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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
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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
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Edson Arneault
President
Date: September 27, 1996