SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT, dated as of July 31, 1997, by and between
AMERICAN BINGO & GAMING CORP. a Delaware corporation, with headquarters located
at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and
_________________, an individual who resides in ______________________ (the
"Buyer").
W I T N E S S E T H:
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WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of convertible preferred stock of the
Company which will be convertible into shares of Common Stock, $.001 par value
(the "Common Stock"), of the Company and in connection therewith the Company is
to issue to the Buyer a warrant to purchase shares of Common Stock as provided
in this Agreement; and
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act");
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(A) SUBSCRIPTION. The Buyer hereby agrees to purchase from the Company
the number of shares (the "Initial Preferred Shares") of Series A Convertible
Preferred Stock, $.01 par value (the "Preferred Stock"), of the Company set
forth on the signature page of this Agreement, having the terms and conditions
as set forth in the form of Certificate of Designations of the Series A
Convertible Preferred Stock attached hereto as Annex I (the "Certificate of
Designations") at the price per share and for the aggregate purchase price set
forth on the signature page of this Agreement. The purchase price for the
Initial Preferred Shares shall be payable in United States Dollars. In
connection with the purchase of the Initial Preferred Shares by the Buyer, the
Company shall issue to the Buyer at the closing on the Closing Date (as defined
herein) a warrant in the form attached hereto as Annex II (the "Warrant") to
purchase _____________ shares of Common Stock (subject to adjustment as provided
in the Warrant). The additional shares of Preferred Stock issuable pursuant to
Section 2(c) of the Registration Rights Agreement, the form of which is attached
hereto as Annex III (the "Registration Rights Agreement"), are referred to
herein as the "Additional Preferred Shares". The Initial Preferred Shares and
the Additional Preferred Shares are referred to herein collectively as the
"Preferred Shares." The shares of Common Stock issuable upon conversion of the
Preferred Shares are referred to herein as the "Conversion Shares." The shares
of Common Stock issuable pursuant to Section 5 of the Certificate of
Designations as a dividend on the Preferred Shares are referred to herein as the
"Dividend Shares". The shares of Common Stock issuable upon conversion of the
Warrant are referred to herein as the "Warrant Shares." The Common Shares, the
Dividend Shares and the Warrant Shares are referred to herein collectively as
the "Common Shares". The Common Shares and the Preferred Shares are referred to
herein collectively as the "Shares." The Shares and the Warrant are referred to
herein collectively as the "Securities."
(B) FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Initial Preferred Shares by delivering good funds in United States Dollars to
the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex IV (the "Joint Escrow Instructions").
Such delivery of funds shall be made against delivery by the Company of the
certificates for the Initial Preferred Shares and the Warrant registered in the
name of the Buyer. Promptly following payment by the Buyer to the Escrow Agent
of the purchase price of the Initial Preferred Shares, but in any event prior to
the Closing Date, the Company shall deliver certificates for the Initial
Preferred Shares and the Warrant, registered in the name of the Buyer, to the
Escrow Agent. The certificates for the Initial Preferred Shares and the Warrant
shall be delivered by the Company to the Escrow Agent on a delivery against
payment basis at the closing. By signing this Agreement, the Buyer and the
Company each agrees to all of the terms and conditions of, and becomes a party
to, the Joint Escrow Instructions, all of the provisions of which are
incorporated herein by this reference as if set forth in full. As used in this
Agreement, the term "Business Day" means any day other than a Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(C) METHOD OF PAYMENT. Payment of the purchase price for the Preferred
Shares shall be made by wire transfer of funds to:
Citibank, N.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA#▇▇▇▇▇▇▇▇▇
For credit to A/C#_____________
For credit to the account of ___________________________
Reference: ___________/American Bingo
Not later than 4:00 p.m., New York City time, on the date which is two Business
Days after the Company shall have accepted this Agreement and returned a signed
counterpart of this Agreement to the Buyer or its legal counsel, the Buyer shall
deposit with the Escrow Agent the aggregate purchase price for the Initial
Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
(A) PURCHASE FOR INVESTMENT. The Buyer is purchasing the Preferred
Shares and acquiring the Warrant for its own account for investment only and not
with a view towards the public sale or distribution thereof;
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(B) ACCREDITED INVESTOR. The Buyer is an "accredited investor" as that
term is defined in Rule 501 of the General Rules and Regulations under the 1933
Act by reason of Rule 501(a)(3);
(C) REOFFERS AND RESALES. All subsequent offers and sales of the
Shares by the Buyer shall be made pursuant to registration of the Shares being
offered and sold under the 1933 Act or pursuant to an exemption from
registration;
(D) COMPANY RELIANCE. The Buyer understands that the Initial Preferred
Shares are being offered and sold, the Warrant is being issued, and the Common
Shares and the Additional Preferred Shares are being offered, to it in reliance
on specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the truth
and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Initial Preferred Shares and the Warrant
and to receive an offer of the Common Shares and the Additional Preferred
Shares;
(E) INFORMATION PROVIDED. The Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Initial Preferred Shares and the issuance of the Warrant and the offer of the
Common Shares and the Additional Preferred Shares which have been requested by
the Buyer; the Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries; without limiting the generality of
the foregoing, the Buyer has had the opportunity to obtain and to review the
Company's (1) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 (the "1996 10-K"), (2) Quarterly Report on Form 10QSB for the fiscal
quarter ended March 31, 1997 (the "March 31 10-Q), (3) Current Report on Form
8-K dated March 18, 1997 and (4) proxy statement for the Company's 1996 Annual
Meeting, in each case as filed with the SEC (collectively, the "SEC Reports")
and a draft of the Quarterly Report on Form 1O-QSB for the fiscal quarter ended
June 30, 1997, and the Buyer understands that its investment in the Shares
involves a high degree of risk;
(F) ABSENCE OF APPROVALS. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Shares; and
(G) SUBSCRIPTION AGREEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable in accordance with its terms, subject
as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
3. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with, the
Buyer that:
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(A) ORGANIZATION AND AUTHORITY. The Company and each of its
subsidiaries listed in Exhibit 21.1 to the 1996 10-K (the "Subsidiaries") is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power and authority to
(i) own, lease and operate its properties and to carry on its business as now
being conducted. and (ii) to execute, deliver and perform its obligations under
this Agreement, the Certificate of Designations, the Warrant, the Registration
Rights Agreement, the Transfer Agent Agreement, the form of which is attached
hereto as Annex IV (the "Transfer Agent Instructions"), and the other agreements
to be executed and delivered by the Company in connection herewith, and to
consummate the transactions contemplated hereby and thereby. The Company and
each of its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in all jurisdictions wherein such
qualification is necessary and where failure so to qualify could have a material
adverse effect on the business, properties, operations, condition (financial or
other), results of operations or prospects of the Company and its Subsidiaries,
taken as a whole. The Company has no equity investment in any person other than
the Subsidiaries.
(B) CAPITALIZATION. The authorized capital stock of the Company
currently consists of (a) 20,000,000 shares of Common Stock of which 4,345,919
shares were outstanding as of July 11, 1997, all of which are fully paid and
nonassessable; and (b) 1,000,000 shares of Preferred Stock, S.001 par value,
none of which are outstanding, and 3,000 shares of which will be designated as
Series A Convertible Preferred Stock, 2,000 of which will be issued pursuant to
this Agreement; and on the Closing Date there will be no material increase from
July 11, 1997 in the number of shares of Common Stock outstanding. As of July
11, 1997, the Company had outstanding 1,155,000 options and 3,067,500 warrants
entitling the holders to purchase an aggregate of 4,222,500 shares of Common
Stock. Other than as set forth in the preceding sentence, the Company does not
have outstanding any material amount of securities (or obligations to issue any
such securities) convertible into, exchangeable for or otherwise entitling the
holders thereof to acquire shares of Common Stock. The outstanding shares of
Common Stock and outstanding options, warrants and other securities to purchase
Common Stock have been duly authorized and validly issued. None of such
outstanding shares of Common Stock, options, warrants and other securities has
been issued in violation of the preemptive rights of any security holder of the
Company. The offers and sales of the outstanding shares of Common Stock and
options, warrants and other rights to acquire Common Stock were at all relevant
times either registered under the 1933 Act and applicable state securities laws
or exempt from such requirements. No holder of any of the Company's securities
has any rights, "demand," "piggyback" or otherwise, to have such securities
registered by reason of the intention to file, filing or effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement).
(C) CONCERNING THE SHARES AND THE COMMON STOCK. The Shares have been
duly authorized. The Initial Preferred Shares, when issued and paid for in
accordance with this Agreement, the Additional Preferred Shares, when issued in
accordance with the Registration Rights Agreement, and the Common Shares, when
issued upon conversion of the Preferred Shares, in payment of dividends on the
Preferred Shares or upon exercise of the Warrant, as the case may be, will be
duly and validly issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such holder. There are
no preemptive or similar rights of any stockholder of the Company or any other
person to acquire any of the Shares. The Common Stock is listed for trading on
the Nasdaq SmallCap Market ("Nasdaq") and (1) the Company and the Common Stock
meet the criteria for continued listing and trading on Nasdaq; (2) except as
listed on Schedule 3(c), the Company has not been notified since January 1, 1995
by Nasdaq of any failure or potential failure to meet the criteria for continued
listing and trading on Nasdaq and (3) no suspension of trading in the Common
Stock is in effect. The Company knows of no reason that the Common Shares will
not be eligible for listing on Nasdaq.
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(D) SUBSCRIPTION AGREEMENT; CERTIFICATE OF DESIGNATIONS; REGISTRATION
RIGHTS AGREEMENT; WARRANT; TRANSFER AGENT INSTRUCTIONS. This Agreement, the
Certificate of Designations, the Registration Rights Agreement, the Warrant and
the Transfer Agent Instructions have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered on behalf of the
Company and this Agreement is, and the Registration Rights Agreement, the
Warrant and the Transfer Agent Instructions, when executed and delivered by the
Company, will be, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and limits upon
rights to indemnity.
(E) NON-CONTRAVENTION. The execution and delivery of this Agreement by
the Company and the other documents contemplated by this Agreement and the
consummation by the Company of the issuance of the Initial Preferred Shares and
the Warrant as contemplated by this Agreement, the issuance of the Additional
Preferred Shares as contemplated by the Registration Rights Agreement and the
other transactions contemplated by this Agreement, the Registration Rights
Agreement, the terms of the Preferred Stock, the Warrant and the Transfer Agent
Instructions do not and will not with or without the giving of notice or the
lapse of time, or both, (i) result in any violation of any term of the
Certificate of Incorporation or By-laws of the Company or any of its
Subsidiaries, (ii) conflict with or result in a breach by the Company or any of
its Subsidiaries of any of the terms or provisions of, or constitute a default
under, or result in the modification of, or result in the creation or imposition
of any lien, security interest, charge or encumbrance upon any of the properties
or assets of the Company or any of its Subsidiaries pursuant to, any indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets is bound or
affected or (iii) violate or contravene any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States federal
or state regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or any of its Subsidiaries or any of their
respective properties or assets or (iv) have any material adverse effect on any
permit, certification, registration, approval, consent, license or franchise
necessary for the Company or any of its Subsidiaries to own or lease and operate
any of their respective properties or to conduct any of their respective
businesses or the ability of the Company or any of the Subsidiaries to make use
thereof.
(F) APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the Stockholders of the Company is required to be obtained
by the Company for (1) the execution, delivery and performance by the Company of
this Agreement, the Registration Rights Agreement (except such authorization of
the SEC as is required with respect to accelerating the effectiveness of any
registration statement filed pursuant thereto), the Warrant and the Transfer
Agent Instructions, (2) the execution, filing and performance by the Company of
the Certificate of Designations, (3) the issuance and sale of the Initial
Preferred Shares and the Warrant as contemplated by this Agreement. (4) the
issuance of the Additional Preferred Shares as contemplated by the Registration
Rights Agreement and (5) the issuance of Conversion Shares on conversion of the
Preferred Shares, the issuance of Dividend Shares as dividends on the Preferred
Shares or the issuance of Warrant Shares upon exercise of the Warrant, other
than (w) listing of the Common Shares on Nasdaq, (x) registration of the resale
of the Common Shares under the 1933 Act as contemplated by the Registration
Rights Agreement, (y) as may be required under applicable state securities or
"blue sky" laws and (z) filling of one or more Forms D with respect to the
Securities as required under Regulation D.
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(G) INFORMATION PROVIDED. The information provided by or on behalf of
the Company to the Buyer in connection with the transactions contemplated by the
Agreement, including, without limitation, the information referred to in Section
2(e) of this Agreement, does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company has not filed any reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"1934 Act") since December 31, 1996 other than the 1996 10-K and the March 31
10-Q.
(H) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has
been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company or any of the Subsidiaries, except as
disclosed in the SEC Reports.
(I) ABSENCE OF CERTAIN PROCEEDINGS. There is no action, suit or
proceeding, before or by any court, public board or body or governmental agency
pending or, to the knowledge of the Company or any of the Subsidiaries,
threatened against the Company or any of the Subsidiaries and there is no
inquiry or investigation before or by any court, public board or body or
governmental agency pending or, to the knowledge of the Company or any of the
Subsidiaries, threatened against the Company or any of the Subsidiaries, in any
such case wherein an unfavorable decision, ruling or finding would have a
material adverse effect on the business, properties, the, condition (financial
or other), results of operations or prospects of the Company and the
Subsidiaries taken as a whole or the transactions contemplated by this Agreement
or any of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of such other documents;
the Company does not have pending before the SEC any request for confidential
treatment of information and to the best of the Company's knowledge no such
request will be made by the Company prior to the time the Registration Statement
relating to the Common Shares which is contemplated by the Registration Rights
Agreement is first ordered effective by the SEC; and there has not been, and to
the best of the Company's knowledge there is not pending or contemplated, any
investigation by the SEC involving the Company or any current or former director
or officer of the Company.
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(J) PROPERTIES. The Company and the Subsidiaries have good title to
all property real and personal (tangible and intangible) and other assets owned
by them, free and clear of all security interests, charges, mortgages, liens or
other encumbrances, except such as are described in the SEC Reports or such as
do not materially interfere with the use of such property made, or proposed to
be made, by the Company or the Subsidiaries. The leases, licenses or other
contracts or instruments under which the Company and the Subsidiaries lease,
hold or are entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company or its Subsidiaries except as disclosed on Schedule 3(j). Neither the
Company nor any of the Subsidiaries has received notice of any material
violation of any applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties.
(K) LABOR RELATIONS. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company or any of the Subsidiaries.
(L) SEC FILINGS. The Company has timely filed all required forms,
reports and other documents with the SEC. All of such forms, reports and other
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act. The Company meets the
requirements for the use of Form S-3 for the registration of the resale of the
Shares by the Buyer.
(M) ABSENCE OF BROKERS, FINDERS, ETC. No broker, finder or similar
person is entitled to any commission, fee or other compensation by reason of the
transactions contemplated by this Agreement other than as disclosed in writing
by the Company to the Buyer prior to execution and delivery of this Agreement by
the Buyer, and the Company shall pay, and indemnify and hold harmless the Buyer
from, any claim made against the Buyer by any person for any such commission,
fee or other compensation.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
(A) TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Shares and the Warrant have not been and are not being registered
under the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Common Shares have not been and are not being registered
under the 1933 Act, and the Securities may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any resale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any such resale of
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder (other than
pursuant to Section 4(d) hereof and pursuant to the Registration Rights
Agreement).
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(B) RESTRICTIVE LEGEND. (1) The Buyer acknowledges and agrees that the
Preferred Shares shall bear a restrictive legend in substantially the following
form (and a stop transfer order may be placed against transfer of the Preferred
Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be sold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act of
1933, as amended, or an opinion of counsel that registration is not required
under said Act.
(2) The Buyer further acknowledges and agrees that the Warrant shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Warrant):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act of
1933, as amended, or an opinion of counsel that registration is not required
under said Act.
(3) The Buyer further acknowledges and agrees that until such time as
the Common Shares have been registered for resale under the 1933 Act as
contemplated by the Registration Agreement, the certificates for the Common
Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for the
Common Shares):
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended. The securities have been acquired for
investment and may not be resold, transferred or assigned in the absence of an
effective registration statement for the securities under the Securities Act of
1933, as amended, or an opinion of counsel that registration is not required
under said Act.
Once the Registration Statement required to be Cited by the Company pursuant to
Section 2 of the Registration Rights Agreement has been declared effective,
thereafter (1) upon request of the Buyer the Company will substitute
certificates without restrictive legend for certificates for any Common Shares
issued prior to the date such Registration Statement is declared effective by
the SEC which bear such restrictive legend and remove any stop-transfer
restriction relating thereto promptly, but in no event later than three days
after surrender of such certificates by the Buyer and (2) the Company shall not
place any restrictive legend on certificates for Common Shares issued on
conversion of or payment of dividends on the Preferred Shares or upon exercise
of the Warrant or impose any stop-transfer restriction thereon.
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(C) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
(D) FORM D; BLUE SKY LAWS. The Company agrees to file a Form D with
respect to the Shares as required under Regulation D and to provide a copy
thereof to the Buyer promptly after such filing. The Buyer agrees to cooperate
with the Company in connection with such filing and, upon request of the
Company, to provide all information relating to the Buyer reasonably required
for such filing
(E) AUTHORIZATION FOR TRADING; REPORTING STATUS. On or before the
Closing Date, the Company shall file a notification for listing of additional
shares with the Nasdaq and shall provide evidence of such filing to the Buyer.
So long as the Buyer beneficially owns any of the Preferred Shares, the Warrant
or the Common Shares, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
(F) USE OF PROCEEDS. Neither the Company nor any subsidiary of the
Company owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System ("margin stock"). The proceeds of sale of the Preferred
Shares will be used for general working capital purposes and in the operation of
the Company's business. None of such proceeds will be used, directly or
indirectly (1) (other than financing its subsidiaries in the ordinary course of
business) to make any loan to or investment in any other person or (2) for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock or for the purpose of maintaining, reducing or retiring any
indebtedness which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might constitute the
transactions contemplated by this Agreement a "purpose credit" within the
meaning of such Regulation G. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
transactions contemplated hereby to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the 1934 Act, in each case as in effect now or as the same may hereafter
be in effect.
(G) BLUE SKY LAWS. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an exemption
for, the Initial Preferred Shares for sale to the Buyer pursuant to this
Agreement, the Additional Preferred Shares for issuance to the Buyer pursuant to
the Registration Rights Agreement, the Warrant for issuance to the Buyer
pursuant to this Agreement and the Common Shares for issuance to the Buyer on
conversion of or dividends on the Preferred Shares or exercise of the Warrants
under such of the securities or "blue sky" laws of jurisdictions as shall be
applicable to the sale of the Initial Preferred Shares pursuant to this
Agreement, issuance of the Additional Preferred Shares pursuant to the
Registration Rights Agreement and the issuance to the Buyer of Common Shares on
conversion of or as dividends on the Preferred Shares of the Warrant pursuant to
this Agreement, and the issuance or upon exercise of the Warrants. The Company
shall furnish copies of all filings, applications, orders and grants or
confirmations of exemptions relating to such securities or "blue sky" laws on or
prior to the Closing Date. The cost of obtaining additional blue sky clearances
in additional states beyond the Company's current blue sky clearances listed on
Schedule 3(g) shall be borne by the holders requesting such clearances.
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(H) CERTAIN EXPENSES. Whether or not the closing occurs, the Company
shall pay or reimburse Plazacorp Investments Limited for all reasonable expenses
(including, without limitation, legal fees and expenses of counsel to Plazacorp
Investments Limited) incurred by Plazacorp Investments Limited, not in excess of
$10,000, in connection with this Agreement and the transactions contemplated
hereby.
(I) CERTAIN ISSUANCES OF SECURITIES. (1) If the transactions
contemplated by this Agreement are subject to the rules proposed to be adopted
by Nasdaq which would require stockholder approval of certain transactions (the
"Nasdaq Stockholder Approval Rules"), then unless the Company obtains
Stockholder Approval (as defined in the Certificate of Designations) or a waiver
thereof from Nasdaq, the Company will not issue any shares of Common Stock or
shares of any other series of preferred stock or other securities convertible
into, exchangeable for or otherwise entitling the holder to acquire shares of
Common Stock which would be subject to the Nasdaq (or any successor or
replacement provision thereof) and which would be integrated with the sale of
the Preferred Shares to the Buyer or the issuance of Common Shares upon
conversion thereof Stockholder Approval Rules for purposes of the Nasdaq
Stockholder Approval Rules (or any successor or replacement provision thereof).
(2) During the period from the date of this Agreement to the date on
which the Registration Statement (as defined in the Registration Rights
Agreement) shall have been effective with the SEC for 60 consecutive days, the
Company shall not offer, sell, contract to sell or issue (or engage any person
to assist the Company in taking any such action) any equity securities or
securities convertible into, exchangeable for or otherwise entitling the holder
to acquire, any Common Stock (collectively, "Equity Securities") at a price
below the market price of the Common Stock without (a) giving the Buyer the
first right to acquire the Equity Securities on the same terms at which the
Equity Securities are to be offered to other investors (and on terms which
permit the Buyer to purchase a pro rata portion of such Equity Securities, based
on the portion of the shares of Preferred Stock purchased by the Buyer pursuant
to this Agreement), and (b) obtaining consent of the holders of a majority of
the shares of the Preferred Shares which consent will not unreasonably be
withheld; provided, however, that nothing in this Section 4(i)(2) shall prohibit
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the Company from issuing securities (x) pursuant to compensation plans for
employees, directors, officers, advisers or consultants of the Company and in
accordance with the terms of such plans as in effect as of the date of this
Agreement, (y) upon exercise of conversion, exchange, purchase or similar rights
issued, granted or given by the Company and outstanding as of the date of this
Agreement or (z) in connection with the acquisition of all or substantially all
the assets or stock of another entity.
(J) CERTAIN TRADING RESTRICTIONS. The Buyer agrees that during the
------------------------------
period from the Closing Date to the date of conversion in full or redemption of
all Preferred Shares owned by the Buyer, the Buyer shall not engage in short
sales with respect to the Common Stock, provided that the foregoing shall not be
deemed to restrict the Buyer from offering to sell shares of Common Stock during
the two Business Days immediately prior to the Buyer's delivery of a Notice of
Conversion.
10
(K) BEST EFFORTS. Each of the parties shall use its best efforts
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timely to satisfy each of the conditions to the other party's obligations to
sell and purchase the Preferred Shares set forth in Section 7 or 8, as the case
may be, of this Agreement on or before the Closing Date.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
(A) TRANSFER AGENT INSTRUCTIONS. Promptly following the delivery by
the Buyer of the aggregate purchase price for the Initial Preferred Shares in
accordance with Section 1(c) hereof, and in any event prior to the Closing Date,
the Company will (1) execute and deliver the Transfer Agent Instructions
substantially in the form attached hereto as ANNEX V to and thereby irrevocably
instruct, American Stock Transfer & Trust Company, as Transfer Agent and
Registrar (the "Transfer Agent"), to issue certificates for the Common Shares
from time to time upon conversion of the Preferred Shares and exercise of the
Warrant in such amounts as specified from time to time to the Transfer Agent in
the Notices of Conversion surrendered in connection with such conversions and
referred to in Section 5(b) of this Agreement and the Form of Subscription in
the form attached to the Warrant and (2) appoint the Transfer Agent the
conversion agent for the Preferred Stock and the exercise agent for the Warrant.
The certificates for the Common Shares may bear the restrictive legend specified
in Section 4(b) of this Agreement prior to registration of the resale of the
Common Shares under the 1933 Act. The certificates for the Common Shares shall
be registered in the name of the Buyer or its nominee and in such denominations
to be specified by the Buyer in connection with each conversion of Preferred
Shares or the exercise of the Warrant. The Company warrants that no instruction
other than (x) such instructions referred to in this Section 5, (y) stop
transfer instructions to give effect to Section 4(a) hereof prior to
registration of the resale of the Common Shares under the 1933 Act and (z) the
instructions required by Section 3(n) of tile Registration Rights Agreement will
be given by the Company to the Transfer Agent and that the Common Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement. Nothing in this Section 5(a) shall
limit in any way the Buyer's obligations and agreement to comply with all
applicable securities laws upon resale of the Shares. If the Buyer provides the
Company with an opinion of counsel reasonably satisfactory in form, scope and
substance to the Company that registration of a resale by the Buyer of any of
the Shares in accordance with clause (1)(B) of Section 4(a) of this Agreement is
not required under the 1933 Act, the Company shall permit the transfer of such
Shares and, in the case of the Common Shares, promptly, but in no event later
than three days after receipt of such opinion, instruct the Company's transfer
agent to issue upon transfer one or more share certificates in such name and in
such denominations as specified by the Buyer. Nothing in this Section 5(a)
shall limit the obligations of the Company under Section 3(n) of the
Registration Rights Agreement.
(B) CONVERSION PROCEDURE. In connection with the exercise of
conversion rights relating to the Preferred Shares, the Buyer or any subsequent
holder of the Preferred Shares shall complete, sign and furnish to the Transfer
Agent a Notice of Conversion in the form attached hereto as Annex VI, which
shall be deemed to satisfy all requirements of the Certificate of Designations.
6. CLOSING DATE.
11
The date and time of the issuance and sale of the Initial Preferred Shares
and the issuance of the Warrant (the "Closing Date") shall be 12:00 noon, New
York City time, on the date which is three Business Days after the date on which
the Buyer has deposited the purchase price for the Preferred Shares with the
Escrow Agent in accordance with Section l(c) hereof, or such other mutually
agreed to time. The closing shall occur on the Closing Date at the offices of
the Escrow Agent.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligation to sell the Initial
Preferred Shares and issue the Warrant to the Buyer pursuant to this Agreement
is conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Company in its
sole discretion):
(A) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(B) Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the Initial Preferred
Shares in accordance with Section l(c) hereof; and conversion thereof
Stockholder Approval Rules for purposes of the Nasdaq Stockholder Approval Rules
(or any successor or replacement provision thereof).
(C) The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the Initial
Preferred Shares and acquire the Warrant on the Closing Date is conditioned upon
the satisfaction of the following conditions precedent on or before the Closing
Date (any or all of which may be waived by the Buyer in its sole discretion):
(A) Delivery by the Company to the Escrow Agent of the certificates for
the Initial Preferred Shares and the Warrant in accordance with this Agreement;
(B) The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date and receipt by the Buyer of a certificate, dated the Closing
Date, of the Chief Executive Officer or the Chief Financial Officer of the
Company confirming such matters and such other matters as the Buyer may
reasonably request;
(C) The receipt by the Buyer of confirmation of the filing with the
Secretary of State of the State of Delaware of the Certificate of Designations;
12
(D) The receipt by the Buyer of a certificate, dated the Closing Date,
of the Secretary of the Company certifying (1) the Certificate of Incorporation
and By-Laws of the Company as in effect on the Closing Date, (2) all resolutions
of the Board of Directors (and committees thereof) of the Company relating to
this Agreement and the transactions contemplated hereby and (3) such other
matters as reasonably requested by the Buyer; and
(E) Receipt by the Buyer on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX VII attached hereto.
9. MISCELLANEOUS.
(A) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York.
(B) COUNTERPARTS. This Agreement may be executed in counterparts and
by the parties hereto on separate counterparts, all of which together shall
constitute one and the same instrument. A facsimile transmission of this
Agreement bearing a signature on behalf of a party hereto shall be legal and
binding on such party.
(C) HEADINGS, ETC. The headings, captions and footers of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(D) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
(E) AMENDMENTS. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company therefrom shall in any event be effective unless the
same shall be in writing and signed by the party to be charged with enforcement,
and then shall be effective only in the specific instance and for the purpose
for which given. No course of dealing between the parties hereto shall operate
as an amendment of this Agreement.
(F) WAIVERS. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising, such right
or remedy, or any course of dealings between the parties, shall not operate as a
waiver thereof or an amendment hereof, nor shall any single or partial exercise
of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power preclude any other or further exercise thereof or
exercise of any other fight or power.
(G) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally (which
shall include telephone line facsimile transmission with answer back
confirmation) or by courier and shall be effective five days after being placed
in the mail, if mailed, or upon receipt, if delivered personally or by courier,
in the case of the Company addressed to the Company at its address shown in the
introductory paragraph of this Agreement, Attention: Chief Executive Officer
(telephone line facsimile transmission number (▇▇▇) ▇▇▇-▇▇▇▇) or, in the case of
the Buyer, at its address shown on the signature page of this Agreement, or such
other address as a party shall have provided by notice to the other party in
accordance with this provision. The Buyer hereby designates as its address for
any notice required or permitted to be given to the Buyer pursuant to the
Certificate of Designations the address shown on the signature page of this
agreement, with a copy to: Plazacorp Investments United, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ until the Buyer shall designate
another address for such purpose.
13
(H) ASSIGNMENT. Prior to the Closing Date, the Buyer shall have the
right to assign its rights and obligations under this Agreement with respect to
the purchase of all or any portion of the Initial Preferred Shares and the
issuance of the Warrants, provided any such assignee, by written instrument duly
executed by such assignee, assumes all obligations of the Buyer hereunder with
respect to the purchase of the portion of the Preferred Shares or the Warrant so
assigned and makes the same representations and warranties with respect thereto
as the Buyer makes in this Agreement, whereupon the Buyer shall be relieved of
any further obligations, responsibilities and liabilities with respect to the
purchase of all or the portion of the Preferred Shares the obligation for the
purchase of which has been so assigned. In the case of any such assignment, the
Company shall agree in writing with such assignee to make available to such
assignee the benefits of the Registration Rights Agreement with respect to the
Common Shares issuable on conversion of the Preferred Shares or exercise of the
Warrant with respect to which the purchase under this Agreement has been so
assigned. Any transfer of the Preferred Shares or the Warrant by the Buyer
after the Closing Date shall be made in accordance with Section 4(a).
(I) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations, warranties, covenants and agreements of the Buyer and the
Company contained in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall survive the delivery of payment
for the Preferred Shares and shall remain in full force and effect regardless of
any investigation made by or on behalf of them or any person controlling or
advising any of them.
(J) ENTIRE AGREEMENT. This Agreement and its Annexes set forth the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, with respect thereto.
(K) TERMINATION. The Buyer shall have the right to terminate this
Agreement by giving notice to the Company at any time at or prior to the Closing
Date if:
(1) the Company shall have failed, refused, or been unable at or prior
to the date of such termination of this Agreement to perform any of its
obligations hereunder;
(2) any other condition of the Buyer's obligations hereunder is not
fulfilled; or
(3) the closing shall not have occurred on a Closing Date on or before
August 7, 1997, other than solely by reason of a breach of this Agreement by the
Buyer.
14
Any such termination shall be effective upon the giving of notice thereof by the
Buyer. Upon such termination, the Buyer shall have no further obligation to the
Company hereunder and the Company shall remain liable for any breach of this
Agreement or the other documents contemplated hereby which occurred on or prior
to the date of such termination.
(L) FURTHER ASSURANCES. Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.
(M) PUBLIC STATEMENTS, PRESS RELEASES, ETC. The Company and the Buyer
shall have the Right to approve before issuance any press releases or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
(N) CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or
one of its officers thereto duly authorized as of the date set forth below.
NUMBER OF SHARES: _________
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE: $_________________
BUYER: _________________
SIGNATURE: _______________________________________
Address:
COMPANY: AMERICAN GAMING & BINGO CORP.
By: ______________________________________________
Title:
15
LIST OF INVESTORS UNDER SERIES A CONVERTIBLE
PREFERRED STOCK FINANCING
Stockholder Number of Shares
----------------------- ----------------
Plazacorp Investments 80
P.R.I.F. #4 1,150
▇▇▇▇▇ ▇▇▇▇▇▇ 520
▇▇▇ ▇▇▇▇▇▇▇ 250
----------------
Total 2,000
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