EXHIBIT 10.37
SETTLEMENT AGREEMENT AND RELEASE
THIS AGREEMENT is made effective as of the ____ day of December, 1996 by and
between MTR Gaming Group, Inc. (f/k/a/ Winners Entertainment, Inc.) (the
"Company"), and Xxxx Xxxxxxxx (the "Shareholder").
WHEREAS, the Company and the Shareholder (as well as the then remaining
shareholders of Mountaineer Park, Inc.) entered into a Stock Purchase Agreement
dated May 5, 1992, as amended by that certain Rider No.1 dated May 5, 1992, as
further amended by that certain Rider No.2 dated October 7, 1992, as further
amended by that certain Rider No.3 dated October 16, 1992, as further amended by
that certain Rider No.4 dated December 3, 1992, and as further amended by that
certain Amendment to Rider No. 4 dated November 28, 1994 (collectively the
"Stock Purchase Agreement"), whereby the Company purchased from the Shareholder
all of Shareholder's shares of common stock of Mountaineer Park, Inc.
("Mountaineer Park") as part of a larger transaction by which the Company
acquired 100% of the common stock of Mountaineer Park; and
WHEREAS, prior to the purchase of Mountaineer Park by the Company, Mountaineer
Park and its wholly owned subsidiary, Mountaineer Magic, Inc., owned and
operated a race track and resort complex at Chester, West Virginia, together
with clubhouse dining facilities, a 101 room hotel, and a nine hole golf course
as well as operated 165 video lottery terminals pursuant to a contract with the
West Virginia Lottery Commission; and
WHEREAS, prior to the purchase of Mountaineer Park by the Company, Mountaineer
Park was unable to operate profitably and required the expansion and enhancement
of video lottery in order to achieve profitability; and
WHEREAS, as a material inducement for the Company to purchase Mountaineer Park,
the Shareholder provided a warranty that "The businesses of [Mountaineer Park,
Inc.] and [Mountaineer Magic, Inc.] are authorized by law in West Virginia...";
and
WHEREAS, as part of the purchase price, the Company delivered to the Shareholder
59,474 shares of the Company's common stock that were accorded registration
rights and were subject to a guaranteed price of $6.00 per share upon such
registration (the "Guaranteed Shares") such that (i) in the event the
Shareholder were to sell the Guaranteed Shares at a price per share less than
$6.00 per share pursuant to Rule 144 at any time prior to the date on which the
Company causes a registration statement on Form S-1 or S-3 to become effective
(the "Effective Date"), the Company would be required to issue, based on the
average closing bid price of the Company's common stock as reported by Nasdaq
for the ten days prior to the Effective Date, that number of shares as shall
equal in value the difference between $6.00 per share and the amount actually
received by the Shareholder in such sales; and (ii) in the event the Shareholder
were to elect not to sell the Guaranteed Shares prior to the Effective Date,
then, so long as the Shareholder sells the Guaranteed Shares within 20 days
after the Effective Date, the Company shall issue, based on the average closing
bid price of the Guarantor's common stock on the Effective Date, that number of
shares as shall equal in value the difference between $6.00 per share and the
and the gross amount actually received by such holders in such sales; and
WHEREAS, notwithstanding the Shareholder's warranty and representation, in
October of 1993, the Supreme Court of West Virginia ruled that the operation of
video lottery terminals in the State of West Virginia generally, and at
Mountaineer Park's facility specifically, was unconstitutional and therefore
illegal and that such operations would have to be terminated within thirty
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(30) days (which, through a series of stays was extended until the end of the
1994 State legislative session); and
WHEREAS, the Company asserts that because Mountaineer Park's operation of video
lottery terminals was declared illegal, Mountaineer Park and the Company have
suffered substantial damages, including but not limited to (i) millions of
dollars spent pursuing court action, lobbying for video lottery legislation, and
funding operating losses at Mountaineer Park until the passage of video lottery
legislation that enabled it to operate profitably; (ii) a precipitous drop in
the market price of the Company's common stock; (iii) delays in the ability to
register the Company's common stock, causing it to incur various contractual
penalties; and (iv) lost Profits; and
WHEREAS, the Shareholder believes it has a valid claim against the Company for
breach of the price guaranty provisions and registration provisions of the Stock
Purchase Agreement; and
WHEREAS, the Company and the Shareholder have agreed to settle the
aforementioned claims on the terms and conditions set forth herein in order to
avoid the expense and uncertainty of litigation:
NOW THEREFORE, in consideration for the mutual promises and benefits set forth
herein, and with full authority to enter into this Agreement and be bound
thereby, the Company and the Shareholder hereby agree as follows:
1. RECITALS. The foregoing recitals are incorporated as if more fully set
forth herein.
2. PAYMENT. In full and complete satisfaction of any claims that the
Shareholder had, has, or may have against the Company arising out of the Stock
Purchase Agreement, the Company shall (i) pay to the Shareholder, the sum of
$50,800; and (ii) deliver to Shareholder 50,000 additional shares of the
Company's stock (the "New Shares"). The New Shares shall have "piggyback"
registration rights and shall, until such registration, bear a restrictive
legend as required by the federal securities laws.
3. INVESTMENT REPRESENTATION.
(a) ACCESS TO INFORMATION. Shareholder represents and warrants that he
has had access to all public information concerning the Company's condition,
financial and otherwise, its management, its business and its prospects.
Shareholder represents that he has received a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended 1995 and Form 10-Q for the Quarter
ended September 30, 1996 (the "Disclosure Documents"). Shareholder represents
that he has read the Disclosure Documents and has reviewed all available
information with his legal, financial and investment advisors to the extent that
he deemed such review necessary or appropriate. Shareholder acknowledges that
he is aware that because of the Company's financial position and other factors,
the acquisition of the common stock involves a high degree of risk.
(b) RESTRICTED SECURITIES. Shareholder understands and acknowledges that,
until registered, the New Shares are restricted securities and are being
acquired by Shareholder for his own account and not on behalf of any other
person and are being acquired for investment purposes and not for distribution.
Shareholder represents that an investment in the common stock is a suitable
investment for Shareholder, taking into consideration the restrictions on
transferability affecting the common stock. The Company is the only person
which may register the common stock for public sale under the Securities Act of
1933 (the "Act") and state securities laws. Shareholder
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agrees that he will not transfer or sell the common stock without registration
under the Act and any applicable state securities laws unless exemptions from
such registration requirements are available.
4. ACKNOWLEDGMENT. The Shareholder acknowledges that upon delivery of the
payment and issuance and delivery of New Shares referred to in Section 2 above,
except as stated herein, the Shareholder shall have no further rights under the
price guarantee or other provisions of the Stock Purchase Agreement.
5. MUTUAL RELEASE. Upon delivery of the payment and issuance and delivery of
New Shares, except for those obligations expressly provided for in this
Agreement, the Company and the Shareholder hereby forever release and discharge
the other and each of the other's officers, directors, shareholders, employees,
agents, affiliates, attorneys, successors, and assigns as appropriate of and
from any and all claims, rights, duties, obligations, debts, liabilities,
damages, injuries, actions, and causes of action of every kind and nature,
foreseen and unforeseen, contingent and actual, liquidated and unliquidated,
suspected and unsuspected, disclosed and undisclosed, including without
limitation all claims which either party has or might have arising from or
related to the Stock Purchase Agreement. Further, the Company expressly
releases the Shareholder from any claim it may have arising out of the warranty
referred to in the fourth Recital of this Agreement.
Each party acknowledges that it has been advised by experienced and
knowledgeable counsel with respect to this Settlement Agreement generally and
this release specifically.
6. COMPLETE AGREEMENT. This Agreement constitutes the full and complete
agreement between the parties.
7. GOVERNING LAW. This Agreement shall be construed in accordance with laws
of the State of West Virginia. Any claim arising out of this Agreement shall be
brought in a court of competent jurisdiction in the State of West Virginia, and
each party to this Agreement hereby consents to the jurisdiction of such courts.
8. THIRD PARTIES, SUCCESSORS AND ASSIGNS. All of the terms, warranties,
representations and covenants of this Amendment shall apply to and be binding
upon, and shall inure to the benefit of the parties hereto, and each of their
respective permitted successors and assignees, and there are no intended third
party beneficiaries.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
first above written.
WITNESS/ATTEST MTR GAMING GROUP, INC.
By:/s/ XXXXX X. XXXXXXXX
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Xxxxx X. Xxxxxxxx, President
/s/ XXXX XXXXXXXX
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Xxxx Xxxxxxxx
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