As filed with the Securities and Exchange Commission on September 19, 1997
Registration No. ___________
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
AMERICAN BINGO & GAMING CORP.
(Name of Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
7990
-------------
(Primary Standard Industrial Classification Code Number)
74-2723809
-----------------
(I.R.S. Employee Identification No.)
____________________
515 Congress Avenue, Suite 1200
Austin, Texas 78701
(512) 472-2041
(Address and telephone number of principal executive offices and principal
place of business)
____________________
John Orton, Chief Financial Officer
American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
(512) 472-2041
(Name, address and telephone number of agent for service)
Copies of all communications to:
Michael H. Freedman, Esq.
Silverman, Collura, Chernis & Balzano, P.C.
381 Park Avenue South, Suite 1601
New York, New York 10016
(212) 779-8600
Approximate date of proposed sale to the public: From time to time or at
one time after the effective date of this Registration Statement as determined
by the Selling Securityholders.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended ("Securities Act"), other than securities offered only in
connection with dividend or reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
==============================================================================
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Per Aggregate Offering Amount of
Securities to be Registered Be Registered(1) Share(2) Price Registration Fee
============================ ================ ==================== =================== =================
<S> <C> <C> <C> <C>
Common Stock(3) 189,500 $ 7.125 $ 1,350,187.50 $ 409.15
Common Stock(4) 445,500 $ 7.125 $ 3,174,187.50 $ 961.88
Common Stock(5) 700,000 $ 7.125 $ 4,987,187 $ 1,511.36
Warrants 237,500 $ 3.125 $ 742,187.50 $ 224.91
TOTAL 1,572,500 $ 10,254,062.50 $ 3,107.30
============================ ================ ==================== =================== =================
<FN>
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended, there are also being registered
such indeterminate number of additional shares of Common Stock as may become issuable upon conversion of the
Series A Convertible Preferred Stock, and upon exercise of stock options and/or warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions.
(2) Common Stock price per share calculated in accordance with Rule 457(c) of the Securities Act
using the last sale price for the Common Stock and Redeemable Common Stock Purchase Warrants on September
17, 1997.
(3) Common Stock held by Selling Securityholders.
(4) Common Stock underlying a stock option and warrants held by Selling Securityholders.
(5) Common Stock underlying Series A Convertible Preferred Stock.
</TABLE>
Pursuant to Rule 429, this Registration Statement also incorporates
securities originally registered on Form SB-2, File No. 333-08171, declared
effective on July 29, 1996.
Pursuant to Rule 429, this Registration Statement also incorporates
securities originally registered on Form SB-2, File No. 33-85300, declared
effective on December 14, 1994.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended ("Securities Act"), or
until the Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
[TO BE INSERTED ALONG LEFTHAND SIDE OF PROSPECTUS COVER PAGE]
[RED HERRING LEGEND]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of any offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any State.
DATED SEPTEMBER 22, 1997 SUBJECT TO COMPLETION
AMERICAN BINGO & GAMING CORP.
189,500 SHARES OF COMMON STOCK
237,500 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
455,500 SHARES OF COMMON STOCK UNDERLYING
WARRANTS AND A STOCK OPTION
700,000 SHARES OF COMMON STOCK UNDERLYING
SERIES A CONVERTIBLE PREFERRED STOCK
This Prospectus relates to the offer and sale from time to time by
certain selling securityholders ("Selling Securityholders") of up to (i)
189,500 shares of the Common Stock, $.001 par value ("Common Stock"), of
American Bingo & Gaming Corp. ("Company"); (ii) 237,500 Redeemable Common
Stock Purchase Warrants ("Warrants"); (iii) 455,500 shares of Common Stock to
be issued from time to time upon exercise of (a) Warrants, (b) a stock option
("Stock Option"), and (c) warrants for the purchase of 133,000 shares of
Common Stock ("B Warrants"). The B Warrants were issued by the Company in
connection with the private placement of its Series A Convertible Preferred
Stock, $.01 par value ("Preferred Stock"); and (iv) up to 700,000 shares of
Common Stock to be issued from time to time upon conversion of the Company's
Preferred Stock. This Prospectus also relates to such presently indeterminate
number of additional shares of Common Stock as may be issuable upon conversion
or exercise of the Preferred Stock, Warrants, B Warrants or Stock Option, or
payment of dividends on the Preferred Stock, based upon fluctuations in the
conversion price of the Preferred Stock, stock splits, stock dividends or
similar transactions, in accordance with Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"). The Preferred Stock and the shares
of Common Stock issuable upon conversion thereof have been and will be issued
in transactions exempt from the registration requirements of the Securities
Act. See "Selling Securityholders" and "Plan of Distribution". This
Prospectus also relates to other securities as follows: (i) 414,750 shares of
Common Stock which were registered on behalf of Selling Securityholders in the
Company's registration statement declared effective July 29, 1996 ("July
Registration Statement"); (ii) 237,500 Warrants which were registered on
behalf of Selling Securityholders in the July Registration Statement; (iii)
237,500 shares of Common Stock underlying Warrants which were registered on
behalf of Selling Securityholders in the July Registration Statement; (iv)
1,725,000 shares of Common Stock underlying Warrants which were registered in
the Company's registration statement declared effective on December 14, 1994
("December Registration Statement"); (v) 100,000 shares of Common Stock
underlying the Underwriter's Option ("Option") which were registered in the
December Registration Statement; (vi) 150,000 Warrants underlying the Option
which were registered in the December Registration Statement; and (vii)
150,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Option which were registered in the December Registration
Statement. The Common Stock, Warrants, and the Common Stock underlying each
of the Preferred Stock, Warrants, and B Warrants are collectively referred to
herein as "Securities".
The Company will not receive any proceeds from possible resales by the
Selling Securityholders of their respective shares of Common Stock of the
Company. The Company has agreed to indemnify certain of the Selling
Securityholders against certain liabilities, including certain liabilities
under the Securities Act, or contribute to payments which such Selling
Securityholders may be required to make in respect thereof. The Company will
receive gross proceeds of up to $17,574,000 upon exercise of the Warrants, B
Warrants and the Stock Option. There can be no assurance that any such
securities will be exercised.
The Selling Securityholders or pledgees, donees, transferees or other
successors in interest that receive such shares as a gift, partnership
distribution or other non-sale related transfer, may sell their shares of
Common Stock from time to time, in market transactions, in negotiated
transactions, through the writing of options, or a combination of such methods
of sale, at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions
by selling their shares of Common Stock to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Securityholders and/or the purchasers of such
shares of Common Stock for whom such broker-dealer may act as agents or to
whom they may sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions.) The
Company has agreed to bear all expenses in connection with the registration of
the shares of Common Stock to which this Prospectus relates.
The Common Stock and Warrants are quoted on the NASDAQ SmallCap Market
System ("Nasdaq") under the symbols "BNGO" and "BNGOW", respectively as well
as on the Boston Stock Exchange under the symbols "ABG" and "ABGW",
respectively. On September 17, 1997 the last sale price of the Common Stock
as reported on Nasdaq was $7.125 and the last sale price of the Warrants was
$3.125.
THESE SECURITIES ARE HIGHLY SPECULATIVE. THEY INVOLVE A HIGH DEGREE OF RISK.
THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL
LOSS OF THEIR ENTIRE INVESTMENT (SEE "RISK FACTORS" - PAGE 7)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at Room 1204, Everett McKinley
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604; and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statements of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.
Additional updating information with respect to the Company may be provided in
the future by means of appendices or supplements to the Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the information that has been or may be
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to American Bingo & Gaming Corp., 515 Congress
Avenue, Suite 1200, Austin, Texas 78701 (512) 472-2041.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for its fiscal year ended
December 31, 1996;
(b) The Company's Quarterly Report on Form 10-QSB for the three month
period ended March 31, 1997;
(c) The Company's Quarterly Report on Form 10-QSB for the six month
period ended June 30, 1997;
(d) The Company's Current Reports on Form 8-K dated March 18, 1997 and
August 15, 1997.
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2, Registration No. 33-85300; and
(f) All other reports filed by the Company pursuant to Section 13(a) and
15(d) of the Exchange Act since the Company's fiscal year ended December 31,
1996.
All documents filed by the Company with the Commission pursuant to
sections 13, 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the offering of securities made by this Prospectus shall be
deemed to be incorporated by reference herein and to be part hereof from their
respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus,
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere or incorporated by reference elsewhere in this Prospectus,
including information under "Risk Factors".
THE COMPANY
American Bingo & Gaming Corp. (the "Company") was incorporated under the
laws of the State of Delaware in 1994. The Company was formed to consummate
the acquisition of entities engaged in the operation of charity bingo
entertainment centers. The Company subsequently completed its initial public
offering in December 1994, from which approximately $5.2 million was raised
through the sale of 1,000,000 shares of Common Stock and 1,725,000 Warrants.
The Company, through its subsidiaries, provides maintenance and
management support for charities which utilize bingo events as a means of fund
raising. The Company presently operates twenty Centers in Texas, Alabama and
South Carolina. In addition, revenues are derived from the sale of bingo
supplies and the operation and/or lease of vending and concession outlets at
the Centers. The Company also derives significant gaming revenues from its
forty (40) South Carolina video gaming centers. The Company is required to
operate its bingo and gaming centers (collectively, the "Centers") in
compliance with applicable state and local laws and regulations. Presently,
approximately forty-five (45) states and the District of Columbia allow
charities to operate regulated bingo halls as a method of fund raising.
The Company has designed an aggressive expansion plan centered around the
acquisition and development of Centers. The Company's goal is to establish
itself as a major force in the estimated multi-billion dollar per year charity
bingo and gaming market. No assurances may be given that the Company's goals
will be achieved.
The Company is knowledgeable with respect to states whose legislation
permits charity bingo and gaming events. The Company identifies and analyzes
desirable bingo markets that offer favorable population and income
demographics. Where viable, the Company currently plans to establish Centers
in each of these markets. This can be accomplished either by building a new
bingo center or by acquiring an existing center.
The Company's principal executive offices are located at 515 Congress
Avenue, Suite 1200, Austin, Texas, 78701 and the telephone number of the
principal executive offices is (512) 472-2041.
RECENT DEVELOPMENTS
In July 1997, the Company sold 200 shares of Preferred Stock and B
Warrants for the purchase of an aggregate of 133,000 shares of Common Stock to
four investors, thereby raising $2,000,000, pursuant to Regulation D of the
Securities Act, and Rule 506 promulgated thereunder. The Preferred Stock is
convertible in accordance with the terms of the Certificate of Designations.
The Company is obligated to register, and is registering herein, the shares of
Common Stock underlying the Preferred Stock and the B Warrants. The Company
enlisted MG Securities as the placement agent and paid $160,000 as
commissions, along with the Stock Option for the purchase of 85,000 shares of
Common Stock.
<PAGE>
RISK FACTORS
The following factors should be considered carefully in evaluating the
Company's business and before making any investment in the Company.
1. Relatively New Venture, Need for Further Acquisitions.
-----------------------------------------------------------
The Company's future success depends upon its ability to continue to
expand its existing operations through the acquisition of bingo and gaming
centers, and the establishment of new centers. There can be no assurance that
the Company will be successful in making such acquisitions or establishing new
centers. The Company is subject to all the risks inherent in attempting to
expand a relatively new business venture. These risks include the potential
inability of the Company to efficiently operate additional centers, the
existence of undisclosed actual or contingent liabilities, the inability to
fund the working capital requirements of additional Centers and the inability
to locate and/or establish Centers which have a positive effect on the
Company's operations. In 1995, the Company encountered a hostile regulatory
environment in Florida and found it necessary to dispose of its four centers
there. In 1997, the State of Texas passed various bingo laws which may be
harmful to the Company. There can be no assurance that the Company will
continue to achieve a level of profitability that will provide a return on
invested capital or will result in an increase in the market value of the
Company's securities.
2. Need for Additional Financing.
--------------------------------
The Company's business plan includes an aggressive program to identify
acquisition candidates that meet certain demographic and other criteria, and
to seek to acquire them. Growth to date has been funded initially with cash
advanced by shareholders and from operations, and since December 1994 with the
proceeds of the Company's initial public offering. The Company believes it
will have resources to enable it to make significant acquisitions. However,
there can be no assurance that the remaining cash, coupled with the Company's
available credit lines and Common Stock, which has been used as currency to
facilitate certain acquisitions, will enable the Company to finance all of its
acquisition plans. Moreover, additional funds may be needed to fund the
working capital requirements of newly acquired Centers. No assurance can be
given that additional needed financing will be available to the Company, or if
available, on terms acceptable to the Company. If further financing is
needed, but not available, the Company will be required to scale down its
acquisition plans.
3. Competition.
-----------
The Company competes with other Centers located in the general area where
the Company's subsidiaries presently operate. Competition is based on such
factors as location, comfort, cleanliness, personal relationships and other
amenities. The Company continues to seek to maximize the competitive
advantages of its facilities. The Company does expect to encounter increased
competition as it seeks to acquire additional Centers. Other forms of gaming,
principally non-charity operations also represent additional competitive
threats to the Company. There can be no assurance that additional competing
Centers will not be opened by parties not affiliated with the Company or that
existing Centers will not be refurbished to the extent that they are more
amenable to the charity bingo players and gaming players who presently
frequent the Company's Centers.
4. Dependence Upon Key Personnel.
--------------------------------
The Company is substantially dependent upon the continued services of
Gregory Wilson, its Chief Executive Officer, who is the Company's most
experienced person in the operation of charity bingo centers. In September
1996, Mr. Wilson entered into a three-year employment agreement with the
Company. The loss of the services of Mr. Wilson through incapacity or
otherwise could have a material adverse effect upon the Company's business and
prospects. To the extent that his services become unavailable, the Company
will be required to retain other qualified personnel, and there can be no
assurance that it will be able to recruit and hire qualified persons upon
acceptable terms. The Company maintains key person life and disability
insurance in the amount of $1,000,000 on the life of Mr. Wilson, with the
Company as beneficiary. However, in the event of loss, there can be no
assurance that the insurance proceeds will adequately compensate the Company.
5. Government Regulation.
----------------------
The Company believes that forty-five (45) states and the District of
Columbia have enacted laws permitting and controlling the operation of the
bingo centers. In some states the Company is required to obtain and maintain
permits and/or licenses from state and local regulatory agencies. State
regulations often limit the amount of revenues which the Company can generate
by limiting the number of sessions, revenues per session, number of locations
which may be operated, or other matters. Certain states may also restrict
bingo operators to locally formed entities or may restrict ownership to
private investors who are active in management. The Company believes it
currently complies with all regulations affecting its operations. However,
there can be no assurance that current laws and regulations will not be
changed or interpreted in such a way as to require the Company to alter its
present activities, further restrict profit margins or obtain additional
capital equipment in order to obtain or maintain licenses and permits.
6. No Assurance as to Future Acquisitions.
-------------------------------------------
The Company's business has grown solely through acquisitions and the
opening of new Centers. The Company's business plan calls for the acquisition
of entities engaged in the operation of charity bingo centers, and gaming
centers. The Company's ability to achieve its expansion plans depends in
large part on its sound business judgment relative to quality targets and its
negotiating strength. Acquisitions to date have been based on a multiple of
pre-tax income. Since the Company has become a public company, it has
acquired properties for a combination of cash, seller-financed notes and
stock, and hopes to continue to do so. If potential sellers are receptive to
accepting equity in the Company as part of the purchase price, the Company's
ability to expand will be enhanced. There can be no assurance, however, that
the Company's acquisition targets will continue to be receptive to such
proposals. Nor can there be assurance that the Company will succeed in
effecting future acquisitions of additional Centers that meet management's
criteria of profitability, physical attributes and demographics in the
targeted states and locales. Moreover there can be no assurance that once
acquisitions are made they will have a positive effect on the Company's
operations.
7. General Economic Risks.
------------------------
The Company's current and future business plans are dependent, in large
part, on the state of the general economy. Adverse changes in general and
local economic conditions may adversely impact on investment in the Company.
These conditions and other factors beyond the Company's control include, among
other factors,: (i) competition from other hospitality and entertainment
properties; (ii) changes in regional and local population and disposable
income composition; (iii) the need for renovations, refurbishment and
improvements; (iv) unanticipated increases in operating costs; (v) changes in
federal, state, local laws, rules and regulations including laws regulating
the environment, signage and the like; (vi) the inability to secure property
and liability insurance to fully protect against all losses, or to obtain such
insurance at reasonable cost; (vii) seasonality, and (ix) changes or
cancellation in local tourist, athletic or cultural events.
8. Possible Volatility of Stock Price.
--------------------------------------
There can be no assurance that a public market price for the Common Stock
or Warrants will continue. The market prices of the Common Stock and the
Warrants may be significantly affected by factors such as announcements by the
Company or its competitors, as well as variations in the Company's results of
operations and market conditions in the gaming industry in general. The
market prices may also be affected by movements in prices of stocks in
general. The relatively limited amount of publicly trading shares and
Warrants (the "float") renders the Company's securities especially susceptible
to sharp price fluctuations.
9. Shares Eligible for Future Sale.
-----------------------------------
A large number of shares of Common Stock presently outstanding are
currently eligible for public sale under the Securities Act. Possible or
actual sales of Common Stock in the future by existing shareholders may have a
depressive effect on the price of the Common Stock in the open market.
10. Possible Effects of Certain Articles of Incorporation and Bylaw
------------------------------------------------------------------
Provisions.
----------
The Company's Articles of Incorporation and Bylaws contain provisions
that may discourage acquisition bids for the Company. The Company has
substantial authorized but unissued capital stock available for issuance. The
Company's Articles of Incorporation contain provisions which authorize the
Board of Directors, without the consent of stockholders, to issue additional
shares of Common Stock and issue shares of Preferred Stock in series,
including establishment of the voting powers, designation, preferences,
limitations, restrictions and relative rights of each series of Preferred
Stock.
11. Absence of Cash Dividends.
----------------------------
The Board of Directors does not anticipate paying cash dividends on the
Common Stock for the foreseeable future and intends to retain any future
earnings to finance the growth of the Company's business. Payment of
dividends, if any, will depend, among other factors, on earnings, capital
requirements and the general operating and financial conditions of the
Company.
12. Risk of Redemption of Warrants.
----------------------------------
The Company may redeem the Warrants (with Investors Associates, Inc., the
Company's underwriter in its initial public offering, prior consent) for $.001
per Warrant, on 30 days' written notice, at any time after the average closing
bid quotation of the Common Stock on Nasdaq was at least $8.00 for 20
consecutive trading days ending three days prior to the notice of redemption.
Notice of redemption of the Warrants could cause the holders thereof to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for the holders to do so, to sell the Warrants at the current
market price when they might otherwise wish to hold the Warrants, or to accept
the redemption price, which is likely to be less than the market value of the
Warrants at the time of the redemption.
13. Investors May be Unable to Exercise Warrants, B Warrants, or Stock
------------------------------------------------------------------
Option.
-------
For the term of the Warrants, B Warrants and Stock Option (collectively
in this paragraph, the "Warrants") the Company will attempt to maintain a
current effective registration statement with the Commission relating to the
shares of Common Stock issuable upon exercise of the Warrants. If the Company
is unable to maintain a current registration statement because the costs
render it uneconomical, or because the value of the shares of Common Stock
underlying the Warrants is less than the exercise price, or any number of
other reasons, the warrantholders will be unable to exercise the Warrants, and
the Warrants may become valueless. Although during the Offering, the Warrants
will not knowingly be sold in any jurisdiction in which they are not
registered or otherwise qualified, a purchaser of the Warrants may relocate
into a jurisdiction in which the shares of Common Stock underlying the
Warrants are not so registered or qualified. In addition, a purchaser of the
Warrants in the open market may reside in a jurisdiction in which the shares
of Common Stock underlying the Warrants are not registered or qualified. If
the Company is unable or chooses not to register or qualify or maintain the
registration or qualification of the shares of Common Stock underlying the
Warrants for sale in all of the states in which the Warrant holders reside,
the Company would not permit such Warrants to be exercised and Warrantholders
in those states may have no choice but to either sell their Warrants or let
them expire. Prospective investors and other interested persons who wish to
know whether or not the Common Stock may be issued upon the exercise of
Warrants by a Warrantholder in a particular state should consult with the
securities department of the state in question or send a written inquiry to
the Company.
14. Speculative Nature of Warrants.
---------------------------------
Warrants are generally more speculative than Common Stock which are
purchasable upon the exercise thereof. During the term of the warrants, the
holders thereof are given the opportunity to profit from a rise in the market
price of the Company's Common Stock, subject to the Company's right of
redemption. Historically, the percentage increase or decrease in the market
price of a warrant has tended to be greater than the percentage increase or
decrease in the market price of the underlying common stock. A warrant my
become valueless, or of reduced value, if the market price of the common
shares decreases, or increases only modestly, over the term of the warrant.
<PAGE>
USE OF PROCEEDS
The Company will not receive proceeds from any sale of the Selling
Securityholder Securities. The proceeds to be received by the Company from
the exercise of the Selling Securityholder Warrants, B Warrants and the Stock
Option (assuming all of such securities are exercised), will be $17,574,000.
The Company intends to use such proceeds for general corporate purposes.
Pending use of the proceeds, they will be invested in short term, interest
bearing securities or money market funds.
<PAGE>
DILUTION
--------
The following discussion assumes that all of the Warrants, B Warrants and
the Stock Option are exercised:
As of June 30, 1997, the net tangible book value of the Common Stock,
based on the balance sheet at June 30, 1997, was $4,146,520 or $.89 per share.
Net tangible book value per share represents the amount of the tangible
assets, $4,918,585, less the amount of its liabilities, $772,065, divided by
the number of shares of Common Stock outstanding 4,645,919. Without taking
into account any changes in the net tangible book value of the Company after
June 30, 1997, other than giving effect to the exercise of all of the
Warrants, B Warrants and the Stock Option, and the receipt of the net proceeds
therefrom, the pro forma net tangible book value of the Common Stock, would be
$21,720,520 or $2.65 per share, representing an immediate increase in the net
tangible book value of $1.76 per share to the present shareholders and an
immediate dilution of $2.35 per share to new investors from the exercise price
of the Redeemable Stock Purchase Warrants ("Warrant Exercise Price").
Dilution per share represents the difference between the Warrant Exercise
Price and the pro forma net tangible book value after the issuance of all the
shares of Common Stock issuable upon exercise of the Warrants, B Warrants and
the Stock Option (collectively, such issuances being referred to as the "Stock
Issuance").
The following table illustrates this dilution:
Warrant Exercise Price $5.00
Net tangible book value prior to Stock Issuance $ .89
Increase attributable to new investors $1.76
Pro Forma net tangible book value
per share after Stock Issuance $2.65
-----
Dilution of net tangible book value
per share to new investors $2.35
-----
<PAGE>
RESALES BY SELLING SECURITYHOLDERS
This Prospectus relates to the proposed resale by the Selling
Securityholders of up to (i) 189,500 shares of Common Stock; (ii) 237,500
Warrants; (iii) 700,000 shares of Common Stock underlying the Preferred Stock;
and (iv) 455,500 shares of Common Stock underlying Warrants, B Warrants and
Stock Option. The following table sets forth as of September 17, 1997 certain
information regarding the beneficial ownership of the Common Stock of each
Selling Securityholder and as adjusted to give effect to the sale of the
Common Stock and Warrants offered hereby. The Common Stock and Warrants are
being registered to permit public secondary trading of the Common Stock and
Warrants, and the Selling Securityholders may offer the Common Stock and
Warrants for resale from time to time. See "Plan of Distribution." The
Company will not receive any of the proceeds from the sale of the Common
Stock. If the Warrants are exercised, the Company would receive $17,574,000.
<TABLE>
<CAPTION>
Common Stock Common Stock Percentage
Names of Selling Beneficially Owned Offered ByOwned After
Security Holders Prior to Offering(1) Beneficial Owner Offering(%)(2)
- ----------------- -------------------- ---------------- --------------
<S> <C> <C> <C>
Focus Tech Investments, Inc. 223,500 100,000(3) **
Barry Goldstein 31,168 30,000(3) **
Michael Mims 100,000 100,000 0
Harold Dukes 8,000 8,000 0
M. F. Johnson 20,000 20,000(3) 0
J.C. Crick 20,000 20,000(3) 0
Lowell Lasley 20,000 20,000(3) 0
Danny C. Dye 67,500 67,500(4) 0
Tom Nguyen 20,000 20,000 0
Tom Vo 2,000 2,000 0
Joe Thuan 2,000 2,000 0
Robert Norman 37,500 37,500 0
David Heller(4) 216,580 216,580(5)(10) 0
Plazacorp Investments Limited 33,320 33,320(6)(10) 0
P.R.I.F. #4 478,975 478,975(7)(10) 0
Sam Reisman 104,125 104,125(8)(10) 0
MG Securities 85,000 85,000(9) 0
<FN>
** Less than 1%
</TABLE>
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares of Common Stock which such person
has the right to acquire such shares within 60 days of September 17, 1997. For
purposes of computing the percentage of outstanding shares of Common Stock
held by each person or group of persons named above, any security which such
person or persons has or have the right to acquire within such date is deemed
to be outstanding but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Except as indicated in
the footnotes to this table and pursuant to applicable community property
laws, the Company believes based on information supplied by such persons, that
the persons named in this table have sole voting and investment power with
respect to all shares of Common Stock which they beneficially own.
(2) Assumes the sale of all Securities offered hereby.
(3) Represents Warrants and the shares of Common Stock underlying such
Warrants.
(4) Represents (I ) 20,000 shares of Common Stock; (ii) 47,500 Warrants;
and (iii) 47,500 shares of Common Stock underlying such Warrants.
(5) Represents (i) 182,000 shares of Common Stock underlying the
Preferred Stock; and (ii) 34,580 shares of Common Stock underlying B Warrants.
(6) Represents (i) 28,000 shares of Common Stock underlying the Preferred
Stock; and (ii) 5,320 shares of Common Stock underlying B Warrants.
(7) Represents (i) 402,500 shares of Common Stock underlying the
Preferred Stock; and (ii) 76,475 shares of Common Stock underlying B Warrants.
(8) Represents (i) 87,500 shares of Common Stock underlying the Preferred
Stock; and (ii) 16,625 shares of Common Stock underlying B Warrants.
(9) Represents 85,000 shares of Common Stock underlying a Stock Option.
(10) The Certificate of Designations for the Preferred Stock and the B
Warrants issued in connection therewith provide that certain Selling
Securityholders may not convert their Preferred Stock or exercise their B
Warrants at any time to acquire a number of shares of Common Stock in excess
of that number which would result in beneficial ownership of more than 4.9% of
the Company's outstanding Common Stock at any time.
The Common Stock being offered hereby by certain of the Selling
Securityholders may be acquired, from time to time, upon (i) the conversion of
the Series A Convertible Preferred Stock which were acquired by them in a
private placement transaction pursuant to a Subscription Agreement, dated as
of August 1, 1997, (ii) the payment by the Company of dividends on the
Preferred Stock in the form of Common Stock in lieu of cash interest, and
(iii) the exercise of B Warrants to purchase 133,000 shares of Common Stock,
which were acquired by certain of the Selling Securityholders from the Company
in connection with the sale of the Preferred Stock. This Prospectus also
relates to such presently indeterminate number of additional Shares as may be
issuable upon conversion of the Preferred Stock or payment of dividends on the
Preferred Stock, based upon fluctuations in the conversion price of the Series
A Preferred Stock in accordance with Rule 416 under the Securities Act.
In recognition of the fact that Selling Securityholders may wish to be legally
permitted to sell their shares of Common Stock when they deem appropriate, the
Company has filed with the Commission, under the Securities Act, a
Registration Statement on Form S-3, of which this Prospectus forms a part,
with respect to the resale of the shares of Common Stock from time to time on
the Nasdaq or in privately negotiated transactions and has agreed to prepare
and file such amendments and supplements to the Registration Statement as may
be necessary to keep the Registration Statement effective until the shares of
Common Stock are no longer required to be registered for the sale thereof by
the Selling Securityholders. The Company has agreed to register a specified
number of shares of Common Stock for resale by the Selling Securityholders.
<PAGE>
PLAN OF DISTRIBUTION
The Selling Securityholders may offer and sell shares of Common Stock and
Warrants from time to time in the discretion of the Selling Securityholders on
Nasdaq or the Boston Stock Exchange or in the over-the-counter market or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or at negotiated prices. The distribution of the
shares of Common Stock and Warrants may be effected from time to time in one
or more transactions including, without limitation: (a) a block trade in which
the broker-dealer so engaged will attempt to sell the Common Stock and
Warrants as agent, but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (d) face-to-face or other direct
transactions between the Selling Securityholders and purchasers without a
broker-dealer or other intermediary. In effecting sales, broker-dealers or
agents engaged by the Selling Securityholders may arrange for other
broker-dealers or agents to participate. From time to time, one or more of
the Selling Securityholders may pledge, hypothecate or grant a security
interest in some or all of the common Stock owned by them, and the pledgees,
secured parties or persons to whom such securities have been hypothecated
shall, upon foreclosure in the event of default, be deemed to be Selling
Securityholders hereunder. In addition, the Selling Securityholders may from
time to time sell short the Common Stock of the Company, and in such
instances, this Prospectus may be delivered in connection with such short sale
and the Common Stock offered hereby may be used to cover such short sale.
Sales of Selling Securityholders' Common Stock and Warrants may also be
made pursuant to Rule 144 under the Securities Act, where applicable. The
Selling Securityholders' shares may also be offered in one or more
underwritten offerings, on a firm commitment or best efforts basis. The
Company will receive no proceeds from the sale of Common Stock by the Selling
Securityholders.
To the extent required under the Securities Act, the aggregate amount of
Selling Securityholders' Common Stock and Warrants being offered and the terms
of the offering, the names of any such agents, brokers, dealers or
underwriters and any applicable commission with respect to a particular offer
will be set forth in an accompanying Prospectus supplement. Any underwriters,
dealers, brokers or agents participating in the distribution of the Common
Stock and Warrants may receive compensation in the form of underwriting
discounts, concessions, commissions or fees from a Selling Securityholder
and/or purchasers of Selling Securityholders' shares of Common Stock and/or
Warrants, for whom they may act. In addition, sellers of Selling
Securityholders' shares of Common Stock and/or Warrants may be deemed to be
underwriters under the Securities Act and any profits on the sale of Selling
Securityholders' shares of Common Stock or Warrants by them may be deemed to
be discounts or commissions under the Securities Act. Selling Securityholders
may have other business relationships with the Company and its subsidiaries or
affiliates in the ordinary course of business.
From time to time each of the Selling Securityholders may transfer,
pledge, donate or assign Selling Securityholders' shares of Common Stock and
Warrants to lenders, family members and others and each of such persons will
be deemed to be a "Selling Securityholder" for purposes of this Prospectus.
The number of Selling Securityholders' shares of Common Stock and Warrants
beneficially owned by those Selling Securityholders who so transfer, pledge,
donate or assign Selling Securityholders' shares of Common Stock or Warrants
will decrease as and when they take such actions. The plan of distribution
for Selling Securityholders' shares of Common Stock and Warrants sold
hereunder will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Securityholders
hereunder.
Including, and without limiting the foregoing, in connection with
distributions of the Common Stock, a Selling Securityholder may enter into
hedging transactions with broker-dealers and the broker-dealers may engage in
short sales of the Common Stock in the course of hedging the positions they
assume with such Selling Securityholder. A Selling Securityholder may also
enter into option or other transactions with broker-dealers that involve the
delivery of the Common Stock to the broker-dealers, who may then resell or
otherwise transfer such Common Stock. A Selling Securityholder may also loan
or pledge the Common Stock to a broker-dealer and the broker-dealer may sell
the Common Stock so loaned or upon default may sell or otherwise transfer the
pledged Common Stock.
The Company is bearing all costs relating to the registration of the
shares of Common Stock (other than fees and expenses, if any, of counsel or
other advisors to the Selling Securityholders). Any commissions, discounts or
other fees payable to broker-dealers in connection with any sale of the shares
of Common Stock and Warrants will be borne by the Selling Securityholder
selling such shares of Common Stock or Warrants.
The Company has agreed to indemnify the Selling Securityholders in
certain circumstances, against certain liabilities, including liabilities
arising under the Securities Act.
<PAGE>
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
American Stock Transfer & Trust Co., 40 Wall Street, New York, New York 10005.
LEGAL MATTERS
The legality of the shares offered hereby has been passed upon for the
Company by Silverman, Collura, Chernis & Balzano, P.C., 381 Park Avenue South,
Suite 1601, New York, New York 10016.
EXPERTS
The Company's consolidated financial statements incorporated by reference
in this Registration Statement, have been incorporated herein in reliance on
the reports of Weinick Sanders Leventhal & Co., LLP (successors to the
practice of Weinick, Sanders & Company, LLP), independent accountants, given
on the authority of that firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expense incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of the
Company in connection with the securities being registered, the Company will,
unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issues.
<PAGE>
==============================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date
hereof. This Prospectus does not constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Available Information 3
Prospectus Summary 5
Risk Factors 7
Use of Proceeds 12
Dilution 13
Resales by Selling Securityholders 14
Plan of Distribution 17
Transfer Agent 19
Legal Matters 19
Experts 19
Disclosure of Commission Position on Indemnification 19
</TABLE>
____________________
Until , 1997 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee $3,107.30
Printing Expenses $10,000*
Legal Fees and Expenses $15,000*
Accounting Fees and Expenses $1,000*
Transfer Agent Fees $1,000*
Miscellaneous Expenses $1,000*
TOTAL $31,107.30
__________
* Estimated
The Selling Security Holders will not be paying any portion of the
foregoing expenses of issuance and distribution.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware and
Article 7 of the Company's Articles of Incorporation contain provisions for
indemnification of officers, directors, employees and agents of the Company.
The Articles of Incorporation require the Company to indemnify such persons to
the full extent permitted by Delaware law. Each person will be indemnified in
any proceeding if he acted in good faith and in a manner which he reasonably
believed to be in, or not opposed to, the best interest of the Company.
Indemnification would cover expenses, including attorney's fees, judgments,
fines and amounts paid in settlement.
The Company's Articles of Incorporation also provided that the Company's
Board of Directors may cause the Company to purchase and maintain insurance on
behalf of any present or past director or officer insuring against any
liability asserted against such person incurred in the capacity of direct or
officer or arising out of such status, whether or not the Company would have
the power to indemnify such person. The Company may seek to obtain directors'
and officers' liability insurance.
Item 16. EXHIBITS
4.1 Certificate of Designations of Series A Preferred Stock.
4.2 Form of Series A Preferred Stock Subscription Agreement.
5.1 Opinion of Silverman, Collura, Chernis & Balzano, P.C., special
counsel for the Registrant, as to the legality of the securities
being registered.
23.1 Consent of Weinick Sanders Leventhal & Co., LLP, Certified Public
Accountants.
23.2 Consent of Silverman, Collura, Chernis & Balzano, P.C. (contained in
Exhibit 5.1).
Item 17. UNDERTAKINGS.
(a) Rule 415 Offerings.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during the period required by Rule 415, a post-effective
amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
Registration Statement; and
(iii) Includes any additional or changed material information on the plan of
distribution.
provided, however, the paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) For determining liability under the Securities Act of 1933, treat
each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Request for acceleration of effective date.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the successful defense of any action, suit or proceedings)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such court.
(c) Reliance upon Rule 430A under the Securities Act.
The undersigned small business issuer hereby undertakes that it will:
(1) For determining any liability under the Securities Act of 1933, as
amended, treat the information omitted from the form of prospectus filed as
part of the registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the small business issuer under Rule 424(b)(1)
or (4) or 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act of 1933, as
amended, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in the
registration statement, and that offering of the securities at that time as
the initial bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Austin, State of Texas on September 16, 1997.
AMERICAN BINGO & GAMING CORP.
By: /S/ GREGORY WILSON
------------------
Gregory Wilson, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration statement was signed by the following persons in the capacities
and on the dates stated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ GREGORY WILSON Chief Executive Officer, September 16, 1997
- ------------------
Gregory Wilson Chairman of the Board
(Principal Executive Officer)
/S/ JOHN ORTON Chief Financial Officer September 16, 1997
- --------------
John Orton (Principal Financial Officer)
/S/ COURTLAND L. LOGUE, JR. President, Director September 16, 1997
- ---------------------------
Courtland L. Logue, Jr.
/S/ LEN BUSSEY Director September 17, 1997
- --------------
Len Bussey
ANNEX I
TO
SUBSCRIPTION
AGREEMENT
AMERICAN BINGO & GAMING CORP.
CERTIFICATE OF DESIGNATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
American Bingo & Gaming Corp., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the
General Corporation Law of the State of Delaware (the "DGCL") DOES HEREBY
CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, by
unanimous written consent dated July 29, 1997, adopted a resolution providing
for the creation of a series of the Corporation's Preferred Stock, $.01 par
value, which series is designated "Series A Convertible Preferred Stock",
which resolution is as follows:
63.03.04.02 --
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Certificate of Incorporation, as amended, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $.01 par value (hereafter called the "Preferred Stock"), of the
Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights
have not been set forth in the Certificate of Incorporation, as amended, of
the Corporation, does hereby fix the same as follows:
63.03.04.02 --
The rights, preferences, privileges, and limitations granted to and
imposed on the Series A Convertible Preferred Stock (the "Series A Convertible
Preferred Stock"), which series shall consist of 3,000 shares, are as set
forth below. The following rights, preferences, privileges, and limitations
are subject to the designation, description, and terms of one or more
subsequent series of Preferred Stock by the Board of Directors of American
Bingo & Gaming Corp. (the "Corporation") pursuant to authority granted by the
Certificate of Incorporation. To the extent that the rights, preferences,
privileges, and limitations of any such subsequent series conflict or are
inconsistent with any of the rights, preferences, privileges, and limitations
of the Series A Convertible Preferred Stock, the designation and description
of terms of the subsequent series which is the latest so designated shall
control and prevail over the rights, preferences, privileges, and limitations
of the Series A Convertible Preferred Stock.
SECTION 1. DEFINITIONS. As used herein, the following terms
-----------
shall have the following meanings:
"AMEX" shall mean the American Stock Exchange, Inc.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Corporation.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Corporation.
"Computed Price" of one share of Common Stock on any date shall mean
the product obtained by multiplying (a) the Conversion Percentage applicable
on such date times (b) the arithmetic average of the per share Market Price of
-----
the Common Stock for the Measurement Period with respect to the applicable
dividend payment date; provided, however, that in no event shall the Computed
-------- -------
Price determined in accordance with this clause (2) be greater than $5.50
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events
occurring on or after the date of filing of this Certificate of Designations
with the Secretary of State of the State of Delaware).
"Conversion Agent" shall mean American Stock Transfer & Trust
Company, or its duly appointed successor.
"Conversion Amount" initially shall be equal to $1,000.00, subject
to adjustment as hereinafter provided.
"Conversion Date" shall mean the date on which the notice of
conversion is actually received by the Conversion Agent, whether by mail,
courier, personal service, telephone line facsimile transmission or other
means, in case of a conversion at the option of the holder pursuant to Section
10(a).
"Conversion Deferral Notice" shall mean a notice given by the
Corporation to the holders of Series A Convertible Preferred Stock pursuant to
Section 10(a)(iii), which notice shall state (1) that the Corporation is
exercising its right to defer conversion of all or a portion of the Excess
Shares pursuant to Section 10(a)(iii), (2) the number of Excess Shares held by
such holder as to which conversion is deferred, and (3) the Conversion Value
per unredeemed Excess Share or the formula for determining the same,
determined in accordance with Section 10(a)(iii).
"Conversion Notice" shall mean a written notice, duly signed by or
on behalf of the holder, stating the number of shares of Series A Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Percentage" shall mean 80%.
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Conversion Value" initially shall be equal to $1,000.00, subject to
adjustment as provided in Section 10(a)(iii).
"Converting Holder" shall mean a holder of Series A Preferred Stock
who delivers to the Corporation a Conversion Notice.
"Current Market Price" shall mean with respect to any date the
arithmetic average of the Market Price of the Common Stock on the 30
consecutive trading days commencing 45 trading days before such date.
"Excess Shares" shall have the meaning set forth in Section 9.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"First Conversion Period" shall mean the period beginning on the
90th day after the Issuance Date and ending on the 134th day after the
Issuance Date.
"Floor Price" shall mean $4.00 per share subject to equitable
adjustment from time to time, on terms reasonably acceptable to the holders of
a majority of the outstanding shares of Series A Convertible Preferred Stock,
for (i) stock splits, (ii) stock dividends, (iii) combinations, (iv) capital
reorganizations, (v) issuance to all holders of Common Stock of rights or
warrants to purchase shares of Common Stock at a price per share less than the
Market Price which would otherwise be applicable, (vi) the distribution by the
Company to all holders of Common Stock of evidences of indebtedness of the
Company or cash (other than regular quarterly cash dividends), (vii) tender
offers by the Company or any subsidiary of the Company or other repurchases of
shares of Common Stock on one or more transaction which, individually or in
the aggregate, result in the purchase of more than 10% or the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in each
such case which occur during the Measurement Period.
"Floor Price Amount" shall mean the number of shares of Common Stock
which would be issuable to a Converting Holder on any Conversion Date,
assuming that the Preferred Shares surrendered for conversion by such
Converting Holder were converted at the Floor Price.
"Floor Price Shares" shall mean the number of shares of Series A
Preferred Stock which, if converted at the Conversion Price, would be
convertible into a number of shares of Common Stock equal to the Floor Price
Amount.
"Fourth Conversion Period" shall mean the period beginning on the
240th day after the Issuance Date.
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Issuance Date" shall mean the first date of original issuance of
any shares of Series A Convertible Preferred Stock.
"Junior Dividend Stock" shall mean, collectively, the Common Stock
and any other class or series of capital stock of the Corporation, ranking
junior as to dividends to the Series A Convertible Preferred Stock.
"Junior Liquidation Stock" shall mean the Common Stock or any other
class or series of the Corporation's capital stock, ranking junior as to
liquidation rights to the Series A Convertible Preferred Stock.
"Liquidation Preference" shall mean, for each share of Series A
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.
"Market Price" of any security on any date shall mean the closing
high bid price of such security on such date on the principal securities
exchange or other market on which such security is listed for trading, as
reported by such exchange or other market; provided, however, that if during
-------- -------
any Measurement Period:
63.03.04.02 --
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market Price
of the Common Stock for each day in such Measurement Period prior to the
earlier of (1) the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution and (2) the date on which
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the earlier of
(1) the record date fixed for such determination and (2) the date on which
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, or fix a record date for such
issuance, which rights or warrants entitle such holders (for a period expiring
within forty-five (45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Market
Price (determined without regard to this proviso) for any day in such
Measurement Period which is prior to the end of such 45-day period, then the
Market Price for such day shall be reduced so that the same shall equal the
price determined by multiplying the Market Price (determined without regard to
this proviso) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the record date
fixed for the determination of stockholders entitled to receive such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Market Price, and of
which the denominator shall be the number of shares of Common Stock
outstanding on the close of business on such record date plus the total number
of additional shares of Common Stock so offered for subscription or purchase.
In determining whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than the Market Price
(determined without regard to this proviso), and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants, the value of
such consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Market Price of the Common Stock for each
day in such Measurement Period prior to the earlier of (1) the day upon which
such subdivision becomes effective and (2) the date on which ex-dividend
trading in the Common Stock with respect to such subdivision begins shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Market Price for each day in such Measurement Period prior to the
day upon which such combination becomes effective shall be proportionately
increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i) of
this proviso applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
clause (ii) of this proviso and dividends and distributions paid exclusively
in cash and excluding any capital stock, evidences of indebtedness, cash or
assets distributed upon a merger or consolidation) (the foregoing hereinafter
in this clause (iv) of this proviso called the "Securities"), or fix a record
date for any such distribution, then, in each such case, the Market Price for
any day in such Measurement Period prior to the earlier of (1) the record date
for such distribution and (2) the date on which ex-dividend trading in the
Common Stock with respect to such distribution begins shall be reduced so that
the same shall be equal to the price determined by multiplying the Market
Price (determined without regard to this proviso) by a fraction of which the
numerator shall be the Market Price (determined without regard to this
proviso) on such date less the fair market value (as determined in good faith
by resolution of the Board of Directors of the Corporation) on such date of
the portion of the Securities so distributed or to be distributed applicable
to one share of Common Stock and the denominator shall be the Market Price
(determined without regard to this proviso); provided, however, that in the
-------- -------
event the then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is equal to
or greater than the Market Price (determined without regard to this clause
(iv) of this proviso) on any such day, in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of shares of Series A
Convertible Preferred Stock shall have the right to receive in payment of
dividends on the shares of Series A Convertible Preferred Stock or upon
conversion of the shares of Series A Convertible Preferred Stock, as the case
may be, the amount of Securities the holders of shares of Series A Convertible
Preferred Stock would have received had the number of shares of Common Stock
to be issued in payment of such dividends on the shares of Series A
Convertible Preferred Stock, or had the holders of shares of Series A
Convertible Preferred Stock converted the shares of Series A Convertible
Preferred Stock, in either such case immediately prior to the record date for
such distribution. If the Board of Directors of the Corporation determines
the fair market value of any distribution for purposes of this clause (iv) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider the
prices in such market on the same day for which an adjustment in the Market
Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which clause (ii) of this proviso
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights or
warrants to which clause (ii) of this proviso applies (and any Market Price
reduction required by this clause (iv) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and
any further Market Price reduction required by clauses (i) and (ii) of this
proviso with respect to such dividend or distribution shall then be made),
except that any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of clause (i) of this
proviso;
(v) The Corporation or any subsidiary of the Corporation shall (x) by
dividend or otherwise, distribute to all holders of its Common Stock cash in
(or fix any record date for any such distribution), or (y) repurchase or
reacquire shares of its Common Stock (other than shares surrendered in payment
of the exercise price or tax obligations incurred in connection with the
exercise of a stock option issued to any of the Corporation's employees,
directors, or consultants; each, an "Option Share Surrender") for, in either
case, an aggregate amount that, combined with (1) the aggregate amount of any
other such distributions to all holders of its Common Stock made exclusively
in cash after the Issuance Date and within the twelve (12) months preceding
the date of payment of such distribution, and in respect of which no
adjustment pursuant to this clause (v) has been made, (2) the aggregate amount
of any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration paid
in respect of any repurchase or other reacquisition by the Corporation or any
subsidiary of the Corporation of any shares of Common Stock (other than an
Option Share Surrender) made after the Issuance Date and within the twelve
(12) months preceding the date of payment of such distribution or making of
such repurchase or reacquisition, as the case may be, and in respect of which
no adjustment pursuant to this clause (v) has been made, and (3) the aggregate
of any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration
payable in respect of any tender offer by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution or
completion of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to clause (vi) of this proviso has
been made, exceeds 10% of the product of the Market Price (determined without
regard to this proviso) on any day in such Measurement Period prior to the
earlier of (1) the record date with respect to such distribution and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
distribution begins or the date of such repurchase or reacquisition, as the
case may be, times the number of shares of Common Stock outstanding on such
date, then, and in each such case, the Market Price for such day shall be
reduced so that the same shall equal the price determined by multiplying the
Market Price (determined without regard to this proviso) for such day by a
fraction (i) the numerator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day less an amount equal
to the quotient of (x) the excess of such combined amount over such 10% and
(y) the number of shares of Common Stock outstanding on such day and (ii) the
denominator of which shall be equal to the Market Price (determined without
regard to this proviso) on such day; provided, however, that in the event the
-------- -------
portion of the cash so distributed or paid for the repurchase or reacquisition
of shares (determined per share based on the number of shares of Common Stock
outstanding) applicable to one share of Common Stock is equal to or greater
than the Market Price (determined without regard to this clause (v) of this
proviso) of the Common Stock on any such day, in lieu of the foregoing
adjustment, adequate provision shall be made so that the holders of shares of
Series A Convertible Preferred Stock shall have the right to receive in
payment of dividends on shares of Series A Convertible Preferred Stock or upon
conversion of shares of Series A Convertible Preferred Stock, as the case may
be, the amount of cash the holders of shares of Series A Convertible Preferred
Stock would have received had the number of shares of Common Stock to be
issued in payment of such dividends on shares of Series A Convertible
Preferred Stock, or had the holders of shares of Series A Convertible
Preferred Stock converted shares of Series A Convertible Preferred Stock, in
either such case, immediately prior to the record date for such distribution
or the payment date of such repurchase, as applicable; or
(vi) A tender offer made by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock shall expire and such
tender offer (as amended upon the expiration thereof) shall require the
payment to stockholders (based on the acceptance (up to any maximum specified
in the terms of the tender offer) of Purchased Shares (as defined below)) of
an aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Corporation) that
combined together with (1) the aggregate of the cash plus the fair market
value (as determined in good faith by a resolution of the Board of Directors
of the Corporation), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the
Corporation or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this clause
(vi) has been made, (2) the aggregate amount of any cash plus the fair market
value (as determined in good faith by a resolution of the Board of Directors
of the Corporation) of consideration paid in respect of any repurchase or
other reacquisition by the Corporation or any subsidiary of the Corporation of
any shares of Common Stock (other than an Option Share Surrender) made after
the Issuance Date and within the twelve (12) months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to this
clause (vi) has been made, and (3) the aggregate amount of any distributions
to all holders of the Corporation's Common Stock made exclusively in cash
within twelve (12) months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to clause (v) of this proviso has been
made, exceeds 10% of the product of the Market Price (determined without
regard to this proviso) on any day in such period times the number of shares
of Common Stock outstanding on such day, then, and in each such case, the
Market Price for such day shall be reduced so that the same shall equal the
price determined by multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on such day multiplied by the
Market Price (determined without regard to this proviso) for such day and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
all shares validly tendered and not withdrawn as of the last time tenders
could have been made pursuant to such tender offer (the "Expiration Time")
(the shares deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on such day and the Market Price
(determined without regard to this proviso) of the Common Stock on the trading
day next succeeding the Expiration Time. If the application of this clause
(vi) to any tender offer would result in an increase in the Market Price
(determined without regard to this proviso) for any day, no adjustment shall
be made for such tender offer under this clause (vi) for such day;
63.03.04.02 --
provided further, however, that if on any date there shall be no reported
- -------- ------- -------
closing high bid price of such security, the "Market Price" on such date shall
be the closing high bid of such security on the date next preceding such date
on which a closing high bid price for such security has been so reported;
provided further, however, that if on any date there shall be no reported
closing high bid price of such security and at the time the closing high bid
price for such date is being determined there shall be known a closing high
bid price so reported for the date next subsequent to such date on which a
closing high bid price shall have been so reported, then the Market Price on
such date for which there shall have been no reported closing high bid price
shall be the lower of (x) the Market Price as determined pursuant to the
second proviso to this definition and (y) the closing high bid price as so
reported for such succeeding day for which a closing high bid price as so
reported is known.
"Maximum Share Amount" shall mean 937,450 shares, or such greater
number as would be permitted by the rules which are proposed to be adopted by
the Nasdaq (such amount to be subject to equitable adjustment from time to
time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the date of
filing this Certificate of Designations with the Secretary of State of the
State of Delaware), of Common Stock.
"Measurement Period" shall mean, with respect to any date, the
period of twenty (20) consecutive days ending one day prior to such date.
"Nasdaq" shall mean the Nasdaq Small Cap Market.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Dividend Stock" shall mean any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series A Convertible Preferred Stock.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series A Convertible Preferred Stock.
"Redemption Date" shall mean the date of a redemption of shares of
Series A Convertible Preferred Stock pursuant to Section 9, determined in
accordance therewith.
"Redemption Notice" shall mean a notice given by the Corporation to
the holders of Series A Convertible Preferred Stock pursuant to Section 9,
which notice shall state (1) that the Corporation is exercising its right to
redeem all or a portion of the Excess Shares pursuant to Section 9, (2) the
number of Excess Shares held by such holder which are to be redeemed, (3) the
Redemption Price per share of Series A Convertible Preferred Stock to be
redeemed or the formula for determining the same, determined in accordance
herewith and (4) the applicable Redemption Date.
"Redemption Price" shall mean the greater of (i) the sum of (a) the
sum of (1) the Conversion Value, (2) an amount equal to the accrued but
unpaid dividends on such share of Series A Convertible Preferred Stock, and
(3) an amount equal to the accrued and unpaid interest on dividends in arrears
(determined as provided in Section 5) through the Redemption Date plus (b) an
----
amount equal to the product obtained by multiplying (x) the sum stated in the
immediately preceding clause (a) times (y) the quotient (expressed as a
-----
percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the Redemption Date by (B)
--
the Conversion Percentage in effect on the Redemption Date and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of
Common Stock which would, but for the redemption pursuant to Section 9, be
issuable on conversion in accordance with Section 10(a) of one share of Series
A Convertible Preferred Stock and any accrued and unpaid dividends thereon and
any accrued and unpaid interest on dividends thereon in arrears if a
Conversion Notice were given by the holder of such share of Series A
Convertible Preferred Stock on the Redemption Date (determined without regard
to any limitation on conversion contained in Section 10(a)) times (y) the
-----
arithmetic average of the Market Price of the Common Stock for the twenty
consecutive trading days ending one trading day prior to the Redemption Date.
"Restricted Person" shall have the meaning provided in Section
10(a).
"Second Conversion Period" shall mean the period beginning on the
135th day after the Issuance Date and ending on the 179th day after the
Issuance Date.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Senior Dividend Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series A
Convertible Preferred Stock.
"Senior Liquidation Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series
A Convertible Preferred Stock.
"Series A Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock of the Corporation.
"Share Limitation Redemption Date" shall mean each date on which the
Corporation is required to redeem shares of Series A Convertible Preferred
Stock as provided in this Section 7(a).
"Share Limitation Redemption Price" shall mean the greater of (i)
the sum of (a) the sum of (1) the Conversion Value, (2) an amount equal to
the accrued but unpaid dividends on the share of Series A Convertible
Preferred Stock to be redeemed pursuant to Section 7(a), and (3) an amount
equal to the accrued and unpaid interest on dividends in arrears on such share
of Series A Convertible Preferred Stock through the applicable Share
Limitation Redemption Date (as provided in Section 5) plus (b) an amount equal
----
to the product obtained by multiplying (x) the sum stated in the immediately
preceding clause (a) times (y) the quotient (expressed as a percentage)
-----
obtained by dividing (A) the amount determined by subtracting from 100 percent
the Conversion Percentage in effect on the applicable Share Limitation
Redemption Date by (B) the Conversion Percentage in effect on the applicable
--
Share Limitation Redemption Date and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would,
but for the redemption pursuant to Section 7(a), be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series A Convertible Preferred Stock on the
applicable Share Limitation Redemption Date (determined without regard to any
limitation on conversion contained in Section 10(a)) times (y) the arithmetic
-----
average of the Market Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the applicable Share Limitation
Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at
a meeting of the stockholders of the Corporation (duly convened at which a
quorum was present), or a written consent of holders of shares of Common Stock
entitled to such number of votes given without a meeting, of the issuance by
the Corporation of 20% or more of the Common Stock of the Corporation
outstanding on the Issuance Date for less than the greater of the book or
market value of such Common Stock on conversion of the Series A Convertible
Preferred Stock, as and to the extent required under rules proposed to be
adopted by the Nasdaq.
"Subscription Agreement" shall mean the Subscription Agreement
between the Corporation and the original holder of shares of Series A
Convertible Preferred Stock pursuant to which the shares of Series A
Convertible Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Third Conversion Period" shall mean the period beginning on the
180th day after the Issuance Date and ending on the 239th day after the
Issuance Date.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series
----------------------
shall be designated as "Series A Convertible Preferred Stock", and the number
of shares constituting the Series A Convertible Preferred Stock shall be
3,000, and shall not be subject to increase.
SECTION 3. STATED CAPITAL. The amount to be represented in
--------------
stated capital at all times for each share of Series A Convertible Preferred
Stock shall be the greater of (i) the sum of (a) the sum of (1) $1,000, (2)
to the extent legally available, the accrued but unpaid dividends on such
share of Series A Convertible Preferred Stock, and (3) an amount equal to the
accrued and unpaid interest on dividends in arrears (as provided in Section 5)
through the date of determination plus (b) an amount equal to the product
----
obtained by multiplying (x) the sum stated in the immediately preceding clause
(a) times (y) the quotient (expressed as a percentage) obtained by dividing
-----
(A) the amount determined by subtracting from 100 percent the Conversion
Percentage in effect on such date of determination by (B) the Conversion
--
Percentage in effect on such date of determination and (ii) an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, at the time of such determination, be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice (as defined
herein) were given by the holder of such share of Series A Convertible
Preferred Stock on the date of such determination (determined without regard
to any limitation on conversion contained in 10(a)) times (y) the arithmetic
-----
average of the Market Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the date of such determination.
The Corporation shall take such action as may be required to maintain the
amount required by this Section 3 to be represented in stated capital for the
Series A Convertible Preferred Stock not less frequently than monthly.
SECTION 4. RANK. All Series A Convertible Preferred Stock shall
----
rank (i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, (ii) on a parity with
any additional series of the class of Preferred Stock which series the Board
of Directors may from time to time authorize, both as to payment of dividends
and as to distributions of assets upon liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary, (iii) on a parity with
the shares of any additional class of preferred stock (or series of preferred
stock of such class) which the Board of Directors or the stockholders may from
time to time authorize in accordance herewith, which class (or series thereof)
by its terms ranks on a parity with the shares of Series A Convertible
Preferred Stock and (iv) senior to any other class or series of preferred
stock (other than as stated in the immediately preceding clauses (ii) and
(iii)) of the Corporation.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of
---------------------------
shares of Series A Convertible Preferred Stock shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available for such purpose, dividends at the rate of $70.00 per annum per
share, and no more, which shall be fully cumulative, shall accrue without
interest (except as otherwise provided herein as to dividends in arrears) from
the date of original issuance until the second anniversary of the Issuance
Date and shall be payable quarterly on February 1, May 1, August 1, and
November 1 of each year commencing November 1, 1997 (except that if any such
date is a Saturday, Sunday, or legal holiday, then such dividend shall be
payable on the next succeeding day that is not a Saturday, Sunday, or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the
Board. Dividends on the Series A Convertible Preferred Stock shall be paid in
cash or, subject to the limitations in Section 5(b) hereof, shares of Common
Stock of the Corporation or any combination of cash and shares of Common
Stock, at the option of the Corporation as hereinafter provided. The amount
of the dividends payable per share of Series A Convertible Preferred Stock for
each quarterly dividend period shall be computed by dividing the annual
dividend amount by four. The amount of dividends payable for the initial
dividend period and any period shorter than a full quarterly dividend period
shall be computed on the basis of a 360-day year of twelve 30-day months.
Dividends not paid on a payment date, whether or not such dividends have been
declared, will bear interest at the rate of 12% per annum until paid. No
dividends or other distributions, other than the dividends payable solely in
shares of any Junior Dividend Stock, shall be paid or set apart for payment on
any shares of Junior Dividend Stock, and no purchase, redemption, or other
acquisition shall be made by the Corporation of any shares of Junior Dividend
Stock unless and until all accrued and unpaid dividends on the Series A
Convertible Preferred Stock and interest on dividends in arrears at the rate
specified herein shall have been paid or declared and set apart for payment.
If at any time any dividend on any the Senior Dividend Stock shall
be in default, in whole or in part, no dividend shall be paid or declared and
set apart for payment on the Series A Convertible Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then current dividend period,
shall have been paid or declared and set apart for payment, without interest.
No full dividends shall be paid or declared and set apart for payment on any
Parity Dividend Stock for any period unless all accrued but unpaid dividends
(and interest on dividends in arrears at the rate specified herein) have been,
or contemporaneously are, paid or declared and set apart for such payment on
the Series A Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series A Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the
Parity Dividend Stock for all dividend periods terminating on or prior to the
date of payment of such full dividends. When dividends are not paid in full
upon the Series A Convertible Preferred Stock and the Parity Dividend Stock,
all dividends paid or declared and set apart for payment upon shares of Series
A Convertible Preferred Stock (and interest on dividends in arrears at the
rate specified herein) and the Parity Dividend Stock shall be paid or declared
and set apart for payment pro rata, so that the amount of dividends paid or
declared and set apart for payment per share on the Series A Convertible
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Series A Convertible Preferred Stock and the Parity Dividend Stock bear to
each other.
Any references to "distribution" contained in this Section 5 shall
not be deemed to include any stock dividend or distributions made in
connection with any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole
discretion to issue shares of Common Stock in payment of dividends on the
Series A Convertible Preferred Stock, the Corporation shall issue and
dispatch, or cause to be issued and dispatched, by the fifth trading day after
such dividend payment date to each holder of such shares a certificate
representing the number of whole shares of Common Stock arrived at by dividing
the per share Computed Price of such shares of Common Stock into the total
amount of cash dividends such holder would be entitled to receive if the
aggregate dividends on the Series A Convertible Preferred Stock held by such
holder which are being paid in shares of Common Stock were being paid in cash;
provided, however, that if certificates representing shares of Common Stock
- -------- -------
are issued and dispatched to holders of Series A Convertible Preferred Stock
- --
subsequent to the fifth trading day after a dividend payment date, the
percentage used to calculate the Computed Price will be reduced by one
percentage point for each trading day after the third trading day following
such dividend payment date to the date of dispatch of shares of Common Stock.
No fractional shares of Common Stock shall be issued in payment of dividends.
In lieu thereof, the Corporation shall pay cash in an amount equal to the
product of (x) the Market Price of the Common Stock for the Measurement Period
applicable to such dividend times (y) the fraction of a share of Common Stock
-----
which would otherwise be issuable by the Corporation. The Corporation shall
not exercise its right to issue shares of Common Stock in payment of dividends
on Series A Convertible Preferred Stock if:
63.03.04.02 --
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid in
shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval has
not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on any
securities exchange or market on which the Common Stock is then listed; or
have not been approved for quotation if the Common Stock is traded in the
over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of one share of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of Common
Stock as a dividend payment or (B) are no longer listed on a national
securities exchange, on the Nasdaq National Market or the Nasdaq SmallCap
Market; or
(vi) the issuance of shares of Common Stock in payment of dividends
on Series A Convertible Preferred Stock held by any Restricted Person would
result in any Restricted Person beneficially owning more than 4.9% of the
Common Stock, determined as provided in the proviso to the second sentence of
Section 10(a) hereof.
63.03.04.02 --
Shares of Common Stock issued in payment of dividends on Series A
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof
is hereby authorized; and the dispatch thereof will be, and for all purposes
shall be deemed to be, payment in full of the cumulative dividends to which
holders are entitled on the applicable dividend payment date.
(c) Neither the Corporation nor any subsidiary of the
Corporation shall redeem, repurchase or otherwise acquire in any one
transaction or series of related transactions any shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock if the number of shares so
repurchased, redeemed or otherwise acquired in such transaction or series of
related transactions (excluding any Option Share Surrender) is more than
either (x) 5.0% of the number of shares of Common Stock, Junior Dividend Stock
or Junior Liquidation Stock, as the case may be, outstanding immediately prior
to such transaction or series of related transactions or (y) 1% of the number
of shares of Common Stock, Junior Dividend Stock or Junior Liquidation Stock,
as the case may be, outstanding immediately prior to such transaction or
series of related transactions if such transaction or series of related
transactions is with any one person or group of affiliated persons, unless the
Corporation or such subsidiary offers to purchase for cash from each holder of
shares of Series A Convertible Preferred Stock at the time of such redemption,
repurchase or acquisition the same percentage of such holder's shares of
Series A Convertible Preferred Stock as the percentage of the number of
outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series A Convertible Preferred Stock
equal to the greater of (i) the sum of (a) the sum of (1) the Conversion
Value, (2) an amount equal to the accrued but unpaid dividends on such share
of Series A Convertible Preferred Stock, plus (3) an amount equal to the
----
accrued and unpaid interest on dividends in arrears (determined as provided in
Section 5) through the date of purchase pursuant to this Section 5(c) plus (b)
----
an amount equal to the product obtained by multiplying (x) the sum stated in
the immediately preceding clause (a) times (y) the quotient (expressed as a
-----
percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the date of purchase
pursuant to this Section 5(c) by (B) the Conversion Percentage in effect on
--
the date of purchase pursuant to this Section 5(c) and (ii) an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, but for the purchase pursuant to this Section 5(c), be issuable
on conversion in accordance with Section 10(a) of one share of Series A
Convertible Preferred Stock and any accrued and unpaid dividends thereon and
any accrued and unpaid interest on dividends thereon in arrears if a
Conversion Notice were given by the holder of such share of Series A
Convertible Preferred Stock on the date of purchase pursuant to this Section
5(c) (determined without regard to any limitation on conversion contained in
Section 10(a)) times (y) the arithmetic average of the Market Price of the
-----
Common Stock for the Measurement Period with respect to the date of purchase
pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the
Corporation shall (1) make any Tender Offer for outstanding shares of Common
Stock, unless the Corporation contemporaneously therewith makes an offer, or
(2) enter into an agreement regarding a Tender Offer for outstanding shares of
Common Stock by any person other than the Corporation or any subsidiary of the
Corporation, unless such person agrees with the Corporation to make an offer,
in either such case to each holder of outstanding shares of Series B
Convertible Preferred Stock to purchase for cash at the time of purchase in
such Tender Offer the same percentage of shares of Series A Convertible
Preferred Stock held by such holder as the percentage of outstanding shares of
Common Stock offered to be purchased in such Tender Offer at a price per share
of Series A Convertible Preferred Stock equal to the greater of (i) the sum of
(a) the sum of (1) the Conversion Value, (2) an amount equal to the accrued
but unpaid dividends on such share of Series A Convertible Preferred Stock,
and (3) an amount equal to the accrued and unpaid interest on dividends in
arrears (determined as provided in Section 5) through the date of purchase
pursuant to this Section 5(d) plus (b) an amount equal to the product obtained
----
by multiplying (x) the sum stated in the immediately preceding clause (a)
times (y) the quotient (expressed as a percentage) obtained by dividing (A)
-
the amount determined by subtracting from 100 percent the Conversion
Percentage in effect on the date of purchase pursuant to this Section 5(d) by
--
(B) the Conversion Percentage in effect on the date of purchase pursuant to
this Section 5(d) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(d), be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series A Convertible Preferred Stock on the date
of purchase pursuant to this Section 5(d) (determined without regard to any
limitation on conversion contained in Section 10(a)) times (y) the price per
-----
share of Common Stock offered in such Tender Offer.
SECTION 6. LIQUIDATION PREFERENCE. In the event of a
-----------------------
liquidation, dissolution, or winding up of the Corporation, whether voluntary
or involuntary, the holders of Series A Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series A Convertible Preferred Stock equal to the Liquidation Preference, and
no more, before any payment shall be made or any assets distributed to the
holders of Junior Liquidation Stock; provided, however, that such rights shall
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accrue to the holders of Series A Convertible Preferred Stock only in the
event that the Corporation's payments with respect to the liquidation
preference of the holders of Senior Liquidation Stock are fully met. After
the liquidation preferences of the Senior Liquidation Stock are fully met, the
entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Series A Convertible Preferred
Stock and any Parity Liquidation Stock in proportion to the respective
preferential amounts to which each is entitled (but only to the extent of such
preferential amounts). After payment in full of the liquidation price of the
shares of the Series A Convertible Preferred Stock and the Parity Liquidation
Stock, the holders of such shares shall not be entitled to any further
participation in any distribution of assets by the Corporation. Neither a
consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities,
or other property in and of itself will be considered a liquidation,
dissolution, or winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT.
--------------------------------------------------
(1) If rules of the Nasdaq SmallCap Market ("Nasdaq") relating to stockholder
approval of certain matters which rules, at the date of filing this
Certificate of Designations, are proposed to be adopted by the Nasdaq, are
adopted by the Nasdaq and are applicable to conversion of shares of Series A
Convertible Preferred Stock so as to limit the number of shares of Common
Stock which the Corporation may issue upon conversion of shares of Series A
Convertible Preferred Stock and payment of dividends on shares of Series A
Convertible Preferred Stock, then the provisions of this Section 7 shall be
applicable. Notwithstanding any other provision herein, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Corporation or waived by the Nasdaq, the Corporation shall not be required to
issue upon conversion of shares of Series A Convertible Preferred Stock
pursuant to Section 10 more than the Maximum Share Amount, less the aggregate
number of shares of Common Stock issued by the Corporation pursuant to Section
5 as dividends on the Series A Convertible Preferred Stock. The Maximum Share
Amount shall be allocated among the shares of Series A Convertible Preferred
Stock at the time of initial issuance thereof pro rata based on the total
number of authorized shares of Series A Convertible Preferred Stock provided
in Section 2. Each certificate for shares of Series A Convertible Preferred
Stock initially issued shall bear a notation as to the number of shares
constituting the portion of the Maximum Share Amount allocated to the shares
of Series A Convertible Preferred Stock represented by such certificate for
purposes of conversion thereof. The Corporation shall maintain records which
show the number of shares of Common Stock issued by the Corporation pursuant
to Section 5 as dividends on the shares of Series A Convertible Preferred
Stock represented by each certificate, which records shall be controlling in
the absence of manifest error. Upon surrender of any certificate for shares
of Series A Convertible Preferred Stock for transfer or re-registration
thereof (or, at the option of the holder, for conversion pursuant to Section
10(a) of less than all of the shares of Series A Convertible Preferred Stock
represented thereby), the Corporation shall make a notation on the new
certificate issued upon such transfer or re-registration or evidencing such
unconverted shares, as the case may be, as to the remaining number of shares
of Common Stock from the Maximum Share Amount remaining available for
conversion of the shares of Series A Convertible Preferred Stock evidenced by
such new certificate (including, without limitation, by taking into account
the number of shares of Common Stock issued by the Corporation pursuant to
Section 5 as a dividend on the shares of Series A Convertible Preferred Stock
represented by the certificate so surrendered and not previously reflected on
the certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series A Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing
an aggregate number of shares of Series A Convertible Preferred Stock equal to
the number of shares of Series A Convertible Preferred Stock represented by
the certificate so surrendered (as reduced by any contemporaneous conversion
of shares of Series A Convertible Preferred Stock represented by the
certificate so surrendered), each certificate issued on such split-up shall
bear a notation of the portion of the Maximum Share Amount allocated thereto
determined by pro rata allocation from among the remaining portion of the
Maximum Share Amount allocated to the certificate so surrendered. If any
shares of Series A Convertible Preferred Stock represented by a single
certificate are converted in full pursuant to Section 10, all of the portion
of the Maximum Share Amount allocated to such shares of Series A Convertible
Preferred Stock which remains unissued after such conversion shall be
re-allocated pro rata to the outstanding shares of Series A Convertible
Preferred Stock held of record by the holder of record at the close of
business on the date of such conversion of the shares of Series A Convertible
Preferred Stock so converted, and if there shall be no other shares of Series
A Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series A Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than
five business days after the occurrence, give notice to each holder (by
telephone line facsimile transmission at such number as such holder has
specified in writing to the Corporation for such purposes or, if such holder
shall not have specified any such number, by overnight courier or first class
mail, postage prepaid, at such holder's address as the same appears on the
stock books of the Corporation) and any holder may at any time after the
occurrence give notice to the Corporation, in either case, if on any ten
trading days within any period of 20 consecutive trading days the Corporation
would not have been required to convert shares of Series A Convertible
Preferred Stock of such holder in accordance with Section 10(a) as a
consequence of the limitations set forth in Section 7(a)(1) had all
outstanding shares of Series A Convertible Preferred Stock held by such holder
been converted into Common Stock on each such day, determined without regard
to the limitation, if any, on such holder contained in the proviso to the
second sentence of Section 10(a) (any such notice, whether given by the
Corporation or a holder, an "Inconvertibility Notice"). If the Corporation
shall have given or been required to give any Inconvertibility Notice, or if a
holder shall have given any Inconvertibility Notice, then within ten business
days after such Inconvertibility Notice is given or was required to be given,
the holder receiving or giving, as the case may be, the Inconvertibility
Notice shall have the right by written notice to the Corporation (which
written notice may be contained in the Inconvertibility Notice given by the
holder) to direct the Corporation to redeem the portion of such holder's
outstanding shares of Series A Convertible Preferred Stock (which, if
applicable, shall be all of such holder's outstanding shares of Series A
Convertible Preferred Stock) as shall not, on the business day prior to the
date of such redemption, be convertible into shares of Common Stock by reason
of the limitations set forth in Section 7(a)(1) (determined without regard to
the limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)), within ten business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder directs the Corporation to redeem outstanding
shares of Series A Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series A Convertible
Preferred Stock, the Corporation would have been able, within the limitations
set forth in Section 7(a)(1), to convert all of such holder's outstanding
shares of Series A Convertible Preferred Stock (determined without regard to
the limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)) on any ten trading days within any period of 20
consecutive trading days commencing after the period of 20 consecutive trading
days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series A Convertible Preferred Stock,
as the case may be, had all of such holder's outstanding shares of Series A
Convertible Preferred Stock been surrendered for conversion into Common Stock
on each of such ten trading days within such 20 trading day period, then the
Corporation shall not be required to redeem any shares of Series A Convertible
Preferred Stock by reason of such Inconvertibility Notice.
(3) Notwithstanding the giving of any notice by the Corporation
to the holders of Series A Convertible Preferred Stock pursuant to Section
7(a)(2) or the giving or the absence of any notice by the holders of the
Series A Convertible Preferred Stock in response thereto or any redemption of
shares of Series A Convertible Preferred Stock pursuant to Section 7(a)(2),
thereafter the provisions of Section 7(a)(2) shall continue to be applicable
on any occasion unless the Stockholder Approval shall have been obtained from
the stockholders of the Corporation or waived by the Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation
shall make payment in immediately available funds of the applicable Share
Limitation Redemption Price to such holder of shares of Series A Convertible
Preferred Stock to be redeemed to or upon the order of such holder as
specified by such holder in writing to the Corporation at least one business
day prior to such Share Limitation Redemption Date. If the Corporation is
required to redeem all or any portion of a holder's outstanding shares of
Series A Convertible Preferred Stock pursuant to this Section 7(a), the
Corporation shall make payment to such holder of the shares of Series A
Convertible Preferred Stock to be redeemed in respect of each share of Series
A Convertible Preferred Stock to be redeemed of an amount equal to the Share
Limitation Redemption Price. Upon redemption of less than all of the shares
of Series A Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three business days after surrender of
such certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series A Convertible Preferred Stock evidenced
by such certificate which have not been redeemed. Only whole shares of Series
A Convertible Preferred Stock may be redeemed.
SECTION 8. NO SINKING FUND. The shares of Series A Convertible
---------------
Preferred Stock shall not be subject to the operation of a purchase,
retirement, or sinking fund.
SECTION 9. REDEMPTION BASED ON FLOOR PRICE AMOUNT. (1) Except
--------------------------------------
as required by Section 10(a)(iv), the Corporation shall not be required to
issue upon conversion of shares of Series A Convertible Preferred Stock
pursuant to Section 10 more than the Floor Price Amount. Upon receiving a
Conversion Notice, the Corporation shall promptly determine whether the
Conversion Price is less than the Floor Price. If the Conversion Price is
less than the Floor Price, the Corporation shall have the right, exercisable
by written notice to the holders of record of the shares of Series A
Convertible Preferred Stock who delivered such Conversion Notice ("Converting
Holders"), to redeem any shares ("Excess Shares") of Series A Convertible
Preferred Stock as to which the Converting Holders delivered a Conversion
Notice which are in excess of the Floor Price Shares. If the Corporation does
not exercise its right of redemption as to all of the Excess Shares, it shall
deliver a Conversion Deferral Notice to each Converting Holder pursuant to
Section 10(a)(iii). Any Redemption Notice under this Section shall be
delivered to the Converting Holders at their addresses appearing on the
records of the Corporation within one Business Day after receipt of the
applicable Conversion Notice and shall specify a date for completing the
redemption (the "Redemption Date") within three Business Days after receipt of
the Conversion Notice; provided, however, that any failure or defect in the
-------- -------
giving of notice to any such holder shall not affect the validity of notice to
or the redemption of shares of Series A Convertible Preferred Stock of any
other holder.
(2) On the Redemption Date and after receipt by the Corporation of
certificates for shares of Series A Preferred Stock to be redeemed pursuant to
this Section 9, the Corporation shall make payment, in immediately available
funds, of the applicable Redemption Price to each holder of Excess Shares to
be redeemed to or upon the order of such holder as specified by such holder in
writing to the Corporation at least one business day prior to the Redemption
Date. Upon redemption of less than all of the shares of Series A Convertible
Preferred Stock evidenced by a particular certificate, promptly, but in no
event later than three business days after surrender of such certificate to
the Corporation, the Corporation shall issue and deliver to the holder of
record of the surrendered certificate (or such holder's assignee) a
replacement certificate for the shares of Series A Convertible Preferred Stock
which have not been redeemed. Only whole shares of Series A Convertible
Preferred Stock may be redeemed. If the Corporation exercises its right to
redeem less than all Excess Shares of Series A Convertible Preferred Stock,
then such redemption shall be made, as nearly as practical, pro rata among the
Converting Holders.
SECTION 10. CONVERSION.
----------
(A) CONVERSION AT OPTION OF HOLDER. (i) Subject to the
----------------------------------
limitation set forth in Section 9, the limitations set forth in the legends to
appear on the certificates for the shares of Series A Preferred Stock as
provided in Section 10(a)(ii), and the provisions of Section 10(a)(iii)
regarding conversion of Excess Shares, the holders of the Series A Convertible
Preferred Stock may convert any or all of their shares of Series A Convertible
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as hereinafter provided. Subject to the
limitations referred to in the preceding sentence, each share of Series A
Convertible Preferred Stock may be converted at the office of the Conversion
Agent or at such other additional office or offices, if any, as the Board of
Directors may designate, initially into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) the
Conversion Value, (ii) accrued but unpaid dividends to the applicable
Conversion Date on the share of Series A Convertible Preferred Stock being
converted, and (iii) accrued but unpaid interest on the dividends on the share
of Series A Convertible Preferred Stock being converted in arrears to the
applicable Conversion Date at the rate provided in Section 5 (such sum, the
"Conversion Amount") by (y) the product of (I) the Conversion Percentage with
respect to the applicable Conversion Date times (II) the arithmetic average of
-----
the Market Price of the Common Stock for the Measurement Period with respect
to the applicable Conversion Date; provided, however, that in no event shall
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the amount determined in accordance with this clause be greater than $5.50
nor, except as provided by Sections 9, 10(a)(iii) and (iv), less than $4.00
U.S. per share of Common Stock (the "Floor Price") (subject to equitable
adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring on or after
the date of filing of this Certificate of Designations with the Secretary of
State of the State of Delaware), in each case subject to adjustment as
hereinafter provided (the "Conversion Rate"); provided further, however, that
---------------- -------
in no event shall any holder of shares of Series A Convertible Preferred Stock
be entitled to convert any shares of Series A Convertible Preferred Stock in
excess of that number of shares of Series A Convertible Preferred Stock upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by such holder and any person whose beneficial ownership of
shares of Common Stock would be aggregated with such holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the
Exchange Act, and Regulation 13D-G thereunder (each a "Restricted Person" and
collectively, the "Restricted Persons") (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted shares of
Series A Convertible Preferred Stock) and (2) the number of shares of Common
Stock issuable upon the conversion of the number of shares of Series A
Convertible Preferred Stock with respect to which the determination in this
proviso is being made, would result in beneficial ownership by such holder and
all Restricted Persons of such holder of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and Regulation 13D-G thereunder, except
as otherwise provided in clause (1) of the proviso to the immediately
preceding sentence.
(ii) (A) 15% of the certificates for shares of Series A
Convertible Preferred Stock shall, until such time as such legend, by its
terms, no longer applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 90TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(B) 25% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 135TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(C) 30% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 180TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(D) 30% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 240TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
Any new certificate issued upon transfer of any shares of Series A Convertible
Preferred Stock or, in connection with a conversion of shares of Series A
Convertible Preferred Stock, to evidence the unconverted balance of shares of
Series A Convertible Preferred Stock shall bear the same legend as the
certificate surrendered to the Corporation in connection herewith, if
applicable.
(iii) If the Corporation does not exercise its right to redeem
all Excess Shares pursuant to Section 9, the Corporation shall, during the
First Conversion Period, the Second Conversion Period and the Third Conversion
Period, have the right to defer conversion of such Excess Shares by delivering
to the Converting Holders, with a copy to the Transfer Agent, a Conversion
Deferral Notice within one Business Day after receipt of the Conversion Notice
to which such Conversion Deferral Notice relates. Any Conversion Deferral
Notice shall be delivered to the Converting Holders at their addresses
appearing on the records of the Corporation. If the Corporation elects to
defer conversion of Excess Shares instead of redeeming them, the Conversion
Value for each unredeemed Excess Share shall be multiplied by 105%; provided,
--------
however, that the Conversion Value for each Excess Share may be adjusted
- -------
pursuant to this Section 10(a)(iii) only once during each of the First
Conversion Period, the Second Conversion Period, and the Third Conversion
Period, although the Conversion Value for any Excess Share may be adjusted
pursuant to this Section 10(a)(iii) during successive conversion periods.
Each certificate for shares of Series A convertible Preferred Stock shall,
until such time as such legend no longer applies, contain the following
legend:
"THE CONVERSION VALUE OF THESE SECURITIES IS SUBJECT TO ADJUSTMENT AS PROVIDED
IN SECTION 10(a)(iii) OF THE CERTIFICATE OF DESIGNATIONS."
(iv) The Corporation shall have no right to defer conversion of
any Excess Shares during the Fourth Conversion Period. If the Corporation
receives a Conversion Notice during the Fourth Conversion Period, and does not
deliver a Redemption Notice to the Converting Holders in accordance with
Section 9, then the Converting Holders shall have the right to proceed with
the conversion described in the Conversion Notice notwithstanding the
limitation set forth in Section 9.
(B) OTHER PROVISIONS. (1) Notwithstanding anything in this
----------------
Section 10(b) to the contrary, no change in the Conversion Amount pursuant to
Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Rate shall actually be changed to reflect all adjustments called
for by this Section 10(b) and not previously made. Notwithstanding anything
in this Section 10(b), no change in the Conversion Amount shall be made that
would result in a Conversion Price of less than the par value of the Common
Stock into which shares of Series A Convertible Preferred Stock are at the
time convertible.
(2) The holders of shares of Series A Convertible Preferred
Stock at the close of business on the record date for any dividend payment to
holders of Series A Convertible Preferred Stock shall be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series A
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Convertible Preferred Stock surrendered for conversion during the period
between the close of business on any record date for a dividend payment and
the opening of business on the corresponding dividend payment date must pay to
the Corporation, within five days after receipt by such holder, an amount
equal to the dividend payable on such shares on such dividend payment date if
such dividend is paid by the Corporation to such holder. A holder of shares
of Series A Convertible Preferred Stock on a record date for a dividend
payment who (or whose transferee) tenders any of such shares for conversion
into shares of Common Stock on or after such dividend payment date will
receive the dividend payable by the Corporation on such shares of Series A
Convertible Preferred Stock on such date, and the converting holder need not
make any payment of the amount of such dividend in connection with such
conversion of shares of Series A Convertible Preferred Stock. Except as
provided above, no adjustment shall be made in respect of cash dividends on
Common Stock or Series A Convertible Preferred Stock that may be accrued and
unpaid at the date of surrender of shares of Series A Convertible Preferred
Stock.
(3) (A) The right of the holders of Series A Convertible
Preferred Stock to convert their shares shall be exercised by delivering
(which may be done by telephone line facsimile transmission) a Conversion
Notice to the Conversion Agent, as provided above. If a holder of Series A
Convertible Preferred Stock elects to convert any shares of Series A
Convertible Preferred Stock in accordance with Section 10(a), such holder
shall not be required to physically surrender the certificate(s) representing
such shares of Series A Convertible Preferred Stock to the Corporation unless
all of the shares of Series A Convertible Preferred Stock represented thereby
are so converted. Each holder of shares of Series A Convertible Preferred
Stock and the Corporation shall maintain records showing the number of shares
so converted and the dates of such conversions or shall use such other method,
satisfactory to such holder and the Corporation, so as to not require physical
surrender of such certificates upon each such conversion. In the event of any
dispute or discrepancy, such records of the Corporation shall be controlling
and determinative in the absence of manifest error. Notwithstanding the
foregoing, if any shares of Series A Convertible Preferred Stock evidenced by
a particular certificate therefor are converted as aforesaid, the holder of
Series A Convertible Preferred Stock may not transfer the certificate(s)
representing such shares of Series A Convertible Preferred Stock unless such
holder first physically surrenders such certificate(s) to the Corporation,
whereupon the Corporation will forthwith issue and deliver upon the order of
such holder of shares of Series A Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series A
Convertible Preferred Stock (upon payment by such holder of shares of Series A
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series A
Convertible Preferred Stock represented by such certificate(s). Each holder
of shares of Series A Convertible Preferred Stock, by acceptance of a
certificate for such shares, acknowledges and agrees that (1) by reason of the
provisions of this paragraph, following conversion of any shares of Series A
Convertible Preferred Stock represented by such certificate, the number of
shares of Series A Convertible Preferred Stock represented by such certificate
may be less than the number of shares stated on such certificate and by reason
of Section 7(a), the number of shares of Common Stock from the Maximum Share
Amount allocated to the shares of Series A Convertible Preferred Stock
represented by such certificate for purposes of conversion of such shares may
be less than the number thereof stated on such certificate and (2) the
Corporation may place a legend on the certificates for shares of Series A
Convertible Preferred Stock which refers to or describes the provisions of
this paragraph.
(B) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series A Convertible Preferred
Stock except that the Corporation shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery upon conversion of shares of Common Stock or other securities or
property in a name other than that of the holder of the shares of the Series A
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been
paid. The number of shares of Common Stock to be issued upon each conversion
of shares of Series C Convertible Preferred Stock shall be the number set
forth in the applicable Conversion Notice which number shall be conclusive
absent manifest error. The Corporation shall notify a holder who has given a
Conversion Notice of any claim of manifest error within one business day after
such holder gives such Conversion Notice and no such claim of error shall
limit or delay performance of the Corporation's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Corporation notifies a holder of shares of Series A Convertible Preferred
Stock being converted within one business day after a Conversion Notice has
been given (which notice shall specify all defects in the Conversion Notice)
and any Conversion Notice containing any such defect shall nonetheless be
effective on the date given if the converting holder promptly corrects all
such defects.
(4) The Corporation (and any successor corporation) shall take
all action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series A Convertible Preferred
Stock outstanding upon the basis herein before provided are at all times
reserved by the Corporation (or any successor corporation), free from
preemptive rights, for such conversion, subject to the provisions of the next
succeeding paragraph. If the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Series A Convertible Preferred Stock
shall be convertible as herein provided, the Corporation shall at the same
time also make proper provision so that thereafter there shall be a sufficient
number of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Series A Convertible Preferred Stock
on the new basis. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all of the
outstanding shares of Series A Convertible Preferred Stock, the Corporation
promptly shall seek such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(5) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause
appropriate provision to be made so that each holder of shares of Series A
Convertible Preferred Stock then outstanding shall have the right thereafter
to convert such shares of Series A Convertible Preferred Stock into the kind
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or share exchange by a holder of shares
of Common Stock into which such shares of Series A Convertible Preferred Stock
could have been converted immediately prior to the effective date of such
consolidation, merger, sale, transfer, or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the holders of
shares of Series A Convertible Preferred Stock on a basis as nearly as
practical as such rights exist hereunder prior thereto. If, in connection
with any such consolidation, merger, sale, transfer, or share exchange, each
holder of shares of Common Stock is entitled to elect to receive securities,
cash, or other assets upon completion of such transaction, the Corporation
shall provide or cause to be provided to each holder of Series A Convertible
Preferred Stock the right to elect the securities, cash, or other assets into
which the Series A Convertible Preferred Stock held by such holder shall be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on
the period in which such election shall be made, and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless the provisions of this paragraph have been complied with. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, or share exchanges.
(6) If a holder shall have given a Conversion Notice for shares
of Series A Convertible Preferred Stock and the Corporation shall not have
given a Redemption Notice pursuant to Section 9(a) or a Conversion Deferral
Notice pursuant to Section 10(a)(iii), the Corporation shall issue and deliver
to such person certificates for the Common Stock issuable upon such conversion
within three business days after such Conversion Notice is given and the
person converting shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common
Stock shall be absolute and unconditional, irrespective of any action or
inaction by the converting holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Corporation to the holder of
record, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the holder of any obligation to the
Corporation, and irrespective of any other circumstance which might otherwise
limit such obligation of the Corporation to the holder in connection with such
conversion. If the Corporation fails to issue and deliver the certificates
for the Common Stock to the holder converting shares of Series A Convertible
Preferred Stock pursuant to the first sentence of this paragraph as and when
required to do so, in addition to any other liabilities the Corporation may
have hereunder and under applicable law (1) the Corporation shall pay or
reimburse such holder on demand for all out-of-pocket expenses including,
without limitation, reasonable fees and expenses of legal counsel incurred by
such holder as a result of such failure, (2) the Conversion Percentage
applicable to such conversion shall be reduced by two-and-one-half percentage
points from the Conversion Percentage otherwise applicable to such conversion
and (3) such holder may by written notice (which may be given by mail,
courier, personal service or telephone line facsimile transmission) or oral
notice (promptly confirmed in writing) given at any time prior to delivery to
such holder of the certificates for the shares of Common Stock issuable upon
such conversion of shares of Series A Convertible Preferred Stock, rescind
such conversion, whereupon such holder shall have the right to convert such
shares of Series A Convertible Preferred Stock thereafter in accordance
herewith.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series A Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock to purchase fractional shares of Common
Stock which would otherwise be issuable in respect of the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the product of (i) the
arithmetic average of the Market Price of a share of Common Stock on the three
consecutive trading days ending on the trading day immediately preceding the
Conversion Date and (ii) such fraction of a share.
(8) The Conversion Amount shall be adjusted from time to time
under certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:
(i) In case the Corporation shall issue rights or warrants on a
pro rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at
a price per share less than the Current Market Price for such record date,
then in each such case the Conversion Amount in effect on such record date
shall be adjusted in accordance with the formula
C1 = C x O + N
-------
O + N x P
-------
M
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable pursuant to
the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which amount
shall include amounts received by the Corporation in respect of
the issuance and the exercise of such rights or warrants).
M = the Current Market Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive such rights or warrants.
If any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be
readjusted appropriately.
(ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined)
evidences of its indebtedness or assets (including securities, but excluding
any warrants or subscription rights referred to in subparagraph (i) above and
any dividend or distribution paid in cash out of the retained earnings of the
Corporation), then in each such case the Conversion Amount then in effect
shall be adjusted in accordance with the formula
C1 = C x M
-----
M - F
where
C1= the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Market Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair market value
on the record date of the assets or securities to be distributed divided
by the number of shares of Common Stock outstanding on the record date.
The Board of Directors shall determine such fair market value, which
determination shall be conclusive.
Such adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution. For purposes of this subparagraph (ii), "Junior Stock" shall
include any class of capital stock ranking junior as to dividends or upon
liquidation to the Series A Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant
to Section 10(b)(5), the holder of any Series A Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable
on the Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each holder and each transfer agent,
if any, for the Series A Convertible Preferred Stock and the Common Stock, a
statement signed by the Chairman of the Board, the President, or any Vice
President of the Corporation and by its Treasurer or its Secretary or an
Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation.
Whenever the Conversion Amount is adjusted, the Corporation will give notice
by mail to the holders of record of Series A Convertible Preferred Stock,
which notice shall be made within 15 days after the effective date of such
adjustment and shall state the adjustment and the Conversion Amount.
Notwithstanding the foregoing notice provisions, failure by the Corporation to
give such notice or a defect in such notice shall not affect the binding
nature of such corporate action of the Corporation.
(11) Whenever the Corporation shall propose to take any of the
actions specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of
Section 10(b)(8) which would result in any adjustment in the Conversion Amount
under this Section 10(b), the Corporation shall cause a notice to be mailed at
least 20 days prior to the date on which the books of the Corporation will
close or on which a record will be taken for such action, to the holders of
record of the outstanding Series A Convertible Preferred Stock on the date of
such notice. Such notice shall specify the action proposed to be taken by the
Corporation and the date as of which holders of record of the Common Stock
shall participate in any such actions or be entitled to exchange their Common
Stock for securities or other property, as the case may be. Failure by the
Corporation to mail the notice or any defect in such notice shall not affect
the validity of the transaction.
(C) MANDATORY CONVERSION. There shall be no mandatory
---------------------
conversion of the Series A Convertible Preferred Stock.
SECTION 11. REDEMPTION AT OPTION OF HOLDERS. The holders of
-------------------------------
shares of Series A Convertible Preferred Stock shall not be entitled to
require the Corporation to redeem any of such shares.
SECTION 12. VOTING RIGHTS. Except as otherwise required by law
-------------
or expressly provided herein, shares of Series A Convertible Preferred Stock
shall not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series A Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Restated Certificate of Incorporation if the amendment, alteration, or repeal
materially and adversely affects the powers, preferences, or special rights of
the Series A Convertible Preferred Stock, or (2) the creation and issuance of
any Senior Dividend Stock or Senior Liquidation Stock; provided, however, that
-------- -------
any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and
adversely such powers, preferences, or special rights and any such increase or
creation and issuance may be made without any such vote by the holders of
Series A Convertible Preferred Stock except as otherwise required by law.
SECTION 13. OUTSTANDING SHARES. For purposes of this
-------------------
Certificate of Designations, all shares of Series A Convertible Preferred
Stock shall be deemed outstanding except (i) from the date of surrender of
certificates representing shares of Series A Convertible Preferred Stock for
conversion into Common Stock, all shares of Series A Convertible Preferred
Stock converted into Common Stock; (ii) from the date of registration of
transfer, all shares of Series A Convertible Preferred Stock held of record by
the Corporation or any subsidiary or Affiliate (as defined herein) of the
Corporation and (iii) from the Share Limitation Redemption Date, Redemption
Date or Optional Redemption Date all shares of Series A Convertible Preferred
Stock which are redeemed, so long as in each case the Share Limitation
Redemption Price, the Redemption Price or the Optional Redemption Price, as
the case may be, of such shares of Series A Convertible Preferred Stock shall
have been paid by the Corporation as and when required hereby. For the
purposes of this Certificate of Designations, "Affiliate" means any person,
other than the original holders of the shares of Series A Convertible
Preferred Stock, directly or indirectly controlling or controlled by or under
direct or indirect common control with the Corporation. "Control" is the
power to direct the management and policies of a person, directly or through
one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise.
<PAGE>
IN WITNESS WHEREOF, American Bingo & Gaming Corp., has caused this
certificate to be signed as of the day of July, 1997.
AMERICAN BINGO & GAMING CORP.
Attest:
By: -----------------------
BY: Chief Executive Officer
SUBSCRIPTION AGREEMENT
DATED AS OF JULY 31, 1997
BY AND BETWEEN
AMERICAN BINGO & GAMING CORP.
AND
PLAZACORP INVESTMENTS LIMITED
____________________
SERIES A CONVERTIBLE PREFERRED STOCK
____________________
<TABLE>
<CAPTION>
SUBSCRIPTION AGREEMENT
SERIES A CONVERTIBLE PREFERRED STOCK
AMERICAN BINGO & GAMING CORP.
PAGE
----
<S> <C>
1. AGREEMENT TO SUBSCRIBE 1
(a) Subscription 1
(b) Form of Payment 1
(c) Method of Payment 2
2. BUYER REPRESENTATIONS, WARRANTIES, ETC. 2
(a) Purchase for Investment 2
(b) Accredited Investor 2
(c) Reoffers and Resales 2
(d) Company Reliance 2
(e) Information Provided 3
(f) Absence of Approvals 3
(g) Subscription Agreement 3
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC. 3
(a) Organization and Authority 3
(b) Capitalization 3
(c) Concerning the Shares and the Common Stock 4
(d) Subscription Agreement 4
(e) Non-contravention 4
(f) Approvals 5
(g) Information Provided 5
(h) Absence of Certain Changes 5
(i) Absence of Certain Proceedings 5
(j) Properties 6
(k) Labor Relations 6
(l) SEC Filings 6
(m) Absence of Brokers, Finders, Etc. 6
4. Certain Covenants and Acknowledgments 6
(a) Transfer Restrictions 6
(b) Restrictive Legend 7
(c) Registration Rights Agreement 7
(d) Form D 7
(e) Authorization for Trading 8
(f) Use of Proceeds 8
(g) Blue Sky Laws 8
(h) Certain Expenses 8
(i) Certain Issuances of Securities 8
(j) Certain Trading Restrictions 9
(k) Best Efforts 9
5. TRANSFER AGENT INSTRUCTIONS 9
(a) Transfer Agent Instructions 9
(b) Conversion Procedure 10
6. CLOSING DATE. 10
7. CONDITIONS TO THE COMPANY'S OBLIGATION
TO SELL AND ISSUE 10
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. 11
9. MISCELLANEOUS. 11
</TABLE>
SCHEDULES
- ---------
Schedule 3(c) NASD Items
Schedule 3(g) Blue Sky Clearances
Schedule 3(j) Property
ANNEXES
- -------
Annex I Certificate of Designations
Annex II Warrant
Annex III Registration Rights Agreement
Annex IV Joint Escrow Instructions
Annex V Transfer Agent Instructions
Annex VI Notice of Conversion
Annex VII Opinion (Closing)
<PAGE>
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of July 30, 1997, by and
-
between AMERICAN BINGO & GAMING CORP. a Delaware corporation, with
headquarters located at 515 Congress Avenue, Suite 7200, Austin, Texas 75701
(the "Company"), and PLAZACORP INVESTMENTS LIMITED, a corporation organized
under the laws of Ontario, Canada (the "Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to
the conditions of this Agreement, shares of convertible preferred stock of the
Company which will be convertible into shares of Common Stock, $.001 par value
(the "Common Stock"), of the Company and in connection therewith the Company
is to issue to the Buyer a warrant to purchase shares of Common Stock as
provided in this Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
.c.1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
.c.(A) SUBSCRIPTION;. The Buyer hereby agrees to purchase from
the Company the number of shares (the "Initial Preferred Shares") of Series A
Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), of the
Company set forth on the signature page of this Agreement, having the terms
and conditions as set forth in the form of Certificate of Designations of the
Series A Convertible Preferred Stock attached hereto as ANNEX I (the
"Certificate of Designations") at the price per share and for the aggregate
purchase price set forth on the signature page of this Agreement. The
purchase price for the Initial Preferred Shares shall be payable in United
States Dollars. In connection with the purchase of the Initial Preferred
Shares by the Buyer, the Company shall issue to the Buyer at the closing on
the Closing Date (as defined herein) a warrant in the form attached hereto as
ANNEX II (the "Warrant") to purchase 133,000 shares of Common Stock (subject
to adjustment as provided in the Warrant). The additional shares of Preferred
Stock issuable pursuant to Section 2(c) of the Registration Rights Agreement,
the form of which is attached hereto as ANNEX III (the "Registration Rights
Agreement"), are referred to herein as the "Additional Preferred Shares". The
Initial Preferred Shares and the Additional Preferred Shares are referred to
herein collectively as the "Preferred Shares." The shares of Common Stock
issuable upon conversion of the Preferred Shares are referred to herein as the
"Conversion Shares." The shares of Common Stock issuable pursuant to Section
5 of the Certificate of Designations as a dividend on the Preferred Shares are
referred to herein as the "Dividend Shares". The shares of Common Stock
issuable upon conversion of the Warrant are referred to herein as the "Warrant
Shares." The Common Shares, the Dividend Shares and the Warrant Shares are
referred to herein collectively as the "Common Shares". The Common Shares and
the Preferred Shares are referred to herein collectively as the "Shares." The
Shares and the Warrant are referred to herein collectively as the
"Securities."
.c.(B) FORM OF PAYMENT;. The Buyer shall pay the purchase price
for the Initial Preferred Shares by delivering good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint
Escrow Instructions attached hereto as ANNEX IV (the "Joint Escrow
Instructions"). Such delivery of funds shall be made against delivery by the
Company of the certificates for the Initial Preferred Shares and the Warrant
registered in the name of the Buyer. Promptly following payment by the Buyer
to the Escrow Agent of the purchase price of the Initial Preferred Shares, but
in any event prior to the Closing Date, the Company shall deliver certificates
for the Initial Preferred Shares and the Warrant, registered in the name of
the Buyer, to the Escrow Agent. The certificates for the Initial Preferred
Shares and the Warrant shall be delivered by the Company to the Escrow Agent
on a delivery against payment basis at the closing. By signing this
Agreement, the Buyer and the Company each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full. As used in this Agreement, the term "Business Day"means any
day other than a Saturday, Sunday or other day on which commercial banks in
The City of New York are authorized or required by law to remain closed.
.c.(C) METHOD OF PAYMENT;. Payment of the purchase price for
the Preferred Shares shall be made by wire transfer of funds to:
Citibank, N.A.
153 East 53rd Street
New York, New York 10043
ABA#021000089
For credit to A/C#37179446
For credit to the account of Brian W. Pusch Attorney Escrow Account
Reference: Plaza/American Bingo
Not later than 4:00 p.m., New York City time, on the date which is two
Business Days after the Company shall have accepted this Agreement and
returned a signed counterpart of this Agreement to the Buyer or its legal
counsel, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Initial Preferred Shares.
.c.2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
.c.(A) PURCHASE FOR INVESTMENT;. The Buyer is purchasing the
Preferred Shares and acquiring the Warrant for its own account for investment
only and not with a view towards the public sale or distribution thereof;
.c.(B) ACCREDITED INVESTOR;. The Buyer is an "accredited
investor" as that term is defined in Rule 501 of the General Rules and
Regulations under the 1933 Act by reason of Rule 501(a)(3);
.c.(C) REOFFERS AND RESALES;. All subsequent offers and sales
of the Shares by the Buyer shall be made pursuant to registration of the
Shares being offered and sold under the 1933 Act or pursuant to an exemption
from registration;
.c.(D) COMPANY RELIANCE;. The Buyer understands that the
Initial Preferred Shares are being offered and sold, the Warrant is being
issued, and the Common Shares and the Additional Preferred Shares are being
offered, to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
the Initial Preferred Shares and the Warrant and to receive an offer of the
Common Shares and the Additional Preferred Shares;
.c.(E) INFORMATION PROVIDED;. The Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Initial Preferred Shares and the issuance of the Warrant and the offer of
the Common Shares and the Additional Preferred Shares which have been
requested by the Buyer; the Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 (the "1996 10-K"), (2) Quarterly Report on Form 10-QSB for the fiscal
quarter ended March 31, 1997 (the "March 31 10-Q), (3) Current Report on Form
8-K dated March 18, 1997 and (4) proxy statement for the Company's 1996 Annual
Meeting, in each case as filed with the SEC (collectively, the "SEC Reports")
and a draft of the Quarterly Report on Form 10-QSB for the fiscal quarter
ended June 30, 1997; and the Buyer understands that its investment in the
Shares involves a high degree of risk;
.c.(F) ABSENCE OF APPROVALS;. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Shares;
and
.c.(G) SUBSCRIPTION AGREEMENT;. This Agreement has been duly
and validly authorized, executed and delivered on behalf of the Buyer and is a
valid and binding agreement of the Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
.c.3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees
with, the Buyer that:
.c.(A) ORGANIZATION AND AUTHORITY;. The Company and each of its
subsidiaries listed in Exhibit 21.1 to the 1996 10-K (the "Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite corporate power and
authority to (i) own, lease and operate its properties and to carry on its
business as now being conducted, and (ii) to execute, deliver and perform its
obligations under this Agreement, the Certificate of Designations, the
Warrant, the Registration Rights Agreement, the Transfer Agent Agreement, the
form of which is attached hereto as ANNEX IV (the "Transfer Agent
Instructions"), and the other agreements to be executed and delivered by the
Company in connection herewith, and to consummate the transactions
contemplated hereby and thereby. The Company and each of its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in all jurisdictions wherein such qualification is necessary and where failure
so to qualify could have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations
or prospects of the Company and its Subsidiaries, taken as a whole. The
Company has no equity investment in any person other than the Subsidiaries.
.c.(B) CAPITALIZATION;. The authorized capital stock of the
Company currently consists of (a) 20,000,000 shares of Common Stock of which
4,345,919 shares were outstanding as of July 11, 1997, all of which are fully
paid and nonassessable; and (b) 1,000,000 shares of Preferred Stock, $.001 par
value, none of which are outstanding, and 3,000 shares of which will be
designated as Series A Convertible Preferred Stock, 2,000 of which will be
issued pursuant to this Agreement; and on the Closing Date there will be no
material increase from July 11, 1997 in the number of shares of Common Stock
outstanding. As of July 11, 1997, the Company had outstanding 1,155,000
options and 3,067,500 warrants entitling the holders to purchase an aggregate
of 4,222,500 shares of Common Stock. Other than as set forth in the preceding
sentence, the Company does not have outstanding any material amount of
securities (or obligations to issue any such securities) convertible into,
exchangeable for or otherwise entitling the holders thereof to acquire shares
of Common Stock. The outstanding shares of Common Stock and outstanding
options, warrants and other securities to purchase Common Stock have been duly
authorized and validly issued. None of such outstanding shares of Common
Stock, options, warrants and other securities has been issued in violation of
the preemptive rights of any securityholder of the Company. The offers and
sales of the outstanding shares of Common Stock and options, warrants and
other rights to acquire Common Stock were at all relevant times either
registered under the 1933 Act and applicable state securities laws or exempt
from such requirements. No holder of any of the Company's securities has any
rights, "demand,""piggy-back" or otherwise, to have such securities registered
by reason of the intention to file, filing or effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement).
.c.(C) CONCERNING THE SHARES AND THE COMMON STOCK;. The Shares
have been duly authorized. The Initial Preferred Shares, when issued and paid
for in accordance with this Agreement, the Additional Preferred Shares, when
issued in accordance with the Registration Rights Agreement, and the Common
Shares, when issued upon conversion of the Preferred Shares, in payment of
dividends on the Preferred Shares or upon exercise of the Warrant, as the case
may be, will be duly and validly issued, fully paid and non-assessable and
will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive or similar rights of any stockholder of
the Company or any other person to acquire any of the Shares. The Common
Stock is listed for trading on the Nasdaq SmallCap Market ("Nasdaq") and (1)
the Company and the Common Stock meet the criteria for continued listing and
trading on Nasdaq; (2) except as listed on Schedule 3(c), the Company has not
been notified since January 1, 1995 by Nasdaq of any failure or potential
failure to meet the criteria for continued listing and trading on Nasdaq and
(3) no suspension of trading in the Common Stock is in effect. The Company
knows of no reason that the Common Shares will not be eligible for listing on
Nasdaq.
.c.(D) SUBSCRIPTION AGREEMENT; CERTIFICATE OF DESIGNATIONS;;
REGISTRATION RIGHTS AGREEMENT; WARRANT; TRANSFER AGENT INSTRUCTIONS. This
Agreement, the Certificate of Designations, the Registration Rights Agreement,
the Warrant and the Transfer Agent Instructions have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
on behalf of the Company and this Agreement is, and the Registration Rights
Agreement, the Warrant and the Transfer Agent Instructions, when executed and
delivered by the Company, will be, valid and binding obligations of the
Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and limits upon rights to indemnity.
.c.(E) NON-CONTRAVENTION;. The execution and delivery of this
Agreement by the Company and the other documents contemplated by this
Agreement and the consummation by the Company of the issuance of the Initial
Preferred Shares and the Warrant as contemplated by this Agreement, the
issuance of the Additional Preferred Shares as contemplated by the
Registration Rights Agreement and the other transactions contemplated by this
Agreement, the Registration Rights Agreement, the terms of the Preferred
Stock, the Warrant and the Transfer Agent Instructions do not and will not
with or without the giving of notice or the lapse of time, or both, (i) result
in any violation of any term of the Certificate of Incorporation or By-laws of
the Company or any of its Subsidiaries, (ii) conflict with or result in a
breach by the Company or any of its Subsidiaries of any of the terms or
provisions of, or constitute a default under, or result in the modification
of, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or
any of its Subsidiaries pursuant to, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries or any of their
respective properties or assets is bound or affected or (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory
body, administrative agency or other governmental body having jurisdiction
over the Company or any of its Subsidiaries or any of their respective
properties or assets or (iv) have any material adverse effect on any permit,
certification, registration, approval, consent, license or franchise necessary
for the Company or any of its Subsidiaries to own or lease and operate any of
their respective properties or to conduct any of their respective businesses
or the ability of the Company or any of the Subsidiaries to make use thereof.
.c.(F) APPROVALS;. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the Stockholders of the Company is required to be
obtained by the Company for (1) the execution, delivery and performance by the
Company of this Agreement, the Registration Rights Agreement (except such
authorization of the SEC as is required with respect to accelerating the
effectiveness of any registration statement filed pursuant thereto), the
Warrant and the Transfer Agent Instructions, (2) the execution, filing and
performance by the Company of the Certificate of Designations, (3) the
issuance and sale of the Initial Preferred Shares and the Warrant as
contemplated by this Agreement, (4) the issuance of the Additional Preferred
Shares as contemplated by the Registration Rights Agreement and (5) the
issuance of Conversion Shares on conversion of the Preferred Shares, the
issuance of Dividend Shares as dividends on the Preferred Shares or the
issuance of Warrant Shares upon exercise of the Warrant, other than (w)
listing of the Common Shares on Nasdaq, (x) registration of the resale of the
Common Shares under the 1933 Act as contemplated by the Registration Rights
Agreement, (y) as may be required under applicable state securities or "blue
sky"laws and (z) filing of one or more Forms D with respect to the Securities
as required under Regulation D.
.c.(G) INFORMATION PROVIDED;. The information provided by or on
behalf of the Company to the Buyer in connection with the transactions
contemplated by the Agreement, including, without limitation, the information
referred to in Section 2(e) of this Agreement, does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Company has not filed any reports
with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended (the "1934 Act") since December 31, 1996 other than the
1996 10-K and the March 31 10-Q.
.c.(H) ABSENCE OF CERTAIN CHANGES;. Since December 31, 1996,
there has been no material adverse change and no material adverse development
in the business, properties, operations, condition (financial or other),
results of operations or prospects of the Company or any of the Subsidiaries,
except as disclosed in the SEC Reports.
.c.(I) ABSENCE OF CERTAIN PROCEEDINGS;. There is no action,
suit or proceeding, before or by any court, public board or body or
governmental agency pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the Subsidiaries and
there is no inquiry or investigation before or by any court, public board or
body or governmental agency pending or, to the knowledge of the Company or any
of the Subsidiaries, threatened against the Company or any of the
Subsidiaries, in any such case wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the business, properties, the,
condition (financial or other), results of operations or prospects of the
Company and the Subsidiaries taken as a whole or the transactions contemplated
by this Agreement or any of the documents contemplated hereby or which would
adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, this Agreement or any
of such other documents; the Company does not have pending before the SEC any
request for confidential treatment of information and to the best of the
Company's knowledge no such request will be made by the Company prior to the
time the Registration Statement relating to the Common Shares which is
contemplated by the Registration Rights Agreement is first ordered effective
by the SEC; and there has not been, and to the best of the Company's knowledge
there is not pending or contemplated, any investigation by the SEC involving
the Company or any current or former director or officer of the Company.
.c.(J) PROPERTIES;. The Company and the Subsidiaries have good
title to all property real and personal (tangible and intangible) and other
assets owned by them, free and clear of all security interests, charges,
mortgages, liens or other encumbrances, except such as are described in the
SEC Reports or such as do not materially interfere with the use of such
property made, or proposed to be made, by the Company or the Subsidiaries.
The leases, licenses or other contracts or instruments under which the Company
and the Subsidiaries lease, hold or are entitled to use any property, real or
personal, are valid, subsisting and enforceable with only such exceptions as
do not materially interfere with the use of such property made, or proposed to
be made, by the Company or its Subsidiaries except as disclosed on Schedule
3(j). Neither the Company nor any of the Subsidiaries has received notice of
any material violation of any applicable law, ordinance, regulation, order or
requirement relating to its owned or leased properties.
.c.(K) LABOR RELATIONS;. No material labor problem exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company or any of the Subsidiaries.
.c.(L) SEC FILINGS;. The Company has timely filed all required
forms, reports and other documents with the SEC. All of such forms, reports
and other documents complied, when filed, in all material respects, with all
applicable requirements of the 1933 Act and the 1934 Act. The Company meets
the requirements for the use of Form S-3 for the registration of the resale of
the Shares by the Buyer.
.c.(M) ABSENCE OF BROKERS, FINDERS, ETC.; No broker, finder or
similar person is entitled to any commission, fee or other compensation by
reason of the transactions contemplated by this Agreement other than as
disclosed in writing by the Company to the Buyer prior to execution and
delivery of this Agreement by the Buyer, and the Company shall pay, and
indemnify and hold harmless the Buyer from, any claim made against the Buyer
by any person for any such commission, fee or other compensation.
.c.4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS;.
.c.(A) TRANSFER RESTRICTIONS;. The Buyer acknowledges that (1)
the Preferred Shares and the Warrant have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in the
Registration Rights Agreement, the Common Shares have not been and are not
being registered under the 1933 Act, and the Securities may not be transferred
unless (A) subsequently registered thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption
from such registration; (2) any resale of the Securities made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable, any such
resale of Securities under circumstances in which the seller, or the person
through whom the sale is made, may be deemed to be an underwriter, as that
term is used in the 1933 Act, may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (3)
neither the Company nor any other person is under any obligation to register
the Securities (other than pursuant to the Registration Rights Agreement)
under the 1933 Act or to comply with the terms and conditions of any exemption
thereunder (other than pursuant to Section 4(d) hereof and pursuant to the
Registration Rights Agreement).
.c.(B) RESTRICTIVE LEGEND;. (1) The Buyer acknowledges and
agrees that the Preferred Shares shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act
of 1933, as amended, or an opinion of counsel that registration is not
required under said Act.
(2) The Buyer further acknowledges and agrees that the Warrant
shall bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Warrant):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act
of 1933, as amended, or an opinion of counsel that registration is not
required under said Act.
(3) The Buyer further acknowledges and agrees that until such
time as the Common Shares have been registered for resale under the 1933 Act
as contemplated by the Registration Agreement, the certificates for the Common
Shares, may bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of the certificates for
the Common Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act
of 1933, as amended, or an opinion of counsel that registration is not
required under said Act.
Once the Registration Statement required to be filed by the Company pursuant
to Section 2 of the Registration Rights Agreement has been declared effective,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC which bear such restrictive legend and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three days
after surrender of such certificates by the Buyer and (2) the Company shall
not place any restrictive legend on certificates for Common Shares issued on
conversion of or payment of dividends on the Preferred Shares or upon exercise
of the Warrant or impose any stop-transfer restriction thereon.
.c.(C) REGISTRATION RIGHTS AGREEMENT;. The parties hereto agree
to enter into the Registration Rights Agreement on or before the Closing Date.
.c.(D) FORM D; BLUE SKY LAWS;. The Company agrees to file a
Form D with respect to the Shares as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The Buyer
agrees to cooperate with the Company in connection with such filing and, upon
request of the Company, to provide all information relating to the Buyer
reasonably required for such filing.
.c.(E) AUTHORIZATION FOR TRADING; REPORTING STATUS;. On or
before the Closing Date, the Company shall file a notification for listing of
additional shares with the Nasdaq and shall provide evidence of such filing to
the Buyer. So long as the Buyer beneficially owns any of the Preferred
Shares, the Warrant or the Common Shares, the Company shall file all reports
required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934
Act and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
.c.(F) USE OF PROCEEDS;. Neither the Company nor any subsidiary
of the Company owns or has any present intention of acquiring any "margin
stock" as defined in Regulation G (12 CFR Part 207) of the Board of Governors
of the Federal Reserve System ("margin stock"). The proceeds of sale of the
Preferred Shares will be used for general working capital purposes and in the
operation of the Company's business. None of such proceeds will be used,
directly or indirectly (1) (other than financing its subsidiaries in the
ordinary course of business) to make any loan to or investment in any other
person or (2) for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to
purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute the transactions contemplated by this Agreement
a "purpose credit" within the meaning of such Regulation G. Neither the
Company nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or the transactions contemplated hereby to
violate Regulation G, Regulation T or any other regulation of the Board of
Governors of the Federal Reserve System or to violate the 1934 Act, in each
case as in effect now or as the same may hereafter be in effect.
.c.(G) BLUE SKY LAWS;. On or before the Closing Date, the
Company shall take such action as shall be necessary to qualify, or to obtain
an exemption for, the Initial Preferred Shares for sale to the Buyer pursuant
to this Agreement, the Additional Preferred Shares for issuance to the Buyer
pursuant to the Registration Rights Agreement, the Warrant for issuance to the
Buyer pursuant to this Agreement and the Common Shares for issuance to the
Buyer on conversion of or dividends on the Preferred Shares or exercise of the
Warrants under such of the securities or "blue sky" laws of jurisdictions as
shall be applicable to the sale of the Initial Preferred Shares pursuant to
this Agreement, issuance of the Additional Preferred Shares pursuant to the
Registration Rights Agreement and the issuance to the Buyer of Common Shares
on conversion of or as dividends on the Preferred Shares of the Warrant
pursuant to this Agreement, and the issuance or upon exercise of the Warrants.
The Company shall furnish copies of all filings, applications, orders and
grants or confirmations of exemptions relating to such securities or "blue
sky" laws on or prior to the Closing Date. The cost of obtaining additional
blue sky clearances in additional states beyond the Company's current blue sky
clearances listed on SCHEDULE 3(G) shall be borne by the holders requesting
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such clearances.
.c.(H) CERTAIN EXPENSES;. Whether or not the closing occurs,
the Company shall pay or reimburse the Buyer for all reasonable expenses
(including, without limitation, legal fees and expenses of counsel to the
Buyer) incurred by the Buyer, not in excess of $10,000, in connection with
this Agreement and the transactions contemplated hereby.
.c.(I) CERTAIN ISSUANCES OF SECURITIES;. (1) If the
transactions contemplated by this Agreement are subject to the rules proposed
to be adopted by Nasdaq which would require stockholder approval of certain
transactions (the "Nasdaq Stockholder Approval Rules"), then unless the
Company obtains Stockholder Approval (as defined in the Certificate of
Designations) or a waiver thereof from Nasdaq, the Company will not issue any
shares of Common Stock or shares of any other series of preferred stock or
other securities convertible into, exchangeable for or otherwise entitling the
holder to acquire shares of Common Stock which would be subject to the Nasdaq
(or any successor or replacement provision thereof) and which would be
integrated with the sale of the Preferred Shares to the Buyer or the issuance
of Common Shares upon conversion thereof Stockholder Approval Rules for
purposes of the Nasdaq Stockholder Approval Rules (or any successor or
replacement provision thereof).
(2) During the period from the date of this Agreement to the date on
which the Registration Statement (as defined in the Registration Rights
Agreement) shall have been effective with the SEC for 60 consecutive days, the
Company shall not offer, sell, contract to sell or issue (or engage any person
to assist the Company in taking any such action) any equity securities or
securities convertible into, exchangeable for or otherwise entitling the
holder to acquire, any Common Stock (collectively, "Equity Securities") at a
price below the market price of the Common Stock without (a) giving the Buyer
the first right to acquire the Equity Securities on the same terms at which
the Equity Securities are to be offered to other investors (and on terms which
permit the Buyer to purchase a pro rata portion of such Equity Securities,
based on the portion of the shares of Preferred Stock purchased by the Buyer
pursuant to this Agreement), and (b) obtaining the consent of the holders of a
majority of the shares of the Preferred Shares which consent will not
unreasonably be withheld; provided, however, that nothing in this Section
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4(i)(2) shall prohibit the Company from issuing securities (x) pursuant to
compensation plans for employees, directors, officers, advisers or consultants
of the Company and in accordance with the terms of such plans as in effect as
of the date of this Agreement, (y) upon exercise of conversion, exchange,
purchase or similar rights issued, granted or given by the Company and
outstanding as of the date of this Agreement or (z) in connection with the
acquisition of all or substantially all the assets or stock of another entity.
.c.(J) CERTAIN TRADING RESTRICTIONS;. The Buyer agrees that
----------------------------
during the period from the Closing Date to the date of conversion in full or
redemption of all Preferred Shares owned by the Buyer, the Buyer shall not
engage in short sales with respect to the Common Stock, provided that the
foregoing shall not be deemed to restrict the Buyer from offering to sell
shares of Common Stock during the two Business Days immediately prior to the
Buyer's delivery of a Notice of Conversion.
.c.(K) BEST EFFORTS;. Each of the parties shall use its best
------------
efforts timely to satisfy each of the conditions to the other party's
obligations to sell and purchase the Preferred Shares set forth in Section 7
or 8, as the case may be, of this Agreement on or before the Closing Date.
.c.5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
.c.(A) TRANSFER AGENT INSTRUCTIONS;. Promptly following the
delivery by the Buyer of the aggregate purchase price for the Initial
Preferred Shares in accordance with Section 1(c) hereof, and in any event
prior to the Closing Date, the Company will (1) execute and deliver the
Transfer Agent Instructions substantially in the form attached hereto as ANNEX
V to and thereby irrevocably instruct, American Stock Transfer & Trust
Company, as Transfer Agent and Registrar (the "Transfer Agent"), to issue
certificates for the Common Shares from time to time upon conversion of the
Preferred Shares and exercise of the Warrant in such amounts as specified from
time to time to the Transfer Agent in the Notices of Conversion surrendered in
connection with such conversions and referred to in Section 5(b) of this
Agreement and the Form of Subscription in the form attached to the Warrant and
(2) appoint the Transfer Agent the conversion agent for the Preferred Stock
and the exercise agent for the Warrant. The certificates for the Common
Shares may bear the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the resale of the Common Shares under the
1933 Act. The certificates for the Common Shares shall be registered in the
name of the Buyer or its nominee and in such denominations to be specified by
the Buyer in connection with each conversion of Preferred Shares or the
exercise of the Warrant. The Company warrants that no instruction other than
(x) such instructions referred to in this Section 5, (y) stop transfer
instructions to give effect to Section 4(a) hereof prior to registration of
the resale of the Common Shares under the 1933 Act and (z) the instructions
required by Section 3(n) of the Registration Rights Agreement will be given by
the Company to the Transfer Agent and that the Common Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement. Nothing in this Section 5(a) shall limit
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Shares. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory in form, scope and
substance to the Company that registration of a resale by the Buyer of any of
the Shares in accordance with clause (1)(B) of Section 4(a) of this Agreement
is not required under the 1933 Act, the Company shall permit the transfer of
such Shares and, in the case of the Common Shares, promptly, but in no event
later than three days after receipt of such opinion, instruct the Company's
transfer agent to issue upon transfer one or more share certificates in such
name and in such denominations as specified by the Buyer. Nothing in this
Section 5(a) shall limit the obligations of the Company under Section 3(n) of
the Registration Rights Agreement.
.c.(B) CONVERSION PROCEDURE;. In connection with the exercise
of conversion rights relating to the Preferred Shares, the Buyer or any
subsequent holder of the Preferred Shares shall complete, sign and furnish to
the Transfer Agent a Notice of Conversion in the form attached hereto as ANNEX
VI, which shall be deemed to satisfy all requirements of the Certificate of
Designations.
.c.6. CLOSING DATE.;
The date and time of the issuance and sale of the Initial Preferred
Shares and the issuance of the Warrant (the "Closing Date") shall be 12:00
noon, New York City time, on the date which is three Business Days after the
date on which the Buyer has deposited the purchase price for the Preferred
Shares with the Escrow Agent in accordance with Section 1(c) hereof, or such
other mutually agreed to time. The closing shall occur on the Closing Date at
the offices of the Escrow Agent.
.c.7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the
Initial Preferred Shares and issue the Warrant to the Buyer pursuant to this
Agreement is conditioned upon the satisfaction of the following conditions
precedent on or before the Closing Date (any or all of which may be waived by
the Company in its sole discretion):
(a) The receipt and acceptance by the Company of this Agreement
as evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the purchase price for the Initial
Preferred Shares in accordance with Section 1(c) hereof; and
(c) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before
the Closing Date.
.c.8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.;
The Company understands that the Buyer's obligation to purchase the
Initial Preferred Shares and acquire the Warrant on the Closing Date is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Buyer in its
sole discretion):
(a) Delivery by the Company to the Escrow Agent of the
certificates for the Initial Preferred Shares and the Warrant in accordance
with this Agreement;
(b) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date and the performance by the Company on or before the Closing Date
of all covenants and agreements of the Company required to be performed on or
before the Closing Date and receipt by the Buyer of a certificate, dated the
Closing Date, of the Chief Executive Officer or the Chief Financial Officer of
the Company confirming such matters and such other matters as the Buyer may
reasonably request;
(c) The receipt by the Buyer of confirmation of the filing with
the Secretary of State of the State of Delaware of the Certificate of
Designations;
(d) The receipt by the Buyer of a certificate, dated the Closing
Date, of the Secretary of the Company certifying (1) the Certificate of
Incorporation and By-Laws of the Company as in effect on the Closing Date, (2)
all resolutions of the Board of Directors (and committees thereof) of the
Company relating to this Agreement and the transactions contemplated hereby
and (3) such other matters as reasonably requested by the Buyer; and
(e) Receipt by the Buyer on the Closing Date of an opinion of
counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX VII
attached hereto.
.c.9. MISCELLANEOUS. ;
(A) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
(B) COUNTERPARTS. This Agreement may be executed in
counterparts and by the parties hereto on separate counterparts, all of which
together shall constitute one and the same instrument. A facsimile
transmission of this Agreement bearing a signature on behalf of a party hereto
shall be legal and binding on such party.
(C) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.
(D) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
(E) AMENDMENTS. No amendment, modification, waiver, discharge
or termination of any provision of this Agreement nor consent to any departure
by the Buyer or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties hereto
shall operate as an amendment of this Agreement.
(F) WAIVERS. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, or any course of dealings between the parties, shall not
operate as a waiver thereof or an amendment hereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or exercise of any other right or power.
(G) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by mail or delivered
personally (which shall include telephone line facsimile transmission with
answer back confirmation) or by courier and shall be effective five days after
being placed in the mail, if mailed, or upon receipt, if delivered personally
or by courier, in the case of the Company addressed to the Company at its
address shown in the introductory paragraph of this Agreement, Attention:
Chief Executive Officer (telephone line facsimile transmission number (512)
472-4307) or, in the case of the Buyer, at its address shown on the signature
page of this Agreement, or such other address as a party shall have provided
by notice to the other party in accordance with this provision. The Buyer
hereby designates as its address for any notice required or permitted to be
given to the Buyer pursuant to the Certificate of Designations the address
shown on the signature page of this agreement, with a copy to: The Law Offices
of Brian W Pusch, Penthouse Suite, 29 West 57th Street, New York, New York
10019 (telephone line facsimile transmission number (212) 980-7055) until the
Buyer shall designate another address for such purpose.
(H) ASSIGNMENT. Prior to the Closing Date, the Buyer shall have
the right to assign its rights and obligations under this Agreement with
respect to the purchase of all or any portion of the Initial Preferred Shares
and the issuance of the Warrants, provided any such assignee, by written
instrument duly executed by such assignee, assumes all obligations of the
Buyer hereunder with respect to the purchase of the portion of the Preferred
Shares or the Warrant so assigned and makes the same representations and
warranties with respect thereto as the Buyer makes in this Agreement,
whereupon the Buyer shall be relieved of any further obligations,
responsibilities and liabilities with respect to the purchase of all or the
portion of the Preferred Shares the obligation for the purchase of which has
been so assigned. In the case of any such assignment, the Company shall agree
in writing with such assignee to make available to such assignee the benefits
of the Registration Rights Agreement with respect to the Common Shares
issuable on conversion of the Preferred Shares or exercise of the Warrant with
respect to which the purchase under this Agreement has been so assigned. Any
transfer of the Preferred Shares or the Warrant by the Buyer after the Closing
Date shall be made in accordance with Section 4(a).
(I) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Preferred Shares and shall remain in full force and effect regardless
of any investigation made by or on behalf of them or any person controlling or
advising any of them.
(J) ENTIRE AGREEMENT. This Agreement and its Annexes set forth
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings, whether
written or oral, with respect thereto.
(K) TERMINATION. The Buyer shall have the right to terminate
this Agreement by giving notice to the Company at any time at or prior to the
Closing Date if:
63.03.04.01-P --
(1) the Company shall have failed, refused, or been unable at or
prior to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or
before August 7, 1997, other than solely by reason of a breach of this
Agreement by the Buyer.
63.03.04.01-P --
Any such termination shall be effective upon the giving of notice thereof by
the Buyer. Upon such termination, the Buyer shall have no further obligation
to the Company hereunder and the Company shall remain liable for any breach of
this Agreement or the other documents contemplated hereby which occurred on or
prior to the date of such termination.
(L) FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
(M) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the
Buyer shall have the right to approve before issuance any press releases or
any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or other public
disclosure with respect to such transactions as is required by applicable law
and regulations (although the Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
(N) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set
forth below.
NUMBER OF SHARES:
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $
BUYER: PLAZACORP INVESTMENTS LIMITED
SIGNATURE
Title:
Address: 3845 Bathurst Street
Suite 202
North York, Ontario
M3H 3N2 Canada
COMPANY: AMERICAN GAMING & BINGO CORP.
By:
Title:
Schedule 3(c)
to
Subscription Agreement
On April 30, 1997, Nasdaq notified the Company that the Company had
failed to file certain information regarding the Company's 1997 Stock Option
Plan. The Company filed a Notification folder for Listing of Additional
Shares on June 5, 1997, supplying the supplemental information requested by
Nasdaq.
<PAGE>
Schedule 3(j)
to
Subscription Agreement
The Company's leases on one bingo center in Mobile, Alabama and on
in Austin, Texas have expired. The Company is operating those centers on
month-to-month leases while it seeks to negotiate longer term leases. The
current lease payments for those centers are approximately $3,000 per month in
Mobile, Alabama and $7,000 per month in Austin, Texas.
September 22, 1997
American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1500
Austin, Texas 78701
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to American Bingo & Gaming Corp.
("Company"), a Delaware corporation, pursuant to a Registration Statement on
Form S-3, as filed with the Securities and Exchange Commission on September
22, 1997 (the "Registration Statement"), covering (i) 189,500 shares of the
Company's Common Stock, $.001 par value ("Common Stock"); (ii) 237,500
Redeemable Common Stock Purchase Warrants ("Warrants"); (iii) 455,500 shares
of Common Stock to be issued from time to time upon exercise of (a) Warrants,
(b) a stock option, and (c) warrants for the purchase of 133,000 shares of
Common Stock; and (iv) up to 700,000 shares of Common Stock to be issued from
time to time upon conversion of the Company's Series A Preferred Stock.
In acting as counsel for the Company and arriving at the opinions as
expressed below, we have examined and relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company, agreements and other instruments, certificates of officers and
representatives of the Company, certificates of public officials and other
documents as we have deemed necessary or appropriate as a basis for the
opinions expressed herein.
In connection with our examination we have assumed the genuineness
of all signatures, the authenticity of all documents tendered to us as
originals, the legal capacity of natural persons and the conformity to
original documents of all documents submitted to us as certified or
photostated copies.
Based on the foregoing, and subject to the qualifications and
limitations set forth herein, it is our opinion that:
1. The Company has authority to issue the Common Stock and Warrants in
the manner and under the terms set forth in the Registration Statement.
2. The Common Stock and Warrants have been duly authorized and when
issued, delivered and paid for by recipients in accordance with their
respective terms, will be validly issued, fully paid and non-assessable.
We express no opinion with respect to the laws other than those of
the State of New York and Federal Laws of the United States of America, and we
assume no responsibility as to the applicability or the effect of the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to
the Registration Statement and its use as part of the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit
in connection with the Registration Statement. It is not to be used,
circulated, quoted or otherwise referred to for any other purpose. Other than
the Company no one is entitled to rely on this opinion.
Very truly yours,
SILVERMAN, COLLURA, CHERNIS, & BALZANO, P.C.
/s/Silverman, Collura, Chernis & Balzano, P.C.
-----------------------------------------
Consent of Independent Accountants
We consent to the incorporation by reference in the Registration Statement of
American Bingo & Gaming Corp. on Form S-3 of our report dated February 21,
1997, except for Note 14 as to which the date is March 1, 1997, on our audits
of the consolidated financial statements of American Bingo & Gaming Corp. and
subsidiaries as of December 31, 1996 and for the years ended December 31, 1996
and for the years ended December 31, 1996 and 1995, which report is included
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934. We also
consent to the reference to our firm under the caption "Experts".
WEINICK SANDERS LEVENTHAL & CO., LLP
(Successors the the Practice of Weinick, Sanders & Co. LLP)
New York, N.Y.
September 19, 1997
