EXHIBIT 10.1
SETTLEMENT AGREEMENT AND RELEASE
THIS AGREEMENT is made effective as of the 1st day of July, 1997 by
and between MTR Gaming Group, Inc. (f/k/a Winners Entertainment, Inc.) (the
"Company"), and Xxxx Xxxxx, Incorporated (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 181,739 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 SS-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
(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, prior to the acquisition of Mountaineer Park, Inc. by the Company,
the Company lent Shareholder the sum of $240,000, which was evidenced by a
promissory note (the "First Note"), but has not been repaid; and
WHEREAS, Shareholder's president made an April 29, 1996 promissory note in
favor of Mountaineer Park, Inc. in the principal amount of $62,000 (the
"Second Note"), the balance of which together with accrued interest is
$78,108.46, and which has not been paid; 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
$278,108.46 out of which the Shareholder hereby irrevocably directs the
Company to withhold the sum of $78,108.46 in full payment of the Second Note
and all accrued interest (leaving a cash payment of $200,000; (ii) cancel
and return to Shareholder the First Note; and (iii) deliver to Shareholder
50,000 shares of the Company's common stock (the "New Shares"). The New
Shares shall 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 1996 and Form 10-Q for the
Quarter ended March 31, 1997 (the "Disclosure Documents"). Shareholder
represents that it has read the Disclosure Documents and has reviewed all
available information with its legal, financial and investment advisors to
the extent that it deemed such review necessary or appropriate. Shareholder
acknowledges that it 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,
unless registered, the New Shares are restricted securities and are being
acquired by Shareholder for its 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
agrees that it 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 off 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
---------------------
Xxxxx X. Xxxxxxxx, President
XXXX XXXXX, INCORPORATED
By: /s/ XXXXXXX X. XXXXX, XX.
--------------------------------
Xxxxxxx X. Xxxxx, Xx., President
