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, 1999
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)
N/A
---
(Former name, address and fiscal year, if changed since last report)
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 4, 1999, the Issuer had 9,910,590 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)
ASSETS
------
June 30, 1999
--------------
<S> <C>
Current Assets:
Cash and cash equivalents $ 4,095,584
Accounts receivable net of allowance for doubtful
accounts of $136,566 520,253
Notes receivable - current portion ($81,998 to related parties),
net of allowance for doubtful accounts of $165,361 304,389
Prepaid license expense - current portion 1,413,704
Other prepaid expenses and current assets 399,814
--------------
Total Current Assets 6,733,744
--------------
Property and Equipment - at cost, net of accumulated
depreciation and amortization 6,387,785
Other Assets:
Notes receivable, net of current portion ($27,333 to related parties) 486,771
Prepaid license expense, net of current portion 932,167
Intangible assets, net of accumulated amortization 4,413,642
Other non-current assets 178,664
--------------
Total Other Assets 6,011,244
--------------
TOTAL ASSETS $ 19,132,773
==============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------
<S> <C>
Current Liabilities:
Notes payable - current portion ($24,828 to related parties) $ 68,076
Capital leases payable - current portion 303,354
Trade accounts payable 228,771
Accrued expenses and other current liabilities 771,330
------------
Total Current Liabilities 1,371,531
------------
Long-term Liabilities:
Notes payable, net of current portion ($271,389 to related parties) 1,536,916
Capital leases payable, net of current portion 68,272
------------
Total Long-term Liabilities 1,605,188
------------
Stockholders' Equity:
Common stock, $.001 par value,
authorized 20,000,000 shares,
issued 10,176,890 shares 10,177
Additional paid-in-capital 23,481,630
Treasury stock - 266,300 shares (732,337)
Accumulated deficit (6,603,416)
------------
Total Stockholders' Equity 16,156,054
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $19,132,773
============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended June 30,
1999 1998
----------- -------------
<S> <C> <C>
REVENUES:
Video gaming $1,968,310 $ 2,407,881
Bingo 1,286,935 1,090,255
Other 295,397 237,961
----------- -------------
TOTAL REVENUES 3,550,642 3,736,097
----------- -------------
COSTS AND EXPENSES:
Direct salaries and other compensation 283,270 603,674
Rent and utilities ($26,310 and $26,310, respectively to related parties) 410,520 1,089,525
Direct operating costs 343,341 1,478,075
Depreciation and amortization 639,913 573,527
License expense 636,302 272,059
Severance expense 580,000 ---
General and administrative 966,155 1,588,874
----------- -------------
TOTAL COSTS AND EXPENSES 3,859,501 5,605,734
----------- -------------
OPERATING INCOME (308,859) (1,869,637)
OTHER INCOME AND EXPENSES:
Interest and investment income ($4,472 and $0, respectively from related parties) 60,250 264,187
Interest expense ($6,232 and $0, respectively to related parties) (60,659) (76,815)
Gain on settlement with a related party 53,809 ---
Other income and (expense) (2,921) (104,152)
----------- -------------
TOTAL OTHER INCOME AND EXPENSES 50,479 83,220
NET INCOME BEFORE PROVISION FOR INCOME TAXES (258,380) (1,786,417)
PROVISION FOR INCOME TAXES 26,882 38,500
----------- -------------
NET INCOME ($285,262) ($1,824,917)
=========== =============
EARNINGS PER SHARE:
Basic ($.03) ($.19)
=========== =============
Diluted ($.03) ($.19)
=========== =============
Weighted average shares outstanding - basic 9,910,590 9,528,869
Weighted average shares outstanding - diluted 9,910,590 9,528,869
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
----------- -------------
REVENUES:
<S> <C> <C>
Video gaming $3,942,633 $ 5,007,035
Bingo 2,659,297 2,072,021
Other 569,842 374,316
----------- -------------
TOTAL REVENUES 7,171,772 7,453,372
----------- -------------
COSTS AND EXPENSES:
Direct salaries and other compensation 572,817 1,143,702
Rent and utilities ($52,620 and $52,620, respectively to related parties) 946,912 1,587,927
Direct operating costs 962,479 2,005,588
Depreciation and amortization 1,367,343 998,328
License expense 1,097,793 587,873
Severance expense 580,000 ---
General and administrative 1,851,453 2,592,853
----------- -------------
TOTAL COSTS AND EXPENSES 7,378,797 8,916,271
----------- -------------
OPERATING INCOME (207,025) (1,462,899)
OTHER INCOME AND EXPENSES:
Interest and investment income ($11,737 and $0, respectively from related parties) 119,694 533,205
Interest expense ($12,920 and $0, respectively to related parties) (131,963) (130,188)
Gain on settlement with a related party, net of legal expenses of $100,000 191,127 ---
Other income and (expense) 30,077 (195,907)
----------- -------------
TOTAL OTHER INCOME AND EXPENSES 208,935 207,110
NET INCOME BEFORE PROVISION FOR INCOME TAXES 1,910 (1,255,789)
PROVISION FOR INCOME TAXES 210,950 114,903
----------- -------------
NET INCOME ($209,040) ($1,370,692)
=========== =============
EARNINGS PER SHARE:
Basic ($.02) ($.15)
=========== =============
Diluted ($.02) ($.15)
=========== =============
Weighted average shares outstanding - basic 9,863,714 9,450,966
Weighted average shares outstanding - diluted 9,863,714 9,450,966
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES:
Net loss ($209,040) ($1,370,692)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,367,343 998,328
Non-cash write-offs and charges --- 1,727,532
Provision for uncollectible receivables 75,631 ---
Gain on litigation settlement 1,300 ---
Gain on receipt of treasury stock (45,938) ---
Increase (decrease) in cash flows as a result of changes in
asset and liability account balances:
Accounts receivable (140,740) (116,118)
Prepaid licenses (846,479) (1,480,085)
Deposits (7,000) ---
Other prepaid expenses and current assets 142,311 (203,549)
Trade accounts payable and accrued expenses 88,461 777,009
Accrued expenses and other current liabilities 362,042 ---
----------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITES 787,891 332,425
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Intangible expenditures --- (509,391)
Property and equipment expenditures (655,006) (1,178,047)
Collections of notes receivable 599,966 179,014
Issuance of notes receivable (20,000) (197,767)
Reductions of notes receivable allowance (105,865) ---
Proceeds from sale of property and equipment 24,714 ---
----------- -------------
NET CASH USED IN INVESTING ACTIVITIES ( 154,191) ( 1,706,191)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations (187,671) (185,321)
Payments on notes payable (618,428) (413,734)
Proceeds from issuance of common stock --- 39,000
Payments related to warrant financing costs --- (354,422)
Dividend payments to preferred stockholders --- (61,108)
Repurchase of common stock --- (182,971)
Preferred stock conversions --- (208,674)
Proceeds from employee stock purchase plan issuances 3,000 ---
Proceeds from option exercises 311,581 ---
Proceeds from margin line of credit --- 1,489,647
----------- -------------
NET CASH (USED IN) / PROVIDED BY FINANCING ACTIVITIES (491,518) 122,417
----------- -------------
NET INCREASE (DECREASE) IN CASH 142,182 (1,251,349)
CASH AT BEGINNING OF PERIOD 3,953,401 11,936,862
----------- -------------
CASH AT END OF PERIOD $4,095,583 $ 10,685,513
=========== =============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
AMERICAN BINGO & GAMING CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
----------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments:
Interest $ 131,963 $130,188
=========== ========
Income taxes $ 122,878 $290,838
=========== ========
Non-cash transactions:
Acquisition of business in exchange for note payable
($0 and $400,000, respectively from related parties) $ --- $400,000
=========== ========
Acquisition of property and equipment in exchange
for notes payable $ 434,415 $439,007
=========== ========
Acquisition of businesses in exchange for common stock $ --- $ 90,000
=========== ========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 1 - PRINCIPLES OF CONSOLIDATION AND 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 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.
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. 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, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1999.
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, 1998.
- --------------------------------------------------------------------------------
NOTE 2 - PROPERTY AND EQUIPMENT.
- --------------------------------------------------------------------------------
Property and equipment at June 30, 1999 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Land $ 189,671
Buildings 379,342
Building and leasehold improvements 2,855,077
Video gaming machines and bingo equipment 7,528,680
Equipment, furniture and fixtures 1,090,729
Automobiles 326,357
------------
12,369,856
Less: Accumulated depreciation and amortization (5,982,071)
------------
Property and equipment, net $ 6,387,785
============
</TABLE>
Property and equipment at June 30, 1999 includes $1.3 million of assets held
under capital leases and related accumulated amortization of $401,000. Related
amortization expense charged to operations for the six months ended June 30,
1999 and 1998 was $108,000 each period.
Depreciation and amortization expense charged to operations for the six months
ended June 30, 1999 and 1998 was $943,000 and $720,000, respectively.
7
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 3 - INTANGIBLE ASSETS.
- --------------------------------------------------------------------------------
Intangible assets at June 30, 1999 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Goodwill $ 5,095,436
Covenants not to compete 553,891
------------
5,649,327
Less: Accumulated amortization (1,235,685)
------------
Intangible assets, net $ 4,413,642
============
</TABLE>
Amortization expense charged to operations for the six months ended June 30,
1999 and 1998 was $424,000 and $287,000, respectively.
- --------------------------------------------------------------------------------
NOTE 4 - SHAREHOLDERS' EQUITY.
- --------------------------------------------------------------------------------
The Company has issued 327,308 shares of its common stock since the beginning of
1999, including 325,000 shares pursuant to stock options exercised and 2,308
shares pursuant to purchases under the Company's Employee Stock Purchase Plan.
The Company received proceeds of $310,781 and $3,000 related to these purchases,
respectively. The Company also recognized $1,300 in equity proceeds for the
reimbursement of founders shares. The Company received 35,000 shares from the
former President Greg Wilson and members of his family, during the second
quarter, in connection with the settlement of lawsuits and other issues between
the parties. These shares have been accounted for as treasury stock.
- --------------------------------------------------------------------------------
NOTE 5 - EARNINGS (LOSS) PER SHARE.
- --------------------------------------------------------------------------------
A reconciliation of basic to diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three months ended June 30,
-------------------------------
1999 1998
---------------------- --------------------------
Basic Diluted Basic Diluted
<S> <C> <C> <C> <C>
Numerator:
- ----------
Net loss ($285,262) ($285,262) ($1,824,917) ($1,824,917)
Add preferred dividends --- --- (29,283) ---
---------- ---------- ------------ ------------
Loss attributable to common stockholders ($285,262) ($285,262) ($1,854,200) ($1,824,917)
========== ========== ============ ============
Denominator:
- ------------
Weighted average shares outstanding 9,910,590 9,910,590 9,528,869 9,528,869
Effect of dilutive securities:
Preferred stock --- --- --- ---
Stock options and warrants --- --- --- ---
---------- ---------- ------------ ------------
Weighted average shares outstanding 9,910,590 9,910,590 9,528,869 9,528,869
========== ========== ============ ============
Earnings (Loss) per share ($.03) ($.03) ($.19) ($.19)
========== ========== ============ ============
</TABLE>
8
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 5 - EARNINGS (LOSS) PER SHARE (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended June 30,
-----------------------------
1999 1998
---------------------- --------------------------
Basic Diluted Basic Diluted
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
- ----------
Net loss ($209,040) ($209,040) ($1,370,692) ($1,370,692)
Add preferred dividends --- --- (61,108) ---
---------- ---------- ------------ ------------
Loss attributable to common stockholders ($209,040) ($209,040) ($1,431,800) ($1,370,692)
========== ========== ============ ============
Denominator:
- ------------
Weighted average shares outstanding 9,863,714 9,863,714 9,450,966 9,450,966
Effect of dilutive securities:
Preferred stock --- --- --- ---
Stock options and warrants --- --- --- ---
---------- ---------- ------------ ------------
Weighted average shares outstanding 9,863,714 9,863,714 9,450,966 9,450,966
========== ========== ============ ============
Earnings (Loss) per share ($.02) ($.02) ($.15) ($.15)
========== ========== ============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTE 6 - OTHER CHARGES AND WRITE-OFFS
- --------------------------------------------------------------------------------
In July 1999, the Company announced the resignations of several members of
management and several members of its Board of Directors. See note 11. In
accordance with contractual agreements with the resigning members of management,
the Company incurred severance charges resulting in a $580,000 charge to second
quarter 1999 earnings. In addition, in connection with the resignations a note
from a related party in the amount of $55,000 was forgiven, resulting in a
charge to second quarter 1999 earnings for that amount.
The Company recorded approximately $2.0 million of asset write-downs,
reorganization charges and other unusual items in the second quarter of 1998.
Management determined that certain write-offs were necessary to reduce
non-performing assets to their net realizable values. Other 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 management
reorganization and corporate office relocation in the second quarter of 1998.
Second quarter 1998 write-offs 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 expenses.
9
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 7 - INCOME TAXES
- --------------------------------------------------------------------------------
The Company recorded approximately $27,000 and $211,000 of state income tax
expense for the three and six month periods ended June 30, 1999, respectively.
The Company does not expect to incur material federal income tax liabilities
until the depletion of its accumulated federal income tax loss carryforwards,
which totaled approximately $2.4 million at June 30, 1999. The utilization of
the net operating loss is subject to limitations in accordance with 382 of the
Internal Revenue Code.
- --------------------------------------------------------------------------------
NOTE 8 - RELATED PARTY TRANSACTIONS.
- --------------------------------------------------------------------------------
At June 30, 1999, notes receivable included promissory notes receivable from
related parties totaling $109,000. The maturity dates range from December 15,
1999 to December 15, 2000 with an interest rate of 8%. Interest income related
to these notes recorded by the Company was $4,472 and $11,737 for the three and
six months ended June 30, 1999, respectively.
In conjunction with the purchase of Ambler Bingo in March 1998, the Company
issued a promissory note payable in the amount of $400,000 to the seller (a
related party), as partial consideration for this purchase. This note payable
is due in monthly installments of $9,765, with an interest rate of 8.0% and a
maturity date of May 2002. For the three and six months ended June 30, 1999,
the Company recognized $6,232 and $12,920, respectively, of interest expense
related to this obligation.
As a part of the Company's acquisition of Darlington Music Co., Inc, the Company
assumed a related party lease for an office and game machine warehouse facility.
The lease is by and between the Company and a former director and officer, and
two immediate family members of the related party, all of whom are shareholders
of the Company. The lease originated on January 15, 1990 for a 15 year term
with monthly rental payments of $3,500. For the three and six months ended June
30, 1999, the Company has expensed $10,500 and $21,000, respectively for rental
payments to the related parties under this lease.
As a part of the acquisition of Gold Strike, Inc. and Lucky 4, Inc. the Company
assumed an operating lease for gaming properties located in South Carolina. The
lessor is a partnership in which a shareholder and former director of the
Company is a 50% general partner. This lease expires November 2001, with
renewal options. The monthly rental payments under this lease are $5,270. For
the three and six months ended June 30, 1999, the Company has expensed $15,810
and $31,620, respectively, for rental payments to the related party under this
lease.
An entity owned and managed by one person who is a shareholder and former
director of the Company, and a second person who is a shareholder of the
Company, entered into a three year Agreement with the Company in November, 1998
to operate the Company's non-route video gaming operations at eight video gaming
machine centers. In connection with this Agreement, the Company entered into a
lease or sublease with the operator at seven of the eight video gaming machine
centers which provide for the monthly payment of rent by the operator. The
Company has recognized a benefit of $179,166 for the six months ended June 30,
1999 related to these lease and subleases.
In July 1999, the Company entered into an arrangement with a person who is a
shareholder and former director of the Company to manage and supervise the
Company's bingo operations in South Carolina. The arrangements provide for the
Company to pay the related party $1 per day as consideration for services, and
such future compensation as the Company shall decide in its absolute discretion.
The Company may terminate the arrangement on twenty-four hours notice. See Note
11.
10
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------------------------------------------------
In July of 1995 the Company bought three Florida bingo centers from Phillip
Furtney and two corporations related to Mr. Furtney (which corporations and Mr.
Furtney are referred to collectively for purposes of this discussion as
"Furtney"). On June 12, 1997, Furtney filed a lawsuit against the Company in
the Circuit Court in Florida, alleging breach of contract on these purchases.
Furtney alleged that the Company defaulted on its original purchase note and
stock obligations under the purchase agreements. Furtney seeks to recover
damages in the amount of $900,000 related to these allegations. On July 12,
1997, the Company answered this lawsuit and filed a counterclaim against Furtney
alleging, among other things, fraud, negligent misrepresentation, breach of
express warranties, contractual indemnity and tortious interference with
contractual rights. The Company believes that it was materially defrauded in
its purchase of these three Florida bingo centers from Furtney in that Furtney
made no disclosure to the Company of an ongoing criminal investigation of the
operation of these bingo centers by the Florida State Attorney General's Office
and that Furtney was fully aware of this investigation. The State of Florida
temporarily closed these three bingo centers, as well as several other centers
formerly owned by Mr. Furtney, in November 1995. The Company re-sold these three
bingo centers in December of 1995. In January 1997, the Company and the State
of Florida settled all matters regarding the Company's previous ownership and
operation of these bingo centers. The Company believes that Furtney'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 material
adverse effect on the financial position and operations of the Company.
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 filed by video poker players. 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 plaintiffs seek to recover the money lost from
playing video poker and to restrict or otherwise limit in various respects the
manner in which video gaming operations are conducted in South Carolina. The
District Judge certified questions for an advisory opinion of the South Carolina
Supreme Court regarding whether video gaming constitutes an illegal lottery in
South Carolina. The Supreme Court issued an opinion in November 1998 stating
that video gaming does not constitute an illegal lottery. In addition, in April
1999 the District Court ruled that video gaming cash payouts are limited to $125
per day per player based on the existing law in South Carolina. Other issues in
this case are still pending in the District Court. 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
material adverse effect on the financial position and operations of the Company.
On October 9, 1997, Collins Entertainment, Inc., filed a lawsuit in the Court of
Common Pleas in Charleston County, South Carolina against the Company, Richard
Henry, a former employee and officer of the Company, Wayne Coats and Coats and
Coats Rental Amusements. The lawsuit alleges that the defendants engaged in
civil conspiracy and tortiously interfered with the plaintiff's contract,
violating the South Carolina Unfair Trade Practices Act. The Company believes
that this lawsuit is completely without merit and the Company will defend itself
vigorously. If this case were to be decided against the Company, it could have
a material adverse effect on the financial position and operations of the
Company.
On September 9, 1998, the Company filed a lawsuit in the Court of Common Pleas
for the Fifth Judicial Circuit in Columbia, South Carolina, against two former
directors, Greg Wilson and Robert Hersch, Investors Associates, Inc., who
previously served as the Company's underwriter, and two former employees, Roy
Stevens and Paul Hermelink. On February 26, 1999,
11
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED).
- --------------------------------------------------------------------------------
the Company and Greg Wilson entered into a settlement with respect to this
lawsuit and other issues and thus Greg Wilson has since been dismissed with
prejudice from this lawsuit. Also, on April 14, 1999, the Company and Robert
Hersch entered into a settlement with respect to this lawsuit and other issues
and thus Robert Hersch has since been dismissed with prejudice from this
lawsuit. The lawsuit seeks to recover both actual and punitive damages, as well
as the return of profits wrongfully obtained and the return of assets, including
common stock of the Company, wrongfully acquired, pursuant to various causes of
action.
On April 16, 1999, Steve Carroll and Wilson Reed, individually and on behalf of
S.C. Music Masters, Inc., filed a lawsuit in the Court of Common Pleas for the
Ninth Judicial Circuit in Charleston County, South Carolina against the Company
and one of its subsidiaries. The lawsuit alleges that the defendants breached
fiduciary duties, breached contracts, engaged in various fraudulent acts,
negligently made false statements and engaged in unfair trade practices. The
plaintiffs seek to recover actual and punitive damages of an unspecified amount
or, in the alternative, to recover incidental damages as well as to have certain
contracts and transactions rescinded or reformed. The Company believes that
this lawsuit is completely without merit and the Company will defend itself
vigorously. If this case were to be decided against the Company, it could have
a material adverse effect on the financial position and operations of the
Company.
On May 14, 1999, Roy Stevens, a former employee and current shareholder of the
Company, filed a lawsuit against the Company, certain of its subsidiaries, and
certain officers, directors and employees of the Company in the Court of Common
Pleas for the Fifth Judicial Circuit in Columbia, South Carolina. The lawsuit
alleges that the defendants breached fiduciary duties, breached contracts,
maliciously prosecuted the plaintiff, and engaged in various fraudulent and
illegal acts. The plaintiff seeks to recover actual and punitive damages of an
unspecified amount, the reassignment of a lease agreement that secures a
promissory note issued by the Company to the plaintiff and to have a receiver
appointed to take control of the Company during the pendency of this lawsuit.
The Company believes that the lawsuit is completely without merit and the
Company will defend itself vigorously. If this case were to be decided against
the Company, it would likely have a material adverse effect on the financial
position and operations of the Company.
On July 8, 1999, Paul Hermelink, a former employee of the Company, filed a
lawsuit in the Court of Common Pleas in the Eleventh Judicial Circuit in
Lexington County, South Carolina against the Company and Michael Mims, a former
director and current shareholder of the Company. The lawsuit alleges defamation
and slander for statements made by Mr. Mims in The State newspaper. The
---------
plaintiff seeks to recover actual and punitive damages of an unspecified amount.
The Company believes that this lawsuit is completely without merit and the
Company will defend itself vigorously. If this case were to be decided against
the Company, it could have a material adverse effect on the financial position
and operations of the Company.
The South Carolina Department of Revenue has performed an audit of the state
income tax returns filed by the Company and its subsidiaries for 1995 and 1996.
As a result of these audits, the Company was notified by the Department of
Revenue that the Company may have additional tax liability relating to these
audits for South Carolina state income taxes for 1995 and 1996, including
interest, of up to $100,000. The Company is in the process of providing
additional information to the Department of Revenue to support its calculation
of income taxes for 1995 and 1996. If this case were to be decided against the
Company, it could have a material adverse effect on the financial position of
the Company.
Under the regulatory requirements in South Carolina, each video gaming machine
("VGM") is required to be connected to the state's computer monitoring system by
February 1, 2000. Any VGM not connected to this online reporting system by the
deadline must be turned off until it is upgraded and connected to the system.
At this time, the Company is attempting to comply with the online reporting
requirements. It is uncertain, however, whether the Company will be able to
meet the February 1, 2000 deadline due to uncertainties facing the video gaming
industry regarding such issues as (i) the timing of the State's certification of
the various types of machines, which certification must occur before the
machines may be connected to the online reporting system, (ii) the availability
of the equipment required to upgrade the VGMs for connection to the online
reporting system, and (iii) the availability of the public utilities to perform
the work necessary to connect the VGMs to the online reporting system. If the
Company is unable to meet the February 1, 2000 deadline with
12
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED).
- --------------------------------------------------------------------------------
respect to some or all of its VGMs, such event would likely have a material
adverse effect on the financial position and operations of the Company.
The Company has identified the equipment that will be required to connect its
existing VGMs to the online reporting system. The equipment necessary includes
both hardware and software upgrades. The Company has allocated approximately
$1.9 million of its 1999 budget to cover these upgrades, including, among other
expenditures, $700,000 in VGM purchases, $600,000 for software upgrades, and
$400,000 for peripheral online connection equipment.
On July 2, 1999, the Governor of South Carolina signed into law legislation
taxing and regulating video poker in South Carolina. The new law requires a
referendum to be held on November 2, 1999, in which South Carolina voters will
decide whether video poker payouts should remain legal. If video poker payouts
are banned as a result of the referendum, payouts will be illegal after June 30,
2000. If video poker payouts are supported by the referendum, however, then
payouts will remain legal and other provisions in the new law will take effect.
One provision which would take effect if voters decide to keep payouts legal is
a 25% tax on net machine income after payouts. The tax would become effective
beginning on December 1, 1999.
If video poker payouts are banned in South Carolina as a result of the
referendum, the Company's financial position and operations will be materially
adversely affected. Even if video poker payouts remain legal, however, the new
law will likely have a materially adverse effect on the financial position and
operations of the Company due to the increased taxes and other regulations that
will be imposed on the video poker industry in South Carolina. See, Note 11.
In the normal course of its business, the Company is subject to litigation and
regulatory assessments and fines. Management of the Company does not believe
any claims, assessments or fines, individually or in the aggregate, will have a
material adverse effect on the Company's financial position or operations of the
Company, except as otherwise stated above.
- --------------------------------------------------------------------------------
NOTE 10 - SEGMENTS
- --------------------------------------------------------------------------------
The Company's Chief Operating Decision Maker ("CODM"), the Chairman and CEO,
evaluates performance and allocates resources based on a measure of segment
profit or loss from operations.
The Company has identified two operating segments based on the different nature
of the services and legislative monitoring and, in general, the type of
customers for those services. The video gaming segment represents operations of
the Company's video gaming machines in South Carolina. The bingo segment
encompasses bingo center services provided to charitable organizations in South
Carolina, Texas and Alabama.
A summary of the segment financial information reported to the CODM is as
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
-------------------------- ----------------------------
Video Gaming Bingo Adjustment Consolidated
-------------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Revenue $ 1,968,310 $1,286,935 $ 295,397 $ 3,550,642
Depreciation and Amortization 307,998 327,977 3,938 639,913
Segment profit (loss) 683,472 301,315 (1,270,049) (285,262)
Capital expenditures by segment 1,717 214,807 14,106 230,630
</TABLE>
13
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 10 - SEGMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
---------------------------- --------------------------------
Video Gaming Bingo Adjustment Consolidated
-------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
Revenue $ 2,407,881 $ 1,090,255 $ 237,960 $ 3,736,097
Depreciation and Amortization 256,860 257,005 59,662 573,527
Segment profit (loss) (19,936) (642,630) (1,162,351) (1,824,917)
Capital expenditures by segment 554,011 47,285 5,079 606,375
Six Months Ended June 30, 1999
-------------------------------
Video Gaming Bingo Adjustment Consolidated
-------------- ------------ ---------------- --------------
Revenue $ 3,942,633 $ 2,659,297 $ 569,842 $ 7,171,772
Depreciation and Amortization 473,742 257,005 (157,220) 1,367,343
Segment profit (loss) 1,113,118 431,022 (1,753,180) (209,040)
Segment Assets 6,996,274 11,571,174 565,325 19,132,773
Capital expenditures by segment 546,289 525,200 17,932 1,089,421
Six Months Ended June 30, 1998
-------------------------------
Video Gaming Bingo Adjustment Consolidated
-------------- ------------ ---------------- --------------
Revenue $ 5,007,035 $ 2,072,021 $ 374,316 $ 7,453,372
Depreciation and Amortization 466,127 448,889 83,312 998,328
Segment profit (loss) 621,130 (485,585) (1,506,237) (1,370,692)
Segment Assets 7,103,189 7,317,293 10,074,095 24,494,577
Capital expenditures by segment 1,350,653 252,724 13,677 1,617,054
</TABLE>
The adjustments represent video gaming and bingo concession and other income,
depreciation and amortization related to corporate assets, corporate losses, and
corporate capital expenditures to reconcile segment balances to consolidated
balances. None of the other adjustments are significant.
- --------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS.
- --------------------------------------------------------------------------------
On July 2, 1999, the Company announced the resignation of the following members
of its Board of Directors and members of management: James L. Hall, formerly a
Director; George M. Harrison, Jr., formerly a Director and Vice President; Andre
M. Hilliou, formerly Chairman of the Board, President and Chief Executive
Officer; Michael W. Mims, formerly a Director; Grover C. Seaton III, formerly a
Director; A. Joe Willis, formerly a Director; Richard M. Kelley, formerly Chief
Financial Officer, Vice President and Treasurer; and Nancy J. Pollick, formerly
Vice President of Operations. Each individual resigned from any and all
positions held with the Company and its subsidiaries. On July 6, 1999, the
Company announced that at a meeting of the Board of Directors, the Board elected
Jeffrey L. Minch as a new Director to fill a vacancy on the Board, joining
Kenneth R. Adams and Daniel W. Deloney on the Board. At the meeting of the
Board of Directors, the Board also elected Mr. Deloney as Chairman of the Board
and President and Chief Executive Officer of the Company. In addition to these
Board and management changes, on July 9, 1999, Brock Henning, a former South
Carolina bingo area manager, and Connie Ryan, former Controller, resigned from
the Company.
14
<PAGE>
AMERICAN BINGO & GAMING CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS (CONTINUED)
- --------------------------------------------------------------------------------
On July 2, 1999, the Governor of South Carolina signed into law legislation
taxing and regulating video poker in South Carolina. The law requires a
referendum to be held on November 2, 1999, in which South Carolina voters will
decide whether video poker payouts should remain legal. If video poker payouts
are banned as a result of the referendum, payouts will be illegal after June 30,
2000. If video poker payouts are supported by the referendum, however, then
payouts will remain legal and other provisions in the new law will take effect.
If video poker payouts remain legal, beginning December 1, 1999, the bet limit
will be $3 per hand and the payout limit will be $500 per sitting. Video poker
operators will only be able to provide the $500 payout to video poker players,
however, if the operators certify to the South Carolina Department of Revenue
before December 1, 1999, that their machines are prepared for connection to the
Department of Revenue central monitoring system or they have ordered the
necessary equipment required for connection to the system. Until then, the
current law regarding the $125 payout limit will remain in effect. Pursuant to
the new law, all video poker machines must be connected to the Department of
Revenue central monitoring system by February 1, 2000, in order to be able to
continue to operate after that date. If voters decide to keep payouts legal, a
25% tax on net machine income after payouts will become effective beginning on
December 1, 1999. Under the new law, casinos, which are video poker locations
with more than 5 video poker machines, will not be licensed to operate after
July 1, 2004. After July 1, 2004, casinos may only continue to operate if the
county in which the casino is operating adopts an ordinance authorizing casinos
to operate. No casino may be licensed to operate if it was not in operation on
May 31, 1999.
If video poker payouts are banned in South Carolina as a result of the
referendum, the Company's financial position and operations will be materially
adversely affected. Even if video poker payouts remain legal, however, the new
law will likely have a material adverse effect on the financial position and
operations of the Company due to the increased taxes and other regulations that
will be imposed on the video poker industry in South Carolina.
On July 13, 1999, the South Carolina Supreme Court ruled that video poker
players cannot win more that $125 in a 24-hour period. In addition, the Court
warned that advertising or offering jackpots over $125 could be a federal
racketeering offense. Advertising or offering jackpots over $125 could also be
criminal offenses under state law. The Court's ruling was issued in a case
filed by several plaintiffs who claim that the activities of some video poker
operators were illegal under current South Carolina law. Even though the
Company is not a party to this case, the Court's ruling will likely affect the
entire video poker industry in South Carolina and is expected to have a material
adverse effect on the operations of the Company.
In July 1999, the Company entered into an arrangement with a person who is a
shareholder and former director of the Company to manage and supervise the
Company's bingo operations in South Carolina. The arrangements provide for the
Company to pay the related party $1 per day as consideration for the services,
and such future consideration as the Company shall decide in its absolute
discretion. The Company may terminate the arrangement on twenty-four hours
notice.
15
<PAGE>
AMERICAN BINGO & GAMING CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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, 1998 and 1997; the Company's Form 10-QSB for the quarters ended June 30,
1998, September 30, 1998 and March 31, 1999; and the consolidated financial
statements and related notes for the period ended June 30, 1999. 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, spending, competition, general economic conditions, and other risks
and uncertainties as discussed in this Quarterly Report and the 1998 Annual
report on Form 10-KSB.
RESULTS OF OPERATIONS
The Company generated consolidated revenues of $3.6 million during the second
fiscal quarter of 1999, ended June 30, 1999, as compared with $3.7 million in
the comparable period of the prior fiscal year, representing a decrease of
$185,000 or less than 5%. Second quarter revenues were led by video gaming
operations, which produced $2.0 million, or 55% of total revenues, compared to
$2.4 million, or 64%, in the comparable quarter of the prior year. The decrease
in video gaming revenues was primarily a result of the re-organization of the
free-standing video gaming machine ("VGM") operations in the fourth quarter of
1998. Bingo rental and other revenues totaled $1.6 million, or 45% of revenues,
for the second quarter of 1999, compared to $1.3 million, or 36% of total
revenue, for the second quarter of 1998. Bingo rental and other revenues
increased primarily due to seven additional Texas bingo centers which were open
in the second quarter of 1999 that were not open in the second quarter of 1998.
Approximately 62% of second quarter revenues were generated in South Carolina,
with 27% in Texas and 11% in Alabama, as compared to second quarter 1998
revenues of 78% in South Carolina, 11% in Texas, and 11% in Alabama. This
shifting of revenues by region is a reflection of the reorganization of the
free-standing VGM operations in South Carolina as well as the additional seven
bingo halls in Texas contributing to operating revenues in the second quarter
1999. Revenues for the first half of 1999 totaled $7.2 million as compared to
$7.5 million in the comparable period of the prior fiscal year, a decrease of
282,000 or 4%. Year-to-date revenues were again led by video gaming operations,
which comprised 55% of total first half 1999 revenues.
Total costs and expenses were $3.9 million in the second quarter of 1999 versus
$5.6 million in the second quarter of 1998, a decrease of $1.7 million or 31%.
The decrease in total costs and expenses is primarily attributable to asset
write-offs and charges of nearly $2.0 million for the second quarter of 1998.
This decrease was offset by an accrual for severance payments of $580,000 which
was recorded in the second quarter of 1999. See Note 6 to the consolidated
financial statements. For the first six months of 1999, total costs and
expenses were $7.4 million versus $8.9 million in the comparable period of 1998,
a decrease of more than $1.5 million or a decrease of 17%. Total costs and
expenses for the first six months of 1998 include approximately $2.0 million of
non-cash write-offs and charges recorded in the second quarter of 1998.
Depreciation, amortization and license expense totaled $1.3 million in the
second quarter of 1999, an increase of $430,000 from the second quarter of 1998.
For the first six months of 1999, depreciation, amortization and license
expenses were $2.5 million versus $1.6 million in the comparable period of 1998,
an increase of $900,000 or 55%. The expense includes the depreciation of the
Company's South Carolina video gaming machines and related license expenses as
well as the amortization of the Company's intangible assets which consist
primarily of goodwill related to the acquisition of the seven bingo halls in
Texas.
General and administrative charges totaled $966,000 in the second quarter of
1999, compared to $1.6 million in 1998. For the first six months of 1998,
general and administrative expenses were $1.9 million versus $2.6 million in the
comparable period of 1998, a decrease of $742,000 or 29%. The change is
primarily due to second quarter 1998 write-offs which include $300,000 for
relocation and reorganization reserves and over $200,000 of abnormally high
legal, travel, marketing and accounting costs.
Second quarter 1999 rent and utilities for the Company's freestanding video
gamerooms and bingo centers totaled $411,000, compared to $1.1 million for the
same period in 1998, a decrease of 62%. The change is primarily composed of
second quarter 1998 write-offs which include a $500,000 accrual for lease
payments on unprofitable and idle bingo centers. The
16
<PAGE>
AMERICAN BINGO & GAMING CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Company is continuing its efforts to minimize rent expenses by subletting,
converting, or terminating leases for idle and unperforming properties.
Direct operating costs for the second quarter of 1999 totaled $343,000, as
compared to $1,478,000 for the same period in 1998, a decrease of approximately
$1.1 million, or 77%. This decrease in direct operating costs is primarily
attributable to second quarter 1998 write-offs and expense reductions resulting
from the reorganization of the Company's freestanding VGM's into route locations
which occurred in the forth quarter of 1998.
Net other income totaled $50,000 for the second quarter of 1999, as compared to
$83,000 for the second quarter of 1998. Other income for the second quarter of
1999 included $8,000 received from the liquidation of Company common stock owned
by the former Company president and members of his family in connection with the
settlement of lawsuits and other issues between the parties. Pursuant to this
settlement, the Company received 35,000 shares of Common Stock and realized a
gain of $46,000. See Note 4.
Net loss for the second quarter of 1999 was ($285,262), which equated to a basic
and fully diluted earnings per share of ($.03). Net loss for the second quarter
of 1998 was ($1,824,917), which equated to a basic and fully diluted earnings
per share of ($.19). Net loss for the first six months of 1999 was ($209,040),
which equated to a basic and fully-diluted earnings per share of ($.02) per
share. Net loss for the first six months of 1998 was ($1,370,692), which
equated to a basic and fully-diluted earnings per share of ($.15).
The weighted average number of basic Common Stock shares outstanding totaled 9.9
million in the second quarter of 1999 as compared to 9.5 million in the second
quarter of 1998. The change is primarily due to the issuance of Common Stock in
the second half of 1998 in connection with the redemption of preferred stock,
the issuance of 128,000 shares of Common Stock in October 1998 related to the
acquisition of six bingo halls in Texas, and the issuance of 325,000 shares of
Common Stock in January 1999 in connection with the exercise of stock options,
less the repurchase of approximately 360,000 shares of Common Stock under the
Company's buyback program during 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at June 30, 1999 totaled $4.1 million and represented
approximately 21% of the Company's total assets of $19.1 million. Cash flows
from operating activities for the second quarter of 1999 totaled $788,000
compared to $332,000 during the second quarter of 1998, an increase of
approximately 137%. Cash flows from operating activities for the first six
months of 1999 were comprised of the Company's net loss of ($209,000), adjusted
for non-cash costs of depreciation, gaming license expense and intangible asset
amortization of $1.4 million, $76,000 related to a decrease in the provision for
uncollectible receivables, a gain on receipt of treasury stock, reduced by net
changes in operating assets and liabilities of approximately ($402,000).
Net cash used in investing activities for the first half of 1999 totaled
$154,000, compared to $1,706,000 in 1998. Cash used in investing activities
consist primarily of $655,000, related to property and equipment purchases,
offset by $600,000 from the repayment of notes receivable. Cash flows from
investing activities in the first quarter of 1998 were primarily related to
capital and intangible asset expenditures.
Cash used in financing activities for the first half of 1999 totaled $492,000.
Cash used related to financing activities in 1999 included $806,000 of net cash
paid to reduce notes payable and capital lease obligations. Cash received
relating to financing activities included $315,000 primarily related to stock
options exercised during the first quarter 1999, and stock purchases under the
Employee Stock Purchase Plan. Cash flows from financing activities in the first
quarter of 1998 netted to a nominal amount.
At June 30, 1999 the Company had $19.1 million in total assets with total
liabilities of $3.0 million and $16.2 million of shareholders equity. Total
assets include $4.1 million in cash, $1.3 million of net accounts and notes
receivable, $6.4 million of property and equipment, $4.4 million of intangible
assets, $2.3 million in prepaid video gaming licenses, and $578,000 of other
assets. Total liabilities primarily consist of notes and capital lease
obligations of $2.0 million.
17
<PAGE>
AMERICAN BINGO & GAMING CORP.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net property and equipment totaled $6.4 million at the end of June 30, 1999.
The majority of property and equipment is comprised of video gaming machines.
Intangible assets, net of accumulated amortization, totaled $4.4 million at the
end of June 30, 1999 and were primarily comprised of goodwill associated with
the Company's acquisition of seven bingo centers in Texas during 1998.
Current liabilities totaled $1.4 million and long-term liabilities totaled $1.6
million at the end of June 30, 1999. The majority of liabilities were comprised
of $2.0 million of notes payable and capital lease obligations related to the
Company's acquisition of video gaming machines.
Current assets totaled $6.7 million at June 30, 1999, providing the company with
working capital of approximately $5.4 million and a current ratio of almost 5 to
1. Net accounts receivable totaled $520,000 and were primarily comprised of
operating receivables and short-term advances to video gaming route location
owners. Total current notes receivable, less provision for doubtful
collectability, totaled $520,000 at June 30, 1999. Note receivables are
primarily comprised of a note balance due on the Company's sale of a Florida
bingo center at the end of 1995, and notes receivable with related parties.
Total prepaid licenses of $2.3 million represent the Company's portfolio of
video gaming licenses for VGM's in South Carolina. Video gaming parts and bingo
supplies are expensed at the time of purchase, therefore no inventory is
recorded for operations.
The Company's ongoing operational funding requirements include video gaming
licenses on new and existing machines which are funded by cash at a cost of
$4,000 for a two year license and is required for each of the Company's VGM's.
The operating lease obligations of the Company's bingo segment will continue to
use cash derived from operations and the Company expects to renegotiate existing
leases, where possible, and to structure future lease obligations consistent
with expected future cash flows from the leased center's operations and fair
market rental rates.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify potential problems that could be caused by the Year 2000 issue. 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 1900 rather than year 2000, which could result in a
system failure or miscalculation. Management currently believes that the Year
2000 issue will not pose significant operational problems for the Company's
computer systems or 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 issue, there can
be no assurance that any one or more such failures would not have a material
adverse effect on the Company. The Company has completed the process of
certifying that the vendors and suppliers of its critical components and
services are Year 2000. The Company intends to rely on Year 2000 compliance on
the part of public utility providers and all state and local regulatory
agencies, although non-compliance by those entities could materially adversely
affect the Company's financial condition and operations.
18
<PAGE>
AMERICAN BINGO & GAMING CORP.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of material pending legal proceedings, see Note 9 to the
unaudited Consolidated Financial Statements included in Part I hereof, which
Note 9 is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 27, 1999, at which
meeting all seven of management's nominees for the Board of Directors were
elected for a one-year term. The individuals elected were as follows: Kenneth
R. Adams, receiving 7,619,322 votes for and 1,627,127 votes against, with no
votes abstaining; James L. Hall receiving 7,619,322 votes for and 1,627,127
votes against, with no votes abstaining; George M. Harrison, Jr. receiving
7,619,322 votes for and 1,627,127 votes against, with no votes abstaining; Andre
M. Hilliou receiving 7,619,322 votes for and 1,627,127 votes against, with no
votes abstaining; Michael W. Mims receiving 7,426,339 votes for and 1,820,110
votes against, with no votes abstaining; Grover C. Seaton, III receiving
7,435,799 votes for and 1,810,650 votes against, with no votes abstaining; and
A. Joe Willis receiving 7,617,014 votes for and 1,629,435 votes against, with no
votes abstaining.
At the meeting, management's proposal to approve the Company's Stock Option Plan
was approved with 2,949,001 votes for, 2,596,060 votes against and 39,416 votes
abstaining. Management's proposal to ratify the appointment of King Griffin &
Adamson P.C. as independent auditors for the 1999 fiscal year was also approved
with 7,569,701 votes for, 1,552,168 votes against and 124,580 votes abstaining.
Management had solicited votes to amend the Company's Certificate of
Incorporation and Bylaws to divide the Board of Directors into two classes. At
the meeting, management made a motion to table this proposal, which motion to
table was approved with 3,027,310 votes for and 779,100 votes against, with no
votes abstaining. Management had also solicited votes to amend the Company's
Certificate of Incorporation to include stockholder licensing provisions. At
the meeting, management made a motion to table this proposal, which motion to
table was approved with 3,051,810 votes for and 754,600 votes against, with no
votes abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
3.1 Amended and Restated Bylaws of the Company.
10.1 American Bingo & Gaming Corp. Stock Option Plan.
10.2 Severance Agreement with James L. Hall dated July 1, 1999 (incorporated
by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by
the Company on July 22, 1999).
10.3 Severance Agreement with George M. Harrison Jr. dated July 2, 1999
(incorporated by reference to Exhibit 10.2 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
10.4 Severance Agreement with Andre M. Hilliou dated July 2, 1999
(incorporated by reference to Exhibit 10.3 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
10.5 Severance Agreement with Michael W. Mims dated July 2, 1999
(incorporated by reference to Exhibit 10.4 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
10.6 Severance Agreement with Grover C. Seaton III dated June 30, 1999
(incorporated by reference to Exhibit 10.5 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
10.7 Severance Agreement with Richard M. Kelley dated July 2, 1999
(incorporated by reference to Exhibit 10.6 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
10.8 Severance Agreement with Nancy J. Pollick dated July 2, 1999
(incorporated by reference to Exhibit 10.7 of the Current Report on
Form 8-K filed by the Company on July 22, 1999).
19
<PAGE>
AMERICAN BINGO & GAMING CORP.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
27.1 Financial Data Schedule (for SEC use only).
(B) REPORTS ON FORM 8-K.
There were no reports on Form 8-K filed by the Company during the quarter ended
June 30, 1999.
20
<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 10, 1999
By:
/s/ Daniel W. Deloney
------------------------
Daniel W. Deloney
Chairman of the Board, President
and Chief Executive Officer
/s/ Larry D. Kasufkin
------------------------
Larry D. Kasufkin
Secretary and Treasurer
21
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
- ------ ----------- -----------
<C> <S> <C>
3.1 Amended and Restated Bylaws of the Company.
10.1 American Bingo & Gaming Corp. Stock Option Plan.
10.2 Severance Agreement with James L. Hall dated July 1, 1999 (incorporated by reference to
Exhibit 10.1 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.3 Severance Agreement with George M. Harrison, Jr. dated July 2, 1999 (incorporated by
reference to Exhibit 10.2 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.4 Severance Agreement with Andr M. Hilliou dated July 2, 1999 (incorporated by reference
to Exhibit 10.3 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.5 Severance Agreement with Michael W. Mims dated July 2, 1999 (incorporated by reference
to Exhibit 10.4 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.6 Severance Agreement with Grover C. Seaton III dated June 30, 1999 (incorporated by
reference to Exhibit 10.5 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.7 Severance Agreement with Richard M. Kelley dated July 2, 1999 (incorporated by
reference to Exhibit 10.6 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
10.8 Severance Agreement with Nancy J. Pollick dated July 2, 1999 (incorporated by reference
to Exhibit 10.7 of the Current Report on Form 8-K filed by the Company on July 22, 1999).
27.1 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE>
EXHIBIT 3.1
-----------
AMENDED AND RESTATED
BYLAWS
OF
AMERICAN BINGO & GAMING CORP.
(5/27/99)
<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.
1
<PAGE>
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.
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
2
<PAGE>
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.
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
3
<PAGE>
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.
(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.
4
<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
5
<PAGE>
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.
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 three nor more than eleven 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
6
<PAGE>
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.
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
7
<PAGE>
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.
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.
8
<PAGE>
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.
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.
9
<PAGE>
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
10
<PAGE>
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.
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
11
<PAGE>
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.
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
12
<PAGE>
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.
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.
13
<PAGE>
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.
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
14
<PAGE>
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.
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.
15
<PAGE>
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.
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.
16
<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 May 27, 1999.
IN WITNESS WHEREOF, I have signed this certification as of the 27th day of
May, 1999.
/s/ Marie T. Pierson
--------------------------------
Marie T. Pierson, Secretary
17
<PAGE>
EXHIBIT 10.1
AMERICAN BINGO & GAMING CORP.
STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
"Award" shall mean a grant of Restricted Stock or an SAR.
-----
"Award Agreement" shall mean an Agreement between the Company and a
----------------
Grantee relating to a grant of Restricted Stock or an SAR.
"Board" shall mean the Board of Directors of the Company.
-----
"Cause" shall mean theft or destruction of property of the Company, a
-----
Parent, or a Subsidiary, disregard of Company rules or policies, or conduct
evincing willful or wanton disregard of the interests of the Company. Such
determination shall be made by the Committee based on information presented by
the Company and the Employee and shall be final and binding on all parties
hereto.
"Change in Control" shall mean the occurrence of any of the following
------------------
events: (i) any individual or entity: (A) directly or indirectly acquiring
beneficial ownership of 35% or more of the Stock of the Company outstanding from
time to time; or (B) making a tender offer for 35% or more of the Stock of the
Company outstanding; or (ii) individuals who constitute a majority of the
Company's Board of Directors on the date of the adoption of this Plan by the
Board of Directors, or individuals elected or nominated directly or indirectly
by at least a majority of such current directors, no longer constitute a
majority of the Company's Board of Directors; or (iii) a merger, consolidation,
asset sale or other transaction involving the sale or other transfer of all or
substantially all of the business or assets of the Company.
"Code" shall mean the United States Internal Revenue Code of 1986,
----
including effective date and transition rules (whether or not codified). Any
reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of future law.
"Committee" shall mean a committee of at least two Directors appointed
---------
from time to time by the Board, having the duties and authority set forth herein
in addition to any other authority granted by the Board; provided, however, that
with respect to any Options or Awards granted to an individual who is also a
Section 16 Insider, the Committee shall consist of at least two Directors (who
need not be members of the Committee with respect to Options or Awards granted
to any other individuals) who are Non-Employee Directors, and all authority and
discretion shall be exercised by such Non-Employee Directors and references
herein to the "Committee" shall mean such insofar as any actions or
determinations of the Committee shall relate to or affect Options or Awards made
to or held by any Section 16 Insider. At any time that the Board shall not have
appointed a committee as described above, any reference herein to the Committee
shall mean a reference to the Board.
"Company" shall mean American Bingo & Gaming Corp., a Delaware
-------
corporation.
"Director" shall mean a member of the Board and any person who is an
--------
advisory or honorary director of the Company if such person is considered a
director for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Employee" shall mean an employee of the Employer.
--------
"Employer" shall mean the corporation that employs a Grantee.
--------
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any
-------------
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may
---------------
purchase a share of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales price
-----------------
of the Stock, regular way, on such date on the securities exchange having the
greatest volume of trading in the Stock during the thirty-day period preceding
the day the value is to be determined or, if such exchange was not open for
trading on such date, the next preceding date on which it was open; (ii) if the
Stock is not traded on any securities exchange, the average of the closing high
bid and low asked prices of the Stock on the over-the-counter market on the day
such value is to be determined, or in the absence of closing bids on such day,
the closing bids on the next preceding day on which there were bids; or (iii) if
the Stock also is not traded on the over-the-counter market, the fair market
value as determined in good faith by the Board or the Committee based on such
relevant facts as may be available to the Board, which may include, but not be
limited to, opinions of independent experts, the price at which recent sales
have been made, the book value of the Stock, and the Company's current and
future earnings.
"Grantee" shall mean a person who is an Optionee or a person who has
-------
received an Award of Restricted Stock or an SAR.
"Incentive Stock Option" shall mean an option to purchase any stock of
----------------------
the Company, which complies with and is subject to the terms, limitations and
conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
"Non-Employee Director" shall have the meaning set forth in Rule 16b-3
---------------------
under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
"Officer" shall mean a person who constitutes an officer of the
-------
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Option" shall mean an option, whether or not an Incentive Stock
------
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
"Optionee" shall mean a person to whom an Option has been granted
--------
hereunder.
"Parent" shall mean any corporation (other than the Employer) in an
------
unbroken chain of corporations ending with the Employer if, at the time of the
grant (or modification) of the Option, each of the corporations other than the
Employer owns stock possessing 50 percent or more of the total combined voting
power of the classes of stock in one of the other corporations in such chain.
"Permanent and Total Disability" shall have the same meaning as given
-------------------------------
to that term by Code Section 22(e)(3) and any regulations or rulings promulgated
thereunder.
"Plan" shall mean the American Bingo & Gaming Corp. Stock Option Plan,
----
the terms of which are set forth herein.
"Purchasable" shall refer to Stock which may be purchased by an
-----------
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth
-----------------------------------
in the Code or in the Employee Retirement Income Security Act of 1974, or the
rules and regulations promulgated under the Code or such Act.
"Reload Option" shall have the meaning set forth in Section 6.8
--------------
hereof.
"Restricted Stock" shall mean Stock issued, subject to restrictions,
-----------------
to a Grantee pursuant to Article VII hereof.
"SAR" means a stock appreciation right.
---
"SAR Exercise Price" means the base value established by the Committee
------------------
for a SAR on the date the SAR is granted and which is used in determining the
amount of benefit, if any, paid to a Grantee.
"Section 16 Insider" shall mean any person who is subject to the
--------------------
provisions of Section 16 of the Exchange Act.
"Stock" shall mean the Common Stock, $.001 par value per share, of the
-----
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for shares of a different stock or securities of the
Company or some other entity, such other stock or securities.
"Stock Option Agreement" shall mean an agreement between the Company
------------------------
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as Exhibit A (which form may be varied by the
Committee in granting an Option).
"Subsidiary" shall mean any corporation (other than the Employer) in
----------
an unbroken chain of corporations beginning with the Employer if, at the time of
the grant (or modification) of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "American Bingo & Gaming
----
Corp. Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of
-------
the Company, its Subsidiaries and its shareholders by affording certain
employees, Officers and Directors of the Company and its Subsidiaries, as well
as key consultants and advisors to the Company or any Subsidiary, an opportunity
to acquire or increase their proprietary interests in the Company. The
objective of the issuance of the Options and Awards is to promote the growth and
profitability of the Company and its Subsidiaries because the Grantees will be
provided with an additional incentive to achieve the Company's objectives
through participation in its success and growth and by encouraging their
continued association with or service to the Company.
2.3 Effective Date. The Plan shall become effective on February 26,
---------------
1999; provided, however, that the Plan shall terminate, and all Options or
Awards theretofore granted or awarded shall become void and may not be
exercised, on June 30, 1999, if the shareholders of the Company shall not by
that date have approved the Plan's adoption.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company which shall include, but not be limited to,
Directors, Officers and employees, including but not limited to executive
personnel, of the Company or any Subsidiary, as well as key consultants and
advisors to the Company or any Subsidiary.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered
----------------------------------
by the Committee. The Committee shall select one of its members as its Chairman
and shall hold its meetings at such times and places as it may determine. The
Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it may deem necessary. The
Committee shall have the power to act by unanimous written consent in lieu of a
meeting, and to meet telephonically. In administering the Plan, the Committee's
actions and determinations shall be binding on all interested parties. The
Committee shall have the power to grant Options or Awards in accordance with the
provisions of the Plan and may grant Options and Awards singly, in combination,
or in tandem. Subject to the provisions of the Plan, the Committee shall have
the discretion and authority to determine those individuals to whom Options or
Awards will be granted and whether such Options shall be accompanied by the
right to receive Reload Options, the number of shares of Stock subject to each
Option or Award, such other matters as are specified herein, and any other terms
and conditions of a Stock Option Agreement or Award Agreement. The Committee
shall also have the discretion and authority to delegate to any Officer its
powers to grant Options or Awards under the Plan to any person who is an
employee of the Company but not an Officer or Director. To the extent not
inconsistent with the provisions of the Plan, the Committee may give a Grantee
an election to surrender an Option or Award in exchange for the grant of a new
Option or Award, and shall have the authority to amend or modify an outstanding
Stock Option Agreement or Award Agreement, or to waive any provision thereof,
provided that the Grantee consents to such action.
4.2 Interpretation; Rules. Subject to the express provisions of the
----------------------
Plan, the Committee also shall have complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option and Award Agreement, and to make
all other determinations necessary or advisable for the administration of the
Plan, including, without limitation, the amending or altering of the Plan and
any Options or Awards granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of
-------------
the Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option or Award granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
--------------
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of the
Committee.
4.5 Company Assistance. The Company shall supply full and timely
-------------------
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary in
the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant to
-----------
the provisions of Section 5.2 hereof, the maximum number of shares of Stock that
may be issued hereunder shall be 750,000. Any or all shares of Stock subject to
the Plan may be issued in any combination of Incentive Stock Options,
non-Incentive Stock Options, Restricted Stock, or SARs, and the amount of Stock
subject to the Plan may be increased from time to time in accordance with
Article X. Shares subject to an Option or issued as an Award may be either
authorized and unissued shares or shares issued and later acquired by the
Company. The shares covered by any unexercised portion of an Option that has
terminated for any reason, or any forfeited portion of an Award, may again be
optioned or awarded under the Plan, and such shares shall not be considered as
having been optioned or issued in computing the number of shares of Stock
remaining available for option or award hereunder.
5.2 Antidilution.
------------
(a) If (x) the outstanding shares of Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of merger, consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, or stock split or stock
dividend, (y) any spin-off, spin-out or other distribution of assets materially
affects the price of the Company's stock, or (z) there is any assumption and
conversion to the Plan by the Company of an acquired company's outstanding
option grants, then:
(i) the aggregate number and kind of shares of Stock for which
Options or Awards may be granted hereunder shall be adjusted proportionately by
the Committee; and
(ii) the rights of Optionees under outstanding Options and the
rights of the holders of Awards, shall be adjusted proportionately by the
Committee.
(b) If the Company is subject to a transaction in which it does
not survive, involving merger, consolidation, or acquisition of the stock or
substantially all the assets of the Company or other similar transaction, the
Committee, in its discretion, may:
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Stock Option or Award
Agreements regarding exercisability, that all such Options and SARs shall
terminate 30 days after the Committee gives written notice of the immediate
right to exercise all such Options and SARs and of the decision to terminate all
Options and SARs not exercised within such 30-day period, and that all
then-remaining restrictions pertaining to Awards under the Plan shall
immediately lapse; and/or
(ii) notify all Grantees that all Options or Awards granted under
the Plan shall be assumed by the successor corporation or substituted on an
equitable basis with options, SARs or restricted stock issued by such successor
corporation.
The Company shall be deemed not to have survived a transaction if pursuant
to such transaction the Company becomes a wholly-owned subsidiary of another
entity.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in Section 5.2(b), the provisions of such
Section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause all then-remaining restrictions pertaining to Awards
under the Plan to lapse, and shall cause every Option outstanding under the Plan
to terminate to the extent not exercised prior to the adoption of the plan of
dissolution or liquidation by the shareholders, provided that, notwithstanding
other provisions hereof, the Committee may declare all Options and SARs granted
under the Plan to be exercisable at any time on or before the fifth business day
following such adoption notwithstanding the provisions of the respective Stock
Option or Award Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of
this Section 5.2, and the manner of their application, shall be determined
solely by the Committee. The adjustments required under this Article V shall
apply to any successors of the Company and shall be made regardless of the
number or type of successive events requiring such adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan,
---------------------------
grant either Incentive Stock Options or Options which do not qualify as
Incentive Stock Options. Within the limitations provided in this Plan, both
types of Options may be granted to the same person at the same time, or at
different times, under different terms and conditions, as long as the terms and
conditions of each Option are consistent with the provisions of the Plan.
Without limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or any other factor
the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
--------------------------
evidenced by minutes of a meeting or the written consent of the Committee and by
a written Stock Option Agreement executed by the Company and the Optionee. The
terms of the Option, including the Option's duration, time or times of exercise,
exercise price, whether the Option is intended to be an Incentive Stock Option,
and whether the Option is to be accompanied by the right to receive a Reload
Option, shall be stated in the Stock Option Agreement. No Incentive Stock
Option may be granted more than ten years after the earlier to occur of the
effective date of the Plan or the date the Plan is approved by the Company's
shareholders.
Separate Stock Option Agreements may be used for Options intended to be
Incentive Stock Options and those not so intended, but any failure to use such
separate agreements shall not invalidate, or otherwise adversely affect the
Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an Incentive
---------------------
Stock Option to any person who, at the time the Incentive Stock Option is
granted:
(a) is not an employee of the Company or any of its Subsidiaries;
or
(b) owns or is considered to own stock possessing at least 10% of
the total combined voting power of all classes of stock of the Company or any of
its Parent or Subsidiary corporations; provided, however, that this limitation
shall not apply if at the time an Incentive Stock Option is granted the Exercise
Price is at least 110% of the Fair Market Value of the Stock subject to such
Option and such Option by its terms would not be exercisable after five years
from the date on which the Option is granted. For the purpose of this
subsection (b), a person shall be considered to own: (i) the stock owned,
directly or indirectly, by or for his or her brothers and sisters (whether by
whole or half blood), spouse, ancestors and lineal descendants; (ii) the stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
trust in proportion to such person's stock interest, partnership interest or
beneficial interest therein; and (iii) the stock which such person may purchase
under any outstanding options of the Employer or of any Parent or Subsidiary of
the Employer.
6.4 $100,000 Limitation. Except as provided below, the Committee shall
--------------------
not grant an Incentive Stock Option to, or modify the exercise provisions of
outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Employer and any Parent or Subsidiary of the
Employer, such that the aggregate Fair Market Value (determined as of the
respective dates of grant or modification of each option) of the stock with
respect to which such Incentive Stock Options are exercisable for the first time
during any calendar year is in excess of $100,000 (or such other limit as may be
prescribed by the Code from time to time); provided that the foregoing
--------
restriction on modification of outstanding Incentive Stock Options shall not
preclude the Committee from modifying an outstanding Incentive Stock Option if,
as a result of such modification and with the consent of the Optionee, such
Option no longer constitutes an Incentive Stock Option; and provided that, if
the $100,000 limitation (or such other limitation prescribed by the Code)
described in this Section 6.4 is exceeded, the Incentive Stock Option, the
granting or modification of which resulted in the exceeding of such limit, shall
be treated as an Incentive Stock Option up to the limitation and the excess
shall be treated as an Option not qualifying as an Incentive Stock Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to each
---------------
Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall not
be less than the Fair Market Value of the Stock as of the date the Option is
granted (or in the case of an Incentive Stock Option that is subsequently
modified, on the date of such modification). The Exercise Price of a
non-Incentive Stock Option shall not be less than 50% of the Fair Market Value
of the Stock on the date the Option is granted.
6.6 Exercise Period. The period for the exercise of each Option
----------------
granted hereunder shall be determined by the Committee, but the Stock Option
Agreement with respect to each Option intended to be an Incentive Stock Option
shall provide that such Option shall not be exercisable after the expiration of
ten years from the date of grant (or modification) of the Option. In addition,
no Option granted to a Section 16 Insider shall be exercisable prior to the
expiration of six months from the date such Option is granted, other than in the
case of the death or disability of the Optionee, and no Option shall be
exercisable prior to shareholder approval of the Plan.
6.7 Option Exercise.
----------------
(a) Unless otherwise provided in the Stock Option Agreement or
Section 6.6 hereof, an Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which have become
Purchasable under the provisions of the Option, but not at any time as to less
than 100 shares unless the remaining shares that have become so Purchasable are
less than 100 shares. The Committee shall have the authority to prescribe in
any Stock Option Agreement that the Option may be exercised only in accordance
with a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at
its principal office a written notice of exercise with respect to a specified
number of shares of Stock and (ii) payment to the Company at that office of the
full amount of the Exercise Price for such number of shares in accordance with
Section 6.7(c). If requested by an Optionee, an Option may be exercised with
the involvement of a stockbroker in accordance with the federal margin rules set
forth in Regulation T (in which case the certificates representing the
underlying shares will be delivered by the Company directly to the stockbroker).
(c) The Exercise Price is to be paid in full in cash upon the
exercise of the Option and the Company shall not be required to deliver
certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash, all or any portion of the Exercise
Price may be paid by tendering to the Company shares of Stock duly endorsed for
transfer and owned by the Optionee, or by authorization to the Company to
withhold shares of Stock otherwise issuable upon exercise of the Option, in each
case to be credited against the Exercise Price at the Fair Market Value of such
shares on the date of exercise (however, no fractional shares may be so
transferred, and the Company shall not be obligated to make any cash payments in
consideration of any excess of the aggregate Fair Market Value of shares
transferred over the aggregate Exercise Price); provided further, that the Board
may provide in a Stock Option Agreement (or may otherwise determine in its sole
discretion at the time of exercise) that, in lieu of cash or shares, all or a
portion of the Exercise Price may be paid by the Optionee's execution of a
recourse note equal to the Exercise Price or relevant portion thereof, subject
to compliance with applicable state and federal laws, rules and regulations.
(d) In addition to and at the time of payment of the Exercise
Price, the Optionee shall pay to the Company in cash the full amount of any
federal, state, and local income, employment, or other withholding taxes
applicable to the taxable income of such Optionee resulting from such exercise;
provided, however, that in the discretion of the Committee any Stock Option
Agreement may provide that all or any portion of such tax obligations, together
with additional taxes not exceeding the actual additional taxes to be owed by
the Optionee as a result of such exercise, may, upon the irrevocable election of
the Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until such
shares have been issued and transferred to the Optionee upon the exercise of the
Option.
6.8 Reload Options.
---------------
(a) The Committee may specify in a Stock Option Agreement (or may
otherwise determine in its sole discretion) that a Reload Option shall be
granted, without further action of the Committee, (i) to an Optionee who
exercises an Option (including a Reload Option) by surrendering shares of Stock
in payment of amounts specified in Sections 6.7(c) or 6.7(d) hereof, (ii) for
the same number of shares as are surrendered to pay such amounts, (iii) as of
the date of such payment and at an Exercise Price equal to the Fair Market Value
of the Stock on such date, and (iv) otherwise on the same terms and conditions
as the Option whose exercise has occasioned such payment, except as provided
below and subject to such other contingencies, conditions, or other terms as the
Committee shall specify at the time such exercised Option is granted; provided,
that the shares surrendered in payment as provided above must have been held by
the Optionee for at least six months prior to such surrender.
(b) Unless provided otherwise in the Stock Option Agreement, a
Reload Option may not be exercised by an Optionee (i) prior to the end of a
one-year period from the date that the Reload Option is granted, and (ii) unless
the Optionee retains beneficial ownership of the shares of Stock issued to such
Optionee upon exercise of the Option referred to above in Section 6.8(a)(i) for
a period of one year from the date of such exercise.
6.9 Non-Transferability of Option. No Option shall be transferable by
------------------------------
an Optionee other than by will or the laws of descent and distribution or, in
the case of non-Incentive Stock Options, pursuant to a Qualified Domestic
Relations Order, and no Option shall be transferable by an Optionee who is a
Section 16 Insider prior to shareholder approval of the Plan. During the
lifetime of an Optionee, Options shall be exercisable only by such Optionee (or
by such Optionee's guardian or legal representative, should one be appointed).
6.10 Termination of Employment or Service. The Committee shall have
---------------------------------------
the power to specify, with respect to the Options granted to a particular
Optionee, the effect upon such Optionee's right to exercise an Option of
termination of such Optionee's employment or service under various
circumstances, which effect may include immediate or deferred termination of
such Optionee's rights under an Option, or acceleration of the date at which an
Option may be exercised in full; provided, however, that in no event may an
Incentive Stock Option be exercised after the expiration of ten years from the
date of grant thereof.
6.11 Employment Rights. Nothing in the Plan or in any Stock Option
------------------
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the right
of the Company or any of its Subsidiaries to terminate such person's employment
at any time.
6.12 Certain Successor Options. To the extent not inconsistent with
---------------------------
the terms, limitations and conditions of Code section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article VI, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code section 424(a).
6.13 Effect of Change in Control. The Committee may determine, at the
---------------------------
time of granting an Option or thereafter, that such Option shall become
exercisable on an accelerated basis in the event that a Change in Control occurs
with respect to the Company (and the Committee shall have the discretion to
modify the definition of a Change in Control in a particular Option Agreement).
If, at any time, the Committee finds that there is a reasonable possibility
that, within six months or less, a Change in Control will occur with respect to
the Company, then the Committee may determine that all outstanding Options shall
be exercisable on an accelerated basis.
ARTICLE VII
RESTRICTED STOCK
7.1 Awards of Restricted Stock. The Committee may grant Awards of
-----------------------------
Restricted Stock, which shall be governed by an Award Agreement between the
Company and the Grantee. Each Award Agreement shall contain such restrictions,
terms, and conditions as the Committee may, in its discretion, determine, and
may require that an appropriate legend be placed on the certificates evidencing
the subject Restricted Stock.
Shares of Restricted Stock granted pursuant to an Award hereunder shall be
issued in the name of the Grantee as soon as reasonably practicable after the
Award is granted, provided that the Grantee has executed the Award Agreement
governing the Award, the appropriate blank stock powers and, in the discretion
of the Committee, an escrow agreement and any other documents which the
Committee may require as a condition to the issuance of such Shares. If a
Grantee shall fail to execute the foregoing documents within any time period
prescribed by the Committee, the Award shall be void. At the discretion of the
Committee, Shares issued in connection with an Award shall be deposited together
with the stock powers with an escrow agent designated by the Committee. Unless
the Committee determines otherwise and as set forth in the Award Agreement, upon
delivery of the Shares to the escrow agent, the Grantee shall have all of the
rights of a shareholder with respect to such Shares, including the right to vote
the Shares and to receive all dividends or other distributions paid or made with
respect to the Shares.
7.2 Non-Transferability. Until any restrictions upon Restricted Stock
-------------------
awarded to a Grantee shall have lapsed in a manner set forth in Section 7.3,
such shares of Restricted Stock shall not be transferable other than by will or
the laws of descent and distribution, or pursuant to a Qualified Domestic
Relations Order, nor shall they be delivered to the Grantee.
7.3 Lapse of Restrictions. Restrictions upon Restricted Stock awarded
----------------------
hereunder shall lapse at such time or times (but, with respect to any award to a
Grantee who is also a Section 16 Insider, not less than six months after the
date of the Award) and on such terms and conditions as the Committee may, in its
discretion, determine at the time the Award is granted or thereafter.
7.4 Termination of Employment. The Committee shall have the power to
---------------------------
specify, with respect to each Award granted to any particular Grantee, the
effect upon such Grantee's rights with respect to such Restricted Stock of the
termination of such Grantee's employment under various circumstances, which
effect may include immediate or deferred forfeiture of such Restricted Stock or
acceleration of the date at which any then-remaining restrictions shall lapse.
7.5 Treatment of Dividends. At the time an Award of Restricted Stock
------------------------
is made the Committee may, in its discretion, determine that the payment to the
Grantee of any dividends, or a specified portion thereof, declared or paid on
such Restricted Stock shall be (i) deferred until the lapsing of the relevant
restrictions and (ii) held by the Company for the account of the Grantee until
such lapsing. In the event of such deferral, there shall be credited at the end
of each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum determined by the Committee. Payment
of deferred dividends, together with interest thereon, shall be made upon the
lapsing of restrictions imposed on such Restricted Stock, and any dividends
deferred (together with any interest thereon) in respect of Restricted Stock
shall be forfeited upon any forfeiture of such Restricted Stock.
7.6 Delivery of Shares. Except as provided otherwise in Article IX
--------------------
below, within a reasonable period of time following the lapse of the
restrictions on shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such shares and such
shares shall be free of all restrictions hereunder.
7.7 Effect of Change in Control. The Committee may determine, at the
-----------------------------
time of granting Restricted Stock or thereafter, that such Restricted Stock
shall become fully vested in the event that a Change in Control occurs with
respect to the Company (and the Committee shall have the discretion to modify
the definition of a Change in Control in a particular Award Agreement). If, at
any time, the Committee finds that there is a reasonable possibility that,
within six months or less, a Change in Control will occur with respect to the
Company, then the Committee may determine that all outstanding Restricted Stock
shall vest on an accelerated basis.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 SAR Grants. The Committee, in its sole discretion, may grant to
-----------
any Grantee a SAR. The Committee may impose such conditions or restrictions on
the exercise of any SAR as it may deem appropriate, including, without
limitation, restricting the time of exercise of the SAR to specified periods as
may be necessary to satisfy the requirements of Rule 16b-3 of the Exchange Act.
8.2 Determination of Price. The SAR Exercise Price shall be
------------------------
established by the Committee in its sole discretion. The SAR Exercise Price
shall not be less than (i) 100% of the Fair Market Value of the Stock on the
date the SAR is granted for a SAR issued in tandem with an Incentive Stock
Option and (ii) 50% of the Fair Market Value of the Stock on the date the SAR is
granted for other SARs.
8.3 Exercise of a SAR. Upon exercise of a SAR, the Grantee shall be
--------------------
entitled, subject to the terms and conditions of this Plan and the Agreement, to
receive the excess for each share of Stock being exercised under the SAR of (i)
the Fair Market Value of such share of Stock on the date of exercise over (ii)
the SAR Exercise Price for such share of Stock.
8.4 Payment for a SAR. At the sole discretion of the Committee, the
--------------------
payment of such excess shall be made in (i) cash, (ii) shares of Stock, or (iii)
a combination of both. Shares of Stock used for this payment shall be valued at
their Fair Market Value on the date of exercise of the applicable SAR.
8.5 Status of a SAR under the Plan. Shares of Stock subject to an
-----------------------------------
Award of a SAR shall be considered shares of Stock which may be issued under the
Plan for purposes of Section 5.1 hereof, unless the Agreement making the Award
of the SAR provides that the exercise of such SAR results in the termination of
an unexercised Option for the same number of shares of Stock.
8.6 Termination of SARs. A SAR may be terminated as follows:
---------------------
(a) During the period of continuous employment with the Company,
Parent or Subsidiary, a SAR will be terminated only if it has been fully
exercised or it has expired by its terms.
(b) Upon termination of employment, the SAR will terminate upon
the earliest of (i) the full exercise of the SAR, (ii) the expiration of the SAR
by its terms, and (iii) not more than three months following the date of
employment termination; provided, however, should termination of employment (A)
result from the death or Permanent and Total Disability of the Grantee, the
period referenced in clause (iii) hereof shall be one year or (B) be for Cause,
the SAR will terminate on the date of employment termination. For purposes of
the Plan, a leave of absence approved by the Company shall not be deemed to be
termination of employment unless otherwise provided in the Agreement or by the
Company on the date of the leave of absence.
(c) Subject to the terms of the Agreement with the Grantee, if a
Grantee shall die or become subject to a Permanent and Total Disability prior to
the termination of employment with the Company, Parent or Subsidiary and prior
to the termination of a SAR, such SAR may be exercised to the extent that the
Grantee shall have been entitled to exercise it at the time of death or
disability, as the case may be, by the Grantee, the estate of the Grantee or the
person or persons to whom the SAR may have been transferred by will or by the
laws of descent and distribution.
(d) Except as otherwise expressly provided in the Agreement with
the Grantee, in no event will the continuation of the term of a SAR beyond the
date of termination of employment allow the Employee, or his beneficiaries or
heirs, to accrue additional rights under the Plan, have additional SARs
available for exercise, or receive a higher benefit than the benefit payable as
if the SAR had been exercised on the date of employment termination.
8.7 No Shareholder Rights. The Grantee shall have no rights as a
-----------------------
shareholder with respect to a SAR. In addition, no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or rights except as provided in Section 5.2 hereof.
8.8 Effect of Change in Control. The Committee may determine, at the
-----------------------------
time of granting an SAR or thereafter, that such SAR shall become fully vested
in the event that a Change in Control occurs with respect to the Company (and
the Committee shall have the discretion to modify the definition of a Change in
Control in a particular Award Agreement). If, at any time, the Committee finds
that there is a reasonable possibility that, within six months or less, a Change
in Control will occur with respect to the Company, then the Committee may
determine that all outstanding SARs shall become exercisable on an accelerated
basis.
ARTICLE IX
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, or deliver any certificate for shares of Restricted Stock
granted hereunder, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges
on which the Stock is then listed;
(b) The completion of any registration or other qualification of
such shares which the Committee shall deem necessary or advisable under any
federal or state law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any
federal or state governmental agency or body which the Committee shall determine
to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Board from time to time may establish for reasons
of administrative convenience.
Stock certificates issued and delivered to Grantees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant to
applicable federal and state securities laws.
ARTICLE X
TERMINATION AND AMENDMENT
10.1 Termination and Amendment. The Board may at any time terminate
---------------------------
the Plan, and may at any time and from time to time and in any respect amend the
Plan; provided, however, that the Board (unless its actions are approved or
ratified by the shareholders of the Company within twelve months of the date
that the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant
to Incentive Stock Options under the Plan or materially increase the number of
shares of Stock subject to the Plan, in each case except as contemplated in
Section 5.2 hereof;
(b) Change the class of employees eligible to receive Incentive
Stock Options that may participate in the Plan or materially change the class of
persons that may participate in the Plan; or
(c) Otherwise materially increase the benefits accruing to
participants under the Plan.
10.2 Effect on Grantee's Rights. No termination, amendment, or
-----------------------------
modification of the Plan shall affect adversely a Grantee's rights under a Stock
Option Agreement or Award Agreement without the consent of the Grantee or his
legal representative.
ARTICLE XI
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees, Officers or Directors of the Company or any of
its Subsidiaries.
ARTICLE XII
MISCELLANEOUS
12.1 Replacement or Amended Grants. At the sole discretion of the
--------------------------------
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or Awards or accept the surrender of outstanding Options or
Awards and grant new Options or Awards in substitution for them. However no
modification of an Option or Award shall adversely affect a Grantee's rights
under a Stock Option Agreement or Award Agreement without the consent of the
Grantee or his legal representative.
12.2 Forfeiture for Competition. If a Grantee provides services to a
----------------------------
competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise, such
services being of a nature that can reasonably be expected to involve the skills
and experience used or developed by the Grantee while an Employee, then that
Grantee's rights under any Options outstanding hereunder shall be forfeited and
terminated, and any shares of Restricted Stock held by such Grantee subject to
remaining restrictions shall be forfeited, subject in each case to a
determination to the contrary by the Committee.
12.3 Plan Binding on Successors. The Plan shall be binding upon the
-----------------------------
successors and assigns of the Company.
12.4 Singular, Plural; Gender. Whenever used herein, nouns in the
--------------------------
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
12.5 Headings, etc., Not Part of Plan. Headings of Articles and
-------------------------------------
Sections hereof are inserted for convenience and reference; they do not
constitute part of the Plan.
12.6 Interpretation. With respect to Section 16 Insiders, transactions
--------------
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Plan administrators fails to so comply, it shall be
deemed void to the extent permitted by law and deemed advisable by the Plan
administrators.
* * * * *
<PAGE>
Exhibit A to American Bingo & Gaming Corp. Stock Option Plan
AMERICAN BINGO & GAMING CORP.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into as of this
______ day of __________________, ________, by and between American Bingo &
Gaming Corp. (the "Company") and _________________ (the "Optionee").
WHEREAS, on February 26, 1999, the Board of Directors of the Company
adopted a stock option plan known as the "American Bingo & Gaming Corp. Stock
Option Plan" (the "Plan"), and recommended that the Plan be approved by the
Company's shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in [the employ of]/[service to] the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as [an employment incentive]/[a service incentive] and to
encourage stock ownership, and also in consideration of the mutual covenants
contained herein, the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
-----------------------
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan has
been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations
-----------------
and conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock, $.001 par value per share (the "Stock"), set forth on
Schedule A attached hereto and incorporated herein by reference. The Option
shall be exercisable in the amounts and at the time specified on Schedule A.
The Option shall expire and shall not be exercisable on the date specified on
Schedule A or on such earlier date as determined pursuant to Section 8, 9, or 10
hereof. Schedule A states whether the Option is intended to be an Incentive
Stock Option.
3. Purchase Price. The price per share to be paid by the Optionee for
---------------
the shares subject to this Option (the "Exercise Price") shall be as specified
on Schedule A, which price shall be an amount not less than the Fair Market
Value of a share of Stock as of the Date of Grant (as defined in Section 11
below) if the Option is an Incentive Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least
---------------
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. In the event this Option is not exercised
with respect to all or any part of the shares subject to this Option prior to
its expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Option Non-Transferable. No Option shall be transferable by an
------------------------
Optionee other than by will or the laws of descent and distribution or, in the
case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations
Order, and no Option shall be transferable by an Optionee who is a Section 16
Insider prior to shareholder approval of the Plan. During the lifetime of an
Optionee, Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
------------------------------
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice of
Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 13 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee and duly endorsed or accompanied by stock
transfer powers having a Fair Market Value equal to the total Exercise Price
applicable to such shares purchased hereunder, or (iii) a certified or cashier's
check accompanied by the number of shares of Stock whose Fair Market Value when
added to the amount of the check equals the total Exercise Price applicable to
such shares purchased hereunder. Upon receipt of any such notice and
accompanying payment, and subject to the terms hereof, the Company agrees to
issue to the Optionee or the Optionee's administrators, executors or personal
representatives, as the case may be, stock certificates for the number of shares
specified in such notice registered in the name of the person exercising this
Option.
7. Adjustment in Option. The number of Shares subject to this Option,
---------------------
the Exercise Price and other matters are subject to adjustment during the term
of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment. [Revise if for consulting arrangement.]
---------------------------
(a) Except as otherwise specified in Schedule A hereto, in the
event of the termination of the Optionee's employment with the Company or any of
its Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the Optionee
may exercise this Option at any time within 30 days after such termination to
the extent of the number of shares which were Purchasable hereunder at the date
of such termination.
(b) Except as specified in Schedule A attached hereto, in the
event of a termination of the Optionee's employment that is either (i) for cause
or (ii) voluntary on the part of the Optionee and without the written consent of
the Company, this Option, to the extent not previously exercised, shall
terminate immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A
hereto, in the event of the retirement of the Optionee at the normal retirement
date as prescribed from time to time by the Company or any Subsidiary, the
Optionee shall continue to have the right to exercise any Options for shares
which were Purchasable at the date of the Optionee's retirement [provided that,
on the date which is three months after the date of retirement, the Options will
become void and unexercisable unless on the date of retirement the Optionee
enters into a noncompete agreement with American Bingo & Gaming Corp. and
continues to comply with such noncompete agreement]. This Option does not
confer upon the Optionee any right with respect to continuance of employment by
the Company or by any of its Subsidiaries. This Option shall not be affected by
any change of employment so long as the Optionee continues to be an employee of
the Company or one of its Subsidiaries.
9. Disabled Optionee. In the event of termination of
------------------
[employment]/[consulting services] because of the Optionee's becoming a Disabled
Optionee, the Optionee (or his or her personal representative) may exercise this
Option at any time within three months after such termination to the extent of
the number of shares which were Purchasable hereunder at the date of such
termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A
-------------------
with respect to the rights of the Optionee upon termination of
[employment]/[consulting services] under Section 8(a) above, in the event of the
Optionee's death while [employed by]/[serving] the Company or any of its
Subsidiaries or within three months after a termination of such
[employment]/[consulting services](if such termination was neither (i) for cause
nor (ii) voluntary on the part of the Optionee and without the written consent
of the Company), the appropriate persons described in Section 6 hereof or
persons to whom all or a portion of this Option is transferred in accordance
with Section 5 hereof may exercise this Option at any time within a period
ending on the earlier of (a) the last day of the three month period following
the Optionee's death or (b) the expiration date of this Option. If the Optionee
was [an employee of]/[a consultant to] the Company at the time of death, this
Option may be so exercised to the extent of the number of shares that were
Purchasable hereunder at the date of death. If the Optionee's
[employment]/[consulting services] terminated prior to his or her death, this
Option may be exercised only to the extent of the number of shares covered by
this Option which were Purchasable hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors
---------------
of the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
----------------------------------
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate any law or any rule, regulation, order or
consent decree of any regulatory authority (including without limitation the
Securities and Exchange Commission) having jurisdiction over the affairs of the
Company. The Optionee agrees that he or she will provide the Company with such
information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section 12.
13. Miscellaneous.
-------------
(a) This Agreement shall be binding upon the parties hereto and
their representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be
governed by the laws of, the State of South Carolina.
(c) Any requests or notices to be given hereunder shall be deemed
given, and any elections or exercises to be made or accomplished shall be deemed
made or accomplished, upon actual delivery thereof to the designated recipient,
or three days after deposit thereof in the United States mail, registered,
return receipt requested and postage prepaid, addressed, if to the Optionee, at
the address set forth below and, if to the Company, to the executive offices of
the Company at 1440 Charleston Highway, West Columbia, SC 29169.
(d) This Agreement may not be modified except in writing executed
by each of the parties hereto.
IN WITNESS WHEREOF, this Stock Option Agreement has been executed on
behalf of the Company and the Optionee has executed this Stock Option Agreement,
all as of the day and year first above written.
AMERICAN BINGO & GAMING CORP. OPTIONEE
By: Signature:
Name: Name:
Title: Address:
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
AMERICAN BINGO & GAMING CORP.
AND
Dated:
1. Number of Shares Subject to Option: Shares.
---------------------------------------
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
------------ -- --------------------------------
3. Option Exercise Price: $ per Share.
-----------------------
4. Date of Grant:
---------------
5. Option Vesting Schedule:
-------------------------
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof
( ) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number of shares:
No. of Shares Vesting Date
--------------- -------------
6. Option Exercise Period:
------------------------
Check One:
( ) All options expire and are void unless exercised on or before
, .
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
--------------- ----------------
7. Effect of Termination of Employment of Optionee (if different from that
-------------------------------------------------
set forth in Sections 8 and 10 of the Stock Option Agreement):
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies American Bingo & Gaming Corp. (the
"Company") of this election to exercise the undersigned's stock option to
purchase shares of the Company's common stock, $.001 par
value per share (the "Common Stock"), pursuant to the Stock Option Agreement
(the "Agreement") between the undersigned and the Company dated. Accompanying
this Notice is (1) a certified or cashier's check in the amount of $ payable to
the Company, and/or (2) _______________ shares of the Company's Common Stock
presently owned by the undersigned and duly endorsed or accompanied by stock
transfer powers, having an aggregate Fair Market Value (as defined in the
American Bingo & Gaming Corp. Stock Option Plan) as of the date hereof of
$__________________, such amounts being equal, in the aggregate, to the purchase
price per share set forth in Section 3 of the Agreement multiplied by the number
of shares being purchased hereby (in each instance subject to appropriate
adjustment pursuant to Section 5.2 of the Agreement).
IN WITNESS WHEREOF, the undersigned has set his/her hand and seal,
this _____ day of ______________, _______.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
Signature:
Name:
Position (if other than Optionee):
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4095584
<SECURITIES> 0
<RECEIVABLES> 1311413
<ALLOWANCES> (301927)
<INVENTORY> 0
<CURRENT-ASSETS> 6733744
<PP&E> 12369856
<DEPRECIATION> (5982071)
<TOTAL-ASSETS> 19132773
<CURRENT-LIABILITIES> 1371531
<BONDS> 0
<COMMON> 10177
0
0
<OTHER-SE> 16145877
<TOTAL-LIABILITY-AND-EQUITY> 19132773
<SALES> 7171772
<TOTAL-REVENUES> 7171772
<CGS> 0
<TOTAL-COSTS> 7378797
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131963
<INCOME-PRETAX> 1910
<INCOME-TAX> 210950
<INCOME-CONTINUING> (209040)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (209040)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
