EXHIBIT 10.36
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 Xxxxxx Xxxx and Xxxxx Xxxx (the "Shareholders").
WHEREAS, the Company and the Shareholders (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 Shareholders
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 Shareholders 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
Shareholders 135,529 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 Shareholders in such sales; and (ii) in the event the
Shareholders were to elect not to sell the Guaranteed Shares prior to the
Effective Date, then, so long as the Shareholders sell 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 Shareholders believe 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 Shareholders 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 Shareholders 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
Shareholders had, has, or may have against the Company arising out of the Stock
Purchase Agreement, the Company shall pay to the Shareholders, the sum of
$250,000.
3. ACKNOWLEDGMENT. The Shareholders acknowledge that upon delivery of the
payment referred to in Section 2 above, except as stated herein, the
Shareholders shall have no further rights under the price guarantee or other
provisions of the Stock Purchase Agreement.
4. MUTUAL RELEASE. Upon delivery of the payment, except for those obligations
expressly provided for in this Agreement, the Company and the Shareholders
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 Shareholders 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.
5. COMPLETE AGREEMENT. This Agreement constitutes the full and complete
agreement between the parties.
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6. 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.
7. 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/ XXXXXX XXXX
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Xxxxxx Xxxx
/s/ XXXXX XXXX
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Xxxxx Xxxx
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