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 quarterly period ended September 30, 1996
                               ------------------


{ }  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period ______________  to  _______________

Commission file number 0-5474


                     NORTH AMERICAN GAMING AND ENTERTAINMENT
--------------------------------------------------------------------------------
               CORPORATION (Exact name of small business issuer as
                            specified in its charter)


         Delaware                                               75 - 2571032
------------------------------------                        -------------------
(State                                                       of incorporation or
                                                             organization)  (IRS
                                                             Employer
                                                             Identification No.)

13150 Coit Road, Suite 125 Dallas, Texas                             75240
-----------------------------------------                   -------------------

(Address of principal executive offices)                       (Zip Code)

Issuer's telephone number, including area code                (972) 671-1133
                                                              ----------------

Former address and telephone number:        777 E. 15th Street
                                            Plano, Texas 75074
                                            (972) 423-9113

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing  requirements for the past 90
days.

                     Yes xx    No
                         ----    ----

Number of shares of common stock,  par value $.01 per share,  outstanding  as of
September 30, 1996: 19,645,698 ----------

Traditional Small Business Disclosure Format:              Yes xx   No
                                                              ----     ----




                                       1
<PAGE>
                          PART 1. FINANCIAL INFORMATION
                          Item 1. Financial Statements
<TABLE>
<CAPTION>

<S>                                                                            <C>        <C>
                       NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED BALANCE SHEETS
                               SEPTEMBER 30, 1996 AND DECEMBER 31, 1995

                                                                       30-Sep-96          31-Dec-95
                                                                       ---------          ---------
ASSETS                                                                 UNAUDITED

CURRENT ASSETS:
   Cash                                                             $   615,354        $   531,996
   Restricted cash                                                      178,305            164,123
   Accounts receivable                                                  195,566             92,791
   Inventories, at cost                                                  78,558             59,891
   Prepaid Insurance
                                                                         85,768             47,075
   Notes receivable - current                                           266,636            253,035
   Income taxes receivable                                                                 116,634
   Current deferred tax asset                                            15,421             10,161
                                                                   -------------       ------------
                  TOTAL CURRENT ASSETS                                1,435,608          1,275,706
PROPERTY AND EQUIPMENT, net of accumulated depreciation               1,441,316          1,660,542

OTHER ASSETS:
   Deposits                                                              71,940             47,246
   Revenue interest rights                                              299,593            338,113
   Goodwill and merger costs                                          2,399,551            720,451
   Notes Receivable-long-term                                            51,436             57,115
                                                                   -------------       ------------
                                                                      2,822,520          1,162,925
                                                                   -------------       ------------
                  TOTAL ASSETS                                       $5,699,444         $4,099,173
                                                                   =============       ============

LIABILITY AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable and accrued liabilities                         $   830,539       $   795,711
   Notes payable - current                                            1,549,420         2,096,065
   Preferred stock dividends payable                                    780,000           580,000
                                                                    ------------       -----------
TOTAL CURRENT LIABILITIES                                             3,159,959         3,471,776

NOTES PAYABLE-LONG-TERM                                                 916,035           143,884

NOTES PAYABLE TO CERTAIN STOCKHOLDERS-LONG-TERM                       2,011,340           665,450
                                                                    ------------       -----------
                  TOTAL LIABILITIES                                  $6,087,334        $4,281,110

STOCKHOLDERS' EQUITY:
 Preferred stock, $.01 par value, 
  10,000,000 shares authorized,  8,000,000 and
 -0- Series B shares at 9/30/96 and
 12/31/95, respectively                                              $3,881,000        $4,800,000

Class A preferred stock, $3.00 par value, 1,600,000 
shares authorized, 1,287,000 and 1,600,000 shares
issued at 9/30/96 and 12/31/95,  respectively                            80,000                 -
Common stock, $.01 par value, 25,000,000 shares
authorized,  19,645,595, and 14,711,589 shares
issued at 9/30/96 and 12/31/95, respectively                            196,435           147,094

Additional paid-in-capital (deficit)                                 (2,955,947)       (3,334,543)
                                                                                     
Retained earnings (deficit)                                          (1,589,378)       (1,794,488)
                                                                   ------------       ------------
                  TOTAL STOCKHOLDERS' EQUITY                        $  (387,890)      $  (181,937)
                                                                   ------------       ------------

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                             $5,699,444        $4,099,173
                                                                     ==========        ==========


                      The accompanying notes are an integral part of the financial statements
</TABLE>
                                       2
<PAGE>
<TABLE>
<CAPTION>


<S>                                                                            <C>             <C>          <C>

                       NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
                                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (UNAUDITED)

                       FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995




                                                                    QUARTER ENDED                  NINE MONTHS ENDED
                                                              30-Sep-96         30-Sep-95        30-Sep-96  30-Sep-95
                                                              ---------         ---------        ---------  ---------

REVENUE:
   Video Poker Revenue                                       $3,463,115      $  2,900,517      $9,516,586   $9,052,929
   Truck Stop and Convenience Store                           1,600,192           607,085       4,347,478    1,784,582
   Cruise Revenue                                               249,897           308,872
                                                            -----------        ----------      ----------   ----------
                                                              5,313,204         3,507,602      14,172,936   10,837,511
                                                            -----------        ----------      ----------   ----------

COST AND EXPENSES:
   Cost of Revenues                                           3,311,506         2,314,565       9,061,082    7,131,175
   Direct Operating Expenses                                  1,385,065           868,181       3,408,835    2,544,283

   General and Administrative Expenses                          140,346           129,384         445,034      440,784
   Interest Expense                                             103,613            36,980         244,746      187,821
   Depreciation and Amortization                                285,108           188,556         628,051      550,268
                                                            -----------        ----------      ----------   ----------
                                                              5,225,638         3,537,666      13,787,748   10,854,331
                                                            -----------        ----------      ----------   ----------

OPERATING INCOME (LOSS)                                          87,566           (30,064)        385,188      (16,820)
                                                            -----------        ----------      ----------   -----------

OTHER REVENUE (EXPENSE), net                                     32,635           119,761         122,671      198,363
                                                            -----------        ----------      ----------   -----------

INCOME BEFORE PROVISION FOR INCOME TAXES                        120,201           89,697          507,859      181,543

PROVISION FOR INCOME TAXES                                      (25,000)         (34,982)        (104,000)     (70,802)
                                                            -----------        ----------      ----------   ----------

NET INCOME                                                  $    95,201      $    54,715      $   403,859   $  110,741

LESS: Preferred Stock Dividends                                       -         (120,000)        (200,000)    (360,000)
                                                            -----------        ---------       ----------   ----------

NET INCOME (LOSS) APPLICABLE TO COMMON STOCK               $     95,201      $   (65,285)     $   203,859  $  (249,259)
                                                           ============        =========       ==========   ===========

EARNINGS PER SHARE - assuming no dilution                  $       0.01      $     (0.00)     $      0.01  $     (0.02)
                                                           ============        =========       ==========   ===========

PRO FORMA INFORMATION (UNAUDITED):
Net Income                                                 $   120,201       $    89,697     $    507,859  $   181,543
Provision for Income Taxes                                     (25,000)          (34,982)        (104,000)     (70,802)
Preferred Stock Dividends                                            -          (120,000)        (200,000)    (360,000)
                                                           ------------        ---------       ----------   ----------


   Net Income (loss) applicable to common stock          $      95,201     $    (65,285)    $   203,859    $  (249,259)
                                                           =============       ========        ==========   ==========

Net loss per common share - assuming no dilution         $        0.01    $       (0.00)    $      0.01    $    (0.02)
                                                           ============= ====================  ============ ==========




                            The accompanying notes are an integral part of the financial statements

                                                         3

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

<S>                                                                            <C>         <C>

                              NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (UNAUDITED)
                                    FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995


                                                                       30-Sep-96                30-Sep-95
                                                                       ---------                ---------

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income                                                            $ 403,859                $ 181,544

Adjustments to reconcile net income to net cash:
Depreciation and amortization                                           628,051                  550,268

Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable                               12,331                  (20,068)
(Increase) decrease in inventories                                      (18,682)                 (18,283)
(Increase) decrease in prepaid insurance                                (43,952)                 (25,599)
(Increase) decrease in deposits                                         (24,693)                 (42,034)
Increase (decrease) in accounts payable and accrued liabilities          34,916                 (345,490)
                                                                    ------------             -----------
Net cash provided (used) by operating activities                        991,830                  280,338
                                                                    ------------             -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, intangibles:             
North American/OM Operating,LLC-equipment                                88,552                  (53,914)
New Orleans Video Poker-equipment                                      (121,003)  
GalaxSea/I.T.Cruise, Inc. acquisition                                (2,096,188)  
                                                                     ----------              -----------
                                                                     (2,128,639)                 (53,914)
Proceeds to borrowers                                                  (260,351)                (235,693)
Repayment by borrowers                                                  334,369                  554,559
                                                                    ------------             -----------

Net cash provided (used) by investing activities                     (2,054,621)                 264,952
                                                                    ------------             -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on subordinated debt
                                                                              -                 (336,820)
Issuance of common stock
                                                                         49,341                  375,741
Issuance of preferred stock                                             100,000                        -
Redemption of preferred stock                                          (939,000)                       -
Additional paid-in-capital                                              378,596                        -
Increase (decrease) in notes payable                                  1,571,394               (1,076,182)
                                                                    ------------             -----------
Net cash provided (used) by financing activities                      1,160,331               (1,037,261)
                                                                    ------------             -----------
NET INCREASE (DECREASE) IN CASH                                          97,540                 (491,971)

CASH - beginning of period                                              696,119                1,018,781
                                                                    ------------             -----------
CASH - ending of period                                                $793,659               $  526,810
                                                                    ============             ===========

                            The accompanying notes are an integral part of the financial statements
                                                        4
</TABLE>
<PAGE>


      NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                           September 30, 1996 AND 1995


Note 1. OPINION OF MANAGEMENT
-----------------------------

The preceding financial information has been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of the  Company,  includes all normal and  recurring  adjustments
necessary  for a fair  statement  of the results of each period  shown.  Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or  omitted  pursuant  to SEC rules and  regulations.  The
Company  believes that the disclosures made are adequate to make the information
presented not  misleading.  It is suggested that these  financial  statements be
read in conjunction with the Company's Annual Report on Form 10-KSB for the year
ended  December  31, 1995 and the  Company's  FORM 8-K dated June 10,  1996,  as
amended by Form 8-K/A (Amendment no. One).

Note 2. LEGISLATIVE ACTION
--------------------------
At the general  election held in Louisiana on November 5, 1996,  all parishes in
which the Company  operates  video poker  casinos  voted to continue  truck stop
video  poker.  The local  option  initiative  gave the voters in each parish the
right to decide what forms of gaming they want to continue in their parish.

Note 3.  ACQUISITION  OF ASSETS
--------------------------------
On June 10, 1996,  Company  acquired 100% of the issued and outstanding  capital
stock  of  I.T.  Cruise,  Inc.  ("I.T.  Cruise")  and  100%  of the  issued  and
outstanding capital stock of GalaxSea Cruises and Tours, Inc.  ("GalaxSea") from
International Tours, Inc. ("International"). Both corporations were wholly-owned
subsidiaries of International.

I.T. Cruise is an Oklahoma  corporation that was formed in 1993. I.T. Cruise has
served as the cruise marketing  division of  International  since that time. The
principal  business of I.T. Cruise is to coordinate  cruise  marketing  programs
between  the  various  major  cruise  lines  and   International's   network  of
approximately  1,400 travel agency locations.  I.T. Cruise enters into contracts
with the cruise  lines that  provide for  favorable  commission  structures  and
marketing support for the International  network. The contracts also provide for
I.T.  Cruise to receive an override  payment based on the cruise sales volume of
the  International  network.  I.T.  Cruise  has  a  twenty  year  contract  with
International  pursuant to which International granted I.T. Cruise the exclusive
right to provide  such  services  to  International's  network of travel  agency
locations.  The contracts  with the cruise lines  generally are negotiated on an
annual basis.

GalaxSea is an Oklahoma corporation that was formed in September 1995. Effective
October 1, 1995, GalaxSea acquired  substantially all of the operating assets of
GalaxSea Associates,  Inc. (GAI), a Florida corporation.  GalaxSea currently has
23 franchisees in its system. Each franchisee pays a monthly license fee, rather
than a royalty percentage based on that agency's annual cruise sales volume. The
principal  business of GalaxSea  will  continue to be the granting of franchises
for the operation of travel vacation stores that specialize in the marketing and
selling of cruise travel, tours and related travel arrangements according to the
concept  and  business  system  developed  by  GalaxSea  and GAI.  GalaxSea  has
contracts  with most major  cruise  lines which  provide for GalaxSea to receive
override payments based on the cruise sales of all GalaxSea  franchisees.  These
contracts also  generally  provide for favorable  commission  structures for the
franchisees.

As  part  of  the   acquisition  of  GalaxSea  by  the  Company,   GalaxSea  and
International  entered into a long-term joint marketing  agreement,  pursuant to
which   GalaxSea   will  have  access  to  market  its  Add-on   franchises   to
International's  network of  approximately  1,400 travel agency  locations.  The
Company's  primary  goals  with  GalaxSea  are to  expand  the  system by adding
franchisees and to increase the cruise sales volume of all stores.

As of June 1, 1996 the Company  began  recording  revenue and expense  from I.T.
Cruise and  GalaxSea.  As a result of this  transaction,  the  Company  recorded
$1,629,341 in goodwill which will be amortized over a sixty month period.

                                       5

<PAGE>

4.  SUB-LEASE AND  MANAGEMENT  AGREEMENT  Effective July 1, 1996 the Company
entered into a sub-lease  agreement with New Orleans Video Poker, Inc. (NOVP) to
manage the Diamond  Jubilee Video Porker  Casino and  Truck-Stop in New Orleans,
LA. This  agreement  provides for a 50/50 split  between the Company and NOVP of
the net cash flow after debt  service  generated  by the  Diamond  Jubilee.  The
agreement further provides for the Company to assume the outstanding liabilities
of NOVP,  exclusive  of  notes  payable  to the  principals  of  NOVP,  with the
operating  assets  becoming  the  property of the  Company.  The Company has the
option to purchase  NOVP's 50% share of the cash flow for the remaining  balance
on the notes to NOVP  principals  which are reduced on a monthly basis from cash
flow distributions. The transaction also included the issuance of 450,000 shares
of common stock in the Company to NOVP.


Donald I. Williams,  manager of OM Operating, LLC, is a 51% shareholder in NOVP,
and currently holds a 5.65% ownership in North American Gaming and Entertainment
Corporation.

Note 5. Accounting Policies
---------------------------

Cruise operations revenues are comprised of ovrerides and commisssions, monthly
franchise license fees, franchise sales fees, marketing fees and training fees.
Overrides and commissions and marketing fees are estimated and recorded based
on cruise sales volume of the I.T. Cruise and GalaxSea franchisees.












                                      


                   (THIS SPACE WAS INTENTIONALLY LEFT BLANK)















                                       6


<PAGE>



Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources

The Company  ended its third  quarter  with  $793,659 in cash and other  current
assets  amounting  to  $641,949,  including  inventories  and  prepaid  expenses
totaling $179,747 and receivables of $462,202. The Company's liabilities totaled
$6,087,334  at  September  30,  1996,  including  accounts  payable  and accrued
liabilities of $830,539,  current notes payable of $1,549,520,  long-term  notes
payable of $2,927,375 and preferred  stock dividends  payable of $780,000.  This
represents an increase of $1,806,224  from $4,281,110 at December 31, 1995. This
increase was comprised of  reductions  totaling  $768,956  which were applied to
long and  short-term  debt to banks and  equipment  manufacturers  amounting  to
$310,268,  and  principal  reduction  on the Gold Rush  casino  and  truck  stop
amounting to $458,688. This was offset by an increase in liabilities recorded at
September 30, 1996,  which included an increase in accounts  payable and accrued
liabilities totaling $34,828; liabilities related to the acquisition of GalaxSea
Cruises and Tours, Inc. (GalaxSea) and IT Cruise, Inc.(I.T. Cruise) amounting to
$1,414,070,  the redemption of Class A Preferred Stock of $926,282 and the final
accrual of preferred  dividends  payable which added $200,000.  This transaction
placed an agreed moratorium on the accrual of dividends for two years, effective
June 1, 1996, and obtained from the holders of Class A Preferred stock the right
to force conversion of the remaining 1,287,000 shares of Class A Preferred Stock
into 8,240,000 shares of Common Stock at any time within the next two years.

Accounts payable and accrued  liabilities of $830,539 included $325,595 in trade
payables,  payroll  and  payroll  taxes of  $121,856,  casino  distributions  of
$180,279, state franchise taxes of $171,049 and accrued interest of $31,755.

The current  portion of notes payable  totaling  $1,549,420,  includes:  various
notes related to the purchase of I.T. Cruise and GalaxSea totaling $638,710; the
stock purchase  resulting from the Gold Rush acquisition  amounting to $325,073;
current  notes payable of $135,353;  video poker machine debt of $81,701;  notes
related to the  partial  redemption  of Class A  Preferred  Stock  amounting  to
$113,865;  equipment  leases and other  notes  totaling  $64,180;  and  $190,538
payable to a bank,  originally  obtained  for the  construction  of the  Pelican
Palace  and  the  purchase  of  the  Lucky   Longhorn,   which  was   previously
collateralized  by the Pelican  Palace,  and  recently  rewritten on a five year
amortization with the Gold Rush being substituted as collateral for the note.

Long-term  notes  payable of  $2,927,375  include:  $874,656  payable to a bank,
originally  obtained for the construction of the Pelican Palace and the purchase
of the Lucky Longhorn,  refinanced as noted above; the stock purchase  debenture
related to the acquisition of GalaxSea and I.T. Cruise  totaling  $775,360;  the
debenture  for the partial  redemption of Class A Preferred  Stock  amounting to
$812,417;  the stock purchase debenture resulting from the Gold Rush acquisition
amounting to $423,563; and equipment leases and other notes totaling $41,379.

The Company  believes it will be able to generate  cash flow from  operations to
service  all debt  according  to the  terms  and  conditions  specified  in debt
instruments. In addition, the Company believes cash flow from operations will be
sufficient to pay accrued preferred dividends on the Company's Class A Preferred
Stock,  totaling $780,000,  once current obligations on notes and debentures are
satisfied.  The Company also believes that it will be able to generate or obtain
the necessary capital from outside sources for expansion projects, but there are
no assurances that current economic conditions will prevail.

The remaining  pre-Merger  liabilities of WNGC  constitute a note payable with a
remaining  balance  of  $135,353  at  September  30,  1996;  this  note  is also
guaranteed  by a director of the  Company.  The amount  paid on WNGC  pre-Merger
liabilities totaled $58,000 during the nine months ended September 30, 1996.

At September 30, 1996,  property and equipment (net) at truck stop,  video poker
and office facilities totaled $1,441,316.  As of September 30, 1996, the Company
owed video poker equipment  manufacturers  a total  principal  amount of $81,701
pursuant to five  promissory  notes secured by such machines and equipment.  The
Company  anticipates  that these equipment notes will be paid-in-full by the end
of the first quarter of 1997.  During the nine months ended  September 30, 1996,
promissory notes to equipment manufacturers were reduced by $248,182.

The  Company  completed  truck  stop  paving in order to  maintain  video  poker
licenses before January 1, 1996 at all locations.  State inspectors approved the
Pelican  Palace,  King's  Lucky  Lady and the  Gold  Rush,  but did not  approve
Stelly's  Southern Gold, at which the engineer had certified  51,250 square feet
was paved.  State  inspectors  disallowed  7,800  square feet of parking area at
Stelly's Southern Gold in LeBeau, Louisiana, claiming that additional driveways

                                       7
<PAGE>

were needed to accommodate easier access to the highway, and therefore suspended
operations of the video poker casino on January 4, 1996.  The Company  protested
the  findings of the State  inspectors,  and on October  29, 1996 the  Louisiana
State Gaming  Commission  approved the  reopening of Stelly's  Southern  Gold in
LeBeau.  Once the  Company  receives  the final  documentation  from the state a
re-start of operations will be initiated;  this is expected  sometime during the
month of November 1996.

Effective  June 10,  1996,  the  Company  acquired  GalaxSea  and  I.T.  Cruise,
companies  engaged in the cruise travel industry.  Cruise revenue as reported is
presented  on an  accrual  basis,  and is  estimated  based  on the  receipt  of
quarterly cash payments of previous years actual revenue;  adjusted for seasonal
variations.  Cruise revenue is comprised of overrides and  commissions on cruise
sales generated by I.T. Cruise from the  International  Tours,  Inc. network and
GalaxSea's  franchise  system.  The cruise lines make  payments of overrides and
commissions on a quarterly basis which are received 30-45 days following the end
of each quarter. Bonus overrides and commissions are paid by the cruise lines on
an annual  basis,  which are received  30-45 days into the next  calendar  year.
GalaxSea franchisees are billed monthly for license fees.

The Company will seek to meet its long-term  liquidity needs  primarily  through
cash flow from operations,  additional borrowings from the Company's traditional
lending  sources  and  possible  sales of equity or debt  securities.  While the
Company believes it will be able to generate and obtain the necessary capital to
meet such needs,  there can be no  assurance  that all of such  capital  will be
available on terms  acceptable  to the  Company,  which could delay or cause the
Company to postpone certain planned activities.

There has been a significant increase during the last two years in the number of
gaming  establishments  opening for operation in Louisiana and Mississippi,  and
competition  for the business of gaming  patrons has become very  intense.  As a
result, it is expected that the profit margins,  which may be expected by gaming
establishments  like the Company  will be adversely  affected,  and that various
gaming  establishments  may be  forced  to close  because  they  cannot  compete
effectively  at such reduced  margins.  The Company  believes it will be able to
maintain a competitive  position by carefully  managing  expenses and cash flow,
but there can be no assurance.


Results of Operations

Net Income for the nine months ended September 30,1996.

Company  operations  resulted in net income  before income taxes of $507,859 for
the nine months ended September 30,1996,  an increase of $326,316,  or 180% from
1995's  $181,543.  The Company  recorded the 70% revenue interest it received in
the  Pelican  Palace as a  repayment  of a note  receivable,  which  amounted to
$236,616 through May 31,1996. This note receivable has been satisfied, therefore
fifty percent of the operating  profit generated at the Pelican Palace after May
31, 1996 is now  recorded as income to the  Company,  which was $230,630 for the
nine months ended  September 30, 1996  compared to $126,861 for 1995.  Effective
June 1, 1996 the Company  began  recording  income from  GalaxSea  and IT Cruise
operations,  which amounted to $9,309 through  September 30, 1996. The Company's
operating profit before  administrative  charges amounted to $1,703,019  through
September 30,1996, up 47% from 1995's $1,162,053.


Revenues  totaled  $14,172,936  for the nine months  ended  September  30, 1996,
compared to $10,837,511 for 1995, up 31%.

Video poker revenues  amounted to $9,516,586  through September  30,1996,  up 5%
from 1995's  $9,052,929.  Discontinued  operations  at  Landry's  Silver Fox and
Stelly's  Southern  Gold,  and  increased  competitive  pressure  at  the  Lucky
Longhorn,  King's Lucky Lady, the Pelican Palace and Route Operations,  resulted
in a combined  decrease of  $2,137,446 in video poker revenue from 1995 to 1996.
This was off-set by the acquisition of the Gold Rush, which generated $2,021,589
through September 30, 1996, and the Diamond  Jubilee's  $579,514 for the quarter
ended September 30, 1996.

Video poker revenue  production by location for the nine months ended  September
30, 1996 and 1995 was as follows:  Lucky  Longhorn,  Vinton,  LA - $2,761,296 in
1996 and $3,248,321 in 1995; Pelican Palace, Toomey, LA - $2,054,426 in 1996 and
$2,103,820 in 1995; the Gold Rush - Opelousas, LA, generated $2,021,589 in 1996;
King's Lucky Lady,

                                       8
<PAGE>

Porte Barre, LA - $1,757,903 in 1996 and $1,800,394 in 1995; the Diamond Jubilee
- New Orleans,  LA,  generated  $579,514 in 1996; Route Operations - South, LA -
$337,009 in 1996 and $474,914 in 1995;  Stelly's  Southern  Gold - LeBeau,  LA -
$4,849 in 1996 and  $321,884  in 1995;  Landry's  Silver Fox,  Jeanerette,  LA -
discontinued operations in 1996 and $1,102,996 in 1995;

Fuel,  convenience  store,  food and  beverage  operating  revenues  amounted to
$4,347,478  for the nine months  ended  September  30,  1996  compared to 1995's
$1,784,582,  an increase of 144%. Fuel and  convenience  store sales amounted to
$3,289,481  for the nine months ended  September 30, 1996 compared to $1,063,771
in 1995.  Food and beverage  sales totaled  $1,057,997 for the nine months ended
September 30, 1996 compared to $720,436 in 1995. The Gold Rush  generated  total
retail  revenues of $2,156,777;  at King's Lucky Lady,  combined retail revenues
were  $1,995,043,  an increase of 24% over  1995's  $1,609,969;  and the Pelican
Palace produced  retail revenues of $175,075,  up 25% from $140,385 in 1995. The
Diamond Jubilee generated total retail revenues from beverage sales of $20,583.

Cruise revenues for the nine months ended  September 30, 1996 totaled  $308,872.
This amount  represents an accrual of $160,000 for overrides and  commissions on
cruise sales volume resulting from I.T.  Cruise's  contracts with  International
Tours,  Inc.  and  marketing  fees of  $5,939;  and the  accrual  of  GalaxSea's
franchise  system  revenues,  comprised of $32,329 in overrides and commissions,
$44,413 in monthly license fees, franchise sales fees of $26,750, marketing fees
totaling $34,212 and training income of $5,229.

Casino Operations:
The Gold Rush generated total revenue of $4,178,366 for the first nine months of
1996. Average daily video poker revenue per device (50 devices) was $148 for the
nine months ended  September  30, 1996.  Combined  retail  revenues  amounted to
$2,156,777  for  the  nine  months  ended  September  30,  1996:  truck  stop  -
$1,884,353;  food and beverage - $272,424.  Operating  profit from the Gold Rush
amounted to $734,443,  representing  43% of the  Company's  aggregate  operating
profit for the 1996 period,  which is defined as Revenues  less Cost of Revenues
and Direct  Operating  Expense as illustrated in the  consolidated  statement of
operations.

King's  Lucky Lady  generated  total  revenue of  $3,752,946  for the first nine
months of 1996 compared to $3,410,363 in 1995, up 10%. Average daily video poker
revenue per device (50  devices)  was $128 for the nine months  ended  September
30,1996 compared to 1995's $132.  Combined retail revenues were  $1,995,043,  an
increase of 24% over 1995's $1,609,969:  truck stop - $1,405,128, an increase of
32% over 1995's $1,063,771; food and beverage - $589,915, up 8% from $546,198 in
1995. During the third quarter of 1995,  another competitor opened 14 miles away
with thirty-five  video poker machines.  This new casino is promoting heavily to
attract local clientele,  and is having a direct impact on King's as well as the
Gold Rush. The Company  anticipates  continued  competitive  pressure which will
make it difficult to regain market share.  Operating profit from King's amounted
to $381,267, a decrease of 2% from 1995's $389,143; this represents 22% and 33%,
respectively, of the Company's aggregate operating profit.

The Lucky  Longhorn  generated  total revenue of  $2,761,296  for the first nine
months of 1996  compared to $3,248,321  in 1995,  down 15%.  Average daily video
poker  revenue  per  device  (50  devices)  was $202 for the first  nine  months
compared to 1995's $238.  The Longhorn  has eighteen  competitors  in its market
area,  including four riverboats,  of which one was licensed in June of 1996 and
two were  added  during  1995.  In  addition,  after a major  full-scale  Native
American casino opened in 1994, absorbing a substantial portion of market share,
it then almost  doubled its gaming  capacity  during the third  quarter of 1995,
which significantly affected the Longhorn's results for the first nine months of
1996. Operating profit from the Longhorn for the nine months ended September 30,
1996 was $540,578,  a decrease of 19% from 1995's $614,205;  this represents 32%
and 53%, respectively, of the Company's aggregate operating profit.

The Pelican  Palace  generated  total revenue of  $2,229,501  for the first nine
months 1996 compared to $2,243,205 in 1995,  down 1%.  Average daily video poker
revenue per device (50 devices)  was $150 for the first nine months  compared to
1995's $154. Combined retail revenues totaled $175,075,  up 25% from $140,385 in
1995.  The Pelican Palace was subject to the same  competitive  pressures as the
Lucky Longhorn during the first nine months ended September 30, 1996.  Operating
profit from the Pelican  Palace was $230,630  for 1996,  an increase of 82% from
1995's $126,861; this represents 14% of the Company's aggregate operating profit
for 1996 and 11% for 1995.  However,  as noted above,  the Company also received
distributions of $236,616 of the Pelican  Palace's  operating profit during 1996
in payment of the Company's note receivable from Curray;  which was paid-in-full
as of May 31, 1996. As of June 1, 1996,  fifty  percent of the operating  profit
generated at the Pelican Palace was recorded as income to the Company.


                                       9
<PAGE>


The Diamond Jubilee generated total revenue of $600,097 for its first quarter of
operations  with the Company.  Average  daily video poker revenue per device (50
devices) was $126 for the three months ended September 30, 1996. Retail beverage
revenues  amounted to $20,583 for the period.  Operating profit from the Diamond
Jubilee  amounted  to  $44,589,  representing  3%  of  the  Company's  aggregate
operating profit for the quarter.

Route  Operations  generated  total  revenue of $337,009 in 1996 and $474,914 in
1995. Operating profit for the nine months ended September 30, 1996 was $48,668,
a decrease of 13% from 1995's $63,805;  this represents 3% and 5%, respectively,
of the Company's aggregate operating profit.  Increased  competition resulted in
discontinued  operations  at  certain  tavern  sites,  resulting  in the sale of
fourteen video poker machines.  The Company  currently has 27 devices  operating
within 12 locations.

Stelly's  Southern  Gold was  closed  January  4,  1996 as a result of the truck
parking lot compliance issue discussed above. Only $4,849 in video poker revenue
was recorded in 1996 compared to $321,884 in 1995. A year-to-date operating loss
totaling  $25,906  was  the  result  of  additional  license  application  fees,
engineering costs, device fees,  insurance and property taxes.  Operating profit
amounted to $69,072 for the nine months ended September 30,1995, and represented
6% of the Company's aggregate operating profit.

Landry's Silver Fox - operations were discontinued as of December 31, 1995. 1995
revenues for the first,  second and third  quarters  amounted to $1,102,996  for
video poker and $33,842 for retail sales.  Operating profit amounted to $139,992
for  the  nine  months  ended  September  30,1995,  and  represented  12% of the
Company's aggregate operating profit.

Travel  Operations:  Cruise revenues recorded for thefour months ended September
30, 1996 totaled  $308,872.  The resulting  operating  profit was $9,309 through
September 30, 1996.

Expenses  totaled  $13,787,748  for the nine  months  ended  September  30, 1996
compared to $10,854,331 for 1995, up 27%.

The direct cost of revenue related to video poker operations  includes fees paid
to the state of Louisiana of $3,243,355,  up 6% in 1996 from $3,070,303 in 1995,
and profit sharing payments as defined in operating and management  contracts of
$2,201,091,  down 18% in 1996 from  1995's  $2,668,466.  This  decline in profit
share  payments  resulted from lower video poker revenue at the Lucky  Longhorn,
the  Pelican  Palace and King's  Lucky  Lady,  and  discontinued  operations  at
Stelly's Southern Gold and Landry's Silver Fox.

The cost of revenue related to retail sales from fuel,  convenience  store, food
and beverage operations totaled  $3,577,670,  the cost of goods sold being 83.7%
of retail sales in 1996;  compared to 1995's $1,392,406,  the cost of goods sold
being 83.5% of retail sales. This increase was mainly due to the addition of the
Gold Rush,  which  added  $1,864,443  to the retail cost of revenues at 86.4% of
retail  sales.  At  King's  Lucky  Lady,  the  retail  cost of  revenue  totaled
$1,599,730,  or 80.2% of retail  sales for the nine months ended  September  30,
1996 compared to 1995's  $1,286,224 at 79.9% of retail sales.  The proportion of
fuel sales at both  facilities  drives the high  margin in cost of sales,  which
amounted to $2,754,591 in 1996 compared to $876,725 in 1995,  constituting 63.4%
of the  Company's  retail sales in 1996 versus 49.1% in 1995. In order to comply
with  state  regulations  governing  truck  stops,  the  Company  is being  very
aggressive in its marketing with very competitive  fuel prices.  The regulations
require a minimum  sales  level of 100,000  gallons per month per  location,  in
order to maintain a complement of 50 video poker machines. In addition, food and
beverage  operations  demonstrated an improvement in the margin of cost of goods
sold to 44.5% in 1996 from 53.2% in 1995. Continued  competitive pressure on all
locations requires the marketing of lower price points, which in turn results in
a  significant  number of sales at a low  dollar  value.  The state  regulations
governing  truck  stops also  require  the  Company to operate  three low volume
restaurants  on a 24 hour basis in order to  maintain a  complement  of 50 video
poker machines.  All of these factors contribute  significantly to the Company's
low gross margin on sales.

The cost of revenues also includes promotional and training production costs for
cruise  operations,  as well as  fees  shared  with  business  alliances,  which
amounted to $38,966 through September 30, 1996.

Direct  operating  expenses for the nine months ended September 30, 1996 totaled
$3,408,835,  up 34%, or $864,552, from 1995's $2,544,283;  this represents 24.1%
and 23.5% of total revenue for 1996 and 1995 respectively.  The


                                       10
<PAGE>

majority of this  increase was due to the addition of new  operations:  the Gold
Rush added  $464,209 to payroll  related  expenses  and $287,999 to other direct
operating  expenses;  cruise operations added $260,595;  and the Diamond Jubilee
added  $132,595  for its first  quarter of  operation  with the  Company.  Lower
expense levels as a result of discontinued operations at Landry's Silver Fox and
Stelly's  Southern Gold totaled  $314,028 and $43,172  respectively for the nine
months ended September 30, 1996. All other operations  experienced a 3.5% growth
in the cost of operations,  up $74,513, to $2,244,201 in 1996 from $2,119,688 in
1995.

General and administrative expenses for the nine months ended September 30, 1996
totaled  $445,034,  up 1% from 1995's  $440,784;  demonstrating an improved cost
margin to 3.1% of total revenue from 4.1% of total revenue in 1995.

Interest  expense for the nine months  ended  September  30,1996 was $244,746 in
1996,  up $56,925,  or 30%, from 1995's  $187,821.  This increase was due to the
stock purchase debenture related to the acquisition of GalaxSea and I.T. Cruise,
and the  debenture  for the  partial  redemption  of  Class A  Preferred  Stock.
Depreciation  and amortization of video poker machines,  leasehold  improvements
and goodwill for the nine months ended  September 30, 1996 amounted to $628,051,
up 14%  from  1995's  $550,268.  The  increase  was due to the  amortization  of
goodwill related to the acquisition of GalaxSea and I.T.  Cruise.  Other revenue
and expense,  net, of $122,671 in 1996, includes rental income,  interest income
and ATM commissions; this compares to $198,363 for 1995.

Forward Looking  Statements - Certain  statements  included in this Management's
Discussion and Analysis are forward  looking  statements that predict the future
development of the Company. The realization of these predictions will be subject
to a number of variable contingencies,  and there is no assurance that they will
occur in the time  frame  proposed.  The  risks  associated  with the  potential
actualization  of the Company's plans include:  regulatory  changes,  regulatory
approvals, the availability and cost of financing, to name a few.




                                       11

<PAGE>





                           PART II. OTHER INFORMATION





Items 2, 4 and 5 are omitted from this report as inapplicable.


Item 1. Legal Proceedings

On August 25, 1995,  the Company filed a petition for  declaratory  judgement in
the 14th Judicial  District  Court,  Calcasieu  Parish,  Louisiana,  seeking the
court's  interpretation  of the Act of Contract and Agreement  (the  "Contract")
under which Operator operates the Lucky Longhorn video poker casino. At issue is
whether  the  Operator  deducts the full 32.5% net device  revenue  tax, or only
22.5%  (which was the  statutory  rate  prior to the  amendment  of the  statute
effective July 1, 1994), in calculating net revenues for distribution  under the
Contract.  The other party to the Contract filed an answer to the Company's suit
on November 28, 1995  claiming  that only the old rate should be  deducted,  and
claiming that Operator was in default for deducting the higher rate and that the
Contract  should  therefore  be  terminated.  No trial  date has been  set,  and
settlement  discussions  are  ongoing.  The Company  believes  the issue will be
resolved satisfactorily, but there can be no assurance in this regard.


Item 3. Default Upon Senior Securities

Simultaneously  with the  acquisition of GalaxSea and I.T.  Cruise,  the Company
also restructured its existing, outstanding Class A Preferred Stock by redeeming
313,000  of  the  1,600,000  outstanding  shares  for  a  $939,000  subordinated
debenture,  placing an agreed  moratorium  on the accrual of  dividends  for two
years and  obtaining  from the holders of Class A  Preferred  stock the right to
force  conversion of the remaining  1,287,000  shares of Class A Preferred Stock
into 8,240,000  shares of Common Stock at any time within the next two years. In
the event of any such  forced  conversion,  as part of the  merger  transaction,
International  Tours was granted  anti-dilution  protection  and will,  upon the
issuance  of such  shares  of  Common  Stock to the  former  holders  of Class A
Preferred  Stock, be entitled to an additional  5,452,854 shares of Common Stock
without further consideration,  in order to maintain its percentage ownership of
voting stock at 44%.  The  $780,000 of dividends on the Class A Preferred  Stock
accumulated  and accrued  through  May 31, 1996 will exist as accrued  dividends
payable.












                                       12









<PAGE>


Item 6. Exhibits and Reports on Form 8-K


(a) The following  documents are filed as part of this Quarterly  Report on Form
10-QSB:


Exhibit
Number        Description of Exhibits

3.1.1          Certificate of Incorporation of the Company, as amended, filed as
               Exhibit 3.1 to the  Company's  Annual Report on Form 10-K for the
               fiscal year ended  December 31, 1986 (the "1986 Form 10-K"),  and
               incorporated herein by reference.

3.1.2          Certificate of Amendment of Certificate of  Incorporation  of the
               Company  dated  April 18,  1994,  filed as  Exhibit  3.1.8 to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               December 31, 1993 (the "1993 Form 10-K"), and incorporated herein
               by reference.

3.1.3          Certificate  of Amendment  of  Certificate  Incorporation  of the
               Company  effecting  one-for-three  reverse  stock  split filed as
               Exhibit  3.1 to the  Company's  Current  Report on Form 8-K dated
               October 17, 1994, and incorporated herein by reference.

3.1.4          Certificate  of Amendment  of  Certificate  Incorporation  of the
               Company  effecting  name change,  increase of authorized  shares,
               authorization  of Class A  preferred  stock and  stock  ownership
               limitations  filed as Exhibit 3.1 to the Company's Current Report
               on Form 8-K dated October 17, 1994,  and  incorporated  herein by
               reference.

3.1.5          Form of "Certificate  of  Designation,  Preferences and Rights of
               Series B  Convertible  Preferred  Stock"  creating  the  Series B
               Preferred Stock, filed as Exhibit 10.1.4 to the Company's Current
               Report on Form 8-K dated June 10, 1996, and  incorporated  herein
               by reference.

3.2            Amended and Restated  Bylaws of the Company  filed as Exhibit
               3.3 to the Company's Current Report on Form 8-K dated October 17,
               1994, and incorporated herein by reference.

*10.1          Stock Purchase and  Registration  Rights  Agreement dated July 1,
               1996  between the Company  and New Orleans  Video Poker  company,
               Inc. ("NOVP").

*10.1.2        Sublease  Agreement  dated  July 1,  1996  between  OM  Operating
               Company, LLC ("Operating") and NOVP.

*10.1.3        Consent to Sublease  entered  into as of October 7, 1996,  by and
               between Operating, NOVP and Stanley Doussan.

*10.2          License to Operate Video Poker Casino dated  effective  December
               15, 1995 between Operating and Ozdon Investments, Inc. relating
               to The Gold Rush Truck Stop.

*27.1         Financial Data Schedule required by Item 601 of Regulation S-B.

----------------------

*    Filed herewith.

(b) A Form 8-K/A (Amendment No. One) was filed on August 25, 1996,  amending the
Form 8-K reporting an event dated June 10, 1996, which Form 8-K/A (Amendment No.
One) covered the following items:

          Item 7 - Financial Statements and Exhibits


                                       13


<PAGE>


               NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION


                                   SIGNATURES

                                     -------

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
thereunto duly authorized.


                            NORTH AMERICAN GAMING AND
                            ENTERTAINMENT CORPORATION
                                  (Registrant)


                   By:                /s/ George J. Akmon
                                      -------------------
                                      George J. Akmon
                                      Executive Vice-President &
                                      Chief Financial Officer (Principal
                                      Financial and Chief Accounting
                                      Officer)



Date:    November 13, 1996
























                                                                 A:\3Q9610Q.WPD





                                       14




<PAGE>



                               STOCK PURCHASE AND
                          REGISTRATION RIGHTS AGREEMENT


         This Stock Purchase and Registration Rights Agreement (the "Agreement")
is made and entered  into as of the 1st day of July,  1996 by and between  NORTH
AMERICAN GAMING AND  ENTERTAINMENT  CORPORATION (the "Issuer"),  and NEW ORLEANS
VIDEO POKER COMPANY, INC. (the "Purchaser").

                              W I T N E S S E T H:

         WHEREAS,  the  Issuer  and  Purchaser  are  entering  into  a  Sublease
Agreement  effective  as of even date  herewith  relating to the  operation of a
video poker casino; and

         WHEREAS,  Issuer has agreed to issue 450,000  shares (the  "Shares") of
its common  stock,  par value $.01 per share (the  "Common  Stock"),  as partial
consideration for Purchaser entering into the Sublease Agreement; and

         WHEREAS, it is a condition precedent to Issuer's issuance of the Shares
and the Purchaser's execution of the Sublease Agreement, that the Issuer and the
Purchaser shall have entered into this Registration Rights Agreement.

         NOW, THEREFORE,  in consideration of the premises and mutual agreements
hereinafter set forth, the Issuer and the Purchaser agree as follows:

         1.  Acquisition of Shares.  The Purchaser is aware that the Shares have
not been  registered  pursuant to either the  Securities Act of 1933, as amended
(the "1933 Act"), or the applicable  securities  acts,  rules, or regulations of
any state (the "Blue Sky Laws"),  on the ground that the  issuance  and delivery
thereof are exempt from such registration under certain exemptions  contained in
the 1933 Act and applicable  Blue Sky Laws. In order to assure the  availability
and  applicability  of such  exemptions,  the Purchaser  hereby  represents  and
warrants to, and covenants and agrees with, the Issuer that:

                  (i) The Purchaser is acquiring the Shares for the  Purchaser's
         own  account  for  investment  and  not  with a view  to  any  sale  or
         distribution of all or any part thereof.

                  (ii) The  Purchaser  will hold the  Shares  subject to all the
         applicable  provisions  of the 1933 Act and the rules  and  regulations
         promulgated  thereunder  by  the  Securities  and  Exchange  Commission
         ("Commission")  and all applicable  provisions of the Blue Sky Laws and
         will not at any time make any sale,  transfer,  or other disposition of
         the Shares in  contravention  of the  provisions of the 1933 Act or the
         Blue Sky Laws.

                  (iii) In order to permit the  Purchaser  to evaluate the risks
         of and to make an  informed  investment  decision  with  respect to the
         acquisition  of the  Shares,  the  Issuer  has  furnished  and/or  made
         available to the Purchaser (a)  information  regarding 


                                       1
<PAGE>

          the Issuer, and its business, properties and financial position deemed
          necessary by the  Purchaser to make an informed  investment  decision,
          (b) such other  information  as the Purchaser has deemed  necessary in
          order to verify the information  furnished and/or made available,  and
          (c) the opportunity to ask questions of, and receive answers from, the
          Issuer or persons  acting on its behalf  concerning the Issuer and the
          terms and conditions of the Purchaser's acquisition of the Shares.

                  (iv) The  Purchaser is able to bear the economic  risks of the
         Purchaser's investment in the Shares for an indefinite period of time.

                  (v)  The  Purchaser  will  not  make  any  sale,   assignment,
         transfer,  or other  disposition  of the  Shares  unless  and until the
         Purchaser  has  given  the  Issuer   written  notice  of  the  proposed
         disposition and the  circumstances  relating thereto and either (a) the
         Shares shall have been registered pursuant to the 1933 Act and the Blue
         Sky Laws or (b) counsel for the Issuer, or counsel  satisfactory to the
         Issuer,  shall have  rendered  a written  opinion  satisfactory  to the
         Issuer that such registration is not required.

                  (vi) A legend in substantially the following form, in addition
         to any legend required by law or agreement to be noted thereon,  may be
         noted  conspicuously on the certificate or certificates  evidencing the
         Shares:


                  "THE  SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED  UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
                  LAWS OF ANY STATE. THESE SHARES MAY NOT BE SOLD,  TRANSFERRED,
                  OR  OTHERWISE  DISPOSED  OF UNLESS  THEY ARE FIRST  REGISTERED
                  UNDER  SUCH ACTS OR UNLESS  COUNSEL  FOR THE  COMPANY OR OTHER
                  COUNSEL  SATISFACTORY  TO THE COMPANY  SHALL HAVE  RENDERED AN
                  OPINION  SATISFACTORY  TO THE  COMPANY TO THE EFFECT THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

                  (vii) Stop transfer instructions may be issued to the transfer
         agent  of the  Issuer  or a  notation  may be made  in the  appropriate
         records of the Issuer with respect to the Shares.

                  (viii) The Purchaser  further  acknowledges its  understanding
         that,  if Rule 144 under the 1933 Act ("Rule  144") is  available  with
         regard to the Shares,  any sales  pursuant to Rule 144 can only be made
         in full  compliance  with all of the provisions of Rule 144,  including
         among other things, the following:

     (a)  the Issuer must be providing  adequate public information with respect
          to the Issuer during a specified time period  immediately prior to the
          sale;

     (b)  a two-year holding period must be satisfied;


                                       2
<PAGE>


     (c)  the amount sold in each 90-day period must not exceed one percent (1%)
          of the outstanding shares of the Issuer's Common Stock;

     (d)  the sales must be made in ordinary broker's transactions as defined in
          Rule 144; and

     (e)  the seller must file a notice of sale with the Commission concurrently
          with placing the order to sell.


2.   (a) Piggy-Back  Registration Right. If the Issuer at any time prior to July
     1,  1998  proposes  to file a  registration  statement  under  the 1933 Act
     covering any of its  securities  other than a  registration  on Form S-8 or
     Form S-4, or any successor or similar forms,  for sale for its own account,
     it will each such time give prompt written notice of its intention to do so
     to the Purchaser and of the Purchaser's  rights under this Agreement.  Upon
     the written  request of the Purchaser made within 30 days after the receipt
     of any such  notice,  the  Issuer  will use its best  efforts to effect the
     registration  under the 1933 Act of all Shares which the Issuer has been so
     requested to register by the Purchaser,  to the extent  requisite to permit
     the  disposition  of the Shares so to be  registered,  by inclusion of such
     Shares in the registration  statement which covers the securities which the
     Issuer  proposes to register;  provided,  that if, at any time after giving
     written notice of its intention to register any securities and prior to the
     effective date of the registration  statement filed in connection with such
     registration,  the Issuer  shall  determine  for any  reason  either not to
     register or to delay  registration of such  securities,  the Issuer may, at
     its election,  give written notice of such  determination  to the Purchaser
     and, thereupon,  (i) in the case of a determination not ro register,  shall
     be relieved of its  obligation  to register any Shares in  connection  with
     such  registration  and  (ii)  in the  case  of a  determination  to  delay
     registering,  shall be  permitted to delay  registering  any Shares for the
     same period as the delay in registering such other securities.

(b)  Priority in Piggy-Back  Registrations.  If (i) a  registration  pursuant to
     this Section  involves an  underwritten  offering of the  securities  being
     registered to be distributed (on a firm commitment basis) by or through one
     or more  underwriters  of  recognized  standing  under  underwriting  terms
     appropriate  for such a transaction,  and (ii) the managing  underwriter of
     such  underwritten  offering  shall inform the Issuer and the  Purchaser by
     letter of its belief that the  distribution of all or a specified number of
     such Shares  concurrently  with the  securities  being  distributed by such
     underwriters   would  interfere  with  the  successful   marketing  of  the
     securities being  distributed by such  underwriters  (such writing to state
     the basis of such belief and the  approximate  number of such Shares  which
     may be distributed without such effect),  then the Issuer may, upon written
     notice to the  Purchaser,  reduce pro rata (if and to the extent  stated by
     such  managing  underwriter  to be necessary to eliminate  such effect) the
     number of such  Shares  and  securities  proposed  to be sold by any person
     other than the Issuer the  registration  of which shall have been requested
     by the  Purchaser  and  each  person  other  than  the  Issuer  so that the
     resultant  aggregate number of such Shares so included in such registration
     shall  be  equal  to  the  number  of  shares   stated  in  such   managing
     underwriter's letter.

(c)  Demand Registration  Rights. The Issuer will, as soon as possible following
     a written  request by  Purchaser  received  by the Issuer  prior to July 1,
     1988, file a shelf  registration  statement on Form S-3 covering the Shares
     and thereafter  shall use its best efforts to cause the shelf  registration
     statement to be declared  effective as soon as  practicable  following such
     filing  and to take  any and all  reasonable  action  within  the  Issuer's
     control (provided that such  registration  statement



                                       3
<PAGE>

          may be unusable  during  periods  (which  shall not exceed one hundred
          twenty  consecutive  days or an aggregate  of one hundred  eighty days
          within  any  three   hundred   sixty  five  day   period)  of  pending
          acquisitions   or  other   material   events  which  would  require  a
          post-effective  amendment  or  supplement  to the  shelf  registration
          statement,  it being agreed that the Issuer shall use its best efforts
          to file a post-effective amendment at the earliest practicable date so
          that the shelf  registration  statement  will be  useable),  as may be
          necessary or  appropriate  to maintain such  effectiveness  until such
          time as neither the Purchaser nor any of its assignees own any Shares.
          Purchaser will cooperate fully with Issuer by filing comments or other
          documents  with  the SEC  which  may be  required  by the  SEC,  or by
          providing such documents as may be reasonably  required by the Issuer.
          If the Purchaser  proposes to dispose of any of the Shares pursuant to
          an underwritten  offering the Purchaser shall have the right to select
          the underwriter.

     3.   Indemnification.  In connection  with the  registration  of any of the
          Shares under the 1933 Act:

     (a)  Issuer's Indemnification.  The Issuer will indemnify and hold harmless
          the  Purchaser,  each person who  controls  the  Purchaser  within the
          meaning of the 1933 Act and the  Securities  Exchange Act of 1934,  as
          amended  (the  "Exchange  Act"),  and the  Purchaser'  s officers  and
          directors against any losses, claims, expenses, damages or liabilities
          (including  reasonable  attorney's fees) , joint or several,  to which
          the Purchaser,  its controlling persons or such officers and directors
          become  subject  under the 1933 Act,  insofar as such losses,  claims,
          expenses, damages or liabilities (or actions in respect thereof) arise
          out of or are  based  upon any  untrue  statement  or  alleged  untrue
          statement of any material fact contained in the registration statement
          in which the Shares are included (the  "Registration  Statement"),  in
          any  prospectus  forming  a part of the  Registration  Statement  (the
          "Prospectus") or any amendment or supplement  thereof, or arise out of
          or are based upon the omission or alleged  omission to state therein a
          material fact  required to be stated  therein or necessary to make the
          statements  therein not misleading,  and will reimburse the Purchaser,
          each such  controlling  person or such  officers and directors for any
          legal or other expenses reasonably incurred by them in connection with
          investigating  or defending  any such loss,  claim,  expense,  damage,
          liability or action;  provided,  however,  that the Issuer will not be
          liable in any such case if but only to the extent  that any such loss,
          claim, expense, damage or liability arises out of our is based upon an
          untrue  statement or alleged  untrue  statement or omission or alleged
          omission so made in conformity with  information  furnished in writing
          to the Issuer by the Purchaser or  Purchaser's  underwriter  expressly
          for inclusion in the Registration Statement.

     (b)  Purchaser's  Indemnification.  The Purchaser  will  indemnify and hold
          harmless the Issuer and each underwriter of the Shares and each person
          who controls the Issuer or any such underwriter  within the meaning of
          the 1933 Act and the  Exchange  Act,  each  officer  of the Issuer who
          signs the  Registration  Statement  and each  director  of the Issuer,
          against  all  losses,   claims,   expenses,   damages  or  liabilities
          (including reasonable attorneys, fees), joint or several, to which the
          Issuer,   any  such   underwriter  or  such  officer  or  director  or
          controlling  person become  subject under the Act, but only insofar as
          such losses, claims,  expenses,  damages or liabilities (or actions in
          respect  thereof) arise out of or are based upon any untrue  statement
          or alleged  untrue  statement of any material fact made in reliance on
          and in conformity with information relating to the Purchaser furnished
          in writing to the Issuer  expressly for inclusion in the  Registration
          Statement. 


                                       4
<PAGE>


     (c)  Notification. Promptly after receipt by an indemnified party hereunder
          of notice of the commencement of any action,  such  indemnified  party
          shall,  if a  claim  in  respect  thereof  is to be made  against  the
          indemnifying party hereunder, notify the indemnifying party in writing
          thereof; provided,  however, that any failure to give such notice will
          not waive any rights of the indemnified party except to the extent the
          rights of the indemnifying  party are materially  prejudiced.  In case
          any such action shall be brought against any indemnified  party and it
          shall notify the indemnifying party of the commencement  thereof,  the
          indemnifying  party shall be entitled  to  participate  in the defense
          thereof.

     (d)  If the  indemnification  provided for in this Section 3 is unavailable
          or  insufficient  to hold harmless an indemnified  party in respect of
          any losses,  claims,  expenses,  damages or  liabilities or actions in
          respect  thereof,  then  each  indemnifying  party  shall  in  lieu of
          indemnifying  such indemnified  party contribute to the amount paid or
          payable by such indemnified party as a result of such losses,  claims,
          expenses,  damages,  liabilities  or actions in such  proportion as is
          appropriate  to reflect the relative  fault of the Issuer,  on the one
          hand,  and  the  Purchaser,  on the  other,  in  connection  with  the
          statements  or  omissions  which  resulted  in  such  losses,  claims,
          expenses,  damages,  liabilities  or  actions  as  well  as any  other
          relevant equitable  considerations,  including the failure to give any
          required  notice.  The relative fault shall be determined by reference
          to, among other things, whether the untrue or alleged untrue statement
          of a material  fact or the  omission  or alleged  omission  to state a
          material fact relates to  information  supplied by the Issuer,  on the
          one hand, or the Purchaser,  on the other,  and the parties,  relative
          intent, knowledge, access to information and opportunity to correct or
          present such statement or omission. The Issuer and the Purchaser agree
          that it would not be just and  equitable if  contribution  pursuant to
          this Section 3 (d) were  determined  by pro rata  allocation or by any
          other  method  of  allocation  which  does  not  take  account  of the
          equitable considerations referred to above in this Section 3 (d) . The
          amount  paid or  payable  to an  indemnified  party as a result of the
          losses, claims, expenses,  damages,  liabilities or actions in respect
          thereof  referred  to above in this  Section  3(d)  shall be deemed to
          include  any  legal  or other  expenses  reasonably  incurred  by such
          indemnified  party in connection with  investigating  or defending any
          such action or claim. No person guilty of fraudulent misrepresentation
          (within  the  meaning  of  Section  11(f)  of the 1933  Act)  shall be
          entitled  to  contribution  from any person who was not guilty of such
          fraudulent misrepresentation.

4.   Expenses. In connection with a piggy-back  Registration  Statement in which
     the Shares are included  pursuant to Section 2(a), the Issuer shall pay all
     expenses  incident to the Issuer's  performance  of or compliance  with its
     obligations  hereunder,  including,  without limitation,  all registration,
     filing and National Association of Securities Dealers,  Inc. fees, all fees
     and  expenses  of  complying  with  securities  or Blue Sky Laws,  all word
     processing,  duplicating  and  printing  expenses,  messenger  and delivery
     expenses, and the reasonable fees and disbursements of the Issuer's counsel
     and  of  its  independent  public   accountants;   and  Purchaser  will  be
     responsible for any expenses incurred by it, including for its own counsel,
     accountants,  underwriters and representatives. In connection with a demand
     Registration Statement in which the Shares are included pursuant to Section
     2(c), Purchaser shall pay all expenses incident to the Issuer's performance
     of or compliance with its  obligations  hereunder,  including  internal and
     external legal, accounting and administrative costs.

                                       5

<PAGE>

5.   Governing  Law.  This  Agreement  shall be  governed by and  construed  and
     enforced  in  accordance  with the  internal  laws of the  State of  Texas,
     without regard to the conflict of law principles thereof.

6.   Binding Effect. The obligations of this Agreement shall be binding upon the
     parties, their heirs, successors and legal representatives.

7.   Assignment.  This  Agreement  may not be assigned by any party  without the
     prior written consent of the other party hereto,  except that the Purchaser
     may assign  all or any  portion of its  rights  under this  Agreement  to a
     stockholder  of  Purchaser  to  which  it  transfers  Shares  in a  private
     transaction   exempt  from  the   registration   and  prospectus   delivery
     requirements of the 1933 Act, provided,  at such time,  Purchaser furnishes
     an opinion of counsel to such effect reasonably acceptable to the Issuer.
                                                                           
9.   Amendment.  Amendments to this Agreement may only be made in writing signed
     by each of the parties.

10. Entire Agreement.  This Agreement  contains the entire  understanding of the
parties  and there  are no other  agreements,  written  or oral,  regarding  the
subject matter hereof.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date first above written.

                                         NORTH AMERICAN GAMING AND
                                         ENTERTAINMENT CORPORATION



                                         By:________________________________
                                            George J. Akmon,
                                            Executive Vice President


                                         NEW ORLEANS VIDEO POKER
                                         COMPANY, INC.



                                         By:_________________________________

                                         Its:________________________________




                                       6

A:\REGISRTS.3
<PAGE>


                               SUBLEASE AGREEMENT


         THIS SUBLEASE  AGREEMENT  ("Sublease")  is entered into effective as of
July 1, 1996 (the  "Effective  Date") by and  between  NEW  ORLEANS  VIDEO POKER
COMPANY,  INC.  (hereafter  "Sublessor")  and OM  OPERATING,  L.L.C.  (hereafter
"Sublessee").

         WHEREAS,  Sublessor  and  Stanley  Doussan  (hereafter  "Doussan")  and
certain other  parties  entered into that certain  Assignment of Agreements  and
Releases in December 1992 relating to a Lease Agreement,  Addendum to Lease, and
Sublease  and  Operator's  Agreement  dated  July 10,  1992,  pursuant  to which
Sublessor assumed all of the  responsibilities  and obligations under such Lease
Agreement,  Addendum to Lease, and Sublease and Operator's Agreement and Doussan
consented to such  assumption of duties by Sublessor and the  assignment of such
agreements to Assignor; and

         WHEREAS,  Sublessor and Doussan entered into that certain  Amendment to
Lease and Addendum to Lease dated  December 15,  1992,  which  amended the Lease
Agreement dated July 10, 1992 and the Addendum to Lease dated July 10, 1992; and

         WHEREAS,  the Lease  Agreement,  Addendum to Lease,  and  Sublease  and
Operator's  Agreement  dated July 10, 1992, as amended by the Amendment to Lease
and Addendum to Lease dated  December 15, 1992, are  hereinafter  referred to as
the "Operator's Agreements"; and

         WHEREAS,  Sublessor  desires to sublease  to  Sublessee  and  Sublessee
desires to sublease  from  Sublessor  the  properties,  rights,  privileges  and
benefits to which Sublessor is entitled under the Operator's Agreements relating
to the video poker casino,  bar,  related parking area and gasoline pump located
on the back parking lot of the video poker casino building; and

         WHEREAS,  Sublessor  desires  to  continue  to retain  the  properties,
rights,  privileges and benefits,  as well as the  obligations,  relating to all
other  aspects of the  Operator's  Agreements,  specifically  the truck stop and
restaurant located in the separate building and the related fuel operations; and

         WHEREAS,  capitalized  terms used herein shall have the same meaning as
in the Operator's  Agreements  except where the context herein clearly indicates
otherwise,  or except where there is a conflict,  in which case the term as used
in the Lease Agreement shall control; and

         WHEREAS,  this Sublease is  contingent  upon the consent of Doussan and
Sublessee's  obligations hereunder shall not commence until such written consent
has been obtained and delivered to Sublessee.

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual  promises and covenants  set forth  herein,  together with other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:


                                       1

<PAGE>

                       Demise and Description of Property

         1.  Sublessor  leases to Sublessee and Sublessee  leases from Sublessor
that  portion of the  Property,  as  described  in the Lease,  constituting  the
separate  building  housing the video poker  casino and bar,  together  with the
related  parking  lot and one gas pump  located at the back of said  parking lot
(the  "Subleased  Premises"),  and all of  Sublessor's  rights,  privileges  and
benefits under the  Operator's  Agreements  relating to the Subleased  Premises,
including,  without limitation, the right to operate the video poker casino, the
bar, the parking lot and the gas pump, it being  understood that Sublessee shall
be responsible for operating and managing the video poker casino,  bar,  related
parking area and the gas pump located in the parking area,  and Sublessor  shall
be responsible  for all other  operations  and  activities  under the Operator's
Agreements relating to the Property.

                                      Term

         2. The term of this Sublease shall be for a period of one year from the
Effective Date, subject to automatic renewal, at the election of Sublessee, upon
thirty days' advance  written notice to Sublessor prior to the expiration of the
initial term or any renewal  term;  provided,  however,  Sublessee may terminate
this  Sublease at any time upon thirty days' written  notice to Sublessor;  and,
provided,  further,  that Sublessee may terminate this Sublease immediately upon
written  notice to Sublessor in the event (i) any of the  Operator's  Agreements
are in default or are  terminated,  or (ii) Sublessor is in default under any of
its obligations to Sublessee hereunder; and, provided, further, that the maximum
number  of  renewals  shall be thirty  (30) one year  renewals;  and,  provided,
further,  that  Sublessor may terminate this Sublease  immediately  upon written
notice to Sublessee if, after payment of all  indebtedness  assumed by Sublessee
set forth in Section 3 hereof, the rental payments to Sublessor set forth in the
first  paragraph  of  Section 3 hereof  are less than  $5,000 per month for five
consecutive months.

                           Consideration to Sublessor

         3. As  consideration  for the Sublease,  Sublessee hereby agrees during
the term of this  Sublease to assume and be bound by all the terms,  conditions,
provisions and obligations of Sublessor under the Operator's Agreements relating
to the  Subleased  Premises,  and  Sublessee  agrees to pay to Sublessor  within
twenty (20) days  following  the end of each  calendar  month an amount equal to
fifty (50%) of the net operating cash flow from the operations of the truck stop
and casino after deduction for (i) all cash costs and expenses paid by Sublessee
for the month, (ii) any reserves deemed  appropriate by Sublessee for such month
and (iii)  interest  and  principal  on any  indebtedness  of  Sublessee  on any
furniture,  fixtures or equipment purchased by Sublessee and placed in the video
poker casino,  bar or on the parking lot,  including,  without  limitation,  the
fifty (50) video poker machines and automated  teller machine to be purchased by
Sublessee  in  accordance  with  the  following   paragraph.   Sublessor  hereby
acknowledges  that such  consideration  is adequate  and that  Sublessor  is not
entitled to any further rent or lease payments during the term of this Sublease.

Sublessee hereby agrees to purchase from Sublessor,  and Sublessor hereby agrees
to sell to Sublessee,  (i) the fifty (50) existing video poker machines and (ii)
the automated teller machine located in the Subleased  Premises  effective as of
the  Effective  Date  in  consideration  of  Sublessee   assuming  the  existing
indebtedness on such machines payable to (i) Prime Finance Corporation and


                                       2

<PAGE>

 (ii) Equitable  Trust Savings Bank,  respectively,  having unpaid  principal
balances as of the Effective  Date of $41,674.55 and  $11,262.60,  respectively;
provided,  however, upon termination of this Sublease by Sublessee in accordance
with  Section 2, said  fifty (50) video  poker  machines  and  automated  teller
machine  shall revert back to  Sublessor  and be deemed to be owned by Sublessor
without further consideration;  provided, further, that if the fuel requirements
for the  Property  are  not met so that  any of the  video  poker  machines  are
required to be removed from the Property or the operation thereof is required to
be  terminated,  such machines shall also revert back to Sublessor and be deemed
to be owned by Sublessor without further  consideration;  provided,  further, at
such time as any of the video poker machines or automated  teller machine revert
back to Sublessor for any reason,  Sublessor  shall be responsible  for assuming
and  resuming  payment  of any of the  foregoing  indebtedness  payable to Prime
Finance Corporation or Equitable Trust Savings Bank which remains unpaid at such
time,  and shall hold  Sublessee  harmless from any liability for any continuing
payments thereof. Sublessor hereby represents and warrants to Sublessee that the
fifty (50) video poker  machines and the automated  teller  machine are free and
clear of all liens, claims and encumbrances except for the indebtedness  payable
to Prime Finance  Corporation and Equitable Trust Savings Bank set forth in this
Section 3.

                            Use of Subleased Premises

         4. The Subleased  Premises  shall be used by Sublessee for the purposes
which  Sublessor is allowed to use them under the  Operator's  Agreement and for
uses normally incident to those purposes.

                   Limited Assumption Agreement and Covenants

         5.  The  Sublessee  shall  comply  with  all of the  provisions  of the
Operator's  Agreements  that  relate  to the  Subleased  Premises  and are to be
performed by the Sublessor  during the term of this  Sublease,  and the rent and
other  expenditures  made thereunder by Sublessee shall be considered  operating
expenses  for  purposes  of net  operating  cash  flow  under  Section 3 of this
Sublease.  However, it is expressly  understood and agreed between Sublessor and
Sublessee  that this Sublease does not constitute an assumption of, and does not
relate to, any  portion of the Lease,  Operator's  Agreements  or the  Property,
other than the Subleased Premises, notwithstanding any provision to the contrary
contained in the Lease or any of the Operator's Agreements.

                Payment/Collection of Rent on Behalf of Sublessor

         6.  Sublessor  hereby  appoints  Sublessee  as its  limited  agent  for
purposes  of making all of the rental  payments  under the Lease and  Operator's
Agreements  to Doussan  and for  collecting  from F&F  Enterprises,  a Louisiana
partnership,  the  rent  and  other  amounts  payable  to  Sublessor  under  the
Operator's Agreement. Sublessor hereby authorizes Sublessee to offset the amount
collected from F&F Enterprises against the payments made by Sublessee to Doussan
on behalf of Sublessor and the negative resulting balance shall be deemed a cash
operating expense under Section 3 and shall be split 50/50 between Sublessee and
Sublessor.







                                       3
<PAGE>


         Option to Acquire Remainder of Lease and Operator's Agreements

         7. Sublessor  hereby grants to Sublessee the option,  exercisable  upon
thirty days' advance written  notice,  to sublease the remainder of the Property
and  obtain  all of  Sublessor's  rights,  privileges  and  benefits  under  the
Operator's Agreements, and undertake all of the responsibilities and obligations
and duties of  Sublessor  under the  Operator's  Agreements.  Such option  shall
expire upon termination of this Sublease.  In the event Sublessee exercises said
option,  this Sublease  shall be deemed  amended so that the Subleased  Premises
shall mean all of the Property, the Sublease shall relate to all portions of the
Operator's  Agreement,  and  Sublessee  shall be entitled to all of  Sublessor's
rights,   privileges  and  benefits  under  the  Operator's  Agreements  and  be
responsible  for  performing  Sublessor's  obligations  and  duties  thereunder,
without  further need for amending  this  Sublease or entering  into any further
agreements. As a condition precedent to exercising such option, Sublessee agrees
to assume payment of any remaining  principal  balance owing by Sublessor at the
date of  exercise  of such  option to the  existing  stockholders  of  Sublessor
(hereinafter referred to collectively as the "Shareholder Notes"), which have an
aggregate outstanding principal balance as of the Effective Date of $569,816.84,
and which are generally referred to as being payable to three separate groups of
shareholders,  as follows:  (i) $187,438.73  payable to the "Keith Group",  (ii)
$187,980.83  payable to the "Peaks Group", and (iii) $194,397.28  payable to the
"Hampton  Group".  It is also  expressly  understood and agreed by Sublessor and
Sublessee  that the balance of the  Shareholder  Notes required to be assumed by
Sublessee  upon exercise of such option shall be reduced  monthly by 91% of each
dollar paid to Sublessor by Sublessee  under this Sublease,  regardless  whether
such amount is applied by Sublessor against payment of the Shareholder Notes; it
being  understood that the other 9% is the interest rate payable by Sublessor on
the Shareholder  Notes; it being the intention that the principal balance of the
Shareholder  Notes to be assumed by Sublessee shall be deemed to be reduced by a
deemed  principal  payment each month equal to 91% of the amount of all payments
to Sublessor by Sublessee pursuant to this Sublease.  Further, it is agreed that
if any of the video poker  machines  revert back to  Sublessor  because the fuel
requirements  at the Property are not met,  those video poker  machines  will be
sold by Sublessor and 91% of the proceeds  thereof (after payment of any portion
of the indebtedness  required to be paid thereon by Sublessor in accordance with
Section 3) shall be deemed to be  applied  against  payment  of the  Shareholder
Notes.

         Moreover,  Sublessee and Sublessor hereby agree that if Sublessee sales
all  or  substantially  all of its  assets  in  Louisiana,  Sublessee  shall  be
obligated to exercise such purchase option concurrently with such sale.

                             Furniture and Fixtures

         8. Except with  regard to the fifty (50) video poker  machines  and the
automated teller machine purchased from Sublessor  hereunder pursuant to Section
3, all  furniture and fixtures and  equipment  placed in the leased  premises by
Sublessee  shall remain the property of  Sublessee.  The  Sublessee  may, at the
expiration  of the term of this  Sublease,  remove such  furniture  and fixtures
(other  than said fifty (50)  video  poker  machines  and the  automated  teller
machine) if removal is done so as not to damage the leased premises.


                                       4

<PAGE>

                            Miscellaneous Provisions

                               Texas Law to Apply

         9.(a) This Sublease shall be construed under and in accordance with the
laws of the State of Texas, and all obligations of the parties created hereunder
are performable in Collin County, Texas as it relates to Sublessor and Sublessee
only.  Nothing herein shall be construed to subject or require Doussan to submit
to the laws of the State of Texas.

                                  Parties Bound

         (b) This  Sublease  shall be binding on and inure to the benefit of the
parties  and  their   respective   heirs,   executors,   administrators,   legal
representatives,  successors, and assigns except as otherwise expressly provided
in this Sublease.  Notwithstanding the foregoing sentence, this Sublease may not
be assigned by Sublessor or Sublessee  without the prior express written consent
of the other party.

                               Legal Construction

         (c) In  case  any  one or  more  of the  provisions  contained  in this
Sublease shall for any reason be held to be invalid,  illegal,  or unenforceable
in any respect,  that  invalidity,  illegality,  or  unenforceability  shall not
affect any other  provision  and this  Sublease  shall be  construed  as if such
invalid, illegal, or unenforceable provision had never been included.

                           Prior Agreements Superseded

         (d) This  Sublease  constitutes  the sole  agreement of the parties and
supersedes any prior  understandings  or written or oral agreements  between the
parties respecting this subject matter.

                                 Attorney's Fees

         (e) If  any  action  at  law or in  equity,  including  an  action  for
declaratory  relief,  is brought to enforce or interpret the  provisions of this
Sublease,   the  prevailing  party  shall  be  entitled  to  recover  reasonable
attorney's fees from the other party,  which fees may be set by the court in the
trial of such action or may be enforced  in a separate  action  brought for that
purpose,  and which fees shall be in addition to any other  relief  which may be
awarded.

                              Specific Performance

         (f) The parties  declare that it is  impossible to measure in money the
damages   which  will  accrue  to  either   party,   their   heirs,   executors,
administrators,  legal  representatives,  successors,  or assigns by reason of a
failure to perform any of the obligations under this Sublease.  Therefore,  if a
party, its heirs, executors, administrators, legal representatives,  successors,
or assigns shall institute any action or proceeding to enforce the provisions of
this  Sublease,  any person  against whom such action or  proceedings is brought
agrees that  specific  performance  may be sought and obtained for any breach of
this agreement.
         Counterparts, One Agreement


                                       5

<PAGE>

         (g) This  Sublease  and all other copies of this  Sublease,  insofar as
they relate to the rights,  duties, and remedies of the parties, shall be deemed
to be one agreement.  This Sublease may be executed  concurrently in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.




                                     Notice

         (h) Unless otherwise provided in this Sublease,  any notice, tender, or
delivery  to be given by either  party to the other may be  effected by personal
delivery in writing or by registered or certified mail, postage prepaid,  return
receipt requested, and shall be deemed received as of the time of actual receipt
or three days  following  mailing if delivered by registered or certified  mail,
return receipt requested.

                                 Time of Essence

                  (i)       Time is of the essence in this Sublease.

Dated effective as of the Effective Date first written above.

                                         SUBLESSOR:

                                         NEW ORLEANS VIDEO POKER
                                         COMPANY, INC.

                                         By:      ______________________________

                                         Its:     ______________________________


                                         SUBLESSEE:

                                         OM OPERATING, L.L.C.


                                         By:      ______________________________
                                                  Don Williams, Manager


                                                              A:\SUBLEASE.3
                                       6

<PAGE>
                               CONSENT TO SUBLEASE

     THIS CONSENT TO SUBLEASE  (the  "Consent")  is entered into by and among OM
OPERATING,  L.L.C.   ("Sublessee"),   NEW  ORLEANS  VIDEO  POKER  COMPANY,  INC.
(hereinafter  "Sublessor),  and STANLEY DOUSSAN (hereafter "Doussan") who agrees
as follows:

         WHEREAS,  Sublessor and Doussan and certain other parties  entered into
that certain  Assignment of Agreements and Releases in December 1992 relating to
a Lease  Agreement,  Addendum to Lease,  and Sublease and  Operator's  Agreement
dated  July  10,  1992,   pursuant  to  which  Sublessor   assumed  all  of  the
responsibilities and obligations under such Lease Agreement,  Addendum to Lease,
and Sublease and Operator's  Agreement and Doussan  consented to such assumption
of duties by Sublessor and the assignment of such agreements to Sublessor; and

         WHEREAS,  Sublessor and Doussan entered into that certain  Amendment to
Lease and Addendum to Lease dated  December 15,  1992,  which  amended the Lease
Agreement dated July 10, 1992 and the Addendum to Lease dated July 10, 1992; and

         WHEREAS,  the Lease  Agreement,  Addendum to Lease,  and  Sublease  and
Operator's  Agreement  dated July 10, 1992, as amended by the Amendment to Lease
and Addendum to Lease dated  December 15, 1992, are  hereinafter  referred to as
the "Operator's Agreements"; and

         WHEREAS,   Sublessor  and  Sublessee   have  entered  into  a  Sublease
Agreement,  a true and correct  copy of which is attached  hereto as Exhibit "A"
and  incorporated  herein for all purposes by this reference  (the  "Sublease"),
pursuant to which  Sublessee will perform the obligations of Sublessor under the
Operator's  Agreements  relating to the video poker casino, bar, related parking
area  and one  gasoline  pump  (the  "Subleased  Premises")  for the term of the
Sublease and in accordance with the terms and conditions of the Sublease; and

         WHEREAS,  the  Sublease  is  contingent  upon  Doussan's  consent,  and
Sublessor and  Sublessee  have  requested  Doussan to signify his consent to the
Sublease; and

         WHEREAS,   Sublessee   desires   to   perform   the   obligations   and
responsibilities of Sublessor under the Operator's  Agreements,  and be entitled
to the rights, benefits and privileges inuring to Sublessor under the Operator's
Agreements,  relating  to the  Subleased  Premises,  for  the  term  of,  and in
accordance with the terms and conditions of, the Sublease; and

         WHEREAS,  Doussan  desires to grant his consent to the  Sublease and to
Sublessee's right to perform the obligations and  responsibilities of Sublessor,
and be entitled to the rights,  benefits and privileges of Sublessor,  under the
Operator's  Agreements  relating to the Subleased Premises;  provided,  however,
Doussan does not hereby  release  Sublessor from any liability or claims arising
out of the Operator's Agreements; and

         WHEREAS,  Sublessor has granted to Sublessee the option to sublease the
additional  rights of  Sublessor  under the  Operator's  Agreements  and Doussan
desires to grant his consent to such  option and the  exercise of such option in
the event it is exercised by Sublessee.


                                       1
<PAGE>


         NOW, THEREFORE,  for and in consideration of the benefits to be derived
by all of the parties herein, Sublessor, Sublessee and Doussan agree as follows:



         1.  Effective  as of the  Effective  Date (as  therein  defined) of the
Sublease,  Sublessor hereby subleases to Sublessee and grants unto Sublessee all
of Sublessor's  right,  title and interest in and to the  Operator's  Agreements
relating to the Subleased Premises for the term of the Sublease.

         2. Effective upon the Effective Date of the Sublease,  Sublessee hereby
agrees to  assume  and be bound by all the  terms,  conditions,  provisions  and
obligations  of  Sublessor  under  the  Operator's  Agreements  relating  to the
Subleased  Premises during the term of the Sublease;  provided,  however,  it is
acknowledged,  understood and agreed among the parties  hereto that  Sublessee's
agreement  to assume  and be bound by such  terms,  conditions,  provisions  and
obligations  shall not  constitute an assumption of, and does not relate to, any
portion of the Lease, Operator's Agreements or the Property, as described in the
Lease, other than the Subleased Premises.

         3. Effective as of the Effective  Date of the Sublease,  Doussan hereby
consents  to the  Sublease  of  the  Operator's  Agreements  from  Sublessor  to
Sublessee  relating  to the  Subleased  Premises,  and  hereby  consents  to the
granting of an option by Sublessor  to Sublessee to a sublease of the  remainder
of the  Operator's  Agreements  and Property from Sublessor to Sublessee and the
exercise of such option without need for further consent from Doussan; provided,
it is acknowledged, understood and agreed among the parties hereto that upon the
exercise  of such  option,  the  Sublease  shall be deemed  to  govern  such new
relationship and shall be deemed amended to cause the Subleased Premises to mean
the entire Property and to cause the Sublease to relate to the entire Operator's
Agreements.

         4. It is hereby  acknowledged,  understood  and  agreed by the  parties
hereto that the consent for the Sublease given by Doussan shall not, in any way,
be  interpreted as a release of Sublessor  under the Operator's  Agreements or a
release or waiver of any claims,  rights of action,  and causes of action he has
or may have against Sublessor under the Operator's Agreements.

         5. All  parties  to this  Consent  agree  that the laws of the State of
Louisiana  shall be applied,  and that in the event any matter is  disputed  the
proper jurisdiction shall be Orleans Parish, Louisiana.

         IN WITNESS WHEREOF,  the parties have executed this Consent on the date
and place hereinafter set forth after due reading of the whole by all parties.

WITNESSES:                                           SUBLESSOR:

                                                 NEW ORLEANS VIDEO POKER
                                                 COMPANY, INC.

______________________________           By:      ______________________________
                                         Its:     ______________________________

                                         Date:    ______________________________

                                         Place:   ______________________________







                                       2
<PAGE>






                                         SUBLESSEE:


                                         OM OPERATING, L.L.C.


______________________________           By:      ______________________________
                                                  Don Williams, Manager

                                         Date:    ______________________________

                                         Place:   ______________________________


                                                              DOUSSAN:

-------------------------------             ------------------------------------
                                                              STANLEY DOUSSAN

                                         Date:    ______________________________

                                         Place:   ______________________________






                                                                   A:\SUBLEASE.5

                                       3
<PAGE>

                                                                       EXHIBIT A

                               SUBLEASE AGREEMENT


         THIS SUBLEASE  AGREEMENT  ("Sublease")  is entered into effective as of
July 1, 1996 (the  "Effective  Date") by and  between  NEW  ORLEANS  VIDEO POKER
COMPANY,  INC.  (hereafter  "Sublessor")  and OM  OPERATING,  L.L.C.  (hereafter
"Sublessee").

         WHEREAS,  Sublessor  and  Stanley  Doussan  (hereafter  "Doussan")  and
certain other  parties  entered into that certain  Assignment of Agreements  and
Releases in December 1992 relating to a Lease Agreement,  Addendum to Lease, and
Sublease  and  Operator's  Agreement  dated  July 10,  1992,  pursuant  to which
Sublessor assumed all of the  responsibilities  and obligations under such Lease
Agreement,  Addendum to Lease, and Sublease and Operator's Agreement and Doussan
consented to such  assumption of duties by Sublessor and the  assignment of such
agreements to Assignor; and

         WHEREAS,  Sublessor and Doussan entered into that certain  Amendment to
Lease and Addendum to Lease dated  December 15,  1992,  which  amended the Lease
Agreement dated July 10, 1992 and the Addendum to Lease dated July 10, 1992; and

         WHEREAS,  the Lease  Agreement,  Addendum to Lease,  and  Sublease  and
Operator's  Agreement  dated July 10, 1992, as amended by the Amendment to Lease
and Addendum to Lease dated  December 15, 1992, are  hereinafter  referred to as
the "Operator's Agreements"; and

         WHEREAS,  Sublessor  desires to sublease  to  Sublessee  and  Sublessee
desires to sublease  from  Sublessor  the  properties,  rights,  privileges  and
benefits to which Sublessor is entitled under the Operator's Agreements relating
to the video poker casino,  bar,  related parking area and gasoline pump located
on the back parking lot of the video poker casino building; and

         WHEREAS,  Sublessor  desires  to  continue  to retain  the  properties,
rights,  privileges and benefits,  as well as the  obligations,  relating to all
other  aspects of the  Operator's  Agreements,  specifically  the truck stop and
restaurant located in the separate building and the related fuel operations; and

         WHEREAS,  capitalized  terms used herein shall have the same meaning as
in the Operator's  Agreements  except where the context herein clearly indicates
otherwise,  or except where there is a conflict,  in which case the term as used
in the Lease Agreement shall control; and

         WHEREAS,  this Sublease is  contingent  upon the consent of Doussan and
Sublessee's  obligations hereunder shall not commence until such written consent
has been obtained and delivered to Sublessee.

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual  promises and covenants  set forth  herein,  together with other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:

                                       1
<PAGE>

                       Demise and Description of Property

         1.  Sublessor  leases to Sublessee and Sublessee  leases from Sublessor
that  portion of the  Property,  as  described  in the Lease,  constituting  the
separate  building  housing the video poker  casino and bar,  together  with the
related  parking  lot and one gas pump  located at the back of said  parking lot
(the  "Subleased  Premises"),  and all of  Sublessor's  rights,  privileges  and
benefits under the  Operator's  Agreements  relating to the Subleased  Premises,
including,  without limitation, the right to operate the video poker casino, the
bar, the parking lot and the gas pump, it being  understood that Sublessee shall
be responsible for operating and managing the video poker casino,  bar,  related
parking area and the gas pump located in the parking area,  and Sublessor  shall
be responsible  for all other  operations  and  activities  under the Operator's
Agreements relating to the Property.

                                      Term

         2. The term of this Sublease shall be for a period of one year from the
Effective Date, subject to automatic renewal, at the election of Sublessee, upon
thirty days' advance  written notice to Sublessor prior to the expiration of the
initial term or any renewal  term;  provided,  however,  Sublessee may terminate
this  Sublease at any time upon thirty days' written  notice to Sublessor;  and,
provided,  further,  that Sublessee may terminate this Sublease immediately upon
written  notice to Sublessor in the event (i) any of the  Operator's  Agreements
are in default or are  terminated,  or (ii) Sublessor is in default under any of
its obligations to Sublessee hereunder; and, provided, further, that the maximum
number  of  renewals  shall be thirty  (30) one year  renewals;  and,  provided,
further,  that  Sublessor may terminate this Sublease  immediately  upon written
notice to Sublessee if, after payment of all  indebtedness  assumed by Sublessee
set forth in Section 3 hereof, the rental payments to Sublessor set forth in the
first  paragraph  of  Section 3 hereof  are less than  $5,000 per month for five
consecutive months.

                           Consideration to Sublessor

         3. As  consideration  for the Sublease,  Sublessee hereby agrees during
the term of this  Sublease to assume and be bound by all the terms,  conditions,
provisions and obligations of Sublessor under the Operator's Agreements relating
to the  Subleased  Premises,  and  Sublessee  agrees to pay to Sublessor  within
twenty (20) days  following  the end of each  calendar  month an amount equal to
fifty (50%) of the net operating cash flow from the operations of the truck stop
and casino after deduction for (i) all cash costs and expenses paid by Sublessee
for the month, (ii) any reserves deemed  appropriate by Sublessee for such month
and (iii)  interest  and  principal  on any  indebtedness  of  Sublessee  on any
furniture,  fixtures or equipment purchased by Sublessee and placed in the video
poker casino,  bar or on the parking lot,  including,  without  limitation,  the
fifty (50) video poker machines and automated  teller machine to be purchased by
Sublessee  in  accordance  with  the  following   paragraph.   Sublessor  hereby
acknowledges  that such  consideration  is adequate  and that  Sublessor  is not
entitled to any further rent or lease payments during the term of this Sublease.

         Sublessee  hereby  agrees to purchase  from  Sublessor,  and  Sublessor
hereby  agrees to sell to  Sublessee,  (i) the fifty (50)  existing  video poker
machines and (ii) the automated teller machine located in the Subleased Premises
effective as of the Effective Date in  consideration  of Sublessee  assuming the
existing  indebtedness on such machines payable to (i) Prime Finance Corporation
and

                                       2


<PAGE>


 (ii) Equitable  Trust Savings Bank,  respectively,  having unpaid  principal
balances as of the Effective  Date of $41,674.55 and  $11,262.60,  respectively;
provided,  however, upon termination of this Sublease by Sublessee in accordance
with  Section 2, said  fifty (50) video  poker  machines  and  automated  teller
machine  shall revert back to  Sublessor  and be deemed to be owned by Sublessor
without further consideration;  provided, further, that if the fuel requirements
for the  Property  are  not met so that  any of the  video  poker  machines  are
required to be removed from the Property or the operation thereof is required to
be  terminated,  such machines shall also revert back to Sublessor and be deemed
to be owned by Sublessor without further  consideration;  provided,  further, at
such time as any of the video poker machines or automated  teller machine revert
back to Sublessor for any reason,  Sublessor  shall be responsible  for assuming
and  resuming  payment  of any of the  foregoing  indebtedness  payable to Prime
Finance Corporation or Equitable Trust Savings Bank which remains unpaid at such
time,  and shall hold  Sublessee  harmless from any liability for any continuing
payments thereof. Sublessor hereby represents and warrants to Sublessee that the
fifty (50) video poker  machines and the automated  teller  machine are free and
clear of all liens, claims and encumbrances except for the indebtedness  payable
to Prime Finance  Corporation and Equitable Trust Savings Bank set forth in this
Section 3.




                            Use of Subleased Premises

         4. The Subleased  Premises  shall be used by Sublessee for the purposes
which  Sublessor is allowed to use them under the  Operator's  Agreement and for
uses normally incident to those purposes.

                   Limited Assumption Agreement and Covenants

         5.  The  Sublessee  shall  comply  with  all of the  provisions  of the
Operator's  Agreements  that  relate  to the  Subleased  Premises  and are to be
performed by the Sublessor  during the term of this  Sublease,  and the rent and
other  expenditures  made thereunder by Sublessee shall be considered  operating
expenses  for  purposes  of net  operating  cash  flow  under  Section 3 of this
Sublease.  However, it is expressly  understood and agreed between Sublessor and
Sublessee  that this Sublease does not constitute an assumption of, and does not
relate to, any  portion of the Lease,  Operator's  Agreements  or the  Property,
other than the Subleased Premises, notwithstanding any provision to the contrary
contained in the Lease or any of the Operator's Agreements.

                Payment/Collection of Rent on Behalf of Sublessor

         6.  Sublessor  hereby  appoints  Sublessee  as its  limited  agent  for
purposes  of making all of the rental  payments  under the Lease and  Operator's
Agreements  to Doussan  and for  collecting  from F&F  Enterprises,  a Louisiana
partnership,  the  rent  and  other  amounts  payable  to  Sublessor  under  the
Operator's Agreement. Sublessor hereby authorizes Sublessee to offset the amount
collected from F&F Enterprises against the payments made by Sublessee to Doussan
on behalf of Sublessor and the negative resulting balance shall be deemed a cash
operating expense under Section 3 and shall be split 50/50 between Sublessee and
Sublessor.





                                        3

<PAGE>


         Option to Acquire Remainder of Lease and Operator's Agreements

         7. Sublessor  hereby grants to Sublessee the option,  exercisable  upon
thirty days' advance written  notice,  to sublease the remainder of the Property
and  obtain  all of  Sublessor's  rights,  privileges  and  benefits  under  the
Operator's Agreements, and undertake all of the responsibilities and obligations
and duties of  Sublessor  under the  Operator's  Agreements.  Such option  shall
expire upon termination of this Sublease.  In the event Sublessee exercises said
option,  this Sublease  shall be deemed  amended so that the Subleased  Premises
shall mean all of the Property, the Sublease shall relate to all portions of the
Operator's  Agreement,  and  Sublessee  shall be entitled to all of  Sublessor's
rights,   privileges  and  benefits  under  the  Operator's  Agreements  and  be
responsible  for  performing  Sublessor's  obligations  and  duties  thereunder,
without  further need for amending  this  Sublease or entering  into any further
agreements. As a condition precedent to exercising such option, Sublessee agrees
to assume payment of any remaining  principal  balance owing by Sublessor at the
date of  exercise  of such  option to the  existing  stockholders  of  Sublessor
(hereinafter referred to collectively as the "Shareholder Notes"), which have an
aggregate outstanding principal balance as of the Effective Date of $569,816.84,
and which are generally referred to as being payable to three separate groups of
shareholders,  as follows:  (i) $187,438.73  payable to the "Keith Group",  (ii)
$187,980.83  payable to the "Peaks Group", and (iii) $194,397.28  payable to the
"Hampton  Group".  It is also  expressly  understood and agreed by Sublessor and
Sublessee  that the balance of the  Shareholder  Notes required to be assumed by
Sublessee  upon exercise of such option shall be reduced  monthly by 91% of each
dollar paid to Sublessor by Sublessee  under this Sublease,  regardless  whether
such amount is applied by Sublessor against payment of the Shareholder Notes; it
being  understood that the other 9% is the interest rate payable by Sublessor on
the Shareholder  Notes; it being the intention that the principal balance of the
Shareholder  Notes to be assumed by Sublessee shall be deemed to be reduced by a
deemed  principal  payment each month equal to 91% of the amount of all payments
to Sublessor by Sublessee pursuant to this Sublease.  Further, it is agreed that
if any of the video poker  machines  revert back to  Sublessor  because the fuel
requirements  at the Property are not met,  those video poker  machines  will be
sold by Sublessor and 91% of the proceeds  thereof (after payment of any portion
of the indebtedness  required to be paid thereon by Sublessor in accordance with
Section 3) shall be deemed to be  applied  against  payment  of the  Shareholder
Notes.

         Moreover,  Sublessee and Sublessor hereby agree that if Sublessee sales
all  or  substantially  all of its  assets  in  Louisiana,  Sublessee  shall  be
obligated to exercise such purchase option concurrently with such sale.

                             Furniture and Fixtures

         8. Except with  regard to the fifty (50) video poker  machines  and the
automated teller machine purchased from Sublessor  hereunder pursuant to Section
3, all  furniture and fixtures and  equipment  placed in the leased  premises by
Sublessee  shall remain the property of  Sublessee.  The  Sublessee  may, at the
expiration  of the term of this  Sublease,  remove such  furniture  and fixtures
(other  than said fifty (50)  video  poker  machines  and the  automated  teller
machine) if removal is done so as not to damage the leased premises.





                                       8


<PAGE>
                            Miscellaneous Provisions

                               Texas Law to Apply

         9.(a) This Sublease shall be construed under and in accordance with the
laws of the State of Texas, and all obligations of the parties created hereunder
are performable in Collin County, Texas as it relates to Sublessor and Sublessee
only.  Nothing herein shall be construed to subject or require Doussan to submit
to the laws of the State of Texas.

                                  Parties Bound

         (b) This  Sublease  shall be binding on and inure to the benefit of the
parties  and  their   respective   heirs,   executors,   administrators,   legal
representatives,  successors, and assigns except as otherwise expressly provided
in this Sublease.  Notwithstanding the foregoing sentence, this Sublease may not
be assigned by Sublessor or Sublessee  without the prior express written consent
of the other party.

                               Legal Construction

         (c) In  case  any  one or  more  of the  provisions  contained  in this
Sublease shall for any reason be held to be invalid,  illegal,  or unenforceable
in any respect,  that  invalidity,  illegality,  or  unenforceability  shall not
affect any other  provision  and this  Sublease  shall be  construed  as if such
invalid, illegal, or unenforceable provision had never been included.

                           Prior Agreements Superseded

         (d) This  Sublease  constitutes  the sole  agreement of the parties and
supersedes any prior  understandings  or written or oral agreements  between the
parties respecting this subject matter.

                                 Attorney's Fees

         (e) If  any  action  at  law or in  equity,  including  an  action  for
declaratory  relief,  is brought to enforce or interpret the  provisions of this
Sublease,   the  prevailing  party  shall  be  entitled  to  recover  reasonable
attorney's fees from the other party,  which fees may be set by the court in the
trial of such action or may be enforced  in a separate  action  brought for that
purpose,  and which fees shall be in addition to any other  relief  which may be
awarded.

                              Specific Performance

         (f) The parties  declare that it is  impossible to measure in money the
damages   which  will  accrue  to  either   party,   their   heirs,   executors,
administrators,  legal  representatives,  successors,  or assigns by reason of a
failure to perform any of the obligations under this Sublease.  Therefore,  if a
party, its heirs, executors, administrators, legal representatives,  successors,
or assigns shall institute any action or proceeding to enforce the provisions of
this  Sublease,  any person  against whom such action or  proceedings is brought
agrees that  specific  performance  may be sought and obtained for any breach of
this agreement.


                                       5


<PAGE>


                           Counterparts, One Agreement

         (g) This  Sublease  and all other copies of this  Sublease,  insofar as
they relate to the rights,  duties, and remedies of the parties, shall be deemed
to be one agreement.  This Sublease may be executed  concurrently in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.



                                     Notice

         (h) Unless otherwise provided in this Sublease,  any notice, tender, or
delivery  to be given by either  party to the other may be  effected by personal
delivery in writing or by registered or certified mail, postage prepaid,  return
receipt requested, and shall be deemed received as of the time of actual receipt
or three days  following  mailing if delivered by registered or certified  mail,
return receipt requested.

                                 Time of Essence

         (i)       Time is of the essence in this Sublease.

Dated effective as of the Effective Date first written above.

                                         SUBLESSOR:

                                         NEW ORLEANS VIDEO POKER
                                         COMPANY, INC.

                                         By:      ______________________________

                                         Its:     ______________________________


                                         SUBLESSEE:

                                         OM OPERATING, L.L.C.


                                         By:      ______________________________
                                                  Don Williams, Manager


                                                                 A:\SUBLEASE.5


   

<PAGE>
                      LICENSE TO OPERATE VIDEO POKER CASINO


     THIS LICENSE TO OPERATE VIDEO POKER CASINO  ("License") is made and entered
into  effective  December  15,  1995  by and  between  OZDON  INVESTMENTS,  INC.
("Licensor") and OM OPERATING, L.L.C. ("Licensee").

         Licensor  hereby  licenses  to  Licensee  the right and  obligation  to
operate the video poker casino and bar at the truck stop  commonly  known as The
Gold Rush Truck  Stop.  Licensee  hereby  accepts  such  license and the related
responsibilities and duties and agrees to comply with all applicable laws, rules
and  regulations  in  connection  therewith.  Licensor and  Licensee  agree that
Licensee will be responsible for all costs, fees, taxes and expenses relative to
such operations and shall be entitled to all income generated therefrom.

         Licensor  hereby further  licenses to Licensee the right and obligation
to operate  and sell all beer,  wine and liquor from the  convenience  store and
restaurant  operations  at The Gold Rush Truck  Stop.  Licensee  hereby  further
accepts such license and the related  responsibilities  and duties and agrees to
comply with all applicable laws, rules and regulations in connection  therewith.
Licensor and Licensee  agree that  Licensee will be  responsible  for all costs,
fees,  taxes and expenses  relative to such  operations and shall be entitled to
all income generated therefrom.

This  License may be  terminated  by  Licensor or Licensee  upon 120 days' prior
written notice to the other party.

         EXECUTED as of the date and year first above written.


                                          OM OPERATING, L.L.C.


                                  By:      ______________________________
                                            Don Williams, Manager


                                          OZDON INVESTMENTS, INC.


                                  By:      ______________________________

                                  Its:     ______________________________




                                                                  A:\LICENSE.2


<PAGE>



  
                            GLAST, PHILLIPS & MURRAY
                           A PROFESSIONAL CORPORATION

                                                         2200 ONE GALLERIA TOWER
                           ATTORNEYS AND COUNSELORS     13355 NOEL ROAD, L.B. 48
MICHAEL D. PARSONS, P.C.                                DALLAS, TEXAS 75240-6657

DIRECT DIAL NUMBER:                                    TELEPHONE: (972) 419-8300
(972) 419-8311                                               FAX: (972) 419-8329


                                November 12, 1996



SECURITIES AND EXCHANGE COMMISSION
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549-1004

Re:      North American Gaming and Entertainment Corporation (the "Company")
         Form 10-QSB for the Quarter Ended September 30, 1996

         Commission File No. 0-5474

         Our File No.: 15006-160

Ladies and Gentlemen:

          On behalf of the Company,  enclosed for electronic  filing please find
     one copy of Form 10-QSB for the quarter ended September 30, 1996.

Please call the undersigned  with any questions or comments.  Collect calls will
     be accepted at 972/419-8311.

                                                              Yours truly,



                                                              Mike Parsons

MDP/lds

Enclosures

S:\CLIENT-O\15006\160\SEC11.12
<PAGE>