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EXHIBIT 10.8
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT made as of June 30, 1995 by and between Winners
Entertainment, Inc., a Delaware corporation formerly known as Excalibur Holding
Corporation ("Winners"), and Xxxxxxx Xxxxx, a resident of Wisconsin ("Xxxxx"):
WHEREAS, Winners and Xxxxx are parties to an Agreement and Plan of
Exchange dated August 31, 1992 ; (the "Exchange Agreement"), which became
effective on October 13, 1992, pursuant to which all the outstanding shares of
common stock of Golden Palace Casinos, Inc., a Minnesota corporation (Golden
Palace") were exchanged for stock of Winners; and
WHEREAS, Xxxxx has received 209,000 shares of Winners' common stock in
exchange for his 209,000 shares of Golden Palace common stock; and
WHEREAS, Winners included 52,500 (which number should have been
52,250) of Xxxxx'x shares in a registration statement under the Securities Act
of 1933 (registration no. 33-564556 the "Registration Statement") filed on Form
S-1 for the purpose of registering 25% of the shares of Winners' stock issued
in exchange for the shares of Golden Palace; and
WHEREAS, Section 4.4(c) of the Exchange Agreement defines the term
"Founder" to include Xxxxx and certain other named individuals and Section
4.4(c) (i) [3] provides that:
[3] in connection with any underwritten public offering of [Winners]
securities (other than the ExCal 1992 Convertible Oil & Gas Program) register
for offer and sale 52,500 shares of [Winners] common stock for each Founder
which shares Xxxxx be either:
[a] purchased by the underwriter for the purchase price of at
least $6.00 per share (if the underwritten purchase price
is less than $6.00 per share, [Winners] Xxxxx pay the
difference between the underwritten purchase price and
$6.00 per share), or
[b] in the event that the prospective underwritten public
offering of [Winners] securities is not closed on or
before February 1, 1993, at each Founder's sole option and
request, [Winners] shall purchase said 52,500 shares of
[Winners] from such requesting Founder for the purchase
price of $6.00 per share.
WHEREAS, Section 4.4(b) of the Exchange Agreement provides in part
that:
[b] [Winners] shall, within 30 days of the Closing date, file
with the SEC a registration statement in appropriate form
covering 25% of the [Winners] stock received by each GPC
securities holder . . . ; and
WHEREAS, Section 4.4(c)(i)[2] of the Exchange Agreement granted Xxxxx
options, exercisable in increments of 10,000 per year, to purchase 50,000
restricted shares of Winners' common stock for $.01 per share, which shares
were not accorded any registration rights; and
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WHEREAS, the Registration Statement has not yet become effective; and
WHEREAS, pursuant to a February 1, 1994 Agreement for Purchase and
Sale of Securities, Xxxxx sold all 209,000 shares of his Winners common stock
in a private transaction; and
WHEREAS, Xxxxx has requested purportedly pursuant to Section
4.4(c)(i)[3][b] of the Exchange Agreement that Winners pay Xxxxx the difference
between $6.00 per share and the purchase price of 52,500 of his shares in the
private sale; and
WHEREAS, on October 21, 1994, Xxxxx filed suit against Winners (Civ.
No. 3-94-CV-1384, D. Minn.) alleging breach of the Exchange Agreement,
consequential damages, and costs and attorney's fees (the "Litigation"); and
WHEREAS, in order to avoid the expense and uncertainty of further
litigation, the parties wish to resolve their differences amicably.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, Winners and Xxxxx agree as follows:
1. Acknowledgment of Mutual Mistake. Winners and Xxxxx acknowledge
that the number 52,500 with respect to the shares referred to in Section
4.4(c)(i)[3] in the Exchange Agreement and included in the Registration
Statement appeared as a product of mutual mistake, and such number should have
been 52,250.
2. Termination of Litigation. Upon execution and delivery of this
Settlement Agreement, Xxxxx will cause the Litigation to be dismissed without
prejudice. Upon either (i) delivery and registration of the Make-Up, Expense,
and Option Shares (as defined below) and issuance of any required Additional
Shares; or (ii) the execution and delivery of the promissory note referred to in
Section 6 of this Agreement, Xxxxx will cause the Litigation to be dismissed
with prejudice.
3. Issuance of Winners Common Stock.
(a) Make-Up Shares. Upon execution and delivery of this
Settlement Agreement, in consideration of Xxxxx'x agreement to dismiss the
Litigation and enter this Agreement, Winners will cause its transfer agent to
issue Xxxxx 120,000 shares of Winners common stock, based on a value of $1.50
per share (the "Make-Up Shares"). Upon issuance, the Make-Up Shares shall be
validly issued, fully paid, and non-assessable. The certificate(s)
representing the Make-Up Shares shall bear the following restrictive legends:
1. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOTE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO WINNERS ENTERTAINMENT, INC. STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
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IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.
2. PURSUANT TO A SETTLEMENT AGREEMENT ENTERED BY THE ISSUER AND
XXXXXXX XXXXX, A COPY OF WHICH IS ON FILE WITH THE ISSUER, THE
ISSUER MAY REPURCHASE THESE SECURITIES AT A PRICE OF $1.50 PER
SHARE AND THE HOLDER OF THESE SECURITIES MAY BE ENTITLED TO THE
ISSUANCE OF ADDITIONAL SHARES.
As soon as the Make-Up Shares are registered as set forth in Section 5
below, or the federal securities laws otherwise permit the removal of the first
restrictive legend, Winners will promptly direct its transfer agent to remove
such legend. Further, if the right of repurchase is extinguished as set forth
herein, Winners will promptly direct its transfer agent to remove the second
legend.
(b) Expense Shares. As additional consideration for Xx. Xxxxx'x
agreements hereunder, Winners will cause its transfer agent to issue Xxxxx
45,000 shares of Winners' common stock, based on a value of $1.50 per share
(the "Expense Shares") as compensation for Xxxxx'x expenses, such as interest
and attorneys' fees. Upon issuance, the Expense Shares shall be validly
issued, fully paid, and non-assessable. The certificate(s) representing the
Expense Shares shall bear the following restrictive legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO WINNERS ENTERTAINMENT, INC. STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH
ACT.
As soon as the Expense Shares are registered as set forth in Section 5
below, or the federal securities laws otherwise permit the removal of the
restrictive legend, Winners will promptly direct its transfer agent to remove
such legend.
(c) Option Shares. Upon Xxxxx'x tendering payment in full for
the exercise of his option to purchase up to 30,000 shares of Winners common
stock pursuant to Section 4.4(c)(i)[2] of the Exchange Agreement, which granted
Xxxxx options to purchase 50,000 shares (the "Option Shares"), and upon
execution and delivery of this Agreement, Winners will cause its transfer agent
to issue Xxxxx the number of Option Shares for which he tenders payment. Upon
issuance, the Option Shares shall be validly issued, fully paid and
non-assessable. The certificate representing the Option Shares shall bear the
following restrictive legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS
AN EFFECTIVE
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REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES,
THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER
SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO WINNERS ENTERTAINMENT, INC. STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
As soon as the Option Shares are registered as set forth in Section 5
below, or the federal securities laws otherwise permit the removal of the
restrictive legend, Winners will promptly direct its transfer agent to remove
such legend.
4. Investment Representation.
(a) Access to Information. Xxxxx represents and warrants that he
has had access to all information available to Winners concerning its
condition, financial and otherwise, its management, its business and its
prospects. Xxxxx represents that he has received a copy of the Company's
Annual Report on Form 10-K for the fiscal years ended 1993 and 1994 and Form
10-Q for the Quarter ended March 31, 1995 (the "Disclosure Documents"). Xxxxx
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. Xxxxx acknowledges
that he is aware that because of Winners' financial position and other factors,
the acquisition of the common stock involves a high degree of risk.
(b) Restricted Securities. Xxxxx understands and acknowledges
that, until registered, the shares of common stock to be issued under this
Settlement Agreement are restricted securities and are being acquired by Xxxxx
for his own account and not on behalf of any other person and are being
acquired for investment purposes and not for distribution. Xxxxx represents
that an investment in the common stock is a suitable investment for Xxxxx,
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 Action 1933 (the "Act") and state
securities laws. Xxxxx 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.
Xxxxx and Winners acknowledge that Xxxxx intends to sell 35,000 shares of the
common stock in a transaction intended to be exempt from the registration
requirements of the Act. Winners will recognize this sale and transfer the
shares on its records, provided that the purchaser executes and agreement
containing investment representations substantially identical to those
contained in this Settlement Agreement and a restrictive legend substantially
identical to that contained in Section 3(b) of this Settlement Agreement is
placed on the certificate representing the shares.
(c) Exempt Transactions. In the event Xxxxx sells any of the
Make-Up Shares prior to the effective date of the registration statement in a
transaction exempt from the Act's registration requirements, then Winners shall
receive a credit against the Note (if such Note is required to be executed and
delivered pursuant to Section 6 below) in an amount equal to the actual
purchase price of such shares, up to $1.50 per share multiplied by the number
of shares sold.
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5. Registration of Shares. Winners will use its best efforts to
cause a registration statement to become effective with the Securities and
Exchange Commission by June 30, 1996 (the "Registration Statement"). Such
Registration Statement shall include the Make-Up Shares, the Expense Shares,
and up to 20,000 of the Option Shares, provided such inclusion is not
prohibited by applicable law. If such registration statement is withdrawn
prior to its effective date, then Winners will include such shares in its next
registration statement. Winners' failure to register any shares required to be
registered by this Settlement Agreement shall not constitute a breach of this
Settlement Agreement so long as Winners shall not have registered shares after
the date of this Agreement for any other selling shareholder in a registration
that legally could have included Xxxxx as a selling shareholder.
6. Execution of Promissory Note. If the Registration Statement does
not become effective by June 30, 1996, for whatever reason, then Winners shall
execute and deliver to Xxxxx a promissory note in the form attached hereto as
Exhibit A (the "Note").
7. Issuance of Additional Shares. If the average closing market
price of Winners' common stock for the ninety (90) trading days immediately
following the effective date of the Registration Statement is less than $1.50
per share, then Winners shall issue Xxxxx that number of additional shares
required to satisfy the difference between $1.50 per share and such average
market price (the "Additional Shares"). Xxxxx'x right to receive and Winners'
obligation to issue Additional Shares, however, shall apply only to the Make-Up
Shares.
8. Acknowledgment Concerning Registration Rights. Xxxxx hereby
acknowledges that the registration rights set forth in Section 4.4(b) of the
Exchange Agreement and the provisions of Section 4.4(c)(i)[3] are not
cumulative and that he was not entitled to the registration of more than 25% of
his Winners shares in any event. Further, Xxxxx acknowledges that, except as
set forth in this Agreement, he has no right to the registration of either any
shares that he currently owns or the 20,000 Option Shares that have not yet
vested.
9. Remaining Shares Unaffected. Nothing in this Agreement shall
affect Xxxxx'x ability to buy or sell shares of Winners stock, including but
not limited to Xxxxx'x right to exercise his option to purchase 20,000
additional shares of Winners common stock pursuant to the Exchange Agreement.
10. Right of Repurchase. After the execution and delivery of the
Note, Winners shall have the right to repurchase the Make-Up Shares at a price
of $1.50 per share. Xxxxx shall transfer and deliver the repurchased shares to
Winners in a manner reasonably acceptable to Winners' counsel and transfer
agent. Additionally, the amount then due on the Note shall be reduced by the
repurchase proceeds. Notwithstanding the foregoing, at any time, Xxxxx may, at
his election, by delivering written notice to Winners, extinguish the right of
repurchase, as to any or all of the Make-Up Shares. In such event, Winners
will receive a credit against the Note in an amount equal to $1.50 multiplied
by the number of shares as to which the right of repurchase has been
extinguished.
11. Mutual Releases. Upon either (i) registration of the Make-Up
Shares or (ii) execution and delivery of the Note, except for those obligations
expressly provided for in this Settlement Agreement, Winners and Xxxxx hereby
forever release and discharge the other and each of the other's officers,
directors, shareholders, employees, agents, affiliates, attorneys, successors,
and assigns of and from any and all claims, rights, duties, obligations, debts,
liabilities, damages, injuries, actions, and causes of action of every
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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 Exchange Agreement that were brought or could have been brought
in the Litigation. Notwithstanding the foregoing, it is expressly agreed by
the parties that Xxxxx'x right, if any, to indemnity or contribution arising
out of Xxxxx'x employment by Golden Palace Casinos shall not be affected by
this release or this Settlement 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.
12. Further Documents. Winners and Xxxxx agree to execute such
further documents as may be necessary from time to time to give effect to the
purposes of this Settlement Agreement.
13. Conflict. To the extent this Agreement is in conflict with the
terms of the Exchange Agreement, the terms of this Agreement shall control with
respect to the rights of Xxxxx.
14. Third Party Beneficiaries. Winners and Xxxxx do not intend for
the terms of this Settlement Agreement to be enforceable by any third parties,
other than the assignees or successors, if any, of the signatories hereto.
This Agreement shall be binding on the parties, their heirs, successors, and
assigns.
15. Choice of Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the State of Minnesota.
16. Merger and Integration. This Settlement Agreement, together with
the Note, if required to be executed hereunder, constitutes a single,
integrated written contract expressing the entire agreement of the parties
hereto with respect to the subject matter hereof. No covenants, agreements,
representations or warranties of any kind have been made by any party hereto,
except as specifically set forth in this Settlement Agreement. All prior
claims, discussion and negotiations have been and are merged and integrated
into, and are superseded by this Settlement Agreement and the Registration
Statement Agreement.
17. Notices. Any notice permitted or required by this Settlement
Agreement shall be by Certified U.S. Mail and shall be deemed received as of
the date on which such notice is delivered by the U. S. Postal Service. Notice
to the Company shall be addressed as follows:
Xxxxx X. Xxxxxxxx, President
Mountaineer Park, Inc.
P. O. Xxx 000
Xxxxxxx, Xxxx Xxxxxxxx 00000
with a copy to:
Xxxxxx Xxxxx, Esq.
Xxxxx & XxXxxxx, P.C.
0000 Xxxxxx Xxxxxxxxx Xx., XX
0xx Xxxxx
Xxxxxxxxxx, X.X. 00000
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Notice to Xxxxx shall be addressed as follows:
Xx. Xxxxxxx Xxxxx
c/o Shallow Jewelers
0000 Xxxx Xxxxxxxxxx Xxx.
Xxxx Xxxxx, Xxxxxxxxx 00000
with a copy to:
Xxxxxxx X. XxXxxxx, Esq.
Hunegs, Stone, Xxxxxx & XxXxxxx
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
18. Attorney's Fees. In any action concerning the performance or
enforcement of the terms of this Settlement Agreement, the prevailing party
shall be entitled to an award of costs and reasonable attorney's fees.
WITNESS the hands of Xxxxx and Winners' duly authorized representative as
of the day and year first above written.
WINNERS ENTERTAINMENT, INC.
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------
Xxxxx X. Xxxxxxxx, President
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Xxxxxxx Xxxxx
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