MARKET PRICE AND DIVIDEND INFORMATION

        Our common stock is listed on the Nasdaq SmallCap Market, or Nasdaq, under the symbol "PSON." The following table sets forth the high and low trading prices per share of Paul-Son common stock on Nasdaq for the periods indicated. Since B&G is a private corporation, there is no established public trading market for common shares of B&G and historical per share data is not available.

        On April 11, 2002, the last trading day prior to the public announcement of the combination, the high, low and closing prices of Paul-Son common stock on Nasdaq were:

        On August 2, 2002, the closing price per share of Paul-Son common stock as reported on Nasdaq was $3.15. There were approximately 129 holders of record of Paul-Son common stock as of August 2, 2002. We urge you to obtain current quotations before making any decision with respect to the combination.

        Unless we are delisted from Nasdaq as a result of the combination, Paul-Son will continue to be listed on Nasdaq under the symbol "PSON." If the combination is completed and if Paul-Son is unsuccessful in its appeal to Nasdaq, Paul-Son will be required to meet the original listing criteria to remain listed on Nasdaq, which Paul-Son may not meet. In such event, Paul-Son will use its best efforts to cause the Paul-Son common stock to be listed on the Pacific Exchange. Paul-Son currently meets the initial listing criteria for Tier II of the Pacific Exchange and believes that it will continue to meet the listing criteria upon completion of the proposed combination.

        We have never paid any dividends on our common stock. The payment of future dividends will be a business decision to be made by our board of directors from time to time based upon our results of operations and financial conditions and other factors as our board of directors considers relevant, although it is presently anticipated that will retain earnings for the operation and expansion of our business for the foreseeable future.

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THE ANNUAL MEETING

        This proxy statement is furnished in connection with the solicitation of proxies from the holders of Paul-Son common stock by our board of directors for use at the annual meeting.

Time and Place

        Our annual meeting of stockholders will be held on September 12, 2002 at 9:00 a.m., local time, at Paul-Son Gaming Corporation, 1700 South Industrial Road, Las Vegas, Nevada.

Purpose of the Annual Meeting

        The purpose of the annual meeting is to consider and vote upon:

•

the combination agreement and the transactions contemplated thereby, including the issuance of shares of Paul-Son common stock equaling 53.45% of the shares outstanding immediately after completion of the combination, and warrants to purchase shares of Paul-Son common stock to provide antidilution protection, to the stockholders of B&G;



•

the re-election of Eric P. Endy to serve on Paul-Son's board of directors;



•

an amendment to Paul-Son's articles of incorporation to elect not to be governed by the anti-takeover protections available to corporations under Nevada corporate law;



•

an amendment to Paul-Son's articles of incorporation to remove the provision allowing Paul-Son's board of directors to redeem control shares, as such term is defined in NRS 78.378 to 78.3793, inclusive;



•

an amendment to Paul-Son's articles of incorporation to remove the provision requiring the affirmative vote of two-thirds of the outstanding shares of Paul-Son common stock to approve a sale, lease or exchange of property or assets, or a merger or exchange of Paul-Son's shares;



•

an amendment to Paul-Son's articles of incorporation to remove the provision requiring the affirmative vote of two-thirds of the outstanding shares of Paul-Son common stock to approve an amendment to Paul-Son's articles of incorporation;



•

an amendment to Paul-Son's articles of incorporation to modify certain provisions that were specific to the Nevada Gaming Commission and make such provisions applicable to other gaming regulatory agencies to which Paul-Son is subject, or together with the two proposals above, the Other Charter Amendments; and



•

such other matters that may properly come before the annual meeting, including the approval of any adjournment of the annual meeting solely for the purpose of soliciting additional proxies in favor of the foregoing proposals, if necessary.

Approval of these proposals, other than the re-election of Mr. Endy and the Other Charter Amendments, is a prerequisite to completion of the combination. None of these proposals, other than the re-election of Eric P. Endy as a director, will become effective unless the combination is approved and effective.

Outstanding Shares Held on Record Date

        As of the record date, July 31, 2002, there were 3,456,654 shares of Paul-Son common stock outstanding that are entitled to notice of, and to vote at, the annual meeting.

Shares Entitled to Vote at the Annual Meeting

        Only holders of record of shares of Paul-Son common stock at the close of business on the record date are entitled to notice of, and to vote at, the annual meeting.

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Quorum

        The presence, in person or by proxy, at the annual meeting of the holders of a majority of the shares of Paul-Son common stock outstanding and entitled to vote at the annual meeting is necessary to constitute a quorum at the annual meeting. If a quorum is not represented at the meeting, a vote for adjournment will be taken among the present stockholders or those represented by proxy. Abstentions and broker non-votes will count in determining whether a quorum is present at the annual meeting. A "broker non-vote" occurs with respect to a proposal when a broker is not permitted to vote on that proposal without instruction from the beneficial owner of the shares of Paul-Son common stock and no instruction is given.

Voting Necessary to Approve Proposals

        Each share of Paul-Son common stock outstanding will be entitled to one vote at the annual meeting.

        Approval of the combination proposal and approval of the amendments to Paul-Son's articles of incorporation require the affirmative vote of two-thirds of the outstanding shares of Paul-Son common stock. Directors are elected upon receiving a plurality of votes cast in their favor from holders of Paul-Son common stock present or represented by proxy at the annual meeting. Abstentions and broker non-votes will count in determining whether a quorum is present at the annual meeting. Abstentions and broker non-votes will be the equivalent of a "no" vote on the proposals for the combination and the amendments to the articles of incorporation, but will not have any effect on the outcome of voting on the director election.

Voting Arrangements

        Each of Eric P. Endy, The Paul S. Endy, Jr. Living Trust, and other family trusts for the benefit of Mr. Endy's children have agreed to vote all of the shares of Paul-Son stock owned, controlled or subsequently acquired by them:

•

in favor of the adoption by Paul-Son of the combination agreement and the approval of the terms thereof and each of the other actions contemplated by the combination agreement;



•

against any transaction, agreement, matter or acquisition proposal that would impede, interfere with, delay, postpone or attempt to discourage the combination and the combination agreement; and



•

for a period of five years after the consummation of the combination, vote in the manner directed by Holding Wilson, the principal stockholder of B&G, with respect to the election or removal of directors.

        In addition, they have each agreed not to:

•

solicit offers from, or enter into negotiations with, other parties regarding the sale of assets (except in the ordinary course), securities or control of Paul-Son or any business combination involving Paul-Son or its subsidiaries; and



•

sell, transfer or otherwise dispose of any of their shares of Paul-Son stock except as previously agreed or as necessary to pay taxes so long as the fair market value of the shares does not exceed $250,000 and such shares are subject to a right of first refusal in favor of Holding Wilson.

        The aggregate amount of shares of Paul-Son common stock subject to the voting arrangements represent approximately 41.2% of the outstanding Paul-Son common stock as of the record date for the annual meeting. Endy's obligation to vote as provided above, other than for the election or removal of directors, terminates upon the earlier to occur of the completion of the combination and the

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termination of the stock purchase agreement in accordance with its terms. The voting arrangements are set forth in Article III of the stock purchase agreement. The entire stock purchase agreement is attached as Annex D to this proxy statement. We urge you to read the full text of the stock purchase agreement.

Management Share Ownership

        As of the record date, the directors and executive officers of Paul-Son beneficially owned an aggregate of 1,440,231 shares of Paul-Son common stock, representing approximately 41.7% of the Paul-Son shares entitled to vote at the Paul-Son annual meeting. The Paul-Son directors and executive officers whose shares are not subject to the voting arrangements beneficially owned an aggregate of 15,097 shares of Paul-Son common stock as of the record date, representing less than one percent of the Paul-Son shares entitled to vote at the annual meeting, and each of these directors and executive officers has advised Paul-Son that he plans to vote or to direct the vote of all shares beneficially owned by him and entitled to vote at the annual meeting "FOR" each of the proposals at the annual meeting.

        As of the record date, the B&G stockholders beneficially owned 73,333 shares of Paul-Son common stock, representing approximately 2.1% of the shares entitled to vote at the Paul-Son annual meeting. Each of the B&G stockholders has advised Paul-Son that such stockholder plans to vote or direct the vote of all shares beneficially owned by him and entitled to vote at the annual meeting "FOR" each of the proposals at the annual meeting.

Proxies

        All shares of Paul-Son common stock represented by properly executed proxies received prior to or at the annual meeting, and not duly and timely revoked, will be voted in accordance with the instructions indicated on such proxies. If no instructions are indicated on a properly executed returned proxy, such proxies will be voted "FOR" the proposals set forth on the respective proxies.

        Brokers are permitted to vote on discretionary items if they have not received instructions from the beneficial owners, but they are not permitted to vote (a "broker non-vote") on non-discretionary items absent instructions from the beneficial owner. Shares represented by abstentions and broker non-votes will be counted for purposes of determining whether there is a quorum at a annual meeting. Brokers will be entitled to use their discretionary authority to vote on the election of director at the annual meeting absent instructions from the beneficial owner of the Paul-Son shares. In accordance with Nasdaq rules, however, brokers and nominees are precluded from exercising their voting discretion with respect to the approval of the combination and adoption of the combination agreement and approval of the amendments of the articles of incorporation and thus, absent specific instructions from the beneficial owner of such shares, are not empowered to vote such shares with respect to the approval or adoption of such proposals. At the annual meeting, abstentions and broker non-votes will be the equivalent of a "no" vote on the proposals for the combination and the amendments to Paul-Son's articles of incorporation, but will not have any effect on the outcome of voting on the director election.

        Any proxy given pursuant to this solicitation may be revoked at any time before such proxy is voted. Attendance at the annual meeting will not in and of itself constitute a revocation of a proxy. You may revoke your proxy before it is voted by:

•

submitting a new proxy with a later date;



•

notifying your company's secretary in writing before your annual meeting that you have revoked your proxy; or



•

voting in person, or notifying the secretary orally of your wish to revoke your proxy, at your annual meeting.

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Other Voting Matters

Voting in Person

        If you plan to attend the annual meeting and wish to vote in person, we will give you a ballot at the annual meeting. However, if your shares of common stock are held in the name of a brokerage firm or trustee, you must obtain from the firm or trustee an account statement or letter of other evidence of your beneficial ownership of the common shares.

People with Disabilities

        We can provide reasonable assistance to help you participate in your annual meeting if you tell us about your disability and your plan to attend. Please call or write the secretary of your company at least two weeks before your annual meeting at the number or address provided on page 123.

Solicitation of Proxies

        Paul-Son's directors, executive officers and certain members of management and employees may be considered "participants in solicitation" of proxies from Paul-Son's stockholders in connection with the combination. Information regarding such persons and a description of their interests in the combination is contained herein, see "Board of Directors and Management of Paul-Son Following the Combination" and "Interests of Certain Persons in the Combination."

        Paul-Son will bear the costs and expenses incurred in connection with preparing, printing, filing and mailing of this proxy statement.

        Solicitation of proxies will be initially made by mail. In addition, directors, officers, and employees of Paul-Son and its subsidiaries may solicit proxies from stockholders by telephone or other electronic means or in person. Any director or employee of Paul-Son or its subsidiaries used to solicit proxies will not receive additional compensation for these services. Paul-Son will request brokerage houses and other custodians, nominees and fiduciaries to forward solicitation materials to beneficial owners of Paul-Son's stock held of record by such persons. Paul-Son will reimburse custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses in doing so.

Other Business; Adjournments and Postponements

        We currently are not aware of any business to be acted upon at the annual meeting other than as discussed herein. If, however, other matters are properly brought before the annual meeting, or any adjourned or postponed annual meeting, your proxies will have discretion to vote or act on those matters according to their best judgment, including to adjourn the annual meeting.

        Adjournments or postponements of the annual meeting may be made for the purpose of, among other things, soliciting additional proxies. Any adjournment may be made from time to time by approval of the holders of common shares representing a majority of the votes present in person or by proxy at the annual meeting, whether or not a quorum exists, without further notice other than by an announcement made at the annual meeting. Paul-Son is soliciting proxies to grant discretionary authority to vote in favor of adjournment of the annual meeting. The directors and executive officers of Paul-Son, who beneficially own approximately 41.7% of the outstanding Paul-Son shares entitled to vote at the annual meeting, have indicated that they anticipate voting in favor of granting such discretionary authority to management's proxy committee. Management's proxy committee currently intends to exercise this discretionary authority to move for adjournment of the meeting if necessary to provide additional time to solicit votes to approve the combination transaction and the related proposals. THE BOARD OF DIRECTORS RECOMMENDS THAT PAUL-SON'S STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL TO GRANT DISCRETIONARY AUTHORITY TO VOTE ON OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING, INCLUDING TO ADJOURN THE ANNUAL MEETING.

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THE COMBINATION

Corporate Organization

        Paul-Son currently operates principally through two wholly-owned subsidiaries, Paul-Son Gaming Supplies, Inc., or Paul-Son Supplies, and Paul-Son Mexicana, S.A. de C.V., or Paul-Son Mexicana. Following the combination, Paul-Son will continue to operate through Paul-Son Supplies and Paul-Son Mexicana, together with two additional wholly-owned subsidiaries, B&G and Bud Jones. Paul-Son will operate in the identical line of business—the manufacture, distribution and sale of casino table game equipment—but with an expanded products offering and additional territories.

        The following illustrations reflect the corporate organization of Paul-Son before and after the combination:

        After the combination, Paul-Son will be headquartered in Las Vegas, Nevada, with manufacturing facilities in Las Vegas, Nevada and Beaune, France and sales offices in Las Vegas, Nevada, Atlantic City, New Jersey and Beaune, France.

Background of the Combination

        The provisions of the combination agreement are the result of arms length negotiations conducted among representatives of Paul-Son, B&G and our respective legal advisors and investment bankers. The following is a summary of the meetings, negotiations and discussions among the parties that preceded execution of the combination agreement.

        Our board and management decided in early 1999 that we should evaluate potential strategic alternatives to expand our revenues and market share. Because of our pre-existing relationship with Ladenburg Thalmann, we asked Ladenburg Thalmann to assist us in seeking out strategic alternatives.

        From March 1999 to June 1999, we had preliminary discussions with Mr. Bud Jones and certain of his advisors about the possibility of our company acquiring Bud Jones. We stopped such discussions after being advised that they were going to make a deal with another party, which party we subsequently learned was B&G.

        On June 18, 1999, our chairman, Eric P. Endy, received a telephone call from a financial advisor representing B&G. The financial advisor advised Mr. Endy of B&G's interest in discussing a potential strategic alliance with us. B&G's financial advisor informed us that B&G had entered into an agreement to acquire Bud Jones. We were advised that B&G's board believed that it would be highly beneficial for us to combine with Bud Jones, and B&G's representatives wished to explore a strategic alliance between our company and Bud Jones. Mr. Endy directed B&G's advisor to our investment banker, Ladenburg Thalmann.

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        Francois Carretté, Chairman of the Board of B&G, sent a letter dated June 23, 1999 to Mr. Endy to confirm B&G's interest and to suggest a meeting in late June 1999 to discuss certain confidentiality and other agreements, and a proposal that our company enter into an option agreement to purchase 40% of Bud Jones.

        From mid-June through mid-July 1999 various communications were exchanged. On July 5, 1999, our chairman and a representative of Ladenburg Thalmann met with Gérard Charlier, chief executive officer of B&G, and a financial advisor to B&G to discuss a proposal that Paul-Son acquire a 40% interest in Bud Jones exercisable upon B&G's completion of its acquisition of Bud Jones, including the provision that B&G finance for us the acquisition of such interest.

        As a result of such meetings, a report was given to our July 7, 1999 board of directors meeting. Our board of directors discussed the businesses of B&G and Bud Jones, the different products and markets served by our three companies and possible synergies to be achieved through a strategic alliance, timing and other obligations suggested by the proposal, anticipated licensing and regulatory considerations and our views on the valuation of Bud Jones. Our board authorized our management to continue discussions with B&G to attempt to negotiate a transaction that would bring together the three companies, instead of the "step" approach suggested by B&G.

        During the ensuing months, we maintained communications with B&G and its financial advisor but did not reach any agreement. In October 1999, increased contacts between the parties resumed. On October 20, 1999, the parties entered into a mutual confidentiality agreement. On October 20, 1999, we formally engaged Ladenburg Thalmann as our advisor in discussions with B&G although Ladenburg Thalmann had been advising us without a formal engagement letter for the preceding several months.

        On October 21, 1999, together with our advisors, we met with representatives of B&G to discuss a potential strategic alliance combination. As a result of these meetings, Mr. Endy met with Mr. Carretté and Mr. Charlier at B&G's offices and manufacturing facilities in Beaune, France, and Ladenburg Thalmann was directed to conduct certain due diligence meetings with B&G's representatives at B&G's offices in Paris. The purpose of these due diligence meetings was to improve our understanding of the respective valuation considerations of the companies and to undertake certain financial due diligence to better advise us in connection with a potential transaction.

        Despite continuing information exchanges and conceptual proposals, the parties failed to reach a consensus on a mutually acceptable deal structure. On January 28, 2000, Mr. Endy and a Ladenburg Thalmann representative met in Paris with Mr. Carretté and Mr. Charlier. Following these meetings, B&G sent a letter dated February 10, 2000 to us which confirmed B&G's interest in a possible transaction and suggested the following conditions:

•

that the B&G shareholders receive 60% of Paul-Son in a combination transaction;



•

that Gérard Charlier become President and Chief Executive Officer of the combined company;



•

that a due diligence report be prepared on our company;



•

that our Las Vegas headquarters be sold to improve our cash position; and



•

that all regulatory requirements be satisfied.

        Because our management and advisors began to doubt whether we would be able to reach an agreement with B&G, we authorized our investment banker to explore other potential strategic alternatives. As a result, through our investment banker, we entered into confidentiality agreements with two parties and had preliminary discussions without finalizing confidentiality agreements with two other parties. In each case, our investment banker had certain inconclusive preliminary discussions with such parties about potential transactions, including other combination opportunities. The discussions did not progress beyond very preliminary information exchanges. All such discussions were abandoned by us as our contacts with B&G became more frequent and began to look more positive. Throughout

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this time, we maintained contact with B&G, and awaited B&G's completion of certain due diligence and other studies.

        In May 2000, our Ladenburg Thalmann representative met with Mr. Charlier and was advised that while B&G intended to complete the Bud Jones acquisition, there continued to be concerns about the ability to combine with Paul-Son on mutually acceptable terms. As a result of these discussions, we advised our investment banker to continue to pursue other potential strategic alternatives.

        At our June 8, 2000 board of directors meeting, our investment banker advised us that additional discussions with B&G had produced B&G's tentative proposal that Paul-Son combine with Bud Jones and that B&G would at a future date consider a combination with Paul-Son. In addition, the B&G stockholders were prepared to enter into a separate loan agreement with our controlling stockholder to respond to our controlling stockholder's estate tax and related liquidity requirements created by the April 1999 death of Paul-Son's founder, Paul S. Endy, Jr. Our board and its advisors continued to discuss the potential advantages and synergies of a B&G transaction. Our board instructed Ladenburg Thalmann to attempt to explore potential transactions with B&G or other parties with whom we had commenced strategic discussions. We also invited Paul Dennis, a successful Cleveland, Ohio businessman, to join our board of directors as an additional independent director.

        Our investment banker continued to exchange communications with B&G about our interest in a potential combination. At that time, B&G was anticipating a Fall 2000 consummation of the acquisition of Bud Jones. Our advisors also continued to have discussions with two other potential parties, but none of the other contacts proceeded beyond preliminary discussions.

        In October 2000, B&G's representatives submitted to us a proposed letter of intent again for our company to be combined with Bud Jones. The October 2000 draft letter of intent proposed:

•

B&G would purchase $800,000 worth of Paul-Son common stock from the Endy Trust (based on an agreed share value of approximately $3.00 per share).



•

B&G would cause 100% of the shares of Bud Jones to be exchanged for approximately 2,000,000 shares of Paul-Son common stock in a merger of Paul-Son and Bud Jones.



•

B&G would grant an exclusive license to Paul-Son in the United States for B&G's electronic chip technology.



•

Paul-Son would have access to Bud Jones' and B&G's export network, and B&G would be granted exclusive worldwide marketing rights for Paul-Son chips.



•

The post-merger share issuance based on the above transaction would result in B&G and Bud Jones stockholders holding approximately 63.2% of Paul-Son shares outstanding.



•

B&G and Bud Jones stockholders would cause to be made available bank financing to Paul-Son.



•

Gerard Charlier would be appointed President, Chief Executive Officer and Chairman of the Board of Paul-Son and Eric Endy would be appointed Vice Chairman of the Board, and would enter into an employment agreement.

        Because our board continued to believe that such a structure would not be in the best interests of our stockholders, we encouraged continuing discussions, but advised B&G that we believed the proposal was not adequate. On October 19, 2000, Mr. Endy and Ladenburg Thalmann met in Las Vegas, Nevada, with Mr. Carretté, Mr. Charlier and their financial advisor to continue discussions about the proposed B&G letter of intent. These discussions were inconclusive. B&G acquired Bud Jones in October 2000.

        On October 24, 2000, our board of directors held a meeting and was advised that B&G representatives wished to meet with our board to make a presentation. As a result, our board of

33

directors invited B&G representatives to make a presentation at our November 13, 2000 board of directors meeting.

        The B&G representatives accepted the invitation to attend the November 2000 board of directors meeting and requested that Paul-Son grant to B&G a right of first refusal until November 14, 2000 with respect to a Paul-Son acquisition proposal. Paul-Son declined to grant any right of first refusal.

        Between late October and November 13, 2000, we exchanged information with B&G and their representatives. B&G submitted to us a proposed letter of intent substantially identical to that submitted in October 2000. At our board's meeting on November 13, 2000, Mr. Carretté, Mr. Charlier and their financial advisor made a presentation to our board of directors. Present with our board of directors were representatives of Ladenburg Thalmann and our legal advisors. During this presentation, we encouraged the B&G representatives to continue discussions but advised them that a critical element in pursuing discussions from our perspective would be that the three companies be combined in a single transaction. The meeting ended on a positive note with the parties agreeing to pursue additional discussions. On November 16, 2000, we were advised by B&G's financial advisor that B&G's controlling stockholder was agreeable in concept to a combination that would bring the three companies together in a single transaction. In late November and early December 2000, the parties exchanged drafts of a revised letter of intent. On December 12, 2000, Mr. Endy and a Ladenburg Thalmann representative made a presentation in Las Vegas, Nevada, to Mr. Charlier and a financial advisor. Following the December 12, 2000 meetings, the B&G representatives advised us that they were authorized to finalize the terms of a letter of intent.

        At our board of directors' meeting on December 14, 2000, where Ladenburg Thalmann and our legal advisors were present, a presentation was made to the board of directors of the proposed transaction. The structure presented was that:

•

B&G and Bud Jones would combine with Paul-Son, resulting in the issuance of 51% of the outstanding voting equity interests to B&G stockholders.



•

Separately, B&G would acquire 300,000 shares of stock for $800,000 from the Endy Trust.



•

Upon consummation of a transaction, the B&G stockholders would control a majority of the board of directors seats, Mr. Charlier would become Chairman of the Board and Chief Executive Officer, and Mr. Endy would become Vice Chairman of the Board.



•

Upon consummation of the transaction, Mr. Endy would enter into a five-year employment agreement with Paul-Son.

        Ladenburg Thalmann provided an analysis on the companies' respective valuations and other combination-related considerations, due diligence on financial and other matters, and a summary of the in person due diligence conducted by a Ladenburg Thalmann representatives in B&G's offices in France. The board discussed various regulatory approval considerations. The board also discussed the fact that the parties had negotiated a $1.0 million termination fee and that there would be certain mutual non-circumvention provisions prohibiting Paul-Son and B&G from seeking other strategic partner candidates, but, that Paul-Son would be obligated to consider a "superior proposal" if a competing offer was made.

        Mr. Endy disclosed to the board the separate elements of the transaction in which Mr. Endy and the Endy Trust would have a personal interest. Those interests included the proposed sale by the Endy Trust of Paul-Son shares to the B&G stockholders and Mr. Endy's five-year employment agreement upon consummation of any combination transaction. These and related factors were disclosed during the course of the board meeting. The board then unanimously approved and authorized management to continue working to reach a final agreement.

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        Separately, the independent board members, Messrs. Dennis, Scott and West, voted and gave similar unanimous approval. By consensus, the board assigned Mr. Dennis to act as lead independent director for purposes of day-to-day communications between our company, B&G and the various advisors.

        Following the December 14, 2000 board meeting, our company and B&G representatives exchanged various communications and drafts of the proposed letter of intent and met with our respective advisors in an effort to reach a mutually acceptable letter of intent. The board was given a briefing on the progress of the discussions at its January 16, 2001 meeting.

        On January 31, 2001, we entered into a binding letter of intent with the B&G stockholders, or the 2001 letter of intent. The 2001 letter of intent provided that:

•

The companies would combine through the contribution of 100% of the outstanding shares of B&G and Bud Jones to Paul-Son in exchange for the issuance of 51% of our post-combination voting common shares.



•

B&G stockholders would designate a majority of our board of directors, and that at least two of our then directors would continue to serve on the board.



•

Mr. Charlier would become Chairman of the Board and Chief Executive Officer of our company and that Mr. Endy would become Vice Chairman of the Board.



•

B&G stockholders would purchase 300,000 shares of stock from the Endy Trust at a purchase price of $3.00 per share. On January 15, 2001, the B&G stockholders had previously purchased 33,333 shares from the Endy Trust for $100,000.



•

Both parties agreed to "no-shop" provisions, subject to our obligation to consider a superior proposal if one were submitted to our board of directors.



•

Our controlling stockholder and B&G's stockholders would vote in favor of the transaction and would vote for five years in favor of the election of mutual designees to the board of directors.



•

A $1.0 million termination fee was provided in the event that either B&G or Bud Jones terminated the 2001 letter of intent, except for certain French regulatory reasons, and we agreed to pay B&G a termination fee in that the event we terminated the 2001 letter of intent after acceptance of a superior proposal.



•

We agreed that a definitive agreement pursuant to the terms of the 2001 letter of intent would be executed within sixty days of January 31, 2001.

We issued a press release announcing the 2001 letter of intent on January 31, 2001 and filed an SEC Form 8-K on the same date.

        Thereafter, our respective management and advisors commenced mutual due diligence, continuing discussions, drafting and negotiation of definitive agreements and other work directed to meeting the deadlines imposed by the 2001 letter of intent. Because of the complex and extensive nature of the discussions, we each agreed that the initial sixty day deadline imposed by the 2001 letter of intent should be extended. Accordingly, we entered into a first amendment to the 2001 letter of intent dated as of March 15, 2001 in which we each agreed to a deadline date of April 30, 2001 for the execution of definitive combination agreements. As part of the consideration for the first amendment, we modified the terms under which the termination fee would be payable. The 2001 letter of intent was amended to provide that the $1.0 million termination fee would be payable:

•

in the "event" either B&G, Bud Jones or the B&G stockholders terminated the 2001 letter of intent after the public announcement for any reason; or



•

either B&G, Bud Jones or the B&G stockholders failed to execute the definitive agreement by April 30, 2001 for any reason.

35

The B&G stockholders executed the first amendment to the 2001 letter of intent on March 15, 2001. The 2001 letter of intent as amended will be referred to as the 2001 letter of intent.

        As we each worked toward the completion of definitive agreements, the parties began to encounter issues within the definitive agreements that were not easily resolved. Accordingly, in light of the significant documentation and mutual due diligence remaining, and in light of the fact that the parties had agreed to execute definitive agreements by April 30, 2001, we met on April 11, 2001 in New York, New York at the offices of legal counsel to B&G. In attendance on behalf of Paul-Son were Mr. Endy, Mr. Dennis, two representative of Ladenburg Thalmann and our legal counsel. Present on behalf of the B&G stockholders were Mr. Carretté, Mr. Charlier, Alain Thieffry, B&G's financial advisor and two of B&G's legal counsel. During the course of this meeting, the parties discussed various continuing due diligence and related matters. The B&G stockholders advised our representatives that the parties had not been able to agree in the definitive agreements to certain terms that the B&G stockholders felt material to the transaction. The B&G stockholders stated that the percentage of shares issuable pursuant to the 2001 letter of intent was ambiguous, that the B&G stockholders should be fully protected from the dilution of any shares issuable pursuant to outstanding stock options, that the B&G designated majority of the board should be calculated without reference to independent directors, and that representations and warranties contained within the definitive agreements should not survive after closing of the transaction. We disagreed with the B&G stockholders, however, we discussed and considered potential options to the B&G proposals, but ultimately, the meeting concluded with the parties unable to agree.

        On April 25, 2001, our board of directors held a special meeting to receive a report on the status of the transaction and the events that transpired at the April 11, 2001 meeting. Present were our board, a representative of our legal counsel and by telephone a representative of our investment banker, Ladenburg Thalmann. Since the April 11, 2001 meeting, there had been no further communications between the parties. The board discussed the fact that the 2001 letter of intent contained an April 30, 2001 deadline, and the board decided that we should await a proposal from B&G until April 30, 2001. The board discussed various effects of failing to reach an agreement, including the significant costs incurred by the company to date, the fact that B&G and Bud Jones were significant competitors to the company and other relevant factors. The board instructed management that, should no contact be received from B&G by April 30, 2001, we should make a demand to the B&G stockholders for the $1.0 million termination fee provided for in the 2001 letter of intent. Mr. Endy, noting his interest in the potential results of a transaction, abstained, and the resolution was approved unanimously. A second vote, with Mr. Endy voting, was taken, and the resolution was unanimously adopted. The board instructed management to keep communications open and be prepared to advise the board of the results following the receipt of any communications from B&G.

        We did not receive any further communications or a proposal from B&G by the April 30, 2001 deadline. Accordingly, on April 30, 2001, Mr. Endy sent a letter to B&G and Bud Jones and their stockholders advising them that due to failure of the B&G parties to execute definitive agreements by April 30, 2001, we were demanding that the $1.0 million termination fee be paid.

        On April 30, 2001 we issued a press release announcing that we had made a demand on B&G and Bud Jones for the termination fee. We also filed an SEC Form 8-K dated April 30, 2001 to the same effect.

        Pursuant to the provisions of the 2001 letter of intent, on May 9, 2001, we filed a demand for arbitration with the American Arbitration Association seeking arbitration of our claims against B&G for the $1.0 million termination fee.

        On May 10, 2001, B&G sent a reply letter denying the assertions in our April 30, 2001 demand letter. In addition to denying our claim for the $1.0 million termination fee, B&G advised us they would seek damages against Paul-Son if the arbitration should proceed. B&G proposed that the parties

36

should either complete the transaction in the 2001 letter of intent, in a manner consistent with the positions asserted by B&G at the April 11, 2001 meeting, or that we should consider an alternative transaction under which Paul-Son would:

•

purchase Bud Jones;



•

license from B&G the "safe chip" technology; and



•

enter into a distribution agreement with B&G for international markets.

In exchange, B&G would:

•

acquire 30% (with antidilution protection) of Paul-Son common stock and a seven-year warrant to purchase up to 51% of Paul-Son common stock,



•

have the right to designate three nominees to Paul-Son's board of directors,



•

designate Mr. Charlier to be named President of Paul-Son.

        In addition, the B&G stockholders would purchase 300,000 shares of Paul-Son common stock from the Endy Trust.

        Mr. Dennis spoke by telephone with Mr. Charlier to explore whether the parties could continue discussions. We replied to B&G's letter by letter dated May 17, 2001 in which we reiterated our willingness to continue discussions for the proposed combination pursuant to the 2001 letter of intent. We rejected the alternative transaction contained in B&G's May 10, 2001 letter.

        On May 21, 2001, Mr. Charlier sent a letter to Mr. Endy agreeing to resume discussions subject to withdrawal of the arbitration proceeding commenced by Paul-Son. As a result of these communications, by letter dated May 30, 2001, we agreed with B&G to stay the arbitration proceeding so the parties could renew discussions. From mid-May 2001 through early June 2001, Mr. Endy, Mr. Dennis and Mr. Charlier engaged in certain telephone conversations about resuming discussions.

        On June 19, 2001, Mr. Endy and Mr. Dennis, on behalf of Paul-Son, and Mr. Carretté, Mr. Charlier and Mr. Thieffry, on behalf of B&G, met in the offices of CMS Bureau Francis Lefebvre-New York, B&G's legal counsel in New York, New York. This meeting resulted in an understanding in principle to complete a transaction. The principal components of the revised transaction were that upon completion of a combination:

•

B&G would be issued 53.45% of Paul-Son's shares outstanding on a post-combination basis;



•

B&G stockholders would be issued antidilution or other acquisition rights equal to the number of stock options and other stock option conversion rights outstanding upon date of the combination;



•

B&G would designate four members out of seven of the Paul-Son board;



•

Mr. Charlier would be elected president and chief executive officer of Paul-Son;



•

representations, warranties and indemnities of the parties would be reciprocal, but would not survive the closing of the combination.



•

the Endy Trust would agree to sell 630,000 shares to the B&G stockholders for $1.0 million;



•

voting agreements would be entered into between Holding Wilson and the Endy Trust for five-year irrevocable proxies in favor of matters brought before the stockholders;



•

Mr. Endy would enter into a five-year employment agreement upon completion of the combination with a base salary of $200,000 per year; and



•

the Endy Trust would grant a right of first refusal to the B&G stockholders for future sales of Endy Trust shares, subject to certain preexisting obligations of the Endy Trust.

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        The parties agreed that B&G's counsel would prepare a non-binding term sheet embodying the above terms. On August 7, 2001, Mr. Endy, on behalf of Paul-Son, and Mr. Charlier, on behalf of the B&G stockholders, signed a non-binding term sheet containing the principal terms described above. Additionally, B&G advanced $67,000 as a loan to Paul-Son to pay Ladenburg Thalmann's initial fees to commence certain analysis.

        On August 27, 2001, we issued our fourth quarter and fiscal year ending press release describing results of operations. In the press release, we announced that the parties had renewed confidential negotiations. We filed our annual report on Form 10-K for the fiscal year ended May 31, 2001 on August 29, 2001, and made similar disclosures.

        Following the execution of a non-binding term sheet, the parties returned to work on due diligence and negotiation and drafting of definitive agreements. From mid-August 2001 through early January 2002, the parties, their investment bankers, accounting advisors and legal advisors exchanged various drafts of the definitive agreements, due diligence materials, engaged in various due diligence and related planning meetings and attempted to resolve open issues.

        On January 10, 2002, our board of directors held a meeting to receive a presentation by our management and advisors on the proposed combination, which we believed at that time was close to finalization. At the meeting held at the company's offices in Las Vegas, Nevada, in addition to all members of the board of directors, representatives of our investment bankers, Ladenburg Thalmann, our legal advisors, Kummer Kaempfer Bonner & Renshaw, and other advisors were present. Our chairman, Mr. Endy, provided an overview of the status of negotiations during the preceding several months. Mr. Endy reported that following the conversations with Mr. Charlier, the parties believed that we were close to execution of definitive agreements. Our legal advisors summarized the board's fiduciary obligations and various board materials given to the board members prior to the meeting. Our financial, legal, accounting and audit committee advisors, together with Mr. Endy, summarized for the board the principal terms of the definitive agreements. Separate disclosure and a discussion of the proposed employment agreement with Mr. Endy, which had been separately negotiated between Mr. Endy and B&G, and the proposed sale by the Endy Trust of 670,000 shares of Paul-Son common stock at an aggregate purchase price of $1.0 million were discussed.

        Ladenburg Thalmann gave a presentation to our board regarding the strategic rationale of the combination, the anticipated perception of the market to a combination, the key terms and conditions of the agreements, operational and financial analyses of the company and of B&G, separately and on a combined basis, and related information. The board also instructed the company's legal advisors to confirm the strategy communicated by B&G of the potential surrender of the Nevada gaming license and the reaction thereto by the Nevada Regulatory Authorities. The parties heard a presentation from Paul-Son's advisors on certain structural aspects of the transaction, including the separate transfer of B&G in exchange for an intercompany promissory note, and the financial and tax reasons for the structure. Ladenburg Thalmann did not deliver a fairness opinion to the board of directors at that meeting. The board also heard a presentation on financial due diligence with respect to B&G and Bud Jones, as well as various regulatory, accounting and tax issues related to the proposed combination. Paul-Son's advisors discussed disclosure requirements and related considerations to consummate the transaction. Throughout the presentations by the various advisors, the board engaged in open discussion and questions of management and the advisors. The board also generally reviewed the fact that other potential strategic alternatives were considered but that after considering the alternatives, the board deemed the B&G transaction to be the most beneficial to the company and its stockholders. The board of directors then dismissed Mr. Endy so that the independent directors could meet separately with the financial, legal, accounting and other advisors present. During this session, the independent directors questioned the advisors on various documentation and regulatory issues related to the combination transaction. Following these discussions, Mr. Endy was invited to rejoin the board of directors' meeting. After disclosure to the board of Mr. Endy's and the Endy Trust's individual interests

38

in the proposed combination, the board unanimously agreed with the recommendations of the independent directors (including in their capacity as the independent audit committee), that Mr. Endy should be directed to pursue negotiations to reach final definitive agreements and to return to the board for further direction.

        On January 25, 2002, B&G held a special meeting of stockholders in Beaune, France. During this meeting, the B&G stockholders received a report on the proposed combination transaction. The B&G stockholders approved the combination transaction with Paul-Son, gave an irrevocable power of attorney to B&G and to Mr. Charlier for a two-year period to contribute the B&G shares to Paul-Son, to execute all combination agreements, and to sign all necessary amendments to any agreements.

        With the agreement terms nearly complete, we provided a description of the proposed combination to Nasdaq staff. The Nasdaq staff informally advised us that they believed that the combination might constitute a "reverse merger" under Nasdaq rules which would require Paul-Son, upon completion of the combination, to comply with the original listing criteria for the Nasdaq SmallCap Market. Based on the then current market conditions, were the original listing criteria to be then imposed on Paul-Son, we would not have met such criteria on two bases, the share price of $4.00 per share (the share price at that time traded between approximately $0.95 and $1.50 per share), and the $5.0 million market value of the public float requirement.

        We submitted a written analysis dated February 1, 2002 to the Nasdaq staff, summarizing key elements of the combination, together with an analysis of Nasdaq Rule 4330(f), which defined a "reverse merger." Subsequent supplemental information was provided to and telephonic discussions were held with the Nasdaq staff.

        On February 14, 2002, our board of directors held a special telephonic meeting with all members of the board present, a representative of Kummer Kaempfer Bonner & Renshaw, other advisors, and our investment banker, Ladenburg Thalmann, participated by telephone. The purpose of this meeting was to update certain financial information that was provided to our board at its January 10, 2002 meeting. Ladenburg Thalmann representatives made a presentation to the board based on the updated operating and financial data provided to Ladenburg Thalmann by B&G and us. Ladenburg Thalmann representatives advised the board that based upon the updated and refined analysis after the combination, the company's combined capitalization would be stronger from a cash and book equity position, that there should be near-term and long-term improvement in loss/earnings per share, even without combination synergies, and that increases could be reasonably anticipated in terms of revenue, operating income and product pricing. Our board of directors questioned certain of the assumptions made and directed that a more conservative model be utilized, including one with no revenue synergies and no cost synergies. Ladenburg did not deliver a fairness opinion to the board of directors at that meeting.

        Our board of directors held a special telephonic meeting on February 19, 2002. Present at this meeting with our board were representatives from Kummer Kaempfer Bonner & Renshaw, representatives from Ladenburg Thalmann and other advisors. Ladenburg Thalmann gave an updated presentation using the more conservative criteria as instructed by our board. The financial analysis given to the board showed negative cash flow on a short-term stand alone basis and positive cash flow short-term on a combined basis and a smaller operating loss on a combined basis. After further discussion, the board concluded that the financial models provided on a conservative basis demonstrated that a combination transaction with B&G would be in the best interest of the stockholders.

        On February 22, 2002, the Nasdaq staff provided telephonic advice to our legal advisors, Kummer Kaempfer Bonner & Renshaw, that the preliminary staff determination was that the combination would be a "reverse merger" under Nasdaq Rule 4330(f). This information was communicated to B&G and our various advisors. Following receipt of this information, we had additional discussions with

39

representatives of B&G and their advisors in which B&G expressed concern that a Nasdaq SmallCap Market delisting was a more negative scenario for the company and the combination.

        On February 27, 2002, Mr. Endy, and a representative of our legal counsel, Kummer Kaempfer Bonner & Renshaw, met with Nasdaq's staff in Gaithersburg, Maryland, to discuss the structure of the combination and to explain our position that the combination should not be considered a "reverse merger" under Nasdaq Rule 4330(f). The Nasdaq staff contacted us telephonically on March 6, 2002, to advise us that the staff continued to see the combination as a "reverse merger," within the meaning Nasdaq Rule 4330(f).

        On March 12, 2002, Mr. Endy and a representative of Kummer Kaempfer Bonner & Renshaw, Mr. Charlier, and B&G's legal counsel, had a telephonic conference call with respect to the impact of going forward on the combination, in light of the Nasdaq's expressed position that the combination would be considered a "reverse merger." Our board of directors had instructed Mr. Endy that Paul-Son would not agree to issue any additional shares to the B&G stockholders due to any negative perception by B&G stockholders caused by a potential Nasdaq SmallCap Market delisting. The parties agreed that in exchange for the Endy Trust transferring an additional 34,556 shares to the B&G stockholders in the event that there should be a Nasdaq SmallCap Market delisting as a result of the combination, together with a reciprocal agreement that upon completion of the combination, the Endy trust would be granted a stock option for 34,556 shares at an exercise price of $4.00 per share, that the parties were willing to proceed to finalize the definitive agreements. The parties further agreed that should Nasdaq SmallCap Market delist our common stock due to the combination, we would agree to apply to list our common stock on the Pacific Exchange.

        Our board of directors held a special telephonic meeting on March 14, 2002. Present were all members of the board of directors, representatives of our investment bankers, Ladenburg Thalmann, a representative of our legal counsel, Kummer Kaempfer Bonner & Renshaw, and other advisors. Our board received a summary of the results of the inquiry, submissions and meetings with Nasdaq, an update on the recent discussions with B&G and the March 12 resolution of the B&G stockholders' concerns in the event of a Nasdaq SmallCap Market delisting as discussed above. Our investment banker, Ladenburg Thalmann, gave an updated report based upon information from B&G and us showing that the combination transaction demonstrated long-term financial benefits to the company and its stockholders. Ladenburg Thalmann did not deliver a fairness opinion to the board of directors at that meeting. Based on the foregoing, our board authorized management to complete negotiations, finalize definitive agreements, issue a conditional long-term incentive plan grant to Mr. Endy for 34,556 shares at an exercise price of $4.00 per share, if the Endy Trust were required to transfer the additional 34,556 shares to the B&G stockholders due to a Nasdaq SmallCap Market delisting, to await receipt of a formal written Nasdaq staff determination, and, in such event, to appeal the finding of the Nasdaq staff.

        The respective parties and their advisors conducted various continued financial due diligence and completion of the definitive agreements.

        On April 10, 2002, our board of directors met. Present were all members of the board of directors, together with representatives of our legal counsel, Kummer Kaempfer Bonner & Renshaw, and other advisors. Management and advisors gave the board an updated report and summarized the results of recent conversations with B&G. The board was advised that both parties were ready to sign the definitive agreements and had exchanged final drafts of the required disclosure schedules pursuant to the definitive agreements. Mr. Endy advised the board that Mr. Charlier had arrived in Las Vegas, Nevada, and the parties had tentatively planned to meet on April 11, 2002, to execute the combination agreement. After brief presentations by our advisors, together with questions by board members and management, our board of directors authorized Mr. Endy to execute the definitive combination

40

agreements, including all related documents, and acknowledged disclosure and consent to the Endy employment agreement and Endy Trust stock purchase agreement.

        The significant differences between the 2001 letter of intent and the combination agreement and our board's analysis and conclusions regarding such differences are as follows:

•

The combination agreement will result in the issuance of 53.45% of Paul-Son common stock outstanding after the combination, including warrants to cover the same percentage based on any options, warrants, other convertible securities or rights to purchase Paul-Son commons stock outstanding as of the closing. The 2001 letter of intent provided for the issuance of 51% of Paul-Son common stock outstanding after the combination.

This issuance was one of the issues of non-agreement discussed during the April 11, 2001 meeting. At that meeting, B&G representatives argued that the post-closing stock issuance should be higher and that there should be anti-dilution protection for all outstanding securities convertible into or exercisable for Paul-Son common stock. The B&G representatives agreed that a compromise was proper pursuant to which the warrants would be issued reflecting the number of options and other rights to obtain Paul-Son common stock outstanding on the closing date of the combination, but the warrants would only be exercisable when and if the options or other rights were actually exercised. Following further negotiation, our board of directors, considering all the factors under the proposed combination, including additional shares transferred by the Endy Trust, and based upon the fairness opinion issued by our investment banker, accepted these changes.

•

Under the combination agreement, Mr. Carretté will become Chairman of the Board, Mr. Charlier will become President and Chief Executive Officer and Mr. Endy will become Executive Vice President. Under the 2001 letter of intent, Mr. Charlier was to become Chairman of the Board, and Mr. Endy was to become Vice Chairman of the Board. Our board agreed to this change, especially in light of the fact that Mr. Carretté will indirectly become our controlling stockholder following the closing.



•

The Endy Trust will sell an aggregate of 670,000 shares of Paul-Son common stock for $1,000,000. Previously, under the 2001 letter of intent, the Endy Trust agreed to sell an aggregate of 333,000 shares for $1,000,000. The Endy Trust agreed to increase the shares to be transferred to the B&G stockholders (thereby reducing the per share price to be received) primarily to facilitate the combination moving forward. Additionally, on March 12, 2002, to further facilitate the combination going forward, the Endy Trust agreed to transfer an additional 34,556 shares to the B&G stockholders in the event that Nasdaq should delist us from the Nasdaq SmallCap Market as a result of the combination.

        On April 11, 2002, Mr. Endy and Mr. Dennis, on behalf of Paul-Son, and Mr. Charlier, on behalf of B&G, met in the offices of our legal advisors, Kummer Kaempfer Bonner & Renshaw, and executed the definitive combination agreements. On April 11, 2002, we issued a press release announcing the execution of the definitive combination agreements. On April 12, 2002, we filed an SEC Form 8-K announcing the execution of the definitive combination agreements.

        On April 18, 2002, we submitted a written appeal of the Nasdaq's staff determination regarding the "reverse merger" issue. We were subsequently advised by Nasdaq that no hearing date on the appeal will be required until after the closing of the combination, at which time Nasdaq is anticipated to advise us that we must comply with the original listing requirements pursuant to Nasdaq Rule 4330(f). We may assert our appeal rights at that time if we elect to do so.

41

        On May 13, 2002, we executed the first amendment to the combination agreement in order to reduce the principal amount of the promissory note to be issued by Paul-Son to purchase Bud Jones. This reflects the reduced value of Bud Jones resulting from losses it incurred in the year ended 2001.

        Pursuant to the definitive agreement, on May 20, 2002, our investment banker, Ladenburg Thalmann, delivered a written opinion to our board of directors advising us that the combination is fair from a financial point of view to Paul-Son and to the stockholders. On June 4, 2002, B&G advised us that they did not object to the fairness opinion findings.

Our Reasons for the Combination; Recommendations of the Board

        Our board of directors, by unanimous vote, has determined that the combination is in the best interest of our stockholders and recommends that our stockholders vote in favor of the combination transaction and the related proposals contained herein. The decision of our board of directors to enter into the combination transaction and to recommend that our stockholders vote in favor of the combination transaction and the related proposals contained herein is based upon its evaluation of a number of factors, including, among others, (i) the fairness opinion dated May 20, 2002, issued by Ladenburg Thalmann that, based upon and subject to the matter set forth and the written opinion, as of the dates thereof, the combination is fair from a financial point of view to Paul-Son and to its stockholders and (ii) certain financial, business and industry data provided by management. See "Opinion of Paul-Son's Investment Banker."

        In reaching the board's conclusion, the board considered a number of factors, including those summarized below:

•

The investigation and recommendation of our compliance committee regarding B&G and its principals.



•

The regulatory licensing and approval history of B&G and its principals.



•

The ownership by B&G of certain technologies, including, but not limited to, the safechip technology.



•

The strong market position B&G holds as a manufacturer and distributor of casino table game equipment in Europe and in other international markets.



•

Paul-Son's, B&G's and Bud Jones' historical and pro forma financial condition, results of operations and other financial information, giving effect to certain pro forma combination considerations.



•

The management expertise and management philosophy exhibited by B&G's management team.



•

The product mix of Paul-Son, B&G and Bud Jones.



•

The trade names and reputations of Paul-Son, B&G and Bud Jones.



•

The current and future outlook for business in the casino table game supply industry.



•

The financial due diligence undertaken by our accounting, financial and legal advisors regarding B&G and Bud Jones.

        In addition to the foregoing considerations, we believe that the combination will be beneficial to our company and its stockholders. The reasons for this conclusion are:

•

We believe that the combination will create an industry-leading company in the casino table game supply business.



•

We believe that the enhanced management team resulting from the combination will provide stronger operational and management expertise.

42

•

We believe that the combination of B&G's and Bud Jones' European and international distribution channels and our domestic distribution channels will provide a powerful global distribution network for our products.



•

We believe that the combination will, on a pro forma combined basis, be accretive in the near-term and long-term and will reduce our historical loss per share with the future prospect of becoming profitable.



•

We believe that the B&G "smart chip" technology, casino chips embedded with microchips, will help expand our casino chip offerings and be more attractive to casino customers seeking technology-driven solutions.



•

We believe that we will be able to achieve manufacturing cost synergies and labor cost savings by combining manufacturing facilities and reducing redundant functions and operations.



•

We believe that we will achieve certain economies of scale through reduction of duplicative administrative functions.



•

We believe that our respective companies' product offerings will provide a broader and more attractive casino table games supply product mix to our customers.



•

We believe that the ability to utilize manufacturing facilities in the United States, Mexico and France will provide opportunities for us to be more flexible and proactive in dealing with customer demands.



•

We believe that the combined companies will be able to access lower cost financing.



•

We believe that the combination of our companies will create a larger stockholder base with greater investment community visibility.

        In addition to the foregoing, our board considered certain potential negative factors regarding the combination, including those summarized below:

•

Our management may be distracted from regular business concerns by the need to integrate operations;



•

We may experience unforeseen difficulties in integrating the respective operations and systems;



•

We may experience problems concerning integrating and managing production and sales facilities in three different countries, the United States, France and Mexico;



•

There may be impacts on our earnings from currency fluctuations among the United States, France and Mexico;



•

We may encounter problems concerning integrating sales strategies for different product lines from Paul-Son, B&G and Bud Jones;



•

We may experience problems integrating different business cultures, customs and philosophies;



•

We will incur significant charges and expenses as a result of the combination;



•

Uncertainties associated with the combination may cause our customers to delay or defer purchasing decisions, which may result in the loss of customers and revenues;



•

Our common stock may be delisted from the Nasdaq SmallCap Market as a result of the combination; and



•

The temporary surge in B&G's revenue generated by European casinos converting their chips to Euros is ending.

43

        The above listed factors considered by the board are not intended to include all matters considered, but are believed to include the material factors considered by the board. In determining that the combination was in the best interest of the stockholders of Paul-Son, our board considered the factors above, and all of the information available to it, as a whole. No specific or relative weights were assigned by the board of directors to such factors, it being generally impractical to do so because the decision to approve the combination was the product of the collective judgment of the members of the board, together with input from management and our advisors. Accordingly, individual directors may have given different weight to the factors considered.

        The board of directors has concluded that the combination is in the best interest of Paul-Son's stockholders and, accordingly, recommends that the Paul-Son stockholders vote in favor of the combination proposals and all other related proposals contained herein.

         THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE COMBINATION AGREEMENT AND RECOMMENDS THAT THE HOLDERS OF PAUL-SON COMMON STOCK VOTE "FOR" THE PROPOSALS SET FORTH IN THIS DOCUMENT

        In considering the recommendation of the Paul-Son board of directors with respect to the combination, the combination agreement and the transactions contemplated thereby, our stockholders should be aware that some of the officers and directors of Paul-Son have certain interests in the proposed combination that are different from and in addition to the interests of Paul-Son stockholders generally. The Paul-Son board of directors was aware of these interests and considered them in approving the combination and the combination agreement. See "—Interests of Certain Persons in the Combination."

Opinion of Paul-Son's Investment Banker

        Ladenburg Thalmann has provided a fairness opinion to Paul-Son in connection with the combination. Paul-Son selected Ladenburg Thalmann based on Ladenburg Thalmann's experience, expertise, reputation and familiarity with Paul-Son's business. In connection with Ladenburg Thalmann's engagement, Paul-Son requested that Ladenburg Thalmann evaluate the fairness, from a financial point of view, to the public stockholders of Paul-Son of the consideration to be paid to the stockholders of B&G in connection with the combination. On May 20, 2002, at a meeting of the Paul-Son board of directors, Ladenburg Thalmann rendered to the Paul-Son board of directors a written opinion to the effect that, as of that date and based on and subject to the matters described in its written opinion, the consideration payable to the stockholders of B&G is fair, from a financial point of view, to the public stockholders of Paul-Son. At this time, Paul-Son has not asked Ladenburg to update, and Ladenburg has not updated, this opinion. Paul-Son's board of directors does not currently expect that it will ask Ladenburg Thalmann to update this opinion.

        The full text of Ladenburg Thalmann's written opinion dated May 20, 2002 to the Paul-Son board of directors, which contains a description of the assumptions made, the procedures followed, the matters considered and the limits of the scope of review undertaken by Ladenburg Thalmann in rendering its opinion, is attached as Annex E and is incorporated in this proxy statement by reference. Paul-Son stockholders are encouraged to, and should, read the Ladenburg Thalmann opinion carefully in its entirety.

        In arriving at its opinion, Ladenburg Thalmann:

•

reviewed the combination agreement and accompanying schedules and exhibits;



•

reviewed the Endy Trust stock purchase agreement;



•

reviewed the preliminary proxy statement of Paul-Son filed with the Securities and Exchange Commission on May 14, 2002;

44

•

reviewed Paul-Son's annual reports to stockholders for the fiscal years ended May 31, 2000 and May 31, 2001 and its quarterly reports for the periods ended February 28, 2002, November 30, 2001, August 31, 2001 and May 31, 2001;



•

reviewed B&G's audited pro forma annual financial statements for the fiscal year ended December 31, 2001, as provided by B&G's management;



•

reviewed B&G's audited annual financial statements for the fiscal year ended December 31, 2000 and December 31, 1999, as provided by B&G's management;



•

reviewed Bud Jones' audited financial statements for the fiscal years ended December 31, 2000 and December 31, 1999, as provided by B&G's management;



•

reviewed certain other historical, operating and financial information and projections, provided to us by the respective managements of Paul-Son and B&G relating to their respective business projects;



•

met with certain members of senior management of both Paul-Son and B&G to discuss their respective businesses and operations, financial condition and future prospects, and their views of the benefits and other implications of the proposed combination;



•

visited and toured B&G's headquarters in Beaune, France;



•

met with B&G's largest stockholder, Holding Wilson, in Paris, France;



•

visited and toured Bud Jones' headquarters in Las Vegas, Nevada and an injection molded chip production facility in Olathe, Kansas;



•

compared the results of operations of B&G with those of certain companies which we deemed to be reasonably comparable to B&G;



•

reviewed the financial terms, to the extent publicly available, of certain comparable transactions; and



•

conducted such other analyses and examinations and considered such other financial, economic and market criteria as Ladenburg Thalmann deemed relevant.

        In connection with its review, Ladenburg Thalmann did not assume any responsibility for independent verification of any of the information that was provided to or otherwise reviewed by it and relied on that information being complete and accurate in all material respects. Ladenburg Thalmann was not requested to and did not make an independent valuation or appraisal of the assets and liabilities of B&G and Paul-Son nor did it verify any of the records of Paul-Son and B&G. With respect to all legal matters, Ladenburg Thalmann relied on the information provided by Paul-Son and B&G and their respective agents. Ladenburg Thalmann's opinion is necessarily based on economic, market and other factors existing, and the information made available to Ladenburg Thalmann as of the date of its opinion and any subsequent change in such factors would require a reconsideration of the opinion.

        Set forth below is a summary of the material financial analyses underlying Ladenburg Thalmann's opinion dated May 20, 2002, delivered to the Paul-Son board of directors in connection with the combination.

        The summary of Ladenburg Thalmann's analyses described below is not a complete description of the analyses underlying Ladenburg Thalmann's opinion. In preparing its opinion to the Paul-Son board of directors, Ladenburg Thalmann performed a variety of financial and comparative analyses, including those described below. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances; therefore, a fairness opinion is not readily

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susceptible to summary description. In arriving at its opinion, Ladenburg Thalmann made qualitative judgments as to the significance and relevance of each analysis and factor that it considered. Accordingly, Ladenburg Thalmann believes that its analyses must be considered as a whole, and that selecting portions of its analyses and factors without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

        In its analyses, Ladenburg Thalmann considered industry performance, regulatory, general business, economic, market and financial conditions, and other matters, many of which are beyond the control of Paul-Son and B&G. No company, transaction or business used in Ladenburg Thalmann's analyses as a comparison is identical to Paul-Son or B&G or the proposed combination, therefore, an evaluation of the results of those analyses is not entirely mathematical. In evaluating the companies and transactions listed below, Ladenburg Thalmann made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Paul-Son or B&G, such as the impact of competition on Paul-Son, B&G and the industry generally, industry growth and the absence of any material adverse change in the financial condition and prospects of Paul-Son, B&G, the industry or the financial markets in general and the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the combination, public trading or other values of the companies, business segments or transactions analyzed.

        The estimates contained in Ladenburg Thalmann's analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not necessarily purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, Ladenburg Thalmann's analyses and estimates are inherently subject to substantial uncertainty.

        Ladenburg Thalmann's opinion and financial analyses were only one of many factors considered by the Paul-Son board of directors in its evaluation of the proposed combination, and should not be viewed as determinative of the views of the Paul-Son board of directors or Paul-Son's management with respect to the combination or the consideration payable to the stockholders of B&G.

        Ladenburg Thalmann performed a comparable company analysis, comparable transaction analysis and discounted cash flow analysis, among others. Further, in performing its analyses, Ladenburg Thalmann utilized the low range of the revenue, EBIT, EBITDA, net income and book value multiples from the comparable company analysis and the comparable transaction analysis based upon the following:

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B&G is a foreign based company with operations in France and is considerably smaller than the public companies Ladenburg Thalmann deemed comparable to B&G and included in the comparable company analysis, or the B&G Comparable Company Index. The B&G Comparable Company Index is significantly larger in terms of latest twelve months revenue and most recent quarter book value than that of B&G, respectively. Based upon a $10.7 million transaction value, the proposed combination is considerably smaller than the average transaction value of the transactions Ladenburg Thalmann deemed comparable to the proposed combination and included in the comparable transaction analysis.



•

B&G supplies plaques, jetons, chips, roulette wheels, displays, layouts, tables and accessories and equipment to licensed casinos. B&G's products are less technical in scope than the products of most of the companies included in the B&G Comparable Company Index. Ladenburg Thalmann noted that higher valuation multiples are typically rendered to the most technologically advanced companies in any industry.

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•

Based on discussions with the executive management team of B&G, Ladenburg Thalmann noted that Bud Jones has been experiencing financial difficulties.

        Due to these factors, Ladenburg Thalmann attributed the low range of the revenue, EBIT, EBITDA, net income and book value multiples from the comparable company analysis and the comparable transaction analysis in arriving at its opinion.

        For the purposes of its analyses, Ladenburg Thalmann valued the consideration to be paid to the B&G stockholders in the combination based on the closing price of Paul-Son's common stock of $2.70 per share at May 17, 2002, multiplied by 3,969,026 shares of Paul-Son common stock, or $10.7 million. In addition, Ladenburg Thalmann excluded the principal amount of the promissory note payable by Paul-Son to B&G for the Bud Jones shares from the calculation of combination consideration and assumed that the warrants issuable to the B&G stockholders will not be exercised to provide the B&G stockholders any shares of Paul-Son in excess of 53.45% of the outstanding shares of Paul-Son common stock.

        Comparable Company Analysis.     Using publicly available information, Ladenburg Thalmann compared selected historical, current and projected operating and financial data and financial ratios for Paul-Son with certain data from selected publicly traded gaming equipment companies that, in Ladenburg Thalmann's judgment, were most closely comparable to Paul-Son. The gaming equipment companies selected are set forth below:

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Acres Gaming, Inc.



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Alliance Gaming Corporation



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Aristocrat Leisure Limited



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Game Tech International, Inc.



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GTECH Holdings Corporation



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Innovative Gaming Corporation of America



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Interlott Technologies, Inc.



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International Game Technology



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International Lottery & Totalizator Systems, Inc.



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MDI Entertainment, Inc.



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Mikohn Gaming Corporation



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Multimedia Games, Inc.



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PDS Gaming Corporation



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Scientific Games Corporation



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Shuffle Master, Inc.



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WMS Industries, Inc.

        Ladenburg Thalmann reviewed, among other things, the following data with respect to the comparable companies: operating statement data, including revenue for the latest twelve months, or LTM; projected fiscal year, or FY, revenue; projected next fiscal year, or FY+1, revenue; LTM operating Income, or LTM EBIT; projected FY EBIT; projected FY+1 EBIT; LTM operating cash flow, or LTM EBITDA; projected FY EBITDA; projected FY+1 EBITDA; LTM net income; projected FY net income; projected FY+1 net income; and the most recent quarter's, or MRQ, book value.

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        Utilizing this information, Ladenburg Thalmann calculated a range of market multiples for the comparable companies by dividing the "Enterprise Value" (total common shares outstanding multiplied by closing market price per share on May 17, 2002, or Market Equity Value, plus total debt and preferred stock, minus cash and equivalents) for each comparable company by, among other things, such company's LTM revenue, projected FY revenue, projected FY+1 revenue, LTM EBIT, projected FY EBIT, projected FY+1 EBIT, LTM EBITDA, projected FY EBITDA, projected FY+1 EBITDA and by dividing each of the comparable companies' LTM net income, projected FY net income, projected FY+1 net income, and MRQ book value.