SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE FISCAL QUARTER ENDED JUNE 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file No. 0-13530
---------
AMERICAN BINGO & GAMING CORP.
-----------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 74-2723809
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 CHARLESTON HIGHWAY, WEST COLUMBIA, SC 29169
-------------------------------------------------
(Address of principal executive offices)
(803) 796-7875
--------------
(Issuer's telephone number)
515 CONGRESS AVENUE, SUITE 1200, AUSTIN, TEXAS 78701
-----------------------------------------------------
(Former address of principal executive offices)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ X ] NO [ ]
As of AUGUST 14, 1998, the Issuer had 9,403,117 shares of its Common Stock, par
value $.001 per share, issued and outstanding.
Transitional Small Business Disclosure Format: YES [ ] NO [X ]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
June 30, 1998
- ------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $10,685,513
Accounts receivable 832,044
Notes receivable - current, net 117,108
Prepaid expenses 426,842
Other current assets 71,820
- ------------------------------------------------------------------------------------------
Total Current Assets 12,133,327
Property and Equipment, net 5,948,661
Other Assets:
Notes receivable, net 1,127,448
Prepaid license expense 2,036,694
Intangible assets, net 2,930,592
Other non-current assets 294,755
- ------------------------------------------------------------------------------------------
Total Other Assets 6,389,489
TOTAL ASSETS $24,471,477
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,793,104
Borrowings under line of credit 1,489,647
Note payable - current 771,072
Capital leases payable - current 419,429
- ------------------------------------------------------------------------------------------
Total Current Liabilities 4,473,252
Long-term liabilities:
Note payable, net 997,883
Capital leases payable, net 359,491
- ------------------------------------------------------------------------------------------
Total Long-term Liabilities 1,357,374
Stockholders' Equity:
Preferred Stock, $.01 par value, authorized 1,000,000 shares, Issued and
Outstanding 1,187 shares, Liquidation preference of $1,000 per share 12
Common Stock, $.001 par value, authorized 20,000,000 shares,
Issued and outstanding 9,570,902 shares 9,571
Treasury Stock (182,915)
Additional paid-in capital 24,019,865
Accumulated deficit (5,205,682)
- ------------------------------------------------------------------------------------------
Total Stockholders' Equity 18,640,851
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,471,477
=========================================================================================
See notes to consolidated financial statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For Three Months Ended June 30, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Video gaming $ 2,407,881 $ 2,440,733
Bingo 1,090,255 800,344
Other 237,961 119,147
------------- -------------
TOTAL REVENUES 3,736,097 3,360,224
COSTS AND EXPENSES:
Direct salaries and other compensation 603,674 476,286
Rent and utilities 1,089,525 334,500
Direct operating costs 1,478,075 443,926
Depreciation and amortization 845,586 359,572
General and administrative 1,588,874 906,910
------------- -------------
TOTAL COSTS AND EXPENSES 5,605,734 2,521,194
- -----------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (1,869,637) 839,030
OTHER INCOME AND EXPENSES:
Interest income 187,372 60,873
Other income --- 21,170
Interest and other expense (104,152) (37,500)
TOTAL OTHER INCOME AND EXPENSES 83,220 44,543
- -----------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES (1,786,417) 883,573
PROVISION FOR INCOME TAXES 38,500 184,956
- -----------------------------------------------------------------------------------------------
NET INCOME (LOSS) ($1,824,917) $ 698,617
===============================================================================================
EARNINGS (LOSS) PER SHARE:
Basic ($.19) $ .10
Diluted ($.19) $ .09
Weighted average shares outstanding 9,528,869 7,176,043
Weighted average shares outstanding - assuming full dilution 9,528,869 7,742,668
See notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For Six Months Ended June 30, 1998 1997
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES:
Video gaming $ 5,007,035 $ 4,818,821
Bingo 2,072,021 1,463,481
Other 374,316 186,032
------------- -------------
TOTAL REVENUES 7,453,372 6,468,334
COSTS AND EXPENSES:
Direct salaries and other compensation 1,143,702 850,722
Rent and utilities 1,587,927 674,074
Direct operating costs 2,005,588 848,212
Depreciation and amortization 1,586,201 718,272
General and administrative 2,592,853 1,837,306
------------- -------------
TOTAL COSTS AND EXPENSES 8,916,271 4,928,586
- -----------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) (1,462,899) 1,539,748
OTHER INCOME AND EXPENSES:
Interest income 367,913 114,232
Other income 35,104 52,036
Interest and other expense (195,907) (54,901)
TOTAL OTHER INCOME AND EXPENSES 207,110 111,367
- -----------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES (1,255,789) 1,651,115
PROVISION FOR INCOME TAXES 114,903 335,743
- -----------------------------------------------------------------------------------------------
NET INCOME (LOSS) ($1,370,692) $ 1,315,372
===============================================================================================
EARNINGS (LOSS) PER SHARE:
Basic ($.15) $ .19
Diluted ($.15) $ .18
Weighted average shares outstanding 9,450,966 6,984,331
Weighted average shares outstanding - assuming full dilution 9,450,966 7,396,695
See notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For Six Months Ended June 30, 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,370,692) $ 1,315,372
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,586,201 718,272
Non-cash write-offs and charges 1,727,532 ---
Changes in operating assets and liabilities, net 583,666 52,525
- -----------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,526,707 $ 2,086,169
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital and intangible expenditures (1,813,762) (2,127,685)
License expenditures (2,067,958) (694,030)
Collections of notes receivable 179,014 187,700
Issuance of notes receivable (197,767) ---
- -----------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES ($3,900,473) ($2,634,015)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes (413,734) (83,814)
Payments on capital leases (185,321) --
Proceeds from capital leases -- 113,667
Proceeds from margin line of credit 1,489,647 --
Proceeds from issuance of common stock 39,000 --
Payments of warrant financing costs (354,422) --
Repurchase of common stock (182,971) --
Preferred stock conversions (208,674)
Dividend payments to preferred stockholders (61,108) --
- -----------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 122,417 $ 29,853
NET DECREASE IN CASH ($1,251,349) ($517,993)
CASH - BEGINNING OF YEAR $ 11,936,862 $ 1,373,057
- -----------------------------------------------------------------------------------
CASH - END OF PERIOD $ 10,685,513 $ 855,064
===================================================================================
See notes to consolidated financial statements.
</TABLE>
4
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of American Bingo & Gaming Corp. and its wholly-owned subsidiaries,
hereafter collectively referred to as "the Company." The financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments and inter-company eliminations
considered necessary for a fair presentation of the interim financial statements
have been included. Certain items in the financial statements have been
reclassified to maintain consistency and comparability for all periods
presented. Operating results for the three- and six-month periods ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998. Except for historical information
contained herein, certain matters set forth in this report are forward looking
statements that are subject to substantial risks and uncertainties, including
the impact of government regulation and taxation, customer attendance and
spending, competition, and general economic conditions, among others. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-KSB for the fiscal
year ended December 31, 1997.
NOTE 2 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and Equipment at June 30, 1998 consists of the following:
<S> <C> <C>
Land $ 189,671
Buildings and improvements 379,342
Leasehold improvements 2,110,204
Video gaming machines and bingo equipment 6,173,167
Equipment, furniture and fixtures 815,636
Automobiles 519,789
----------
Sub-total 10,187,809
Accumulated depreciation and amortization (4,239,148)
------------
Property and Equipment, net $ 5,948,661
</TABLE>
NOTE 3 INTANGIBLE ASSETS
<TABLE>
<CAPTION>
Intangible Assets at June 30, 1998 consist of the following:
<S> <C> <C>
Goodwill $3,498,019
Covenants not to compete 228,891
----------
Sub-total 3,726,910
Accumulated amortization (796,318)
-----------
Intangible Assets, net $2,930,592
</TABLE>
5
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
NOTE 4 INCOME TAXES
The Company recorded $38,500 and $114,903 of income tax liability, respectively,
for the quarter and six month periods ended June 30, 1998. The Company does not
expect to incur material income tax liabilities until the depletion of its
accumulated tax loss carryforwards, which totaled approximately $2.2 million at
the end of 1997.
NOTE 5 EARNINGS (LOSS) PER SHARE
A reconciliation of basic to diluted earnings (loss) per share is as follows:
<TABLE>
<CAPTION>
Three months ended June 30, 1998 1997
- ---------------------------------------- -------------------------- ----------------------
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C>
Numerator:
- ----------------------------------------
Net Income (Loss) ($1,824,917) ($1,824,917) $ 698,617 $ 698,617
less Preferred Dividends (29,283) --- --- ---
------------ ------------ ---------- ----------
Income Available to Common Shareholders ($1,854,200) ($1,824,917) $ 698,617 $ 698,617
Denominator:
- ----------------------------------------
Weighted Average Shares Outstanding 9,528,869 9,528,869 7,176,043 7,176,043
Effect of Dilutive Securities:
Preferred Stock --- --- --- ---
Stock Options and Warrants --- --- --- 566,625
------------ ------------ ---------- ----------
Weighted Average Shares Outstanding 9,528,869 9,528,869 7,176,043 7,742,668
Earnings (Loss) Per Share ($.19) ($.19) $ .10 $ .09
Six months ended June 30, 1998 1997
- ---------------------------------------- -------------------------- ----------------------
Basic Diluted Basic Diluted
Numerator:
- ----------------------------------------
Net Income (Loss) ($1,370,692) ($1,370,692) $1,315,372 $1,315,372
less Preferred Dividends (61,108) --- --- ---
------------ ------------ ---------- ----------
Income Available to Common Shareholders ($1,431,800) ($1,370,692) $1,315,372 $1,315,372
Denominator:
- ----------------------------------------
Weighted Average Shares Outstanding 9,450,966 9,450,966 6,984,331 6,984,331
Effect of Dilutive Securities:
Preferred Stock --- --- --- ---
Stock Options and Warrants --- --- --- 412,364
------------ ------------ ---------- ----------
Weighted Average Shares Outstanding 9,450,966 9,450,966 6,984,331 7,396,695
Earnings (Loss) Per Share ($.15) ($.15) $ .19 $ .18
</TABLE>
6
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
NOTE 6 WRITE-OFFS AND CHARGES
The Company recorded approximately $2.0 million of asset write-downs,
reorganization charges and other unusual items in the second quarter of 1998.
The Company's new management determined that certain write-offs were necessary
to reduce non-performing assets to their net realizable values. Certain charges
were also taken to reflect expected losses from future lease payments on idle or
unprofitable bingo properties and expected costs for the Company's recent
management reorganization and corporate office relocation. Management
continually reviews asset valuations. Although there can be no assurance,
management does not expect to incur further material write-downs or charges in
the foreseeable future.
Write-offs in the second quarter included $460,000 for leasehold improvement
costs for idle or unprofitable bingo centers acquired in 1997; $204,000 for
discontinued "8-Liner" gaming machines acquired in 1997; $163,000 for
uncollectible bingo advances, receivables and deposits from 1997; and $100,000
for previously capitalized legal, public relations and other related costs.
Charges in the second quarter included $500,000 for future rent obligations on
idle or unprofitable bingo centers acquired in 1997 and $300,000 for management
reorganization, legal and corporate office relocation expenses. The Company also
recorded over $270,000 of costs in the second quarter for unusually high legal
expenses, travel,recruiting, relocation and other operating expenses.
NOTE 7 SHAREHOLDERS' EQUITY
The Company has issued approximately 340,000 shares since the beginning of 1998,
including 205,000 shares issued for preferred stock conversions, 29,630 shares
issued pursuant to acquisitions, and 33,000 shares for the exercise of employee
stock options. The Company's share issuances have been partially offset by the
repurchase of nearly 56,000 shares for $183,000 through a stock buyback program
beginning in the second quarter. The Company's Board of Directors authorized the
Company to purchase up to 1.0 million shares of its common stock in open
market or privately-negotiated transactions over an unspecified period of time.
NOTE 8 CONTINGENCIES
In July of 1995 the Company acquired three Florida bingo centers from an
individual (seller), and in December of 1995 the Company re-sold these three
bingo centers. In June of 1997, the seller filed a lawsuit against the Company,
alleging breach of contract on these purchases and default on purchase note and
stock obligations per sales agreements. In July of 1997 the Company filed a
counterclaim against the seller, alleging fraud, negligent representation,
breach of contract and other charges related to the Company's purchase. The
Company believes that the seller's lawsuit against the Company is completely
without merit and that the Company will prevail in its counterclaim against him.
There can be no assurance of this result, however, and a decision against the
Company could have a potentially adverse effect on the financial position and
operations of the Company.
7
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1998
NOTE 8 CONTINGENCIES (CONTINUED)
In 1997 one of the Company's subsidiaries was named a defendant (among many
other video gaming operators) in a legal action in the Federal U.S. District
Court in Columbia, South Carolina. This action alleges various wrongful acts by
the defendants, including allegations that certain of the defendants' video
gaming operations in South Carolina: i) comprise a lottery, which violates the
state constitution; ii) violate the state's daily net video gaming machine
payout limit of $125 per player; iii) violate the state's single premise rule
which only allows up to five video gaming machines per premise; and iv) violate
the state's prohibition against beer and wine permit holders allowing gambling
or games of chance. The plaintiffs in this action are attempting to have this
action certified as a class action lawsuit. The District Judge certified
questions for an advisory opinion of the South Carolina Supreme Court and oral
arguments were heard by the state Supreme Court in April of 1998. The Supreme
Court has not yet rendered its decision. The Company believes that this action
is completely without merit and will defend itself vigorously. If this case were
to be decided against the Company, it would likely have a materially adverse
effect on the financial position and operations of the Company.
In 1997, the South Carolina Department of Revenue and the South Carolina Law
Enforcement Division brought a declaratory judgment action against various
organizations whose members have beer and wine permits and also offer video
poker for play. The suit was also brought against certain businesses in the
video poker industry. Neither the Company nor any subsidiary is a named
defendant in this case. The plaintiffs have styled the case as a class action
and have requested that the court declare that the South Carolina Code prohibits
beer and wine from being sold at establishments that provide video poker
machines for play. At issue in the case is whether a specific South Carolina
statute (S.C. Code Section 61-4-580(3)) prohibits a beer and wine permit holder
from also offering video poker for play. The plaintiffs have filed a motion that
the case be certified as a class action and have filed a motion for summary
judgment. The defendants are vigorously defending the case. If this case were to
be decided in favor of the Department of Revenue, it would likely have a
material adverse effect on the financial position and operations of the Company.
The Company continues to monitor all legislative and judicial developments which
may affect the Company.
Additionally, on June 30, 1998, the South Carolina Department of Revenue
announced that as of August 1, 1998, it would no longer allow beer and wine
permits at any location which also offers video poker, based on its
interpretation of the South Carolina statute noted above. However, in two
separate state court cases, two state Circuit Court judges have entered
injunctions prohibiting the Department of Revenue from enforcing its
interpretation of the South Carolina statute at issue at the current time. It
is currently anticipated that neither court will issue a final decision on this
issue for several weeks. If this issue were to be decided in favor of the
Department of Revenue, it would likely have a material adverse effect on the
financial position and operations of the Company.
NOTE 9 LINE OF CREDIT
The Company has a margin line of credit with Merrill Lynch and had borrowed
nearly $1.5 million against this line as of June 30, 1998. The Company can
borrow up to 50% of its marginable investments held with Merrill Lynch on this
line, which bears interest at the U.S. prime rate, which was 8.5% at June 30,
1998.
8
AMERICAN BINGO & GAMING CORP.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
American Bingo & Gaming Corp. was formed in 1994 as a Delaware corporation to
consummate the acquisition of charitable bingo centers and video gaming
operations. The Company operates primarily through wholly-owned subsidiaries in
Texas, Alabama and South Carolina. The Company completed its initial public
offering in December of 1994.
The following discussion should be read in conjunction with the Company's Form
10-KSB and the consolidated financial statements for the years ended December
31, 1997 and December 31, 1996; the Company's Form 10-QSB for the quarters ended
March 31, 1997, June 30, 1997, September 30, 1997 and March 31, 1998; and the
consolidated financial statements and related notes, for the periods ended June
30, 1998, found elsewhere in this report. The statements in this Quarterly
Report on Form 10-QSB relating to matters that are not historical facts,
including, but not limited to, statements found in this "Management Discussion
and Analysis of Financial Condition and Results of Operations," are
forward-looking statements that involve a number of risks and uncertainties.
Factors that could cause actual future results to differ materially from those
expressed in such forward-looking statements include, but are not limited to,
the impact of government regulation and taxation, customer attendance and
spending, competition, general economic conditions, and other risks and
uncertainties as discussed in this Quarterly Report and the 1997 Annual Report
on Form 10-KSB.
RESULTS OF OPERATIONS
(Note: 1997 results have been restated to incorporate 1997 pooled transactions).
The Company generated consolidated revenues of over $3.7 million during the
second fiscal quarter of 1998, ended June 30, 1998, as compared to $3.4 million
in the comparable period of the prior fiscal year, representing an increase of
$376,000 or 11%. Revenues were led by video gaming operations, which produced
$2.4 million or 64% of total revenues for the second quarter of 1998. Bingo
rental and other revenues totaled $1.3 million or 36% of revenues for the second
quarter of 1998. Approximately 78% of second quarter 1998 revenues were
generated in South Carolina, with 11% in Alabama and 11% in Texas. The
year-over-year revenue increase was due to increases in bingo/other revenues of
$409,000. Bingo/other revenues increased primarily due to the Company's opening
of new South Carolina bingo centers in the second and third quarters of 1997 and
the acquisition of a bingo center in Texas in the first quarter of 1998.
Revenues for the first fiscal half of 1998 totaled $7.5 million, as compared to
$6.5 million in the comparable period of the prior fiscal year, an increase of
15%. Year-to-date revenues were again led by video gaming operations, which
comprised 67% of total first half 1998 revenues. The $985,000 increase in first
half 1998 revenues was primarily driven by increased revenues from bingo/other
revenues.
Total costs and expenses were $5.6 million in the second quarter of 1998 versus
$2.5 million in the second quarter of 1997, an increase of $3.1 million or 122%.
Direct salaries and other compensation totaled $604,000 in the second quarter of
1998, which included the costs of gameroom workers and bingo center property
managers. Rent and utilities for the Company's freestanding video gamerooms and
bingo centers totaled $1.1 million in the second quarter of 1998, including a
reserve of $500,000 for future rents on idle or unprofitable bingo properties,
which are currently costing the Company approximately $140,000 per quarter. The
Company is attempting to minimize these costs by canceling idle property leases
or sub-letting or converting these properties to other income-producing uses.
Direct operating costs for the Company's video and bingo centers totaled $1.5
million during the second quarter of 1998, including write-offs of $927,000 for
non-performing assets. Direct operating costs normally include video gaming
parts, bingo supplies, repairs and maintenance, janitorial services, insurance,
travel, and local taxes, among other expenses.
9
AMERICAN BINGO & GAMING CORP.
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Depreciation and amortization
totaled $846,000 in the second quarter of 1998, more than double the second
quarter of 1997 balance, due to a near doubling of the number of gaming machines
under operation and an increase in bingo centers during this period.
Depreciation and amortization expense includes the amortization of the Company's
South Carolina video gaming licenses, depreciation of the Company's video gaming
machines and other assets, and amortization of the Company's intangible assets.
General and administrative (G&A) expenses totaled $1.6 million in the second
quarter of 1998, including nearly $300,000 for reorganization and relocation
reserves and over $200,000 of abnormally high legal, travel, marketing and
accounting costs. Total costs and expenses were $8.9 million for the first half
of 1998 versus $4.9 million in the first half of 1997, an increase of 81%,
primarily led by the aforementioned write-offs and charges.
10
AMERICAN BINGO & GAMING CORP.
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
The Company's increased costs and expenses for the second quarter of 1998
included nearly $2.0 million of asset write-downs, reorganization charges and
other unusual items (See Note 6). Management has elected to write down various
assets by over $927,000 in accordance with its expectation of reduced future
returns from these assets. These write-downs include $460,000 for the write-off
of leasehold improvements made to idle and/or unprofitable South Carolina bingo
properties acquired in 1997; $204,000 for the write-off of discontinued
"8-Liner" gaming machines; $163,000 for uncollectible bingo advances,
receivables and deposits; and $100,000 for previously capitalized costs. The
Company's reorganization charges include $500,000 of accruals for lease payments
on unprofitable, idle bingo properties acquired in 1997. The Company intends to
cancel certain of these leases where possible and sub-lease or re-negotiate
lower future rental payments on the other properties, but there can be no
assurance of the Company's success in these endeavors. The Company's
reorganization charges also include $300,000 of accruals for legal expenses and
relocation costs associated with the reorganization and relocation of the
Company's corporate offices from Texas to South Carolina. The Company also
incurred over $270,000 of unusually high legal, travel, accounting, marketing
and other operating expenses in the second quarter. Although there can be no
assurance, management does not expect to incur further material asset
write-downs or reorganization costs in the foreseeable future.
Management has been aggressively focused on reducing G&A and other costs and has
taken action over the past three months to reduce costs by approximately $2.0
million per year through workforce downsizing, officer and management salary
cuts and other expense reductions. The Company realized a small portion of these
expense reductions beginning in the second quarter of 1998, and expects to begin
recognizing the full financial benefit of these savings beginning in the third
quarter of 1998.
Net other income totaled $83,000 for the second quarter of 1998 as compared to
$45,000 for the second quarter of 1997. Net other income totaled $207,000 for
the first half of 1998 as compared to $111,000 for the first half of 1997. The
Company's other income is primarily comprised of interest income on its
short-term investments, less interest costs on equipment leases and notes.
The Company recorded $39,000 of income tax liability in the second quarter of
1998 versus $185,000 in the second quarter of 1997. Income taxes totaled
$115,000 for the first half of 1998 as compared to $336,000 for the first half
of 1997. The majority of the Company's recognized tax expense is attributable to
state income tax obligations. The Company had approximately $2.2 million of tax
loss carryforwards at the beginning of 1998, and does not expect to incur any
significant federal income tax liability until this carryforward is depleted.
Net loss for second quarter of 1998 was ($1.8) million, which equated to a basic
and fully-diluted loss per share of ($.19). Net income for the second quarter
of 1997 was $699,000, which equated to basic earnings per share of $.10 and
diluted earnings per share of $.09. Net income for the second quarter of 1998
decreased from 1997 due primarily to the aforementioned charges and write-offs.
11
AMERICAN BINGO & GAMING CORP.
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Net loss for the first half of 1998 was ($1.4) million, which equated to a basic
and fully-diluted loss per share of ($.15). Net income for the first half of
1997 was $1.3 million, which equated to basic earnings per share of $.19 and
diluted earnings per share of $.18. Net income for the first half of 1998
decreased from 1997 due primarily to the aforementioned charges and write-offs.
The number of Company shares outstanding totaled 9.6 million at the end of the
second quarter of 1998 as compared to 7.2 million at the end of the second
quarter of 1997. This share increase was primarily due to the Company's warrant
call at the end of 1997, which increased shares outstanding by 2.3 million.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and cash equivalents of approximately
$10.7 million, down from $11.9 million at the end of 1997. Cash declined $1.2
million during the first half of 1998 primarily as a result of the purchase of
video gaming machines licenses of $2.1 million. The Company pays $4,000 for a
two-year video gaming license in South Carolina, and such licenses are renewable
at the end of each May. This license renewal timetable requires a major
investment of the Company's cash each year at this time. The Company also
invested $1.8 million in the addition of new video gaming machines, finish out
of corporate offices and two bingo centers in South Carolina, and the
acquisition of a bingo center in Texas during the first half of 1998. The cost
of the Company's investments in video gaming licenses and new assets was
primarily financed by cash generated by operations of $2.5 million and
borrowings of $1.5 million under the Company's margin credit line.
Cash provided by operating activities totaled $2.5 million in the first half of
1998. These non-cash flows were comprised of the Company's net loss of ($1.4
million), adjusted for: non-cash write-offs and charges of $1.7 million;
depreciation, gaming license amortization and intangible asset amortization of
$1.6 million; and net changes in operating assets and liabilities of $584,000.
Cash provided by operating activities in the first half of 1997 totaled $2.1
million, which was less than comparable 1998 cash provided by operating
activities due to a reduction in the Company's working capital.
Cash used in investing activities in the first half of 1998 totaled ($3.9
million) and was primarily comprised of the aforementioned expenditures for
video gaming licenses, leasehold improvements, and the acquisition of a bingo
center. Cash used in investing activities in the first half of 1997 totaled
($2.6 million), which was lower than comparable 1998 cash used in investing
activities primarily due to the Company's increased investment in video gaming
licenses.
Cash provided by financing activities in the first half of 1998 totaled $122,000
and was primarily comprised of $1.5 million of borrowings under the Company's
margin line of credit, reduced by note and lease payments ($599,000), warrant
financing costs ($354,000), payments to preferred shareholders for stock
conversions and dividends ($270,000), and repurchase of Company stock
($183,000). Cash provided by financing activities in the first half of 1997
totaled $30,000.
Current assets totaled $12.1 million at the end of the second quarter of 1998,
providing the Company with working capital of $7.7 million. Cash and cash
equivalents totaled $10.7 million at the end of the second quarter of 1998 and
represented nearly 44% of the Company's total assets. Accounts receivable
totaled $832,000 and were primarily comprised of short-term advances to video
gaming route location owners. Total notes receivable, less provision for
doubtful collectibility, totaled $1.2 million at June 30, 1998. Notes receivable
are primarily comprised of note balances due on the Company's sale of four
Florida bingo centers at the end of 1995. Total prepaid licenses of $2.0 million
represent the Company's portfolio of video gaming licenses for machines in South
Carolina. Video gaming parts and bingo supplies are expensed at the time of
purchase; thus no inventory is recorded for operations.
12
AMERICAN BINGO & GAMING CORP.
<PAGE>
Net property and equipment totaled $5.9 million at the end of the second quarter
of 1998. The majority of property and equipment is comprised of video gaming
machines. Net intangible assets totaled $2.9 million at the end of the second
quarter of 1998 and were primarily comprised of goodwill associated with the
Company's acquisition of bingo centers.
Current liabilities totaled $4.5 million and long-term liabilities totaled $1.4
million at the end of the second quarter of 1998. The majority of liabilities
were comprised of notes payable, capital lease obligations and the Company's
borrowings on its margin credit line. The Companies line of credit allows
the Company to borrow up to 50% of its marginable investments held with Merrill
Lynch, and bears interest at the U.S. Prime rate, which was 8.5% at June 30,
These borrowings were primarily to finance the Company's acquisition
of video gaming machines and licenses and other asset additions over
the past six months.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company had total assets of $24.5 million and total liabilities of $5.8
million at the end of the second quarter of 1998, with shareholder equity of
$18.6 million. Management believes that its current cash balances of $10.7
million, current operational cash flows, margin credit line and two equipment
lease financing credit lines will support operational and expansion requirements
for the next year. The Company intends to finance future expansion primarily
through the use of cash, stock and notes, and may seek incremental financing for
attractive acquisition opportunities. The Company intends to use a portion of
its cash to repurchase its common shares on a periodic basis. The Company
repurchased nearly 56,000 common shares in the second quarter of 1998.
Year 2000 Issue
Management has conducted a comprehensive review of its computer systems to
identify potential problems that could be caused by the Year 2000 Problem. This
issue is the result of computer programs that were written using two digits
rather than four to define the applicable year. Such programs may recognize a
date using "00" as the year rather than the year 2000, which could result in a
system failure or miscalculation. Management currently believes that the Year
2000 problem will not pose significant operational problems for the Company's
computer systems nor will result in significant costs to become Year 2000
compliant. However, if the Company's computer systems were subject to undetected
system failures or operational problems resultant from the Year 2000 Problem, it
could have a potentially material impact on the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of material pending legal proceedings, see Note 8 to the
unaudited Consolidated Financial Statements included in Part I hereof, which
Note 8 is incorporated herein by reference.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 4, 1998, the Company's Board of Directors adopted a Rights Agreement
and declared a dividend of one Right for each outstanding share of common stock
of the Company. For additional information regarding the Rights Agreement and
the Rights, see the discussion provided in Part II, Item 5 hereof.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 5, 1998, at which
meeting all six of management's nominees for the Board of Directors were elected
to serve one year terms. The individuals elected were: Randall J. Fein,
receiving 7,134,128 votes for and 1,533,171 votes against or withheld, with no
votes abstaining; G. George Fox, receiving 7,134,128 votes for and 1,533,171
votes against or withheld, with no votes abstaining; George M. Harrison, Jr.,
receiving 8,622,874 votes for and 44,425 votes against or withheld, with no
votes abstaining; Andre M. Hilliou, receiving 8,623,474 votes for and 43,825
votes against or withheld, with no votes abstaining; Michael W. Mims, receiving
8,623,474 votes for and 43,825 votes against or withheld, with no votes
abstaining; and L. Gregory Wilson, receiving 7,115,628 votes for and 1,551,671
votes against or withheld, with no votes abstaining. All six of these persons
served on the Board of Directors prior to their election at the Annual Meeting,
and following the election these six persons constituted the Board of Directors
of the Company. At the Annual Meeting, the shareholders also voted to ratify
the appointment of King Griffin & Adamson P.C. as the Company's auditors for
1998, with such matter receiving 8,597,412 votes for and 20,429 votes against or
withheld, and 49,458 votes abstaining.
13
AMERICAN BINGO & GAMING CORP.
<PAGE>
ITEM 5. OTHER INFORMATION
On August 4, 1998 the Company's Board of Directors authorized the issuance of
one right (a "Right") with respect to each outstanding share of the Company's
common stock to holders of record of the common stock as of the close of
business on August 24, 1998, such dividend to be paid as of the close of
business on August 24, 1998. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") dated as of August 4, 1998
between the Company and American Stock Transfer & Trust Company as Rights Agent.
The description of the Rights contained in Item 1 of the Company's Registration
Statement on Form 8-A, as filed with the Securities and Exchange Commission on
August 13, 1998, is incorporated herein by reference.
Any shareholder of the Company who intends to present a proposal at the 1999
Annual Meeting of Shareholders, which proposal is not included in the Company's
Proxy Statement, must deliver notice of such proposal to the Company no later
than sixty days prior to the date of the 1999 Annual Meeting. If the proposing
shareholder fails to deliver notice of such proposal to the Company by such
date, then the person or persons designated as proxies in connection with the
Company's solicitation of proxies shall have the discretionary voting authority
to vote on such matter, in accordance with their judgment, the shares of the
Company's Common Stock represented by the proxy cards received by the Company
when such proposal is presented at the 1999 Annual Meeting. Any such notice of
a shareholder proposal must be made in writing addressed to Richard M. Kelley,
American Bingo & Gaming Corp., 1440 Charleston Highway, West Columbia, South
Carolina 29169. At this time, the Board of Directors has not set the date for
the 1999 Annual Meeting; however, the Board expects to have the date set prior
to the filing of the Form 10-QSB for the quarter ended September 30, 1998. The
Company intends to disclose the date of the 1999 Annual Meeting in the September
30, 1998 Form 10-QSB with a clarification of the deadline for shareholders to
submit proposals as discussed above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<C> <S>
(a) Exhibits.
3.1 Certificate of Incorporation of the Company dated September 8, 1994, as amended October 17,
1994 (incorporated by reference to Exhibit 3.1 of the Annual Report on Form 10-KSB filed by
the Company for the year ended December 31, 1994), and amended July 31, 1997 (incorporated
by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-3 filed on
September 22, 1997), and amended August 13, 1998.
3.2 Amended and Restated Bylaws of the Company.
10.1 1994 Amended Employee Stock Option Plan (incorporated by reference to Exhibit 10.10 of the
Annual Report on Form 10-KSB filed by the Company for the year ended December 31, 1994).
10.2 1995 Employee Stock Option Plan (incorporated by reference to Exhibit 10.11 of the Annual
Report on Form 10-KSB filed by the Company for the year ended December 31, 1994).
10.3 1995 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.12 of the Annual
Report on Form 10-KSB filed by the Company for the year ended December 31, 1994).
13
<PAGE>
10.4 1996 Employee Stock Option Plan (incorporated by reference to Exhibit 10.15 of the Annual
Report on Form 10-KSB filed by the Company for the year ended December 31, 1995.
10.5 Amended and Restated 1997 Employee Stock Option Plan.
10.6 Agreement and Plan of Reorganization dated August 13, 1997, by and among the Company,
Gold Strike Acquisition Corporation, Gold Strike, Inc. and Michael W. Mims.
10.7 Agreement and Plan of Reorganization dated November 12, 1997, by and among the Company,
Darlington Music Acquisition Corporation, Darlington Music Co., Inc. and George M.
Harrison, Jr., Thomas M. Harrison and William W. Harrison.
10.8 Employment Agreement with L. Gregory Wilson dated September 10, 1996 (incorporated by
reference to Exhibit 10.16 of the Annual Report on Form 10-KSB filed by the Company for the
year ended December 31, 1996).
10.9 Employment Agreement with Courtland L. Logue, Jr., dated September 10, 1996 (incorporated
by reference to Exhibit 10.16 of the Annual Report on Form 10-KSB filed by the Company for
the year ended December 31, 1996).
10.10 Employment Agreement with John Richard Henry dated August 1, 1997.
10.11 Employment Agreement dated October 29, 1996 with John T. Orton (incorporated by reference
to Exhibit 10.16 of the Annual Report on Form 10-KSB filed by the Company for the year
ended December 31, 1996), as amended April 10, 1998.
10.12 Employment Agreement dated September 24, 1997 with Michael W. Mims, as amended July
27, 1998.
10.13 Employment Agreement dated December 18, 1997 with George M. Harrison, Jr., as amended
February 25, 1998 and as further amended July 27, 1998.
10.14 Employment Agreement dated April 30, 1998 with Andre Marc Hilliou.
10.15 Employment Agreement dated June 19, 1998 with Richard M. Kelley.
10.16 Severance Agreement dated February 8, 1998 with Courtland L. Logue, Jr.
10.17 Mutual Release and Settlement Agreement dated July 24, 1998 with L. Gregory Wilson
(incorporated by reference to Exhibit 99.2 of the Current Report on Form 8-K filed by the
Company on August 4, 1998).
10.18 Severance Agreement dated July 24, 1998 with L. Gregory Wilson (incorporated by reference
to Exhibit 99.3 of the Current Report on Form 8-K filed by the Company on August 4, 1998).
10.19 Promissory Note and Security Agreement dated June 4, 1998 with Michael W. Mims.
10.20 Promissory Note dated February 24, 1998, with George M. Harrison, Jr.
10.21 Settlement Agreement dated January 27, 1997 with the State of Florida.
14
<PAGE>
10.22 Rights Agreement dated August 4, 1998, between the Company and American Stock Transfer &
Trust Company (incorporated by reference to Exhibit 1 of the Registration Statement on Form 8-
A filed by the Company on August 13, 1998).
27.1 Financial Data Schedule (for SEC use only).
27.2 Restated Financial Data Schedule for Six Months Ended June 30, 1996 (for SEC use only).
27.3 Restated Financial Data Schedule for Six Months Ended June 30, 1997 (for SEC use only).
99.1 Description of the Rights to Purchase Preferred Stock (incorporated by reference to Item 1 on
pages 2 through 4 of the Registration Statement on Form 8-A filed by the Company on August
13, 1998).
</TABLE>
(b) Reports on Form 8-K.
During the quarter ended June 30, 1998, the Company filed one report on Form
8-K. On May 4, 1998, the Company filed a Form 8-K to report the following Item
5 events: (i) that Andre M. Hilliou had been hired as the Company's Chief
Executive Officer and that he would serve on the Board of Directors, and (ii)
that the Company had terminated a proposed acquisition of certain bingo halls
located in Mississippi. In addition, the Form 8-K reported as an Item 6 event
that Jeffrey Gilbert had resigned from the Board of Directors and that there
were no disagreements between the Company and Mr. Gilbert.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
American Bingo & Gaming Corp.
August 14, 1998
By:
/s/ Andre M. Hilliou
-----------------------
Andre M. Hilliou
Chairman of the Board, President
and Chief Executive Officer
/s/ Richard M. Kelley
------------------------
Richard M. Kelley
Vice President, Chief Financial Officer,
Treasurer and Secretary
16
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C> <C>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NUMBER
--------------------------------------------------------------------------- -----------
3.1 Certificate of Incorporation of the Company dated September 8, 1994, as
amended October 17, 1994 (incorporated by reference to Exhibit 3.1 of the
Annual Report on Form 10-KSB filed by the Company for the year ended
December 31, 1994), and amended July 31, 1997 (incorporated by reference
to Exhibit 4.1 of the Company's Registration Statement on Form S-3 filed
on September 22, 1997), and amended August 13, 1998.
3.2 Amended and Restated Bylaws of the Company.
10.1 1994 Amended Employee Stock Option Plan (incorporated by reference to
Exhibit 10.10 of the Annual Report on Form 10-KSB filed by the Company
for the year ended December 31, 1994).
10.2 1995 Employee Stock Option Plan (incorporated by reference to Exhibit
10.11 of the Annual Report on Form 10-KSB filed by the Company for the
year ended December 31, 1994).
10.3 1995 Employee Stock Purchase Plan (incorporated by reference to Exhibit
10.12 of the Annual Report on Form 10-KSB filed by the Company for the
year ended December 31, 1994).
10.4 1996 Employee Stock Option Plan (incorporated by reference to Exhibit
10.15 of the Annual Report on Form 10-KSB filed by the Company for the
year ended December 31, 1995).
10.5 Amended and Restated 1997 Employee Stock Option Plan.
10.6 Agreement and Plan of Reorganization dated August 13, 1997, by and
among the Company, Gold Strike Acquisition Corporation, Gold Strike, Inc.
and Michael W. Mims.
10.7 Agreement and Plan of Reorganization dated November 12, 1997, by and
among the Company, Darlington Music Acquisition Corporation, Darlington
Music Co., Inc. and George M. Harrison, Jr., Thomas M. Harrison and
William W. Harrison.
10.8 Employment Agreement with L. Gregory Wilson dated September 10, 1996
(incorporated by reference to Exhibit 10.16 of the Annual Report on Form
10-KSB filed by the Company for the year ended December 31, 1996).
10.9 Employment Agreement with Courtland L. Logue, Jr., dated September 10,
1996 (incorporated by reference to Exhibit 10.16 of the Annual Report on
Form 10-KSB filed by the Company for the year ended December 31, 1996).
10.10 Employment Agreement with John Richard Henry dated August 1, 1997.
10.11 Employment Agreement dated October 29, 1996 with John T. Orton
(incorporated by reference to Exhibit 10.16 of the Annual Report on Form
10-KSB filed by the Company for the year ended December 31, 1996), as
amended April 10, 1998.
10.12 Employment Agreement dated September 24, 1997 with Michael W. Mims,
as amended July 27, 1998.
10.13 Employment Agreement dated December 18, 1997 with George M.
Harrison, Jr., as amended February 25, 1998 and as further amended July
27, 1998.
10.14 Employment Agreement dated April 30, 1998 with Andre Marc Hilliou.
10.15 Employment Agreement dated June 19, 1998 with Richard M. Kelley.
10.16 Severance Agreement dated February 8, 1998 with Courtland L. Logue, Jr.
10.17 Mutual Release and Settlement Agreement dated July 24, 1998 with L.
Gregory Wilson (incorporated by reference to Exhibit 99.2 of the Current
Report on Form 8-K filed by the Company on August 4, 1998).
10.18 Severance Agreement dated July 24, 1998 with L. Gregory Wilson
(incorporated by reference to Exhibit 99.3 of the Current Report on Form 8-
K filed by the Company on August 4, 1998).
10.19 Promissory Note and Security Agreement dated June 4, 1998 with Michael
W. Mims.
10.20 Promissory Note dated February 24, 1998, with George M. Harrison, Jr.
10.21 Settlement Agreement dated January 27, 1997 with the State of Florida.
10.22 Rights Agreement dated August 4, 1998, between the Company and
American Stock Transfer & Trust Company (incorporated by reference to
Exhibit 1 of the Registration Statement on Form 8-A filed by the Company
on August 13, 1998).
27.1 Financial Data Schedule (for SEC use only).
27.2 Restated Financial Data Schedule for Six Months Ended June 30, 1996 (for
SEC use only).
27.3 Restated Financial Data Schedule for Six Months Ended June 30, 1997 (for
SEC use only).
99.1 Description of the Rights to Purchase Preferred Stock (incorporated by
reference to Item 1 on pages 2 through 4 of the Registration Statement on
Form 8-A filed by the Company on August 13, 1998).
</TABLE>
<PAGE>
AMERICAN BINGO & GAMING CORP.
CERTIFICATE OF DESIGNATIONS OF
SERIES B PREFERRED STOCK
(Pursuant to Section 151 of the of the Delaware General Corporation Law)
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, at a
meeting held August 4, 1998, adopted a resolution providing for the creation of
a series of the Corporation's Preferred Stock, $.01 par value, which series is
designated "Series B Preferred Stock", which resolution is as follows:
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:
The rights, preferences, privileges, and limitations granted to and imposed
on the Series B Preferred Stock (the "Series B Preferred Stock"), which series
shall consist of 300,000 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 B 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 B Preferred Stock.
SECTION 1. SERIES B PREFERRED STOCK. There shall be a series of
Preferred Stock referred to "Series B Preferred Stock."
<PAGE>
SECTION 2. DESIGNATION, PAR VALUE AND AMOUNT. The shares of Series B
Preferred Stock shall be with par value of $0.01 per share, and the number of
shares constituting such series shall be 300,000; provided, however, that, if
more than a total of 300,000 shares of Series B Preferred Stock shall be
issuable upon the exercise of Rights (the "Rights") issued pursuant to the
Rights Agreement, dated as of August 4, 1998, between the Corporation and
American Stock Transfer Company, as Rights Agent, as amended from time to time
(the "Rights Agreement"), the Board of Directors of the Corporation, pursuant to
Section 151 of the Delaware General Corporation Law, shall direct by resolution
or resolutions that a Certificate of Designation be properly executed and filed
providing for the total number of shares of Series B Preferred Stock authorized
to be issued to be increased (to the extent that the Certificate of
Incorporation then permits) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of the Rights.
SECTION 3. VOTING RIGHTS. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Except as required by applicable law, the holders of shares of
Series B Preferred Stock and the holders of shares of the Corporation's Common
Stock, $0.001 par value (the "Common Stock"), shall vote together as one class
on all matters submitted to a vote of shareholders of the Corporation.
(B) Each share of Series B Preferred Stock shall entitle the
holder thereof to 1000 votes on all matters submitted to a vote of the
shareholders of the Corporation.
(C) The Certificate of Incorporation of the Corporation shall not
be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series B Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least a
majority of the outstanding shares of Series B Preferred Stock, voting
separately as a class.
(D) Except as set forth herein (or as otherwise required by
applicable law), holders of Series B Preferred Stock shall have no general or
special voting rights and their consent shall not be required for taking any
corporate action.
SECTION 4. DIVIDENDS. The holders of Series B Preferred Stock shall
share ratably in any dividend or distribution declared by the Corporation on
shares of Common Stock in a ratio of 1000 to one with respect to a share of
Series B Preferred Stock and a share of Common Stock, respectively.
SECTION 5. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Subject to the prior and superior rights of holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series B Preferred Stock with respect to rights upon liquidation, dissolution
or winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
2
<PAGE>
liquidation, dissolution or winding up) to the Series B Preferred Stock unless
prior thereto the holders of shares of Series B Preferred Stock shall have
received $0.01 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, if any, to the date of such payment (the "Series B
Liquidation Preference"). Following the payment of the full amount of the
Series B Liquidation Preference, no additional distributions shall be made to
the holders of shares of Series B Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an amount per share (the
"Capital Adjustment") equal to the quotient obtained by dividing (i) the Series
B Liquidation Prefer-ence by (ii) 1000. Following the payment of the full
amount of the Series B Liquidation Preference and the Capital Adjustment in
respect of all outstanding shares of Series B Preferred Stock and Common Stock,
respectively, holders of Series B Preferred Stock and holders of Common Stock
shall receive a ratable and proportionate share of the remaining assets to be
distributed in the ratio of 1000 to one (1) with respect to Series B Preferred
Stock and Common Stock, on a per share basis, respectively.
(B) If there are not sufficient assets available to permit payment
in full of the Series B Liquidation Preference and the liquidation preferences
of all other series of preferred stock, if any, which rank on a parity with the
Series B Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of Series B Preferred Stock and the holders of such
parity shares in proportion to their respective liquidation preferences. If
there are not sufficient assets available to permit payment in full of the
Capital Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
SECTION 6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series B Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to 1000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.
SECTION 7. NO REDEMPTION. The shares of Series B Preferred Stock
shall not be redeemable.
SECTION 8. RANKING. The Series B Preferred Stock shall rank junior
to the Series A Convertible Preferred Stock and to all other series of the
Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
SECTION 9. REACQUIRED SHARES. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Designation creating a
series of Preferred Stock or as otherwise required by law.
3
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its Chief Executive Officer as of August 4, 1998.
/s/ Andre M. Hilliou
----------------------
Andre M. Hilliou, Chairman and
Chief Executive Officer
4
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN BINGO & GAMING CORP.
(8/4/98)
<PAGE>
TABLE OF CONTENTS
ARTICLE I. - OFFICES
Section 1. Office
Section 2. Other Offices
ARTICLE II. - MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings
Section 2. Annual Meeting
Section 3. Special Meetings
Section 4. Notice
Section 5. Voting List
Section 6. Quorum
Section 7. Required Vote; Withdrawal Of Quorum
Section 8. Method of Voting; Proxies
Section 9. Record Date
Section 10. Action Without Meeting
Section 11. Inspectors of Elections
ARTICLE III. - DIRECTORS
Section 1. Management
Section 2. Number; Election
Section 3. Change in Number
Section 4. Removal
Section 5. Vacancies and Newly Created Directorships
Section 6. Election of Directors; Cumulative Voting Prohibited
Section 7. Place of Meetings
Section 8. First Meetings
Section 9. Regular Meetings
Section 10. Special Meetings
Section 11. Quorum
Section 12. Action Without Meeting; Telephone Meetings
Section 13. Chairman of the Board
Section 14. Compensation
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE IV. - COMMITTEES
Section 1. Designation
Section 2. Number; Qualification; Term
Section 3. Authority
Section 4. Committee Changes; Removal
Section 5. Alternate Members of Committees
Section 6. Regular Meetings
Section 7. Special Meetings
Section 8. Quorum; Majority Vote
Section 9. Minutes
Section 10. Compensation
Section 11. Responsibility
ARTICLE V. - NOTICES
Section 1. Method
Section 2. Waiver
Section 3. Exception to Notice Requirement
ARTICLE VI. - OFFICERS
Section 1. Officers
Section 2. Election
Section 3. Compensation
Section 4. Removal and Vacancies
Section 5. Chairman of the Board
Section 6. Vice Chairman of the Board
Section 7. Chief Executive Officer
Section 8. President
Section 9. Vice Presidents
Section 10. Secretary
Section 11. Assistant Secretaries
Section 12. Treasurer
Section 13. Assistant Treasurers
ARTICLE VII. - CERTIFICATES REPRESENTING SHARES
Section 1. Certificates
Section 2. Legends
Section 3. Lost Certificates
Section 4. Transfer of Shares
Section 5. Registered Stockholders
<PAGE>
TABLE OF CONTENTS
(Continued)
ARTICLE VIII. - GENERAL PROVISIONS
Section 1. Dividends
Section 2. Reserves
Section 3. Checks
Section 4. Fiscal Year
Section 5. Seal
Section 6. Indemnification
Section 7. Transactions with Directors and Officers
Section 8. Amendments
Section 9. Table of Contents; Headings
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN BINGO & GAMING CORP.
(the "Corporation")
ARTICLE I.
OFFICES
-------
Section 1. Office. The registered office of the Corporation is
------
currently at 15 East North Street, City of Dover, County of Kent, Delaware
19901. The executive offices of the Corporation are currently located at 1440
Charleston Highway, West Columbia, South Carolina, 29169.
Section 2. Other Offices. The Corporation may also have offices at
--------------
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meetings. Meetings of stockholders for all
-------------------
purposes may be held at such time and place, either within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of stockholders of the
---------------
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders
-----------------
shall be called pursuant to the requirements of the Certificate of Incorporation
and these Bylaws. Special meetings may also be called upon written request to
the President or the Secretary by the holders of at least 20% of the
Corporation's securities outstanding and entitled to vote on the date of such
notice.
Section 4. Notice. Written or printed notice stating the place, date,
------
and hour of each meeting of the stockholders and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman of
the Board, the Secretary, or the person(s) calling the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is to be
sent by mail, it shall be directed to such stockholder at his address as it
appears on the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, in which case it shall be directed to him at such other
address. Notice of any meeting of stockholders shall not be required to be given
to any stockholder who shall attend such meeting in person or by proxy and shall
not, at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
<PAGE>
Section 5. Voting List. At least ten (10) days before each meeting of
-----------
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the Board of
Directors, shall prepare a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting or a duly executed waiver of notice of such meeting or, if not so
specified, at the place where the meeting is to be held. Such list shall also be
produced and kept at the time and place of the meeting at all times during such
meeting and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares
------
entitled to vote on a matter, present in person or represented by proxy, shall
constitute a quorum at any meeting of stockholders, except as otherwise provided
by statute, the Certificate of Incorporation or these Bylaws. If a quorum shall
not be present at any meeting of stockholders, the stockholders entitled to vote
thereat who are present, in person or by proxy, or, if no stockholder entitled
to vote is present, any officer of the Corporation, may adjourn the meeting from
time to time until a quorum shall be present. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
At any adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the original meeting had a quorum
been present; provided that, if the adjournment is for more than thirty (30)
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting.
Section 7. Required Vote; Withdrawal Of Quorum. When a quorum is
---------------------------------------
present at any meeting, the vote of the holders of at least a majority of the
outstanding shares entitled to vote who are present, in person or by proxy,
shall decide any question brought before the meeting, unless the question is one
on which, by express provision of statute, the Certificate of Incorporation or
these Bylaws, a different vote is required, in which case such express provision
shall govern and control the decision of the question. The stockholders present
at a duly constituted meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
<PAGE>
Section 8. Method of Voting; Proxies. (a) Each outstanding share,
----------------------------
regardless of class, shall be entitled to one vote on each matter submitted to a
vote at a meeting of stockholders, except to the extent that the voting rights
of the shares of any class or classes are limited, denied, increased or
decreased by the Certificate of Incorporation.
(b) Each stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy, but no
such proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period. Each proxy shall be filed with
the Secretary of the Corporation prior to or at the time of the meeting.
(c) Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy pursuant to
subsection (b) of this section, the following shall constitute a valid means by
which a stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another
person or persons to act for him as proxy. Execution may be
accomplished by the stockholder or by an authorized officer, director,
employee or agent of the stockholder signing such writing or causing
such stockholder's signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile
signature.
(ii) A stockholder may authorize another person or persons to act
for him as proxy by transmitting or authorizing the transmission of a
telegram, cablegram, or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized
by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other
means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the
stockholder. If it is determined that such telegrams, cablegrams or
other electronic transmissions are valid, the inspectors or, if there
are no inspectors, such other persons making that determination shall
specify the information upon which they relied.
(d) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to subsection (c)
of this section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission.
<PAGE>
(e) A duly executed proxy shall be irrevocable if it states that
it is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
Section 9. Record Date. (a) In order that the Corporation may
------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by statute or these Bylaws, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Such delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by statute or
these Bylaws, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
<PAGE>
Section 10. Action Without Meeting. (a) Any action required or
------------------------
permitted to be taken at a meeting of the stockholders of the Corporation may be
taken without a meeting, without prior notice and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted. Such consent
or consents shall be delivered to the Corporation at its registered office in
Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of stockholders'
meetings are recorded. Such delivery shall be by hand or by certified or
registered mail, return receipt requested.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the written consent, and no consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered in the manner required by this section to
the Corporation, written consents signed by a sufficient number of stockholders
to take action are delivered to the Corporation in the manner required by this
section.
Section 11. Inspectors of Elections. (a) The Corporation shall, in
-------------------------
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist them in the performance of their
duties.
(c) The date and time of the opening and the closing of the polls
for each matter upon which the stockholders will vote at a meeting shall be
announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the inspectors after the
closing of the polls unless the Delaware Court of Chancery upon application by a
stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, any information provided in accordance
with 212(c)(2) of the General Corporation Law of Delaware, ballots and the
regular books and records of the Corporation, except that the inspectors may
consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees
or similar persons which represent more votes than the holder of a proxy is
authorized by the record owner to cast or more votes than the stockholder holds
of record. If the inspectors consider other reliable information for the limited
purpose permitted herein, the inspectors at the time they make their
certification pursuant to subsection (b)(v) of this section shall specify the
precise information considered by them including the person or persons from whom
they obtained the information, when the information was obtained, the means by
which the information was obtained and the basis for the inspectors' belief that
such information is accurate and reliable.
<PAGE>
ARTICLE III.
DIRECTORS
---------
Section 1. Management. The business and affairs of the Corporation
----------
shall be managed by its Board of Directors who may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute,
the Certificate of Incorporation or these Bylaws directed or required to be
exercised or done by the stockholders. The Board of Directors shall keep regular
minutes of its proceedings.
Section 2. Number; Election. The Board of Directors shall consist of
-----------------
no less than two (2) nor more than seven (7) directors, who need not be
stockholders or residents of the State of Delaware. The directors shall be
elected at the annual meeting of the stockholders, except as hereinafter
provided, and each director elected shall hold office until his successor is
elected and qualified or until his earlier resignation or removal.
Section 3. Change in Number. The number of directors may be increased
----------------
or decreased from time to time by resolution adopted by the affirmative vote of
a majority of the Board of Directors, but no decrease shall have the effect of
shortening the term of any incumbent director.
Section 4. Removal. Any director may be removed, with or without
-------
cause, at any annual or special meeting of stockholders, by the affirmative vote
of the holders of a majority of the shares represented in person or by proxy at
such meeting and entitled to vote for the election of such director, if notice
of the intention to act upon such matters shall have been given in the notice
calling such meeting.
Section 5. Vacancies and Newly Created Directorships. Vacancies and
-------------------------------------------
newly created directorships resulting from any increase in the authorized number
of directors may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. Each director so
chosen shall hold office until the first annual meeting of stockholders held
after his election and until his successor is elected and qualified or until his
earlier resignation or removal. If at any time there are no directors in office,
an election of directors may be held in the manner provided by statute. Except
as otherwise provided in these Bylaws, when one or more directors shall resign
from the Board of Directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have the
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in these Bylaws with respect to the filling
of other vacancies.
Section 6. Election of Directors; Cumulative Voting Prohibited. At
------------------------------------------------------
every election of directors, each stockholder shall have the right to vote in
person or by proxy the number of voting shares owned by him for as many persons
as there are directors to be elected and for whose election he has a right to
vote. Cumulative voting shall be prohibited.
<PAGE>
Section 7. Place of Meetings. The directors of the Corporation may
-------------------
hold their meetings, both regular and special, either within or without the
State of Delaware.
Section 8. First Meetings. The first meeting of each newly elected
---------------
Board shall be held without further notice immediately following the annual
meeting of stockholders, and at the same place, unless by unanimous consent of
the directors then elected and serving, such time or place shall be changed.
Section 9. Regular Meetings. Regular meetings of the Board of
-----------------
Directors may be held without notice at such time and place as shall from time
to time be determined by the Board of Directors.
Section 10. Special Meetings. Special meetings of the Board of
-----------------
Directors may be called by the Chairman of the Board on two (2) days notice to
each director, either personally or by mail or by telegram. Special meetings may
be called in like manner and on like notice on the written request of a majority
of the directors. Except as may be otherwise expressly provided by statute, the
Certificate of Incorporation or these Bylaws, neither the business to be
transacted at, nor the purpose of, any special meeting need be specified in a
notice or waiver of notice.
Section 11. Quorum. At all meetings of the Board of Directors, the
------
presence of a majority of the directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, except as may be otherwise specifically
provided by statute, or the Certificate of Incorporation or these Bylaws. If a
quorum shall not be present at any meeting of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 12. Action Without Meeting; Telephone Meetings. Any action
---------------------------------------------
required or permitted to be taken at a meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by all the members of the Board of
Directors or committee, as the case may be. Such consent shall have the same
force and effect as a unanimous vote at a meeting. Subject to applicable notice
provisions and unless otherwise restricted by the Certificate of Incorporation,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in and hold a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute presence in person at such meeting, except where a
person's participation is for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
<PAGE>
Section 13. Chairman of the Board and Vice Chairman of the Board. The
----------------------------------------------------
Board of Directors may elect a Chairman of the Board to preside at their
meetings and to perform such other duties as the Board of Directors may from
time to time assign to him. The Board of Directors may also elect a Vice
Chairman of the Board to preside at their meetings in the absence of the
Chairman of the Board and to perform such other duties as the Board of Directors
or the Chairman of the Board may from time to time assign to him.
Section 14. Compensation. Directors, as such, shall not receive any
------------
stated salary for their services, but, by resolution of the Board of Directors,
a fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors; provided, that
nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV.
COMMITTEES
----------
Section 1. Designation. The Board of Directors may, by resolution
-----------
passed by a majority of the entire Board of Directors, designate one or more
committees.
Section 2. Number; Qualification; Term. Each committee shall consist
----------------------------
of one or more directors appointed by resolution adopted by a majority of the
entire Board of Directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
Board of Directors. Each committee member shall serve as such until the earliest
of (i) the expiration of his term as director, (ii) his resignation as a
committee member or as a director, or (iii) his removal as a committee member or
as a director.
Section 3. Authority. Each committee, to the extent expressly provided
---------
in the resolution of the Board of Directors establishing such committee, shall
have and may exercise all of the authority of the Board of Directors in the
management of the business and affairs of the Corporation except to the extent
expressly restricted by statute, the Certificate of Incorporation or these
Bylaws.
Section 4. Committee Changes; Removal. The Board of Directors shall
----------------------------
have the power at any time to fill vacancies in, to change the membership of,
and to discharge any committee. The Board of Directors may remove any committee
member, at any time, with or without cause.
Section 5. Alternate Members of Committees. The Board of Directors may
-------------------------------
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee.
<PAGE>
Section 6. Regular Meetings. Regular meetings of any committee may be
----------------
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
Section 7. Special Meetings. Special meetings of any committee may be
----------------
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two (2) days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
Section 8. Quorum; Majority Vote. At meetings of any committee, a
-----------------------
majority of the number of members designated by the Board of Directors shall
constitute a quorum for the transaction of business. If a quorum is not present
at a meeting of any committee, a majority of the members present may adjourn the
meeting from time to time, without notice other than an announcement at the
meeting, until a quorum is present. The act of a majority of the members present
at any meeting at which a quorum is in attendance shall be the act of a
committee, unless the act of a greater number is required by law, the
Certificate of Incorporation or these Bylaws.
Section 9. Minutes. Each committee shall cause minutes of its
-------
proceedings to be prepared and shall report the same to the Board of Directors
upon the request of the Board of Directors. The minutes of the proceedings of
each committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
Section 10. Compensation. Committee members may, by resolution of the
------------
Board of Directors, be allowed a fixed sum and expenses of attendance, if any,
for attending any committee meetings or a stated salary.
Section 11. Responsibility. The designation of any committee and the
--------------
delegation of authority to it shall not operate to relieve the Board of
Directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE V.
NOTICES
-------
Section 1. Method. Whenever by statute, the Certificate of
------
Incorporation, or these Bylaws, notice is required to be given to any committee
member, director, or stockholder and no provision is made as to how such notice
shall be given, personal notice shall not be required, and any such notice may
be given (a) in writing, by mail, postage prepaid, addressed to such committee
member, director, or stockholder at his address as it appears on the books or
(in the case of a stockholder) the stock transfer records of the Corporation, or
(b) by any other method permitted by law (including but not limited to overnight
courier service, telegram, telex, or telefax). Any notice required or permitted
to be given by mail shall be deemed to be given when deposited in the United
States mail as aforesaid. Any notice required or permitted to be given by
overnight courier service shall be deemed to be given at the time delivered to
such service with all charges prepaid and addressed as aforesaid. Any notice
required or permitted to be given by telegram, telex, or telefax shall be deemed
to be delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
<PAGE>
Section 2. Waiver. Whenever any notice is required to be given to any
------
stockholder, director, or committee member of the Corporation by statute, the
Certificate of Incorporation or these Bylaws, a written waiver thereof, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be equivalent to notice. Attendance of a stockholder,
director, or committee member at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends for the express purpose of
objecting at the beginning of the meeting to the transaction of any business on
the ground that the meeting is not lawfully called or convened.
Section 3. Exception to Notice Requirement. The giving of any notice
--------------------------------
required under any provision of the General Corporation Law of Delaware, the
Certificate of Incorporation or these Bylaws shall not be required to be given
to any stockholder to whom (i) notice of two consecutive annual meetings, and
all notices of meetings or of the taking of action by written consent without a
meeting to such stockholder during the period between such two consecutive
annual meetings, or (ii) all, and at least two, payments (if sent by first class
mail) of dividends or interest on securities during a twelve-month period, have
been mailed addressed to such person at his address as shown on the records of
the Corporation and have been returned undeliverable. If any such stockholder
shall deliver to the Corporation a written notice setting forth his then current
address, the requirement that notice be given to such stockholder shall be
reinstated.
ARTICLE VI.
OFFICERS
--------
Section 1. Officers. The officers of the Corporation shall be elected
--------
by the directors and shall be a Chief Executive Officer, a President, a Vice
President, a Treasurer and a Secretary. The Board of Directors may also choose a
Chairman of the Board, a Vice Chairman of the Board, additional Vice Presidents
and one or more Assistant Secretaries and Assistant Treasurers. Any two or more
offices may be held by the same person.
Section 2. Election. The Board of Directors at its first meeting after
--------
each annual meeting of stockholders shall elect the officers of the Corporation,
none of whom need be a member of the Board, a stockholder or a resident of the
State of Delaware. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall be appointed for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the Board of Directors.
Section 3. Compensation. The compensation of all officers and agents
------------
of the Corporation shall be fixed by the Board of Directors.
<PAGE>
Section 4. Removal and Vacancies. Each officer of the Corporation
-----------------------
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer or agent elected or appointed by the
Board of Directors may be removed either for or without cause by a majority of
the directors represented at a meeting of the Board of Directors at which a
quorum is represented, whenever in the judgment of the Board of Directors the
best interests of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors.
Section 5. Chairman of the Board. The Chairman of the Board, if such
----------------------
an officer shall be elected, shall preside at all meetings of the Board of
Directors and the stockholders of the Corporation. In the absence of the
Chairman of the Board, such duties shall be performed by the Vice Chairman of
the Board, if such an officer shall be elected, and then by the Chief Executive
Officer of the Corporation. In addition, if such an officer shall be elected,
the Chairman of the Board shall exercise and perform such other powers and
duties as usually appertain to the office of the Chairman of the Board and as
may from time to time be assigned to the Chairman of the Board by the Board of
Directors of the Corporation or be prescribed by these Bylaws.
Section 6. Vice Chairman of the Board. The Vice Chairman of the Board,
--------------------------
if such an officer shall be elected, shall, in the absence of the Chairman of
the Board, preside at all meetings of the Board of Directors and the
stockholders of the Corporation. If such an officer shall be elected, the Vice
Chairman of the Board shall, in the absence of the Chairman of the Board,
exercise and perform such powers and duties assigned to the Chairman of the
Board. In addition, if such an officer shall be elected, the Vice Chairman of
the Board shall exercise and perform such other powers and duties as may from
time to time be assigned to the Vice Chairman of the Board by the Board of
Directors of the Corporation or by the Chairman of the Board or be prescribed by
these Bylaws.
Section 7. Chief Executive Officer. Subject to the control of the Board of
-----------------------
Directors of the Corporation and subject to the supervisory powers, if any, as
may be assigned by the Board of Directors of the Corporation to the Chairman of
the Board, if such an officer shall be elected, and to the Vice Chairman of the
Board, if such an officer shall be elected, the Chief Executive Officer shall be
the chief executive officer of the Corporation and in general shall supervise
and control the business and affairs of the Corporation. The Chief Executive
Officer shall perform such other duties expressly delegated to other persons by
these Bylaws or the Board of Directors, and such other duties as may be
prescribed by the stockholders or the Board of Directors from time to time. In
the absence of the Chairman of the Board and the Vice Chairman of the Board, the
Chief Executive Officer shall preside at all meetings of the Board of Directors
and of the stockholders of the Corporation. The Chief Executive Officer shall
formulate and submit to the Board of Directors matters of general policy for the
Corporation and shall keep the Board of Directors fully informed as they or any
of them shall request and shall consult the Board of Directors concerning the
business of the Corporation. The Chief Executive Officer shall have the power to
appoint and remove agents and employees, except those appointed by the Board of
Directors. The Chief Executive Officer shall vote, or shall give a proxy to any
other officer of the Corporation to vote, all shares of stock of any other
Corporation standing in the name of the Corporation.
<PAGE>
Section 8. President. Subject to the control of the Board of Directors
---------
of the Corporation and subject to such supervisory powers, if any, as may be
assigned by the Board of Directors of the Corporation to the Chief Executive
Officer, if such an officer shall be elected, the President shall be the chief
operating officer of the Corporation. If there is no Chief Executive Officer, or
in the absence of the Chief Executive Officer, or in the event of his inability
or refusal to act, the President shall perform the duties and exercise the
powers of the Chief Executive Officer. The President shall perform such other
duties as usually appertain to the office of the chief operating officer, except
for any duties expressly delegated to other persons by these bylaws or the Board
of Directors, and such other duties as may be prescribed by the stockholders,
the Chief Executive Officer, if any, or the Board of Directors from time to
time. The President may sign with the Secretary or any other officer of the
Corporation thereunto authorized by the Board of Directors, certificates for
shares of capital stock of the Corporation and any deeds, bonds, mortgages,
contracts, checks, notes, drafts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the signing and
execution thereof has been expressly delegated by the Bylaws or by the Board of
Directors to some other officer or agent of the Corporation, or shall be
required to be otherwise executed.
Section 9. Vice Presidents. Each Vice President shall have only such
----------------
powers and perform only such duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to him.
Section 10. Secretary. The Secretary shall attend all sessions of the
---------
Board of Directors and all meetings of the stockholders and record all votes and
the minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for any committee when required. Except as otherwise
provided herein, the Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, under whose supervision he shall be. He shall keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it, and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or an Assistant
Secretary.
Section 11. Assistant Secretaries. Each Assistant Secretary shall have
---------------------
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe or as the President may from time to time delegate.
Section 12. Treasurer. The Treasurer shall have the custody of the
---------
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements of the Corporation and shall deposit all monies and
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
directors, at the regular meetings of the Board of Directors, or whenever they
may require it, an account of all his transactions as Treasurer and of the
financial condition of the Corporation, and shall perform such other duties as
the Board of Directors may prescribe. If required by the Board of Directors, he
shall give the Corporation a bond in such form, in such sum, and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation.
<PAGE>
Section 13. Assistant Treasurers. Each Assistant Treasurer shall have
--------------------
only such powers and perform only such duties as the Board of Directors may from
time to time prescribe.
ARTICLE VII.
CERTIFICATES REPRESENTING SHARES
--------------------------------
Section 1. Certificates. The shares of the Corporation shall be
------------
represented by certificates in such form as shall be determined by the Board of
Directors. Such certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued. Each certificate
shall state on the face thereof the holder's name, the number and class of
shares, and the par value of such shares or a statement that such shares are
without par value. Each certificate shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary and may be sealed with
the seal of the Corporation or a facsimile thereof Any or all of the signatures
on a certificate may be facsimile.
Section 2. Legends. The Board of Directors shall have the power and
-------
authority to provide that certificates representing shares of stock shall bear
such legends, including, without limitation, such legends as the Board of
Directors deems appropriate to assure that the Corporation does not become
liable for violations of federal or state securities laws or other applicable
law.
Section 3. Lost Certificates. The Corporation may issue a new
------------------
certificate representing shares in place of any certificate theretofore issued
by the Corporation, alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to be
lost, stolen or destroyed. The Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may require the owner of such lost,
stolen or destroyed certificate, or his legal representative, to advertise the
same in such manner as it shall require and/or to give the Corporation a bond in
such form, in such sum, and with such surety or sureties as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Shares. Shares of stock shall be transferable
-------------------
only on the books of the Corporation by the holder thereof in person or by his
duly authorized attorney. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or the transfer agent of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
<PAGE>
Section 5. Registered Stockholders. The Corporation shall be entitled
-----------------------
to treat the holder of record of any share or shares of stock as the holder in
fact thereof, and, accordingly, shall not be bound to recognize any equitable or
other claim or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VIII.
GENERAL PROVISIONS
------------------
Section 1. Dividends. The directors, subject to any restrictions
---------
contained in the Certificate of Incorporation, may declare dividends upon the
shares of the Corporation's capital stock. Dividends may be paid in cash, in
property, or in shares of the Corporation, subject to the provisions of the
General Corporation Law of Delaware and the Certificate of Incorporation.
Section 2. Reserves. By resolution of the Board of Directors, the
--------
directors may set apart out of any of the funds of the Corporation such reserve
or reserves as the directors from time to time, in their discretion, think
proper to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other purposes as the
directors shall think beneficial to the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 3. Checks. All checks or demands for money and notes of the
------
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
------------
fixed by resolution of the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon the
----
name of the Corporation. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. Indemnification. The Corporation shall indemnify its
---------------
directors, officers, employees and agents to the fullest extent permitted by the
General Corporation Law of Delaware and the Certificate of Incorporation.
Section 7. Transactions with Directors and Officers. No contract or
------------------------------------------
other transaction between the Corporation and any other corporation and no other
act of the Corporation shall, in the absence of fraud, be invalidated or in any
way affected by the fact that any of the directors of the Corporation are
pecuniarily or otherwise interested in such contract, transaction or other act,
or are directors or officers of such other corporation. Any director of the
Corporation, individually, or any firm or corporation of which any such director
may be a member, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation; provided,
--------
however, that the fact that the director, individually, or the firm or
corporation is so interested shall be disclosed or shall have been known to the
Board of Directors or a majority of such members thereof as shall be present at
any annual meeting or at any special meeting, called for that purpose, of the
Board of Directors at which action upon any contract or transaction shall be
taken. Any director of the Corporation who is so interested may be counted in
determining the existence of a quorum at any such annual or special meeting of
the Board of Directors which authorizes such contract or transaction, and may
vote thereat to authorize such contract or transaction with like force and
effect as if he were not such director or officer of such other corporation or
not so interested. Every director of the Corporation is hereby relieved from any
disability which might otherwise prevent him from carrying out transactions with
or contracting with the Corporation for the benefit of himself or any firm,
corporation, trust or organization in which or with which he may be in anywise
interested or connected.
<PAGE>
Section 8. Amendments. These Bylaws may be altered, amended, or
----------
repealed or new bylaws may be adopted by the stockholders or by the Board of
Directors at any regular meeting of the stockholders or the Board of Directors,
at any special meeting of the stockholders or the Board of Directors if notice
of such alteration, amendment, repeal, or adoption of new bylaws be contained in
the notice of such special meeting, or by written consent of the Board of
Directors or the stockholders without a meeting.
Section 9. Table of Contents; Headings. The Table of Contents and
------------------------------
headings used in these Bylaws have been inserted for convenience only and do not
constitute matters to be construed in interpretation.
<PAGE>
------
CERTIFICATE BY SECRETARY
------------------------
The undersigned, being the Secretary of the Corporation, hereby certifies
that the foregoing Amended and Restated Bylaws were duly adopted by the Board of
Directors of the Corporation effective on August 4, 1998.
IN WITNESS WHEREOF, I have signed this certification as of the 4th day of
August, 1998.
/s/ Richard M. Kelley
------------------------
Richard M. Kelley, Secretary
<PAGE>
AMENDED AND RESTATED
EMPLOYEE STOCK OPTION PLAN
AMERICAN BINGO & GAMING CORP.
1997 STOCK OPTION PLAN
1. PURPOSE
The purpose of the 1997 Stock Option Plan ("Plan") is to provide a method
whereby selected key employees, selected key consultants, professionals and
non-employee directors of American Bingo & Gaming Corp. (the "Corporation") and
its subsidiaries may have the opportunity to invest in shares of the
Corporation's Common Stock ("Common Stock" or "Shares"), thereby giving them a
proprietary and vested interest in the growth and performance of the
Corporation, and in general, generating an increased incentive to contribute to
the Corporation's future success and prosperity, thus enhancing the value of the
Corporation for the benefit of shareholders. Further, the Plan is designed to
enhance the Corporation's ability to attract and retain individuals of
exceptional managerial talent upon whom, in large measure, the sustained
progress, growth, and profitability of the Corporation depends.
2. ADMINISTRATION
The Plan shall be administered by the Corporation's Board of Directors
("Board of Directors" or "Board") or if so designated by resolution of the Board
by a Committee composed of not less than two individuals ("Committee"). From
time to time the Board, or if so designated the Committee, may grant stock
options ("Stock Options" or "Options") to such eligible parties and for such
number of Shares as it in its sole discretion may determine. A grant in any year
to an eligible Employee (as defined in Section 3 below) shall neither guarantee
nor preclude a grant to such Employee in subsequent years. Subject to the
provisions of the Plan, the Board, shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, to
determine the terms and provisions of the Option agreements described in Section
5(h) thereof to make all other determinations necessary or advisable for the
administration of the Plan. The Board, or if so designated the Committee, may
correct any defect, supply any omissions or reconcile any inconsistency in the
Plan or in any Option in the manner and to the extent it shall deem desirable.
The determinations of the Board in the administration of the Plan, as described
herein, shall be final and conclusive. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Delaware.
3. ELIGIBILITY
The class of employees eligible to participate under the Plan shall
include, employees of the Corporation, key consultants or professionals and
non-employee directors of the Company and its subsidiaries (collectively and
individually, "Employees"). Nothing in the Plan or in any agreement thereunder
shall confer any right on an Employee or key vendor of goods and services to
continue in the employ of the Corporation or shall interfere in any way with the
right of the Corporation or its subsidiaries, as the case may be, to terminate
his employment at any time.
<PAGE>
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 7, an aggregate of 750,000
shares of Common Stock shall be available for issuance under the Plan. The
shares of Common Stock deliverable upon the exercise of Options may be made
available from authorized but unissued Shares or Shares reacquired by the
Corporation, including Shares purchased in the open market or in private
transactions. If any Option granted under the Plan shall terminate for any
reason without having been exercised or settled in Common Stock or in cash
pursuant to related Common Stock appreciation rights, the Shares subject to, but
not delivered under, such Option shall be available for other Options.
5. GRANT TERM AND CONDITIONS OF OPTIONS
The Board or if so designated the Committee, may from time to time after
consultation with management select employees to whom Stock Options shall be
granted. The Options granted may be incentive Stock Options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code"), or non-statutory Stock Options ("Non-statutory Stock
Options"), whichever the Board, or if so designated the Committee, shall
determine, subject to the following terms and conditions:
(a) Price. The purchase price per share of Common Stock deliverable upon
-----
exercise of each Incentive Stock Option shall not be less than 100 percent of
the Fair Market Value of the Common Stock on the date such Option is granted.
Provided, however, that if an Incentive Stock Option is issued to an individual
who owns, at the time of grant, more than ten percent (10%) of the total
combined voting power of all classes of the Company's Common Stock, the exercise
price of such Option shall be at least 110% of the Fair Market Value of the
Common Stock on the date of grant and the term of the Option shall not exceed
five years from the date of grant. The Option price of Shares subject to
Non-statutory Stock Options shall be determined by the Board of Directors or
Committee in its absolute discretion at the time of grant of such Option,
provided that such price shall not be less than 85% of the Fair Market Value of
the Common Stock at the time of grant. For purposes of this plan, Fair Market
Value shall be the average of the closing Bid and Ask prices for the Common
Stock on the date in question.
(b) Payment. Options may be exercised only upon payment of the purchase
-------
price thereof in full. Such payment shall be made in such form of consideration
as the Board or Committee determines and may vary for each Option. Payment may
consist of cash, check, notes, delivery of shares of Common Stock having a fair
market value on the date of surrender equal to the aggregate exercise price, or
any combination of such methods or other means of payment permitted under the
Delaware General Corp. Law.
(c) Term of Options. The term during which each Option may be exercised
-----------------
shall be determined by the Board, or if so designated the Committee, provided
that an Incentive Stock Option shall not be exercisable in whole or in part more
than 10 years from the date it is granted. All rights to purchase Common
Stock pursuant to an Option shall, unless sooner terminated, expire at the date
designated by the Board or, if so designated the Committee.
2
<PAGE>
The Board, or if so designated the Committee, shall determine the date on
which each Option shall become exercisable and may provide that an Option shall
become exercisable in installments. The Shares comprising each installment may
be purchased in whole or in part at any time after such installment becomes
purchasable, except that the exercise of Incentive Stock Options shall be
further restricted as set forth herein. The Board, or if so designated the
Committee, may in its sole discretion, accelerate the time at which any Option
may be exercised in whole or in part, provided that unless otherwise determined
by the Board, or if so designated the Committee, no Option shall be exercisable
until one year after grant.
(d) Limitations on Grants. The aggregate Fair Market Value (determined at
-----------------------
the time the Option is granted) of the Common Stock with respect to which the
Incentive Stock Option is exercisable for the first time by an Optionee during
any calendar year (under all plans of the Company and its parent or any
subsidiary of the Corporation) shall not exceed $100,000. The foregoing
limitation shall be modified from time to time to reflect any changes in Section
422 of the Code and any regulations promulgated thereunder setting forth
such limitations.
(e) Termination of Employment.
---------------------------
(i) If the employment of an Employee by the Company or a subsidiary
corporation of the Company shall be terminated voluntarily by the Employee or
for cause by the Company, then his Option shall expire forthwith unless
otherwise determined by the Board, or if so designated the Committee. Except as
provided in subparagraphs (ii) and (iii) of this Paragraph (e), if such
employment shall terminate for any other reason, unless otherwise determined by
the Board, or if so designated the Committee, then such Option may be exercised
at any time within three (3) months after such termination, subject to the
provisions of subparagraph (iv) of this Paragraph (e). For purposes of this
subparagraph, an employee who leaves the employ of the Company to become an
employee of a subsidiary corporation of the Company or a corporation (or
subsidiary or parent corporation of the corporation) which has assumed the
Option of the Company as a result of a corporate reorganization, etc., shall not
be considered to have terminated his employment.
(ii) If the holder of an Option under the Plan dies (a) while employed by,
or while serving as a non-employee Director for, the Company or a subsidiary
corporation of the Company, or (b) within three (3) months after the termination
of his employment or services other than voluntarily by the employee or
non-employee Director, or for cause, then such Option may, subject to the
provisions of subparagraph (iv) of this Paragraph (e), be exercised by the
estate of the employee or non-employee Director or by a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of such employee or non-employee Director at any time within one (1) year
after such death.
(iii) If the holder of Option under the Plan ceases employment because of
permanent or total disability (within the meaning of Section 22 (e) (3) of the
Code) while employed by the Company or a subsidiary corporation of the Company,
then such Option may, subject to the provisions of subparagraph (iv) of this
Paragraph (e), be exercised at any time within one year after his termination of
employment due to disability.
3
<PAGE>
(iv) Except as otherwise determined by the Board, or if so designated the
Committee, an Option may not be exercised pursuant to this Paragraph (e), except
to the extent that the holder was entitled to exercise the Option at the
time of termination of employment, termination of Directorship, or death, and in
any event may not be exercised after the expiration of the Option. For purpose
of this Paragraph (e), the employment relationship of an employee of the Company
or of a subsidiary corporation of the company will be treated as continuing
intact while he is on military or sick leave or other bona fide leave of absence
(such as temporary employment by the Government) if such leave does not exceed
ninety (90) days, or, if longer, so long as his right to reemployment is
guaranteed either by statute or by contract.
(f) Non-transferability of Options. No Option shall be transferable by a
--------------------------------
Holder otherwise than by will or the laws of descent and distribution, and
during the lifetime of the Employee to whom an Option is granted it may be
exercised only by the employee, his guardian or legal representative if
permitted by Section 422 and related sections of the Code and any regulations
promulgated thereunder.
(g) Listing and Registration. Each Option shall be subject to the
--------------------------
requirement that if at any time the Board, or if so designated the Committee,
shall determine, in its discretion, the listing, registration or qualification
of the Common Stock subject to such Option upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue or purchase of Shares thereunder,
no such Option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board, or if so designated
the Committee.
(h) Option Agreement. Each Employee to whom an Option is granted shall
-----------------
enter into an agreement with the Corporation which shall contain such
provisions, consistent with the provisions of the Plan, as may be established by
the Board, or if so designated the Committee.
(i) Withholding. Prior to the delivery of certificates for shares of Common
-----------
Stock, the Corporation or a subsidiary shall have the right to require a
payment from an Employee to cover any applicable withholding or other employment
taxes due upon the exercise of an Option. An Optionee may make such payment
either (i) in cash, (ii) by authorizing the Company to withhold a portion of the
stock otherwise issuable to the Optionee, (iii) by delivering already-owned
Common Stock, or (iv) by any combination of these means.
6. STOCK APPRECIATION RIGHTS
The Board or Committee may grant stock appreciation rights ("SARs") in
connection with all or any part of an Option granted under the Plan, either
concurrently with the grant of the Option or at any time thereafter, and may
also grant SARs independently of Options.
4
<PAGE>
(a) SARs Granted in Connection with an Option. An SAR granted in connection
-----------------------------------------
with an Option entitles the Optionee to exercise the SAR by surrendering to the
Company, unexercised, the underlying Option. The Optionee receives in exchange
from the Company an amount equal to the excess of (x) the Fair Market Value on
the date of surrender of the underlying Option, over (y) the exercise price of
the Common Stock covered by the surrendered portion of the Option.
When an SAR is exercised, the underlying Option, to the extent surrendered,
ceases to be exercisable, and the number of Shares available for issuance under
the Plan is reduced correspondingly.
An SAR is exercisable only when and to the extent the underlying Option is
exercisable and expires no later than the date on which the underlying Option
expires. Notwithstanding the foregoing, neither an SAR nor a related Option may
be exercised during the first six (6) months of its respective term: provided,
however, that this limitation will not apply if the Optionee dies or is disabled
within such six (6) month period.
(b) Independent SARs. The Board or the Committee may grant SARs without
-----------------
related Options. Such an SAR will entitle the Optionee to receive from the
company on exercise of the SAR an amount equal to the excess of (x) the fair
market value of the Common Stock covered by the exercised portion of the SAR, as
of the date of such exercise, over (y) the fair market value of the Common Stock
covered by the exercised portion of the SAR as of the date on which the SAR was
granted.
SARs shall be exercisable in whole or in part at such times as the Board or
the Committee shall specify in the Optionee's SAR grant or agreement.
Notwithstanding the foregoing, an SAR may not be exercised during the first six
(6) months of its term: provided, however, that this limitation will not apply
if the Optionee dies or is disabled within such six (6) month period.
(c) Payment on Exercise. The Company's obligations arising upon the
---------------------
exercise of an SAR may be paid in cash or Common Stock, or any combination of
the same, as the Board or the Committee may determine. Shares issued on the
exercise of an SAR are valued at their fair market value as of the date of
exercise.
(d) Limitation on Amount paid on SAR Exercise. The Board or the Committee
-------------------------------------------
may in its discretion impose a limit on the amount to be paid on exercise of an
SAR. In the event such a limit is imposed on an SAR granted in connection with
an Option, the limit will not restrict the exercisability of the underlying
Option.
(e) Persons Subject to 16(b). An Optionee subject to Section 16(b) of the
--------------------------
Securities Exchange Act of 1934, may only exercise an SAR during the period
beginning on the third and ending on the twelfth business day following the
Company's public release of quarterly or annual summary statements of sales and
earnings and in accordance with all other provisions of Section 16(b).
5
<PAGE>
(f) Non-Transferability of SARs. An SAR is non-transferable by the Optionee
---------------------------
other than by will or the laws of descent and distribution, and is exercisable
during the Optionee's lifetime only by the Optionee, or, in the event of death,
by the Optionee's estate or by a person who acquires the right to exercise the
Option by bequest or inheritance.
(g) Effect on Shares in Plan. When an SAR is exercised, the aggregate
----------------------------
number of shares of Common Stock available for issuance under the Plan will be
reduced by the number of underlying shares of Common Stock as to which the SAR
is exercised.
7. ADJUSTMENT OF AND CHANGES IN COMMON STOCK
In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of Shares, merger, consolidation, distribution of assets,
or any other changes in the corporate structure or Shares of the Corporation,
the Board, or if so designated the Committee, shall make such adjustments as it
deems appropriate in the number and kind of Shares and SARs authorized by the
Plan, in the number and kind of Shares covered by the Options granted and in the
exercise price of outstanding Options and SARs.
8. MERGERS, SALES AND CHANGE OF CONTROL
In the case of (i) any merger, consolidation or combination of the
Corporation with or into another corporation (other than a merger, consolidation
or combination in which the Corporation is the continuing corporation and which
does not result in its outstanding Common Stock being converted into or
exchanged for different securities, cash or other property, or any combination
thereof) or a sale of all or substantially all of the business or assets of the
Corporation or (ii) a Change in Control (as defined below) of the Corporation,
each Option or SAR then outstanding for one year or more shall (unless the
Board, or if so designated the Committee, determines otherwise), receive upon
exercise of such Option or SAR an amount equal to the excess of the Fair Market
Value on the date of such exercise of (a) the securities, cash or other
property, or combination thereof, receivable upon such merger, consolidation or
combination in respect of a share of Common Stock, in the cases covered by
clause (i) above, or (b) the final tender offer price in the case of a tender
offer resulting in a Change in Control or (c) the value of the Common Stock
covered by the Option or SAR as determined by the Board, or if so designated the
Committee, in the case of a Change in Control by reason of any other event, over
the exercise price of such Option, multiplied by the number of shares of Common
Stock with respect to which such Option or SAR shall have been exercised
provided that in each event the amount payable in the case of an Incentive Stock
Option shall be limited to the maximum permissible amount necessary to preserve
the Incentive Stock Option status. Such amount may be payable fully in cash,
fully in one or more of the kind or kinds or property payable in such merger,
consolidation or combination, or partly in cash and partly in one or more such
kind or kinds of property, all in the discretion of the Board or if so
designated the Committee.
Any determination by the Board, or if so designated the Committee, made
pursuant to this Section 8 may be made as to all outstanding Options and SARs or
only as to certain Options and SARs specified by the Board, or if so designated
the Committee and any such determination shall be made (a) in cases covered by
clause (i) above, prior to the occurrence of such event, (b) in the event of a
6
<PAGE>
tender or exchange offer, prior to the purchase of any Common Stock pursuant
thereto by the offeror and (c) in the case of a Change in Control by reason of
any other event, just prior to or as soon as practicable after such Change in
Control.
A "Change in Control" shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such person
or persons, shall own beneficially 25% or more of the Common Stock outstanding,
or (b) if following (i) a tender or exchange offer for voting securities of the
Corporation, or (ii) a proxy contest for the election of directors of the
Corporation, the persons who were directors of the Corporation immediately
before the initiation of such event cease to constitute a majority of the Board
of Directors of the Corporation upon the completion of such tender or exchange
offer or proxy contest or within one year after such completion.
9. NO RIGHTS OF SHAREHOLDERS
Neither an Employee nor the Employee's legal representative shall be, or
have any of the rights and privileges of, a shareholder of the Corporation in
respect of any Shares purchasable upon the exercise of any Option, in whole or
in part, unless and until certificates for such Shares shall have been issued.
10. PLAN AMENDMENTS
The plan may be amended by the Board, as it shall deem advisable or to
conform, to any change in any law or regulation applicable thereto; provided,
that the Board may not, without the authorization and approval of shareholders:
(i) increase the aggregate number of Shares available for Options except as
permitted by Section 7; (ii) Materially increase the benefits accruing to
participants under this Plan; (iii) extend the maximum period during which an
Option may be exercised; or (iv) change the Plan's eligibility requirements. Any
discrepancy between the Board and any committee regarding this Plan shall be
decided in any manner directed by the Board.
11. TERM OF PLAN
The Plan shall become effective upon its approval by the Corporation
shareholders. No Options or SARs shall be granted under the Plan after the date
which is ten years after the date on which the Plan was approved by the
Corporation shareholders.
7
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AMERICAN BINGO & GAMING CORP.
AS THE "BUYER"
AND
GOLD STRIKE ACQUISITION CORPORATION
AS THE "SUB"
AND
GOLD STRIKE, INC.
AS THE "COMPANY"
AND
MICHAEL W. MIMS
THE SOLE SHAREHOLDER OF
GOLD STRIKE, INC.
AS THE "SHAREHOLDER"
DATED: AUGUST 13, 1997
--
<PAGE>
SCHEDULES
---------
SCHEDULE
- --------
1.4 Locations of Business
1.11 Contracts
1.16 Leases
1.21 Permits
1.24 Real Property
4.1 Corporate Records
4.5 Permits and Approvals
4.6 Consents
4.7 Financial Statements
4.8 List of Material Changes
4.9 Undisclosed Liabilities
4.10 List of Property
4.13 Litigation
4.14 Compliance with Law
4.17 Employees
4.18 Insurance
4.20 Liens
4.22 Banks
4.23 Quarterly Reports of Gaming Operations
4.24 Real Property Restrictions
5.4 Ownership and Management of Exempted Entities
6.4A Litigation
6.4B Consents
i
<PAGE>
EXHIBITS
--------
EXHIBIT
- -------
1.6 Form of the Buyer's and Sub's Closing Certificate
1.10 Form of the Company's and the Shareholder's Closing Certificate
2.9 Form of Voting Agreement
8.3 Form of Employment Agreement of Michael Mims
ii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 13th day of August, 1997, by and among American Bingo and Gaming Corp., a
----
corporation organized and existing under the laws of the State of Delaware (the
"Buyer"), Gold Strike Acquisition Corporation, a corporation organized and
existing under the laws of the State of South Carolina (the "Sub"), Gold Strike,
Inc., a corporation organized and existing under the laws of the State of South
Carolina (the "Company"), and Michael W. Mims, the sole shareholder of the
Company (the "Shareholder").
RECITALS
--------
WHEREAS, the Shareholder currently operates a video poker business as a
sole proprietor but is in the process of transferring all of the assets and
liabilities related to the business to the Company as soon as the Company's two
year residency requirement applicable to owners and operators of video poker
machines is satisfied on August 24, 1997, which residency requirement is imposed
by Section 12-21-2804(D) of the South Carolina Code; and
WHEREAS, the Shareholder owns all of the issued and outstanding shares of
capital stock of the Company (all of such issued and outstanding shares of
capital stock being referred to herein as the "Shares"); and
WHEREAS, the Boards of Directors of each of the Company, the Buyer and the Sub
have determined that a business combination between the parties is in the best
interests of their respective companies and stockholders and accordingly have
agreed to effect the Merger (hereinafter defined) upon the terms and conditions
set forth herein; and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
<PAGE>
NOW, THEREFORE, in consideration of the recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto DO HEREBY AGREE as follows:
ARTICLE I
---------
DEFINITIONS
-----------
When used in this Agreement, the following terms shall have the meanings
ascribed to them below:
1.1 ABG Common Stock. "ABG Common Stock" shall have the meaning ascribed to
----------------
it in Section 2.7.
1.2 Agreement. "Agreement" shall mean this Agreement and Plan of
---------
Reorganization, together with the Exhibits and Schedules incorporated herein by
reference, as the same may be amended from time to time in accordance with the
terms hereof.
1.3 Assets. "Assets" shall mean all of the equipment, machinery, real
------
property, fixtures, leasehold interests, inventory, prepaid expenses, all of the
Company's rights under the Contracts and Leases, and all other tangible and
intangible assets of every kind which are currently owned by the Shareholder for
use in the Business, and will be owned by the Company as of Closing Date.
1.4 Business. "Business" shall mean the operations of the Company as of the
--------
date of Closing, which shall include the ownership and operation of all of
Shareholder's video poker games at various locations in Aiken, Beaufort,
Edgefield and Richland Counties in South Carolina, which locations are
identified on Schedule 1.4 hereto.
1.5 Buyer. "Buyer" shall mean American Bingo & Gaming Corp., a corporation
-----
organized and existing under the laws of the State of Delaware.
1.6 Buyer's and Sub's Closing Certificate. "Buyer's and Sub's Closing
----------------------------------------
Certificate" shall mean the certificate of Buyer and the Sub in the form of
Exhibit 1.6 hereto.
2
<PAGE>
1.7 Closing. "Closing" shall mean the conference held at 10:00 am., local
-------
time, on the Closing Date, at Buyer's offices, or such other time and place as
the parties hereto may mutually agree. All transactions occurring at the Closing
shall be deemed to have occurred simultaneously, and no one transaction shall be
deemed to be complete until all transactions required to be completed at the
Closing are completed.
1.8 Closing Date. "Closing Date" shall mean August 25, 1997, or such other
-------------
date as the parties hereto may mutually agree, on which date the Articles of
Merger shall be filed with the South Carolina Secretary of State and become
effective.
1.9 Code "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
1.10 Company's and Shareholder's Closing Certificate. "Company's and
---------------------------------------------------
Shareholder's Closing Certificate" shall mean the certificate of the Company and
the Shareholder in the form of Exhibit 1.10 hereto.
1.11 Contracts. "Contracts" shall mean all contracts, agreements,
---------
mortgages, trust deeds, indentures, notes, licenses, franchises, obligations or
other commitments, arrangements and understandings with a term of more than one
year or for an amount exceeding $1,000 to which the Company is a party or by
which it is bound or to which the Shareholder is a party in connection with the
Business, as described in Schedule 1.11 hereto.
1.12 Fixtures and Equipment. "Fixtures and Equipment" shall mean any and
-----------------------
all of the furniture, fixtures, furnishings, leasehold improvements, supplies,
vehicles, parts, tools, machinery, equipment and other items of tangible
personal property which will be owned or leased by the Company as of the Closing
Date.
1.13 Indemnified Party. "Indemnified Party" shall have the meaning ascribed
-----------------
to it in Section 10.2 hereof.
1.14 Indemnifying Party. "Indemnifying Party" shall have the meaning
-------------------
ascribed to it in Section 10.2 hereof.
3
<PAGE>
1.15 Law. "Law" shall mean any federal, state, local or other law or
---
governmental agency requirement of any kind, and the rules, regulations,
ordinances, permits, licenses and orders promulgated thereunder.
1.16 Leases. "Leases" shall mean all leases of real and personal property
------
to which the Company is a party or to which the Shareholder is a party in
connection with the Business, as described in Schedule 1.16.
1.17 Lien. "Lien" shall mean any mortgage, pledge, lien, security interest,
----
claim, encumbrance, charge, option, equity, right, proxy, voting or other
agreement which in any way limits or restricts any right of ownership of the
Assets.
1.18 Merger. "Merger" shall have the meaning ascribed to it in Section 2.1
------
hereof.
1.19 Merger Consideration. "Merger Consideration" shall have the meaning
---------------------
ascribed to it in Section 2.7 hereof.
1.20 NASDAQ. "NASDAQ" shall mean the Nation Association of Securities
------
Dealers Automated Quotation Stock Market.
1.21 Permits. "Permits" shall mean all licenses, permits and other
-------
governmental authorizations and pending applications therefore necessary for the
Company to conduct the Business, as described on Schedule 1.21 hereto.
1.22 Person. "Person" shall mean any government, natural person,
------
corporation, partnership or other legal entity.
1.23 Proprietorship. "Proprietorship" shall mean the Shareholder's sole
--------------
proprietorship as of the date of this Agreement through which Shareholder owns
the Assets, and the Permits, and operates the Business, all of which will be
transferred by Shareholder to the Company prior to Closing.
1.24 Real Property. "Real Property" shall mean all real property owned or
-------------
leased by the Company as of the Closing Date, including all appurtenant rights,
claims and interests therein, as described on Schedule 1.24 hereto.
4
<PAGE>
1.25 Registered Shares. "Registered Shares" shall have the meaning ascribed
-----------------
to it in Section 6.7 hereof.
1.26 Registration Statement. "Registration Statement" shall have the
-----------------------
meaning ascribed to it in Section 6.7 hereof.
1.27 SEC. "SEC" shall mean the United States Securities and Exchange
---
Commission.
1.28 Shareholder. "Shareholder" shall mean Michael W. Mims.
-----------
1.29 Shares. "Shares" shall have the meaning set forth in Section 4.2.
------
1.30 Surviving Corporation. "Surviving Corporation" shall have the meaning
---------------------
ascribed to it in Section 2.1 hereof.
1.31. Unregistered Shares. "Unregistered Shares" shall have the meaning
--------------------
ascribed to it in Section 6.10 hereof.
ARTICLE II
----------
THE MERGER
----------
2.1 Merger of Sub into the Company. On the Closing Date, the Sub shall be
------------------------------
merged with and into the Company in accordance with this Agreement and the
separate corporate existence of the Sub shall thereupon cease (the "Merger").
The Merger shall be based on the respective representations, warranties and
agreements of the parties hereto, and shall be subject to the terms and
conditions herein stated. The Merger is intended to be a "tax-free
reorganization" pursuant to Section 368(a)(2)(E) of the Code and the parties
hereto shall not report the transaction in a manner inconsistent therewith or
otherwise take any action that would prevent the Merger from qualifying as such;
provided, however, that the actual tax effect of the transactions contemplated
by this Agreement is not a condition precedent to the closing of the
transactions contemplated hereby and no party hereto makes or has made any
representation, warranty or covenant to any other party hereto as to such
qualification. The Company shall be the surviving corporation in the Merger (in
such capacity, hereinafter referred to as the "Surviving Corporation") and shall
5
<PAGE>
continue to be governed by the laws of the State of South Carolina and the
separate corporate existence of Surviving Corporation with all its rights,
privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger, except as set forth herein. The Merger shall have the
effects specified in the South Carolina Business Corporation Act of 1988, as
amended.
2.2 Merger Certificates. If all conditions to the Merger set forth herein
--------------------
have been fulfilled or waived in accordance herewith and this Agreement shall
not have been terminated pursuant to the terms hereof, the parties hereto shall
cause to be properly executed and filed with the South Carolina Secretary of
State on the Closing Date Articles of Merger meeting the requirements of the
South Carolina Business Corporation Act of 1988, as amended. The Merger shall
become effective on the Closing Date upon filing of the Articles of Merger with
the South Carolina Secretary of State.
2.3 Articles of Incorporation of Surviving Corporation. At the Closing
-----------------------------------------------------
Date, the Articles of Incorporation of the Company shall be the Articles of
Incorporation of the Surviving Corporation.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Sub on the
---------------------------------------
Closing Date shall be the Bylaws of the Surviving Corporation, unless and until
duly amended in accordance with their terms.
2.5 Directors of the Surviving Corporation. The persons who are directors
---------------------------------------
of the Sub immediately prior to the Closing Date shall, from and after the
Closing Date, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
2.6 Officers of the Surviving Corporation. The persons who are officers of
-------------------------------------
the Sub immediately prior to the Closing Date shall, from and after the Closing
Date, be the officers of the Surviving Corporation and shall hold their same
respective office(s) until their earlier death, resignation or removal.
2.7 Conversion of the Shares. The manner of converting the Shares in the
------------------------
Merger shall be as follows:
6
<PAGE>
(a) As a result of the Merger and without any action on the part of
the holder thereof, the Shares shall cease to be outstanding and shall be
cancelled and retired and shall cease to exist, and the Shareholder shall
thereafter cease to have any rights with respect to the Shares, except the right
to receive eight hundred twenty-seven thousand, six hundred eighty (827,680)
shares of Buyer's common stock (the "ABG Common Stock") (the "Merger
Consideration").
(b) On the Closing Date, each share of the Sub's common stock issued
and outstanding as of the Closing Date shall be surrendered in exchange for
share of validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.8 Exchange of Certificates Representing the Shares.
------------------------------------------------
(a) On the Closing Date, (i) the Shareholder, as the holder of all
outstanding certificates representing the Shares, shall, upon surrender of such
certificates, be entitled to receive the Merger Consideration and (ii) until the
certificates representing the Shares have been surrendered by the Shareholder
and replaced by certificates representing the Surviving Corporation common
stock, the certificates for the Shares shall, for all purposes, be deemed to
evidence ownership of the Surviving Corporation common stock.
(b) The Shareholder shall deliver to the Sub on the Closing Date the
certificates representing the Shares owned by him, duly endorsed in blank by the
Shareholder, or accompanied by blank stock powers, and with all necessary
transfer tax and other revenue stamps (if any), acquired at the Shareholder's
expense. The Shareholder agrees to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
the Shares or with respect to the stock powers accompanying the Shares.
Simultaneous with such delivery on the Closing Date, the Shareholder shall
receive in exchange therefor a certificate or certificates representing the ABG
Common Stock.
2.9 Voting Agreement. The ABG Common Stock owned by the Shareholder after
-----------------
Closing and the shares of Common Stock of Buyer held by Greg Wilson, President
and Chief Executive Officer of Buyer, shall be subject to the terms of the
Voting Agreement, in the form of Exhibit 2.9 hereto, by and between the
Shareholder and Greg Wilson.
7
<PAGE>
2.10 Absence of Schedules. The parties hereto recognize and agree that the
--------------------
Schedules to this Agreement were not available as of the date of execution of
this Agreement. Accordingly, the parties hereto hereby waive any breach of any
representation, warranty, condition or provision of this Agreement which may
technically be deemed to exist due to the failure of any party hereto to
properly disclose any information which otherwise would have, or should have,
been disclosed on a Schedule attached to this Agreement on the date it is
signed. The parties hereto agree that all such Schedules shall be prepared only
as of the Closing Date and that accordingly any such representation, warranty,
condition or provision of this Agreement which is impacted by the absence of
such Schedule shall be deemed to speak, and shall be relevant, only as of the
Closing Date and thereafter.
ARTICLE III
-----------
FEASIBILITY PERIOD, ACCESS AND INDEMNITY
----------------------------------------
3.1 Feasibility Period. From the date of execution of this Agreement by
-------------------
Buyer and the Shareholder until the earlier of the Closing or twenty (20) days
hereafter (the "Feasibility Period"), Buyer shall have the right of review,
investigation and inspection of the Assets and the Business to determine whether
or not Buyer desires to proceed with the Closing. During the Feasibility Period
the Buyer may conduct inspections and economic and feasibility studies of the
Assets and the Business to determine that they are suitable, in Buyer's sole
opinion, for Buyer's purposes and conduct all such inspections and studies as
Buyer deems reasonable of the Assets and the Business. Seller agrees to
cooperate fully with Buyer's efforts and shall execute such forms and requests
as may be required to obtain the information deemed necessary by Buyer. No
study, investigation or inspection by Buyer or Buyer's representatives shall be
deemed to have in any way diminished or waived the representations, warranties
or covenants of Seller set forth in this Agreement.
8
<PAGE>
3.2 Access and Indemnity. Buyer and Buyer's agents shall have the right of
--------------------
access to the Business, Assets and Real Estate during the Feasibility Period for
the purpose of conducting such studies, investigations and inspections. Buyer
shall repair any damage or injury to property resulting from Buyer's
investigation and inspections. Buyer shall indemnify and hold harmless Seller on
account of any claims, causes of action, damages, costs and expenses (including
attorney's fees) arising out of or relating to the acts of Buyer, its agents and
employees under the provisions of this Section. This indemnity shall survive the
termination of this Contract.
3.3 Termination of Contract. If Buyer determines, in Buyer's sole judgment
-----------------------
and discretion, that the Assets are not suitable for Buyer's intended purposes,
Buyer shall give Seller written notice of such fact on or before the end of the
Feasibility Period. Upon receipt of such written notice, both parties shall be
released from all further obligations under this Contract.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
-------------------------------------------------
AND THE COMPANY
---------------
The Shareholder and the Company make the following representations and
warranties to the Buyer. The Buyer has inspected the Assets and performed all
necessary due diligence and is acquiring the Company as a result of such
inspection and due diligence and not in reliance upon any representation or
warranty with respect thereto made by the Shareholder other than those
specifically set forth in this Agreement.
4.1 Organization of the Company. The Company is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of the State
of South Carolina. The Company has the requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
Company has the requisite corporate power and authority to carry on the Business
and to own, operate and hold under lease or otherwise the Assets. Schedule 4.1
shall consist of true, complete and correct copies of the Company's Articles of
Incorporation, Bylaws and all amendments thereto, as presently in effect, all
corporate minutes of board of directors and shareholder meetings and actions by
written consent by them since the incorporation of the Company, and the stock
ledger and minute book of the Company.
9
<PAGE>
4.2 Capitalization; Ownership. The total authorized capital stock of the
--------------------------
Company consists of 100,000 shares of common stock, no par value. As of the date
hereof, 100 shares of common stock are issued and outstanding (the "Shares"),
all of which shares are owned by the Shareholder. The Shares constitute all the
issued and outstanding shares of capital stock of the Company. The Shareholder
has good and marketable title to the Shares, free and clear of all Liens. The
Shares have been validly authorized and issued and are fully paid and
non-assessable. Neither the Company nor the Shareholder has received any notice
of any adverse claim to the ownership of the Shares. There is no security,
option, warrant, right (preemptive or otherwise), call, subscription, agreement,
conversion or exchange, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly (a) calls for the issuance,
sale, pledge or other disposition of any shares of capital stock of the Company,
or (b) obligates the Company to grant, offer or enter into any of the foregoing
or (c) relates to the voting or control of such capital stock, securities or
rights. Upon receipt by the Shareholder of the Merger Consideration, the Buyer
will own one hundred percent (100%) of the issued and outstanding shares of the
Company free and clear of all Liens.
4.3 Authorization; Enforceability. The Shareholder and the Company have the
-----------------------------
requisite individual and corporate power and authority to execute, deliver and
perform this Agreement and each of the documents, instruments and agreements
contemplated hereby to which either of them is or will be a party, and to
perform their obligations hereunder or thereunder. The execution, delivery and
performance of this Agreement and each of the other documents, instruments and
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Company, and no further approvals
on the part of the Company are required. This Agreement has been, and the other
documents and instruments required hereby to which the Company will be a party
will be, duly executed and delivered by the Company, and when duly executed and
delivered by the other parties hereto and thereto (assuming such documents and
instruments will be valid and binding obligations of such other parties), will
be the valid and binding obligations of the Company, and will be enforceable
against the Shareholder and the Company in accordance with their respective
terms, subject to the effect of bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by general
principles of equity. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal is
required by the Shareholder and/or the Company for the execution, delivery
and/or performance of this Agreement, other than Articles of Merger which must
be filed with the South Carolina Secretary of State in connection with the
merger contemplated by this Agreement.
10
<PAGE>
4.4 No Conflict or Violation. Neither the execution and delivery of this
-------------------------
Agreement and each of the documents, instruments and agreements contemplated
hereby by the Company and the Shareholder nor the consummation of the
transactions contemplated hereby and thereby will result in (a) a violation of,
or a conflict with, any provision of the Articles of Incorporation or Bylaws of
the Company, (b) a violation by the Company of any judgment, order or decree
binding on the Company, (c) to the best of the Shareholder's and the Company's
knowledge, a violation by the Company of any Law or the occurrence of any event
which with notice, lapse of time, or both, would result in the violation of any
Law, judgment, order or decree binding on the Company, or (d) a breach of,
default under, or conflict with, any material term or provision of, or
permission to modify, terminate, or accelerate, any Contract, Lease or other
agreement or instrument, or obligation thereunder, applicable to the Company,
the Business or any of the Assets, or an event which with notice, lapse of time,
or both, would result in any such breach, default, or conflict.
4.5 Permits and Approvals. Except as set forth in Schedule 4.5 hereto, no
---------------------
Permit from or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority is necessary to enter into
this Agreement, any instrument, document or other agreement contemplated hereby,
and to carry out the transactions contemplated hereby and thereby; provided,
however, neither the Company nor the Shareholder makes any representation or
warranty as to any requirement of the Buyer with respect to any of the matters
discussed in this Section 4.5.
11
<PAGE>
4.6 Consents. Except as set forth on Schedule 4.6, no consent of any party
--------
to any Contract, Lease, or other agreement or instrument applicable to the
Company, the Business or any of the Assets, is required for the execution,
delivery and/or performance of this Agreement.
4.7 Financial Condition. Schedule 4.7 shall consist of true and complete
--------------------
copies of (i) the compiled balance sheets of the Proprietorship as of December
31, 1996, and June 30, 1997, and the related compiled statement of income and
cash flows of the Proprietorship for the year ended December 31, 1996, and the
six months ended June 30, 1997, accompanied by the compilation report thereon of
the accountants (collectively the "Financial Statements"). The Financial
Statements (i) were prepared in accordance with the books of account and other
financial records of the Proprietorship by accountants retained by Shareholder,
(ii) present fairly the financial condition, results of operations and cash
flows of the Proprietorship as of the dates thereof and for the periods covered
thereby, (iii) have been prepared in accordance with general accepted accounting
principles ("GAAP") applied on a basis consistent with the past practices of the
Proprietorship, and (iv) include all adjustments (consisting only of normal
recurring accruals) that are necessary for a fair presentation of the financial
conditions of the Proprietorship, and the results of operations and cash flows
of the Proprietorship as of the dates thereof or for the periods covered
thereby.
4.8 Lack of Material Changes. Except as set forth in Schedule 4.8, since
-------------------------
July 1, 1997:
(a) There has not been any change having a material adverse effect on
the Business operations, properties (including any intangible properties),
condition (financial or otherwise), assets, liabilities, results of operations
or prospects of the Business or the Proprietorship.
(b) The operations and business of the Proprietorship have been
conducted in all respects only in the ordinary course.
(c) The Shareholder and/or the Proprietorship and/or the Company has
not mortgaged, pledged or subjected to lien or other encumbrance any of the
Assets.
12
<PAGE>
(d) Neither the Proprietorship nor the Company has suffered an
extraordinary loss (whether or not covered by insurance) or waived any right of
substantial value.
(e) Neither the Proprietorship nor the Company has sold or transferred
any of its assets having a book value in the aggregate of $5,000 or more or
canceled any debts or claims, except, in each case, in the ordinary course of
business, and except for the transfer of the Assets from the Proprietorship to
the Company.
(f) The Company has not issued any common stock, preferred stock,
capital stock, bonds, warrants, options, rights or any other form of corporate
securities, other than the original issuance of 100 shares of common stock of
the Shareholder.
(g) There is no compensation payable or to become payable by the
Company to any of its officers, employees or agents, or any known payment or
arrangement made to or with any of such persons, except as described in this
Agreement.
(h) Neither the Proprietorship nor the Company has made any change in
the method of accounting or accounting practice or policy used by them, other
than changes required by GAAP.
(i) Neither the Proprietorship nor the Company has made any material
changes in the customary methods of operations of the Business, including
practice and policies relating to purchasing, inventory, marketing, selling or
pricing.
(j) Neither the Proprietorship nor the Company has agreed, whether in
writing or otherwise, to engage in any of the acts specified in this Section
4.8, except for those contemplated by this Agreement.
13
<PAGE>
(k) There is no fact known to the Company and/or Shareholder which
will have a material adverse effect or in the future (as far as the Company or
Shareholder can foresee) may have a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of the Company which has not been disclosed to Buyer in this
Agreement; provided, however, that the Company and Shareholder express no
opinion as to political or economic matters of general applicability.
(l) The assets and operations of the Proprietorship as disclosed and
described in and upon the balance sheet and other financial statements described
in Section 4.7 will be transferred and assigned by Shareholder to the Company
prior to Closing so that there will be no material difference in the assets,
liabilities and operations of the Company as of the day of Closing from the
assets, liabilities and operations described in and upon said financial
statements.
4.9 Absence of Undisclosed Liabilities. Except as set forth on Schedule
------------------------------------
4.9, neither the Proprietorship nor the Company has liabilities or obligations
of any nature (whether absolute, accrued, contingent, or otherwise) which
individually or in the aggregate, are material, including without limitation
liabilities for federal, state, local, or foreign taxes, liabilities to
customers or suppliers, direct or indirect, claims, losses, damages,
deficiencies (including deferred income tax and other net tax deficiencies),
costs, expenses, obligations, guarantees, or responsibilities, whether accrued,
absolute, or contingent, known or unknown, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, (hereinafter collectively referred to as
"Liabilities") other than the following:
(a) Liabilities for which full provision and disclosure have been made
on the balance sheet of the Proprietorship as of June 30, 1997, and/or
(b) Other liabilities arising since June 30, 1997, and prior to the
Closing Date which have been incurred in the ordinary course of business and
which are not inconsistent with the representations and warranties of the
Company and Shareholder contained in this Agreement or any other provisions of
This Agreement.
4.10 Title to Assets. At Closing the Company will be the rightful owner of
---------------
all the Assets, free and clear of any and all Liens. Schedule 4.10 shall consist
of a true and complete list of all legal and personal properties and material
Assets (including but not limited to machinery, equipment,
14
<PAGE>
inventories, and intangibles owned, leased, used in the business and/or licensed
by the Shareholder and/or the Company, all of which will be transferred to the
Company prior to Closing), together with a list of all personal property
attached to, located on or used in connection with the Business and which will
not be owned by the Company as of the date of Closing but which the Company will
have the right to use under lease, rental or other agreement, accompanied by
true and current photocopies of such agreements. The Assets constitute all of
such properties and assets which are necessary to conduct the Business.
4.11 Condition of Fixtures and Equipment. The Fixtures and Equipment are in
-----------------------------------
good operating condition and repair, normal wear and tear excepted, and are
adequate for the purposes for which they are being utilized, subject to the
continuing need for ordinary, routine maintenance and repairs.
4.12 Leases. Schedule 1.16 contains an accurate and complete list of all
------
Leases. The Leases constitute valid and legally binding obligations of the
Company and are enforceable in accordance with their terms, subject to the
effect of bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity, and none of
the Leases will be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. Neither the Shareholder nor the
Company is in default, and neither the Company nor the Shareholder has received
notice of any asserted default, under any Lease.
4.13 No Litigation. Except as set forth in Schedule 4.13, there is no
--------------
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending, proposed or threatened against the Company or the
Shareholder relating to this Agreement, the Assets, the Business or the
transactions contemplated herein, and there is no writ, injunction, decree,
order or judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or threatened, relating to the
ownership, use or maintenance of the Assets or the operation of the Business by
the Company or the Shareholder.
15
<PAGE>
4.14 Compliance with Law. To the best of the Shareholder's and the
---------------------
Company's knowledge, except as specified in Schedule 4.14, the Company's and the
Shareholder's conduct of the Business and ownership and/or use of the Assets do
not materially violate or conflict with any Law. The Permits described in
Schedule 1.21 (i) constitute all permits, licenses and governmental agency
authorizations, registrations and approvals required for the Company to own
and/or use the Assets and/or to conduct the Business, (ii) are in full force and
effect, and (iii) are being complied with in all material respects.
4.15 Taxes. The Shareholder and the Company have filed all required tax
-----
returns and reports, including but not limited to state, local and federal
income tax returns, payroll tax reports and real and personal property tax
reports, and have paid all taxes shown thereby to be due and payable. Copies of
all such returns and reports for all open tax years have been delivered or made
available to the Buyer prior to the date of this Agreement. The Shareholder and
the Company have paid (or have made adequate provision for and will timely pay)
all taxes (including additions to taxes, penalties and interest), withholdings
and other governmental charges the nonpayment of which could materially
adversely affect any of the Assets, the use of the Assets, or the conduct of the
Business or could cause the Company to incur a material liability. No taxing
authority has asserted any claim for the assessment of any such tax liability,
withholding or other governmental charges, nor is any governmental entity
presently engaged in an audit of the Shareholder's or the Company's tax returns,
nor, to the best of the Shareholder's and the Company's knowledge, about to
engage in such an audit.
4.16 Contracts. Schedule 1.11 contains a list of all Contracts and a brief
---------
description of the subject matter of each such Contract. Neither the Shareholder
nor the Company is in material breach or violation of, or in default under, and
there is no valid basis for a claim of material breach or violation of, or
default under, any such Contract, and no event has occurred which constitutes
or, with the lapse of time or the giving of notice or both, would constitute
such a material breach or violation or default by the Company, or any other
party thereto. No party to any Contract has given notice of its intention
16
<PAGE>
to cancel or terminate any such Contract. None of the rights of the Company
under the Contracts will be materially impaired by the delivery, execution and
performance of this Agreement.
4.17 ERISA Matters and Employees. The Company does not have, nor does it
----------------------------
contribute to, any pension, profit sharing, option, other incentive plan, or any
other type of employee benefit plan (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974), or any obligation to or customary
arrangement with employees for bonuses, incentive compensation, or severance
pay. Schedule 4.17 hereto contains a list of the Company's employees with
current salary (or rate of pay) and other compensation now paid by the Company
to each employee, including a description of any increase scheduled to be
effective after the date of this Agreement.
4.18 Insurance. Schedule 4.18 hereto contains a complete and correct list
---------
of all insurance policies, of any kind, held by the Company. Each such policy is
valid and enforceable; all premiums and other payments due from the Company on
account of any such policy have been paid and there is no act or failure to act
which has or might cause any such policy to be canceled or terminated.
4.19 No Brokers' or Finders' Fees. Neither the Company nor the Shareholder
----------------------------
is committed to any liability for any brokers' or finders' fees or any similar
fees in connection with the transactions contemplated by this Agreement. Neither
the Company nor the Shareholder has had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by this Agreement.
4.20 Liens. Except as set forth on Schedule 4.20, at Closing the Company
-----
will have good and marketable title to all of the Assets and the Assets will not
be subject to any liens.
4.21 Questionable Payments. Neither the Company, any director, officer,
----------------------
agent, employee, nor other person associated with or acting on behalf of such
entities or individuals has, directly or indirectly: (i) used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
payment to foreign or domestic governmental officials or employees or to foreign
or domestic political parties or campaigns from corporate funds; (ii)
17
<PAGE>
violated any provision of the Foreign Corrupt Practices Act of 1977; (iii)
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; (iv) made any false or fictitious entry on the books or records of
the Company; (v) made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment; (vi) given any favor or gift which is not deductible for
federal income tax purposes; and/or (viii) made any bribe, kickback, or other
payment of a similar or comparable nature, whether lawful or not, to any person
or entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained.
4.22 Bank Accounts. Schedule 4.22 shall list the names and address of every
-------------
bank and other financial institution in which the Company maintains an account
(whether checking, savings or otherwise), lock box or safe deposit box, and the
account numbers and names of persons having signing authority or other access
thereof.
4.23 Quarterly Reports. Schedule 4.23 shall consist of copies of the
------------------
quarterly reports of the gaming operations of the Business for the most recent
six month period which have been filed with the South Carolina Department of
Revenue.
4.24 Lack of Restrictions. Except as set forth on Schedule 4.24 hereto, no
--------------------
real property owned, leased or used by the Proprietorship or the Company in
connection with the Business lies in an area which is, or to the knowledge of
the Company or Shareholder, will be, subject to zoning, use or building code
restrictions which would prohibit, and the Company and the Shareholder are not
aware of any facts relating to the acts of another person or entity or its
ownership, leasing, licensing or use of any real or personal property which
would prevent, the continued effective ownership, leasing and use of such real
property in the Business.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
-------------------------------------------------
18
<PAGE>
The Shareholder, with respect to himself and his obligations hereunder,
hereby represents and warrants to the Buyer:
5.1 Ownership of Shares; Title. He is the owner of record and beneficially
---------------------------
of the Shares he is selling hereunder. He has good and marketable title to such
Shares, free and clear of all Liens. He has received no notice of any adverse
claim to the ownership of the Shares. There is no security, option, warrant,
right, call, subscription, agreement, conversion or exchange, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly affects the Shares.
5.2 Authorization; Enforceability. He has the power and authority and has
------------------------------
full legal capacity and is competent to execute, deliver and perform his
obligations under this Agreement and each of the other documents, instruments
and agreements contemplated hereby to which he is or will be a party. This
Agreement has been, and the other documents and instruments required hereby to
which he will be a party will be, duly executed and delivered by him, and when
duly executed and delivered by the other parties hereto and thereto (assuming
such documents and instruments will be valid and binding obligations of such
other parties) will be his valid and binding obligations, enforceable against
him in accordance with their respective terms, subject to the effect of
bankruptcy, insolvency, moratorium, or other similar laws affecting the
enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity.
5.3 No Conflict or Violation. Neither the execution and delivery of this
-------------------------
Agreement by him nor the consummation of the transactions contemplated hereby
will result in (a) a violation by him of any Law, judgment, order or decree
binding upon him or any event which with notice, lapse of time, or both, would
result in any such violation, (b) a breach of, default under, or conflict with,
any material term or provision of, or permission to modify, terminate or
accelerate, any Contract, Lease or other agreement or instrument, or obligation
thereunder, to which the Company is a party and which is applicable to him or
any of his assets, or an event which with notice, lapse of time, or both, would
result in any such breach or default, or (c) the creation of any lien upon, or
result in any person obtaining any right to acquire any of his properties,
assets or rights.
19
<PAGE>
5.4 Ownership and Management of Exempted Entities. Attached as Schedule 5.4
---------------------------------------------
hereto is a complete and accurate description of the following information with
respect to the businesses exempted from Shareholder's non-competition agreement
pursuant to Section 11.4 of this Agreement: (i) a complete description of the
identities and ownership interests of each equity owner in each such entity (as
shareholder, partner, or otherwise), to the best of Shareholder's knowledge;
(ii) the identity of each officer, director and other person participating in
management of such business, to the best of Shareholder's knowledge; and (iii) a
complete description of the Employee's current and past management activities
with respect to each such business. Buyer will keep and maintain the
confidentiality of the information disclosed on Schedule 5.4 and will not
disclose such information to any third party except: (a) if ordered to do so by
any court or regulatory authority; or (b) as necessary in litigation for the
enforcement or defense of its rights under this Agreement and the other related
agreements referred to herein.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE SUB
-------------------------------------------------------
The Buyer and the Sub hereby represent and warrant to the Shareholder as
follows:
6.1 Organization of Buyer. The Buyer and the Sub are corporations duly
----------------------
organized and validly existing and in good standing under the laws of the State
of Delaware and the State of South Carolina, respectively, and have the
requisite corporate power and authority to enter into this Agreement and perform
their obligations hereunder.
6.2 Authorization; Enforceability. Each of the Buyer and the Sub have the
------------------------------
requisite corporate power and authority to execute, deliver and perform this
Agreement and each of the documents, instruments and agreements contemplated
hereby to which the Buyer and the Sub are or will be a party, and to perform
their obligations hereunder or thereunder. The execution, delivery and
20
<PAGE>
performance of this Agreement and each of the other documents, instruments and
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Buyer and the Sub, and no further
approvals on the part of the Buyer and the Sub are required. This Agreement has
been, and the other documents and instruments required hereby to which the Buyer
and the Sub will be a party will be, duly executed and delivered by the Buyer
and the Sub, and when duly executed and delivered by the other parties hereto
and thereto (assuming such documents and instruments will be valid and binding
obligations of such other parties) will be the valid and binding obligations of
the Buyer and the Sub, enforceable against the Buyer and the Sub in accordance
with their respective terms, subject to the effect of bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity.
6.3 No Conflict or Violation. Neither the execution and delivery of this
-------------------------
Agreement and each of the documents, instruments and agreements contemplated
hereby by the Buyer or the Sub nor the consummation of the transactions
contemplated hereby and thereby will result in (a) a violation of, or a conflict
with, any provision of the Articles of Incorporation or Bylaws of the Buyer or
the Sub, (b) a violation by the Buyer or the Sub of any judgment, order or
decree binding on the Buyer or the Sub, (c) to the best of the Buyer's and the
Sub's knowledge, a violation by the Buyer or the Sub of any Law or the
occurrence of any event which with notice, lapse of time, or both, would result
in the violation of any Law, judgment, order or decree binding on the Buyer or
the Sub, or (d) a breach of, default under, or conflict with, any material term
or provision of, or permission to modify, terminate, or accelerate, any
contract, lease, mortgage, deed of trust, indenture, permit, license, franchise
or commitment or other agreement or instrument, or obligation thereunder,
applicable to the Buyer or the Sub, the business or any of their assets, or an
event which with notice, lapse of time, or both, would result in any such
breach, default, or conflict.
21
<PAGE>
6.4 No Litigation or Consents. Except as set forth on Schedule 6.4A, there
-------------------------
is no litigation, arbitration proceeding, governmental investigation, citation
or action of any kind pending, proposed or threatened against the Buyer or the
Sub with respect to any transaction in the Buyer's securities, the transactions
contemplated by this Agreement, or the business or assets of the Buyer or the
Sub. Except as set forth on Schedule 6.4B, no consent of any other Person and no
consent, Permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Buyer or the Sub in connection with the execution, delivery,
performance, validity or enforceability of this Agreement and the transactions
contemplated herein.
6.5 No Brokers' or Finders' Fees. Neither Buyer nor the Sub is committed to
----------------------------
any liability for any brokers' or finders' fees or any similar fees in
connection with the transactions contemplated by this Agreement. The Buyer and
the Sub have not had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement.
6.6 ABG Common Stock. The issuance and delivery by the Buyer of shares of
-----------------
the ABG Common Stock in connection with the transactions contemplated by this
Agreement will be, as of the Closing Date, duly authorized by all necessary
corporate action on the part of the Buyer. The shares of ABG Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
6.7 Registered Stock. One hundred thousand (100,000) shares of the ABG
-----------------
Common Stock (the "Registered Shares") to be issued in connection with the
transactions contemplated by this Agreement have been registered with the SEC on
a registration statement on Form S-3 (the "Registration Statement"). The Buyer
is eligible to use Form S-3, Form S-3 is the proper registration statement to
be used for this transaction, and Form S-3 is being used properly in connection
with this transaction. The Registration Statement has been declared effective
under the Securities Act of 1933, as amended, and is not subject to a stop order
or threatened stop order. All necessary qualifications or exemptions under
applicable state securities laws related to the issuance of the Registered
22
<PAGE>
Shares by Buyer to Shareholder in connection with the transactions contemplated
by this Agreement, have been obtained and are in full force and effect. The
Registered Shares to be issued pursuant to this Agreement will be freely
transferrable under federal securities laws by the Shareholder.
6.8 Compliance with Securities Laws. The Buyer has filed in a timely manner
-------------------------------
all reports and other documents required to be filed by it with the SEC. All of
these reports and documents, as of their respective dates, complied in all
material respects with all applicable statutes, rules and regulations enforced
or promulgated by the SEC. As of their respective dates of filing, none of the
SEC reports, including, but not limited to, the Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1996, contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements therein not misleading.
6.9 Rule 144. The Buyer recognizes that the Shareholder may be deemed to be
--------
an "affiliate" of the Buyer, as that term is defined in Rule 144 of the
Securities Act of 1933, and that as an "affiliate" the Shareholder would be
subject to restrictions and limitations imposed by Rule 144 in the event the
Shareholder decided to sell any of the ABG Common Stock. Furthermore, even if
the Shareholder is not deemed to be an "affiliate" of the Buyer under Rule 144,
the Buyer recognizes that the Shareholder will be subject to restrictions and
limitations imposed by Rule 144 in the event the Shareholder decides to sell any
of the Unregistered Shares. Accordingly, Buyer agrees to timely file all reports
and other documents required to be filed by it with the SEC and to take such
other action as is required from time to time to ensure that the Shareholder is
able to sell the shares of ABG Common Stock issued to him in compliance with the
provisions of Rule 144 or Rule 145 (as in effect at the time of any proposed
sale), if applicable.
6.10 Restrictions on Disposition of Shares. Seven hundred twenty-seven
---------------------------------------
thousand six hundred eighty (727,680) shares of the ABG Common Stock (the
"Unregistered Shares") to be issued to the Shareholder in connection with the
transactions contemplated by this Agreement, will not have been registered
23
<PAGE>
under the Securities Act of 1933, and may be resold by the Shareholder only
after registration under the Securities Act of 1933, or under an available
exemption, or pursuant to Rule 144. The Shareholder agrees that the
Unregistered Shares will not be disposed of except (i) pursuant to an effective
registration statement under the Securities Act of 1933, or (ii) in any other
transaction which is exempt from registration under the Securities Act of 1933
or the rules and regulations of the SEC promulgated thereunder. The Shareholder
further agrees (i) that no such sale, conveyance or disposition of the
Unregistered Shares shall occur for a period of twelve (12) months after
Closing, (ii) that no more than one-third (1/3) of the Unregistered Shares shall
be sold during the period between the first anniversary and the second
anniversary of Closing, (iii) that no more than one-third (1/3) of the
Unregistered Shares shall be sold during the period between the second
anniversary and the third anniversary of Closing, and (iv) that no more than
one-third (1/3) of the Unregistered Shares shall be sold during the period
between the third anniversary and the fourth anniversary of Closing; provided,
however, this annual limitation on sales of the Unregistered Shares shall not
apply in the event (i) the Buyer is the subject of an acquisition pursuant to
any merger, stock exchange, stock purchase, consolidation, tender offer or other
type of similar transaction, or (ii) the Buyer extends an offer to its
shareholders to repurchase shares of its common stock. In order to effectuate
the covenants of this subsection, an appropriate legend will be placed upon each
of the certificates of stock at the time of distribution of such Unregistered
Shares pursuant to this Agreement, and stop transfer instructions shall be
placed with the transfer agent for such shares. Such legend shall be removed
from the respective certificates as appropriate upon reaching the respective
anniversary date which terminates the restriction.
6.11 Evidence of Compliance with Private Offering Exception. The
--------------------------------------------------------------
Shareholder will agree to provide such reasonable evidence as counsel for Buyer
may request in order to evidence the private offering nature of the distribution
of the Unregistered Shares received pursuant to this Agreement.
ARTICLE VII
-----------
CERTAIN MATTERS PENDING THE CLOSING
-----------------------------------
24
<PAGE>
The Shareholder, the Company, the Buyer and the Sub each covenants with the
others as follows for the period from the date hereof through the Closing Date:
7.1 Maintenance of the Company and the Business Prior to Closing. The
----------------------------------------------------------------
Shareholder shall use his best efforts to continue to carry on the Business in
the ordinary course and in accordance with past practice, and will not take any
action inconsistent therewith or with the consummation of the Closing. Without
limiting the generality of the foregoing, the Shareholder shall, absent the
written consent of the Buyer, which consent shall not be unreasonably withheld,
(a) maintain the Assets in substantially their current state of repair,
excepting normal wear and tear; (b) use all reasonable efforts to preserve
intact the relationships with all Persons having business dealings with the
Shareholder related to the Business; (c) not enter into or agree to enter into
any material purchase commitment for Fixtures and Equipment or supplies, except
in the ordinary course of business; (d) not authorize, declare, pay or effect
any dividend in respect of the Company's capital stock; (e) not enter into or
agree to enter into any material contract without amending Schedule 1.11 and
providing the Buyer with a copy of the revised Schedule 1.11 within seven days
after entering into such a contract; (f) not amend or agree to amend the
Company's Articles of Incorporation or Bylaws or merge with or consolidate into
any other entity; (g) not sell, pledge or acquire or agree to sell, pledge or
acquire any shares of capital stock or other securities of the Company; (h) not
grant or enter into any options, warrants, calls or commitments of any kind with
respect to the Company's capital stock; (i) not make or agree to make any single
capital expenditure or commitment in excess of $20,000 nor aggregate capital
expenditure or commitment in excess of $50,000; and (j) not borrow or agree to
borrow any funds or incur or agree to incur, whether directly or by way of
guarantee or otherwise, any indebtedness, obligation or liability or enter into
any other material transaction except in the ordinary course of business.
7.2 Cooperation. The Company, the Shareholder, the Buyer and the Sub shall
-----------
use their best efforts to cause the transactions contemplated by this Agreement
to be consummated. The Company and the Shareholder shall use their best efforts
to obtain all consents and authorizations of third parties and to make all
filings with and give all notices to third parties which may be necessary or
reasonably required in order to effect the transactions contemplated hereby.
25
<PAGE>
7.3 Compliance with Law. The Company and the Shareholder shall continue to
-------------------
conduct the Business and to use the Assets in compliance with all applicable
Laws, and all orders of any court or of any federal, state, municipal or other
governmental department, noncompliance with which could cause a material adverse
change in the Assets or the Business.
7.4 Registration Statement. The Buyer shall take all other required action
----------------------
to ensure that on the Closing Date the Registered Shares issued in connection
with the transactions contemplated by this Agreement will be freely
transferrable by the Shareholder.
7.5 Listing Application. The Buyer shall prepare and submit to NASDAQ a
--------------------
listing application covering the ABG Common Stock and shall use its best efforts
to obtain approval for the listing of the ABG Common Stock upon official notice
of issuance.
7.6 Articles of Merger and Plan of Merger. Prior to the Closing Date, the
-------------------------------------
Shareholder and the Buyer shall prepare Articles of Merger and Plan of Merger
reflecting the terms of the Merger, which Articles of Merger will be filed with
the Secretary of State of South Carolina on the Closing Date to effectuate the
Merger.
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND THE SUB
----------------------------------------------------------------
Each and every obligation of the Buyer and the Sub to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following express conditions precedent:
8.1 Compliance with Agreement. The Company and the Shareholder shall have
-------------------------
performed and complied in all material respects with all of their respective
obligations under this Agreement that are to be performed or complied with by
them prior to or on the Closing Date. Without limiting the foregoing, by the
Closing Date the Shareholder shall have transferred good and marketable title to
all the Assets to the Company.
26
<PAGE>
8.2 Proceedings and Instruments Satisfactory. All proceedings, corporate or
----------------------------------------
other, to be taken by the Company and the Shareholder in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the Buyer, the Sub and
their counsel, and the Company and the Shareholder shall have made available to
the Buyer for examination the originals or true and correct copies of all
documents that the Buyer may reasonably request in connection with the
transactions contemplated by this Agreement.
8.3 Employment Agreement. The Buyer shall have received from the
----------------------
Shareholder an employment agreement in substantially the form set forth in
Exhibit 8.3.
8.4 No Adverse Change. There shall have been no material adverse change in
-----------------
the Business, Assets, operations or condition (financial or otherwise) of the
Proprietorship or the Company between the date hereof and the Closing Date.
8.5 No Litigation. No investigation, suit, charge, action or other
--------------
proceeding shall be threatened or pending before any court or governmental
agency that seeks restraint, prohibition, damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby,
or which seeks to obtain, establish or impose any interest in or lien or
encumbrance upon any of the Assets, or which, if successful, would materially
impair operation of the Business or the financial condition of the
Proprietorship or the Company.
8.6 Representations and Warranties. All Schedules referred to in this
--------------------------------
Agreement which contain or should contain information concerning the Shareholder
or the Company shall have been fully and accurately completed and provided to
the Buyer for attachment to this Agreement; and the representations and
warranties made by the Company and the Shareholder in this Agreement and the
Schedules attached hereto shall be true and correct in all material respects as
of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
27
<PAGE>
8.7 Consents. Except as set forth in Schedule 4.6, all consents, approvals
--------
and waivers from third parties and governmental authorities and other parties
necessary (a) to permit the Shareholder to transfer the Shares to the Buyer,
free and clear of all Liens; (b) to consummate the transactions contemplated
hereby; and (c) to allow the Company to operate the Business after the Closing
Date shall have been obtained by the Buyer.
<PAGE>
8.8 Deliveries at Closing. The Company and the Shareholder shall have
----------------------
delivered, or cause to be delivered, to the Buyer the following documents, each
properly executed and dated as of the Closing Date: (a) the Company's and the
Shareholder's Closing Certificate; (b) certificates evidencing the Shares, duly
endorsed in blank for transfer or accompanied by duly executed stock powers; and
(c) such other documents as the Buyer may reasonably request.
8.9 No Termination Under Article III. Buyer shall not have given timely
-----------------------------------
notice of termination of this Agreement pursuant to Article III hereof.
ARTICLE IX
----------
CONDITIONS PRECEDENT TO THE OBLIGATIONS
---------------------------------------
OF THE SHAREHOLDER AND THE COMPANY
----------------------------------
Each and every obligation of the Shareholder and the Company to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following express conditions precedent:
9.1 Compliance with Agreement. The Buyer and the Sub shall have performed
--------------------------
and complied in all material respects with all of its obligations under this
Agreement that are to be performed or complied with by it prior to or on the
Closing Date.
9.2 Proceedings and Instruments Satisfactory. All proceedings, corporate or
----------------------------------------
other, to be taken by the Buyer and the Sub in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Shareholder, the Company
and their counsel and the Buyer shall have made available to the Shareholder for
examination the originals or true and correct copies of all documents that the
Shareholder may reasonably request in connection with the transactions
contemplated by this Agreement.
28
<PAGE>
9.3 Employment Agreement. The Buyer shall have executed the Shareholder's
---------------------
employment agreement in substantially the form set forth in Exhibit 8.3.
<PAGE>
9.4 No Adverse Change. There shall have been no material adverse change in
-----------------
the operation or condition (financial or otherwise) of the Buyer or in the value
of the ABG Common Stock between the date hereof and the Closing Date.
9.5 No Litigation. No investigation, suit, action or other proceeding shall
-------------
be threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
9.6 Representations and Warranties. All Schedules referred to in this
--------------------------------
Agreement which contain or should contain information concerning the Buyer or
the Sub shall have been fully and accurately completed and provided to the
Shareholder and the Company for attachment to this Agreement; and the
representations and warranties made by the Buyer and the Sub in this Agreement
and the Schedules attached hereto shall be true and correct in all material
respects as of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
9.7 Consents. All consents, approvals and waivers from governmental
--------
authorities and other parties necessary to permit the Shareholder to transfer
the Shares to the Buyer as contemplated hereby shall have been obtained by the
Buyer.
9.8 Registration Statement. The Registration Statement for the Registered
-----------------------
Shares shall be effective and not subject to a stop order or threatened stop
order. All necessary qualifications or exemptions under applicable state
securities laws shall have been obtained and be in full force and effect.
9.9 Approval for Listing. Buyer shall have filed the necessary
-----------------------
documentation to list the ABG Common Stock to be issued pursuant to this
Agreement on NASDAQ.
9.10 Deliveries at Closing. The Buyer shall have delivered to the
-----------------------
Shareholder the following documents, each properly executed and dated as of the
Closing Date: (a) the Merger Consideration in the form of ABG Common Stock; (b)
29
<PAGE>
the Buyer's and Sub's Closing Certificate; (c) certified corporate resolutions
of the board of directors of the Buyer and the Sub approving the transactions
contemplated by this Agreement; and (d) such other documents as the Shareholder
may reasonably request.
ARTICLE X
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
10.1 Survival of Representations and Warranties. All of the representations
------------------------------------------
and warranties contained in this Agreement shall survive the consummation of the
transactions contemplated by this Agreement.
10.2 Indemnification.
---------------
(a) The Shareholder hereby agrees to indemnify, defend and hold
harmless the Buyer and the Sub from and against any and all damages, losses,
expenses, claims or other liabilities, including without limitation reasonable
attorneys' fees, incurred by the Buyer or the Sub as a result, directly or
indirectly, of any breach, violation or nonfulfillment of any covenant,
representation, warranty or other provision of this Agreement, or any agreement
executed in connection with the transactions contemplated by this Agreement, or
any misrepresentation or omission with respect to any covenant, representation,
warranty or other provision of this Agreement, on the part of the Shareholder.
The Buyer and the Sub hereby agree to indemnify, defend and hold harmless the
Shareholder from and against any and all damages, losses, expenses, claims, or
other liabilities, including without limitation reasonable attorneys' fees,
incurred by the Shareholder as a result, directly or indirectly, of any breach,
violation or nonfulfillment of any covenant, representation, warranty or other
provision of this Agreement, or any agreement executed in connection with the
transactions contemplated by this Agreement, or any misrepresentation or
omission with respect to any covenant, representation, warranty or other
provision of this Agreement, on the part of the Buyer or the Sub.
(b) Should any claim be made by a person not a party to this
Agreement, with respect to any matter to which the foregoing indemnity relates,
the party against whom such claim is asserted (the "Indemnified Party"), within
a reasonable period of time, shall give written notice to the other party (the
"Indemnifying Party") of any such claim, and the Indemnifying Party shall
30
<PAGE>
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its own selection. In such defense or settlement of
any claims, the Indemnified Party shall cooperate with the Indemnifying Party to
the maximum extent reasonably possible. Any payment resulting from such defense
or settlement, together with the total expense thereof, shall be binding on the
Buyer, the Company and the Shareholder.
(c) Notwithstanding the foregoing provisions of this Section 10.2, no
party shall be liable to indemnify the other until the total of all
indemnifiable losses, liabilities, damages, costs, or expenses for which
indemnification would otherwise be required, equals or exceeds $25,000. At such
time as the aggregate indemnifiable losses, liabilities, damages, costs and
expenses have exceeded this threshold amount, the Indemnifying Party shall pay
all such excess amounts as provided herein.
ARTICLE XI
NON-COMPETITION AGREEMENT
-------------------------
11.1 Shareholder's Covenants. Shareholder covenants and agrees that:
-----------------------
(a) Shareholder shall not, directly or indirectly, within the
Territory during the Restricted Period, promote, operate, manage or conduct any
bingo game or related gaming business permitted under the terms and conditions
of any bingo license issued by the State of South Carolina or under any other
state or federal law or authority, or operate any video game machine or other
gaming machine or device (such games and game machines being referred to herein
as "Games").
(b) Further, Shareholder shall not, directly or indirectly, within the
Territory during the Restricted Period, solicit or sell for, own, or acquire any
interest in, either directly or indirectly, any corporation, partnership,
limited partnership, or other entity, or become engaged by, act as landlord to,
or as agent or consultant for, do business with, manage, operate, control, be
employed by, participate in, or be connected, in any manner with, or in any
manner assist, any other person, corporation, partnership or other entity
engaged in the business of promoting, operating, managing or conducting Games.
31
<PAGE>
11.2 Restricted Period. For the purpose of this Agreement, the "Restricted
-----------------
Period" means the period commencing with the date hereof and continuing until
three years thereafter.
11.3 Territory. For purposes of this Agreement the "Territory" shall mean:
---------
(i) with regard to any activities described in Section 11.1 above which are
conducted under a Class B or Class C bingo license (or equivalent thereof under
any future law) issued by the State of South Carolina or under any other state
or federal law or authority, the area within a fifty (50) mile radius of any
bingo facility then owned by Company, Buyer or any subsidiary of Buyer, and (ii)
with regard to any activities described in Section 11.1 above which are
conducted under any Class A license (or equivalent thereof under any future law)
issued by the State of South Carolina or under any other state or federal law or
authority, the area within a one hundred (100) mile radius of any bingo game
facility then owned by Company, Buyer, or any subsidiary of Buyer; and (iii)
with regard to video game facilities, the area within a twenty-five (25) mile
radius of any bingo, video poker or video game facility then owned by the
Company, Buyer, or any subsidiary of Buyer.
11.4 Exemptions. The provisions of this Article XI shall not apply to
----------
businesses operated by Mims Amusement Company Partnership, Mims Amusement
Operating Co, Palmetto State Distributing Company, Inc., or Universal Mortgage
and Loan Co.; provided that within the twelve (12) month period immediately
preceding the date of this Agreement Shareholder has had, and during the
Restricted Period shall have, no role, directly or indirectly, in management or
operation of any such exempted business, nor shall Shareholder during the
Restricted Period receive any payment or distribution of any kind, as
compensation or otherwise, from any such business other than dividends upon
corporate stock which are strictly proportional to the percentage of stock owned
by him, or distributions with respect to his capital accounts in partnerships
which are strictly proportional to the percentage of his capital account
ownership in any such partnership.
11.5 Enforcement. In the event of a breach by either party of the
-----------
provisions of this Agreement, the non-breaching party, in addition to any other
remedies it may have at law or under this Agreement, shall be entitled to an
injunction restraining the breaching party from violating or continuing a
violation of the terms of this Article XI.
32
<PAGE>
ARTICLE XII
-----------
REGISTRATION RIGHTS
-------------------
12.1 Piggyback Registration. If at any time, or from time to time, the
-----------------------
Buyer shall determine to register any of its securities under the Securities Act
of 1933, either for its own account or the account of a shareholder, pursuant to
an underwritten public offering, the Buyer shall (a) promptly give to the
Shareholder written notice thereof, and (b) include in such registration and in
any underwriting involved therein, up to one-third (1/3) of the Unregistered
Shares as specified in a written request or requests of the Shareholder made
within thirty days after receipt by the Shareholder of such written notice from
the Buyer.
12.2 Limitations on Registration. If the underwriter determines that
-----------------------------
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Unregistered Shares to be
included in the registration and underwriting; provided, however, that the
underwriter may not limit the amount of Unregistered Shares included in such
registration and underwriting to less than an amount equal to TEN percent (10%)
of the amount of all of the Buyer's securities included within such registration
and underwriting. If the Shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the Buyer
and the underwriter.
12.3 Delay or Cancellation of Registration. If, at any time after giving
---------------------------------------
the Shareholder written notice of the Buyer's intention to register any of its
securities, and prior to the effective date of the registration statement filed
in connection with such registration, the Buyer shall determine for any reason
not to register or to delay the registration, at its sole election, the Buyer
may give written notice of such determination to the Shareholder and thereupon
shall be relieved of its obligation to register the Unregistered Shares in
connection with such registration (but not from its obligation to pay
registration expenses in connection therewith or to register the Unregistered
Shares in a subsequent registration).
12.4 Expenses. All expenses incurred in connection with any registration,
--------
qualification or compliance pursuant to this Article XII, including without
limitation, all registration, filing, and qualification fees, printing expenses,
fees and disbursements of counsel for the Buyer, and expenses of any special
audits incidental to or required by such registration, shall be
33
<PAGE>
borne by the Buyer; provided, however, the Buyer shall not be required to pay
underwriters' fees, discounts, or commissions relating to the Unregistered
Shares.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Books and Records. Each party agrees that it will cooperate with and
-----------------
make available to the other parties, during normal business hours, all books,
records and information retained and remaining in existence after the Closing
Date which are necessary or useful in connection with any tax filing, inquiry,
audit, investigation or dispute, any litigation or investigation or any other
matter requiring any such books, records or information. The party requesting
any such books, records or information shall bear all of the other parties'
out-of-pocket costs and expenses reasonably incurred in connection with
providing such books, records and information.
13.2 Further Assurances. Both before and after the Closing Date, each party
------------------
will cooperate in good faith with the other parties and, from time to time as
requested by the other party or parties, will take all appropriate action and
execute all documents which may be necessary to carry out any of the
transactions contemplated hereunder more effectively, all at the expense of the
requesting party unless arising out of a default of the cooperating party.
13.3 Entire Agreement; Amendment. This Agreement constitutes the entire
-----------------------------
agreement among the parties pertaining to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements among the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
34
<PAGE>
13.4 Expenses. Each party hereto shall bear its own fees and expenses of
--------
its counsel, accountants and other experts incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby. To the extent such fees and expenses are incurred by the Company prior
to Closing, such fees and expenses shall be paid by the Company at Closing.
13.5 Termination. If any condition precedent to the Shareholder's
-----------
obligations hereunder is not satisfied and such condition is not waived by the
Shareholder at or prior to the Closing Date, or if any condition precedent to
the Buyer's obligations hereunder is not satisfied and such condition is not
waived by the Buyer at or prior to the Closing Date, the Shareholder or the
Buyer, as the case may be, may terminate this Agreement at their option by
notice to the other party or parties, as the case may be. In the event of the
termination of this Agreement by any party as above provided, no party shall
have any liability hereunder of any nature whatsoever to the other party, other
than the liability of each party for its own expenses and liability resulting,
arising or accruing from the breach of this Agreement; provided, however, that a
party shall not be so relieved of liability to the other party if the failure to
satisfy a condition precedent results from the failure of a party to make good
faith efforts to satisfy such condition. In the event that a condition precedent
to a party's obligations is not satisfied, nothing contained herein shall be
deemed to require any party to terminate this Agreement, rather than to waive
such condition precedent and proceed with the Closing.
13.6 Governing Law. This Agreement shall be governed by, construed and
--------------
interpreted in accordance with the laws of the State of South Carolina, without
reference to the conflicts of laws principles thereof.
13.7 Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns or heirs and personal representatives.
13.8 Assignment. This Agreement and each party's respective rights
----------
hereunder may not be assigned by any party without the prior written consent of
the other parties.
35
<PAGE>
13.9 No Reliance. No third party is entitled to rely on any of the
------------
representations, warranties and agreements contained in this Agreement.
13.10 Notices. All communications, notices and disclosures required or
-------
permitted by this Agreement shall be in writing, and delivered personally, sent
by overnight messenger service, or sent by United States mail, certified or
registered, postage prepaid, and addressed as follows, unless and until a party
notifies the others in accordance with this Section of a change of address:
If to the Company Pre-Closing: 2605 C Seminole Road
Columbia, South Carolina 29210
Attn: Michael Mims
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
If to the Company Post-Closing: 515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Greg Wilson
If to the Shareholder: 2605 C Seminole Road
Columbia, South Carolina 29210
Attn: Michael Mims
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
If to the Buyer or to Sub: American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Greg Wilson
With a copy to: Wilson & Varner, L.L.P.
301 Congress Avenue, Suite 2025
Austin, Texas 78701
Attn: Rodney Varner
36
<PAGE>
13.11 Counterparts; Headings. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall be deemed an original but all of which shall
together constitute but one and the same Agreement. The Table of Contents and
Article and Section headings in this Agreement are inserted for convenience of
reference only and shall not constitute a part hereof.
13.12 Interpretation. Unless the context requires otherwise, all words used
--------------
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular and all
words in any gender shall extend to and include all genders.
13.13 Severability. If any provision, clause or part of this Agreement, or
------------
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby.
13.14 Confidentiality. The parties hereto agree to keep this Agreement
---------------
confidential, as well as any information or document obtained by either party in
connection with this transaction, except to the extent disclosure is required to
or by any government agency or regulatory or quasi-regulatory body.
13.15 Joint Draftsmanship. The preparation of this Agreement has been a
--------------------
joint effort of the parties and this Agreement shall not, solely as a matter of
judicial construction, be construed more severely against one of the parties
than the other.
37
<PAGE>
IN WITNESS WHEREOF, each corporate party has caused this Agreement to be duly
executed in its name by its duly authorized officer and each individual party
hereto has duly executed this Agreement, all as of the day and year first above
written, unless otherwise noted below.
AMERICAN BINGO & GAMING CORP.
By: /s/ Greg Wilson
-----------------
Greg Wilson, President
SHAREHOLDER
/s/ Michael W. Mims
----------------------
Michael W. Mims
GOLD STRIKE, INC.
By: /s/ Michael W. Mims
----------------------
Michael W. Mims, President
GOLD STRIKE ACQUISITION CORPORATION
By: /s/ Greg Wilson, as of 8/25/97
-----------------------------------
Its: Greg Wilson, President
------------------------
38
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AMERICAN BINGO & GAMING CORP.
AS THE "BUYER"
AND
DARLINGTON MUSIC ACQUISITION CORPORATION
AS THE "SUB"
AND
DARLINGTON MUSIC CO., INC.
AS THE "COMPANY"
AND
GEORGE M. HARRISON, JR.
THOMAS M. HARRISON
WILLIAM W. HARRISON
THE SHAREHOLDERS OF
DARLINGTON MUSIC CO., INC.
AS THE "SHAREHOLDERS"
DATED: NOVEMBER 12, 1997
<PAGE>
SCHEDULES
---------
SCHEDULE
- --------
1.4 Locations of Business
1.11 Contracts
1.16 Leases
1.21 Permits
1.23 Real Property
2.7 Allocation of Merger Consideration
4.5 Permits and Approvals
4.6 Consents
4.7 Financial Statements
4.8 List of Material Changes
4.9 Undisclosed Liabilities
4.10 List of Property
4.13 Litigation
4.14 Compliance with Law
4.17A Employee Benefit Plans
4.17B Employees
4.18 Insurance
4.20 Liens
4.22 Banks
4.23 Quarterly Reports of Gaming Operations
4.24 Real Property Restrictions
i
<PAGE>
5.1 Share Ownership
6.4A Litigation
6.4B Consents
7.1 Approved Payments
11.1 Exceptions to Non-compete
ii
<PAGE>
EXHIBITS
--------
EXHIBIT
- -------
1.6 Form of the Buyer's and Sub's Closing Certificate
1.10 Form of the Company's and the Shareholders' Closing Certificate
2.9 Form of Voting Agreement
8.3 Form of Employment Agreement
iii
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 12th day of November, 1997, by and among American Bingo and Gaming Corp., a
corporation organized and existing under the laws of the State of Delaware (the
"Buyer"), Darlington Music Acquisition Corporation, a corporation organized and
existing under the laws of the State of South Carolina (the "Sub"), Darlington
Music Co., Inc., a corporation organized and existing under the laws of the
State of South Carolina (the "Company"), and George M. Harrison, Jr., Thomas M.
Harrison and William W. Harrison, the shareholders of the Company (the
"Shareholders").
RECITALS
--------
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Company (all of such issued and outstanding shares of
capital stock being referred to herein as the "Shares"); and
WHEREAS, the Boards of Directors of each of the Company, the Buyer and the
Sub have determined that a business combination between the parties is in the
best interests of their respective companies and stockholders and accordingly
have agreed to effect the Merger (hereinafter defined) upon the terms and
conditions set forth herein; and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto DO HEREBY AGREE as follows:
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
When used in this Agreement, the following terms shall have the meanings
ascribed to them below:
1.1 ABG Common Stock. "ABG Common Stock" shall have the meaning
------------------
ascribed to it in Section 2.7.
1.2 Agreement. "Agreement" shall mean this Agreement and Plan of
---------
Reorganization, together with the Exhibits and Schedules incorporated herein by
reference, as the same may be amended from time to time in accordance with the
terms hereof.
1.3 Assets. "Assets" shall mean all of the equipment, machinery, real
------
property, fixtures, leasehold interests, inventory, and prepaid expenses, all of
the Company's rights under the Contracts and Leases, and all other tangible and
intangible assets of every kind which are currently owned by the Company for use
in the Business.
1.4 Business. "Business" shall mean the operations of the Company as
--------
of the date of Closing, which shall include the ownership and operation of video
poker games at various locations in South Carolina, which locations are
identified on Schedule 1.4 hereto.
1.5 Buyer. "Buyer" shall mean American Bingo & Gaming Corp., a
-----
corporation organized and existing under the laws of the State of Delaware.
1.6 Buyer's and Sub's Closing Certificate. "Buyer's and Sub's Closing
--------------------------------------
Certificate" shall mean the certificate of Buyer and the Sub in the form of
Exhibit 1.6 hereto.
1.7 Closing. "Closing" shall mean the conference held at 10:00 am,
-------
local time, on the Closing Date, at Buyer's offices, or such other time and
place as the parties hereto may mutually agree. All transactions occurring at
the Closing shall be deemed to have occurred simultaneously, and no one
transaction shall be deemed to be complete until all transactions required to be
completed at the Closing are completed.
2
<PAGE>
1.8 Closing Date. "Closing Date" shall mean December 16, 1997, or such
------------
other date as the parties hereto may mutually agree, on which date the Articles
of Merger shall be filed with the South Carolina Secretary of State and become
effective.
1.9 Code. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
1.10 Company's and Shareholders' Closing Certificate. "Company's and
-------------------------------------------------
Shareholders' Closing Certificate" shall mean the certificate of the Company and
the Shareholders in the form of Exhibit 1.10 hereto.
1.11 Contracts. "Contracts" shall mean all contracts, agreements,
---------
mortgages, trust deeds, indentures, notes, licenses, franchises, obligations or
other commitments, arrangements and understandings with a term of more than one
year or for an amount exceeding $1,000 to which the Company is a party or by
which it is bound, as described in Schedule 1.11 hereto.
1.12 Fixtures and Equipment. "Fixtures and Equipment" shall mean any
------------------------
and all of the furniture, fixtures, furnishings, leasehold improvements,
supplies, vehicles, parts, tools, machinery, equipment and other items of
tangible personal property which will be owned or leased by the Company as of
the Closing Date.
1.13 Indemnified Party. "Indemnified Party" shall have the meaning
------------------
ascribed to it in Section 10.2 hereof.
1.14 Indemnifying Party. "Indemnifying Party" shall have the meaning
-------------------
ascribed to it in Section 10.2 hereof.
3
<PAGE>
1.15 Law. "Law" shall mean any federal, state, local or other law or
---
governmental agency requirement of any kind, and the rules, regulations,
ordinances, permits, licenses and orders promulgated thereunder.
1.16 Leases. "Leases" shall mean all leases of real and personal
------
property to which the Company is a party, as described in Schedule 1.16.
1.17 Lien. "Lien" shall mean any mortgage, pledge, lien, security
----
interest, claim, encumbrance, charge, option, equity, right, proxy, voting or
other agreement which in any way limits or restricts any right of ownership of
the Assets.
1.18 Merger. "Merger" shall have the meaning ascribed to it in Section
------
2.1 hereof.
1.19 Merger Consideration. "Merger Consideration" shall have the
---------------------
meaning ascribed to it in Section 2.7 hereof.
1.20 NASDAQ. "NASDAQ" shall mean the National Association of
------
Securities Dealers Automated Quotation Stock Market.
1.21 Permits. "Permits" shall mean all licenses, permits and other
-------
governmental authorizations and pending applications therefore necessary for the
Company to conduct the Business, as described on Schedule 1.21 hereto.
1.22 Person. "Person" shall mean any government, natural person,
------
corporation, partnership or other legal entity.
1.23 Real Property. "Real Property" shall mean all real property owned
-------------
or leased by the Company as of the Closing Date, including all appurtenant
rights, claims and interests therein, as described on Schedule 1.23 hereto.
1.24 Registered Shares. "Registered Shares" shall have the meaning
------------------
ascribed to it in Section 6.7 hereof.
4
<PAGE>
1.25 Registration Statement. "Registration Statement" shall have the
-----------------------
meaning ascribed to it in Section 6.7 hereof.
1.26 SEC. "SEC" shall mean the United States Securities and Exchange
---
Commission.
1.27 Shareholders. "Shareholders" shall mean George M. Harrison, Jr.,
------------
Thomas M. Harrison, and William W. Harrison.
1.28 Shares. "Shares" shall have the meaning set forth in Section 4.2.
------
1.29 Surviving Corporation. "Surviving Corporation" shall have the
----------------------
meaning ascribed to it in Section 2.1 hereof.
1.30. Unregistered Shares. "Unregistered Shares" shall have the
--------------------
meaning ascribed to it in Section 6.10 hereof.
ARTICLE II
----------
THE MERGER
----------
2.1 Merger of Sub into the Company. On the Closing Date, the Sub shall
------------------------------
be merged with and into the Company in accordance with this Agreement and the
separate corporate existence of the Sub shall thereupon cease (the "Merger").
The Merger shall be based on the respective representations, warranties and
agreements of the parties hereto, and shall be subject to the terms and
conditions herein stated. The Merger is intended to be a "tax-free
reorganization" pursuant to Section 368(a)(2)(E) of the Code and the parties
hereto shall not report the transaction in a manner inconsistent therewith or
otherwise take any action that would prevent the Merger from qualifying as such;
provided, however, that the actual tax effect of the transactions contemplated
by this Agreement is not a condition precedent to the closing of the
transactions contemplated hereby and no party hereto makes or has made any
representation, warranty or covenant to any other party hereto as to such
qualification. The Company shall be the surviving corporation in the Merger (in
5
<PAGE>
such capacity, hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of South Carolina and the
separate corporate existence of Surviving Corporation with all its rights,
privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger, except as set forth herein. The Merger shall have the
effects specified in the South Carolina Business Corporation Act of 1988, as
amended.
2.2 Merger Certificates. If all conditions to the Merger set forth
--------------------
herein have been fulfilled or waived in accordance herewith and this Agreement
shall not have been terminated pursuant to the terms hereof, the parties hereto
shall cause to be properly executed and filed with the South Carolina Secretary
of State on the Closing Date Articles of Merger meeting the requirements of the
South Carolina Business Corporation Act of 1988, as amended. The Merger shall
become effective on the Closing Date upon filing of the Articles of Merger with
the South Carolina Secretary of State.
2.3 Articles of Incorporation of Surviving Corporation. At the Closing
--------------------------------------------------
Date, the Articles of Incorporation of the Company shall be the Articles of
Incorporation of the Surviving Corporation.
2.4 Bylaws of the Surviving Corporation. The Bylaws of the Sub on the
------------------------------------
Closing Date shall be the Bylaws of the Surviving Corporation, unless and until
duly amended in accordance with their terms.
2.5 Directors of the Surviving Corporation. The persons who are
------------------------------------------
directors of the Sub immediately prior to the Closing Date shall, from and after
the Closing Date, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
6
<PAGE>
2.6 Officers of the Surviving Corporation. The persons who are
-----------------------------------------
officers of the Sub immediately prior to the Closing Date shall, from and after
the Closing Date, be the officers of the Surviving Corporation and shall hold
their same respective office(s) until their earlier death, resignation or
removal.
2.7 Conversion of the Shares. The manner of converting the Shares in
--------------------------
the Merger shall be as follows:
(a) As a result of the Merger and without any action on the part of the
holder thereof, the Shares shall cease to be outstanding and shall be canceled
and retired and shall cease to exist, and the Shareholders shall thereafter
cease to have any rights with respect to the Shares, except the right to receive
one million (1,000,000) shares of Buyer's common stock (the "ABG Common Stock")
(the "Merger Consideration"), allocated among the Shareholders as identified on
Schedule 2.7.
(b) On the Closing Date, each share of the Sub's common stock issued
and outstanding as of the Closing Date shall be surrendered in exchange for a
share of validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation.
2.8 Exchange of Certificates Representing the Shares.
-----------------------------------------------------
(a) On the Closing Date, (i) the Shareholders, as the holders of all
outstanding certificates representing the Shares, shall, upon surrender of such
certificates, be entitled to receive the Merger Consideration and (ii) until the
certificates representing the Shares have been surrendered by the Shareholders
and replaced by certificates representing the Surviving Corporation common
stock, the certificates for the Shares shall, for all purposes, be deemed to
evidence ownership of the Surviving Corporation common stock.
7
<PAGE>
(b) The Shareholders shall deliver to the Sub on the Closing Date the
certificates representing the respective Shares owned by them, duly endorsed in
blank, or accompanied by blank stock powers, and with all necessary transfer tax
and other revenue stamps (if any), acquired at each Shareholder's expense. The
Shareholders agree to cure any deficiencies with respect to the endorsement of
the certificates or other documents of conveyance with respect to the Shares or
with respect to the stock powers accompanying the Shares. Simultaneous with
such delivery on the Closing Date, each Shareholder shall receive in exchange
therefor a certificate or certificates representing the ABG Common Stock
allocated to such Shareholder as his respective portion of the Merger
Consideration as noted on Schedule 2.7.
2.9 Voting Agreement. The ABG Common Stock owned by the Shareholders
-----------------
after Closing and the shares of common stock of Buyer held by Greg Wilson,
President and Chief Executive Officer of Buyer, and Michael Mims shall be
subject to the terms of the Voting Agreement, in the form of Exhibit 2.9 hereto,
by and between the Shareholders, Greg Wilson and Michael Mims.
2.10 Absence of Schedules. The parties hereto recognize and agree that
--------------------
the Schedules to this Agreement were not available as of the date of execution
of this Agreement. Accordingly, the parties hereto hereby waive any breach of
any representation, warranty, condition or provision of this Agreement which may
technically be deemed to exist due to the failure of any party hereto to
properly disclose any information which otherwise would have, or should have,
been disclosed on a Schedule attached to this Agreement on the date it is
signed. The parties hereto agree that all such Schedules shall be prepared only
as of the Closing Date and that accordingly any such representation, warranty,
condition or provision of this Agreement which is impacted by the absence of
such Schedule shall be deemed to speak, and shall be relevant, only as of the
Closing Date and thereafter.
8
<PAGE>
ARTICLE III
-----------
FEASIBILITY PERIOD, ACCESS AND INDEMNITY
----------------------------------------
3.1 Feasibility Period. From the date of execution of this Agreement
-------------------
by Buyer and the Shareholders until the earlier of the Closing or thirty (30)
days hereafter (the "Feasibility Period"), Buyer shall have the right of review,
investigation and inspection of the Company to determine whether or not Buyer
desires to proceed with the Closing. During the Feasibility Period the Buyer
may conduct inspections and economic and feasibility studies of the Company to
determine that the Company is suitable, in Buyer's sole opinion, for Buyer's
purposes and conduct all such inspections and studies as Buyer deems reasonable
of the Company. The Company and the Shareholders agree to cooperate fully with
Buyer's efforts and shall execute such forms and requests as may be required to
obtain the information deemed necessary by Buyer. No study, investigation or
inspection by Buyer or Buyer's representatives shall be deemed to have in any
way diminished or waived the representations, warranties or covenants of the
Company and the Shareholders set forth in this Agreement.
3.2 Access and Indemnity. Buyer and Buyer's agents shall have the right
----------------------
of access to the Company's facilities during the Feasibility Period for the
purpose of conducting such studies, investigations and inspections. Buyer shall
repair any damage or injury to the Company's property resulting from Buyer's
investigation and inspections. Buyer shall indemnify and hold harmless the
Company and the Shareholders on account of any claims, causes of action,
damages, costs and expenses (including attorney's fees) arising out of or
relating to the acts of Buyer, its agents and employees under the provisions of
this Article III. This indemnity shall survive the termination of this
Agreement.
3.3 Termination of Agreement. If Buyer determines, in Buyer's sole
--------------------------
judgment and discretion, that the Company is not suitable for Buyer's intended
purposes, Buyer shall give the Company and the Shareholders written notice of
such fact on or before the end of the Feasibility Period. Upon receipt of such
written notice, all parties shall be released from all further obligations under
this Agreement. If the Buyer does not timely provide such written notice to the
Company and the Shareholders, then it shall be conclusively deemed that the
Company is suitable for Buyer's intended purposes, and this Agreement may not be
terminated by the Buyer for the reasons set forth in this Article III.
9
<PAGE>
3.4 Confidentiality.
---------------
(a) Each party to this Agreement acknowledges that from the date
of this Agreement until Closing he or it may receive confidential and
proprietary information from one or more other parties to this Agreement. Such
information, whether written or oral, includes, but is not limited to,
financial, technical, permitting, operating, marketing and other information, as
well as information pertaining to geographical areas and fields of business
interests, identities and information about employees, consultants, vendors,
suppliers, customers, and other business contacts, methods of doing business and
other trade secrets (the "Confidential Information"). Each party to this
Agreement agrees to keep all such Confidential Information secret and to
maintain the confidentiality of such information up to and through the date of
Closing hereunder, or indefinitely if the Closing does not occur; provided,
however, that the following shall be deemed not to be Confidential Information:
(1) information lawfully obtained by a party from a third party who is not
under an obligation of confidentiality with respect to such information; (2)
10
<PAGE>
information which is in the public domain; (3) information which a party can
prove was independently developed by him or it without the use of information
which would otherwise be Confidential Information; and (4) information which the
party is ordered to disclose by any court or governmental agency (provided that
he gives the other parties hereto written notice of any such judicial or
administrative proceeding as soon as practical after the party learns of such
proceeding).
(b) The Confidential Information shall be used solely for the
purpose of evaluating the possible transactions contemplated by this Agreement
and shall not be used in any way directly or indirectly detrimental to any party
hereto. Such Confidential Information may be disclosed to advisers of the
parties hereto as necessary for the sole purpose of evaluating the proposed
transactions contemplated by this Agreement. All persons to whom such
Confidential Information is disclosed shall be informed of the confidential
nature of such information and shall likewise agree to be bound by the terms of
this confidentiality provision. Each party hereto agrees and recognizes that it
will be liable to the other parties hereto for any breach of this
confidentiality provision by it or any of its representatives.
(c) Upon written request of any party hereto, or upon the
termination of this Agreement, each party hereto shall promptly return to the
other parties any Confidential Information obtained and shall destroy all
originals and copies of any notes, analyses, compilations, studies,
interpretations or other materials prepared containing or reflecting any
Confidential Information.
(d) Until three years from the date of this Agreement, Buyer shall
not initiate or maintain contact with any officer, director, employee or agent
of the Company, except with the written consent of the Company. For a period of
three years from the date hereof, Buyer shall not hire any employee of the
Company with whom it has had contact or who became known to it during its
investigation.
11
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
AND THE COMPANY
---------------
The Shareholders and the Company make the following representations and
warranties to the Buyer. The Buyer has inspected the Assets and performed all
necessary due diligence and is acquiring the Company as a result of such
inspection and due diligence and not in reliance upon any representation or
warranty with respect thereto made by the Shareholders other than those
specifically set forth in this Agreement.
4.1 Organization of the Company. The Company is a corporation duly
------------------------------
organized and validly existing and in good standing under the laws of the State
of South Carolina. The Company has the requisite corporate power and authority
to enter into this Agreement and to perform its obligations hereunder. The
Company has the requisite corporate power and authority to carry on the Business
and to own, operate and hold under lease or otherwise the Assets. The Company
has provided the Buyer with true, complete and correct copies of the Company's
Articles of Incorporation, Bylaws and all amendments thereto, as presently in
effect, all corporate minutes of board of directors and shareholder meetings and
actions by written consent by them since the incorporation of the Company, and
the stock ledger and minute book of the Company.
4.2 Capitalization; Ownership. The total authorized capital stock of
--------------------------
the Company consists of 100,000 shares of common stock, no par value. As of the
date hereof, 16,200 shares of common stock are issued and outstanding (the
"Shares"), all of which shares are owned by the Shareholders. The Shares
constitute all the issued and outstanding shares of capital stock of the
Company. The Shareholders have good and marketable title to the Shares, free
and clear of all Liens. The Shares have been validly authorized and issued and
12
<PAGE>
are fully paid and non-assessable. Neither the Company nor any Shareholder has
received any notice of any adverse claim to the ownership of the Shares. There
is no security, option, warrant, right (preemptive or otherwise), call,
subscription, agreement, conversion or exchange, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly (a)
calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of the Company, or (b) obligates the Company to grant, offer or
enter into any of the foregoing or (c) relates to the voting or control of such
capital stock, securities or rights. Upon receipt by the Shareholders of the
Merger Consideration, the Buyer will own one hundred percent (100%) of the
issued and outstanding shares of the Company free and clear of all Liens.
4.3 Authorization; Enforceability. Each Shareholder and the Company
------------------------------
have the requisite individual and corporate power and authority to execute,
deliver and perform this Agreement and each of the documents, instruments and
agreements contemplated hereby to which any of them is or will be a party, and
to perform their obligations hereunder or thereunder. The execution, delivery
and performance of this Agreement and each of the other documents, instruments
and agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Company, and no further approvals
on the part of the Company are required. This Agreement has been, and the other
documents and instruments required hereby to which the Company will be a party
will be, duly executed and delivered by the Company, and when duly executed and
delivered by the other parties hereto and thereto (assuming such documents and
instruments will be valid and binding obligations of such other parties), will
be the valid and binding obligations of the Company, and will be enforceable
against the Shareholders and the Company in accordance with their respective
terms, subject to the effect of bankruptcy, insolvency, moratorium, or other
13
<PAGE>
similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by general
principles of equity. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local or other governmental authority or any court or other tribunal is
required by the Shareholders and/or the Company for the execution, delivery
and/or performance of this Agreement, other than Articles of Merger which must
be filed with the South Carolina Secretary of State in connection with the
merger contemplated by this Agreement.
4.4 No Conflict or Violation. Neither the execution and delivery of
---------------------------
this Agreement and each of the documents, instruments and agreements
contemplated hereby by the Company and the Shareholders nor the consummation of
the transactions contemplated hereby and thereby will result in (a) a violation
of, or a conflict with, any provision of the Articles of Incorporation or Bylaws
of the Company, (b) a violation by the Company of any judgment, order or decree
binding on the Company, (c) to the best of the Shareholders' and the Company's
knowledge, a violation by the Company of any Law or the occurrence of any event
which with notice, lapse of time, or both, would result in the violation of any
Law, judgment, order or decree binding on the Company, or (d) a breach of,
default under, or conflict with, any material term or provision of, or
permission to modify, terminate, or accelerate, any Contract, Lease or other
agreement or instrument, or obligation thereunder, applicable to the Company,
the Business or any of the Assets, or an event which with notice, lapse of time,
or both, would result in any such breach, default, or conflict.
4.5 Permits and Approvals. Except as set forth in Schedule 4.5 hereto,
---------------------
no Permit from or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority is necessary to enter into
this Agreement, any instrument, document or other agreement contemplated hereby,
and to carry out the transactions contemplated hereby and thereby; provided,
14
<PAGE>
however, neither the Company nor the Shareholders make any representation or
warranty as to any requirement of the Buyer with respect to any of the matters
discussed in this Section 4.5.
4.6 Consents. Except as set forth on Schedule 4.6, no consent of any
--------
party to any Contract, Lease, or other agreement or instrument applicable to the
Company, the Business or any of the Assets, is required for the execution,
delivery and/or performance of this Agreement.
4.7 Financial Condition. Schedule 4.7 shall consist of true and
--------------------
complete copies of (i) the compiled balance sheets of the Company as of August
31, 1997, and September 30, 1997, and the related compiled statement of income
and cash flows of the Company for the year ended August 31, 1997, and the month
ended September 30, 1997, accompanied by the compilation report thereon of the
accountants (collectively the "Financial Statements"). The Financial Statements
(i) were prepared in accordance with the books of account and other financial
records of the Company by accountants retained by the Company, (ii) present
fairly the financial condition, results of operations and cash flows of the
Company as of the dates thereof and for the periods covered thereby, (iii) have
been prepared in accordance with general accepted accounting principles ("GAAP")
applied on a basis consistent with the past practices of the Company, and (iv)
include all adjustments (consisting only of normal recurring accruals) that are
necessary for a fair presentation of the financial conditions of the Company,
and the results of operations and cash flows of the Company as of the dates
thereof or for the periods covered thereby.
4.8 Lack of Material Changes. Except as set forth in Schedule 4.8,
---------------------------
since August 31, 1997:
(a) There has not been any change having a material adverse effect on the
Business operations, properties (including any intangible properties), condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of the Company.
15
<PAGE>
(b) The operations and business of the Company have been conducted in all
respects only in the ordinary course.
(c) The Shareholders and/or the Company have not mortgaged, pledged or
subjected to lien or other encumbrance any of the Assets.
(d) The Company has not suffered an extraordinary loss (whether or not
covered by insurance) or waived any right of substantial value.
(e) The Company has not sold or transferred any of its assets having a
book value in the aggregate of $5,000 or more or canceled any debts or claims,
except, in each case, in the ordinary course of business.
(f) The Company has not issued any common stock, preferred stock, capital
stock, bonds, warrants, options, rights or any other form of corporate
securities.
(g) There is no compensation payable or to become payable by the Company
to any of its officers, employees or agents, or any known payment or arrangement
made to or with any of such persons, except as described in this Agreement and
except as noted on Schedule 7.1.
(h) The Company has not made any change in the method of accounting or
accounting practice or policy used by the Company, other than changes required
by GAAP.
(i) The Company has not made any material changes in the customary methods
of operations of the Business, including practice and policies relating to
purchasing, inventory, marketing, selling or pricing.
(j) The Company has not agreed, whether in writing or otherwise, to engage
in any of the acts specified in this Section 4.8, except for those contemplated
by this Agreement and except as noted on Schedule 7.1.
16
<PAGE>
(k) There is no fact known to the Company and/or any Shareholder which
will have a material adverse effect or in the future (as far as the Company or
any Shareholder can foresee) may have a material adverse effect on the financial
condition, results of operations, business, properties, assets, liabilities, or
future prospects of the Company which has not been disclosed to Buyer in this
Agreement; provided, however, that the Company and the Shareholders express no
opinion as to political or economic matters of general applicability.
4.9 Absence of Undisclosed Liabilities. Except as set forth on Schedule
----------------------------------
4.9, the Company does not have liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) which individually or in the
aggregate, are material, including without limitation liabilities for federal,
state, local, or foreign taxes, liabilities to customers or suppliers, direct or
indirect, claims, losses, damages, deficiencies (including deferred income tax
and other net tax deficiencies), costs, expenses, obligations, guarantees, or
responsibilities, whether accrued, absolute, or contingent, known or unknown,
fixed or unfixed, liquidated or unliquidated, secured or unsecured, (hereinafter
collectively referred to as "Liabilities") other than the following:
(a) Liabilities for which full provision and disclosure have been made
on the balance sheet of the Company as of September 30, 1997, and/or
(b) Other liabilities arising since September 30, 1997, and prior to
the Closing Date which have been incurred in the ordinary course of business and
which are not inconsistent with the representations and warranties of the
Company and Shareholders contained in this Agreement or any other provisions of
this Agreement.
4.10 Title to Assets. The Company is the rightful owner of all the
-----------------
Assets, free and clear of any and all Liens. Schedule 4.10 shall consist of a
true and complete list of all legal and personal properties and material Assets
(including but not limited to machinery, equipment, inventories, and intangibles
17
<PAGE>
owned, leased, used in the business and/or licensed by the Company), together
with a list of all personal property attached to, located on or used in
connection with the Business and which will not be owned by the Company as of
the date of Closing but which the Company will have the right to use under
lease, rental or other agreement, accompanied by true and current photocopies of
such agreements. The Assets constitute all of such properties and assets which
are necessary to conduct the Business.
4.11 Condition of Fixtures and Equipment. The Fixtures and Equipment
-------------------------------------
are in good operating condition and repair, normal wear and tear excepted, and
are adequate for the purposes for which they are being utilized, subject to the
continuing need for ordinary, routine maintenance and repairs.
4.12 Leases. Schedule 1.16 contains an accurate and complete list of
------
all Leases. The Leases constitute valid and legally binding obligations of the
Company and are enforceable in accordance with their terms, subject to the
effect of bankruptcy, insolvency, moratorium, or other similar laws affecting
the enforcement of creditors' rights generally and except as the availability of
equitable remedies may be limited by general principles of equity, and none of
the Leases will be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. The Company is not in default, and
the Company has not received notice of any asserted default, under any Lease.
4.13 No Litigation. Except as set forth in Schedule 4.13, there is no
-------------
litigation, arbitration proceeding, governmental investigation, citation or
action of any kind pending, proposed or threatened against the Company or any
Shareholder relating to this Agreement, the Assets, the Business or the
transactions contemplated herein, and there is no writ, injunction, decree,
order or judgment outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or threatened, relating to the
ownership, use or maintenance of the Assets or the operation of the Business by
the Company.
18
<PAGE>
4.14 Compliance with Law. To the best of the Shareholders' and the
---------------------
Company's knowledge, except as specified in Schedule 4.14, the Company's conduct
of the Business and ownership and/or use of the Assets do not materially violate
or conflict with any Law. The Permits described in Schedule 1.21 (i) constitute
all permits, licenses and governmental agency authorizations, registrations and
approvals required for the Company to own and/or use the Assets and/or to
conduct the Business, (ii) are in full force and effect, and (iii) are being
complied with in all material respects.
4.15 Taxes. The Company has filed all required tax returns and
-----
reports, including but not limited to state, local and federal income tax
returns, payroll tax reports and real and personal property tax reports, and
have paid all taxes shown thereby to be due and payable. Copies of all such
returns and reports for all open tax years have been delivered or made available
to the Buyer prior to the date of this Agreement. The Company has paid (or has
made adequate provision for and will timely pay) all taxes (including additions
to taxes, penalties and interest), withholdings and other governmental charges
the nonpayment of which could materially adversely affect any of the Assets, the
use of the Assets, or the conduct of the Business or could cause the Company to
incur a material liability. No taxing authority has asserted any claim for the
assessment of any such tax liability, withholding or other governmental charges,
nor is any governmental entity presently engaged in an audit of the Company's
tax returns, nor, to the best of the Shareholders' and the Company's knowledge,
about to engage in such an audit.
4.16 Contracts. Schedule 1.11 contains a list of all Contracts and a
---------
brief description of the subject matter of each such Contract. The Company is
not in material breach or violation of, or in default under, and there is no
19
<PAGE>
valid basis for a claim of material breach or violation of, or default under,
any such Contract, and no event has occurred which constitutes or, with the
lapse of time or the giving of notice or both, would constitute such a material
breach or violation or default by the Company, or any other party thereto. No
party to any Contract has given notice of its intention to cancel or terminate
any such Contract. None of the rights of the Company under the Contracts will
be materially impaired by the delivery, execution and performance of this
Agreement.
4.17 ERISA Matters and Employees. Schedule 4.17A contains a list of
------------------------------
every pension, profit sharing, option, other incentive plan, or any other type
of employee benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974) which the Company has or contributes to, and any
obligation of the Company to, or customary arrangement by the Company with,
employees for bonuses, incentive compensation, or severance pay. Schedule 4.17B
hereto contains a list of the Company's employees with current salary (or rate
of pay) and other compensation now paid by the Company to each employee,
including a description of any increase scheduled to be effective after the date
of this Agreement.
4.18 Insurance. Schedule 4.18 hereto contains a complete and correct
---------
list of all insurance policies, of any kind, held by the Company. Each such
policy is valid and enforceable, and all premiums and other payments due from
the Company on account of any such policy have been paid and there is no act or
failure to act which has or might cause any such policy to be canceled or
terminated.
4.19 No Brokers' or Finders' Fees. Neither the Company nor any
--------------------------------
Shareholder is committed to any liability for any brokers' or finders' fees or
any similar fees in connection with the transactions contemplated by this
Agreement. Neither the Company nor any Shareholder has had any dealings,
negotiations or communications with any broker or other intermediary in
connection with the transactions contemplated by this Agreement.
20
<PAGE>
4.20 Liens. Except as set forth on Schedule 4.20, at Closing the
-----
Company will have good and marketable title to all of the Assets and the Assets
will not be subject to any liens.
4.21 Questionable Payments. Neither the Company, any director,
----------------------
officer, agent, employee, nor other person associated with or acting on behalf
of such entities or individuals has, directly or indirectly: (i) used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful payment to foreign or domestic governmental officials or employees or
to foreign or domestic political parties or campaigns from corporate funds; (ii)
violated any provision of the Foreign Corrupt Practices Act of 1977; (iii)
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; (iv) made any false or fictitious entry on the books or records of
the Company; (v) made any bribe, rebate, payoff, influence payment, kickback, or
other unlawful payment; (vi) given any favor or gift which is not deductible for
federal income tax purposes; and/or (viii) made any bribe, kickback, or other
payment of a similar or comparable nature, that is unlawful, to any person or
entity, private or public, regardless of form, whether in money, property, or
services, to obtain favorable treatment in securing business or to obtain
special concessions, or to pay for favorable treatment for business secured or
for special concessions already obtained.
4.22 Bank Accounts. Schedule 4.22 shall list the names and address of
--------------
every bank and other financial institution in which the Company maintains an
account (whether checking, savings or otherwise), lock box or safe deposit box,
and the account numbers and names of persons having signing authority or other
access thereof.
21
<PAGE>
4.23 Quarterly Reports. Schedule 4.23 shall consist of copies of the
------------------
quarterly reports of the gaming operations of the Business for the most recent
six month period which have been filed with the South Carolina Department of
Revenue.
4.24 Lack of Restrictions. Except as set forth on Schedule 4.24
----------------------
hereto, no real property owned, leased or used by the Company in connection with
the Business lies in an area which is, or to the knowledge of the Company or
Shareholders, will be, subject to zoning, use or building code restrictions
which would prohibit, and the Company and the Shareholders are not aware of any
facts relating to the acts of another person or entity or its ownership,
leasing, licensing or use of any real or personal property which would prevent,
the continued effective ownership, leasing and use of such real property in the
Business.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
--------------------------------------------------
The Shareholders, with respect to themselves and their obligations
hereunder, hereby represent and warrant to the Buyer:
5.1 Ownership of Shares; Title. Each Shareholder is the owner of
-----------------------------
record and beneficially of the Shares he is selling hereunder, as listed on
Schedule 5.1. Each Shareholder has good and marketable title to his respective
Shares, free and clear of all Liens. No Shareholder has received notice of any
adverse claim to the ownership of the Shares by the respective Shareholder.
There is no security, option, warrant, right, call, subscription, agreement,
conversion or exchange, commitment or understanding of any nature whatsoever,
fixed or contingent, that directly or indirectly affects the Shares.
5.2 Authorization; Enforceability. Each Shareholder has the power and
------------------------------
authority and has full legal capacity and is competent to execute, deliver and
22
<PAGE>
perform his obligations under this Agreement and each of the other documents,
instruments and agreements contemplated hereby to which he is or will be a
party. This Agreement has been, and the other documents and instruments
required hereby to which each Shareholder will be a party will be, duly executed
and delivered by each Shareholder, and when duly executed and delivered by the
other parties hereto and thereto (assuming such documents and instruments will
be valid and binding obligations of such other parties) will be each
Shareholder's valid and binding obligations, enforceable against him in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally and except as the availability of equitable remedies
may be limited by general principles of equity.
5.3 No Conflict or Violation. With respect to each Shareholder,
---------------------------
neither the execution and delivery of this Agreement by him nor the consummation
of the transactions contemplated hereby will result in (a) a violation by him of
any Law, judgment, order or decree binding upon him or any event which with
notice, lapse of time, or both, would result in any such violation, (b) a breach
of, default under, or conflict with, any material term or provision of, or
permission to modify, terminate or accelerate, any Contract, Lease or other
agreement or instrument, or obligation thereunder, to which the Company is a
party and which is applicable to him or any of his assets, or an event which
with notice, lapse of time, or both, would result in any such breach or default,
or (c) the creation of any lien upon, or result in any person obtaining any
right to acquire any of his properties, assets or rights.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE SUB
-------------------------------------------------------
The Buyer and the Sub hereby represent and warrant to the Shareholders as
follows:
23
<PAGE>
6.1 Organization of Buyer. The Buyer and the Sub are corporations duly
---------------------
organized and validly existing and in good standing under the laws of the State
of Delaware and the State of South Carolina, respectively, and have the
requisite corporate power and authority to enter into this Agreement and perform
their obligations hereunder.
6.2 Authorization; Enforceability. Each of the Buyer and the Sub have
------------------------------
the requisite corporate power and authority to execute, deliver and perform this
Agreement and each of the documents, instruments and agreements contemplated
hereby to which the Buyer and the Sub are or will be a party, and to perform
their obligations hereunder or thereunder. The execution, delivery and
performance of this Agreement and each of the other documents, instruments and
agreements contemplated hereby and the consummation of the transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of the Buyer and the Sub, and no further
approvals on the part of the Buyer and the Sub are required. This Agreement has
been, and the other documents and instruments required hereby to which the Buyer
and the Sub will be a party will be, duly executed and delivered by the Buyer
and the Sub, and when duly executed and delivered by the other parties hereto
and thereto (assuming such documents and instruments will be valid and binding
obligations of such other parties) will be the valid and binding obligations of
the Buyer and the Sub, enforceable against the Buyer and the Sub in accordance
with their respective terms, subject to the effect of bankruptcy, insolvency,
moratorium, or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be limited by
general principles of equity.
6.3 No Conflict or Violation. Neither the execution and delivery of
---------------------------
this Agreement and each of the documents, instruments and agreements
contemplated hereby by the Buyer or the Sub nor the consummation of the
transactions contemplated hereby and thereby will result in (a) a violation of,
24
<PAGE>
or a conflict with, any provision of the Articles of Incorporation or Bylaws of
the Buyer or the Sub, (b) a violation by the Buyer or the Sub of any judgment,
order or decree binding on the Buyer or the Sub, (c) to the best of the Buyer's
and the Sub's knowledge, a violation by the Buyer or the Sub of any Law or the
occurrence of any event which with notice, lapse of time, or both, would result
in the violation of any Law, judgment, order or decree binding on the Buyer or
the Sub, or (d) a breach of, default under, or conflict with, any material term
or provision of, or permission to modify, terminate, or accelerate, any
contract, lease, mortgage, deed of trust, indenture, permit, license, franchise
or commitment or other agreement or instrument, or obligation thereunder,
applicable to the Buyer or the Sub, the business or any of their assets, or an
event which with notice, lapse of time, or both, would result in any such
breach, default, or conflict.
6.4 No Litigation or Consents. Except as set forth on Schedule 6.4A,
---------------------------
there is no litigation, arbitration proceeding, governmental investigation,
citation or action of any kind pending, proposed or threatened against the Buyer
or the Sub with respect to any transaction in the Buyer's securities, the
transactions contemplated by this Agreement, or the business or assets of the
Buyer or the Sub. Except as set forth on Schedule 6.4B, no consent of any other
Person and no consent, Permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required by the Buyer or the Sub in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and the transactions contemplated herein.
6.5 No Brokers' or Finders' Fees. Neither Buyer nor the Sub is
--------------------------------
committed to any liability for any brokers' or finders' fees or any similar fees
in connection with the transactions contemplated by this Agreement. The Buyer
and the Sub have not had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement.
25
<PAGE>
6.6 ABG Common Stock. The issuance and delivery by the Buyer of shares
----------------
of the ABG Common Stock in connection with the transactions contemplated by this
Agreement will be, as of the Closing Date, duly authorized by all necessary
corporate action on the part of the Buyer. The shares of ABG Common Stock to be
issued pursuant to this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
6.7 Registered Stock. One hundred fifty thousand (150,000) shares of
-----------------
the ABG Common Stock (the "Registered Shares") to be issued in connection with
the transactions contemplated by this Agreement have been registered with the
SEC on a registration statement on Form S-3 (the "Registration Statement"). The
Buyer is eligible to use Form S-3, Form S-3 is the proper registration statement
to be used for this transaction, and Form S-3 is being used properly in
connection with this transaction. The Registration Statement has been declared
effective under the Securities Act of 1933, as amended, and is not subject to a
stop order or threatened stop order. All necessary qualifications or exemptions
under applicable state securities laws related to the issuance of the Registered
Shares by Buyer to Shareholders in connection with the transactions contemplated
by this Agreement, have been obtained and are in full force and effect. The
Registered Shares to be issued pursuant to this Agreement will be freely
transferable under federal securities laws by the Shareholders.
6.8 Compliance with Securities Laws. The Buyer has filed in a timely
---------------------------------
manner all reports and other documents required to be filed by it with the SEC.
All of these reports and documents, as of their respective dates, complied in
all material respects with all applicable statutes, rules and regulations
enforced or promulgated by the SEC. As of their respective dates of filing,
none of the SEC reports, including, but not limited to, the Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1996, contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein not misleading.
26
<PAGE>
6.9 Rule 144. The Buyer recognizes that some or all of the
---------
Shareholders may be deemed to be an "affiliate" of the Buyer, as that term is
defined in Rule 144 of the Securities Act of 1933, and that as an "affiliate" a
Shareholder would be subject to restrictions and limitations imposed by Rule 144
in the event the Shareholder decided to sell any of the ABG Common Stock.
Furthermore, even if none of the Shareholders are deemed to be an "affiliate" of
the Buyer under Rule 144, the Buyer recognizes that the Shareholders will be
subject to restrictions and limitations imposed by Rule 144 in the event any
Shareholder decides to sell any of the Unregistered Shares, and the Shareholders
may be subject to restrictions and limitations imposed by Rule 145 in the event
any Shareholder decides to sell any of the Registered Shares. Accordingly,
Buyer agrees to timely file all reports and other documents required to be filed
by it with the SEC and to take such other action as is required from time to
time to ensure that the Shareholders are able to sell the shares of ABG Common
Stock issued to them in compliance with the provisions of Rule 144 or Rule 145
(as in effect at the time of any proposed sale), if applicable.
6.10 Restrictions on Disposition of Shares. Eight hundred fifty
-----------------------------------------
thousand (850,000) shares of the ABG Common Stock (the "Unregistered Shares") to
be issued to the Shareholders in connection with the transactions contemplated
by this Agreement, will not have been registered under the Securities Act of
1933, and may be resold by the Shareholders only after registration under the
Securities Act of 1933, or under an available exemption, or pursuant to Rule
144. The Shareholders agree that the Unregistered Shares will not be disposed
of except (i) pursuant to an effective registration statement under the
Securities Act of 1933, or (ii) in any other transaction which is exempt from
27
<PAGE>
registration under the Securities Act of 1933 or the rules and regulations of
the SEC promulgated thereunder. Each Shareholder further agrees (i) that no
such sale, conveyance or disposition of his allocated portion of the
Unregistered Shares shall occur for a period of twelve (12) months after
Closing, (ii) that no more than one-third (1/3) of his allocated portion of the
Unregistered Shares shall be sold during the period between the first
anniversary and the second anniversary of Closing, (iii) that no more than
one-third (1/3) of his allocated portion of the Unregistered Shares shall be
sold during the period between the second anniversary and the third anniversary
of Closing, and (iv) that no more than one-third (1/3) of his allocated portion
of the Unregistered Shares shall be sold during the period between the third
anniversary and the fourth anniversary of Closing; provided, however, this
annual limitation on sales of the Unregistered Shares shall not apply in the
event (i) the Buyer is the subject of an acquisition pursuant to any merger,
stock exchange, stock purchase, consolidation, tender offer or other type of
similar transaction, or (ii) the Buyer extends an offer to its shareholders to
repurchase shares of its common stock. In order to effectuate the covenants of
this subsection, an appropriate legend will be placed upon each of the
certificates of stock at the time of distribution of such Unregistered Shares
pursuant to this Agreement, and stop transfer instructions shall be placed with
the transfer agent for such shares. Such legend shall be removed from the
respective certificates as appropriate upon reaching the respective anniversary
date that terminates the restriction.
6.11 Evidence of Compliance with Private Offering Exception. The
------------------------------------------------------------
Shareholders will agree to provide such reasonable evidence as counsel for Buyer
may request in order to evidence the private offering nature of the distribution
of the Unregistered Shares received pursuant to this Agreement.
28
<PAGE>
ARTICLE VII
-----------
CERTAIN MATTERS PENDING THE CLOSING
-----------------------------------
The Shareholders, the Company, the Buyer and the Sub each covenants with
the others as follows for the period from the date hereof through the Closing
Date:
7.1 Maintenance of the Company and the Business Prior to Closing. The
-------------------------------------------------------------
Shareholders shall use their best efforts to continue to carry on the Business
in the ordinary course and in accordance with past practice, and will not take
any action inconsistent therewith or with the consummation of Closing. Without
limiting the generality of the foregoing, the Shareholders shall, absent the
written consent of the Buyer, which consent shall not be unreasonably withheld,
(a) maintain the Assets in substantially their current state of repair,
excepting normal wear and tear; (b) use all reasonable efforts to preserve
intact the relationships with all Persons having business dealings with the
Company; (c) not enter into or agree to enter into any material purchase
commitment for Fixtures and Equipment or supplies, except in the ordinary course
of business; (d) not authorize, declare, pay or effect any dividend in respect
of the Company's capital stock, except as noted on Schedule 7.1; (e) not enter
into or agree to enter into any material contract without amending Schedule 1.11
and providing the Buyer with a copy of the revised Schedule 1.11 within seven
days after entering into such a contract; (f) not amend or agree to amend the
Company's Articles of Incorporation or Bylaws or merge with or consolidate into
any other entity; (g) not sell, pledge or acquire or agree to sell, pledge or
acquire any shares of capital stock or other securities of the Company; (h) not
grant or enter into any options, warrants, calls or commitments of any kind with
respect to the Company's capital stock; (i) not make or agree to make any single
capital expenditure or commitment in excess of $20,000 nor aggregate capital
expenditure or commitment in excess of $50,000; and (j) not borrow or agree to
borrow any funds or incur or agree to incur, whether directly or by way of
guarantee or otherwise, any indebtedness, obligation or liability or enter into
any other material transaction except in the ordinary course of business.
29
<PAGE>
7.2 Cooperation. The Company, the Shareholders, the Buyer and the Sub
-----------
shall use their best efforts to cause the transactions contemplated by this
Agreement to be consummated. The Company and the Shareholders shall use their
best efforts to obtain all consents and authorizations of third parties and to
make all filings with and give all notices to third parties which may be
necessary or reasonably required in order to effect the transactions
contemplated hereby.
7.3 Compliance with Law. The Company and the Shareholders shall
---------------------
continue to conduct the Business and to use the Assets in compliance with all
applicable Laws, and all orders of any court or of any federal, state, municipal
or other governmental department, noncompliance with which could cause a
material adverse change in the Assets or the Business.
7.4 Registration Statement. The Buyer shall take all other required
-----------------------
action to ensure that on the Closing Date the Registered Shares issued in
connection with the transactions contemplated by this Agreement will be freely
transferable by the Shareholders.
7.5 Listing Application. The Buyer shall prepare and submit to NASDAQ
--------------------
a listing application covering the ABG Common Stock and shall use its best
efforts to obtain approval for the listing of the ABG Common Stock upon official
notice of issuance.
7.6 Articles of Merger and Plan of Merger. Prior to the Closing Date,
--------------------------------------
the Shareholders and the Buyer shall prepare Articles of Merger and Plan of
Merger reflecting the terms of the Merger, which Articles of Merger will be
filed with the Secretary of State of South Carolina on the Closing Date to
effectuate the Merger.
30
<PAGE>
ARTICLE VIII
------------
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER AND THE SUB
----------------------------------------------------------------
Each and every obligation of the Buyer and the Sub to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
the following express conditions precedent:
8.1 Compliance with Agreement. The Company and the Shareholders shall
--------------------------
have performed and complied in all material respects with all of their
respective obligations under this Agreement that are to be performed or complied
with by them prior to or on the Closing Date.
8.2 Proceedings and Instruments Satisfactory. All proceedings,
-------------------------------------------
corporate or other, to be taken by the Company and the Shareholders in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Buyer, the Sub and their counsel, and the Company and the
Shareholders shall have made available to the Buyer for examination the
originals or true and correct copies of all documents that the Buyer may
reasonably request in connection with the transactions contemplated by this
Agreement.
8.3 Employment Agreement. The Buyer shall have received from each
---------------------
Shareholder an executed employment agreement in substantially the form set forth
in Exhibit 8.3.
8.4 No Adverse Change. There shall have been no material adverse
-------------------
change in the Business, Assets, operations or condition (financial or otherwise)
of the Company between the date hereof and the Closing Date.
8.5 No Litigation. No investigation, suit, charge, action or other
--------------
proceeding shall be threatened or pending before any court or governmental
agency that seeks restraint, prohibition, damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby,
31
<PAGE>
or which seeks to obtain, establish or impose any interest in or lien or
encumbrance upon any of the Assets, or which, if successful, would materially
impair operation of the Business or the financial condition of the Company.
8.6 Representations and Warranties. All Schedules referred to in this
-------------------------------
Agreement which contain or should contain information concerning the
Shareholders or the Company shall have been fully and accurately completed and
provided to the Buyer for attachment to this Agreement; and the representations
and warranties made by the Company and the Shareholders in this Agreement and
the Schedules attached hereto shall be true and correct in all material respects
as of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
8.7 Consents. Except as set forth in Schedule 4.6, all consents,
--------
approvals and waivers from third parties and governmental authorities and other
parties necessary (a) to permit the Shareholders to transfer the Shares to the
Buyer, free and clear of all Liens; (b) to consummate the transactions
contemplated hereby; and (c) to allow the Company to operate the Business after
the Closing Date shall have been obtained by the Buyer.
8.8 Deliveries at Closing. The Company and the Shareholders shall have
---------------------
delivered, or cause to be delivered, to the Buyer the following documents, each
properly executed and dated as of the Closing Date: (a) the Company's and the
Shareholders' Closing Certificate; (b) certificates evidencing the Shares, duly
endorsed in blank for transfer or accompanied by duly executed stock powers; and
(c) such other documents as the Buyer may reasonably request.
8.9 No Termination Under Article III. Buyer shall not have given
------------------------------------
timely notice of termination of this Agreement pursuant to Article III hereof.
32
<PAGE>
ARTICLE IX
----------
CONDITIONS PRECEDENT TO THE OBLIGATIONS
---------------------------------------
OF THE SHAREHOLDERS AND THE COMPANY
-----------------------------------
Each and every obligation of the Shareholders and the Company to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following express conditions precedent:
9.1 Compliance with Agreement. The Buyer and the Sub shall have
---------------------------
performed and complied in all material respects with all of their obligations
under this Agreement that are to be performed or complied with by them prior to
or on the Closing Date.
9.2 Proceedings and Instruments Satisfactory. All proceedings,
-------------------------------------------
corporate or other, to be taken by the Buyer and the Sub in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be reasonably satisfactory in form and substance to the Shareholders, the
Company and their counsel and the Buyer shall have made available to the
Shareholders for examination the originals or true and correct copies of all
documents that any Shareholder may reasonably request in connection with the
transactions contemplated by this Agreement.
9.3 Employment Agreement. The Buyer shall have executed an employment
---------------------
agreement for each Shareholder in substantially the form set forth in Exhibit
8.3.
9.4 No Adverse Change. There shall have been no material adverse
-------------------
change in the operation or condition (financial or otherwise) of the Buyer or in
the value of the ABG Common Stock between the date hereof and the Closing Date.
9.5 No Litigation. No investigation, suit, action or other proceeding
--------------
shall be threatened or pending before any court or governmental agency that
seeks restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
33
<PAGE>
9.6 Representations and Warranties. All Schedules referred to in this
-------------------------------
Agreement which contain or should contain information concerning the Buyer or
the Sub shall have been fully and accurately completed and provided to the
Shareholders and the Company for attachment to this Agreement; and the
representations and warranties made by the Buyer and the Sub in this Agreement
and the Schedules attached hereto shall be true and correct in all material
respects as of the Closing Date with the same force and effect as though such
representations and warranties had been made on the Closing Date.
9.7 Consents. All consents, approvals and waivers from governmental
--------
authorities and other parties necessary to permit the Shareholders to transfer
the Shares to the Buyer as contemplated hereby shall have been obtained by the
Buyer.
9.8 Registration Statement. The Registration Statement for the
-----------------------
Registered Shares shall be effective and not subject to a stop order or
threatened stop order. All necessary qualifications or exemptions under
applicable state securities laws shall have been obtained and be in full force
and effect.
9.9 Approval for Listing. Buyer shall have filed the necessary
----------------------
documentation to list the ABG Common Stock to be issued pursuant to this
Agreement on NASDAQ.
9.10 Deliveries at Closing. The Buyer shall have delivered to the
-----------------------
Shareholders the following documents, each properly executed and dated as of the
Closing Date: (a) the Merger Consideration in the form of ABG Common Stock; (b)
the Buyer's and Sub's Closing Certificate; (c) certified corporate resolutions
of the board of directors of the Buyer and the Sub approving the transactions
34
<PAGE>
contemplated by this Agreement; and (d) such other documents as the Shareholders
may reasonably request.
ARTICLE X
---------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
10.1 Survival of Representations and Warranties. All of the
----------------------------------------------
representations and warranties contained in this Agreement shall survive the
consummation of the transactions contemplated by this Agreement.
10.2 Indemnification.
---------------
(a) The Shareholders hereby agree to indemnify, defend and hold
harmless the Buyer and the Sub from and against any and all damages, losses,
expenses, claims or other liabilities, including without limitation reasonable
attorneys' fees, incurred by the Buyer or the Sub as a result, directly or
indirectly, of any breach, violation or nonfulfillment of any covenant,
representation, warranty or other provision of this Agreement, or any agreement
executed in connection with the transactions contemplated by this Agreement, or
any misrepresentation or omission with respect to any covenant, representation,
warranty or other provision of this Agreement, on the part of the Shareholders.
The Buyer and the Sub hereby agree to indemnify, defend and hold harmless the
Shareholders from and against any and all damages, losses, expenses, claims, or
other liabilities, including without limitation reasonable attorneys' fees,
incurred by any Shareholder as a result, directly or indirectly, of any breach,
violation or nonfulfillment of any covenant, representation, warranty or other
provision of this Agreement, or any agreement executed in connection with the
transactions contemplated by this Agreement, or any misrepresentation or
omission with respect to any covenant, representation, warranty or other
provision of this Agreement, on the part of the Buyer or the Sub.
35
<PAGE>
(b) Should any claim be made by a person not a party to this Agreement,
with respect to any matter to which the foregoing indemnity relates, the party
against whom such claim is asserted (the "Indemnified Party"), within a
reasonable period of time, shall give written notice to the other party (the
"Indemnifying Party") of any such claim, and the Indemnifying Party shall
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its own selection. In such defense or settlement of
any claims, the Indemnified Party shall cooperate with the Indemnifying Party to
the maximum extent reasonably possible. Any payment resulting from such defense
or settlement, together with the total expense thereof, shall be binding on the
Buyer, the Company and the Shareholders.
(c) Notwithstanding the foregoing provisions of this Section 10.2, no
party shall be liable to indemnify the other until the total of all
indemnifiable losses, liabilities, damages, costs, or expenses for which
indemnification would otherwise be required, equals or exceeds $25,000. At such
time as the aggregate indemnifiable losses, liabilities, damages, costs and
expenses have exceeded this threshold amount, the Indemnifying Party shall pay
all such excess amounts as provided herein.
ARTICLE XI
NON-COMPETITION AGREEMENT
-------------------------
11.1 Shareholders' Covenants. Except as set forth on Schedule 11.1, each
-----------------------
Shareholder covenants and agrees that:
(a) Such Shareholder shall not, directly or indirectly,
within the Territory during the Restricted Period, promote, operate, manage or
conduct any bingo game or related gaming business permitted under the terms and
conditions of any bingo license issued by the State of South Carolina or under
any other state or federal law or authority, or operate any video game machine
or other gaming machine or device (such games and game machines being referred
to herein as "Games").
36
<PAGE>
(b) Further, such Shareholder shall not, directly or
indirectly, within the Territory during the Restricted Period, solicit or sell
for, own, or acquire any interest in, either directly or indirectly, any
corporation, partnership, limited partnership, or other entity, or become
engaged by, act as landlord to, or as agent or consultant for, do business with,
manage, operate, control, be employed by, participate in, or be connected, in
any manner with, or in any manner assist, any other person, corporation,
partnership or other entity engaged in the business of promoting, operating,
managing or conducting Games.
11.2 Restricted Period. For the purpose of this Agreement, the
------------------
"Restricted Period" means the period commencing with the date hereof and
continuing until three years thereafter.
11.3 Territory. For purposes of this Agreement the "Territory" shall
---------
mean: (i) with regard to any activities described in Section 11.1 above which
are conducted under a Class B or Class C bingo license (or equivalent thereof
under any future law) issued by the State of South Carolina or under any other
state or federal law or authority, the area within a fifty (50) mile radius of
any bingo facility then owned by Company, Buyer or any subsidiary of Buyer, and
(ii) with regard to any activities described in Section 11.1 above which are
conducted under any Class A license (or equivalent thereof under any future law)
issued by the State of South Carolina or under any other state or federal law or
authority, the area within a one hundred (100) mile radius of any bingo game
facility then owned by Company, Buyer, or any subsidiary of Buyer; and (iii)
with regard to video game facilities, the area within a twenty-five (25) mile
radius of any bingo, video poker or video game facility then owned by the
Company, Buyer, or any subsidiary of Buyer.
37
<PAGE>
11.4 Enforcement. In the event of a breach by either party of the
-----------
provisions of this Agreement, the non-breaching party, in addition to any other
remedies it may have at law or under this Agreement, shall be entitled to an
injunction restraining the breaching party from violating or continuing a
violation of the terms of this Article XI.
ARTICLE XII
-----------
REGISTRATION RIGHTS
-------------------
12.1 Piggyback Registration. If at any time after December 31, 1998,
-----------------------
or from time to time thereafter, the Buyer shall determine to register any of
its securities under the Securities Act of 1933, either for its own account or
the account of a shareholder, pursuant to an underwritten public offering, the
Buyer shall (a) promptly give to each Shareholder written notice thereof, and
(b) include in such registration and in any underwriting involved therein, up to
one-sixth (1/6) of each Shareholder's Unregistered Shares as specified in a
written request or requests of a Shareholder made within thirty days after
receipt by the Shareholder of such written notice from the Buyer.
12.2 Limitations on Registration. If the underwriter determines that
-----------------------------
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Unregistered Shares to be
included in the registration and underwriting; provided, however, that the
underwriter may not limit the amount of Unregistered Shares included in such
registration and underwriting to less than an amount equal to five percent (5%)
of the amount of all of the Buyer's securities included within such registration
and underwriting. If any Shareholder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the Buyer
and the underwriter.
12.3 Delay or Cancellation of Registration. If, at any time after
---------------------------------------
giving the Shareholders written notice of the Buyer's intention to register any
of its securities, and prior to the effective date of the registration statement
38
<PAGE>
filed in connection with such registration, the Buyer shall determine for any
reason not to register or to delay the registration, at its sole election, the
Buyer may give written notice of such determination to the Shareholders and
thereupon shall be relieved of its obligation to register the Unregistered
Shares in connection with such registration (but not from its obligation to pay
registration expenses in connection therewith or to register the Unregistered
Shares in a subsequent registration).
12.4 Expenses. All expenses incurred in connection with any
--------
registration, qualification or compliance pursuant to this Article XII,
including without limitation, all registration, filing, and qualification fees,
printing expenses, fees and disbursements of counsel for the Buyer, and expenses
of any special audits incidental to or required by such registration, shall be
borne by the Buyer; provided, however, the Buyer shall not be required to pay
underwriters' fees, discounts, or commissions relating to the Unregistered
Shares.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Books and Records. Each party agrees that it will cooperate with
------------------
and make available to the other parties, during normal business hours, all
books, records and information retained and remaining in existence after the
Closing Date which are necessary or useful in connection with any tax filing,
inquiry, audit, investigation or dispute, any litigation or investigation or any
other matter requiring any such books, records or information. The party
requesting any such books, records or information shall bear all of the other
parties' out-of-pocket costs and expenses reasonably incurred in connection with
providing such books, records and information.
13.2 Further Assurances. Both before and after the Closing Date, each
-------------------
party will cooperate in good faith with the other parties and, from time to time
39
<PAGE>
as requested by the other party or parties, will take all appropriate action and
execute all documents which may be necessary to carry out any of the
transactions contemplated hereunder more effectively, all at the expense of the
requesting party unless arising out of a default of the cooperating party.
13.3 Entire Agreement; Amendment. This Agreement constitutes the
-----------------------------
entire agreement among the parties pertaining to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions of the parties, whether oral or written, and there
are no warranties, representations or other agreements among the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
13.4 Expenses. Each party hereto shall bear its own fees and expenses
--------
of its counsel, accountants and other experts incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
hereby. To the extent such fees and expenses are incurred by the Company prior
to Closing, such fees and expenses shall be paid by the Company at Closing.
13.5 Termination. If any condition precedent to the Shareholders'
-----------
obligations hereunder is not satisfied and such condition is not waived by the
Shareholders at or prior to the Closing Date, or if any condition precedent to
the Buyer's obligations hereunder is not satisfied and such condition is not
waived by the Buyer at or prior to the Closing Date, any Shareholder or the
Buyer, as the case may be, may terminate this Agreement at their option by
40
<PAGE>
notice to the other party or parties, as the case may be. In the event of the
termination of this Agreement by any party as above provided, no party shall
have any liability hereunder of any nature whatsoever to the other party, other
than the liability of each party for its own expenses and liability resulting,
arising or accruing from the breach of this Agreement; provided, however, that a
party shall not be so relieved of liability to the other party if the failure to
satisfy a condition precedent results from the failure of a party to make good
faith efforts to satisfy such condition. In the event that a condition
precedent to a party's obligations is not satisfied, nothing contained herein
shall be deemed to require any party to terminate this Agreement, rather than to
waive such condition precedent and proceed with the Closing.
13.6 Governing Law. This Agreement shall be governed by, construed and
-------------
interpreted in accordance with the laws of the State of South Carolina, without
reference to the conflicts of laws principles thereof.
13.7 Successors and Assigns. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns or heirs and personal representatives.
13.8 Assignment. This Agreement and each party's respective rights
----------
hereunder may not be assigned by any party without the prior written consent of
the other parties.
13.9 No Reliance. No third party is entitled to rely on any of the
------------
representations, warranties and agreements contained in this Agreement.
13.10 Notices. All communications, notices and disclosures required or
-------
permitted by this Agreement shall be in writing, and delivered personally, sent
by overnight messenger service, or sent by United States mail, certified or
registered, postage prepaid, and addressed as follows, unless and until a party
notifies the others in accordance with this Section of a change of address:
41
<PAGE>
If to the Company Pre-Closing: 300 South Main Street
Darlington, South Carolina 29532
Attn: George M. Harrison, Jr.
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
If to the Company Post-Closing: 515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Greg Wilson
If to the Shareholders: Mr. George M. Harrison, Jr.
208 Wyandot Street
Darlington, South Carolina 29532
Mr. Thomas M. Harrison
719 Spring Street
Darlington, South Carolina 29532
Mr. William W. Harrison
Post Office Box 354
Darlington, South Carolina 29540
With a copy to: Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
If to the Buyer or to Sub: American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Greg Wilson
With a copy to: Wilson & Varner, L.L.P.
301 Congress Avenue, Suite 2025
Austin, Texas 78701
Attn: Rodney Varner
42
<PAGE>
13.11 Counterparts; Headings. This Agreement may be executed in one or
----------------------
more counterparts, each of which shall be deemed an original but all of which
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
13.12 Interpretation. Unless the context requires otherwise, all words
--------------
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular
and all words in any gender shall extend to and include all genders.
13.13 Severability. If any provision, clause or part of this
------------
Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the application of such provision,
clause or part under other circumstances, shall not be affected thereby.
13.14 Confidentiality. The parties hereto agree to keep this Agreement
---------------
confidential, as well as any information or document obtained by either party in
connection with this transaction, except to the extent disclosure is required to
or by any government agency or regulatory or quasi-regulatory body.
13.15 Joint Draftsmanship. The preparation of this Agreement has been
--------------------
a joint effort of the parties and this Agreement shall not, solely as a matter
of judicial construction, be construed more severely against one of the parties
than the other.
43
<PAGE>
IN WITNESS WHEREOF, each corporate party has caused this Agreement to be duly
executed in its name by its duly authorized officer and each individual party
hereto has duly executed this Agreement, all as of the day and year first above
written, unless otherwise noted below.
AMERICAN BINGO & GAMING CORP.
By: /s/ Greg Wilson
-------------------------------
L. Gregory Wilson, President
DARLINGTON MUSIC CO., INC.
By: /s/ George M. Harrison, Jr.
--------------------------------------
George M. Harrison, Jr., President
DARLINGTON MUSIC ACQUISITION
CORPORATION
By: /s/ Greg Wilson
-------------------------------
L. Gregory Wilson, President
SHAREHOLDERS:
/s/ George M. Harrison, Jr.
--------------------------
George M. Harrison, Jr.
/s/ Thomas M. Harrison
-------------------------
Thomas M. Harrison
/s/ William W. Harrison
--------------------------
William W. Harrison
44
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made as of the 1 day of August, 1997,
- ------
between American Bingo & Gaming Corp. (the "Company"), and John Richard Henry
(the "Employee").
1. Employee Duties. The Company hereby employs the Employee as General
----------------
Counsel and Chief Administrative Officer, with such responsibilities and duties
as may be directed by the Company's President or Board of Directors from time to
time. The Employee shall devote his full working time to the performance of his
responsibilities and duties hereunder and shall not, directly or indirectly,
render services to any other person or organization for which he receives
compensation without the consent of the Company's Board of Directors or
otherwise engage in any activities which materially interfere with the
performance by the Employee of his duties hereunder or detrimentally affect the
Company or its business.
2. Term of Employment. The term of employment (the "Term") shall commence
------------------
on the date of this Agreement and continue until December 31, 2000, unless
earlier terminated at any time at the will of either Employee or the Company.
3. Compensation.
------------
Base Salary. Employee shall receive an aggregate annual base salary at
-----------
the rate of $100,000 per annum during the employment term, effective on October
1, 1997. Installments of base salary shall be paid not less frequently than
bi-weekly. Annual salary increases, if any, will be determined by the Company's
President and the Company's Board.
4. Bonuses. Commencing with the Company's 1996 fiscal year and for each
-------
additional year of employment under this Agreement, an annual cash bonus pool
("Bonus Pool") will be created for the benefit of management personnel of the
Company who earn more than $60,000 per year. The Bonus Pool shall be comprised
of an amount which shall equal 2% of the net operating income of the Company as
reported on the Company's certified financial statements for the year in
question provided that the Company reported net operating income of $2,000,000
or greater in such year. The maximum Bonus Pool in any year shall not exceed
$400,000. The Employee shall be eligible to participate in the Bonus Pool. The
Board by unanimous vote may allow any other employee of the Company to
participate in the Bonus Pool. The Bonus Pool will be distributed 30 days after
the Company's receipt of its certified financial statements for such year in
accordance with the directives of the Board of Directors of the Company. In the
event the Board can not unanimously agree to the distribution of the Bonus Pool,
the Bonus Pool will be distributed as follows:
The Company's Chief Executive Officer shall receive 50% of the Bonus Pool and
the balance distributed among the remaining members of management, including the
Employee, on a pro rata basis relative to the dollar amount of their respective
annual salaries.
<PAGE>
The Board may, in its sole discretion, award to the Employee additional
Bonuses beyond the Bonus Pool.
5. Employee Stock Options. The Company agrees to grant to the Employee
------------------------
options to purchase 216,667 shares (which number includes 150,000 shares granted
pursuant to Employee's Employment Agreement dated October 25, 1996) of its
common stock as outlined in Attachment 1 hereto. The options will be subject to
all terms and conditions of the Company's 1994, 1995 and 1996 Stock Plans, and
shall be "statutory" options under said plans. The Company will take appropriate
legal steps to propose amendments to the 1996 Stock Option Plan which would
increase the number of authorized options so as to enable Employee to purchase a
total of 216,667 shares to vest to Employee. The options shall vest according to
the schedule shown on Attachment 1.
In addition, all Options shall vest in favor of the Employee in the event
that a significant change in ownership of the Company occurs. A significant
change shall be deemed to occur for purposes of this Agreement only in the event
that shares owned by the Company's Chairman and members of his family change by
greater than 20% of the total amount of shares of the Company's common stock
outstanding. Prior to such event, a significant change in ownership will not be
created in the event the Company conducts a secondary public offering, engages
in a private placement of its securities or enters into an acquisition agreement
pursuant to which the Company is the survivor and the Company controls the
company acquired. Employee may sell the stock represented by his vested and
exercised options in any quarter after vesting subject to Rule 144 restrictions.
The number of shares and pricing thereof for the option shares shall be
proportionally adjusted for any and all stock splits during the term of this
Agreement. Any options not exercised five years after vesting will be cancelled
and will be of no force and effect.
6. Other Fringe Benefits. Employee shall receive the following benefits
----------------------
during the Term of Employment.
(a) Comprehensive family health and major medical coverage in
accordance with the general policies of the Company as in effect from time to
time;
(b) Payment on behalf of the Employee of Oklahoma Bar Association
filing fees and continuing education fees;
(c) Use of a company vehicle without assessment;
(d) Disability insurance; and
(e) Term life insurance in the amount of $500,000.
7. Reimbursement of Expenses. The Company shall reimburse Employee for all
-------------------------
reasonable, ordinary and necessary expenses incurred by him in the performance
of his duties hereunder, provided that Employee accounts to the Company
therefore in the manner prescribed by the Company for reimbursement of
Employee's expenses.
2
<PAGE>
8. Vacation. Employee shall be entitled to a three week paid vacation each
--------
year during the term hereof.
9. Effect of Termination of Employment. If Employee's employment hereunder
-----------------------------------
shall be unilaterally terminated by the Company without Employee's consent, then
the unvested options will vest proportionally based upon the number of months of
Employee's service to the Company under this Agreement. If Employee's employment
is terminated voluntarily by Employee or with Employee's consent, all options
which have not vested as of the termination date will be cancelled and this
Agreement shall forthwith terminate, provided, that Employee's obligations under
Section 11 shall continue unaffected.
10. Death of Employee. If Employee's employment hereunder shall terminate
-----------------
because of his death, this Agreement shall forthwith terminate, except that
Employee's personal representative shall be entitled to receive all cash
compensation accrued in favor of Employee but unpaid as of the date of death, as
well as all of Employee's vested stock options. All rights of Employee's
personal representative to receive any further compensation hereunder or under
any other plan, arrangement or procedure of the Company shall terminate to the
extent not theretofore vested, except for any rights which arise by virtue of
Employee's death under any such plan, arrangement or procedure.
11. Non-Disclosure and Non-Compete.
------------------------------
11.1 Non-Disclosure. Employee agrees that all information pertaining to the
--------------
prior, current or contemplated business of the Company, its parent, its
subsidiaries, affiliates or its successors in interest (hereafter referred to
collectively in this Section 11 as the Company), excluding publicly available
information (in substantially the form in which it is publicly available) unless
such information is publicly available by reason of unauthorized disclosure by
Employee, constitutes valuable and confidential assets of the Company. Such
information includes, without limitation, information related to trade secrets,
customer and client lists, contract terms, legal and accounting advice and
opinions, supplier lists, methods of doing business, financing techniques and
sources and financial statements of the Company. Such Information is sometimes
hereinafter referred to as "Confidential Information." Employee shall hold all
such Confidential Information in trust and confidence for the Company and shall
not use or disclose any such Confidential Information other than for the
business of the Company or as required by law, either during the Term of
Employment or after his employment terminates for whatever reason. Employee
acknowledges that, prior to his employment with the Company, Employee had no
previous experience, as owner, employee, or otherwise in the bingo or gaming
business, and that Employee has gained valuable knowledge and experience in such
business through his employment with Employer.
11.2 Non-Competition. As a material part of the consideration for
---------------
Employee's access to Confidential Information, and for the know-how and training
provided to Employee by Company in the business of operation of bingo and gaming
facilities, which Confidential Information, know-how and training Employee would
not have otherwise received, and in consideration for renegotiated employee
stock options being issued to Employee in connection with this Agreement which
are given upon terms more favorable to Employee than options previously issued
or promised to him, Employee covenants and agrees that, during the term of
Employee's employment with the Company, and for a period of two years
thereafter, Employee will not, within the Restricted Territory (defined below),
directly or indirectly, promote, operate, manage, conduct, solicit, sell for,
own, acquire any interest in, act as landlord to, or as employee, director,
agent or consultant for, do business with, participate in, be connected with, or
in any manner assist any other person, partnership, limited partnership or other
entity which is engaged in, the business of operation of bingo games, video
games, slot machines, or other similar games or machines. The Restricted Area is
the geographical area within fifty (50) miles of each and every bingo or gaming
facility owned, leased or operated by Company, except that after termination of
Employee's employment, the Restricted Area shall be limited to the geographical
area within fifty (50) miles of each such facility owned, leased or operated by
Company as of the date of termination of Employee's employment. Employee will
observe and perform the provisions of this Article 11.2 in good faith, and will
use no means or measures to circumvent the intent of this Article 11. 2.
3
<PAGE>
11.3 Enforcement. In the event of a breach by Employee of the
-----------
provisions of this Article 11.3, Employer shall have, in addition to any other
remedies it may have at law or under this Agreement, the right to a temporary
restraining order, temporary injunction and permanent injunction restraining
Employee from violating or continuing a violation of the terms of this Article
11.3. Employee agrees that in the event of such breach the amount of damages
would be difficult or impossible to determine, and agrees that a bond in the
amount of $1,000.00 would be appropriate in connection with a temporary
restraining order or temporary injunction.
11.4 Severance, Reformation. Should any court of competent
-----------------------
jurisdiction hold any portion of this Article 11 to be unenforceable in whole or
in part, such court shall be authorized and requested to sever the offending
provision from this Article 11, and to reform this Article so as to comply as
closely as possible with the intentions of the parties as stated herein, so that
it will be enforceable by injunction.
11.5 Breach of Article 11. Since a breach of the provisions of this
-----------------------
Article 11 could not be adequately compensated by money damages, the Company
shall be entitled, in addition to any other right and remedy available to it, to
an injunction restraining such breach or threatened breach, and in either case
no bond or other security shall be required in connection therewith, and
Employee hereby consents to the issuance of such injunction. Employee agrees
that the provisions of this Article 11 are necessary and reasonable to protect
the Company in the conduct of its business. If any restriction contained in this
Article 11 shall be deemed to be invalid, illegal or unenforceable by reason of
the extent, duration, or geographical scope thereof, or otherwise, then the
court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof, and in its reduced
form such restrictions shall then be enforceable in the manner contemplated
hereby.
12. Warranties and Representations of the Employee. The Employee warrants
-----------------------------------------------
and represents that the Employee is not subject to any agreement, contract,
judgment, decree, or limitation the effect of which would prohibit, limit or
otherwise restrict the employment of the Employee by the Company pursuant to the
terms of this Agreement.
13. Services on Behalf of Subsidiary Companies. The Employee's services
-------------------------------------------
hereunder shall be performed on behalf of the Company and on behalf of each
subsidiary of the Company whether now existing or hereafter formed. For purposes
of this Agreement, the words "Company" and "Employer" shall refer to and include
each of the subsidiaries of the Company.
4
<PAGE>
14. Notices. All notices, requests, consents and other communications,
-------
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered mail (notices
sent by telegram or mailed shall be deemed to have been given on the date sent),
as follows (or to such other address as either party shall designate by notice
in writing to the other in accordance herewith):
If to the Employee:
John Richard Henry
1810 Intervail Drive
Austin, Texas 78746
If to the Company:
American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Mr. Greg Wilson
With a copy to:
Rodney Varner
Wilson & Varner, L.L.P.
301 Congress Avenue, Suite 2025
Austin, Texas 78701
15. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the local laws of the State of Texas applicable to
agreements made and to be performed entirely in such state.
16. Headings and Captions. The section headings contained herein are for
---------------------
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
17. Replace Prior Agreement; Entire Agreement. This Agreement modifies and
------------------------------------------
supersedes the Employment Agreement between Employee and the Company dated
October 25, 1996. This Agreement sets forth the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this Agreement,
and neither party shall be bound by or liable for any alleged representation,
promise or inducement not so set forth.
5
<PAGE>
18. Assignment. This Agreement, and the Employee's rights and obligations
----------
hereunder, may not be assigned by the Employee. The Company may freely assign
its rights, together with its obligations, hereunder without consent of the
Employee. In such event the obligations of the Company hereunder shall be
binding on its successors or assigns, whether by merger, consolidation, or
acquisition of all or substantially all of its business or assets, or otherwise.
19. Amendments; No Waiver. This Agreement may be amended, modified,
-----------------------
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
AMERICAN BINGO & GAMING CORP.
By: /s/ Greg Wilson
-----------------
/s/ John Richard Henry
-------------------------
John Richard Henry
6
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT 1
------------
Richard Henry
-------------
Stock Option Agreement
- ------------------------------------------------------------------------------------------------------------
BLOCK 1 BLOCK 2 BLOCK 3 BLOCK 4 BLOCK 5 BLOCK 6 BLOCK 7 BLOCK 8
--------- --------- -------------- -------------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares 33,334 33,333 33,333 33,333 16,667 16,667 16,667 33,333
- ------------ --------- --------- -------------- -------------- ------- --------- --------- ---------
Vesting Date 12/31/95 12/31/96 12/31/97 12/31/98 6/30/99 12/31/97 12/31/98 12/31/99
- ------------ --------- --------- -------------- -------------- ------- --------- --------- ---------
Pricing $ 2.25 $ 2.50 Lower of $3.00 Lower of $4.00 Same as $ 5.00 $ 5.00 $ 5.00
- ------------ or 85% of or 85% of Block 4
closing bid closing bid on
on 12/31/96 12/31/97
- ------------ --------- --------- -------------- -------------- ------- --------- --------- ---------
</TABLE>
7
<PAGE>
AGREEMENT
AGREEMENT (the "Agreement") made as of April 10, 1998 (the "Effective
Date"), by and between John T. Orton ("Orton") and American Bingo & Gaming
Corp., a Delaware corporation (the "Company"). Orton and the Company are
collectively referred to as the "Parties."
1. Orton is employed by the Company as Chief Financial Officer pursuant to
an Employment Agreement dated October 29, 1996 (the "Employment Agreement").
Orton will continue to perform his duties full-time under the Employment
Agreement until the Company completes its annual shareholder meeting or the
Close of business on June 5, 1998, whichever is sooner. Commencing Monday, June
8, 1998, Orton will perform his employment duties on an as-needed basis, not to
exceed twenty hours per week (including all travel time). To the extent Orton
works in excess of twenty hours on behalf of the Company during any calendar
week, such excess hours shall be credited to and offset Orton's maximum time
availability in subsequent periods; and any excess hours that have not been so
offset in any calendar month (i.e., those exceeding 80 hours in the aggregate)
shall be compensated at $125 per hour. Orton shall report all accumulated time
credits to the Company at the end of each calendar month. Notwithstanding
anything in the Employment Agreement to the contrary, Orton shall be free to
work for, consult with, assist and/or receive compensation from other sources,
so long as such affiliations do not materially interfere with the duties to be
rendered by Orton to the Company under this paragraph 1.
2. Orton's employment relationship with the Company, and (except as
provided herein) his Employment Agreement, shall terminate on December 31, 1998
(the "Termination Date"). Orton shall receive his full annualized compensation
of One Hundred Thousand Dollars ($100,000) through December 31, 1998 in
customary semi-monthly payments, subject to any customary and required tax
withholdings and deductions, and shall receive all benefits and bonuses
customarily provided by the Company and/or set forth in the Employment Agreement
to the extent such rights accrue during the period prior to the Termination Date
(even if distributed thereafter), including but not limited to those benefits
and bonuses referred to in paragraphs 4, and 6 through 8 of the Employment
Agreement.
3. To the extent the following may be lawfully accomplished, Orton may, at
his election, exercise the option to defer all or a portion of his income to the
1999 Calendar year. This election may be accomplished by the designation of an
escrow agent to receive and hold Orton's compensation from the Company. Orton
will notify the Company in writing if he chooses to exercise this election.
4. Subsequent to the Termination Date, Orton shall not hold himself out as
being affiliated with, an agent for, or possessing authority to bind the Company
in any manner.
<PAGE>
5. Prior to and after the Termination Date, Orton shall be entitled to all
indemnity protections (statutory, contractual, and those arising under insurance
policies) that apply to other former officers of the Company, and the Company
shall not hereafter reduce the level of such protection available to Orton.
6. Orton currently holds, under the Company's Stock Plans, several tranches
of stock options, consisting in the aggregate of 75,000 shares at an exercise
price of $5.00 per share, and 50,000 shares (25,000 of which are already vested)
at an exercise price of $2.00 per share (collectively, including any stock
options hereafter issued to Orton, the "Options"). All of Orton's Options shall
be fully vested as of the Effective Date, notwithstanding anything to the
contrary in the Employment Agreement or any other agreement applicable to the
Options. To the extent Company consent is thereafter required for transfers of
securities, the Company shall not unreasonably delay or withhold consent to
Orton's requests, provided they are consistent with applicable law, to sell the
Company's securities; and the Company shall provide reasonable letters
confirming Orton's right to sell (including, after 1998, as a non-affiliate) in
accordance with Rule 144 restrictions or other applicable regulations.
7. To the extent any provision of this Agreement conflicts with the
Employment Agreement or any other agreement between the Parties, such agreements
are deemed automatically modified in accordance herewith. Except to the extent
automatically modified herein as necessary to avoid conflict with this
Agreement, all existing agreements regarding noncompetition, exclusivity, and
confidentiality existing between Orton and the Company shall continue in effect
in accordance with their terms.
8. Orton understands that all health insurance benefits paid by the Company
for Orton or his dependents will cease as of the Termination Date. However,
Orton may elect at his own expense, to continue the health insurance coverage
formerly provided by the Company to the extent authorized by Texas' employee
health insurance continuation laws, or if applicable, the Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA). Orton may notify the Company in
writing of his election to continue the health insurance coverage on himself
and/or his dependents, as currently in effect, in which case he shall pay to the
Company (or the carrier, as the case may be) the premiums attributable thereto
in advance on the first day of each month. The Company will assist in the
arrangements for the continuation of his health insurance.
9. Orton shall have the option to purchase from the Company or its lessor,
if applicable (with all transferable warranties), his company car, a 1996
Chevrolet Tahoe (VIN number 16NEC13R3TJ354596) for 75 percent of the lowest 1998
year-end blue book price, which option may be exercised during the period from
December 31, 1998 through and including January 31, 1999.
10. Upon the Termination Date, Orton shall promptly surrender to the
Company all materials (including, without limitation, keys, access cards, and
files) belonging to the Company, whether or not deemed confidential or
proprietary.
11. This Agreement may not be modified except in a written instrument
hereafter signed by the Parties to be bound by such modification. This Agreement
shall bind and inure to the benefit of the Parties, their successors, assigns,
heirs and legal representatives.
2
<PAGE>
12. The prevailing Party in any proceeding relating to this Agreement shall
be entitled to recover reasonable attorneys fees. Either Party may request
mediation of any dispute, in which event the Parties, through their attorneys,
shall promptly select a mediator and convene a mediation within thirty (30)
days, subject to the mediator's schedule.
13. The provisions of this Agreement are deemed severable; if a provision
herein is unenforceable the remainder of the Agreement shall remain enforceable
provided that the deletion of the invalid provision does not substantially
defeat the objects and benefits to be derived under this Agreement.
14. Each Party shall take such actions as may be reasonably necessary to
effectuate this Agreement.
15. This Agreement binds and inures to the benefit of the successors,
assigns, and legal representatives of the Parties, provided that the obligation
of Orton to furnish personal services may not be assigned.
16. THIS AGREEMENT SHALL BE DEEMED PERFORMABLE BY ALL PARTIES IN TRAVIS
COUNTY, TEXAS, AND THE CONSTRUCTION AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY TEXAS LAW.
17. The undersigned representative of the Company represents that he has
been authorized by the Company's Board of Directors to sign this Agreement on
behalf of the Company.
Executed as of the Effective Date.
AMERICAN BINGO & GAMING, INC.
By: /s/ Greg Wilson
-----------------
Its Authorized Representative
/s/ John T. Orton
--------------------
John T. Orton
3
<PAGE>
THIS EMPLOYMENT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
------------------------------------------------------------
TO THE UNIFORM ARBITRATION ACT, S.C. CODE ANN. 15-48-10, ET SEQ.
-----------------------------------------------------------------
(LAW CO-OP. 1976 AND SUPP. 1993)
--------------------------------
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made as of the 24th day of September,
----
1997, between American Bingo & Gaming Corp. (the "Company"), and Michael W. Mims
(the "Employee").
1. Employee Duties. The Company hereby employs the Employee as manager
---------------
of its video poker and video game operation in South Carolina, with such
responsibilities and duties as the Board of Directors may from time to time
determine. The Employee shall devote full time to the Company to accomplish the
assigned responsibilities.
2. Term of Agreement. Employment under this Agreement shall commence
-------------------
on the date first shown above and continue for three (3) years unless earlier
terminated in the manner provided below.
2.1. Termination by Company. This Agreement may be terminated by
------------------------
Company only in the event that:
(a) Employee dies;
(b) Employee becomes physically, mentally or emotionally unable to
perform his duties hereunder (subject to all limitations and restrictions upon
such termination imposed by applicable law);
(c) Employee is convicted of violating any law having a material
adverse affect on any video poker or other gaming activities of the Company, or
is barred temporarily or permanently from any gaming activity in South Carolina;
(d) Employee is convicted of any felony crime;
(e) Employee commits an act of material insubordination;
(f) Employee fails to perform his duties hereunder in a
reasonable, ethical manner for any other reason; or
(g) Employee materially breaches this Agreement.
<PAGE>
Provided, however, before terminating the Agreement pursuant to Paragraphs
(e), (f) or (g) above, the Company must first give the Employee notice and a
reasonable opportunity to cure such default, if such default is of a nature that
it can be cured by Employee.
2.2 Termination by Employee. This Agreement may be terminated by
-------------------------
Employee in the event that Company fails to pay any compensation due hereunder
after notice and a reasonable opportunity to cure such default.
2.3 Accrued Compensation. In the event of termination of this
---------------------
Agreement, Employee shall be paid his compensation through the date of
termination; provided that Company may set-off or recoup from such unpaid
compensation any sums owed to Employer by Employee.
3. Compensation. Employee shall be paid a salary of two hundred fifty
------------
thousand dollars ($250,000) per year, payable in monthly installments throughout
each year, subject to reduction as provided below. Upon the first anniversary
of this Agreement, Company shall compute the Gross Machine Income ("GMI") from
the video poker operations for each of the Company's and its subsidiaries'
locations listed on Exhibit "A". "GMI" means the gross receipts less payouts
for the video poker machines. GMI shall include both the GMI allocated to the
Company or its subsidiary and the GMI allocated to the location operator, if the
location operator is not the Company or a subsidiary of the Company, except as
otherwise noted on Exhibit "A". If for the twelve month period after the date
of this Agreement such GMI is less than $4,000,000, Employee's annual salary
thereafter shall be reduced so that such salary is the same percentage of
$250,000 as such GMI for the twelve month period after the date hereof is of
$4,000,000. Employee's annual salary shall be reviewed at each anniversary of
the date hereof, and shall upon each such anniversary be adjusted so that it is
the same percentage of $250,000 that such GMI for the preceding twelve month
period is of $4,000,000; provided, however, that Employee's salary shall never
exceed $250,000 per year.
4. Cash and Stock Bonuses. Any bonuses over and above the compensation
----------------------
described above will be based on the Company's performance, Employee's
performance, and in the absolute discretion of the Board of Directors.
5. Other Fringe Benefits. Employee shall receive the following
-----------------------
benefits during the Term of Employment: comprehensive health, accident, major
medical, dental, disability and life insurance protection in accordance with the
general policies of the Company as in effect from time to time.
6. Reimbursement of Expenses. The Company shall reimburse Employee for
-------------------------
all reasonable, ordinary and necessary expenses incurred by him in the
performance of his duties hereunder, provided that Employee accounts to the
Company therefore in the manner prescribed by the Company for reimbursement of
Employee's expenses.
7. Vacation; Holidays. Employee shall be entitled to 15 business days
-------------------
paid vacation each year during the term hereof. Employee shall also be entitled
to nine (9) paid holidays each year during the term hereof as determined by the
Company.
8. Non-Disclosure and Non-Compete.
--------------------------------
2
<PAGE>
8.1 Non-Disclosure. Employee agrees that all information pertaining to
--------------
the prior, current or contemplated business of the Company, its parent, its
subsidiaries, affiliates or its successors in interest (hereafter referred to
collectively in this Section 8 as the Company), excluding publicly available
information (in substantially the form in which it is publicly available) unless
such information is publicly available by reason of unauthorized disclosure by
Employee and excluding such information which Employee possessed prior to his
employment by the Company, constitutes valuable and confidential assets of the
Company. Such information includes, without limitation, information related to
trade secrets, customer and client lists, contract terms, legal and accounting
advice and opinions, supplier lists, methods of doing business, financing
techniques and sources and financial statements of the Company. Such
Information is sometimes hereinafter referred to as "Confidential Information."
Employee shall hold all such Confidential Information in trust and confidence
for the Company and shall not use or disclose any such Confidential Information
other than for the business of the Company or as required by law, either during
the Term of Employment or after his employment terminates for whatever reason.
8.2 Non-Competition. As a material part of the consideration for
---------------
Employee's access to Confidential Information, and for the know-how and training
provided to Employee by the Company, Employee covenants and agrees that:
(a) Employee shall not, directly or indirectly, within the
Territory during the Restricted Period, promote, operate, manage or conduct any
bingo game or related gaming business permitted under the terms and conditions
of any license issued by the State of South Carolina or under any other state or
federal law or authority, or operate any video game machine or other gaming
machine or device (such games and game machines being referred to herein as
"Games").
(b) Further, Employee shall not, directly or indirectly, within
the Territory during the Restricted Period, solicit or sell for, own, or acquire
any interest in, either directly or indirectly, any corporation, partnership,
limited partnership, or other entity, or become engaged by, act as landlord to,
or as agent or consultant for, do business with, manage, operate, control, be
employed by, participate in, or be connected, in any manner with, or in any
manner assist, any other person, corporation, partnership or other entity
engaged in the business of promoting, operating, managing or conducting Games.
8.3 Restricted Period. For the purpose of this Agreement, the
------------------
"Restricted Period" means the period commencing with the date hereof and
continuing until two years after termination of this Agreement.
8.4 Territory. For purposes of this Agreement the "Territory" shall
---------
mean: (i) with regard to any activities described in Section 1 above which are
conducted under a Class B or Class C bingo license (or equivalent thereof under
any future law) issued by the State of South Carolina or under any other state
or federal law or authority, the area within a fifty (50) mile radius of any
bingo facility then owned by Company or any subsidiary of the Company; and (ii)
with regard to any activities described in Section 1 above which are conducted
under any Class A license (or equivalent thereof under any future law) issued by
the State of South Carolina or under any other state or federal law or
authority, the area within a three hundred (300) mile radius of any bingo game
facility then owned by Company or any subsidiary of the Company; and (iii) with
regard to video game facilities, the area within a twenty-five (25) mile radius
of any bingo, video poker or video game facility then owned by the Company or
any subsidiary of the Company.
3
<PAGE>
8.5 Exemptions. The provisions of this Article 8 shall not apply to
----------
businesses operated by Mims Amusement Company Partnership, Mims Amusement
Operating Co., Palmetto State Distributing Company, Inc., or Universal Mortgage
and Loan Co., provided that within the twelve (12) month period immediately
preceding the date of this Agreement Employee has had, and during the Restricted
Period Employee shall have, no role, directly or indirectly, in management or
operations of any such exempted business, nor shall Employee during the
Restricted Period receive any payment or distribution of any kind, as
compensation or otherwise, from any such business other than dividends upon
corporate stock which are strictly proportional to the percentage of stock owned
by him, or distributions with respect to his capital accounts in partnerships
which are strictly proportional to the percentage of his capital account
ownership in any such partnership.
8.6 Enforcement. In the event of a breach by Employee of the
-----------
provisions of this Article 8, Company shall have, in addition to any other
remedies it may have at law or under this Agreement, the right to a temporary
restraining order, temporary injunction and permanent injunction restraining
Employee from violating or continuing a violation of the terms of this Article
8. Employee agrees that in the event of such breach the amount of damages would
be difficult or impossible to determine, and agrees to a bond in the amount to
be determined by a court of competent jurisdiction.
8.7 Severance, Reformation. Should any court of competent jurisdiction
----------------------
hold any portion of this Article 8 to be unenforceable in whole or in part, such
court shall be authorized and requested to sever the offending provision from
this Article 8, and to reform this Article so as to comply as closely as
possible with the intentions of the parties as stated herein, so that it will be
enforceable by injunction.
8.8 Survival of Termination. The provisions of this Section 8 shall
-------------------------
survive termination of Employee's employment; provided, however, such provisions
shall not survive if this Agreement is terminated by Employee pursuant to
Section 2.2 of this Agreement.
9. Warranties and Representations of the Employee. Employee warrants
------------------------------------------------
and represents that:
(a) The Employee is not subject to any agreement, contract,
judgment, decree, or limitation the effect of which would prohibit, limit or
otherwise restrict the employment of the Employee by the Company pursuant to the
terms of this Agreement, and
(b) Attached as Exhibit "B" hereto is a complete and accurate
description of the following information with respect to the businesses exempted
from Employee's non-competition agreement pursuant to Section 8.5: (i) a
complete description of the identities and ownership interests of each equity
owner in each such entity (as shareholder, partner, or otherwise), to the best
of Employee's knowledge; (ii) the identity of each officer, director or other
person participating in management, to the best of Employee's knowledge; and
(iii) a complete description of the Employee's current and past management
activities with respect to each such business. The Company will keep and
maintain the confidentiality of the information disclosed on Exhibit "B" and
will not disclose such information to any third party except: (a) if ordered to
do so by any court or regulatory authority; or (b) as necessary in litigation
for the enforcement or defense of its rights under this Agreement and the other
related agreements referred to herein.
4
<PAGE>
10. Services on Behalf of Subsidiary Companies. The Employee's
-----------------------------------------------
services hereunder shall be performed on behalf of the Company and on behalf of
each subsidiary of the Company whether now existing or hereafter formed. For
purposes of this Agreement, the "Company" shall refer to and include each of the
subsidiaries of the Company.
11. Indemnification. The Company agrees that it will indemnify and
---------------
hold harmless the Employee against any losses, claims, damages or liabilities
(including, but not limited to, all costs of defense and investigation and all
attorneys' fees) to which Employee may become subject, under the federal
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in,
or material omission from any registration statement or other document filed
with the Securities and Exchange Commission or otherwise made public, where such
untrue statement or material omission relates to matters outside of Employee's
direct knowledge and upon which Employee relied upon reasonably and in good
faith.
12. Notices. All notices, requests, consents and other communications,
-------
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered mail (notices
sent by telegram or mailed shall be deemed to have been given on the date sent),
as follows (or to such other address as either party shall designate by notice
in writing to the other in accordance herewith):
If to the Employee:
Michael W. Mims
2605C Seminole Road
Columbia, South Carolina 29210
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
5
<PAGE>
If to the Company:
American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Mr. Greg Wilson
With a copy to:
Rodney Varner
Wilson & Varner, L.L.P.
301 Congress Avenue, Suite 2025
Austin, Texas 78701
13. Governing Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the local laws of the State of South Carolina
applicable to agreements made and to be performed entirely in such state. In
any litigation for enforcement or interpretation of this Agreement, the
prevailing party shall be entitled to recover his or its reasonable attorneys'
fees, costs and expenses, in addition to any other remedies provided at law or
in equity.
14. Headings and Captions. The section headings contained herein are
-----------------------
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. Entire Agreement. This Agreement along with the Agreement and Plan
----------------
of Reorganization dated August 13, 1997, and other documents referred to
therein, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersede all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made by either party
that is not embodied in this Agreement and/or said Agreement and Plan of
Reorganization, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
16. Assignment. This Agreement, and the Employee's rights and
----------
obligations hereunder, may not be assigned by the Employee. The Company may
freely assign its rights, together with its obligations, hereunder without
consent of the Employee. In such event the obligations of the Company hereunder
shall be binding on its successors or assigns, whether by merger, consolidation,
or acquisition of all or substantially all of its business or assets, or
otherwise.
17. Amendments: No Waiver. This Agreement may be amended, modified,
-----------------------
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
6
<PAGE>
18. Arbitration. Except to the extent not preempted by the Federal
-----------
Arbitration Act, 9 U.S.C. 1 et seq. (1970), any claim or controversy arising
-- ---
out of, or relating to, any provision of this Employment Agreement, or the
breach thereof, or the Employee's employment in general, shall upon written
demand of any party, be settled by three (3) arbitrators in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association to the extent consistent with the laws of the State of South
Carolina and the Uniform Arbitration Act, S.C. Code 15-48-10, et seq., (Law.
-- ---
Co-Op. 1976, as amended). Judgment rendered by the arbitrators may be entered
in the appropriate Court in Richland County, South Carolina, having jurisdiction
thereof. Arbitration shall be held in the County of Richland, State of South
Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
AMERICAN BINGO & GAMING CORP.
By: /s/ Greg Wilson
-----------------
L. Gregory Wilson, President
/s/ Michael W. Mims
----------------------
Michael W. Mims
7
<PAGE>
EXHIBIT A
Aiken County
- -------------
Wild Cherry
Double 7
Golden Palace
Double Diamonds
Southern Sport
Country Convenience(1)
Beaufort County
- ----------------
Low Country Players
Riptides(1)
Edgefield County
- -----------------
Lucky 4
Danny's Games
Kershaw County
- ---------------
Ed Blanton Bingo(1)
Lexington County
- -----------------
Ed Blanton Highway 378(1)
Richland County
- ----------------
Mr. Lucky(1)
Double Diamonds(1)
Ed Blanton Bingo(1)
(1) For purposes of calculating GMI pursuant to Section 3 of the Employment
Agreement, GMI shall not include the GMI allocated to the location operators for
these locations.
<PAGE>
EXHIBIT B
The parties to the Employment Agreement agree that the information required to
be disclosed on this Exhibit B will only disclose the information as to Michael
W. Mims, and not any other shareholder, officer or director of any such entity.
Mims Amusement Company Partnership:
- -------------------------------------
Michael W. Mims, 11.11% partner.
Mims Amusement Operating Co.:
- -------------------------------
Michael W. Mims, 13.33% shareholder.
Palmetto State Distributing Company, Inc.:
- ---------------------------------------------
Michael W. Mims, 20% shareholder and Secretary.
Universal Mortgage and Loan Co.:
- -----------------------------------
Michael W. Mims, 16% shareholder.
Except as otherwise noted above, Michael W. Mims has not served as an officer,
director or in any other management role for any of the four entities listed
above during the last three years.
<PAGE>
THIS EMPLOYMENT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
------------------------------------------------------------
TO THE UNIFORM ARBITRATION ACT, S.C. CODE ANN. 15-48-10, ET SEQ.
-----------------------------------------------------------------
(LAW CO-OP. 1976 AND SUPP. 1997)
--------------------------------
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") between
American Bingo & Gaming Corp. (the "Company") and Michael W. Mims (the
"Employee") is entered into as of the 27th day of July, 1998.
---- ----
WHEREAS, the Company and the Employee entered into an Employment
Agreement as of September 24, 1997 (the "Employment Agreement"); and
WHEREAS, the parties to the Employment Agreement wish to modify and
amend certain provisions of the Employment Agreement;
NOW, THEREFORE, in consideration of the recitals and mutual covenants,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties DO HEREBY AGREE as follows:
1. Amendment of Section 2. Section 2 of the Employment Agreement is
----------------------
hereby amended to read in its entirety as follows: "Employment under this
Agreement shall commence on September 24, 1997 and continue for one year unless
earlier terminated in the manner provided below; provided, however, Employee's
employment shall be extended for up to two consecutive one year terms unless the
Company notifies Employee at least thirty days prior to the termination date of
its desire not to extend the terms of this Agreement."
2. Amendment of Section 3. Section 3 of the Employment Agreement is
----------------------
hereby amended to read in its entirety as follows: "Employee shall be paid a
salary of one hundred twenty-five thousand dollars ($125,000) per year, payable
in monthly installments throughout the year." Such adjustment to the annual
salary of the Employee shall be effective beginning June 1, 1998.
3. Miscellaneous. This Amendment controls over any contrary or
-------------
inconsistent provision of the Employment Agreement. Every provision of the
Employment Agreement not specifically amended or modified by the terms of this
Amendment shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
AMERICAN BINGO & GAMING CORP.
By: /s/ Andre M. Hilliou
-----------------------
Andre M. Hilliou, President
EMPLOYEE
/s/ Michael W. Mims
----------------------
Michael W. Mims
<PAGE>
THIS EMPLOYMENT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
------------------------------------------------------------
TO THE UNIFORM ARBITRATION ACT, S.C. CODE ANN. 15-48-10, ET SEQ.
-----------------------------------------------------------------
(LAW CO-OP. 1976 AND SUPP. 1996)
--------------------------------
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made as of the 18th day of December,
----
1997, between Darlington Music Co., Inc. (the "Company"), and George M.
Harrison, Jr. (the "Employee").
1. Employee Duties. The Company hereby employs the Employee as a
----------------
manager of its video poker and video game operation in South Carolina, with such
responsibilities and duties as the Board of Directors may from time to time
determine; provided, however, the Company agrees that it will not require the
Employee to move his primary residence out of the Darlington, South Carolina
area as a condition of maintaining employment with the Company or as a condition
of complying with this Employment Agreement, and that the Employee's travel
requirements in connection with his responsibilities and duties will not be
unreasonable. The Employee shall devote full time to the Company to accomplish
the assigned responsibilities.
2. Term of Agreement. Employment under this Agreement shall commence
-------------------
on the date first shown above and continue for three (3) years unless earlier
terminated in the manner provided below.
2.1. Termination by Company. This Agreement may be terminated by
------------------------
Company only in the event that:
(a) Employee dies;
(b) Employee becomes physically, mentally or emotionally unable to
perform his duties hereunder (subject to all limitations and restrictions upon
such termination imposed by applicable law);
(c) Employee is convicted of violating any law having a material
adverse affect on any video poker or other gaming activities of the Company, or
is barred temporarily or permanently from any gaming activity in South Carolina;
(d) Employee is convicted of any felony crime;
(e) Employee commits an act of material insubordination;
(f) Employee fails to perform his duties hereunder in a
reasonable, ethical manner for any other reason; or
(g) Employee materially breaches this Agreement.
<PAGE>
Provided, however, before terminating the Agreement pursuant to Paragraphs
(e), (f) or (g) above, the Company must first give the Employee notice and a
reasonable opportunity to cure such default, if such default is of a nature that
it can be cured by Employee.
2.2 Termination by Employee. This Agreement may be terminated by
-------------------------
Employee in the event that Company fails to pay any compensation due hereunder
after notice and a reasonable opportunity to cure such default.
2.3 Accrued Compensation. In the event of termination of this
---------------------
Agreement, Employee shall be paid his compensation through the date of
termination; provided that Company may set-off or recoup from such unpaid
compensation any sums owed to Employer by Employee.
3. Compensation. Employee shall be paid a salary of one hundred four
------------
thousand dollars ($104,000) per year, payable in monthly installments throughout
each year.
4. Cash and Stock Bonuses. Any bonuses over and above the compensation
----------------------
described above will be based on the Company's performance, Employee's
performance, and in the absolute discretion of the Board of Directors.
5. Other Fringe Benefits. Employee shall receive the following
-----------------------
benefits during the Term of Employment: comprehensive health, accident, major
medical, dental, disability and life insurance protection in accordance with the
general policies of the Company as in effect from time to time, as well as an
annual contribution on behalf of the Employee to the Darlington Music Co., Inc.
Profit Sharing Plan #1 of not less than 7% of the Employee's annual gross
compensation.
6. Reimbursement of Expenses. The Company shall reimburse Employee for
-------------------------
all reasonable, ordinary and necessary expenses incurred by him in the
performance of his duties hereunder, provided that Employee accounts to the
Company therefore in the manner prescribed by the Company for reimbursement of
Employee's expenses.
7. Vacation; Holidays. Employee shall be entitled to 15 business days
-------------------
paid vacation each year during the term hereof. Employee shall also be entitled
to nine (9) paid holidays each year during the term hereof as determined by the
Company.
8. Non-Disclosure and Non-Compete.
--------------------------------
8.1 Non-Disclosure. Employee agrees that all information pertaining to
--------------
the prior, current or contemplated business of the Company, its parent, its
subsidiaries, affiliates or its successors in interest (hereafter referred to
collectively in this Article 8 as the Company), excluding publicly available
information (in substantially the form in which it is publicly available) unless
such information is publicly available by reason of unauthorized disclosure by
Employee and excluding such information which Employee possessed prior to his
employment by the Company, constitutes valuable and confidential assets of the
Company. Such information includes, without limitation, information related to
trade secrets, customer and client lists, contract terms, legal and accounting
advice and opinions, supplier lists, methods of doing business, financing
techniques and sources and financial statements of the Company. Such
Information is sometimes hereinafter referred to as "Confidential Information."
Employee shall hold all such Confidential Information in trust and confidence
for the Company and shall not use or disclose any such Confidential Information
other than for the business of the Company or as required by law, either during
the Term of Employment or after his employment terminates for whatever reason.
2
<PAGE>
8.2 Non-Competition. As a material part of the consideration for
---------------
Employee's access to Confidential Information, and for the know-how and training
provided to Employee by the Company, except as provided on Schedule A Employee
covenants and agrees that:
(a) Employee shall not, directly or indirectly, within the
Territory during the Restricted Period, promote, operate, manage or conduct any
bingo game or related gaming business permitted under the terms and conditions
of any license issued by the State of South Carolina or under any other state or
federal law or authority, or operate any video game machine or other gaming
machine or device (such games and game machines being referred to herein as
"Games").
(b) Further, Employee shall not, directly or indirectly, within
the Territory during the Restricted Period, solicit or sell for, own, or acquire
any interest in, either directly or indirectly, any corporation, partnership,
limited partnership, or other entity, or become engaged by, act as landlord to,
or as agent or consultant for, do business with, manage, operate, control, be
employed by, participate in, or be connected, in any manner with, or in any
manner assist, any other person, corporation, partnership or other entity
engaged in the business of promoting, operating, managing or conducting Games.
8.3 Restricted Period. For the purpose of this Agreement, the
------------------
"Restricted Period" means the period commencing with the date hereof and
continuing until two years after termination of this Agreement.
8.4 Territory. For purposes of this Agreement the "Territory" shall
---------
mean: (i) with regard to any activities described in Section 1 above which are
conducted under a Class B or Class C bingo license (or equivalent thereof under
any future law) issued by the State of South Carolina or under any other state
or federal law or authority, the area within a fifty (50) mile radius of any
bingo facility then owned by American Bingo & Gaming Corp. ("ABG") or any
subsidiary of ABG; and (ii) with regard to any activities described in Section 1
above which are conducted under any Class A license (or equivalent thereof under
any future law) issued by the State of South Carolina or under any other state
or federal law or authority, the area within a one hundred (100) mile radius of
any bingo game facility then owned by ABG or any subsidiary of ABG; and (iii)
with regard to video game facilities, the area within a twenty-five (25) mile
radius of any bingo, video poker or video game facility then owned by ABG or any
subsidiary of ABG.
8.5 Enforcement. In the event of a breach by Employee of the
-----------
provisions of this Article 8, Company shall have, in addition to any other
remedies it may have at law or under this Agreement, the right to a temporary
restraining order, temporary injunction and permanent injunction restraining
Employee from violating or continuing a violation of the terms of this Article
8. Employee agrees that in the event of such breach the amount of damages would
be difficult or impossible to determine, and agrees to a bond in the amount to
be determined by a court of competent jurisdiction.
3
<PAGE>
8.6 Severance, Reformation. Should any court of competent jurisdiction
----------------------
hold any portion of this Article 8 to be unenforceable in whole or in part, such
court shall be authorized and requested to sever the offending provision from
this Article 8, and to reform this Article so as to comply as closely as
possible with the intentions of the parties as stated herein, so that it will be
enforceable by injunction.
8.7 Survival of Termination. The provisions of this Article 8 shall
-------------------------
survive termination of Employee's employment; provided, however, such provisions
shall not survive if this Agreement is terminated by Employee pursuant to
Section 2.2 of this Agreement.
9. Warranties and Representations of the Employee. Employee warrants
------------------------------------------------
and represents that the Employee is not subject to any agreement, contract,
judgment, decree, or limitation the effect of which would prohibit, limit or
otherwise restrict the employment of the Employee by the Company pursuant to the
terms of this Agreement.
10. Services on Behalf of Subsidiary Companies. The Employee's
-----------------------------------------------
services hereunder shall be performed on behalf of the Company and on behalf of
each subsidiary of the Company whether now existing or hereafter formed. For
purposes of this Agreement, the "Company" shall refer to and include each of the
subsidiaries of the Company.
11. Indemnification. The Company agrees that it will indemnify and
---------------
hold harmless the Employee against any losses, claims, damages or liabilities
(including, but not limited to, all costs of defense and investigation and all
attorneys' fees) to which Employee may become subject, under the federal
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in,
or material omission from any registration statement or other document filed
with the Securities and Exchange Commission or otherwise made public, where such
untrue statement or material omission relates to matters outside of Employee's
direct knowledge and upon which Employee relied upon reasonably and in good
faith.
12. Notices. All notices, requests, consents and other communications,
-------
required or permitted to be given hereunder, shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by prepaid
telegram, or mailed first-class, postage prepaid, by registered mail (notices
sent by telegram or mailed shall be deemed to have been given on the date sent),
as follows (or to such other address as either party shall designate by notice
in writing to the other in accordance herewith):
If to the Employee:
George M. Harrison, Jr.
208 Wyandot Street
Darlington, South Carolina 29532
4
<PAGE>
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
Third Floor, Keenan Building
1330 Lady Street
P. O. Box 11070 (29211)
Columbia, South Carolina 29201
Attn: Daniel J. Fritze
If to the Company:
Darlington Music Co., Inc.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
Attn: Mr. Greg Wilson
With a copy to:
Rodney Varner
Wilson & Varner, L.L.P.
301 Congress Avenue, Suite 2025
Austin, Texas 78701
13. Governing Law. This Agreement shall be governed by and construed
--------------
and enforced in accordance with the local laws of the State of South Carolina
applicable to agreements made and to be performed entirely in such state. In
any litigation for enforcement or interpretation of this Agreement, the
prevailing party shall be entitled to recover his or its reasonable attorneys'
fees, costs and expenses, in addition to any other remedies provided at law or
in equity.
14. Headings and Captions. The section headings contained herein are
-----------------------
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. Entire Agreement. This Agreement along with the Agreement and Plan
----------------
of Reorganization dated November 12, 1997, and other documents referred to
therein, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof, and supersede all prior agreements,
arrangements and understandings, written or oral, relating to the subject matter
hereof. No representation, promise or inducement has been made by either party
that is not embodied in this Agreement and/or said Agreement and Plan of
Reorganization, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
16. Assignment. This Agreement, and the Employee's rights and
----------
obligations hereunder, may not be assigned by the Employee. The Company may
freely assign its rights, together with its obligations, hereunder without
consent of the Employee. In such event the obligations of the Company hereunder
shall be binding on its successors or assigns, whether by merger, consolidation,
or acquisition of all or substantially all of its business or assets, or
otherwise.
5
<PAGE>
17. Amendments: No Waiver. This Agreement may be amended, modified,
-----------------------
superseded, cancelled, renewed or extended and the terms or covenants hereof may
be waived, only by a written instrument executed by both of the parties hereto,
or in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
18. Arbitration. Except to the extent not preempted by the Federal
-----------
Arbitration Act, 9 U.S.C. 1 et seq. (1970), any claim or controversy arising
-- ---
out of, or relating to, any provision of this Employment Agreement, or the
breach thereof, or the Employee's employment in general, shall upon written
demand of any party, be settled by three (3) arbitrators in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association to the extent consistent with the laws of the State of South
Carolina and the Uniform Arbitration Act, S.C. Code 15-48-10, et seq., (Law.
-- ---
Co-Op. 1976, as amended). Judgment rendered by the arbitrators may be entered
in the appropriate Court in Darlington County, South Carolina, having
jurisdiction thereof. Arbitration shall be held in the County of Darlington,
State of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
DARLINGTON MUSIC CO., INC.
By: /s/ Greg Wilson
-----------------
L. Gregory Wilson, President
EMPLOYEE
/s/ George M. Harrison, Jr.
-------------------------------
George M. Harrison, Jr.
6
<PAGE>
SCHEDULE A
-----------
Exceptions to Non-compete
1. Harrison and Associates, a general partnership consisting of the 3
Shareholders plus their mother, Mary E. Harrison, which primarily owns real
estate, some of which is leased to third parties who have entered into Coin
Machine Leasing and Service Agreements with the Company.
2. G.B.T. Harrison, a general partnership consisting of the 3 Shareholders,
which primarily owns real estate, some of which is leased to third parties who
have entered into Coin Machine Leasing and Service Agreements with the Company.
3. Steve's One Stop, owned by Harrison and Associates, is a store location
leased to a third party.
4. J and J Grocery, owned by Harrison and Associates, is a store location
leased to a third party.
5. Mike's Place, owned by Harrison and Associates, is a store location
leased to a third party.
6. Old Bozos Pizza, owned by G.B.T. Harrison, is a store location which is
currently empty.
7. Positive Teen, owned by G.B.T. Harrison, is a store location leased to a
third party.
8. R.B. Jr., owned by the Shareholders' mother, Mary E. Harrison, is a store
location leased to a third party.
9. Old Ebonys, owned by the Shareholders' mother, Mary E. Harrison, is a
store location leased to a third party.
10. Radio Shack Building, owned by the Shareholders' mother, Mary E.
Harrison, is a store location leased to a third party.
<PAGE>
THIS EMPLOYMENT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
------------------------------------------------------------
TO THE UNIFORM ARBITRATION ACT, S.C. CODE ANN. 15-48-10, ET SEQ.
-----------------------------------------------------------------
(LAW CO-OP. 1976 AND SUPP. 1997)
--------------------------------
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment") between
Darlington Music Co., Inc. (the "Company") and George M. Harrison, Jr. (the
"Employee") is entered into as of the 25th day of February, 1998.
----
WHEREAS, the Company and the Employee entered into an Employment
Agreement as of December 18, 1997 (the "Employment Agreement"); and
WHEREAS, the parties to the Employment Agreement wish to modify and
amend certain provisions of the Employment Agreement;
NOW, THEREFORE, in consideration of the recitals and mutual covenants,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties DO HEREBY AGREE as follows:
1. Amendment of Section 2.3. The following sentence is hereby added to
------------------------
the end of Section 2.3: "Provided, however, upon termination of the Employee's
employment with the Company by the Company or the Employee for any reason
whatsoever, the balance due, including accrued interest thereon, on the
Promissory Note dated February 24, 1998, by and between the Company and the
Employee shall be forgiven in full and any obligation of the Employee to make
further payments of principal and/or interest to the Company pursuant to the
Promissory Note shall thereby immediately be terminated and forgiven."
2. Amendment of Section 3. Section 3 of the Employment Agreement is
----------------------
hereby amended to read in its entirety as follows: "Employee shall be paid a
salary of one hundred twenty-five thousand dollars ($125,000) per year, payable
in monthly installments throughout each year." Such adjustment to the annual
salary of the Employee shall be retroactive to December 18, 1997.
3. Miscellaneous. This Amendment controls over any contrary or
-------------
inconsistent provision of the Employment Agreement. Every provision of the
Employment Agreement not specifically amended or modified by the terms of this
Amendment shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
DARLINGTON MUSIC CO., INC.
By: /s/ L. Gregory Wilson
------------------------
L. Gregory Wilson, President
EMPLOYEE
/s/ George M. Harrison, Jr.
-------------------------------
George M. Harrison, Jr.
<PAGE>
THIS EMPLOYMENT AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
------------------------------------------------------------
TO THE UNIFORM ARBITRATION ACT, S.C. CODE ANN. 15-48-10, ET SEQ.
-----------------------------------------------------------------
(LAW CO-OP. 1976 AND SUPP. 1997)
--------------------------------
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this "Amendment")
between Darlington Music Co., Inc. (the "Company") and George M. Harrison, Jr.
(the "Employee") is entered into as of the 27th day of July, 1998.
---- ----
WHEREAS, the Company and the Employee entered into an Employment
Agreement as of December 18, 1997, as amended February 25, 1998 (the "Employment
Agreement"); and
WHEREAS, the parties to the Employment Agreement wish to modify and
amend certain provisions of the Employment Agreement;
NOW, THEREFORE, in consideration of the recitals and mutual covenants,
conditions and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties DO HEREBY AGREE as follows:
1. Amendment of Section 2. Section 2 of the Employment Agreement
----------------------
is hereby amended to read in its entirety as follows: "Employment under this
Agreement shall commence on December 18, 1997 and continue for one year unless
earlier terminated in the manner provided below; provided, however, Employee's
employment shall be extended for up to two consecutive one year terms unless the
Company notifies Employee at least thirty days prior to the termination date of
its desire not to extend the terms of this Agreement."
2. Miscellaneous. This Amendment controls over any contrary or
-------------
inconsistent provision of the Employment Agreement. Every provision of the
Employment Agreement not specifically amended or modified by the terms of this
Amendment shall remain in full force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
DARLINGTON MUSIC CO., INC.
By: /s/ Frank Thatcher, Sr.
--------------------------
Name: Frank Thatcher, Sr.
---------------------
Its: Vice President
---------------
EMPLOYEE
/s/ George M. Harrison, Jr.
-------------------------------
George M. Harrison, Jr.
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is executed as of this 30th
day of April, 1998 (the "Effective Date"), by and between AMERICAN BINGO &
GAMING CORP., a Delaware corporation (the "Company"), and ANDRE MARC HILLIOU
(the "Executive").
WHEREAS, the parties wish to enter into an employment agreement to employ
the Executive as its President and Chief Executive Officer and to set forth
certain additional agreements between the Executive and the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. TERM
----
The Company will employ the Executive, and the Executive will serve the
Company, under the terms of this Agreement, for an initial term of three years
commencing on May 18, 1998 (the "Employment Date"). The terms of this Agreement
may be extended for one or more additional twelve-month periods provided the
Company and the Executive agree in writing to such an extension.
Notwithstanding the foregoing, the Executive's employment hereunder may be
earlier terminated as provided in Section 4 hereof. The term of this Agreement,
as in effect from time to time in accordance with the foregoing, shall be
referred to herein as the "Term." The period of time between the Employment
Date and the termination of the Executive's employment hereunder shall be
referred to herein as the "Employment Period."
2. EMPLOYMENT
----------
(a) POSITIONS AND REPORTING. The Company hereby employs the Executive
for the Employment Period as its President and Chief Executive Officer on the
terms and conditions set forth in this Agreement.
(b) AUTHORITY AND DUTIES. The Executive shall exercise such authority,
perform such executive duties and functions and discharge such responsibilities
as the Board of Directors may from time to time determine, consistent with the
Executive's position and the By-Laws of the Company. Without limiting the
generality of the foregoing, the Executive shall report directly and be
responsible to the Board of Directors of the Company. During the Employment
Period, the Executive shall devote his full business time, skill and efforts to
the business of the Company. Notwithstanding the foregoing, the Executive may
(i) make and manage passive personal business investments of his choice (in the
case of publicly held corporations, not to exceed 2% of the outstanding voting
stock) and serve in any capacity with any civic, educational or charitable
organization, or any trade association, without seeking or obtaining approval
from the Board of Directors of the Company (the "Board"), provided such
activities and service do not materially interfere or conflict with the
performance of his duties hereunder, and (ii) with the approval of the Board,
serve on the boards of directors of other corporations.
(c) PRIOR EMPLOYMENT. The Executive represents and warrants that he
has no individual employment agreement or non-competition agreement with his
current or any prior employer or any other agreement, contract, judgment, decree
or limitation which would prohibit, limit or otherwise restrict the employment
of the Executive by the Company pursuant to the terms of this Agreement.
(d) BOARD PARTICIPATION. The Executive shall serve as a director of
the Company during the Employment Period if he is nominated to do so and elected
by the Company's shareholders. As an employee of the Company, the Executive will
not receive additional compensation for serving as a director. However, the
Executive will be reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board or Board committees and for other expenses incurred in his
capacity as a director of the Company. In the event the Executive is not elected
to, or if he resigns from, the Board for any reason, such event will not
terminate this Agreement or in any way prejudice the rights of the parties
hereunder.
3. COMPENSATION AND BENEFITS
---------------------------
(a) SALARY. During the Employment Period, the Company shall pay to the
Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of Two Hundred Twenty-Five
Thousand ($225,000) Dollars per annum, payable in arrears not less frequently
than monthly in accordance with the normal payroll practices of the Company.
Such base salary shall be subject to review each year for a possible increase by
the Board of Directors, but shall in no event be decreased from its
then-existing level during the Employment Period. The Executive may also be
requested to serve as a director or officer of various subsidiaries and
affiliates of the Company and he hereby agrees to fulfill his duties as such an
officer and a director of such entities without additional compensation.
(b) ANNUAL BONUS. During the Employment Period, the Executive shall
have the opportunity to earn an annual performance bonus of up to Fifty Thousand
($50,000) Dollars per annum. The payment of any annual bonus under any such
program shall be contingent upon the achievement of certain corporate and/or
individual performance goals. The Executive and the Company acknowledge that the
performance goals which will serve as the basis for determining the annual bonus
have not yet been established and hereby agree to establish such goals as soon
as possible following the Employment Date.
(c) EQUITY PARTICIPATION. On the Effective Date, the Executive shall
be granted stock options to acquire 300,000 shares of the Common Stock of the
Company, at $3.75 per share, subject to the terms and conditions of the stock
option agreement between the Company and the Executive dated as of the date
hereof. The stock options granted shall vest in increments of 25,000 beginning
on July 31, 1998 and continuing to vest at the rate of 25,000 on each October
31, January 31, April 30 and July 31 through April 30, 2001; provided, however,
except as otherwise provided in this Agreement, the Executive's options shall
vest only if the Executive is employed by the Company on the respective date of
vesting noted above. The Executive shall also be entitled to receive awards
under any other stock option or equity based incentive compensation plan or
arrangement adopted by the Company during the Employment Period for which senior
executives are eligible. The level of the Executive's future participation in
any such plan or arrangement shall be in the sole discretion of the Board.
2
<PAGE>
(d) OTHER BENEFITS. During the Employment Period, the Executive shall
be entitled to participate in the Company's group health insurance plan, dental
plan, group life insurance plan, long-term disability insurance plan, employee
stock purchase plan, profit sharing plan, SARSEP and all of the other employee
benefit plans, programs and arrangements of the Company in effect during the
Employment Period which are generally available to senior executives of the
Company, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans, programs and arrangements. In addition,
during the Employment Period, the Executive shall be entitled to fringe benefits
and perquisites comparable to those of other senior executives of the Company,
including, but not limited to, three weeks of paid vacation per year.
(e) MOVING EXPENSES. The Company shall pay or reimburse the Executive
for the direct and reasonable expenses incurred in connection with relocating
the Executive and his immediate family to Columbia, South Carolina; provided,
however, such moving expenses shall not exceed $20,000.
(f) BUSINESS EXPENSES. During the Employment Period, the Company shall
reimburse the Executive for all documented reasonable business expenses incurred
by the Executive in the performance of his duties under this Agreement, in
accordance with the Company's policies.
(g) VEHICLE ALLOWANCE. The Company shall provide the Executive a
vehicle allowance in the amount of Three Hundred ($300) Dollars per month.
(h) INDEMNIFICATION. During the Employment Period and thereafter, the
Company shall indemnify the Executive to the fullest extent permitted by
applicable law, and the Executive shall be entitled to the protection of
insurance policies the Company may elect to maintain generally for the benefit
of its directors and officers, with respect to all costs, charges and expenses
whatsoever incurred or sustained by the Executive in connection with any action,
suit or proceeding to which he may be made a party by reason of being or having
been a director, officer or employee of the Company or having served any other
enterprise as a director, officer or employee at the request of the Company.
4. TERMINATION OF EMPLOYMENT
---------------------------
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment hereunder for cause. For purposes of this Agreement, the Company
shall have "cause" to terminate the Executive's employment hereunder if such
termination shall be the result of:
(i) willful, material fraud or material dishonesty in connection
with the Executive's performance hereunder that results in harm to the
Company;
3
<PAGE>
(ii) the failure by the Executive to substantially perform his
material duties hereunder that results in harm to the Company, if the
Executive has been provided an opportunity to cure as provided in
Section 4(c) of this Agreement;
(iii) the Executive's material breach of this Agreement, if the
Executive has been provided an opportunity to cure as provided in
Section 4(c) of this Agreement;
(iv) the appropriation of a material business opportunity of the
Company, including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of
the Company;
(v) the material misappropriation of any of the Company's funds
or property; or
(vi) the conviction of, or the entering of a guilty plea or plea
of no contest with respect to, a felony or the equivalent thereof.
(b) TERMINATION FOR GOOD REASON. The Executive shall have the right to
terminate his employment with the Company at any time and for any reason. For
purposes of this Agreement and subject to the Company's opportunity to cure as
provided in Section 4(c) hereof, the Executive shall have "good reason" to
terminate his employment hereunder if such termination shall be the result of:
(i) a material diminution during the Employment Period in the
Executive's duties or responsibilities as set forth in Section 2
hereof;
(ii) a material breach by the Company of the compensation and
benefits provisions set forth in Section 3 hereof;
(iii) a notice of termination by the Executive under Section 4(c)
hereof within twelve months following the occurrence of a Change in
Control (as defined in Section 4(f) hereof); or
(iv) a material breach by the Company of any other term of this
Agreement.
(c) NOTICE OF OPPORTUNITY TO CURE. Notwithstanding the foregoing, it
shall be a condition precedent to the Company's right to terminate the
Executive's employment for "cause" and the Executive's right to terminate his
employment for "good reason" that (1) the party seeking the termination shall
first have given the other party written notice stating with specificity the
reason for the termination ("breach") and (2) if such breach is susceptible of
cure or remedy, a period of 30 days from and after the giving of such notice
shall have elapsed without the breaching party having effectively cured or
remedied such breach during such 30-day period, unless such breach cannot be
cured or remedied within 30 days, in which case the period for remedy or cure
shall be extended for a reasonable time (not to exceed an additional 30 days),
provided the breaching party has made and continues to make a diligent effort to
effect such remedy or cure.
4
<PAGE>
(d) TERMINATION UPON DEATH. Except as provided in this Agreement, the
Employment Period and all benefits and other rights of the Executive under this
Agreement shall be terminated by the death of the Executive. The Executive's
estate shall be entitled to receive all compensation, reimbursements and
benefits, including but not limited to life insurance benefits, payable to or
accruable for the benefit of the Executive under this Agreement.
(e) TERMINATION UPON DISABILITY. The Employment Period may be
terminated by the Company if the Executive shall be rendered incapable of
performing his duties to the Company by reason of any medically determined
physical or mental impairment for a period of at least three consecutive months
(a "Disability"). In the event that the Company elects to terminate the
Employment Period due to the Disability of the Executive, the Executive shall
receive all compensation, reimbursements and other benefits payable to, or
accruable for the benefit of, the Executive under this Agreement through the
date of the determination of the Disability and for the shorter of three months
thereafter or the date upon which the Executive first becomes eligible to
receive disability benefits pursuant to the Company's long-term disability
insurance policy as may then be in effect.
(f) DEFINITION OF CHANGE IN CONTROL. A "Change in Control" shall be
deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's capital stock
are converted into cash, securities or other property, other than a
consolidation or merger of the Company in which the holders of the
Company's voting stock immediately prior to the consolidation or
merger shall, upon consummation of the consolidation or merger, own at
least 50% of the voting stock of the surviving corporation, or any
sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company;
or
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall after the date hereof become the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of securities of the Company representing 35%
or more of the voting power of all then outstanding securities of the
Company having the right under ordinary circumstances to vote in an
election of the Board (including, without limitation, any securities
of the Company that any such person has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, which shall be deemed beneficially owned by
such person); or
5
<PAGE>
(iii) individuals who at the date hereof constitute the entire
Board and any new directors whose election by the Board, or whose
nomination for election by the Company's stockholders, shall have been
approved by a vote of at least a majority of the directors then in
office who either were directors at the date hereto or whose election
or nomination for election shall have been so approved (the
"Continuing Directors") shall cease for any reason to constitute a
majority of the members of the Board.
5. CONSEQUENCES OF TERMINATION
-----------------------------
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event of
termination of the Executive's employment hereunder by the Company without
"cause" (other than upon death or Disability) or by the Executive for "good
reason" (each as defined in Section 4 hereof), the Executive shall be entitled
to the following severance pay and benefits:
(i) SEVERANCE PAY - severance payment in the form of continuation
of the Executive's base salary as in effect immediately prior to such
termination for a period of twelve months (the "Severance Period");
(ii) VESTING OF OPTIONS - in the event the Executive has stock
options which were granted as part of the 300,000 grant under Section
3(c) above which have not vested, then 50,000 of such options, or such
lesser amount as has not vested, shall immediately vest; and
(iii) BENEFITS CONTINUATION - continuation for the Severance
Period of coverage under the group health, dental, disability and life
insurance benefit plans or arrangements in which the Executive is
participating at the time of termination; provided, however, that the
Company's obligation to provide -------- ------- such coverages shall
be terminated if the Executive is able to obtain substitute coverage
from another employer at any time during the Severance Period. The
Executive shall be entitled, at the expiration of the Severance
Period, to elect continued medical coverage in accordance with section
4980B of the Internal Revenue Code of 1986, as amended (or any
successor provision thereto).
(b) OTHER TERMINATIONS. In the event of termination of the Executive's
employment hereunder for any reason other than those specified in Section
5(a) hereof, the Executive shall not be entitled to any severance pay or
benefits continuation contemplated by the foregoing, except as may
otherwise be provided under the applicable benefit plans or award
agreements relating to the Executive.
(c) ACCRUED RIGHTS. Notwithstanding any other provision of this
Agreement, in the event of termination of the Executive's employment
hereunder for any reason, the Executive shall be entitled to payment of any
unpaid portion of his base salary through the effective date of
termination, and payment of any accrued but unpaid rights solely in
accordance with the terms of any incentive bonus, stock option or employee
benefit plan or program of the Company.
6
<PAGE>
6. CONFIDENTIALITY
---------------
The Executive agrees that he will not at any time during the Employment
Period or at any time thereafter for any reason, in any fashion, form or manner,
either directly or indirectly, divulge, disclose or communicate to any person,
firm, corporation or other business entity, in any manner whatsoever, any
confidential information or trade secrets concerning the business of the
Company, including, without limiting the generality of the foregoing, the
techniques, methods or systems of its operation or management, any information
regarding its financial matters, or any other material information concerning
the business of the Company, its manner of operation, its plans or other
material data. The provisions of this Section 6 shall not apply to (i)
information that is public knowledge other than as a result of disclosure by the
Executive in breach of this Section 6; (ii) information disseminated by the
Company to third parties in the ordinary course of business; (iii) information
lawfully received by the Executive from a third party who, based upon inquiry by
the Executive, is not bound by a confidential relationship to the Company; or
(iv) information disclosed under a requirement of law or as directed by
applicable legal authority having jurisdiction over the Executive.
The Executive further agrees that he will not remove from the Company's
premises (except to the extent such removal is for purposes of the performance
of the Executive's duties at home or while traveling, or except as otherwise
specifically authorized by the Company) Company property which includes, but is
not limited to, any document, record, notebook, plan, model, component, device,
or computer software or code, whether embodied in a disk or in any other form
(collectively, the "Proprietary Items"). The Executive recognizes that, as
between the Company and the Executive, all of the Proprietary Items, whether or
not developed by the Executive, are the exclusive property of the Company. Upon
termination of this Agreement by either party, or upon the request of the
Company during the Employment Period, the Executive will return to the Company
all of the Proprietary Items in the Executive's possession or subject to the
Executive's control, and the Executive shall not retain any copies, abstracts,
sketches, or other physical embodiments of any of the Proprietary Items.
7. INVENTIONS
----------
The Executive is hereby retained in a capacity such that the Executive's
responsibilities may include the making of technical and managerial
contributions of value to the Company. The Executive hereby assigns to the
Company all right, title and interest in such contributions and inventions made
or conceived by the Executive alone or jointly with others during the Employment
Period which relate to the business of the Company. This assignment shall
include (a) the right to file and prosecute patent applications on such
inventions in any and all countries, (b) the patent applications filed and
patents issuing thereon, and (c) the right to obtain copyright, trademark or
trade name protection for any such work product. The Executive shall promptly
and fully disclose all such contributions and inventions to the Company and
assist the Company in obtaining and protecting the rights therein (including
patents thereon) in any and all countries; provided, however, that said
-------- -------
contributions and inventions will be the property of Company, whether or not
patented or registered for copyright, trademark or trade name protection, as the
case may be. Inventions conceived by the Executive which are not related to the
business of the Company will remain the property of the Executive.
7
<PAGE>
8. NON-COMPETITION
---------------
The Executive agrees that he shall not, during the Employment Period and/or
Severance Period and during the "Restricted Period," without the approval of the
Board, directly or indirectly, alone or as a partner, joint venturer, officer,
director, employee, consultant, agent, independent contractor or stockholder
(other than as provided below) of any company or business, engage in any
"Competitive Business" within a fifty mile radius of any locality in which the
Company or any of its subsidiaries or affiliates then operates. For purposes of
the foregoing, the term "Restricted Period" shall mean: (i) six months after
the Employment Period or, if applicable, six months after the Severance Period,
whichever is longer, with respect to any "Competitive Business" outside of South
Carolina; and (ii) two years after the Employment Period or, if applicable, two
years after the Severance Period, whichever is longer, with respect to any
"Competitive Business" within South Carolina. For purposes of the foregoing,
the term "Competitive Business" shall mean any business involved in the
ownership, operation or management of a bingo or video gaming business or such
other business as the Company may then be engaged in. Notwithstanding the
foregoing, the Executive shall not be prohibited, during the non-competition
period applicable above, from acting as a passive investor where he owns not
more than 2% of the issued and outstanding capital stock of any publicly-held
company. During the period that the above non-competition restriction applies,
the Executive shall not, without the written consent of the Company, solicit any
employee of the Company or any employee of a subsidiary or affiliate of the
Company to terminate his or her employment. The period of time applicable to
any covenant in this Section 8 will be extended by the duration of any violation
by the Executive of such covenant.
If any covenant in this Section 8 is held to be unreasonable, arbitrary, or
against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
9. BREACH OF RESTRICTIVE COVENANTS
----------------------------------
The parties agree that a breach or violation of Section 6, 7 or 8 hereof
will result in immediate and irreparable injury and harm to the innocent party,
who shall have, in addition to any and all remedies of law and other
consequences under this Agreement, the right to an injunction, specific
performance or other equitable relief to prevent the violation of the obligation
hereunder.
8
<PAGE>
10. NOTICE
------
For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Company, to:
American Bingo & Gaming Corp.
Attn: George M. Harrison, Jr.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
(b) If to the Executive, to:
Andre Marc Hilliou
Route 2, Box 314
Fincastle, VA 24090
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
11. ARBITRATION; LEGAL FEES
-----------------------
Except as provided in Section 9 hereof, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in South Carolina in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall
reimburse the Executive for all reasonable legal fees and costs and other fees
and expenses which the Executive may incur in respect of any dispute or
controversy arising against the Company under or in connection with this
Agreement; provided, however, that the Company shall only reimburse the
-------- -------
Executive for such fees, costs and expenses if the Executive prevails in any
such action.
12. WAIVER OF BREACH
-----------------
Any waiver of any breach of the Agreement shall not be construed to be a
continuing waiver or consent to any subsequent breach on the part either of the
Executive or of the Company.
13. NON-ASSIGNMENT; SUCCESSORS
--------------------------
Neither party hereto may assign his or its rights or delegate his or its
duties under this Agreement without the prior written consent of the other
party; provided, however, that (i) this Agreement shall inure to the benefit of
-------- -------
and be binding upon the successors and assigns of the Company upon any sale of
all or substantially all of the Company's assets, or upon any merger,
consolidation or reorganization of the Company with or into any other
corporation, all as though such successors and assigns of the Company and their
respective successors and assigns were the Company; and (ii) this Agreement
shall inure to the benefit of and be binding upon the heirs, assigns or
designees of the Executive to the extent of any payments due to them hereunder.
As used in this Agreement, the term "Company" shall be deemed to refer to any
such successor or assign of the Company referred to in the preceding sentence.
9
<PAGE>
14. WITHHOLDING OF TAXES
--------------------
All payments required to be made by the Company to the Executive under this
Agreement shall be subject to the withholding of such amounts, if any, relating
to tax and other payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
15. SEVERABILITY
------------
To the extent any provision of this Agreement or portion thereof shall be
invalid or unenforceable, it shall be considered deleted therefrom and the
remainder of such provision and of this agreement shall be unaffected and shall
continue in full force and effect.
16. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
17. GOVERNING LAW
-------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of South Carolina without regard to the
conflicts of law principles thereof.
18. ENTIRE AGREEMENT
----------------
This Agreement constitutes the entire agreement by the Company and the
Executive with respect to the subject matter hereof and supersedes any and all
prior agreements or understandings between the Executive and the Company with
respect to the subject matter hereof, whether written or oral. This Agreement
may be amended or modified only by written instrument executed by the Executive
and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
THE EXECUTIVE AMERICAN BINGO & GAMING CORP.
/s/ Andre Marc Hilliou /s/ George M. Harrison, Jr.
- ------------------------- -------------------------------
Andre Marc Hilliou By: George M. Harrison, Jr.
Its: Chief Executive Officer
10
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is executed as of this 19th
----
day of June, 1998 (the "Effective Date"), by and between AMERICAN BINGO & GAMING
CORP., a Delaware corporation (the "Company"), and RICHARD M. KELLEY (the
"Executive").
WHEREAS, the parties wish to enter into an employment agreement to employ
the Executive as its Vice President and Chief Financial Officer and to set forth
certain additional agreements between the Executive and the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. TERM
----
The Company will employ the Executive, and the Executive will serve the
Company, under the terms of this Agreement, for an initial term of two years
commencing on June 29, 1998 (the "Employment Date"). The terms of this
Agreement may be extended for one or more additional twelve-month periods
provided the Company and the Executive agree in writing to such an extension no
later than thirty days prior to the expiration of the term of this Agreement.
Notwithstanding the foregoing, the Executive's employment hereunder may be
earlier terminated as provided in Section 4 hereof. The term of this Agreement,
as in effect from time to time in accordance with the foregoing, shall be
referred to herein as the "Term." The period of time between the Employment
Date and the termination of the Executive's employment hereunder shall be
referred to herein as the "Employment Period."
2. EMPLOYMENT
----------
(a) POSITIONS AND REPORTING. The Company hereby employs the Executive
for the Employment Period as its Vice President and Chief Financial Officer on
the terms and conditions set forth in this Agreement.
(b) AUTHORITY AND DUTIES. The Executive shall exercise such authority,
perform such executive duties and functions and discharge such responsibilities
as the President of the Company may from time to time determine, consistent with
the Executive's position and the By-Laws of the Company. Without limiting the
generality of the foregoing, the Executive shall report directly and be
responsible to the President of the Company. During the Employment Period, the
Executive shall devote his full business time, skill and efforts to the business
of the Company. Notwithstanding the foregoing, the Executive may (i) make and
manage passive personal business investments of his choice (in the case of
publicly held corporations, not to exceed 2% of the outstanding voting stock)
and serve in any capacity with any civic, educational or charitable
organization, or any trade association, without seeking or obtaining approval
from the President of the Company, provided such activities and service do not
materially interfere or conflict with the performance of his duties hereunder,
and (ii) with the approval of the President, serve on the boards of directors of
other corporations.
(c) PRIOR EMPLOYMENT. The Executive represents and warrants that he
has no individual employment agreement or non-competition agreement with his
current or any prior employer or any other agreement, contract, judgment, decree
or limitation which would prohibit, limit or otherwise restrict the employment
of the Executive by the Company pursuant to the terms of this Agreement.
3. COMPENSATION AND BENEFITS
---------------------------
(a) SALARY. During the Employment Period, the Company shall pay to the
Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of One Hundred Forty Thousand
($140,000) Dollars per annum, payable in arrears not less frequently than
monthly in accordance with the normal payroll practices of the Company. Such
base salary shall be subject to review each year for a possible increase, but
shall in no event be decreased from its then-existing level during the
Employment Period. The Executive may also be requested to serve as a director or
officer of various subsidiaries and affiliates of the Company and he hereby
agrees to fulfill his duties as such an officer and a director of such entities
without additional compensation.
(b) ANNUAL BONUS. During the Employment Period, the Executive shall
have the opportunity to earn an annual discretionary bonus of up to Fifty
Thousand ($50,000) Dollars per annum. The Executive and the Company acknowledge
that an incentive program which will serve as the basis for determining the
Executive's annual bonus has not yet been established and hereby agree to
establish such program as soon as possible following the Employment Date. The
Executive acknowledges that this annual discretionary bonus shall be terminated
upon the establishment and adoption of an annual incentive program by the
Company which may be similar or greater in value. Until such incentive program
is established, the Executive's bonus opportunity shall be discretionary and
shall be comparable to or greater than awards granted to other executive
officers of the Company.
(c) EQUITY PARTICIPATION. The Executive shall be entitled to receive
awards under any stock option or equity based incentive compensation plan or
arrangement adopted by the Company for which senior executives are eligible. The
level of the Executive's future participation in any such plan or arrangement
shall be determined by the Board of Directors and shall be comparable to other
executive officers of the Company.
(d) OTHER BENEFITS. During the Employment Period, the Executive shall
be entitled to participate in the Company's group health insurance plan, dental
plan, group life insurance plan, long-term disability insurance plan, employee
stock purchase plan, profit sharing plan, SARSEP and all of the other employee
benefit plans, programs and arrangements of the Company in effect during the
Employment Period which are generally available to senior executives of the
Company, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans, programs and arrangements. In addition,
during the Employment Period, the Executive shall be entitled to fringe benefits
and perquisites comparable to those of other senior executives of the Company,
including, but not limited to, three weeks of paid vacation per year and
reasonable professional membership license fees and expenses.
2
<PAGE>
(e) MOVING EXPENSES. The Company shall pay or reimburse the Executive
for the direct and reasonable expenses incurred in connection with relocating
the Executive and his immediate family to Columbia, South Carolina; provided,
however, such moving expenses shall not exceed $20,000. In addition, during the
transition period, the Company shall pay up to six months of full furnished
housing expenses for the Executive and shall pay for the Executive's reasonable
temporary ground transportation expenses or, at the determination of the
Company's President, shall pay for the Executive's vehicles to be transported to
South Carolina. It is the intent of this Section 3(e) that the Executive shall
not incur any out-of-pocket expenses related to his relocation to Columbia,
South Carolina.
(f) BUSINESS EXPENSES. During the Employment Period, the Company shall
pay directly or reimburse the Executive for all documented reasonable business
expenses incurred by the Executive in the performance of his duties under this
Agreement, in accordance with the Company's policies.
(g) VEHICLE ALLOWANCE. The Company shall provide the Executive a
vehicle allowance in the amount of Three Hundred ($300) Dollars per month.
(h) INDEMNIFICATION. During the Employment Period and thereafter, the
Company shall indemnify the Executive to the fullest extent permitted by
applicable law, and the Executive shall be entitled to the protection of
insurance policies the Company may elect to maintain generally for the benefit
of its officers, with respect to all costs, charges and expenses whatsoever
incurred or sustained by the Executive in connection with any action, suit or
proceeding to which he may be made a party by reason of being or having been an
officer or employee of the Company or having served any other enterprise as a
director, officer or employee at the request of the Company. The Company shall
maintain director and officer insurance at reasonable and customary levels.
4. TERMINATION OF EMPLOYMENT
---------------------------
(a) TERMINATION FOR CAUSE. The Company may immediately terminate the
Executive's employment hereunder for "cause" upon written notice to the
Executive. For purposes of this Agreement, the Company shall have "cause" to
terminate the Executive's employment hereunder if such termination shall be the
result of:
(i) willful, material fraud or material dishonesty in connection
with the Executive's performance hereunder that results in harm to the
Company;
(ii) the failure by the Executive to substantially perform his
material duties hereunder in good faith that results in material harm
to the Company, if the Executive has been provided an opportunity to
cure as provided in Section 4(c) of this Agreement;
(iii) the Executive's material breach of this Agreement, if the
Executive has been provided an opportunity to cure as provided in
Section 4(c) of this Agreement;
3
<PAGE>
(iv) the failure by the Executive to diligently pursue in good
faith and obtain any operating or other licenses required to be
obtained by the Executive individually for the execution of his duties
and responsibilities on behalf of the Company; provided, however, the
Executive shall be entitled to the severance pay and benefits set
forth under Section 5(a) hereof if the Executive's inability to obtain
any operating or other license is due to some factor outside of the
Executive's control;
(v) the appropriation of a material business opportunity of the
Company, including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of
the Company;
(vi) the material misappropriation of any of the Company's funds
or property; or
(vii) the conviction of, or the entering of a guilty plea or plea
of no contest with respect to, a felony or the equivalent thereof.
(b) TERMINATION FOR GOOD REASON. The Executive shall have the right to
terminate his employment with the Company at any time for "good reason" upon
thirty days prior written notice to the Company. For purposes of this Agreement
and subject to the Company's opportunity to cure as provided in Section 4(c)
hereof, the Executive shall have "good reason" to terminate his employment
hereunder if such termination shall be the result of:
(i) a significant diminution during the Employment Period in the
Executive's duties or responsibilities as set forth in Section 2
hereof;
(ii) a significant breach by the Company of the compensation and
benefits provisions set forth in Section 3 hereof;
(iii) a notice of termination by the Executive under Section 4(i)
hereof within twelve months following the occurrence of a Change in
Control (as defined in Section 4(h) hereof);
(iv) a significant breach by the Company of any other term of
this Agreement; or
(v) the failure of the Company and the Executive to agree to a
written extension of this Agreement at least thirty days prior to the
expiration of the Term of this Agreement; provided, however, the
Executive's notice of termination under this provision must be
received by the Company prior to the expiration of the Term of this
Agreement.
(c) NOTICE OF OPPORTUNITY TO CURE. As noted in Section 4(a) and
Section 4(b), in certain situations it shall be a condition precedent to the
Company's right to terminate the Executive's employment for "cause" and the
Executive's right to terminate his employment for "good reason" that (1) the
party seeking the termination shall first have given the other party written
notice stating with specificity the reason for the termination ("breach") and
(2) if such breach is susceptible of cure or remedy, a period of 30 days from
and after the giving of such notice shall have elapsed without the breaching
party having effectively cured or remedied such breach during such 30-day
period, unless such breach cannot be cured or remedied within 30 days, in which
case the period for remedy or cure shall be extended for a reasonable time (not
to exceed an additional 30 days), provided the breaching party has made and
continues to make a diligent effort to effect such remedy or cure.
4
<PAGE>
(d) TERMINATION UPON DEATH. Except as provided in this Agreement, the
Employment Period and all benefits and other rights of the Executive under this
Agreement shall be terminated by the death of the Executive. The Executive's
estate shall be entitled to receive all compensation, reimbursements and
benefits, including but not limited to life insurance benefits, payable to or
accruable for the benefit of the Executive under this Agreement.
(e) TERMINATION UPON DISABILITY. The Employment Period may be
terminated by the Company if the Executive shall be rendered incapable of
performing his duties to the Company by reason of any medically determined
physical or mental impairment for a period of at least three consecutive months
(a "Disability"). In the event that the Company elects to terminate the
Employment Period due to the Disability of the Executive, the Executive shall
receive all compensation, reimbursements and other benefits payable to, or
accruable for the benefit of, the Executive under this Agreement through the
date of the determination of the Disability and to the date upon which the
Executive first becomes eligible to receive disability benefits pursuant to the
Company's long-term disability insurance policy as may then be in effect.
(f) TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment hereunder without "cause" at any time upon thirty days
prior written notice to the Executive; provided, however, that in the event of
such termination the Executive shall be entitled to the severance pay and
benefits set forth under Section 5(a) hereof.
(g) TERMINATION WITHOUT GOOD REASON. The Executive may terminate his
employment with the Company at any time without "good reason" upon thirty days
prior written notice to the Company; provided, however, the Executive's
effective date of termination shall be no later than sixty days after the date
of notice to the Company unless otherwise agreed by the Company. In the event of
such a voluntary termination by the Executive, the Executive shall receive no
further payments or benefits due under this Agreement from and after the
effective date of termination. A voluntary termination under this Section 4(g)
shall not be deemed a breach of this Agreement.
(h) DEFINITION OF CHANGE IN CONTROL. A "Change in Control" shall be
deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's capital stock
are converted into cash, securities or other property, other than a
consolidation or merger of the Company in which the holders of the
Company's voting stock immediately prior to the consolidation or
merger shall, upon consummation of the consolidation or merger, own at
least 50% of the voting stock of the surviving corporation, or any
sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company;
or
5
<PAGE>
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), shall after the date hereof become the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of securities of the Company representing 35%
or more of the voting power of all then outstanding securities of the
Company having the right under ordinary circumstances to vote in an
election of the Board (including, without limitation, any securities
of the Company that any such person has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise, which shall be deemed beneficially owned by
such person); or
(iii) individuals who at the date hereof constitute the entire
Board and any new directors whose election by the Board, or whose
nomination for election by the Company's stockholders, shall have been
approved by a vote of at least a majority of the directors then in
office who either were directors at the date hereto or whose election
or nomination for election shall have been so approved (the
"Continuing Directors") shall cease for any reason to constitute a
majority of the members of the Board.
(i) NOTICE OF TERMINATION. Any termination of the Executive's
employment hereunder by either the Company or the Executive shall be
communicated to the other party by a "Notice of Termination" to be given in
accordance with Section 10 hereof. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) briefly summarizes the facts and
circumstances deemed to provide a basis for the termination of the Executive's
employment and the applicable provision hereof, and (iii) if the effective date
of termination is other than the date of receipt of such notice, specifies the
effective date of termination.
5. CONSEQUENCES OF TERMINATION
-----------------------------
(a) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event of
termination of the Executive's employment hereunder by the Company without
"cause" pursuant to Section 4(f) hereof, by the Company pursuant to Section
4(a)(iv) due to some factor outside of the Executive's control which caused the
Executive to be unable to obtain any operating or other license, or by the
Executive for "good reason" pursuant to Section 4(b) hereof, the Executive shall
be entitled to the following severance pay and benefits:
(i) SEVERANCE PAY - severance payment in the form of a lump sum
single payment comprised of the Executive's base salary as in effect
immediately prior to such termination for the greater of nine months
or the remaining Term of this Agreement (the "Severance Period"), and
any accrued, earned or unpaid benefits applicable through the
Severance Period, with all benefits, including bonuses, to be earned
through the Severance Period; and
6
<PAGE>
(ii) BENEFITS CONTINUATION - continuation for the Severance
Period of coverage under the group health, dental, disability and life
insurance benefit plans or arrangements in which the Executive is
participating at the time of termination; provided, however, that the
-------- -------
Company's obligation to provide such coverages shall be terminated if
the Executive is able to obtain substitute effective coverage from
another employer at any time during the Severance Period. The
Executive shall be entitled, at the expiration of the Severance
Period, to elect continued medical coverage in accordance with section
4980B of the Internal Revenue Code of 1986, as amended (or any
successor provision thereto).
(b) OTHER TERMINATIONS. In the event of termination of the Executive's
employment under Sections 4(a) (other than Section 4(a)(iv) as noted), 4(d),
4(e) or 4(g) for any reason other than those specified in Section 5(a) hereof,
the Executive shall not be entitled to any severance pay or benefits
continuation contemplated by the foregoing, except as may otherwise be provided
under the applicable benefit plans or award agreements relating to the
Executive.
(c) ACCRUED RIGHTS. Notwithstanding any other provision of this
Agreement, in the event of termination of the Executive's employment hereunder
for any reason, the Executive shall be entitled to payment of any unpaid portion
of his base salary through the effective date of termination, and payment of any
accrued but unpaid rights solely in accordance with the terms of any incentive
bonus, stock option or employee benefit plan or program of the Company.
6. CONFIDENTIALITY
---------------
The Executive agrees that he will not at any time during the Employment
Period or at any time thereafter for any reason, in any fashion, form or manner,
either directly or indirectly, divulge, disclose or communicate to any person,
firm, corporation or other business entity, in any manner whatsoever, any
confidential information or trade secrets concerning the business of the
Company, including, without limiting the generality of the foregoing, the
techniques, methods or systems of its operation or management, any information
regarding its financial matters, or any other material information concerning
the business of the Company, its manner of operation, its plans or other
material data. The provisions of this Section 6 shall not apply to (i)
information that is public knowledge other than as a result of disclosure by the
Executive in breach of this Section 6; (ii) information disseminated by the
Company to third parties in the ordinary course of business; (iii) information
lawfully received by the Executive from a third party who, based upon inquiry by
the Executive, is not bound by a confidential relationship to the Company; or
(iv) information disclosed under a requirement of law or as directed by
applicable legal authority having jurisdiction over the Executive.
The Executive further agrees that he will not remove from the Company's
premises (except to the extent such removal is for purposes of the performance
of the Executive's duties at home or while traveling, or except as otherwise
specifically authorized by the Company) Company property which includes, but is
not limited to, any document, record, notebook, plan, model, component, device,
or computer software or code, whether embodied in a disk or in any other form
(collectively, the "Proprietary Items"). The Executive recognizes that, as
between the Company and the Executive, all of the Proprietary Items, whether or
not developed by the Executive, are the exclusive property of the Company. Upon
termination of this Agreement by either party, or upon the request of the
Company during the Employment Period, the Executive will return to the Company
all of the Proprietary Items in the Executive's possession or subject to the
Executive's control, and the Executive shall not retain any copies, abstracts,
sketches, or other physical embodiments of any of the Proprietary Items.
7
<PAGE>
7. INVENTIONS
----------
The Executive is hereby retained in a capacity such that the Executive's
responsibilities may include the making of technical and managerial
contributions of value to the Company. The Executive hereby assigns to the
Company all right, title and interest in such contributions and inventions made
or conceived by the Executive alone or jointly with others during the Employment
Period which directly relate to the business of the Company. This assignment
shall include (a) the right to file and prosecute patent applications on such
inventions in any and all countries, (b) the patent applications filed and
patents issuing thereon, and (c) the right to obtain copyright, trademark or
trade name protection for any such work product. The Executive shall promptly
and fully disclose all such contributions and inventions to the Company and
assist the Company in obtaining and protecting the rights therein (including
patents thereon) in any and all countries; provided, however, that said
-------- -------
contributions and inventions will be the property of Company, whether or not
patented or registered for copyright, trademark or trade name protection, as the
case may be. Inventions conceived by the Executive which are not related to the
business of the Company will remain the property of the Executive.
8. NON-COMPETITION
---------------
The Executive agrees that he shall not, during the Employment Period and/or
Severance Period and during the "Restricted Period," without the approval of the
Board, directly or indirectly, alone or as a partner, joint venturer, officer,
director, employee, consultant, agent, independent contractor or stockholder
(other than as provided below) of any company or business, engage in any
"Competitive Business" within a fifty mile radius of any locality in which the
Company or any of its subsidiaries or affiliates then operates; provided,
however, this non-competition provision shall not apply (i) if the Executive's
employment is terminated b the Executive pursuant to Section 4(b)(i), (ii),
(iii) or (iv) hereof, or (ii) if the Executive's employment is terminated by the
Company pursuant to Section 4(f) hereof, or (iii) if the Company and the
Executive mutually agree to terminate the Executive's employment. For purposes
of the foregoing, the term "Restricted Period" shall mean: (i) six months after
the Employment Period or, if applicable, six months after the Severance Period,
whichever is longer, with respect to any "Competitive Business" outside of South
Carolina; and (ii) two years after the Employment Period or, if applicable, two
years after the Severance Period, whichever is longer, with respect to any
"Competitive Business" within South Carolina. For purposes of the foregoing,
the term "Competitive Business" shall mean any business involved in the
ownership, operation or management of a bingo or video gaming business or such
other business as the Company may then be engaged in as a primary source of
business. Notwithstanding the foregoing, the Executive shall not be prohibited,
during the non-competition period applicable above, from acting as a passive
investor where he owns not more than 2% of the issued and outstanding capital
stock of any publicly-held company. During the period that the above
non-competition restriction applies, the Executive shall not, without the
written consent of the Company, solicit any employee of the Company or any
employee of a subsidiary or affiliate of the Company to terminate his or her
employment. The period of time applicable to any covenant in this Section 8
will be extended by the duration of any violation by the Executive of such
covenant.
8
<PAGE>
If any covenant in this Section 8 is held to be unreasonable, arbitrary, or
against public policy, such covenant will be considered to be divisible with
respect to scope, time, and geographic area, and such lesser scope, time or
geographic area, or all of them, as a court of competent jurisdiction may
determine to be reasonable, not arbitrary, and not against public policy, will
be effective, binding, and enforceable against the Executive.
9. BREACH OF RESTRICTIVE COVENANTS
----------------------------------
The parties agree that a breach or violation of Section 6, 7 or 8 hereof
will result in immediate and irreparable injury and harm to the innocent party,
who shall have, in addition to any and all remedies of law and other
consequences under this Agreement, the right to an injunction, specific
performance or other equitable relief to prevent the violation of the obligation
hereunder.
10. NOTICE
------
For purposes of this Agreement, notices, demands and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or (unless otherwise specified)
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Company, to:
American Bingo & Gaming Corp.
Attn: Andre M. Hilliou
1440 Charleston Highway
West Columbia, SC 29169
(b) If to the Executive, to:
Richard M. Kelley
14612 Addison Street
Sherman Oaks, CA 91403
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
9
<PAGE>
11. ARBITRATION; LEGAL FEES
-------------------------
Except as provided in Section 9 hereof, any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in South Carolina in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company shall
reimburse the Executive for all reasonable legal fees and costs and other fees
and expenses which the Executive may incur in respect of any dispute or
controversy arising against the Company under or in connection with this
Agreement; provided, however, that the Company shall only reimburse the
-------- -------
Executive for such fees, costs and expenses if the Executive prevails in any
such action.
12. WAIVER OF BREACH
------------------
Any waiver of any breach of the Agreement shall not be construed to be a
continuing waiver or consent to any subsequent breach on the part either of the
Executive or of the Company.
13. NON-ASSIGNMENT; SUCCESSORS
---------------------------
Neither party hereto may assign his or its rights or delegate his or its
duties under this Agreement without the prior written consent of the other
party; provided, however, that (i) this Agreement shall inure to the benefit of
-------- -------
and be binding upon the successors and assigns of the Company upon any sale of
all or substantially all of the Company's assets, or upon any merger,
consolidation or reorganization of the Company with or into any other
corporation, all as though such successors and assigns of the Company and their
respective successors and assigns were the Company; and (ii) this Agreement
shall inure to the benefit of and be binding upon the heirs, assigns or
designees of the Executive to the extent of any payments due to them hereunder.
As used in this Agreement, the term "Company" shall be deemed to refer to any
such successor or assign of the Company referred to in the preceding sentence.
14. WITHHOLDING OF TAXES
----------------------
All payments required to be made by the Company to the Executive under this
Agreement shall be subject to the withholding of such amounts, if any, relating
to tax and other payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
15. SEVERABILITY
------------
To the extent any provision of this Agreement or portion thereof shall be
invalid or unenforceable, it shall be considered deleted therefrom and the
remainder of such provision and of this agreement shall be unaffected and shall
continue in full force and effect.
16. COUNTERPARTS
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
10
<PAGE>
17. GOVERNING LAW
--------------
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of South Carolina without regard to the
conflicts of law principles thereof.
18. ENTIRE AGREEMENT
-----------------
This Agreement constitutes the entire agreement by the Company and the
Executive with respect to the subject matter hereof and supersedes any and all
prior agreements or understandings between the Executive and the Company with
respect to the subject matter hereof, whether written or oral. This Agreement
may be amended or modified only by written instrument executed by the Executive
and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
THE EXECUTIVE AMERICAN BINGO & GAMING CORP.
/s/ Richard M. Kelley /s/ Andre M. Hilliou
- ------------------------ ------------------------
Richard M. Kelley By: Andre M. Hilliou
Its: President and Chief Executive Officer
11
<PAGE>
SEVERANCE AGREEMENT
-------------------
This Severance Agreement ("this Agreement") is between Courtland L. Logue,
Jr. ("Employee") and American Bingo & Gaming Corp. ("the Employer").
WHEREAS, Employer and Employee entered into that certain Employment
Agreement, dated September 10, 1996 ("the Employment Agreement");
WHEREAS, Employer and Employee desire to terminate the employment
relationship and the Employment Agreement effective on the date of the execution
of this Agreement by both parties ("the Effective Date") on the terms provided
herein;
WHEREAS, Employer and Employee desire to modify certain terms of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the terms hereof and other valuable
consideration, the sufficiency of which is hereby acknowledged by the parties,
the parties hereby agree as follows:
1. Termination of Employment. The Employment Agreement and the employment
-------------------------
of Employee with Employer, is terminated as of February 6, 1998 ("the Date of
Termination"). Effective the Date of Termination, the Employee ceases to be
Chief Executive Officer, a director, and an officer of the Employer.
2. Compensation. Employer shall pay Employee his base salary earned through
------------
the Date of Termination. Employee acknowledges that he will not receive any
bonus or other incentive compensation, nor will he receive any payment in lieu
of fringe benefits, including vacation benefits. Employee shall be given title
to the Suburban currently provided to him by Employer as his company car, free
of all encumbrances, and Employer shall transfer to Employee all transferable
warranties. Employee shall be provided all COBRA benefits due to him pursuant to
such act.
3. Options. Employer and Employee agree that the Employment Agreement is
-------
amended, effective the Date of Termination, by deleting the last sentence of the
first paragraph of Section 3 and inserting in its place and stead the following:
"Said options shall vest at the rate of 9,500 shares per month until February 6,
1998, at which time said options shall become fully vested." Employer also
agrees that Employees other option to purchase 30,000 shares, granted pursuant
to the Employer's 1996 Employee Stock Option Plan, shall fully vest on February
6, 1998. The piggy-back rights set forth in Section 3 of the Employment
Agreement shall be extended to December 31, 2002 and shall also be extended to
the additional 30,000 shares. The shares covered by these options have already
been registered by Employer. Other than the irrevocable proxy granted pursuant
to Section 11 hereof, the shares issued upon exercise of stock options shall be
free of all legends and encumbrances. The Employer and its counsel shall
accommodate Employee's sales by providing "nonaffiliate" letters and other
appropriate documentation upon request. The vesting of these options is in
consideration of the release of all claims, disputes and causes of action which
Employee, Employee's heirs, executors, administrators or assigns have or may
have against Employer (and all of its related entities), as specifically set
forth in Section 6 hereof, as well as the "stand still" agreement set forth in
Section 10 hereof.
2
<PAGE>
4. Acknowledgement. Employee hereby acknowledges the restrictions of
---------------
Article 8 of the Employment Agreement and acknowledges that said Article 8
remains in full force and effect and is supported by independent valuable
consideration and contains reasonable limitations as to the time, geographical
area, and scope of activity for which he is to be restrained and acknowledges
that the limitations of said Article are necessary to protect the goodwill and
other business interests of Employer. Employer acknowledges that the
prohibitions in Section 8.1 of the Employment Agreement shall not apply to
information that is customarily known within the bingo and gaming industry or
that is now or hereafter available in the public domain through no breach of
confidentiality on the part of Employee.
5. Correction. Employer and Employee agree that the two references to "this
----------
Article 8.3 "in Section 8.3 of the Employment Agreement were intend to refer to
"this Article 8" and that the two references to "this Article 8.4" in Section
8.4 of the Employment Agreement were intended to refer to "this Article 8".
Employer and Employee agree to hereby amend the Employment Agreement to correct
these errors.
6. Release of Employer. In consideration of receipt by Employee of the
--------------------
additional vested option pursuant to Section 3 hereof, Employee (on behalf of
himself, his heirs, estate, successors, assigns, agents, representatives,
attorneys, and any other person or entity claimingby, through, under, or because
of him) unconditionally releases, acquits, forever discharges, and covenants not
to sue, without limitation, the Employer and its representatives, affiliates,
agents, attorneys, insurers, predecessors, successors, assigns, officers,
directors, shareholders, employees, parents, subsidiaries, divisions and any
person or entity claiming by, through or under any of them (collectively the
"Releasees"), from and on each and every right, claim, complaint, demand, cause
of action, proceedings, and damages of whatsoever kind or nature which Employee
now has, has had, or might have at any time hereafter relating to or arising out
of any act, transaction, or occurrence, arising on or before the execution of
this Agreement, including without limitation each and every claim for any type
of relief or remedy whatsoever based upon any theory whatsoever, whether known
or unknown at this time, and specifically including without limitation claims
and causes of action relating to or arising out of Employee's employment with
the Employer, such as Employee's employment, termination of employment, or the
terms and conditions of his employment, including any claims under the Fair
Labor Standards Act, the Civil Rights Act of 1964 and 1991, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the Texas
Unemployment Compensation Act, the Texas Payday Act, the Texas Commission on
Human Rights Act, the Texas Workers Compensation Act, and any other federal or
state statute or regulation, and including any common law, contractual or tort
claims or causes of action.
It is the intention of the parties in executing this Agreement, and in
receiving the full consideration called for herein, that this Agreement shall be
effective as a full and final accord, satisfaction and general release of each
and every released matter and each Releasee. In connection with this waiver and
relinquishment, Employee acknowledges that he is aware that he and/or his
attorneys may hereafter discover claims or facts in addition to or different
from those which they, or the other parties hereto, now know or believe to exist
with respect to the subject matter of this Agreement, but that it is his
intention hereby to fully, finally and forever settle and release all of the
Releasees and the released matters, disputes, and differences, known or unknown,
suspected and unsuspected, which do now exist, may exist, or heretofore have
existed between Employee and each Releasee.
2
<PAGE>
7. Release of Employee. Employer unconditionally releases, acquits, forever
-------------------
discharges, and covenants not to sue, the Employee from and on each and every
right, claim, complaint, demand, cause of action, proceedings, and damages of
whatsoever kind or nature which Employee now has, has had, or might have at any
time hereafter relating to or arising out of any act, transaction, or
occurrence, arising on or before the execution of this Agreement, including each
and every claim for any type of relief or remedy whatsoever based upon any
theory whatsoever, whether known or unknown at this time. Employer acknowledges
that it is not aware of any circumstance at this time giving rise to any claim,
complaint, demand, cause of action, proceedings, or damages against Employee.
8. Exceptions to Releases. Notwithstanding the provisions of Sections 6 and
----------------------
7 hereof, however, the foregoing releases do not extend to, and specifically
exclude:
a. any claims based on conduct, acts, omissions or events occurring
after the Effective Date;
b. the obligations undertaken and covenants made in this Agreement;
c. the obligations contained in the stock option agreements relating
to options referred to in Section 3 hereof;
d. subject to Section 9 hereof, claims against Employee asserted by
Employer at any time for contribution or indemnity on account of third party
claims asserted against Employer to the extent attributable to the conduct of
Employee;
e. claims against Employer or its affiliates asserted by Employee at
any time for contribution or indemnity on account of third party claims asserted
against Employee to the extent attributable to the conduct of Employer or its
affiliates, except to the extent attributable to the conduct of Employee; and
f. claims made by Employee for indemnification with respect to claims
relating to his own conduct to the extent allowed under Section 9 hereof or
under applicable state corporate law.
3
<PAGE>
9. Indemnification. Employer acknowledges its obligation to provide the
---------------
indemnification set forth in Section II of the Employment Agreement and shall
continue after the Effective Date to provide such indemnification for Employee's
actions prior the Date of Termination. Employer shall continue to provide
Employee with the same indemnification and directors' and officers' liability
insurance coverage provided to Employer's then serving officers and directors,
which indemnification and insurance shall relate to the period during which
Employee served as an officer and director.
10. Stand Still Agreement. In consideration of receipt by Employee of the
----------------------
additional vested option pursuant to Section 3 hereof, Employee covenants and
agrees as follows:
a. Employee shall not, directly or indirectly, acquire or otherwise
become the beneficial owner of any securities of the Employer, except pursuant
to the exercise of the options discussed in Section 3 hereof.
b. Employee shall not, directly or indirectly, (i) solicit proxies
with respect to the equity securities of the Employer under any circumstances or
(ii) become a "participant" in any "election contest" (as such terms are used in
Rule 14A- 11 of Regulation 14A under the Securities Exchange Act of 1934 ("the
1934 Act")) relating to the election of directors of Employer.
c. Employee shall not, directly or indirectly, join a partnership,
limited partnership, syndicate or other "group" (as such term is used in Section
13(d)(1) of the 1934 Act), or otherwise act in concert with any person for the
purpose of acquiring, holding, voting or disposing of securities of the Employer
or rights to acquire such securities or for the purpose of circumventing the
provisions of this Section 10.
d. Employee shall not, directly or indirectly, propose any business
combination with Employer or make or propose a tender or exchange offer or any
other offer for any securities of Employer.
e. Employee shall not agree to be a nominee to the Board of Directors
of the Employer, nor shall he agree to serve as a director of the Employer.
f. Employee acknowledges that for purposes of this Section 10
"indirectly" includes communicating with, advising, facilitating, participating
in, encouraging, soliciting, counseling or otherwise assisting others to take or
attempt to take any of the actions prohibited by this Section 10. Employee and
Employer understand that Employee shall not be in violation of this Section 10
with respect to the actions of others if Employee refuses to assist others with
their actions.
g. The restrictions set forth in this Section 10 shall terminate on
February 6, 2003.
11. Irrevocable Proxy. Employee shall execute an irrevocable proxy, in the
-----------------
form attached hereto, granting to management of Employer the right to vote all
shares of Employer's equity securities owned at any time during the term of such
proxy.
12. Return of Employer's Property. Employee will return to Employer all of
-----------------------------
Employer's property in Employee's possession as of the Effective Date,
including, but not limited to, computers and related equipment, software, files,
and disks, keys, credit cards, access cards, and documents of any kind and all
information of the Employer without regard to the media in which such
information is maintained.
4
<PAGE>
13. Confidentiality. Employee hereby acknowledges, represents and agrees
---------------
that he will keep the fact of this Agreement and all of its terms completely
confidential, and that Employee will not disclose any information concerning
this Agreement to any person, including, but not limited to, any past, present,
or prospective employees of Employer, provided however that Employee may (i)
disclose the fact of the settlement with the Employer represented by this
Agreement, (ii) disclose the restrictions set forth in Section 10 hereof, and
(iii) disclose any information required by law to be disclosed by Employee after
Employee has notified Employer of such requirement and gives Employer the
opportunity to review the information to be disclosed as soon as possible.
14. References. Employer and Employee have agreed on the form of press
----------
release announcing Employee's termination, which form is attached hereto.
Employer, agrees, in accordance with its policy, to provide a neutral reference
giving position and dates of employment only to any prospective employers of
Employee. Neither Employer nor any of its senior management shall make comments
to any third parties that disparage Employee. Employee shall not make any
comments to any third parties that disparage Employer or the officers,
directors, or employees of Employer.
15. Enforcement. In the event of a breach by Employee of Sections 10, 11,
-----------
12, 13, or 14 of this Agreement, Employer shall have, in addition to any other
remedies it may have at law or under this Agreement, the right to a temporary
restraining order, temporary injunction and permanent injunction restraining
Employee from violating or continuing a violation of the terms of such Sections.
Employee agrees that in the event of such breach, the amount of damages would be
difficult or impossible to determine, and agrees that a bond in the amount of
$1,000 would be appropriate in connection with a temporary restraining order or
temporary injunction.
16. No Admission of Liability. This Agreement shall not be construed in any
-------------------------
way as an admission by the Employer of any unlawful acts whatsoever against
Employee or any other person. The Employer specifically disclaims any unlawful
acts or liability to Employee or any other person on the part of itself, its
employees, or its agents.
17. Acknowledgements. Employee represents and acknowledges that in
----------------
executing this Agreement, he does not rely and has not relied upon any
representation or statement made by Employer, or its agents, representatives, or
attorneys with regarding to the subject matter, basis or effect of this
Agreement or otherwise. Employee further represents that he has relied upon
advice of his personal legal counsel regarding the subject matter of this
Agreement.
18. Governing Law. This Agreement is made and entered into in the County of
-------------
Travis, State of Texas, and shall in all respects be interpreted, enforced, and
governed under the laws of The State of Texas. The parties agree that Travis
County, Texas, is the proper venue for any resolution of a dispute arising under
this Agreement and the Employment Agreement. The language of all parts of this
Agreement shall in all cases be construed as a whole according to its fair
meaning, and not strictly for or against any of the parties. The parties further
agree that there will be no presumption that any ambiguity in the Agreement
shall be construed against the drafter of the Agreement.
5
<PAGE>
19. Attorney's Fees. The prevailing party in any dispute arising out of or
---------------
relating to the subject matter of this Agreement shall be entitled to recover
his or its reasonable attorney's fees and expenses, and any costs associated
with any such dispute.
20. Mediation. Subject to the right of either party to seek injunctive
---------
relief in a court in the event the circumstances require urgent resort to such
remedy, the parties will first seek to resolve any disputes through mediation
before a mediator agreed to by their respective counsel prior to proceeding with
litigation. Such mediation shall be held within 30 days following the written
request by either party.
21. Savings Clause. Should any provision of this Agreement be declared to
---------------
be or determined by any court to be illegal or invalid, the validity of the
remaining parts, terms, or provisions shall not be affected thereby and said
illegal or invalid part, term, or provision shall be deemed not to be a part of
this Agreement.
22. Authority to Sign. Each person signing in a representative capacity
-----------------
below hereby represents that he has authority to sign on behalf of the entity or
person from whom he is signing and that he and the represented entity or person
are empowered to enter into and to perform this Agreement.
23. Further Assurances. The parties hereto shall take all actions that may
------------------
be necessary or appropriate to accomplish the terms of this Agreement.
24. Binding on Successors. This Agreement shall bind and inure to the
-----------------------
benefit of the parties, their successors, assigns, heirs, and legal
representatives.
25. Entiretyof Agreement. This Agreement sets forth the entire Agreement
---------------------
between the parties hereto, and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof.
6
<PAGE>
PLEASE READ CAREFULLY. THIS SEVERANCE AGREEMENT INCLUDES A RELEASE BY
EMPLOYEE OF ALL KNOWN AND UNKNOWN CLAIMS ARISING PRIOR TO ITS EXECUTION. YOU
MAY CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT.
/s/ Courtland L. Logue, Jr.
-------------------------------
Employee Signature
Date: 2/8/98
------
AMERICAN BINGO AND GAMING CORP.
By: /s/ Greg Wilson
-----------------
Name: Greg Wilson
------------
Title: CEO
---
Date: 2/6/98
------
<PAGE>
The securities evidenced hereby have not been registered under the Securities
Act of 1933 (the "Act") or any state securities laws and must be held
indefinitely unless they are transferred pursuant to an effective registration
statement under the Act and any applicable state securities laws, or must be
held until the receipt of an opinion of counsel satisfactory to the Company that
registration is not required.
PROMISSORY NOTE
Date: June 4, 1998
Maker: Michael W. Mims
Maker's Mailing Address:
257 Amenity Road
Chapin, SC 29036
Payee: American Bingo & Gaming Corp.
Place for Payment:
1440 Charleston Highway
West Columbia, SC 29169
Principal Amount:
Two Hundred Eighty-Four Thousand Eight Hundred Eighty-Nine And
34/100 Dollars ($284,889.34), consisting of Forty Thousand
Dollars ($40,000) advanced on September 3, 1997, Twenty Thousand
Dollars ($20,000) advanced on October 13, 1997, Twenty-Four
Thousand Nineteen And 32/100 Dollars ($24,019.32) advanced on May
20, 1998, One Hundred Ninety-Seven Thousand Seven Hundred
Sixty-Six And 63/100 Dollars ($197,766.63) advanced on June 4,
1998, and accrued interest through the date hereof on all prior
advances of Three Thousand One Hundred Three And 39/100 Dollars
($3,103.39).
Annual Interest Rate on Unpaid Principal:
Seven Percent (7%), with interest accruing from the date hereof.
Terms of Payment (principal and interest):
All principal and accrued interest shall be payable in full on
May 31, 2001. All payments by Maker on this Promissory Note shall
be applied first towards the accrued interest with any remaining
amount applied towards the unpaid principal balance.
<PAGE>
Security for Payment:
Pursuant to the Security Agreement executed on the date hereof,
One Hundred Thousand (100,000) shares of the common stock of
Payee, owned and held of record by Maker, are pledged by Maker as
security for the payment of this Promissory Note. The certificate
for such shares is attached hereto and shall be held by Payee
until this Promissory Note is paid in full.
Maker promises to pay to the order of Payee at the place for payment and
according to the terms of payment the principal amount plus interest at the
rates stated above. All unpaid amounts shall be due by May 31, 2001. Maker
hereby agrees that at least one-half (1/2) of any net proceeds he receives from
the sale of any stock of Payee shall be paid to Payee as payment of the
principal and accrued interest on this Promissory Note.
If Maker defaults in the payment of this Promissory Note or in the
performance of any obligation in any instrument securing this Promissory Note,
and the default continues for thirty (30) days after Payee gives Maker written
notice of the default, then Payee may declare the unpaid principal balance and
earned interest on this Promissory Note immediately due.
If this Promissory Note or any instrument securing it is given to an
attorney for collection or enforcement, or if suit is brought for collection or
enforcement, or if it is collected or enforced through probate, bankruptcy, or
other judicial proceeding, the Maker shall pay Payee all costs of collection and
enforcement, including reasonable attorney's fees and court costs, in addition
to other amounts due.
Interest on the debt evidenced by this Promissory Note shall not exceed the
maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged, or received under law; any interest in excess of that maximum
amount shall be credited towards the principal of the debt or, if that has been
paid, refunded. On any acceleration or required or permitted prepayment, any
such excess shall be canceled automatically as of the acceleration or prepayment
or, if already paid, credited towards the principal of the debt or, if the
principal of the debt has been paid, refunded. This provision overrides other
provisions in this and all other instruments concerning the debt.
Except to the extent of the Maker's interest in the American Bingo & Gaming
Corp. common stock securing this Promissory Note, there shall be no liability
hereunder, or under any security document securing this Promissory Note, for the
payment of the indebtedness (including without limitation principal, interest,
penalties, collection or other fees and attorney's fees) evidenced hereby or for
the performance of the covenants and obligations set forth in any document
securing this Promissory Note, including, but not limited to, the obligations
contained in any such security document to pay the indebtedness evidenced hereby
and to make the payments provided for therein, and nothing contained herein or
in such security document shall obligate the Maker hereof, or its successors or
assigns, further than to bind its right, title and interest in and to the
American Bingo & Gaming Corp. common stock; so, that in the event of a default
hereunder or thereunder, the sole remedy of the legal holder and Payee hereof
shall be the foreclosure of the lien of said security document covering said
stock and neither the Payee nor the legal holder hereof shall be entitled to a
personal or deficiency judgment against the Maker hereof, and none shall be
sought or entered.
2
<PAGE>
Prepayment of principal and interest in whole or in part may be made at any
time without penalty.
The provisions of this Promissory Note are to be governed by and construed
according to the laws of the State of South Carolina.
/s/ Michael W. Mims
----------------------
Michael W. Mims
3
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of the 4th day of
June, 1998, by and between Michael W. Mims ("Pledgor") and American Bingo &
Gaming Corp., a Delaware corporation ("Pledgee").
WHEREAS, ON June 4, 1998, Pledgee accepted a promissory note from Pledgor
in the amount of Two Hundred Eighty-Four Thousand Eight Hundred Eighty-Nine And
34/100 Dollars ($284,889.34) (the "Promissory Note") related to previous
advances of funds by Pledgee to Pledgor which in the aggregate total that
amount; and
WHEREAS, securing the repayment of the Promissory Note, Pledgor has pledged
to Pledgee One Hundred Thousand (100,000) shares of the common stock of Pledgee,
owned and held of record by Pledgor;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt,
adequacy and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Pledge. In connection with the issuance of the Promissory Note by
------
Pledgor to Pledgee in connection with Pledgee's loans to Pledgor, Pledgor hereby
grants a security interest to Pledgee in One Hundred Thousand (100,000) shares
of the common stock of Pledgee, represented by certificate No.0841. Pledgee
----
shall hold the pledged shares as security for the repayment of the Promissory
Note, and shall not encumber or dispose of the shares.
2. Dividends.- During the term of this pledge, all dividends and other
---------
amounts received by Pledgee shall be applied to the payment of the principal and
accrued interest on the Promissory Note.
3. Voting Rights. During the term of this pledge, and as long as Pledgor is
-------------
not in default in the performance of any term of this agreement or in the
payment of the principal or interest of the Promissory Note, Pledgor shall vote
the pledged shares on all matters.
4. Adjustments. If, during the term of this pledge, any share dividend,
-----------
reclassification, readjustment, or other change is declared or made in the
capital structure of American Bingo & Gaming Corp., all new, substituted, and
additional shares, or other securities, issued by reason of any such change the
shares originally pledged hereunder.
<PAGE>
5. Payments of Promissory Note. Upon payment of the total balance due on
----------------------------
the Promissory Note, Pledgee shall immediately transfer to Pledgor all of the
pledged shares.
It is agreed between the parties that if the value of the pledged shares becomes
less than the balance owed, the company may require the pledgor to pledge more
shares of stock at the request of the Chief Executive Officer. If such request
is made, then the pledgor shall comply within ten days or the note will become
due and payable upon demand.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first above written.
AMERICAN BINGO & GAMING CORP.
By: /s/ Andre M. Hilliou
-----------------------
Andre M. Hilliou, President
/s/ Michael W. Mims
----------------------
Michael Mims
/s/ George Harrison
---------------------
George Harrison, Chairman
2
<PAGE>
The securities evidenced hereby have not been registered under the Securities
Act of 1933 (the "Act") or any state securities laws and must be held
indefinitely unless they are transferred pursuant to an effective registration
statement under the Act and any applicable state securities laws, or must be
held until the receipt of an opinion of counsel satisfactory to the Company that
registration is not required.
PROMISSORY NOTE
$81,998.55 February 24, 1998
Darlington, South Carolina
FOR VALUE RECEIVED, the undersigned, George M. Harrison, Jr. ("Harrison")
promises to pay to the order of Darlington Music Co., Inc., a South Carolina
corporation (together with any holder hereof, the "Holder"), at 515 Congress
Avenue, Suite 1200, Austin, Texas 78701 (or at such other place as the Holder
may specify), in lawful money of the United States of America, the principal sum
of Eighty-One Thousand, Nine Hundred Ninety-Eight Dollars and Fifty-Five Cents
($81,998.55) in payments of Twenty-Seven Thousand, Three Hundred Thirty-Two
Dollars and Eighty-Five Cents ($27,332.85) plus accrued interest on December 15,
1998, December 15, 1999 and December 15, 2000. Unpaid principal hereunder shall
bear interest at the rate of 8% per annum. Interest shall accrue from the date
hereof. Interest shall be computed on the outstanding principal amount
hereunder on the basis of the actual number of days elapsed over a year of 360
days. Whenever any payment hereunder shall become due, or otherwise would
occur, on a day that is not a business day, such payment may be made on the next
succeeding business day, and such extension of time shall in such case be
included in the computation of interest, if applicable.
Prepayment of principal and interest in whole or in part may be made at any
time without penalty.
Harrison: (i) promises to pay all expenses, including reasonable attorneys'
fees, actually incurred in the enforcement or collection of this Promissory
Note; (ii) agrees that no delay, failure to act or failure to exercise any right
or remedy on the part of the Holder shall in any way affect or impair its
obligations; and (iii) waives its rights to presentment, protest, demand and
notice of dishonor, and further waives its rights to all other notices or
demands that might otherwise be required by law.
In the event of a default in the payment of any principal or interest when
due under this Promissory Note, which default shall continue for a period of 30
days following receipt by Harrison of a written notice from the Holder, then the
entire balance outstanding hereunder shall, at the option of the Holder, become
forthwith due and payable, without presentment, notice of dishonor or protest
for the payment of the whole or any part hereof, and the Holder shall be
entitled to exercise cumulatively all other rights and privileges provided by
law. Failure at any time to exercise the foregoing or any other rights by the
Holder hereunder shall not constitute a waiver thereof, nor shall it be a bar to
the exercise of any of the aforesaid options or rights at a later date.
Time is of the essence with respect to this Promissory Note.
The provisions of this Promissory Note are to be governed by and construed
according to the laws of the State of South Carolina.
IN WITNESS WHEREOF, Harrison has caused this Promissory Note to be duly
executed and delivered as of the day and year first above written.
/s/ George M. Harrison, Jr.
-------------------------------
George M. Harrison, Jr.
2
<PAGE>
IN THE CIRCUIT COURT OF THE TWELFTH JUDICIAL CIRCUIT
IN AND FOR MANATEE COUNTY, FLORIDA
Case No. CA 95-4278
STATE OF FLORIDA,
OFFICE OF THE ATTORNEY GENERAL,
Plaintiff,
vs.
959 HALL FOR HIRE, INC., a
Florida corporation;
6323 14th STREET HALL FOR HIRE, INC.,
a Florida corporation; PATRICK SAVAGE;
and AMERICAN BINGO & GAMING, a
foreign corporation,
Defendants.
- ----------------------------------------------
SETTLEMENT AGREEMENT
---------------------
The Plaintiff, STATE OF FLORIDA, OFFICE OF THE ATTORNEY GENERAL, and the
Defendants, 959 HALL FOR HIRE, INC., 6323 14th STREET HALL FOR HIRE, INC., and
AMERICAN BINGO & GAMING CORP. (hereinafter "Defendants"), by and through their
respective attorneys undersigned, hereby settle all claims in accordance with
the following terms and conditions:
1. The Defendants shall pay the sum of $30,000 to the Plaintiff within 30
days of the date of the sentencings in Case No. 95-2943(F)(B) and Case No.
95-2943(F)(C). (The Defendants, 959 Hall for Hire, Inc. and 6323 14th Street
Hall for Hire, Inc., shall each contribute the sum of $15,000, as set forth in
their plea agreements in the two criminal cases referenced above.)
<PAGE>
2. The Defendants and all related entities and their principals shall
permanently cease all involvement of any kind in any bingo or gambling related
activities in the State of Florida. Within the same time frame set forth above,
the Defendants shall transfer their interests in three purchase money notes with
respect to the three Florida bingo halls located at 959 Pondella Road, North
Fort Myers; 6323 14th Street, Bradenton; and 1700 Tamiami Trail, Murdock; and
the notes shall not be transferred to Philip Furtney, any member of the Pondella
Enterprise, or any related businesses, affiliates, or associates; the notes
shall not be transferred to any corporations or subsidiaries of the Defendants
or the principals thereof; and the notes shall not be transferred at a profit
over their face value.
3. Within the same time frame set forth above, the Defendants shall amend
any and all misleading statements made to the Securities and Exchange Commission
regarding this case and the criminal cases referenced above. Such amendment
shall be subject to approval by the Plaintiff, but such approval shall not be
unreasonably withheld.
4. Following the completion of the acts required in paragraphs 1 through 3
above, as well as the completion of all appellate proceedings in this case, the
parties shall execute and exchange mutual general releases in favor of the other
parties and their affiliates.
5. Following the completion of the acts and events set forth in paragraphs
1 through 4 above, the Plaintiff shall file its dismissal of this case with
prejudice, with each party to bear its own attorney's fees and costs.
6. All terms and conditions of this agreement shall remain operative
regardless of the outcome of appellate proceedings in this case.
<PAGE>
7. This agreement shall not operate to abridge any party's right to take
the pending appellate proceedings to conclusion.
8. The parties acknowledge and agree that this agreement constitutes the
compromise of an existing dispute, and not an admission of liability or damages,
or of the strength or weakness of any claims, defenses, or positions.
9. The trial court shall retain jurisdiction to enforce the terms of this
agreement.
/s/ Jacqueline H. Dowd /s/ Robert W. Genzman
- ------------------------- ------------------------
Jacqueline H. Dowd Robert W. Genzman, Esquire
Assistant Attorney General Florida Bar No. 339148
Office of the Attorney General AKERMAN, SENTERFITT & EIDSON, P.A.
Department of Legal Affairs P.O. Box 231
28 West Central Blvd., Suite 310 Orlando, FL 32802-0231
Orlando, FL 32801 (407) 843-7860
Attorney for Plaintiff Telecopier (407) 843-6610
Attorneys for Defendants, 959 HALL FOR
HIRE, INC., 6323 14TH STREET HALL FOR
HIRE, INC. and AMERICAN BINGO & GAMING
CORPORATION
1/27/97 1/27/97
- ------- -------
Date Date
3
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 2593145
<SECURITIES> 8092368
<RECEIVABLES> 2076600
<ALLOWANCES> (212392)
<INVENTORY> 0
<CURRENT-ASSETS> 12133327
<PP&E> 10187809
<DEPRECIATION> (4239148)
<TOTAL-ASSETS> 24471477
<CURRENT-LIABILITIES> 4473252
<BONDS> 0
<COMMON> 9571
0
12
<OTHER-SE> 18631268
<TOTAL-LIABILITY-AND-EQUITY> 24471477
<SALES> 0
<TOTAL-REVENUES> 7453372
<CGS> 0
<TOTAL-COSTS> (8916270)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (119165)
<INCOME-PRETAX> (1255789)
<INCOME-TAX> (114903)
<INCOME-CONTINUING> (1370692)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1370692)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.13)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1011435
<SECURITIES> 0
<RECEIVABLES> 1179239
<ALLOWANCES> (341000)
<INVENTORY> 0
<CURRENT-ASSETS> 2485009
<PP&E> 6608706
<DEPRECIATION> (3248544)
<TOTAL-ASSETS> 7546819
<CURRENT-LIABILITIES> 1226592
<BONDS> 0
<COMMON> 4111
0
0
<OTHER-SE> 5462394
<TOTAL-LIABILITY-AND-EQUITY> 7546819
<SALES> 0
<TOTAL-REVENUES> 3989278
<CGS> 0
<TOTAL-COSTS> 3531782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 461530
<INCOME-TAX> 17100
<INCOME-CONTINUING> 444430
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444430
<EPS-PRIMARY> .08
<EPS-DILUTED> .07
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 855064
<SECURITIES> 0
<RECEIVABLES> 1640521
<ALLOWANCES> (265000)
<INVENTORY> 0
<CURRENT-ASSETS> 1819942
<PP&E> 7564919
<DEPRECIATION> (3799194)
<TOTAL-ASSETS> 10212031
<CURRENT-LIABILITIES> 957024
<BONDS> 0
<COMMON> 6831
0
0
<OTHER-SE> 7908654
<TOTAL-LIABILITY-AND-EQUITY> 10212031
<SALES> 0
<TOTAL-REVENUES> 6468334
<CGS> 0
<TOTAL-COSTS> 4928586
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54901
<INCOME-PRETAX> 1651115
<INCOME-TAX> 335743
<INCOME-CONTINUING> 1315372
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1315372
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
