SEVERANCE AGREEMENT
                               -------------------

     This  Severance Agreement ("this Agreement") is between Courtland L. Logue,
Jr.  ("Employee")  and  American  Bingo  &  Gaming  Corp.  ("the  Employer").

     WHEREAS,  Employer  and  Employee  entered  into  that  certain  Employment
Agreement,  dated  September  10,  1996  ("the  Employment  Agreement");

     WHEREAS,  Employer  and  Employee  desire  to  terminate  the  employment
relationship and the Employment Agreement effective on the date of the execution
of  this  Agreement by both parties ("the Effective Date") on the terms provided
herein;

     WHEREAS,  Employer  and  Employee  desire  to  modify  certain terms of the
Employment  Agreement  as  provided  herein;

     NOW,  THEREFORE,  in  consideration  of the terms hereof and other valuable
consideration,  the  sufficiency of which is hereby acknowledged by the parties,
the  parties  hereby  agree  as  follows:

     1. Termination of Employment.  The Employment  Agreement and the employment
        -------------------------
of Employee  with  Employer,  is terminated as of February 6, 1998 ("the Date of
Termination").  Effective  the Date of  Termination,  the Employee  ceases to be
Chief Executive Officer, a director, and an officer of the Employer.

     2. Compensation. Employer shall pay Employee his base salary earned through
        ------------
the Date of  Termination.  Employee  acknowledges  that he will not  receive any
bonus or other incentive  compensation,  nor will he receive any payment in lieu
of fringe benefits,  including vacation benefits.  Employee shall be given title
to the Suburban  currently  provided to him by Employer as his company car, free
of all  encumbrances,  and Employer shall transfer to Employee all  transferable
warranties. Employee shall be provided all COBRA benefits due to him pursuant to
such act.

     3. Options.  Employer and Employee agree that the  Employment  Agreement is
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amended, effective the Date of Termination, by deleting the last sentence of the
first paragraph of Section 3 and inserting in its place and stead the following:
"Said options shall vest at the rate of 9,500 shares per month until February 6,
1998,  at which time said  options  shall become fully  vested."  Employer  also
agrees that Employees other option to purchase 30,000 shares,  granted  pursuant
to the Employer's 1996 Employee Stock Option Plan,  shall fully vest on February
6,  1998.  The  piggy-back  rights  set  forth in  Section  3 of the  Employment
Agreement  shall be extended to December  31, 2002 and shall also be extended to
the additional  30,000 shares.  The shares covered by these options have already
been registered by Employer.  Other than the irrevocable  proxy granted pursuant
to Section 11 hereof,  the shares issued upon exercise of stock options shall be
free of all  legends  and  encumbrances.  The  Employer  and its  counsel  shall
accommodate  Employee's  sales by  providing  "nonaffiliate"  letters  and other
appropriate  documentation  upon  request.  The  vesting of these  options is in
consideration of the release of all claims,  disputes and causes of action which
Employee,  Employee's  heirs,  executors,  administrators or assigns have or may
have against  Employer (and all of its related  entities),  as specifically  set
forth in Section 6 hereof,  as well as the "stand still"  agreement set forth in
Section 10 hereof.

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<PAGE>

     4.  Acknowledgement.  Employee  hereby  acknowledges  the  restrictions  of
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Article 8 of the  Employment  Agreement  and  acknowledges  that said  Article 8
remains  in full  force and  effect and is  supported  by  independent  valuable
consideration and contains reasonable  limitations as to the time,  geographical
area,  and scope of activity for which he is to be restrained  and  acknowledges
that the  limitations  of said Article are necessary to protect the goodwill and
other  business   interests  of  Employer.   Employer   acknowledges   that  the
prohibitions  in  Section  8.1 of the  Employment  Agreement  shall not apply to
information  that is customarily  known within the bingo and gaming  industry or
that is now or  hereafter  available in the public  domain  through no breach of
confidentiality on the part of Employee.

     5. Correction. Employer and Employee agree that the two references to "this
        ----------
Article 8.3 "in Section 8.3 of the Employment  Agreement were intend to refer to
"this  Article 8" and that the two  references  to "this Article 8.4" in Section
8.4 of the  Employment  Agreement  were  intended to refer to "this  Article 8".
Employer and Employee agree to hereby amend the Employment  Agreement to correct
these errors.

     6.  Release of  Employer.  In  consideration  of receipt by Employee of the
         --------------------
additional  vested option  pursuant to Section 3 hereof,  Employee (on behalf of
himself,  his  heirs,  estate,  successors,  assigns,  agents,  representatives,
attorneys, and any other person or entity claimingby, through, under, or because
of him) unconditionally releases, acquits, forever discharges, and covenants not
to sue, without limitation,  the Employer and its  representatives,  affiliates,
agents,  attorneys,  insurers,  predecessors,   successors,  assigns,  officers,
directors,  shareholders,  employees, parents,  subsidiaries,  divisions and any
person or entity  claiming by,  through or under any of them  (collectively  the
"Releasees"),  from and on each and every right, claim, complaint, demand, cause
of action, proceedings,  and damages of whatsoever kind or nature which Employee
now has, has had, or might have at any time hereafter relating to or arising out
of any act,  transaction,  or occurrence,  arising on or before the execution of
this Agreement,  including without  limitation each and every claim for any type
of relief or remedy whatsoever based upon any theory  whatsoever,  whether known
or unknown at this time, and specifically  including  without  limitation claims
and causes of action  relating to or arising out of Employee's  employment  with
the Employer, such as Employee's employment,  termination of employment,  or the
terms and  conditions  of his  employment,  including  any claims under the Fair
Labor  Standards  Act, the Civil Rights Act of 1964 and 1991, the Americans with
Disabilities   Act,  the  Age   Discrimination  in  Employment  Act,  the  Texas
Unemployment  Compensation  Act, the Texas Payday Act, the Texas  Commission  on
Human Rights Act, the Texas Workers  Compensation  Act, and any other federal or
state statute or regulation,  and including any common law,  contractual or tort
claims or causes of action.

     It  is  the  intention  of  the parties in executing this Agreement, and in
receiving the full consideration called for herein, that this Agreement shall be
effective  as  a full and final accord, satisfaction and general release of each
and  every released matter and each Releasee. In connection with this waiver and
relinquishment,  Employee  acknowledges  that  he  is  aware  that he and/or his
attorneys  may  hereafter  discover  claims or facts in addition to or different
from those which they, or the other parties hereto, now know or believe to exist
with  respect  to  the  subject  matter  of  this  Agreement, but that it is his
intention  hereby  to  fully,  finally and forever settle and release all of the
Releasees and the released matters, disputes, and differences, known or unknown,
suspected  and  unsuspected,  which  do now exist, may exist, or heretofore have
existed  between  Employee  and  each  Releasee.

                                       2
<PAGE>

     7. Release of Employee. Employer unconditionally releases, acquits, forever
        -------------------
discharges,  and  covenants  not to sue, the Employee from and on each and every
right, claim, complaint,  demand, cause of action,  proceedings,  and damages of
whatsoever  kind or nature which Employee now has, has had, or might have at any
time  hereafter  relating  to  or  arising  out  of  any  act,  transaction,  or
occurrence, arising on or before the execution of this Agreement, including each
and every  claim for any type of relief  or  remedy  whatsoever  based  upon any
theory whatsoever,  whether known or unknown at this time. Employer acknowledges
that it is not aware of any  circumstance at this time giving rise to any claim,
complaint, demand, cause of action, proceedings, or damages against Employee.

     8. Exceptions to Releases. Notwithstanding the provisions of Sections 6 and
        ----------------------
7 hereof,  however,  the foregoing  releases do not extend to, and  specifically
exclude:

          a. any claims based on conduct,  acts,  omissions or events  occurring
after the Effective Date;

          b. the obligations undertaken and covenants made in this Agreement;

          c. the obligations  contained in the stock option agreements  relating
to options referred to in Section 3 hereof;

          d. subject to Section 9 hereof,  claims against  Employee  asserted by
Employer at any time for  contribution  or  indemnity  on account of third party
claims asserted  against  Employer to the extent  attributable to the conduct of
Employee;

          e. claims against  Employer or its affiliates  asserted by Employee at
any time for contribution or indemnity on account of third party claims asserted
against  Employee to the extent  attributable  to the conduct of Employer or its
affiliates, except to the extent attributable to the conduct of Employee; and

          f. claims made by Employee for indemnification  with respect to claims
relating  to his own  conduct to the extent  allowed  under  Section 9 hereof or
under applicable state corporate law.

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<PAGE>

     9.  Indemnification.  Employer  acknowledges  its obligation to provide the
         ---------------
indemnification  set forth in Section II of the  Employment  Agreement and shall
continue after the Effective Date to provide such indemnification for Employee's
actions  prior the Date of  Termination.  Employer  shall  continue  to  provide
Employee with the same  indemnification  and directors' and officers'  liability
insurance  coverage  provided to Employer's then serving officers and directors,
which  indemnification  and  insurance  shall relate to the period  during which
Employee served as an officer and director.

     10. Stand Still  Agreement.  In consideration of receipt by Employee of the
         ----------------------
additional  vested option pursuant to Section 3 hereof,  Employee  covenants and
agrees as follows:

          a. Employee shall not,  directly or  indirectly,  acquire or otherwise
become the beneficial  owner of any securities of the Employer,  except pursuant
to the exercise of the options discussed in Section 3 hereof.

          b. Employee  shall not,  directly or indirectly,  (i) solicit  proxies
with respect to the equity securities of the Employer under any circumstances or
(ii) become a "participant" in any "election contest" (as such terms are used in
Rule 14A- 11 of Regulation 14A under the  Securities  Exchange Act of 1934 ("the
1934 Act")) relating to the election of directors of Employer.

          c. Employee  shall not,  directly or  indirectly,  join a partnership,
limited partnership, syndicate or other "group" (as such term is used in Section
13(d)(1) of the 1934 Act),  or otherwise  act in concert with any person for the
purpose of acquiring, holding, voting or disposing of securities of the Employer
or rights to acquire such  securities  or for the purpose of  circumventing  the
provisions of this Section 10.

          d. Employee shall not,  directly or  indirectly,  propose any business
combination  with Employer or make or propose a tender or exchange  offer or any
other offer for any securities of Employer.

          e. Employee  shall not agree to be a nominee to the Board of Directors
of the Employer, nor shall he agree to serve as a director of the Employer.

          f.  Employee  acknowledges  that  for  purposes  of  this  Section  10
"indirectly" includes communicating with, advising, facilitating,  participating
in, encouraging, soliciting, counseling or otherwise assisting others to take or
attempt to take any of the actions  prohibited by this Section 10.  Employee and
Employer  understand  that Employee shall not be in violation of this Section 10
with respect to the actions of others if Employee  refuses to assist others with
their actions.

          g. The  restrictions  set forth in this Section 10 shall  terminate on
February 6, 2003.

     11. Irrevocable Proxy.  Employee shall execute an irrevocable proxy, in the
         -----------------
form attached  hereto,  granting to management of Employer the right to vote all
shares of Employer's equity securities owned at any time during the term of such
proxy.

     12. Return of Employer's Property.  Employee will return to Employer all of
         -----------------------------
Employer's  property  in  Employee's   possession  as  of  the  Effective  Date,
including, but not limited to, computers and related equipment, software, files,
and disks,  keys, credit cards,  access cards, and documents of any kind and all
information  of  the  Employer  without  regard  to  the  media  in  which  such
information is maintained.

                                       4
<PAGE>

     13.  Confidentiality.  Employee hereby acknowledges,  represents and agrees
          ---------------
that he will keep the fact of this  Agreement  and all of its  terms  completely
confidential,  and that  Employee will not disclose any  information  concerning
this Agreement to any person,  including, but not limited to, any past, present,
or  prospective  employees of Employer,  provided  however that Employee may (i)
disclose  the fact of the  settlement  with  the  Employer  represented  by this
Agreement,  (ii) disclose the restrictions  set forth in Section 10 hereof,  and
(iii) disclose any information required by law to be disclosed by Employee after
Employee  has  notified  Employer of such  requirement  and gives  Employer  the
opportunity to review the information to be disclosed as soon as possible.

     14.  References.  Employer  and  Employee  have agreed on the form of press
          ----------
release  announcing  Employee's  termination,  which  form is  attached  hereto.
Employer,  agrees, in accordance with its policy, to provide a neutral reference
giving  position and dates of employment  only to any  prospective  employers of
Employee.  Neither Employer nor any of its senior management shall make comments
to any  third  parties  that  disparage  Employee.  Employee  shall not make any
comments  to  any  third  parties  that  disparage  Employer  or  the  officers,
directors, or employees of Employer.

     15.  Enforcement.  In the event of a breach by Employee of Sections 10, 11,
          -----------
12, 13, or 14 of this  Agreement,  Employer shall have, in addition to any other
remedies  it may have at law or under this  Agreement,  the right to a temporary
restraining order,  temporary  injunction and permanent  injunction  restraining
Employee from violating or continuing a violation of the terms of such Sections.
Employee agrees that in the event of such breach, the amount of damages would be
difficult or impossible  to  determine,  and agrees that a bond in the amount of
$1,000 would be appropriate in connection with a temporary  restraining order or
temporary injunction.

     16. No Admission of Liability. This Agreement shall not be construed in any
         -------------------------
way as an  admission by the Employer of any  unlawful  acts  whatsoever  against
Employee or any other person. The Employer  specifically  disclaims any unlawful
acts or  liability  to Employee or any other  person on the part of itself,  its
employees, or its agents.

     17.   Acknowledgements.   Employee  represents  and  acknowledges  that  in
           ----------------
executing  this  Agreement,  he  does  not  rely  and has not  relied  upon  any
representation or statement made by Employer, or its agents, representatives, or
attorneys  with  regarding  to the  subject  matter,  basis  or  effect  of this
Agreement or  otherwise.  Employee  further  represents  that he has relied upon
advice of his  personal  legal  counsel  regarding  the  subject  matter of this
Agreement.

     18. Governing Law. This Agreement is made and entered into in the County of
         -------------
Travis, State of Texas, and shall in all respects be interpreted,  enforced, and
governed  under the laws of The State of Texas.  The  parties  agree that Travis
County, Texas, is the proper venue for any resolution of a dispute arising under
this Agreement and the Employment  Agreement.  The language of all parts of this
Agreement  shall in all  cases be  construed  as a whole  according  to its fair
meaning, and not strictly for or against any of the parties. The parties further
agree that there will be no  presumption  that any  ambiguity  in the  Agreement
shall be construed against the drafter of the Agreement.

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<PAGE>

     19.  Attorney's Fees. The prevailing party in any dispute arising out of or
          ---------------
relating to the subject  matter of this  Agreement  shall be entitled to recover
his or its reasonable  attorney's  fees and expenses,  and any costs  associated
with any such dispute.

     20.  Mediation.  Subject  to the right of either  party to seek  injunctive
          ---------
relief in a court in the event the  circumstances  require urgent resort to such
remedy,  the parties will first seek to resolve any disputes  through  mediation
before a mediator agreed to by their respective counsel prior to proceeding with
litigation.  Such  mediation  shall be held within 30 days following the written
request by either party.

     21. Savings  Clause.  Should any provision of this Agreement be declared to
         ---------------
be or  determined  by any court to be illegal or  invalid,  the  validity of the
remaining  parts,  terms, or provisions  shall not be affected  thereby and said
illegal or invalid part,  term, or provision shall be deemed not to be a part of
this Agreement.

     22.  Authority to Sign.  Each person signing in a  representative  capacity
          -----------------
below hereby represents that he has authority to sign on behalf of the entity or
person from whom he is signing and that he and the represented  entity or person
are empowered to enter into and to perform this Agreement.

     23. Further Assurances.  The parties hereto shall take all actions that may
         ------------------
be necessary or appropriate to accomplish the terms of this Agreement.

     24.  Binding  on  Successors.  This  Agreement  shall bind and inure to the
          -----------------------
benefit  of  the  parties,   their   successors,   assigns,   heirs,  and  legal
representatives.

     25.  Entiretyof  Agreement.  This Agreement sets forth the entire Agreement
          ---------------------
between the parties hereto, and fully supersedes any and all prior agreements or
understandings  between  the parties  hereto  pertaining  to the subject  matter
hereof.

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<PAGE>

     PLEASE  READ  CAREFULLY.  THIS  SEVERANCE  AGREEMENT  INCLUDES A RELEASE BY
EMPLOYEE  OF  ALL  KNOWN AND UNKNOWN CLAIMS ARISING PRIOR TO ITS EXECUTION.  YOU
MAY  CONSULT  WITH  AN  ATTORNEY  PRIOR  TO  EXECUTING  THIS  AGREEMENT.


                                             /s/  Courtland  L.  Logue,  Jr.
                                             -------------------------------
                                             Employee  Signature
                                             Date:  2/8/98
                                                    ------



                                             AMERICAN  BINGO  AND  GAMING  CORP.

                                             By:  /s/  Greg  Wilson
                                             -----------------
                                             Name:  Greg  Wilson
                                                    ------------
                                                    Title:  CEO
                                                            ---
                                                    Date:  2/6/98
                                                           ------

<PAGE>