<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date earliest event reported) September 19, 1996
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WINNERS ENTERTAINMENT, INC.
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(exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
33-22521 84-1103135
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(Commission File Number) (IRS Employer Identification Number)
1461 GLENNEYRE STREET, SUITE F, LAGUNA BEACH, CALIFORNIA
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(Address of principal executive offices)
92651
(Zip Code)
Registrant's Telephone Number, Including Area Code: (714) 376-3010
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On September 19, 1996, Winners Entertainment, Inc. (the
"Company") entered into an Amendment of Construction Loan Agreement (the
"Amendment") among the Company, its wholly owned subsidiary, Mountaineer Park,
Inc. ("Mountaineer") and Richard C. Breeden, solely in his capacity as trustee
(the "Trustee") of the estate of Bennett Management and Development Corp.
("Bennett"). The Amendment settled all of the claims of the Company and
Mountaineer against Bennett. The Amendment is subject to the approval of the
United States Bankruptcy Court and, if approved, the Amendment will be
effective as of October 31, 1996 and the Company and Mountaineer will dismiss
their lawsuit against Bennett with prejudice.
The Amendment modifies the schedule for amortization of the principal
of Bennett's $10.2 million loan such that, instead of 36 equal monthly payments
of $283,333, Mountaineer will make principal payments of $75,000 per month from
October through March and $125,000 per month from April through September. The
remaining principal balance will continue to be due on April 30, 1999. In the
event the Bennett loan is not prepaid by December 31, 1997, the interest rate
on any outstanding balance shall, as of January 1, 1998, increase from 12.5% to
14.5% until paid in full; provided, however, that (i) if the holder of the
second trust on Mountaineer's property (currently Madeleine, LLC pursuant to a
Deed of Trust and Term Loan Agreement dated as of July 2, 1996) for any reason
does not approve such interest rate increase, then the interest rate shall not
increase; and (ii) in lieu thereof, the monthly payments of principal will
increase to $100,000 from October through March and $200,000 from April through
September.
The Amendment also modifies the Company's obligation to issue
additional shares of its Common Stock to Bennett if the loan is not prepaid by
January 1, 1997. Whereas the Construction Loan Agreement as previously amended
required the Company to issue Bennett $2,500,000 worth of its Common Stock
based on the average market price for the 20 consecutive trading days preceding
January 2, 1997, the Amendment permits the Company, at its option, either to
pay Bennett $500,000 in cash or issue Common Stock having a value of $750,000.
Similarly, the Company may pay $750,000 in cash or issue Common Stock having a
value of $1,000,000 if the Bennett loan is not prepaid by July 1, 1997, and pay
$1,000,000 in cash or issue Common Stock having a value of $1,250,000 if the
loan is not prepaid by December 31, 1997. If the Company elects to issue
Bennett additional shares of Common Stock, such shares will be subject to the
Construction Loan Agreement's requirement that, to the extent such issuance
would otherwise result in Bennett having voting rights to greater than 5% of
the Company's issued and outstanding shares, then the voting rights shall be
transferred to the Company's board of directors.
To the extent any shares previously issued pursuant to the
Construction Loan Agreement or to be issued pursuant to the
<PAGE> 3
Amendment are restricted securities and are not eligible for public sale
pursuant to Court order or exemption, then such shares shall have piggyback
registration rights until December 31, 1997, with respect to any registered
offering of shares by the Company or any shareholder of the Company, except for
registered offerings undertaken in connection with the Term Loan Agreement
dated as of July 2, 1996 among the Company, Mountaineer and Madeleine, LLC, and
demand registration rights after December 31, 1997 or any other time at which
there is a registered offering in connection with the Term Loan Agreement.
In the event the Trustee desires to sell any of the shares held by
Bennett, the Amendment also grants the Company until December 31, 1997 the
right to match any bona fide offer of a non-affiliate to purchase the shares.
The Amendment likewise grants the Company an option, for the period commencing
on the date Mountaineer has paid the Bennett loan in full and terminating ten
business days thereafter, to purchase all (but not part) of the 1,530,000
shares currently held by Bennett for a price per share equal to 90% of the
average closing bid price of the shares as reported by Nasdaq for the twenty
(20) consecutive trading days immediately preceding the date on which
Mountaineer retires the loan, but in no event less than $1.125 per share.
As part of the Amendment, American Gaming & Entertainment, Ltd.
("AGEL"), an affiliate of Bennett which had performed management services at
Mountaineer pursuant to a June 2, 1994 management agreement, delivered an
acknowledgment that the management agreement had been terminated and that a
June 30, 1995 Settlement Agreement among the Company, Mountaineer, and AGEL was
in effect. That Settlement Agreement terminated the management agreement and
settled the accounts of the parties as of June 30, 1995.
The Amendment is subject to the approval of the United States
Bankruptcy Court, upon application to be made by the Trustee upon notice to
Bennett's creditors, which application was served by the Trustee on September
20, 1996 and filed with the Court on September 25, 1996. There can be no
assurance, however, that the Court will approve the Amendment or any
modification thereof on terms acceptable to the Company.
Item 7. Financial Statements and Agreements.
(c) Exhibits
1. Amendment of Construction Loan Agreement dated
September 19, 1996 between Winners Entertainment, Inc., Mountaineer Park, Inc.
and Richard C. Breeden, solely in his official capacity as trustee of the
estate of Bennett Management and Development Corp.
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
WINNERS ENTERTAINMENT, INC.
By /s/ Edson Arneault
-----------------------
Edson Arneault
President
Date: September 27, 1996
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AMENDMENT OF CONSTRUCTION LOAN AGREEMENT
This Agreement, entered this 19th day of September, 1996, by and
between Winners Entertainment, Inc. and its wholly owned subsidiary Mountaineer
Park, Inc. ("WINS/MPI") and Richard C. Breeden, solely in his official capacity
as trustee of the estate of Bennett Management and Development Corp. and
Bennett Funding Group (the "Trustee").
WHEREAS, MPI as borrower, WINS as guarantor, and Bennett Management
and Development Corp. ("BMDC") as lender entered a Construction Loan Agreement
dated as of June 27, 1994, which was amended by agreements dated September 27,
1994, December 7, 1994, February 10, 1995, April 10, 1995, and July 7, 1995,
and certain repayment terms of which were extended by agreements dated October
31, 1995, November 28, 1995, and January 12, 1996 (the "Amended Loan
Agreement"); and
WHEREAS, MPI borrowed from BMDC in the aggregate $10.2 million
principally for renovations at the Mountaineer Racetrack and Gaming Resort
located in Chester, Hancock County, West Virginia; and
WHEREAS, the loans made pursuant to the Amended Loan Agreement are
evidenced by a Promissory Note dated June 28, 1994 and are secured by (i) the
real estate and improvements constituting the Mountaineer Racetrack and Gaming
Resort pursuant to a Credit Line Deed of Trust made June 27, 1994, which is of
record in Hancock County, West Virginia; and (ii) pursuant to the agreement of
January 12, 1996, certain personalty reflected by a UCC-1 Financing Statement
dated July 2, 1996, which is of record in Charleston, West Virginia; and
WHEREAS, pursuant to the Amended Loan Agreement MPI was obligated to
make payments of interest only through April of 1996 and since May of 1996 has
been obligated to make payments of principal and interest on a thirty-six (36)
month schedule of amortization and has met all of its obligations with respect
to such payments through and including the payment that became due on August
31, 1996; and
WHEREAS, pursuant to the Amended Loan Agreement WINS was obligated to
issue BMDC in the aggregate 1,530,000 shares of WINS common stock and did in
fact issue and deliver such shares (1,125,000 of which were mistakenly issued
in the name of Bennett Funding Group) (the "Shares"); and
WHEREAS, on July 1, 1996, MPI and WINS filed an adversary proceeding
against BMDC in the United States Bankruptcy Court for the Northern District of
New York, seeking compensatory and punitive damages, recoupment and setoff, and
other equitable relief, including declaratory and injunctive relief for lender
liability (the "Litigation"), and alleging, among other things, that the
conduct of BMDC had impaired WINS' and MPI's ability to refinance the Amended
Loan Agreement prior to the commencement of the principal payments; and
WHEREAS, the Trustee desires to obtain the voluntary dismissal of the
Litigation in order to conserve the resources of the estate of BMDC; and
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WHEREAS, in order to realize such cost savings, as well as to enhance
the value of the Shares, the Trustee is willing, subject to (i) the approval of
the United States Bankruptcy Court for the Northern District of New York (the
"Court") and (ii) the terms and conditions set forth below, to make the
accommodations set forth below:
NOW THEREFORE, in consideration of the mutual promises contained
herein, the adequacy and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Bankruptcy Court Approval. The parties hereto acknowledge
that this Agreement is expressly subject to the approval of the Court, upon
application to be made by the Trustee upon proper notice to BMDC's creditors.
The Trustee shall use his best efforts to file this amendment with the Court as
soon as possible.
2. Effective Date. If this Agreement is approved by the Court,
then the Agreement shall become effective as of October 31, 1996 such that the
payment due from MPI on that date shall be subject to the terms hereof (the
"Effective Date").
3. Dismissal of the Litigation; Mutual Releases. WINS and MPI
shall dismiss the Litigation with prejudice. Each party shall bear its own
legal fees and expenses. The parties hereby agree to execute the Amended and
Restated Mutual Releases attached hereto as Exhibit A.
4. Settlement with American Gaming & Entertainment, Ltd. On the
Effective Date of this Agreement, the Trustee shall deliver to MPI the
acknowledgement of American Gaming & Entertainment, Ltd. and its wholly owned
subsidiary, Gamma of West Virginia, Inc. ("AGEL"), in the form attached hereto
as Exhibit B, that the Settlement Agreement dated as of June 30, 1995 (the
"Settlement Agreement"), a copy of which is attached hereto as Exhibit C, is in
full force and effect and that WINS, MPI, and AGEL shall assume, for purposes
of such acknowledgement, that Termination, as that term is defined in the
Settlement Agreement, has occurred.
5. Modification of Principal Amortization. The Amended Loan
Agreement shall be further amended such that rather than thirty-six (36) equal
payments of principal (together with interest at the rate of 12.5% per annum)
on the last day of each month, MPI shall make payments of principal in the
amount of $75,000 per month for the months of October through March inclusive
and $125,000 per month for the months of April through September inclusive as
follows:
October 31, 1996 $ 75,000
November 30, 1996 $ 75,000
December 31, 1996 $ 75,000
January 31, 1997 $ 75,000
February 28, 1997 $ 75,000
March 31, 1997 $ 75,000
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April 30, 1997 $125,000
May 31, 1997 $125,000
June 30, 1997 $125,000
July 31, 1997 $125,000
August 31, 1997 $125,000
September 30, 1997 $125,000
October 31, 1997 $ 75,000
November 30, 1997 $ 75,000
December 31, 1997 $ 75,000
January 31, 1998 $ 75,000
February 28, 1998 $ 75,000
March 31, 1998 $ 75,000
April 30, 1998 $125,000
May 31, 1998 $125,000
June 30, 1998 $125,000
July 31, 1998 $125,000
August 31, 1998 $125,000
September 30, 1998 $125,000
October 31, 1998 $ 75,000
November 30, 1998 $ 75,000
December 31, 1998 $ 75,000
January 31, 1999 $ 75,000
February 28, 1999 $ 75,000
March 31, 1999 $ 75,000
April 30, 1999 Remaining Principal Balance
The interest rate shall remain the same (unless increased pursuant to Paragraph
7 below). The term of the loans, however, shall not be changed, and any
principal balance outstanding on the termination date, together with any
accrued but unpaid interest, shall be due and payable on the date set forth in
the Amended Loan Agreement. MPI will give the Lender ten (10) days notice of
any prepayment.
6. WINS Shares: Right to Match/Option to Purchase. WINS hereby
acknowledges and confirms that BMDC is the owner of the Shares and that the
Shares are fully-paid and non-assessable. In the event the Trustee desires to
sell the Shares, in whole or in part, the Trustee shall provide WINS written
notice of a bona fide offer of a non-affiliate to purchase the Shares. Upon
receipt of the Trustee's notice, WINS shall have seven (7) business days in
which to provide the Trustee written notice of its desire to match such offer
and purchase the Shares. Within three (3) business days after providing
notice, WINS shall deliver good funds representing the purchase price to the
Trustee against delivery of the certificates representing the Shares, duly
endorsed with Medallion signature guarantee. If WINS does not desire to
purchase the Shares or fails timely to deliver the purchase price after
providing notice of an intent to match a bona fide offer, then the Trustee
shall be permitted to sell the Shares to the offeror
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without any further obligation to WINS. WINS shall have no liability for any
damages suffered by the Trustee or the estate of BMDC in the event WINS
provides notice of an intent to exercise its right to match, but for whatever
reason determines not to purchase the Shares. The right to match shall
terminate on December 31, 1997.
For a period commencing on the date MPI fully satisfies the loans
(the "Satisfaction Date") and terminating at the close of business (Eastern
Time) ten (10) business days thereafter (the "Option Period") -- assuming BMDC
(or the Bennett Funding Group) still owns the Shares -- WINS shall have the
option to purchase all (but not part) of the Shares for a price per share equal
to 90% of the average closing bid price of the Shares as reported by Nasdaq for
the twenty (20) consecutive trading days immediately preceding the Satisfaction
Date, but in no event less than $1.125 per share; provided that if the exercise
of the option by WINS during the Option Period would result in liability under
Section 16(b) of the Securities Exchange Act of 1934, as amended, because of
the matching of the sale of shares upon the exercise of the option with an
acquisition of shares under the Amended Loan Agreement, the option shall not
become exercisable until the earliest date at which such liability would not be
triggered and shall extend for ten additional business days from such date.
Any delay of the date on which the option may be exercised occasioned by
compliance with Section 16(b) shall have no effect on the price per share to be
paid by WINS upon exercise of the option. Unless the Shares have been sold
prior to the Satisfaction Date in a transaction consistent with this Agreement,
the Trustee shall not sell the Shares to anyone other than WINS or its assignee
during the Option Period or any extension thereof. The option is not
applicable in the context of an acquisition of all of the stock of WINS.
7. Additional Stock; Increased Interest Rate. (a) Article II,
Section 2.2 of the Amended Loan Agreement, "Issuance of Additional Shares,"
which was amended in its entirety on July 7, 1995 pursuant to Section 5 of
Construction Loan Agreement Amendment V, is hereby amended such that the
heading for Article II, Section 2.2 shall be "Issuance of Additional Shares;
Increased Interest Rate" and the final paragraph of such section is deleted and
replaced by the following:
In the event the loans have not been prepaid in full by
January 1, 1997, Winners shall at its sole option on January
2, 1997 either (i) pay the Lender $500,000 or (ii) issue to
Lender that number of Winners shares which when multiplied by
the average market price would equal $750,000.
In the event the loans have not been prepaid in full by July
1, 1997, Winners shall at its sole option on July 2, 1997
either (i) pay the Lender $750,000 or (ii) issue to Lender
that number of Winners shares which when multiplied by the
average market price would equal $1,000,000.
In the event the loans have not been prepaid in full by
December 31, 1997, Winners shall at its sole option on January
2, 1998 either (i) pay the Lender
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$1,000,000 or (ii) issue to Lender that number of Winners
shares which when multiplied by the average market price would
equal $1,250,000.
(b) In the event the loans have not been prepaid in full by December
31, 1997, the interest rate on any outstanding balance shall, as of January 1,
1998, increase from 12.5% to 14.5% until paid in full; provided, however, that
(i) if the holder of the second trust on MPI's property (currently Madeleine,
LLC pursuant to a Deed of Trust and Term Loan Agreement dated as of July 2,
1996) for any reason does not approve such interest rate increase, then the
interest rate shall not increase; and (ii) in lieu thereof, the schedule of
amortization set forth in Section 5 above shall be further amended, beginning
with the payment due January 31, 1998, as follows:
January 31, 1998 $100,000
February 28, 1998 $100,000
March 31, 1998 $100,000
April 30, 1998 $200,000
May 31, 1998 $200,000
June 30, 1998 $200,000
July 31, 1998 $200,000
August 31, 1998 $200,000
September 30, 1998 $200,000
October 31, 1998 $100,000
November 30, 1998 $100,000
December 31, 1998 $100,000
January 31, 1999 $100,000
February 28, 1999 $100,000
March 31, 1999 $100,000
April 30, 1999 Remaining Principal Balance
To the extent additional amounts are not paid or shares issued
pursuant to Section 7(a), Lender shall be paid the original additional
consideration of $2,500,000 of shares valued as of January 2, 1997 as provided
in the amendment of the Construction Loan Agreement dated July 5, 1995, less
any amounts paid or shares issued under Section 7(a).
To the extent any Shares issued pursuant to the Construction Loan
Agreement as hereby amended are restricted and are not eligible for public sale
pursuant to Court order or exemption, then such Shares shall have piggyback
registration rights with respect to any registered offering of shares by WINS
or any shareholder of WINS, except for registered offerings undertaken in
connection with the Term Loan Agreement dated as of July 2, 1996 among MPI,
WINS, and Madeleine, LLC, until December 31, 1997 and demand registration
rights after December 31, 1997 or any other time at which there is a registered
offering in connection with the Term Loan Agreement.
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8. No Other Changes. No amendment, change, or modification of
the Amended Loan Agreement is intended except as specifically set forth herein.
During the term of the Construction Loan Agreement as amended hereby, MPI will
not amend any other loan agreement to which it is a party or become an obligor
under any new loan agreement without the permission of the Lender, which
permission will not be unreasonably withheld.
9. Notices. Any notices permitted or required hereunder shall be
deemed effective when actually received by the parties as follows:
If to WINS and MPI:
Edson R. Arneault, President
Mountaineer Park, Inc.
State Route 2
Chester, West Virginia 26034
with a copy to:
Robert L. Ruben, Esq.
Freer & McGarry, P.C.
1000 Thomas Jefferson Street, N.W.
Sixth Floor
Washington, D.C. 20007
If to the Trustee:
Richard C. Breeden, Trustee
Bennett Management and Development Corp.
2 Clinton Square
Syracuse, New York 13202
with a copy to:
James M. Cotter, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
10. Court Jurisdiction; Cooperation. All parties to this
agreement submit to the jurisdiction of the Court for any disputes arising out
of this agreement. The parties agree to cooperate in effecting the intentions
of this agreement and to deliver additional documentation as may be required or
deemed appropriate to implement the intentions of the parties.
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11. Trustee. The Trustee is entering into this settlement as
Trustee only and shall have no personal responsibility.
IN WITNESS WHEREOF, the parties hereto have approved and executed this
Settlement Agreement as of the date first set forth above.
WINNERS ENTERTAINMENT, INC.
By: /s/ Edson R. Arneault
------------------------------------------------
Edson R. Arneault, President
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
------------------------------------------------
Edson R. Arneault, President
By: /s/ Richard C. Breeden
------------------------------------------------
Richard C. Breeden, Solely in His Capacity
as Trustee of the Estate of Bennett
Management and Development Corp.
and Bennett Funding Group
Acknowledged and Agreed as to Paragraph 4 by:
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ J. Douglas Wellington
---------------------------
Its:
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EXHIBIT A
AMENDED AND RESTATED MUTUAL RELEASE AGREEMENT
THE RELEASE EXTENDED BY MOUNTAINEER/WINNERS: The undersigned,
Mountaineer Park, Inc., and Winner's Entertainment, Inc. (herein sometimes
referred to collectively as "Mountaineer/Winners", for and in consideration of
the execution and delivery by Richard C. Breeden, solely in his capacity as
trustee (the "Trustee") of the estate of Bennett Management & Development Corp.
and The Bennett Funding Group, Inc. of this Mutual Release Agreement, and
subject to the limitations hereinafter set forth, hereby RELEASE and FOREVER
DISCHARGE Bennett Management & Development Corp., The Bennett Funding Group,
Inc., and their officers, directors, shareholders, employees, agents, servants,
attorneys, successors, assigns, insurers, heirs and personal representatives,
subsidiaries, and each and every other corporate or other type entity
affiliated directly or indirectly with The Bennett Funding Group, Inc.
("Bennett affiliated entities"), and also their officers, directors,
shareholders, employees, agents, servants, attorneys, successors, assigns,
insurers, heirs and personal representatives and Richard C. Breeden, both
personally and as Trustee, of and from any and all claims, suits and causes of
action of whatsoever kind or character Mountaineer/Winners, or either of them,
now has or may hereafter have, by reason of any damages, losses or expenses
incurred or to be incurred and of whatever kind or character by the undersigned
Mountaineer Park, Inc. or Winner's Entertainment, Inc., arising from or growing
out of or in any way related to (1) the borrower-lender relationship between
Mountaineer Park, Inc. and Bennett Management & Development Corp., or (ii) the
relationships between or among any of the undersigned or any of the other
parties released by this or the following paragraph ("other relationships")
arising by reason of or growing out of or in any way related to said
borrower-lender relationship between Mountaineer Park, Inc. and Bennett
Management & Development Corp.
THE RELEASE EXTENDED BY BENNETT/BENNETT: The undersigned, Bennett
Management & Development Corp. and The Bennett Funding Group, Inc. (herein
sometimes referred to collectively as "Bennett/Bennett"), for and in
consideration of the execution and delivery by Mountaineer Park, Inc. and
Winner's Entertainment, Inc., of this Mutual Release Agreement, and subject to
the limitations hereinafter set forth, hereby RELEASE and FOREVER DISCHARGE
Mountaineer Park, Inc. and Winner's Entertainment, Inc., and their officers,
directors, shareholders, employees, agents, servants, attorneys, successors,
assigns, insurers, heirs and personal representatives, subsidiaries, and each
and every other corporate or other type entity affiliated directly or
indirectly with Winner's Entertainment, Inc. ("Winner's affiliated entities"),
and also their officers, directors, shareholders, employees, agents, servants,
attorneys, successors, assigns, insurers, heirs and personal representatives,
of and from any and all claims, suits and causes of action of whatsoever kind
of character Bennett/Bennett, or either of them, now has or may hereafter have,
by reason of any damages, losses or expenses incurred or to be incurred and of
whatever kind or character by the undersigned Bennett Management & Development
Corp. or The Bennett Funding Group, Inc., arising from or growing out of or in
any way related to (i) the borrower-lender relationship between Mountaineer
Park, Inc. and Bennett Management & Development Corp., or (ii) the
relationships between or among any of the undersigned or any of the other
parties released by this or the preceding paragraph ("other relationships")
arising by reason of or growing out of or in any way related to said borrower-
<PAGE> 9
lender relationship between Mountaineer Park, Inc. and Bennett Management &
Development Corp.
LIMITATIONS: The undersigned declare it to be their understanding and
intentions that their obligations under or related to the loan documents
evidencing said borrower-lender relationship occurring prior to September 19,
1996, shall never be or become the basis of (or a part of the basis of) a
claim, suit or cause of action by or against any of the undersigned. However,
it is agreed that the releases hereby extended will not preclude a claim, suit
or cause of action by any of the undersigned, nor an enforcement of remedies
available to Bennett Management & Development Corp. (or its successors or
assigns) under said loan documents, so long as such claim, suit, cause of
action or enforcement of remedies is based solely upon a breach of obligation,
or breach of duty, or failure to pay or failure to perform occurring on or
after September 20, 1996.
Mountaineer/Winners understand and agree that the aforesaid claims
hereby released by them include, but are not limited to, any claims and
possible claims stated in, implied by or inferred from (i) the content of a
certain letter dated September 25, 1996, from Mountaineer Park, Inc. to Bennett
Management & Development Corp. (signed by Edson R. Arneault and addressed to
Kevin J. Kuppel), and (ii) the content of a certain letter dated September 6,
1995, from Mountaineer Park, Inc. to Bennett Management & Development Corp.
(also, signed by Edson R. Arneault and addressed to Kevin J. Kuppel).
Mountaineer/Winners further understand and agree that the aforesaid Bennett
affiliated entities hereby released include, but are not limited to, American
Gaming & Entertainment, Ltd., Gamma of West Virginia, Inc., and Gamma
International, Ltd., insofar as claims, suits and causes of action by the
undersigned would related directly or indirectly to the loan which is the basis
of the aforesaid borrower-lender relationship.
The undersigned hereby declare that the terms of this Release have
been completely read and are fully understood and voluntarily accepted for the
purpose of making a full and final compromise, adjustment and settlement,
subject to the above-stated limitations, of any and all claims, disputed or
otherwise, known or unknown, discovered or not discovered, on account of said
borrower-lender relationship or said other relationships and for the express
purpose of precluding forever, subject to the above-stated limitations, any
further or additional claims, demands or suits against any and all entities and
persons named or referred to herein as a released party, arising out of the
aforesaid borrower-lender relationships or said other relationships.
The undersigned understand and agree that the aforesaid payments of
cash and execution and delivery of this Mutual Release Agreement were made by
way of settlement and that liability for any claims hereby released have been
and are specifically denied by the parties released hereby.
The undersigned represent and warrant that the terms hereof were
reached by them after full and complete opportunity to consult with counsel
regarding the settlement and the effect of this release; that they execute this
release voluntarily, freely, without compulsion or duress and mindful that it
has legal consequences precluding any further action, subject to the
above-stated limitations, on any claim they have or might have as to said
borrower-lender relationship or said other relationships against the parties
released; and that no person has made any promise or
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<PAGE> 10
given any inducement whatsoever to encourage them to make this settlement other
than the considerations above recited; and, that (i) no limitation or
restriction exists as to the power or the authority of the undersigned to
execute this release, (ii) the persons executing same on behalf of the
undersigned have been duly authorized so to do, and (iii) this release is valid
and binding and the provisions hereof are enforceable against the undersigned
in accordance with its terms.
This Mutual Release Agreement may be executed in any number of
counterparts, each of which shall, for all purposes, be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
WITNESS the following signatures as of the 19th day of September,
1996.
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
---------------------------------
/s/ Naomi J. Balt
- ----------------------------
Witness Its: President
--------------------------------
WINNER'S ENTERTAINMENT, INC.
By: /s/ Edson R. Arneault
---------------------------------
/s/ Naomi J. Balt
- ----------------------------
Witness Its: President
--------------------------------
BENNETT MANAGEMENT & DEVELOPMENT
CORP.
By: /s/ Richard C. Breeden
---------------------------------
Richard C. Breeden, Solely
- ---------------------------- in His Capacity as Trustee
Witness of the Estate of the Bennett
Management and Development Corp.
THE BENNETT FUNDING GROUP, INC.
By: /s/ Richard C. Breeden
---------------------------------
Richard C. Breeden, Solely
- ---------------------------- in His Capacity as Trustee
Witness of the Estate of the Bennett
Funding Group, Inc.
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EXHIBIT B
AMERICAN GAMING & ENTERTAINMENT, LTD.
Bayport One
Yacht Club Drive, Suite 300
West Atlantic City, New Jersey 08232
September 19, 1996
Mr. Edson R. Arneault
President
Mountaineer Park, Inc.
State Route 2
Chester, West Virginia 26034
Dear Mr. Arneault:
On behalf of American Gaming & Entertainment, Ltd. and its wholly
owned subsidiary, Gamma of West Virginia, Inc., I am writing to acknowledge
that the Settlement Agreement dated as of June 30, 1995 and executed by Winners
Entertainment, Inc., Mountaineer Park, Inc., Gamma of West Virginia, Inc., and
American Gaming & Entertainment, Inc. (the "Settlement Agreement") is in full
force and effect. Winners Entertainment, Inc. and Mountaineer Park, Inc. may
assume for purposes of this acknowledgement that Termination, as that term is
defined in the Settlement Agreement, has occurred. Accordingly, the Management
Agreement dated June 2, 1994 has automatically terminated and the relationship
among the parties to the Settlement Agreement is as set forth therein.
ACKNOWLEDGED THIS 19th DAY OF September, 1996
BY: /s/ J. Douglas Wellington
-----------------------------------------
J. Douglas Wellington, President
<PAGE> 12
EXHIBIT C
SETTLEMENT AGREEMENT
This Settlement Agreement is entered as of June 30, 1995 among Winners
Entertainment, Inc., a Delaware corporation ("Winners"), Mountaineer Park,
Inc., a West Virginia corporation wholly owned by Winners ("Mountaineer"), and
Gamma of West Virginia, Inc., a West Virginia corporation wholly owned by
American Gaming & Entertainment, Ltd. ("Gamma").
WHEREAS, Mountaineer and Gamma (by assignment from American Gaming &
Entertainment, Ltd.) are parties to that certain Management Agreement made as
of June 2, 1994, as subsequently amended, concerning the management of
Permitted Activities (as that term is defined therein) at the Mountaineer
Racetrack & Resort (the "Management Agreement"); and
WHEREAS, Winners agreed to be bound by certain provisions of the
Management Agreement; and
WHEREAS, as of this date Winners, Mountaineer, and Gamma entered into
a Stay Agreement with respect to the Management Agreement (the "Stay
Agreement"); and
WHEREAS, as of July 1, 1995, Mountaineer and American Newco, Inc., a
corporation of which Alfred J. Luciani and J. Timothy Smith are sole
shareholders, are entering into a Consulting Agreement; and
WHEREAS, Gamma and/or its affiliates and Mountaineer and Winners wish
to provide for the termination of the Management Agreement subject to and in
accordance with the terms of the Stay Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants,
acknowledgments, and conditions contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. TERMINATION OF AGREEMENTS. The Management Agreement and,
except as otherwise specifically provided herein, all relationships established
thereby and obligations arising thereunder, shall immediately and automatically
terminate upon the termination of the Stay Agreement pursuant to Section 2(a)
thereof or the termination of the Consulting Agreement pursuant to Section
2(a)(b) or (c) thereof ("Termination"). Upon Termination, no party to this
Settlement Agreement shall have any further rights or obligations under either
the Management Agreement or any other written or oral agreement that may have
been in effect prior to the execution of this Settlement Agreement (except for
the Consulting Agreement), all of which shall be of no further force or effect.
This Settlement Agreement shall not take effect and no party shall have any
rights or obligations hereunder until Termination.
<PAGE> 13
2. SETTLEMENT OF ACCOUNTS; RETURN OF RECORDS. Upon Termination,
Gamma will immediately cause its employees to vacate any rooms they are
occupying at the Mountaineer Lodge. Upon presentation of an invoice for (i)
any long distance telephone calls placed by Gamma employees from the
Mountaineer Lodge to a number other than the offices of AGEL; and (ii) any
alcoholic beverages charged by Gamma employees in the sixty (60) days preceding
the effective date of the Stay Agreement, Gamma shall be responsible for full
payment to Mountaineer. All such charges shall be made without pre-invoice
interest at the rates Mountaineer customarily charges its patrons for the same
products and services. Promptly upon determining in the ordinary course any
management fees due Gamma under the Management Agreement through June 30, 1995,
Mountaineer will pay such fees in full. Gamma expressly agrees, however, that
Mountaineer may deduct from such payment as a setoff all sums due Mountaineer
from Gamma pursuant to this Section 2.
Upon Termination, Gamma shall return to Mountaineer all software,
records, manuals, books, forms, documents, notes, letters, memoranda, reports,
data tables, devices, and apparatus owned or possessed by Mountaineer or
Winners, regardless of who prepared them.
3. MUTUAL RELEASES. Except for those obligations expressly
provided for in this Settlement Agreement, including but not limited to Section
4 below (limited indemnity) Winners and Mountaineer on the one hand, and Gamma
and AGEL on the other hand, 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 kind and nature, foreseen and unforeseen,
contingent and actual, liquidated and unliquidated, suspected and unsuspected,
disclosed and undisclosed, whether direct or by way of indemnity, contribution,
or otherwise, including without limitation all claims which either party has or
might have arising from or related to the Management Agreement or any prior
oral or written agreement among the parties.
Each of the parties hereby acknowledges that it has been advised and
is aware of the provisions of Section 1542 of the Civil Code of the State of
California, and does hereby expressly waive and relinquish all rights and
benefits which it has or may have under said Section 1542, which reads as
follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him, must have
materially affected his settlement with the debtor.
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<PAGE> 14
Each party also waives any similar law or rule.
4. LIMITED INDEMNITY. Notwithstanding anything herein to
the contrary, Gamma and AGEL hereby agree to indemnify and hold Mountaineer and
Winners harmless from and against any and all claims, liabilities, losses,
actions, suits, or proceedings, at law or in equity, that it may incur or with
which it may be threatened by reason of either (i) allegations by third parties
that Gamma or AGEL employees engaged in willful or intentional tortious conduct
or wrongdoing; or (ii) allegations of willful or intentional violations of the
West Virginia Racetrack Video Lottery Act (though the parties are currently
unaware of any such allegations). This indemnification shall include but not
be limited to expenses (including attorneys' fees) reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever.
5. EXPRESS WAIVER OF COVENANT NOT TO COMPETE; SERVICES OF
AMERICAN NEWCO, INC.
Mountaineer and Winners each expressly waives and releases Gamma from
non-competition provisions set forth in Section 7 of the Management Agreement.
Gamma and AGEL hereby consent to Mountaineer's or Winners' future use
of the services of American Newco, Inc., a corporation wholly owned by Alfred
Luciani, president of Gamma and AGEL, and J. Timothy Smith, on a consulting
basis on terms upon which they may agree. Gamma and AGEL acknowledge that such
employment will not give rise to claims that Mountaineer or Winners thereby
engaged in unfair competition, or any similar wrongful conduct with Gamma or
AGEL.
6. CONFIDENTIALITY. Gamma acknowledges that during the term of
the Management Agreement, it has had access to non-public information,
including trade secrets, that are the property of Mountaineer or Winners. From
and after the date hereof, Gamma agrees that it will not disclose to any person
information concerning Mountaineer, Winners, or the operation of Mountaineer
Racetrack & Resort that is not in the public domain.
7. FURTHER ACTION. The parties hereto agree to provide, upon
reasonable notice, any further documents and to undertake any further action
reasonably required to effectuate the purposes of this Settlement Agreement,
including, but not limited to, compliance with requests made by state
regulators.
8. HEIRS, SUCCESSORS AND ASSIGNS. This Settlement Agreement
shall inure to the benefit of, and shall be binding upon, the heirs,
successors, and assigns of the parties hereto as well as each party's present
and former affiliated corporations, predecessors, parent corporations,
subsidiaries, divisions,
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<PAGE> 15
operating companies, officers, directors, agents, employees, administrators,
representatives, shareholders, accountants, and attorneys, individually as well
as in the capacity indicated. However, except as expressly provided herein,
this Settlement Agreement is not for the benefit of any person not a party
hereto or specifically identified as a beneficiary herein, and is not intended
to constitute a third party beneficiary contract.
9. MERGER AND INTEGRATION. This Settlement Agreement 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, discussions and negotiations have been and are merged and
integrated into, and are superseded by this Settlement Agreement.
10. GOVERNING LAW; FORUM SELECTION. This Settlement Agreement
shall be construed in accordance with, and governed by, the laws of the State
of West Virginia. The parties hereto agree
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<PAGE> 16
that any dispute concerning this Settlement Agreement shall be litigated in the
Circuit Court of Hancock County, West Virginia, and the parties hereto agree to
submit to the jurisdiction of such court.
IN WITNESS WHEREOF, the parties hereto have approved and executed this
Settlement Agreement as of the date first set forth above.
WINNERS ENTERTAINMENT, INC.
By: /s/ Edson R. Arneault
-----------------------------------
Edson R. Arneault, President
MOUNTAINEER PARK, INC.
By: /s/ Edson R. Arneault
------------------------------------
Edson R. Arneault, President
GAMMA OF WEST VIRGINIA, INC.
By: /s/ Alfred Luciani
------------------------------------
Alfred Luciani, President
AMERICAN GAMING & ENTERTAINMENT, LTD.
By: /s/ Alfred Luciani
------------------------------------
Alfred Luciani, President
By: /s/ J. Timothy Smith
------------------------------------
J. Timothy Smith, Executive Vice
President & Chief Operating Officer
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