appreciation Right may
be paid in cash or in shares of the class then subject to the corresponding
option (valued on the basis of their fair market value, determined as
specified with respect to the measurement of the amount payable as aforesaid),
or in a combination of cash and such shares so valued, as determined by the
Committee. No Stock Appreciation Right may be exercised in whole or in part
(a) other than in connection with the contemporaneous surrender without
exercise of such corresponding option, or the portion thereof that corresponds
to the portion of the Stock Appreciation Right being exercised, or (b) except
to the extent that the corresponding option or such portion thereof is
exercisable on the date of exercise of the Stock Appreciation Right by the
person exercising the Stock Appreciation Right.
14. Restricted Stock. If the instrument evidencing the option so
provides, shares of stock issued on exercise of an option granted under this
Plan may upon issuance be subject to the following restrictions (and, as used
herein, "restricted stock" means shares issued on exercise of options granted
under this Plan which are still subject to restrictions imposed under this
Section 14 that have not yet expired or terminated):
<PAGE 70>
(a) shares of restricted stock may not be sold or otherwise
transferred or hypothecated;
(b) if the employment of the holder of a share of restricted stock
with the Company or a subsidiary is terminated for any reason other than his
death, normal or early retirement in accordance with his employer's
established retirement policies or practices, or total disability, the Company
(or any subsidiary designated by it) shall have the option for sixty (60) days
after such termination of employment to purchase for cash all or any part of
his restricted stock at the lesser of (i) the price paid therefor by the
holder, or (ii) the fair market value of the restricted stock on the date of
such termination of employment (determined in a manner specified in the
instrument evidencing the option); and
(c) as to the shares of stock affected thereby, any additional
restrictions that may be imposed on particular shares of restricted stock as
specified in the instrument evidencing the option.
The restrictions imposed under this Section 14 shall apply as well to all
shares or other securities issued in respect of restricted stock in connection
with any stock split, reverse stock split, stock dividend, recapitalization,
reclassification, spin-off, split-off, merger, consolidation or
reorganization, but such restrictions shall expire or terminate at such time
or times as shall be specified therefor in the instrument evidencing the
option which provides for the restrictions.
15. Cash Bonus. If the instrument evidencing the option so provides, a
cash bonus may be payable to the optionee upon the exercise of an option
granted under this Plan. The cash bonus shall be in such amount and shall be
payable at such time as shall be determined by the Committee and as shall be
set forth in the instrument evidencing the option.
16. Financial Assistance. Subject to the requirements of Delaware law
for the valid issuance of stock, the Company is vested with authority under
this Plan to assist any person to whom an option is granted hereunder
(including any director or officer of the Company or any of its subsidiaries)
in the payment of the purchase price payable on the exercise of that option
and any taxes resulting from the exercise of that option, by lending such
amount to such person on such terms and at such rates of interest and upon
such security (or unsecured) as shall have been authorized by the Committee.
17. Amendment and Terminations. The Board may discontinue the Plan at
any time and may amend it from time to time. No amendment or discontinuation
of the Plan shall adversely affect any award previously granted without the
employee's written consent. Amendments may be made without stockholder
approval except as required to satisfy Rule 16b-3 under the Securities
Exchange Act of 1934 (or any successor rule) or other regulatory requirements.
<PAGE 71>
18. Tax Withholding.
(a) Each employee shall, no later than the date as of which the
value of an award first becomes includible in the employee's gross income for
applicable tax purposes, pay to the Company, or make arrangements satisfactory
to the Committee regarding the payment of, any federal, state, local or other
taxes of any kind required by law to be withheld with respect to the award.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company (and, where applicable, any related
company) shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the employee.
(b) To the extent permitted by the Committee, and subject to such
terms and conditions as the Committee may provide, an employee may elect to
have the withholding tax obligation, or any additional tax obligation with
respect to any awards hereunder, satisfied by (i) having the Company withhold
shares of stock otherwise deliverable to the employee with respect to the
award or (ii) delivering to the Company shares of unrestricted stock.
19. Option Grant Restriction. Any person may be granted, under the Plan,
options to purchase shares of stock only to the extent that the number of
shares subject to such new options plus the number of shares subject to
options granted to such person during the one year period prior to the date of
such new grant is not greater than 2,000,000 shares of stock.
20. Plan Name. The Plan, formerly known as the '1989 Stock Option Plan,'
shall hereafter be known as the 'Stock Option Plan.'
10K Edgar final full.doc
<PAGE 72>
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of December 31, 1999
between American Gaming & Entertainment, Ltd., a Delaware Corporation (the
"Company"), and J. Douglas Wellington, a resident of New Jersey ("Executive").
A. Executive desires to continue his employment as President and
Chief Executive Officer of Company.
B. Company desires to continue to retain the benefit of Executive's
experience and loyalty, and to employ Executive as President and Chief
Executive Officer of the Company.
C. Executive and the Company have agreed to enter into this
Employment Agreement in connection with a certain letter agreement dated
November 23, 1999 ("Letter Agreement") by and among Executive; the Company;
the Company's subsidiaries and affiliates, including, without limitation,
Emerald Gaming, Inc., AMGAM Associates and American Gaming and Resorts of
Mississippi, Inc.; Shamrock Holdings Group, Inc.1; and Bennett Funding Group,
Inc.2 (collectively, the "Parties"), which Letter Agreement resolves and
settles certain claims by and among the Parties, and contemplates the
Company's continued employment of Executive for a fixed term.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. Definitions.
The terms used in this Agreement shall be defined as follows:
(a) "Agreement" shall mean this Employment Agreement as amended from
time to time.
(b) "Base Salary" shall mean the annual base salary payable to
Executive pursuant to Section 4(a) hereof.
_____________________
1 Shamrock Holdings Group, Inc. ("Shamrock") is operating as a debtor and
debtor in possession under Chapter 11 of Title 11, United States Code as a
result of its filing of a voluntary petition in the United States Bankruptcy
Court for the Northern District of New York.
2 Bennett Funding Group, Inc. and various affiliated entities (collectively,
the "Bennett Entities") are debtors in a substantively consolidated Chapter 11
bankruptcy proceeding pending in the United States Bankruptcy Court for the
Northern District of New York. Richard C. Breeden is the appointed Chapter 11
Trustee ("Trustee" for the Bennett Entities.
<PAGE 73>
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Cause" shall mean termination of the Executive's employment with
the Company by the Board because of (i) Executive's willful misconduct or
gross negligence in the performance of, or the willful failure or refusal by
Executive to perform substantially, Executive's duties and obligations under
this Agreement, as an officer of the Company or the lawful duties which are
otherwise assigned to Executive by the Board, (ii) the inexcusable repeated or
prolonged absence from work by Executive (other than pursuant to a Permanent
Disability (as defined below) of Executive), (iii) any breach by Executive of
Executive's material obligations under this Agreement, (iv) the habitual abuse
of illegal or intoxicating substances by Executive, (v) conviction or entry of
a plea of guilty to any felony by Executive, (vi) Executive's engagement in
fraud, misappropriation, embezzlement, or other act or acts of dishonesty
resulting in, or intended to result in, substantial personal enrichment of
Executive at the expense of the Company or (vii) the entry of any final civil
judgment in connection with any allegation of fraud, misrepresentation,
misappropriation or any other intentional tort or intentional statute
violation related to Executive's employment with the Company. A Cause pursuant
to clauses (i) - (iv) of this Section 1(d) shall be deemed to exist only if
such Cause has not been cured by Executive within two weeks after written
notice thereof from the Company to Executive.
(e) A "Change in Control" shall be deemed to have occurred if, at any
time during the thirteen (13) month period after the date of this Agreement
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) (other than an "Affiliate" (as defined in the Exchange Act) of
Shamrock or the Bennett Entities) becomes the "Beneficial Owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing greater than 50% of the combined voting power
(with respect to the election of directors, or a merger, consolidation or
liquidation of the Company or a sale of all or substantially all of the
business or assets of the Company) of the Company's then outstanding
securities who was not as of the date of this Agreement the Beneficial Owner
of securities of the Company representing greater than 50% of such combined
voting power of the Company's securities outstanding as of the date of this
Agreement; (2) the consummation of a merger or consolidation of the Company
with or into any other corporation, other than (A) a merger or consolidation
which would result in all or substantially all of the Beneficial Owners of
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) greater than 50% of the
combined voting power (with respect to the election of directors, or a merger,
consolidation or liquidation of the Company or a sale of all or substantially
all of the business or assets of the Company) of the securities of the Company
or of such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger, consolidation or distribution effected to
implement a recapitalization or reorganization of the Company (or similar
transaction) which results in no person (other than Shamrock, the Bennett
Entities or any of its Affiliates) after such transaction, directly or
indirectly, owning more than 40% of the combined voting power (with respect to
the election of directors, or a merger, consolidation or liquidation of the
Company or a sale of all or substantially all of the business or assets of the
Company) of the Company's then outstanding securities; (3) the consummation of
a plan of complete
<PAGE 74>
liquidation of the Company or of an agreement for the sale or disposition by
the Company of all or substantially all of the Company's business or assets to
any person or (4) Shamrock, the Bennett Entities, or the Trustee exercises
control over the Company, including without limitation (A) causing the
election of any person not currently a director of the Company to the Board or
(B) causing the appointment of any person as an officer of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" shall mean the Compensation Committee of the Board,
if one exists and, if not, shall mean the Board.
(h) "Confidential Information" shall have the meaning ascribed to it
in Section 7 below.
(i) "Effective Date" shall mean the date of this Agreement.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "Executive Benefit Plans" shall mean any plans within the meaning
of Sections 4(b) of this Agreement.
(l) "Period" shall mean the thirteen (13) month period commencing on
the date of this Agreement. If the parties hereto agree to any extension of
the Period, the term "Period" shall include all such extensions thereof;
provided, that the Company shall not be obligated to grant any such extension.
(m) "Permanently Disabled" shall mean prevented from performing his
obligations hereunder for a period of 120 consecutive days as a result of his
physical or mental health, as evaluated by sufficient documentation including
doctors' statements.
(n) "Substantial Breach" shall mean (1) a substantial reduction in,
the nature or status of Executive's responsibilities hereunder; provided, that
it shall not be deemed to be a Substantial Breach if Executive's duties are
revised so that he remains an officer but is removed or not reelected as
President or as Chief Operating Officer or as a director of the Company; (2) a
reduction by the Company in the Base Salary of Executive; (3) the failure by
the Company to allow Executive to participate to the full extent in all plans,
programs or benefits in accordance with Sections 4(b) hereof; (4) the failure
by the Company to pay, distribute or grant any amounts of cash, stock or other
compensation to Executive to which he is contractually entitled; or (5) the
failure of the Company to maintain its principal offices during the Period in
Glen Rock, New Jersey or in Atlantic, Bergen, Passaic, Morris or
<PAGE 75>
Essex counties in New Jersey or Rockland county in New York, provided,
however, that the Company move and maintain its principal offices through the
end of the Period in Glen Rock, New Jersey or in Bergen, Passaic, Morris or
Essex counties in New Jersey or Rockland county in New York upon the merger or
consolidation with or into another entity. A Substantial Breach shall be
deemed to occur only if such Substantial Breach has not been corrected by the
Company within two weeks of receipt of notice from Executive of the occurrence
of such Substantial Breach, which notice shall specifically set forth the
nature of the Substantial Breach.
2. Employment and Duties.
(a) General. From the date of this Agreement through the end of
the Period, the Company hereby employs Executive, and Executive agrees upon
the terms and conditions herein set forth, to serve as an officer of the
Company and Executive, in such capacity, shall perform duties consistent with
the Letter Agreement and substantially the same as normally performed by
persons in like positions in similar companies and substantially the same as
those performed by Executive immediately prior to the date of this Agreement.
So long as the principal offices of the Company are not located in Bergen,
Passaic, Morris or Essex counties in New Jersey or Rockland county in New
York, Executive may work one day per week from his home.
(b) No Other Employment. Throughout the time that Executive is
employed by the Company during the Period, Executive shall, except as may from
time to time be otherwise agreed in writing by the Company and unless
prevented for less than 120 consecutive days by ill health, devote his full-
time working hours to his duties hereunder and Executive shall not, directly
or indirectly, render services to any other person or organization for which
he receives compensation (excluding outside board activities for a public
charity, which involve modest time commitments) without the consent of the
Board or otherwise engage in activities which would interfere with the
performance of his duties hereunder; provided, however, that the Executive may
render volunteer services for which he is not compensated so long as such
services do not interfere with the performance of his duties hereunder.
3. Term of Employment. Subject to earlier termination of employment
hereunder pursuant to Sections 5 or 6 of this Agreement, the Company shall
retain Executive during the Period and Executive shall serve in the employ of
the Company for the Period.
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to Executive during the Period as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to Executive a base
salary in the amount of one hundred and thirty-five thousand four hundred
seventeen dollars ($135,417) (the "Base Salary") for the Period payable in
accordance with the Company's standard payroll policies. The Company shall be
entitled to deduct or withhold all taxes and charges which the Company may be
required to deduct or withhold therefrom.
<PAGE 76>
(b) Other Executive Benefit Plans. Executive shall be eligible
to participate in all pension and welfare plans and programs of the Company
for executive employees, existing from time to time, including, without
limitation, the following.
(i) All qualified benefit plans and programs (e.g., defined
contribution, supplemental retirement and Section 401(k) plans, long-term
disability and life insurance plans and programs);
(ii) All hospitalization and medical plans and programs; and
(iii) All retirement plans and programs.
Such other executive benefit plans shall be substantially similar to those
plans in effect at the Company immediately prior to the Effective Date.
c) Severance Compensation. Assuming that there is no intervening
voluntary bankruptcy by the Company during the Period without Shamrock's
consent and that the conditions of this Agreement and the Letter Agreement are
satisfied, the Company shall pay to Executive a severance payment, from a
reserve account set aside and controlled by Shamrock, in an amount equal to
one hundred twenty-five thousand dollars ($125,000).
5. Termination of Employment for Cause.
(a) Compensation and Benefits. If, prior to the expiration of
the Period, (i) Executive's employment hereunder is terminated by the Company
for Cause, or (ii) Executive resigns from his employment hereunder other than
under circumstances covered by Section 6 below, Executive shall not be
eligible to receive any compensation or benefits or to participate in any
plans or programs under Section 4 hereof with respect to the Period after the
date of such termination except for the right to receive benefits under any
plan or program, to the extent vested, in accordance with the terms of such
plan or program and except for benefits provided in accordance with customary
practices of the Company at Executive's expense (e.g., hospitalization and
medical insurance).
(b) Date of Termination. The date of termination of Executive's
employment hereunder by the Company under this Section 5 shall be (i)
immediately upon receipt by Executive of written notice of termination for
Cause; provided that the Cause specified in such notice shall not have been
corrected by Executive within two (2) weeks after Executive received notice of
such Cause if Executive had the right pursuant to Section 1(d) to cure such
Cause or (ii) immediately upon receipt by the Company of written notice of
Executive's resignation, except if such resignation is due to a Substantial
Breach.
<PAGE 77>
6. Termination of Employment Other Than For Cause.
(a) Compensation and Benefits. If, prior to the expiration of
the Period, Executive's employment hereunder is terminated by the Company
without Cause or for any reason within thirteen months after a Change in
Control, or if, prior to the expiration of the Period, Executive resigns from
his employment hereunder following a Substantial Breach or for any reason
within thirteen months after a Change in Control, or if, prior to the
expiration of the Period, Executive dies or becomes Permanently Disabled while
employed hereunder, notwithstanding such termination or resignation, through
the end of the Period:
(i) Executive shall be entitled to continue to receive
payments through the expiration of the Period under Section 4(a) above at the
rate of his Base Salary as in effect on the date of termination or
resignation;
(ii) Executive shall be entitled to receive the severance
compensation described in Section 4(c).
(b) Date of Termination. The date of termination's of
Executive's employment by the Company under this Section 6 shall be the date
specified in the written notice of termination to Executive or if no such date
is specified therein, the date on which such notice is given to Executive. The
date of resignation by Executive under this Section 6 as a result of a
Substantial Breach shall be immediately upon receipt by the Company of written
notice of resignation; provided, that the Substantial Breach shall not have
been corrected by the Company during the two (2) week period after such notice
of such Substantial Breach was provided to the Company pursuant to Section
1(n) hereunder. The date of termination of Executive's employment in the event
of his death shall be the date of Executive's death or in the event Executive
becomes Permanently Disabled, 120 days after the date such disability
commenced.
(c) Reduction in Payments. The amount of any payments of
compensation and benefits to Executive under this Section 6 shall be reduced
by the amount, if any, necessary to prevent any part of such payments from
being treated as an "excess parachute payment" (as that term is defined for
purposes of Section 280G(b)(1) of the Code and the related federal tax
regulations); provided, however that such reduction shall apply only if the
reduction will result in payments to Executive under this Section 6 which
have, after consideration of all applicable taxes, a greater after-tax benefit
to Executive than the amount of such payments to Executive under this Section
6 computed without such reduction. The determination of relative benefits
shall be made by the Company on the basis of information supplied by
Executive.
7. Nondisclosure of Confidential Information.
(a) Definition. For purposes of this Agreement "Confidential
Information" means any information or compilation of information, not
generally known, which is proprietary to the Company and relates to the
Company's existing or reasonably foreseeable business. All information which
the Company identifies as being "confidential" or "trade secret" shall be
<PAGE 78>
presumed to be Confidential Information. Confidential Information shall also
include any confidential information of a parent, subsidiary or sister
corporation of the Company and any information disclosed by a third party
under contract with the Company which contract requires such disclosed
information be kept confidential. Confidential Information shall not include
information that is in or enters the public domain other than through a breach
of confidentiality owed to the Company.
(b) Nondisclosure. During the Period and at all times
thereafter, Executive shall hold in strictest of confidence and will never
disclose, furnish, transfer, communicate, make assessable to any person or use
in any way Confidential Information for Executive's own or another's benefit
or permit the same to be used in competition with the Company, nor will
Executive accept any employment which would, by the nature of the position,
inherently involve the use or disclosure by Executive of Confidential
Information.
8. Specific Performance and Injunctive Relief. In addition to any
other relief afforded by law, the Company shall have the right to enforce the
covenants contained in Section 7 hereof by specific performance and by
preliminary, temporary and permanent injunctive relief against Executive and
any other person concerned thereby, it being understood that damages, specific
performance or injunctive relief shall be proper modes of relief and are not
to be considered as alternative remedies. If the Company is successful in any
action for specific performance or injunctive relief the costs incurred by the
Company related thereto, including reasonable attorneys' fees and expenses,
shall be paid by Executive.
9. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any and all oral or written
understanding between the parties hereto.
10. Headings of No Effect. The Section headings contained in this
Agreement are included solely for convenience of reference and shall not in
any way affect the meaning or interpretation of any of the provisions of this
Agreement.
11. Binding Agreement. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto, any successor to or assigns of the
Company, and Executive's heirs and the personal representative of Executive's
estate. This Agreement replaces Executive's existing Employment Agreement.
12. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be deemed replaced by a term or provision that is
valid and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision.
<PAGE 79>
13. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except with the prior written consent of Shamrock and the
Bennett Entities and by an instrument in writing signed by both parties
hereto. The waiver by either party hereto of compliance with any provision of
this Agreement by the other party hereto shall not operate or be construed as
a waiver of any other provision of this Agreement or of any subsequent breach
by such party of a provision of this Agreement.
14. Renewal. The Company shall be under no obligation to renew this
Agreement.
15. Governing Law. All matters affecting this Agreement, including the
validity hereof, are to be governed by, interpreted and construed in
accordance with the laws of the State of New Jersey.
16. Notices. Any notice hereunder by either party hereto to the other
shall be given in writing by personal delivery or certified mail, return
receipt requested. If addressed to Executive, the notice shall be delivered or
mailed to Executive at the address specified under Executive's signature
hereto or such other address which Executive has advised the Company to send
notice to, or if addressed to the Company, the notice shall be delivered or
mailed to the Company at its executive offices and to the attention of each
member of the Board of Directors of the Company at their respective business
addresses. A notice shall be deemed given, if by personal delivery, on the
date of such delivery or, if by certified mail, on the date shown on the
applicable return receipt. Copies of all notices shall simultaneously be given
in the same manner to Shamrock Holdings Group, Inc., Clinton Square, Syracuse,
NY 13202, Attn: Richard C. Breeden, President.
17. Consideration. The parties acknowledge that the restrictions
contained in Section 7 hereof are a reasonable and necessary protection of the
immediate interests of the Company and any violation of these restrictions
would cause substantial injury to the Company and that the Company would not
have entered into this Employment Agreement without receiving the additional
consideration offered by Executive in binding himself to these restrictions.
<PAGE 80>
IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by
its officer pursuant to the authority of its Board, and Executive has executed
this Agreement, as of the day and year first written above.
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: WILLIAM RAFFERTY
___________________________________
Name: William Rafferty
Title: Compensation Committee Chairman
J. DOUGLAS WELLINGTON
___________________________________
J. Douglas Wellington
Address: 51 Beech Road
Glen Rock, NJ 07452
10K Edgar final full.doc
<PAGE 81>
Exhibit 10.3
AGREEMENT
THIS AGREEMENT dated as of September 1, 1999 between American Gaming &
Entertainment, Ltd., a Delaware Corporation (the "Company"), and J. Douglas
Wellington, President of the Company ("Lessor").
WHEREAS, Lessor is performing his duties for the Company from his
residence, and
WHEREAS, the Company is saving the cost of an office for Lessor, and
WHEREAS, as a result of the foregoing arrangement, Lessor is incurring
increased utility costs and other expenses,
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. The Company shall pay the Lessor one hundred dollars ($100) per month
for each month that Lessor uses his residence in connection with his
performance of his duties for the Company.
2. If the residence of the Lessor is used for more than three days in a
month by non-Company personnel (excluding Lia Potiris, consultant) in
connection with the business of the Company, the Company shall pay the Lessor
an additional four hundred fifty dollars ($450) for such month.
IN WITNESS WHEREOF, the Company has caused this agreement to be signed by
the Compensation Committee of the Board, and Lessor has executed this
agreement, as of the day and the year first written above.
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: WILLIAM RAFFERTY
____________________________________
Name: William Rafferty
Title: Compensation Committee
J. DOUGLAS WELLINGTON
____________________________________
J. Douglas Wellington
10K Edgar final full.doc
<PAGE 82>
Exhibit 10.10
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 16, 1999, made by American
Gaming & Entertainment, Ltd., a Delaware corporation (the "Pledgor"), in favor
of Shamrock Holdings Group, Inc., Debtor in Possession (the "Secured Party").
WITNESSETH
WHEREAS, the Secured Party beneficially owns or controls at least 52.6%
of the voting power of the outstanding voting securities of the Pledgor and
all of the Series C Cumulative Preferred Stock, Series D Cumulative Preferred
Stock and Series E Preferred Stock of the Pledgor;
WHEREAS, as of December 31, 1998, the Pledgor owed the Secured Party not
less than $57,175,000 in respect of, among other things, various loans and
advances, accrued and declared dividends and obligations under certain lease
agreements, all of which are currently due and payable (the "Overdue
Obligations");
WHEREAS, the Pledgor and the Secured Party have entered into a letter
agreement dated November 23, 1999 ("Letter Agreement") which provides for the
delivery of this Security Agreement;
WHEREAS, the Pledgor has agreed to grant to the Secured Party the
security interests provided herein; and
WHEREAS, the Secured Party is a debtor and debtor in possession in a
bankruptcy case under chapter 11 of Title 11 of the United States Code, 11
U.S.C. ss 101-1330, Case No.98-63631, pending in the United States Bankruptcy
Court for the Northern District of New York (the "Bankruptcy Court").
NOW, THEREFORE, in consideration or the premises contained herein, the
Pledgor hereby agrees with the Secured Party as follows:
Section 1. Defined Terms.
(a) Definitions. Unless otherwise defined herein, the following
terms which are defined in the Uniform Commercial Code as in effect in the
State of New York on the date hereof are used herein as so defined: Chattel
Paper, Farm Products, General Intangibles, Instruments and Proceeds; and the
following terms shall have the following meanings:
<PAGE 83>
"Agreement": this Security Agreement, as the same may be amended;
supplemented or otherwise modified from time to time.
"Code": the Uniform Commercial Code as from time to time in effect in the
State of New York.
"Collateral": as defined in Section 3.
"Collateral Account": any collateral account established by the Secured
Party as provided in subsection 8(a).
"Contracts": the Proxy Agreement and the Trust Agreement, including,
without limitation, (a) all rights of the Pledgor to receive moneys due and to
become due to it thereunder or in connection therewith, (b) all rights of the
Pledgor to damages arising out of or for breach or default in respect thereof
and (c) all rights of the Pledgor to exercise all remedies thereunder.
"Contractual Obligation": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"Event of Default": as defined in Section 7 of this Agreement.
"Forbearance Period": as defined in Section 2 of this Agreement.
"GAAP": generally accepted accounting principles applied on a consistent
basis.
"Governmental Authority": any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government (including the National Association of Insurance Commissioners).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease
having substantially the same economic effect as any of the foregoing).
"Obligations": the collective reference to (a) all amounts due and owing
to the Secured Party by the Pledgor as of the date hereof in an amount that as
of December 31, 1998, was not less than $57, 175,000, (b) all amounts to
become due and owing to the Secured Party by the Pledgor under the agreements
listed on Schedule 1 hereto and (c) all obligations to the Secured Party of
the Pledgor which may arise under or in connection with this Agreement or any
of the agreements listed on Schedule I hereto.
<PAGE 84>
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Proxy Agreement": the Irrevocable Proxy and Consent Agreement, dated as
of August 23, 1996, by and between Paul R. Partridge, Patrick F. Daly, James
A. Everatt, Charles E. Reisert, Jr., Eric C. Jackson and the Pledgor, as the
same may be amended, supplemented or otherwise modified from time to time.
"Requirement of Law": as to any Person, the Certificate of Incorporation
and By-Laws or other organizational or governing documents of such Person, and
any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"RSR Trustee": NBD Bank, N.A., in its capacity as trustee under the Trust
Agreement, or any duly appointed successor to NBD Bank, N.A. in such capacity.
"Trust Agreement": The Trust Agreement dated as of August 23, 1996,
between the Pledgor and the RSR Trustee, as the same may be amended,
supplemented or otherwise modified from time to time.
(b) Other Definitional Provisions. The words "hereof;" "herein",
"hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section, subsection and Schedule references
are to this Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural
forms of such terms.
Section 2. Forbearance. The Secured Party shall forbear from the exercise
of any rights or remedies in respect of the Overdue Obligations during the
period (the "Forbearance Period") commencing on the date hereof and ending on
the earlier to occur of (a) the date of the occurrence of an Event of Default
under any of paragraphs (a) through (e) of Section 7 of this Agreement and (b)
the date on which the Pledgor is no longer diligently pursuing disposition of
its Membership Interest (as defined in the Trust Agreement) pursuant to the
terms of the Proxy Agreement, (c) March 1, 2000, (d) by mutual consent of the
parties hereto, or (e) breach of the Letter Agreement.
Section 3. Grant of Security Interest. As collateral security for the
prompt and complete payment and performance of all Obligations, the Pledgor
hereby grants to the Secured Party a security interest in all of the Pledgor's
right, title or interest in, to and under the following property, whether now
owned or at any time hereafter acquired by the Pledgor (collectively, the
"Collateral"):
<PAGE 85>
(a) all Proceeds and products and all collateral security and
guarantees given by any Person with respect to the Contracts;
(b) all General Intangibles arising out of or related to the
Contracts or the Membership Interest (as defined in the Trust Agreement);
(c) all books and records pertaining to the Collateral referred
to in clauses (a), (b) and (d) of this Section 3; and
(d) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
Section 4. Representations and Warranties: The Pledgor hereby represents
and warrants that:
(a) Power and Authority. The Pledgor has the corporate power and
authority to execute and deliver, to perform its obligations under, and to
grant the security interest in the Collateral pursuant to, this Agreement and
has taken all necessary corporate action to authorize its execution, delivery
and performance of, and grant of the security interest in the Collateral
pursuant to, this Agreement.
(b) Title: No Other Liens, Except for the security interest
granted to the Secured Party pursuant to this Agreement and rights granted
under the Contracts, the Pledgor's right, title and interest in, to and under
each item of the Collateral are free and clear of any and all Liens or claims
of others. No financing statement or other public notice with respect to all
or any part of the Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Secured Party pursuant to
this Agreement.
(c) Enforceable Obligation; Perfected, First Priority Security
Interests. This Agreement constitutes a valid and binding obligation of the
Pledgor, enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law), an implied covenant of good faith and fair dealing and the authority
of the Indiana Gaming Commission. The security interests granted pursuant to
this Agreement upon completion of the filings and other actions specified on
Schedule 2 will constitute a first priority perfected security interests in
the Collateral in favor of the Secured Party, as collateral security for the
Obligations.
(d) No Violation. The execution, delivery and performance of this
Agreement will not violate any provision of any Requirement of Law or material
Contractual Obligation of the Pledgor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of the Pledgor
pursuant to any Requirement of Law or Contractual Obligation of the
<PAGE 86>
Pledgor, except the security interests created hereby:
(e) No Consents Required. No consent or authorization of, filing
with, or other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without limitation,
any stockholder or creditor of the Pledgor or RSR, LLC or any other member
thereof), is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(f) No Litigation. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Pledgor, threatened by or against the Pledgor or against any
of its properties or revenues with respect to this Agreement or any of the
transactions contemplated hereby, except as disclosed and alleged in a letter
from RSR, LLC to Pledgor dated September 9, 1999 and an action commenced by
Pledgor in connection therewith.
(g) Chief Executive Office. The Pledgor's chief executive office
is located at 51 Beech Road, Glen Rock, New Jersey 07452.
(h) Farm Products. None of the Collateral constitutes, or is the
Proceeds of; Farm Products.
Section 5. Covenants. The Pledgor covenants and agrees with the Secured
Party that from and after the date of this Agreement until the Obligations
shall have been paid in full:
(a) Inspection of Property; Books and Records; Discussions. The
Pledgor will keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to the Collateral. The
Pledgor will permit representatives of the Secured Party to visit and inspect
any of the Pledgor's properties where any of the Collateral or any of the
Pledgor's books and records relating to the Collateral are located and to
inspect the Collateral and to examine and make abstracts from any of its books
and records during normal business hours upon five days' prior written notice
(or, if an Event of Default has occurred and is continuing, at any reasonable
time) and no more than once a month (or, if an Event of Default has occurred
and is continuing, as often as may be desired by the Secured Party) and to
discuss the condition and operation of the Collateral with officers and
employees of the Pledgor and with its independent certified public
accountants.
(b) Payment of Obligations. The Pledgor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits therefrom,
as well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if the amount or validity thereof is
currently being contested in good faith by appropriate proceedings, reserves
in conformity with GAAP with respect thereto have
<PAGE 87>
been provided on the books of the Pledgor and such proceedings do not involve
any material danger of the sale, forfeiture or loss of any of the Collateral
or any interest therein.
(c) Limitation on Dispositions and Liens; Further Documentation
(i) The Pledgor will not sell, transfer, lease or otherwise
dispose of any of the Collateral, or attempt, offer or contract to do so,
except with the prior written consent of the Secured Party or in accordance
with the terms of any Contract; provided that the Proceeds of any such
disposition shall constitute Collateral hereunder.
(ii) The Pledgor will (A) not create, incur or permit to
exist any Lien or claim on or to the Collateral or the Membership Interest (as
defined in the Trust Agreement), other than (I) the security interests created
hereby and (II) claims arising under the terms of any Contract, (B) maintain
the security interest created by this Agreement as a first, perfected secured
interest having the priority described in subsection 4(c) and (C) defend such
security interest against claims and demands of all Persons whomsoever.
(iii) At any time and from time to time, upon the written request
of the Secured Party, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and delivery such further instruments and documents
and take such further actions as the Secured Party may reasonably request for
the purpose of obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the security
interests created hereby.
(d) Delivery of Instruments and Chattel Paper. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel paper, such Instrument or Chattel Paper
shall be immediately delivered to the Secured Party, duly indorsed in a manner
satisfactory to the Secured Party, to be held as Collateral pursuant to this
Agreement.
(e) Changes in Locations. Name. etc. Unless it shall have given
the Secured Party at least 30 days' prior written notice, the Pledgor will
not:
(i) change the location of its chief executive office from
that specified in subsection 4(g); or
(ii) change its name, identity or corporate structure to
such an extent that any financing statement filed by the Secured Party in
connection with this Agreement would become seriously misleading.
(f) Further Identification of Collateral. The Pledgor will
furnish to the Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party may
<PAGE 88>
reasonably request, all in reasonable detail.
(g) Notices. The Pledgor will advise the Secured Party promptly,
in reasonable detail, of:
(i) any Lien (other than security interests created hereby)
on any of the Collateral; and
(ii) the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the creation, perfection or enforcement of the
security interests created hereby.
(h) Indemnification. The Pledgor agrees to pay, and to save the
Secured Party harmless from, any and all liabilities, costs and expenses
(including, without limitation, reasonable legal fees and expenses) with
respect to the enforcement, performance and administration of this Agreement
("indemnified liabilities"), provided that the Pledgor shall have no
obligation hereunder to the Secured Party with respect to indemnified
liabilities arising from (i) the gross negligence or willful misconduct of the
Secured Party or (ii) legal proceedings commenced against the Secured Party by
any security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as such.
The agreements in this subsection shall survive repayment of the Obligations.
Section 6. Provisions Relating to Contracts.
(a) Pledgor Remains Liable under Contracts. Anything herein to
the contrary notwithstanding, the Pledgor shall remain liable under each of
the Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant
to the terms and provisions of such Contract. The Secured Party shall not have
any obligation or liability under any Contract by reason of or arising out of
this Agreement or its receipt of any payment relating to such Contract
pursuant hereto, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of the Pledgor under or pursuant to any
Contract, to make any payment to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Contract, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
(b) Representations and Warranties.
(i) No consent of any party (other than the Pledgor) to any
Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(ii) Each Contract is in full force and effect and
constitutes a valid and
<PAGE 89>
enforceable obligation of the Pledgor and, to the best of the Pledgor's
knowledge, the other parties thereto, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
(iii) No consent or authorization of, filing with or other
act by or in respect of any Governmental Authority is required in connection
with the execution, delivery, performance, validity or enforceability of any
of the Contracts by any party thereto other than those which have been duly
obtained, made or performed, are in full force and effect and do not subject
the scope of any such Contract to any material adverse limitation, either
specific or general in nature.
(iv) Neither the Pledgor nor (to the best of the Pledgor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the material terms thereof.
(v) The Pledgor has fully performed all its obligations
under each Contract for which performance has been required as of the date
hereof
(vi) To the best of Pledgor's knowledge, the right, title
and interest of the Pledgor in, to and under the Contracts are not subject to
any defenses, offsets, counterclaims or claims that, in the aggregate, could
reasonably be expected to have a material adverse effect on the aggregate
value of the Collateral or on the creation, perfection or enforcement of the
security interests created hereby, except as alleged in a letter from RSR, LLC
to Pledgor dated September 9, 1999.
(vii) The Pledgor has delivered to the Secured Party a
complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto as of the date hereof.
(viii) No amount payable to the Pledgor under or in connection
with any Contract is evidenced by any Instrument or Chattel Paper which has
not been delivered to the Secured Party.
(ix) None of the parties to any Contract is a Governmental
Authority.
(c) Covenants.
(i) The Pledgor will perform and comply in all material
respects with all its obligations under the Contracts.
(ii) The Pledgor will not amend, modify, terminate or waive
any provision of any Contract in any manner without the prior written consent
of the Secured Party.
<PAGE 90>
(iii) The Pledgor will exercise promptly and diligently each
and every material right which it may have under each Contract (other than any
right of termination) unless, in the Pledgor's reasonable business judgment,
and after notice to and consultation with the Secured Party, the Pledgor
determines that the non-exercise of such right would not have a material
adverse effect on the aggregate value of the Collateral or on the creation,
perfection or enforcement of the security interests created hereby, provided
that, except for any transfer of the Membership Interest pursuant to Section 4
of the Proxy Agreement, the Pledgor will not direct any action by the RSR
Trustee under the Trust Agreement, including, without limitation, the
disposition of the Membership Interest (as defined in the Trust Agreement)
under Article 5a of the Trust Agreement, without the prior written consent of
the Secured Party.
(iv) The Pledgor will deliver to the Secured Party a copy of
each demand, notice or document received by it relating in any way to any
Contract.
Section 7. Default. Each of the following shall be an event of default
("Event of Default") under this Agreement:
(a) any representation or warranty made or deemed made by the
Pledgor contained herein or that is contained in any certificate, document or
financial or other statement furnished by it at any time under or in
connection with this Agreement shall prove to have been inaccurate in any
material respect on or as of the date made or deemed made; or
(b) the Pledgor shall default in the observance or performance
of any agreement contained in subsection 5(e) or Section 6; or
(c) the Pledgor shall default in the observance or performance of
any other agreement contained in this Agreement (other than as provided in
paragraphs (a) and (b) of this Section) or under the Letter Agreement, and
such default shall continue unremedied for a period of 10 days after notice to
the Pledgor from the Secured Party; or
(d) any levy, attachment or execution on, or seizure of; any of
the Collateral; or
(e)(A) the Pledgor shall commence any case, proceeding or other
action (I) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (II) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or the Pledgor
<PAGE 91>
shall make a general assignment for the benefit of its creditors; or (B) there
shall be commenced against the Pledgor any case, proceeding or other action of
a nature referred to in clause (A) above that (I) results in the entry of an
order for relief or any such adjudication or appointment or (II) remains
undismissed, undischarged or unbonded for a period of 60 days; or (C) there
shall be commenced against the Pledgor any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets that results in the
entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (D) the Pledgor shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (A), (B) or (C) above; or
(f) the termination of the Forbearance Period in accordance with
Section 2.
Section 8. Remedies.
(a) Proceeds to be Turned Over to Secured Party. Before or after
an Event of Default, all Proceeds received by the Pledgor consisting of cash,
checks and other cash equivalents shall be held by the Pledgor in trust for
the Secured Party, segregated from other funds of the Pledgor, and shall,
forthwith upon receipt by the Pledgor, be turned over to the Secured Party in
the exact form received by the Pledgor (duly indorsed by the Pledgor to the
Secured Party, if required) and held by the Secured Party in a Collateral
Account maintained under the sole dominion and control of the Secured Party,
provided that any proceeds received by the Pledgor that should have been
deposited in the account maintained by the RSR Trustee shall be paid over to
the RSR Trustee for deposit into such account to be held in accordance with
the terms of the Trust Agreement. All Proceeds while held by the Secured Party
in a Collateral Account (or by the Pledgor in trust for the Secured Party)
shall continue to be held as collateral security for all the Obligations and
shall not constitute payment thereof until applied as provided in. subsection
8(b).
(b) Application of Proceeds. At such intervals as may be agreed
upon by the Pledgor and the Secured Party, or, if an Event of Default shall
have occurred and be continuing, at any time at the Secured Party's election,
the Secured Party may apply all or any part of Proceeds held in any Collateral
Account in payment of the Obligations in such order as the Secured Party may
elect, and any part of such funds which the Secured Party elects not so to
apply and deems not required as collateral security for the Obligations shall
be paid over from time to time by the Secured Party to the Pledgor or to
whomsoever may be lawfully entitled to receive the same. Any balance of such
Proceeds remaining after the Obligations shall have been paid in full, shall
be paid over to the Pledgor or to whomsoever may be lawfully entitled to
receive the same.
(c) Code Remedies. If an Event of Default shall occur and be
continuing, the Secured Party may exercise, in addition to all other rights
and remedies granted to it in this
<PAGE 92>
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. To the extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Secured Party arising
out of the exercise by it of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such
sale or other disposition.
Section 9. Secured Party's Appointment as Attorney in Fact; Secured
Party's Performance of Pledgor's Obligations.
(a) Powers. The Pledgor hereby irrevocably constitutes and
appoints the Secured Party and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Pledgor and in the name of
the Pledgor or in its own name, from time to time in the Secured Party's
discretion, for the purpose of carrying out the terms of this Agreement, to
take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, the
Pledgor hereby gives the Secured Party the power and right on behalf of the
Pledgor, without notice to or assent by the Pledgor; to do any or all of the
following:
(i) in the name of the Pledgor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Contract or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Secured Party for the purpose of collecting any and
all such moneys due under any Contract or with respect to any other Collateral
whenever payable;
(ii) pay or discharge taxes and Liens levied or placed on of
threatened against the Collateral;
(iii) execute any indorsements, assignments or other instruments
of conveyance or transfer with respect to the Collateral; and
(iv) (A) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Parry or as the Secured Party shall direct;
(B) ask or demand for, collect, receive payment of and receipt for, any and
all moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) sign and indorse any
assignments, notices and other documents in connection with any of the
Collateral; (D) commence and prosecute any suits, actions or proceedings at
law or in equity in any court of competent jurisdiction to collect the
Collateral or any Proceeds thereof and to enforce any other right in respect
of any Collateral or Pledgor's rights under the Contracts; (E) defend any
<PAGE 93>
suit, action or proceeding brought against the Pledgor with respect to any
Collateral; (F) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, to give such discharges or releases
as the Secured Party may deem appropriate; and (G) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though the Secured Party were the
absolute owner thereof for all purposes, and do, at the Secured Party's option
and the Pledgor's expense, at any time, or from time to time, all acts and
things which the Secured Party deems necessary to protect, preserve or realize
upon the Collateral and the Secured Party's security interests therein and to
effect the intent of this Agreement, all as fully and effectively as the
Pledgor might do.
Anything in this subsection to the contrary notwithstanding, the Secured
Patty agrees that it will not, without Pledgor's consent which shall not be
unreasonably withheld,
exercise any rights under the power of attorney provided for in this
subsection unless an Event of Default shall have occurred and be continuing.
(b) Performance by Secured Party of Pledgor's Obligations.
Subject to the giving of notice required under subsection 7(c), if the Pledgor
fails to perform or comply with any of its agreements contained herein, the
Secured Party, at its option, but without any obligation so to do, may perform
or comply, or otherwise cause performance or compliance, with such agreement.
(c) Pledgor's Reimbursement Obligation. The expenses of the
Secured Party incurred in connection with actions undertaken as provided in
this Section, together with interest thereon at a rate per annum equal to the
rate of interest publicly announced by The Chase Manhattan Bank as its "Prime
Rate" in effect at such time at its principal office in New York, New York,
from the date of payment by the Secured Party to the date reimbursed by the
Pledgor, shall be payable by the Pledgor to the Secured Party on demand.
(d) Ratification; Power Counted With An Interest. The Pledgor
hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof. All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until this
Agreement is terminated and the security interests created hereby are
released.
Section 10. Duty of Secured Party. The Secured Party's sole duty with
respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Secured Party deals with
similar property for its own account. Neither the Secured Party nor any of its
officers, directors, employees or agents shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or to take any
other action whatsoever. with regard to the Collateral or any part thereof.
The powers
<PAGE 94>
conferred on the Secured Party hereunder are solely to protect the Secured
Party's interests in the Collateral and shall not impose any duty upon the
Secured Party to exercise any such powers. The Secured Party shall be
accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officer, directors,
employees or agents shall be responsible to the Pledgor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
Section 11. Execution of Financing Statements. Pursuant to Section 9-402
of the Code, the Pledgor authorizes the Secured Party to file financing
statements with respect to the Collateral without the signature of the Pledgor
in such form and in such filing offices as the Secured Party reasonably
determines appropriate to perfect the security interests of the Secured Party
under this Agreement. A carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
Section 12. Effectiveness. (a) The agreements and obligations of the
parties under this Agreement (other than the agreement of the Secured Party
contained in Section 2 above) shall be effective upon the due execution and
delivery of this Agreement by the Secured Party and the Pledgor and (b) the
agreement of the Secured Party contained in Section 2 above shall become
effective upon approval of this Agreement by the Bankruptcy Court.
Section 13. Notices. All notices, requests and demands to or upon the
Secured Patty or the Pledgor to be effective shall be in writing (including by
facsimile transmission) and shall be deemed to have been duly given or made
(a) in the case of delivery by hand, when delivered, (b) in the case of
delivery by mail, three days after being deposited in the mails, postage prep
aid, or (c) in the case of delivery by facsimile transmission, when sent and
receipt has been confirmed, in each case addressed as follows or to such other
address as may be hereafter notified by the respective parties hereto:
(i) if to the Secured Party, at its address or transmission
number for notices set forth under its signature below; and
(ii) if to the Pledgor, at its address or transmission
number for notices set forth under its signature below.
Section 14. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
Section 15. Integration. This Agreement represents the agreement of the
parties hereto with respect to the subject matter hereof and there are no
promises or representations by any party hereto relative to the subject matter
hereof not reflected herein.
<PAGE 95>
Section 16. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) Amendments in Writing. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by
a written instrument executed by the Pledgor and the Secured Party, provided
that any provision of this Agreement imposing obligations on the Pledgor may
be waived by the Secured Patty in a written instrument executed by the Secured
Party.
(b) No Waiver by Course of Conduct. The Secured Party shall not be
deemed to have waived any right or remedy hereunder or to have acquiesced in
any Event of Default by any act (except by a written instrument pursuant to
subsection 16(a)), delay, indulgence, omission or otherwise. No failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Secured Party of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Secured Party would otherwise have on any future
occasion.
(c) Remedies Cumulative. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive
of any other rights or remedies provided by law.
Section 17. Section Headings. The Section and subsection headings used in
this Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof
Section 18. Successors and Assigns. This Agreement shall be binding upon
the successors and assigns of the Pledgor and shall inure to the benefit of
the Secured Party and its successors and assigns.
Section 19. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New
York.
Section 20. Secured Party's Representations and Warranties. The Secured
Party hereby represents and warrants to the Pledgor that:
a. Power and Authoritv. The Secured Party has the corporate
power and authority to execute and deliver, and to perform its obligations
under, this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of this Agreement.
b. Enforceable Obligation. This Agreement constitutes a valid
and binding obligation of the Secured Party, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other
<PAGE 96
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
c. No Violation. The execution, delivery and performance of This
Agreement by the Secured Party will not violate any provision of any
Requirement of Law or material Contractual Obligation of the Secured Party.
d. No Consents Required. No consent or authorization of; filing
with or other act by or in respect of any arbitrator or Governmental Authority
and no consent of any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
AMERICAN GAMING & ENTERTAINMENT,
LTD., as Pledgor
By /s/ J. Douglas Wellington
_______________________________
Name: J. Douglas Wellington
Title: President and Chief Executive Officer
Address: 51 Beech Road
Glen Rock, NJ 07452
Fax: (201) 447-1892
SHAMROCK HOLDINGS GROUP, INC.,
Debtor in Possession, as Secured Party
By /s/ Richard Breeden
______________________
Name: Richard Breeden
Title: President
Address: c/o The Bennett Funding
Group, Inc.
Two Clinton Square
Syracuse, NY 13202
Fax: (315) 422-9361
<PAGE 97>
Schedule 1
__________
AGREEMENTS GIVING RISE TO OBLIGATIONS
1. First Preferred Ship Mortgage, dated May 6, 1994 granted by American
Gaming Corporation to the American Gaming & Entertainment Ltd. (the "Pledgor")
2. First Amendment to First Preferred Ship Mortgage dated July 28, 1994
from American Gaming Corporation to the Pledgor
3. Second Amendment to First Preferred Ship Mortgage dated December 15,
1994 granted by American Gaming and Resorts of Mississippi, Inc. ("AGRM") to
the Pledgor, together with Assignment of First Preferred Ship Mortgage dated
December 15, 1994 from the Pledgor to Shamrock Holdings Group, Inc.
4. Assumption and Third Amendment of First Preferred Ship Mortgage dated
as of January 31, 1995 made by the Pledgor and executed by AGRM in favor of
Shamrock Holdings Group, Inc.
5. Agreement to Restructure and Cancel Debt dated as of April 12, 1995 by
and between Bennett Management and Development Company and the Pledgor.
6. Assignment of Charter Agreement and Collateral Assignment Agreement
dated as of April 13, 1995 by and between the Pledgor and Shamrock Holdings
Group, Inc.
7. Security Agreement dated April 12, 1995 by and between Bennett
Management and Development Company and the Pledgor.
8. Amendment to Agreement to Restructure and Cancel Debt and Assignment of
Charter Agreement and Collateral Assignment executed on July 10, 1995 by and
between the Pledgor, Bennett Management and Development Company and Bennett
Holdings, Inc.
9. Agreement dated as of August 15, 1995 by and between Bennett Holdings,
Inc. and Emerald Gaming, Inc.
10. Exclusive Management Agreement dated as of August 15, 1995 by and
between Bennett Holdings, Inc. and Emerald Gaming, Inc.
11. Letter Agreement dated September 26, 1996 between Shamrock Holdings
Group, Inc. and the Pledgor.
12. Letter agreement dated September 20, 1994 by and between Bennett
Holdings, Inc. and Pledgor.
<PAGE 98>
13. Letter agreement dated November 5, 1997 by and between Shamrock
Holdings Group, Inc. and the Pledgor.
14. Letter agreement dated November 23, 1999 by and between Shamrock
Holdings Group, Inc. and the Pledgor.
<PAGE 99>
Schedule 2
__________
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
New Jersey Secretary of State
10K Edgar final full.doc
<PAGE 100>
Exhibit 11
AMERICAN GAMING & ENTERTAINMENT, LTD.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
Years ended December 31,
____________________________
1999 1998
_____________ ____________
Net income (loss) for common stockholders $ 61,417,000 $ (6,720,000)
============== =============
Basic income (loss) per share:
Before extraordinary item $ 1.14 $ (0.54)
Extraordinary item 3.76 -
_____________ ____________
Total $ 4.90 $ (0.54)
============== =============
Diluted income (loss) per share:
Before extraordinary item $ 0.01 $ (0.54)
Extraordinary item 0.02 -
_____________ ____________
Total $ 0.03 $ (0.54)
============== =============
Shares outstanding:
Basic weighted average number of common
shares outstanding 12,532,102 12,532,102
Dilutive effect of conversion of preferred
stock Series A, C, D & E 1,816,508,248 -
_____________ ____________
Diluted weighted average number of common
shares outstanding 1,829,040,350 12,532,102
============== =============
10K Edgar final full.doc
<PAGE 101>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
American Gaming & Entertainment, Ltd.:
Glen Rock, New Jersey
We consent to the incorporation by reference in the Registration Statement of
American Gaming & Entertainment, Ltd. on Form S-8 (Registration Nos. 33-57194,
33-80714 and 33-87790) of our report dated March 17, 2000, appearing in this
Annual Report on Form 10-KSB of American Gaming & Entertainment, Ltd. for the
year ended December 31, 1999.
/s/ Mintz Rosenfeld & Company LLC
Fairfield, New Jersey
March 29, 2000
10K Edgar final full.doc
<PAGE 102>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
American Gaming & Entertainment, Ltd.:
We consent to the incorporation by reference in the Registration Statements of
American Gaming & Entertainment, Ltd. on Form S-8 (Registration Nos. 33-57194,
33-80714 and 33-87790) of our report dated April 14, 1999 (which report does
not express an opinion on the 1998 or 1997 financial statements), appearing in
this Annual Report on Form 10-KSB of American Gaming & Entertainment, Ltd. for
the year ended December 31, 1999.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
March 29, 2000
10K Edgar final full.doc
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN GAMING & ENTERTAINMENT, LTD. FOR
THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 127,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 568,000
<PP&E> 88,000
<DEPRECIATION> 83,000
<TOTAL-ASSETS> 573,000
<CURRENT-LIABILITIES> 102,000
<BONDS> 0
0
17,137,000
<COMMON> 126,000
<OTHER-SE> (16,792,000)
<TOTAL-LIABILITY-AND-EQUITY> 573,000
<SALES> 0
<TOTAL-REVENUES> 11,743,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,431,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,476,000
<INCOME-PRETAX> 12,950,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,950,000
<DISCONTINUED> 0
<EXTRAORDINARY> 47,181,000
<CHANGES> 0
<NET-INCOME> 60,131,000
<EPS-BASIC> 4.90
<EPS-DILUTED> 0.03
</TABLE>
