-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fA3g2lbctdRMHQk42tLzEdCJAG/973Hk1tIkOVpTFXRgPnlTyhh5riL4xIflYOUa Iw6Idcv6GVBqL5UT1Ier8Q== 0000351903-95-000013.txt : 19950517 0000351903-95-000013.hdr.sgml : 19950516 ACCESSION NUMBER: 0000351903-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACKPOT ENTERPRISES INC CENTRAL INDEX KEY: 0000351903 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880169922 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09728 FILM NUMBER: 95537726 BUSINESS ADDRESS: STREET 1: 1110 PALMS AIRPORT DR CITY: LAS VEGAS STATE: NV ZIP: 89119 BUSINESS PHONE: 7023693424 MAIL ADDRESS: STREET 2: 1110 PALMS AIRPORT DRIVE CITY: LAS VEGAS STATE: NV ZIP: 89119 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________to___________________ Commission File No. 1-9728 JACKPOT ENTERPRISES, INC. (Exact name of registrant as specified in its charter) NEVADA 88-0169922 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1110 Palms Airport Drive, Las Vegas, Nevada 89119 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (702) 263-5555 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No There were 9,249,803 shares of the registrant's common stock outstanding as of May 5, 1995. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1995 and June 30, 1994 Condensed Consolidated Statements of Income - Three and Nine Months Ended March 31, 1995 and 1994 Condensed Consolidated Statement of Stockholders' Equity - Nine Months Ended March 31, 1995 Condensed Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1995 and 1994 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) March 31, June 30, ASSETS 1995 1994 ______ ________ _______ Current assets: Cash and cash equivalents $ 30,892 $ 23,543 Short-term investments 509 Prepaid expenses 1,391 2,057 Deferred Federal income tax 2,744 5,093 Other current assets 1,883 1,614 ________ ________ Total current assets 36,910 32,816 ________ ________ Property and equipment, at cost: Land and buildings 2,656 2,656 Gaming equipment 26,172 25,138 Other equipment 4,098 4,248 Leasehold improvements 709 1,037 ________ ________ 33,635 33,079 Less accumulated depreciation (18,516) (16,360) ________ ________ 15,119 16,719 Lease acquisition costs and other intangible assets, net of accumulated amortization of $6,708 and $6,241 8,944 10,278 Goodwill, net of accumulated amortization of $2,294 and $2,150 5,336 5,480 Lease and other security deposits 3,663 3,689 Other non-current assets 2,715 4,477 ________ ________ Total assets $ 72,687 $ 73,459 ======== ========
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share data) (Unaudited) (Concluded) March 31, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 ____________________________________ ________ _______ Current liabilities: Current portion of long-term debt $ 1,037 $ 1,447 Accounts payable 1,120 2,011 Due to equity investee 194 2,617 Other current liabilities 5,103 4,719 _______ _______ Total current liabilities 7,454 10,794 Long-term debt, less current portion 276 1,403 Deferred Federal income tax 471 471 Accrued rent 3,250 2,337 Accrued pension and other liabilities 2,326 2,188 _______ _______ Total liabilities 13,777 17,193 _______ _______ Commitments and contingencies Stockholders' equity: Preferred stock - authorized 1,000,000 shares of $1 par value; none issued Common stock - authorized 30,000,000 shares of $.01 par value; 9,441,580 and 9,345,240 shares issued 94 93 Additional paid-in capital 63,322 64,844 Accumulated deficit (2,031) (6,796) Less 191,767 and 125,119 shares of common stock in treasury, at cost (2,475) (1,875) _______ _______ Total stockholders' equity 58,910 56,266 _______ _______ Total liabilities and stockholders' equity $72,687 $73,459 ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE AND NINE MONTHS ENDED MARCH 31, 1995 AND 1994 (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 1995 1994 1995 1994 _______ _______ _______ _______ Revenues: Route operations $22,141 $23,119 $65,063 $66,504 Casino operations 2,096 1,780 6,576 6,045 _______ _______ _______ _______ Totals 24,237 24,899 71,639 72,549 _______ _______ _______ _______ Costs and expenses: Route operations 16,685 16,696 48,965 48,462 Casino operations 1,881 1,610 5,946 5,013 Amortization 750 755 2,074 2,411 Depreciation 1,342 1,562 4,007 4,250 General and administrative 1,375 1,585 4,128 4,475 _______ _______ _______ _______ Totals 22,033 22,208 65,120 64,611 _______ _______ _______ _______ Operating income 2,204 2,691 6,519 7,938 _______ _______ _______ _______ Other income (expense): Interest and other income 315 116 720 550 Interest expense (22) (88) (125) (260) Loss from investment in equity investee (708) (2,450) _______ _______ _______ _______ Totals 293 (680) 595 (2,160) _______ _______ _______ _______ Income before income tax 2,497 2,011 7,114 5,778 _______ _______ _______ _______ Provision (credit) for Federal income tax: Current 1,344 2,997 Deferred 825 (640) 2,349 (975) _______ _______ _______ ______ Totals 825 704 2,349 2,022 _______ _______ _______ _______ Net income $ 1,672 $ 1,307 $ 4,765 $ 3,756 ======= ======= ======= ======= Earnings per common and common equivalent share $ .18 $ .14 $ .52 $ .40 ======= ======= ======= ======= Cash dividends per share of common stock $ .08 $ .08 $ .24 $ .23 ======= ======= ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED MARCH 31, 1995 (Dollars and shares in thousands, except per share data) (Unaudited) Treasury Common Stock Additional Stock Total _____________ Paid-in Accumulated _____________ Stockholders' Shares Amount Capital Deficit Shares Amount Equity ______ ______ ________ __________ ______ ______ ____________ Balance July 1, 1994 9,345 $93 $64,844 $(6,796) (125) $(1,875) $56,266 Tax benefit from stock options 86 86 Cash dividends ($.24 per share) (2,214) (2,214) Issuance and receipt of shares on exercise of stock options 97 1 606 (67) (600) 7 Net income 4,765 4,765 _____ ___ _______ _______ ____ _______ _______ Balance March 31, 1995 9,442 $94 $63,322 $(2,031) (192) $(2,475) $58,910 ===== === ======= ======= ==== ======= =======
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MARCH 31, 1995 AND 1994 (Dollars in thousands) (Unaudited) 1995 1994 ________ ________ Operating activities: Net income $ 4,765 $ 3,756 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,081 6,661 Deferred Federal income tax 2,349 (975) (Gain) loss on sales, exchanges and retirements of assets (133) 62 Loss from investment in equity investee 2,450 Other (200) Increase (decrease) from changes in: Prepaid expenses and other current assets 427 1,406 Other non-current assets 204 431 Accounts payable (891) (230) Other current liabilities 134 (602) Accrued rent 913 995 Other liabilities 138 (333) _______ ________ Net cash provided by operating activities 13,787 13,621 _______ ________ Investing activities: Purchases of short-term investments (8) Proceeds from sales of short-term investments 509 10,590 Net proceeds (advances) to location operators 180 123 Proceeds from sale of other non-current assets 617 Proceeds from sales of property and equipment 204 395 Purchases of property and equipment (2,615) (11,849) Advances to equity investee (1,498) (2,075) Increase in lease acquisition costs and other intangible assets (596) (2,489) Lease and other security deposits 26 (2,180) Increase in other assets related to casino facility (984) Other (505) _______ ________ Net cash used in investing activities (3,173) (8,982) _______ ________ Financing activities: Proceeds from long-term debt 275 Payments of long-term debt (1,058) (963) Proceeds from issuance of common stock 7 355 Dividends paid (2,214) (2,142) _______ ________ Net cash used in financing activities (3,265) (2,475) _______ ________ Net increase in cash and cash equivalents 7,349 2,164 Cash and cash equivalents at beginning of period 23,543 18,993 _______ ________ Cash and cash equivalents at end of period $30,892 $ 21,157 ======= ======== Supplemental disclosures of cash flow data: Cash paid during the period for: Interest $ 125 $ 247 Federal income tax $ 2,400 Non-cash financing activities: Assumption of debt upon sale of other non-current asset $ 479 Common stock surrendered in exercise of stock options $ 600
See Notes to Condensed Consolidated Financial Statements. JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - General: In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly Jackpot's financial position as of March 31, 1995, and the results of its operations for the three and nine months ended March 31, 1995 and 1994 and its cash flows for the nine months ended March 31, 1995 and 1994. Information included in the condensed consolidated balance sheet as of June 30, 1994 has been derived from Jackpot's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended June 30, 1994 (the "1994 Form 10-K"). The earnings for the three and nine months ended March 31, 1995 and 1994 are not necessarily indicative of results for a full year. Note 2 - Earnings per share: Earnings per share for the three months ended March 31, 1995 and 1994 and the nine months ended March 31, 1995 are computed by dividing net income of $1,672,000, $1,307,000 and $4,765,000, respectively, by the weighted average number of common shares outstanding of 9,247,000, 9,230,000 and 9,229,000, respectively. Stock options and warrants have been excluded from those computations because they had no effect or were antidilutive on earnings per share. Earnings per share for the nine months ended March 31, 1994 is computed by dividing (i) net income, as adjusted (see Note 1 of Notes to Consolidated Financial Statements in the 1994 Form 10-K for a description of the adjustments), by (ii) the weighted average number of common shares outstanding adjusted for the number of common share equivalents attributable to stock options and warrants. The net income, as adjusted, used for the computation for the nine months ended March 31, 1994 was $4,027,000 and the weighted average number of common shares and common share equivalents used in the computation for the nine months ended March 31, 1994 was 9,947,000. Note 3 - Stockholders' equity: Cash dividends: During the nine months ended March 31, 1995, Jackpot paid cash dividends of approximately $2,214,000 ($.24 per common share). On April 7, 1995, Jackpot's Board of Directors declared a quarterly dividend of $.08 per common share (approximately $740,000) for the quarter ended March 31, 1995 which was paid on April 28, 1995 to stockholders of record on April 17,1995. Note 3 - Stockholders' equity (continued): The 1992 Incentive and Non-qualified Stock Option Plan: On September 30, 1994, the exercise price of the June 30, 1994 grant of nonqualified stock options to purchase an aggregate of 82,500 shares of common stock (27,500 each to three directors) was vested at $9.50 per share, the fair market value of the stock on that date, pursuant to the terms of the 1992 Incentive and Non-qualified Stock Option Plan (the "1992 Plan"). See Note 8 of Notes to Consolidated Financial Statements in the 1994 Form 10-K for further information regarding the 1992 Plan and option grants. On August 17, 1994, a committee of the Board of Directors granted non-qualified stock options to certain officers and employees to purchase 171,000 shares of common stock at the then fair market value of $8.50 per share. Such options are exercisable for a period of five years from the date of the grant. See Note 6 for further information regarding the subsequent cancellation of options held by two former officers. Also on August 17, 1994, the Board approved certain amendments (the "Amendments") to the 1992 Plan which were approved by Jackpot's stockholders on January 10, 1995 at the Annual Meeting of Stockholders. The Amendments increased the number of shares of common stock authorized for issuance pursuant to the 1992 Plan from 1,045,000 shares to 2,545,000 shares and allowed for the possibility of extending the period of time under which options to purchase common stock may be exercised under certain circumstances. In connection with the employment of Don R. Kornstein (see Note 4), as President, Chief Executive Officer and Director effective September 8, 1994, Mr. Kornstein was granted options to purchase up to 700,000 shares of Jackpot common stock at $9.25 per share. The exercise price per share was 100% of the fair market value on September 8, 1994. These options will vest in equal installments on each September 8 of 1995, 1996 and 1997, respectively, subject to earlier vesting upon the achievement of certain earnings tests, or a certain stock price test or upon a change in control, as defined in Mr. Kornstein's employment agreement. Such options expire ten years from the date of grant and remain exercisable for a period of 18 months following the termination of Mr. Kornstein's contract under certain circumstances. Note 3 - Stockholders' equity (concluded): Other nonqualified stock options: On August 17, 1994, the Board of Directors extended from October 18, 1994 to October 18, 1999 at the same exercise price the expiration date of options to purchase an aggregate of 220,617 shares of common stock originally granted on October 18, 1989 at $9.19 per share to three directors and an officer. The exercise price was in excess of 100% of the fair market value of the common stock on the date of the extension of the grants. Common stock surrendered in exercise of nonqualified stock options: In January 1995, as consideration for the issuance of common stock pursuant to the exercise of nonqualified stock options, three directors surrendered an aggregate of 66,642 shares (22,214 shares each) of common stock with an aggregate fair market value of $599,772 ($199,924 each), or $9.00 per share, the fair market value of the common stock based on the closing market price on the exercise date. Such shares were recorded as treasury stock and the exchanges were treated as "non-cash" transactions in January 1995. Common stock warrants: As of March 31, 1995, there were 1,588,195 warrants outstanding and 1,747,015 shares of common stock reserved for issuance upon exercise of such warrants (see Note 8 of Notes to Consolidated Financial Statements in the 1994 Form 10-K). Note 4 - Commitments and contingencies: Employment agreements: Jackpot entered into an employment agreement with Mr. Kornstein effective September 8, 1994 which expires on September 30, 1997 but will automatically be extended for additional one year periods on each October 1 commencing October 1, 1995 unless notice is given by the Company or Mr. Kornstein. The aggregate commitment for future salaries at March 31, 1995, excluding bonuses, under all of Jackpot's employment agreements (see Note 10 of Notes to Consolidated Financial Statements in the 1994 Form 10-K) is approximately $2,200,000. Mr. Kornstein's employment agreement provides for a bonus per fiscal year equal to (i) 2% of all amounts up to the first $5 million by which earnings before interest, taxes, depreciation and amortization, as defined ("EBITDA") for such fiscal year exceeds $10 million, (ii) 4% of all amounts up to the first $5 million by which EBITDA for such fiscal year exceeds $15 million, (iii) 5% of all amounts up to the first $5 million by which EBITDA for such fiscal year exceeds $20 million, (iv) 6% of all amounts up to the first $5 million by which EBITDA for such fiscal year exceeds $25 million, plus (v) 7% of all amounts by which EBITDA for such fiscal year exceeds $30 million. In addition, Mr. Kornstein's employment agreement provides for the payment of amounts equal to three years his annual compensation including bonuses if there is a termination of his employment. The minimum contingent liability at March 31, 1995 under all of Jackpot's employment and severance agreements was approximately $2,800,000. Note 4 - Commitments and contingencies (concluded): Financial instruments with concentration of credit risk: Phar-Mor, a large chain store, is currently under Chapter 11 of the U.S. Bankruptcy Code (see Note 10 of Notes to Consolidated Financial Statements in the 1994 Form 10-K). As of March 31, 1995, Jackpot had approximately $1,400,000 of costs related to lease deposits, prepaid rent and other lease connected expenditures for Phar-Mor. Postemployment benefits: The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" ("SFAS 112"), which is effective for fiscal years beginning after December 15, 1993. This Statement establishes accounting standards for employers who provide postemployment benefits to former or inactive employees, their beneficiaries and covered dependents, after employment but before retirement and requires employers to accrue such benefits if attributable to employees services previously rendered. Effective July 1, 1994, Jackpot adopted the provisions of SFAS 112. Since Jackpot does not provide any significant postemployment benefits as described in SFAS 112, the cumulative effect of adopting SFAS 112 for years prior to fiscal 1995 was not material. Letter of credit: In November 1993, Jackpot and the Mississippi Power & Light Company ( MP&L ) entered into a one-year letter of credit whereby Jackpot guaranteed that it would use $1 million of electric service in connection with the dockside casino facility in Tunica County, Mississippi (the "Tunica Facility"), which closed permanently on July 8, 1994 (see Note 10 of Notes to Consolidated Financial Statements in the 1994 Form 10-K). In December 1994, Jackpot and MP&L entered into a settlement and release agreement pursuant to which the letter of credit was terminated. The settlement did not have a material effect on Jackpot's financial position or its results of operations. Note 5 - Other transactions: Settlement agreement: On February 28, 1995, Jackpot entered into a settlement agreement with Winners Entertainment, Inc., formerly Excalibur Holding Corporation ("Winners"). The agreement requires Winners to issue and register shares of Winners' common stock equal in value to $500,000, measured at the time of the effective date of a future registration of the shares, subject to certain limitations. In no event, however, shall Winners be required to issue more than 250,000 shares (see Note 14 of Notes to Consolidated Financial Statements in the 1994 Form 10-K). Note 5 - Other transactions (concluded): South Dakota: As a result of further re-evaluation in the third quarter of fiscal 1995 of market and gaming conditions in Deadwood, South Dakota, management has determined that the value of Jackpot's investments in property has been further impaired. Accordingly, Jackpot wrote down its assets by $800,000 in the third quarter of fiscal 1995. For further information, see Note 5 of Notes to Consolidated Financial Statements in the 1994 Form 10-K. Tunica, Mississippi dockside gaming facility: In the third quarter of fiscal 1995, Jackpot sold certain assets associated with the Tunica Facility (see Note 5 of Notes to Consolidated Financial Statements in the 1994 Form 10-K). The gain from the sale of such assets, net of the write-down of the South Dakota properties described above was $75,000 and is included in the third quarter of fiscal 1995 under the caption "interest and other income" in the accompanying condensed consolidated statements of income. Note 6 - Subsequent Event: On April 20, 1995, Jeffrey L. Gilbert and Frederick Sandvick resigned as Executive Vice President and Chief Operating Officer and Executive Vice President and Chief Financial Officer, respectively. In connection with the termination of their respective employment agreements, which was effective April 28, 1995, Jackpot paid Messrs. Gilbert and Sandvick an aggregate of approximately $770,000 in consideration for the termination of employment and the cancellation of certain nonqualified stock options in full satisfaction of all rights under their respective employment agreements including, but not limited to, severance compensation and accrued vacation. Options to purchase an aggregate of 475,085 shares of Jackpot common stock were cancelled on April 28, 1995. All costs in connection with the resignation of Messrs. Gilbert and Sandvick have been accrued as of March 31, 1995. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity Cash Flows: Jackpot's principal sources of cash in the nine months ended March 31, 1995 (the "1995 nine months") consisted of the cash flows from operating activities and its available cash, cash equivalents and short-term investments which, at June 30, 1994, approximated $24.1 million. Net cash provided by operating activities approximated $13.8 million in the 1995 nine months, which exceeded the net cash used by investing and financing activities by approximately $7.3 million in the 1995 nine months. Net cash used in investing activities in the 1995 nine months was approximately $3.2 million which included cash used of approximately $4.7 million and cash received of approximately $1.5 million. Of the $4.7 million, $1.5 million was used for advances to the dockside casino facility in Tunica County, Mississippi (the "Tunica Facility"), which closed permanently on July 8, 1994. Such advances to the Tunica Facility were used for payment toward Jackpot's share of unpaid liabilities and estimated closing costs, which were fully accrued as of June 30, 1994. Management has estimated that Jackpot will be required to advance an additional amount of approximately $.2 million in the remainder of fiscal 1995 in connection with Jackpot's share of remaining unpaid liabilities and closing costs of the Tunica Facility, which amounts have also been fully accrued (see Note 5 of Notes to Consolidated Financial Statements in Jackpot's 1994 Form 10-K). The remaining $3.2 million of cash used in investing activities consisted primarily of the purchase of equipment. The $1.5 million of cash received from investing activities included aggregate proceeds from sales of short-term investments and sales of certain assets. Net cash used in financing activities in the 1995 nine months was approximately $3.3 million which resulted from the payment of approximately $1.1 million of long-term debt and the payment of approximately $2.2 million of dividends. Liquidity: At March 31, 1995, Jackpot had cash, cash equivalents and short-term investments of approximately $30.9 million, an increase of approximately $6.8 million from the beginning of the 1995 nine months. Primarily as a result of that increase, as well as the investing and financing activities described above, Jackpot's working capital and current ratio increased to approximately $29.5 million and 5.0 to 1, respectively, at March 31, 1995, from approximately $22.0 million and 3.0 to 1, respectively, at June 30, 1994. Management believes Jackpot's working capital and cash generated from operations will be sufficient to enable Jackpot to meet its planned capital expenditures, meet its debt service requirements on its existing debt, pay quarterly cash dividends pursuant to Jackpot's dividend policy and meet its other ongoing cash requirements as they become due in the remainder of fiscal 1995. With respect to planned capital expenditures, management anticipates Jackpot will purchase approximately $1.0 million of property and equipment, exclusive of business acquisitions, in the remainder of fiscal 1995 to be used in existing and currently planned new locations. Jackpot continues to selectively explore expansion opportunities, both in and outside Nevada, and various potential acquisitions, both gaming and non-gaming related. anagement believes working capital and cash generated from operations will be sufficient to enable Jackpot to continue its expansion; however, Jackpot may seek additional debt or equity financing to facilitate such acquisitions and expansion. Results of Operations Revenues: Total revenues in the three months ended March 31, 1995 (the "1995 three months") decreased approximately $.7 million, from $24.9 million in the three months ended March 31, 1994 (the "1994 three months") to $24.2 million in the 1995 three months, while total revenues in the 1995 nine months decreased approximately $.9 million, from $72.5 million in the nine months ended March 31, 1994 (the "1994 nine months") to $71.6 million in the 1995 nine months. The decreases in total revenues of $.7 million and $.9 million were the net result of decreases of $1.0 million (from $23.1 million in the 1994 three months to $22.1 million in the 1995 three months) and $1.4 million (from $66.5 million in the 1994 nine months to $65.1 million in the 1995 nine months), respectively, in gaming route operations revenues and increases of $.3 million (from $1.8 million in the 1994 three months to $2.1 million in the 1995 three months) and $.5 million (from $6.1 million in the 1994 nine months to $6.6 million in the 1995 nine months), respectively, in casino operations revenues. The decreases in gaming route operations revenues of $1.0 million and $1.4 million resulted from a combination of additional revenues generated from existing and new locations, net of lost revenues from terminated locations. In the 1995 three months and 1995 nine months, new locations generated approximately $1.7 million and $5.5 million, respectively, of revenues, while existing locations generated approximately $.8 million and $3.5 million, respectively, in additional revenues. Terminated locations had generated $3.5 million and $10.4 million, in revenues in the 1994 three months and 1994 nine months, respectively. The loss of the revenues generated at the terminated locations was primarily due to the expiration of the Company's right to operate at certain locations of a major retail chain store customer (the "Customer") on June 30, 1994 (see Item 1 - Business - Gaming Route Operations in the 1994 Form 10-K). Jackpot generated approximately 9% of its total revenues and a significantly greater percentage of its total operating income from operations at locations of the Customer during the year ended June 30, 1994. The increase in casino operations revenues in the 1995 three months was primarily due to the commencement in January 1995 of operations of Jackpot's Highway 93 Casino, Inc., dba the Pony Express Casino (the "Pony Express Casino"). The increase in casino operations revenues in the 1995 nine months was primarily due to the commencement in July 1994 of operations of Water Street Casino, Inc. dba the Post Office Casino (the "Post Office Casino") which was downsized and converted into a gaming route location in the 1995 nine months. Cost and expenses: Route operations expenses in the 1995 three months remained constant at approximately $16.7 million compared to the 1994 three months and, as a percentage of route operations revenues increased to 75.4% in the 1995 three months from 72.2% in the 1994 three months. Route operations expenses in the 1995 nine months increased approximately $.5 million (from $48.5 million in the 1994 nine months to $49.0 million in the 1995 nine months) and, as a percentage of route operations revenues, route operations expenses increased to 75.3% in the 1995 nine months from 72.9% in the 1994 nine months. The increase of $.5 million in the 1995 nine months over the 1994 nine months was primarily attributable to increases in payroll costs. Route operations expenses increased as a percentage of route operations revenues primarily because of the loss of the Customer, with which route operations expenses were lower as a percentage of route operations revenues than Jackpot's prior year overall percentage. Although Jackpot was able to replace a substantial portion of the revenues lost with revenues generated by new and existing locations, generally the costs associated with revenues generated at new locations have been greater as a percentage of revenues than have the costs associated with the lost revenues. With respect to location rent, which is the single largest route operation expense, no contract with a material effect on operating results expires in the remainder of fiscal 1995. See Item 1 - Business - Gaming Route Operations in the 1994 Form 10-K for a further description of the Company's lease and license agreements. Casino operations expenses in the 1995 three months increased approximately $.3 million (from $1.6 million in the 1994 three months to $1.9 million in the 1995 three months) and, as a percentage of casino operations revenues decreased to 89.7% in the 1995 three months from 90.4% in the 1994 three months due primarily to the operating results of the Pony Express Casino. Casino operations expenses in the 1995 nine months increased approximately $.9 million (from $5.0 million in the 1994 nine months to $5.9 million in the 1995 nine months) and, as a percentage of casino operations revenues, casino operations expenses increased to 90.4% in the 1995 nine months from 82.9% in the 1994 nine months due to the lower than expected revenues of the Post Office Casino. As a result of the continuation of the poor operating performance of the Post Office Casino, which generated an operating loss of approximately $.4 million in the 1995 nine months including a one-time charge of approximately $.2 million in connection with the reduction in the size of gaming operations at the location from 175 gaming machines to 70 gaming machines and the change in operations from a casino location to a gaming route location in the three months ended December 31, 1994, Jackpot terminated the operating agreement and sublease with the lessor and ceased operations at the Post Office Casino in the 1995 three months. Amortization expense in the 1995 three months remained constant at approximately $.8 million compared to the 1994 three months and in the 1995 nine months decreased by approximately $.3 million (from $2.4 million in the 1994 nine months to $2.1 million in the 1995 nine months). The decrease in amortization expense in the 1995 nine months was primarily attributable to the decrease in amortization expense related to certain locations whose lease acquisitions costs were fully amortized as of June 30, 1994. Depreciation expense in the 1995 three months and the 1995 nine months decreased approximately $.3 million (from $1.6 million in the 1994 three months to $1.3 million in the 1995 three months and from $4.3 million in the 1994 nine months to $4.0 million in the 1995 nine months). The decreases in depreciation expense were primarily due to the reduction in depreciation expense of certain assets associated with the Tunica Facility. General and administrative expenses in the 1995 three months and the 1995 nine months decreased approximately $.2 million (from $1.6 million in the 1994 three months to $1.4 million in the 1995 three months) and $.4 million (from $4.5 million in the 1994 nine months to $4.1 million in the 1995 nine months) primarily as a result of decreases in development and certain overhead costs, offset by increases in severance costs. Operating income decreased approximately $.5 million in the 1995 three months (from $2.7 million in the 1994 three months to $2.2 million in the 1995 three months) and $1.4 million in the 1995 nine months (from $7.9 million in the 1994 nine months to $6.5 million in the 1995 nine months). The decreases in operating income of $.5 million and $1.4 million were due to the previously described effect on gaming route operations of the expiration of the Company's right to operate at certain locations of the Customer on June 30, 1994. With respect to other non-operating income and expense, the 1994 three months and the 1994 nine months included Jackpot's loss from the Tunica Facility of approximately $.7 million and $2.4 million, respectively. The 1995 periods do not have any losses from the Tunica Facility because, as previously described, Jackpot permanently closed the Tunica Facility on July 8, 1994 and had accrued as of June 30, 1994 an estimate for all anticipated closing costs associated with the closure. The effective tax rate was approximately 33% in the 1995 periods, which was lower than the 35% rate in the 1994 periods primarily because of the increase in estimated tax benefits from tax-exempt interest income. Net income increased approximately $.4 million in the 1995 three months (from $1.3 million in the 1994 three months to $1.7 million in the 1995 three months) and $1.0 million in the 1995 nine months (from $3.8 million in the 1994 nine months to $4.8 million in the 1995 nine months) due to the results of operations described above. Earnings per share in the 1995 three months and the 1995 nine months were $.18 and $.52 per share, respectively, compared to earnings per share in the 1994 three months and the 1994 nine months of $.14 and $.40 per share, respectively. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10.47 - Settlement Agreement by and among Winners Entertainment, Inc. (formerly Excalibur Holding Corporation), Mountaineer Park, Inc. and Jackpot Enterprises, Inc. Exhibit 11.1 - Computation of Earnings Per Common Share for the three and nine months ended March 31,1995 and 1994. Exhibit 27.1 - Financial Data Schedule (electronic filing only) (b) Reports on Form 8-K - No Form 8-K was filed for the three months ended March 31, 1995. Signature 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. JACKPOT ENTERPRISES, INC. (Registrant) By: /s/ Bob Torkar _________________________ BOB TORKAR Senior Vice President - Finance, Treasurer and Chief Accounting Officer Date: May 12, 1995 EX-27 2
5 This schedule contains summary financial information extracted from Jackpot's Condensed Consolidated Balance Sheets - March 31, 1995 and June 30, 1994 and its Condensed Consolidated Statements of Income - Three and Nine Months ended March 31, 1995 and 1994 and is qualified in its entirety by reference to such finanical statements. 9-MOS JUN-30-1995 JUL-01-1994 MAR-31-1995 0 0 0 0 0 36,910 33,635 18,516 72,687 7,454 276 94 0 0 58,816 72,687 0 71,639 0 54,911 5,189 0 125 7,114 2,349 0 0 0 0 4,765 .52 .52
EX-10 3 SETTLEMENT AGREEMENT This Settlement Agreement is entered as of February 28, 1995 among Winners Entertainment, Inc., a Delaware corporation formerly known as Excalibur Holding Corporation ("Winners"), Mountaineer Park, Inc., a West Virginia corporation wholly owned by Winners ("Mountaineer"), and Jackpot Enterprises, Inc., a Nevada corporation ("Jackpot"). WHEREAS, on or about January 27, 1993 Winners and Jackpot executed a letter agreement (the "Letter Agreement") relating to certain actions that Winners and Jackpot were to take with respect to the development of Mountaineer Racetrack & Resort, a Chester, West Virginia racetrack and resort complex owned by Mountaineer; and WHEREAS, on or about January 27, 1993, in connection with the transactions contemplated by the Letter Agreement, Winners delivered to Jackpot a Credit Line Deed of Trust (which was recorded in Hancock County, West Virginia), 30,000 shares of Winners' common stock (the "Existing Shares"), a Guaranty of a Note made and delivered by Mountaineer, and a Registration Rights Agreement with respect to the 30,000 shares of common stock on a piggyback basis, excluding the then current shelf registration; and WHEREAS, the Letter Agreement contemplated the simultaneous consummation of various transactions which were not completed; and WHEREAS, the Letter Agreement contemplated, subject to certain conditions, the payment of certain liquidated damages in the event the transactions were not completed; and WHEREAS, a dispute arose concerning the obligations and performance of the parties with respect to the payment of liquidated damages; and WHEREAS, on April 12, 1994, Mountaineer commenced Civil Action NO. 94-P-42-W against Jackpot in the Circuit Court of Hancock County, West Virginia to compel release of the Credit Line Deed of Trust and for attorney's fees pursuant to West Virginia Code Chapter 38, Article 12, Section 10; and WHEREAS, on May 6, 1994, Jackpot provided the release of the Credit Line Deed of Trust (which has been recorded in Hancock County, West Virginia) in settlement of that action, which has been dismissed with prejudice; and WHEREAS, on May 6, 1994, Jackpot commenced Civil Action NO. 94-C-819 against Winners in the Circuit Court of Kanawha County, West Virginia to enforce its rights under the Letter Agreement; and WHEREAS, on or about June 25, 1994, the parties agreed to settle the dispute in the following manner, without admitting any liability whatsoever, but to avoid the cost and uncertainty of litigation, the parties now wish to resolve their differences amicably pursuant to the terms of this Settlement Agreement. NOW, THEREFORE, in consideration of the covenants, promises and deliveries described below, the parties hereto agree as follows: 1. Termination of Agreements. The parties hereby formally terminate each and every obligation of the Letter Agreement and each of the Registration Rights Agreement, Note and Guaranty, as dated on or about January 27, 1993 (collectively the "Collateral Documents"). It is understood by the parties that the consideration paid to Jackpot shall be allocable to its equity interest in the Letter Agreement. No party in this Settlement Agreement shall have any further rights or obligations under either the Letter Agreement or any of the Collateral Documents, all of which shall be of no further force or effect. 2. Issuance of Stock; Registration. Winners agrees to issue, or cause to be issued, to Jackpot a number of shares of Winners' common stock that sold by Jackpot, together with the Existing Shares on the effective date of a registration statement filed by Winners, would result in net sale proceeds to Jackpot (including and limited to all normal costs of registration such as legal, accounting and printing fees, but excluding commissions attributable to the sale of any shares held by Jackpot) of $512,500 excluding sale proceeds from the sale of any Late Shares as defined below. Winners agrees promptly to prepare and file a registration statement with the Securities and Exchange Commission and to use its best efforts to cause such registration statement to become and remain effective pursuant to the terms of a Registration Statement Agreement attached hereto as Exhibit A which shall be executed and delivered by Winners and Jackpot on the date hereof. Upon execution of this Settlement Agreement, Winners shall issue, or cause to be issued, to Jackpot 125,000 shares of Winners' common stock (the "Interim Additional Shares"). To the extent the market price of the Existing Shares and the Interim Additional Shares, on the effective date of the registration statement, is less than $512,500, Winners shall issue, or cause to be issued, to Jackpot and include in the registration statement additional shares such that the net sale proceeds to Jackpot, if sold by Jackpot on the effective date of the registration statement, together with the Existing Shares and the Interim Additional Shares is equal to $512,500 (the "Deficiency Shares"). To the extent that market price of the Existing and Interim Additional Shares on the effective date of the registration statement is greater than $512,500, then Winners shall have the option to reacquire from Jackpot at par value the number of shares necessary to reduce Jackpot's net sale proceeds, if such shares were sold by Jackpot on the effective date of the registration statement, to $512,500. Winners may exercise such option by notifying Jackpot in writing and tendering full payment within five (5) business days after the effective date of the registration statement. However, if Winners has not caused a registration statement including the Existing Shares, the Interim Additional Shares, and any Deficiency Shares to become effective on or before April 29, 1995, Winners shall immediately issue or cause to be issued, to Jackpot 12,500 shares of Winners common stock ("Late Shares") and shall immediately issue or cause to be issued Jackpot an additional 12,500 Late Shares at the end of each subsequent sixty (60) day period until such time as a registration statement including the Existing Shares, the Interim Additional Shares, any Deficiency Shares, and any Late Shares becomes effective. In no event, however, shall Winners be required to issue to Jackpot in the aggregate more than 250,000 shares, excluding the Existing Shares, of Winners Common Stock. The certificate for the Interim Additional Shares and any Deficiency Shares and any Late Shares shall bear the following legends: (1) THE SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN OR RIGHT WITH RESPECT THERETO MAY BE MADE ONLY IN ACCORDANCE WITH THE SETTLEMENT AGREEMENT DATED AS OF JUNE 30, 1994 AMONG JACKPOT ENTERPRISES, INC., MOUNTAINEER PARK, INC., AND WINNERS ENTERTAINMENT, INC., AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH WINNERS ENTERTAINMENT, INC. (2) THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, 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. THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. Jackpot agrees that it shall not transfer or sell the common stock issued by Winners to Jackpot without registration under the Securities Act of 1933 and applicable state securities laws unless exemptions from such registration requirements are available. 3. Acknowledgement by Jackpot. The original Note made by Mountaineer and the original Guaranty have been delivered to Winners by Jackpot. Jackpot hereby acknowledges that the original Note has been satisfied and the original Guaranty has been released. 4. Termination of Litigation. Upon the execution of this Settlement Agreement, Jackpot shall cause the civil action pending in Kanawha County, West Virginia to be dismissed with prejudice. 5. Mutual Releases. Except for those obligations expressly provided for in this Settlement Agreement and the Registration Statement Agreement, Winners and Mountaineer on the one hand, and Jackpot 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 Letter Agreement or one or more of the Collateral Documents. 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. Each party also waives any similar law or rule. 6. Representations and Warranties of Winners. Winners hereby represents and warrants to Jackpot that: 6.1 Organization; Good Standing; Qualification. Winners is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business, to execute and deliver this Settlement Agreement and the Registration statement Agreement, to issue and sell the shares of Winners' common stock contemplated hereunder, and to carry out the provisions of this Settlement Agreement and the Registration statement Agreement. Winners is duly qualified to transact business and is in good standing in each jurisdiction in which failure to so qualify would have a material and adverse affect on the business, properties, condition (financial or otherwise) or operations of Winners or on the ability of Winners or its subsidiaries to perform their obligations under this Settlement Agreement and the Registration Statement Agreement. 6.2 Authorization. All corporate action on the part of Winners, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Settlement Agreement and the Registration Statement Agreement, the performance of all obligations of Winners hereunder and thereunder, the authorization, issuance (or reservation for issuance), sale and delivery of the shares of common stock being issued hereunder, has been taken prior to the date hereof, and each of this Settlement Agreement constitutes a valid and legally binding obligation of Winners, enforceable in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and any other laws of general application affecting enforcement of creditors' rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. 6.3 Valid Issuance of Common Stock. The Shares of common stock that are being issued hereunder, when delivered in accordance with the terms of this Settlement Agreement, will be duly and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under this Settlement Agreement and under applicable state and federal securities laws. 6.4 Governmental Consents. No consent, approval, qualification, order or authorization of, or filing with, any local, state or federal governmental authority is required on the part of Winners in connection with the offer, sale, or issuance of the shares of common stock being issued or issuable pursuant to the terms of this Settlement Agreement. 6.5 No Violation, Conflict or Default. The execution, delivery and performance by Winners of this Settlement Agreement and the Registration Statement Agreement, and the consummation of the transactions contemplated hereby and thereby, will not result in any violation or default of any provision of Winners' certification of incorporation or bylaws, any statute, law, regulation, order or decree applicable to Winners, or any contract, commitment, agreement, arrangement or restriction of any kind to which Winners is a party or by which Winners is bound. 7. 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, 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. 8. Merger and Integration. This Settlement Agreement, together with the Registration Statement 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 and the Registration Statement Agreement. All prior claims, discussions and negotiations have been and are merged and integrated into, and are superseded by this Settlement Agreement and the Registration Statement Agreement. 9. Governing Law; Forum Selection. This Settlement Agreement shall be construed in accordance with, and governed by, the laws of the State of California. The parties hereto agree that any dispute concerning this Settlement Agreement shall be litigated in the state or federal courts in Los Angeles County, California, and the parties hereto agree to submit to the jurisdiction of such courts. /s/ Thomas K. Russell Thomas K. Russell Secretary, Winners Entertainment, Inc. Secretary, Mountaineer Park, Inc. JACKPOT ENTERPRISES, INC. By: /s/ Jeffrey L. Gilbert Name: Title: REGISTRATION STATEMENT AGREEMENT REGISTRATION STATEMENT AGREEMENT (the "Agreement"), dated as of February 28, 1995 between Winners Entertainment, Inc., a Delaware corporation (the "Company"), and Jackpot Enterprises, Inc., a Nevada corporation (the "Holder"). 1. Introduction. Pursuant to a Settlement Agreement (the "Settlement Agreement") dated as of the date hereof between the Company, the Holder and Mountaineer Park, Inc., a West Virginia corporation wholly owned by Winners, the Company has agreed to register Common Stock owned by the Holder on the terms and conditions set forth herein. 2. Registration under Securities Act. 2.1 Registration of securities other than registerable shares. Until after the effective date of the registration statement, the Company shall not, after the date hereof, grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject to the prior rights of the holder of registrable shares set forth in, and are not in conflict or inconsistent with the provisions of, this Agreement or the Settlement Agreement. 2.2 Registration rights. The Company shall after the date hereof, as expeditiously as possible: (i) prepare and as soon thereafter as possible file with the Commission a registration on Form S-1 (or any successor long form registration statement) or Form S-2 or S-3 (or any successor short form registration statement) under the Securities Act, as may be applicable, to effect a registration of the Existing Shares, the Interim Additional Shares, any Deficiency Shares and any Late Shares (including such audited financial statements as may be required by the Securities Act or the rules and regulations promulgated thereunder) and thereafter use its best efforts to cause such registration statement to become and remain effective; provided that before filing such registration statement or any amendments thereto, the Company will furnish to counsel selected by the Holder copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until the earlier of such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the Holder thereof set forth in such registration statement or the expiration of 120 days after such registration statement becomes effective. (iii) furnish to the Holder and each underwriter, if any, of the securities being sold by the Holder such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the requirements of the Securities Act, and such other documents, as the Holder and underwriter, if any, may reasonably request in order to facilitate the public sale or other disposition of the Registerable Shares owned by the Holder. (iv) use its best efforts to register or qualify all Registerable Shares under such other securities laws or blue sky laws of the states of California, Illinois, Michigan, Minnesota, Ohio and Nevada, and to keep such registrations or qualifications in effect for so long as such registration statement remains in effect; the Company shall also provide the Holder with a copy of a blue sky memorandum prepared by the Law Firm of Hughes Hubbard & Reed in connection with the filing of the Company's registration statement on Form S-3 with the Securities and Exchange Commission, and copies of the blue sky opinion letters prepared by the Company's previous securities counsel, Freer & Alagia, in connection with earlier proposed registration statements. (v) use its best efforts to cause all Registerable Shares covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holder to consummate the disposition of such Registerable Shares; (vi) in the case of underwritten offerings only, furnish to the Holder a signed counterpart of the opinions of counsel for the Company and "comfort" letters from the Company's accountants as such underwriters may reasonably request. (vii) notify the Holder, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, upon the Company's discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as therein effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of the Holder promptly prepare and furnish to the Holder and each underwriter, if any, a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary to that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (viii) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securities holders, in the case of an underwritten offering under a registration statement pursuant to this Section, as soon as reasonably practicable following completion of the offering pursuant to such registration statement, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first full calendar month after the completion of such underwritten offering pursuant to this Section, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and will furnish to the Holders at least 5 business days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus. The Company may require the Holder of Registerable Shares as to which any registration is being effected to furnish the Company such information regarding the Holder and the distribution of such securities as the Company may for time to time reasonably request in writing. The Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in subdivision (vii) of this Section 2.2, the Holder will forthwith discontinue its disposition of Registerable Shares pursuant to the registration statement relating to such Registerable Shares until the Holder's receipt of the copies of the supplemented or amended prospectus contemplated by subdivision (vii) of this Section 2.2 and, if so directed by the Company, will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in the Holder's possession of the prospectus relating to such Registerable Shares current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in paragraph (ii) of this Section 2.2 shall be extended by the length of the period from and including the date the Holder of Registerable Shares covered by such registration statement shall have received such notice to the date on which the Holder has received the copies of the supplemented or amended prospectus contemplated by paragraph (vii) of this Section 2.2. 2.3 Underwritten offerings. The Holder of Registerable Shares to be distributed by underwriters in a registration pursuant to this Section shall be parties to the underwriting agreement (including any holdback agreements) between the Company and such underwriters and may require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement also be conditions precedent to the obligations of the Holder of Registerable Shares. The Holder of Registerable Shares shall not be required to make any representations or warranties to or agreements with the Company or the underwriters other than such representations, warranties or agreements regarding the Holder, the Holder's Registerable Shares and the Holder's intended method of distribution as are customarily given to the underwriters and any other representation required by law. 2.4 Preparation; reasonable investigation. The Company will give the Holder of Registrable Shares, their underwriters, if any, and up to one designated counsel and one designated accounting firm to represent the interest of Holder, copies of each draft of the registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto. Although Winners will consider any comments or revisions provided by such underwriters or accounting firm, Winners shall retain sole discretion to include or exclude such proposed comments or revisions and under no condition shall Winners be required to delay the filing of any registration statement, prospectus, amendment, supplement or other related document pending such consideration of such comments or revisions. 2.5 Registration expenses. The Company shall bear all Registration Expenses except fees and expenses of the Holder's designated counsel and designated accounting firm. The Holder's participation in the registration shall not require that it pay a portion of the Registration Expenses and all underwriting discounts and commissions applicable to shares sold by the Holder shall be paid by the Company. 3. Definitions. Terms defined in the Settlement Agreement, unless otherwise defined herein, shall have the meanings provided in the Settlement Agreement when used herein. As used herein, unless the context otherwise requires, the following terms have the following respective meanings: Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act. Common Stock: The common stock, $0.00001 par value, of the Company. Company: As defined in the introductory paragraph of this Agreement. Holder: As defined in the introductory paragraph to this Agreement. Person: A corporation, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision or a governmental agency. Registerable Shares: (a) All Existing Shares, Interim Additional Shares, Deficiency Shares and Late Shares, (b) any additional shares of Common Stock receivable or received by the Holder upon the payment of stock dividends thereon, and (c) any securities issued or issuable with respect to the Common Stock referred to in the foregoing subdivision by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Any particular Registerable Shares shall cease to be Registerable Shares when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement. Registration Expenses: All expenses incident to the Company's performance of or compliance with Section 2, including without limitation, all registration, filing and National Association of Securities Dealers, Inc. fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, and any fees, commissions, discounts and disbursements of underwriters. Securities Act: The Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as of the same shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include a reference to the comparable section, if any, of any such similar Federal statute. Settlement Agreement: As defined in Section 1 of this Agreement. 4. Rule 144. The Company shall timely file the reports required to be filed by it under the Securities Exchange Act of 1934 (including but not limited to the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder. 5. Amendments and Waivers. This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Holder. 6. Nominees for Beneficial Owners. In the event that any Registerable Shares are held by a nominee for the beneficial owners thereof, the beneficial owner thereof may, at its election, be treated as the Holder of such Registerable Shares for purposes of any request or other action by the Holder pursuant to this Agreement. If the beneficial owner of any Registerable Shares so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registerable Shares. 7. Notices. Any notice or other communication required or permitted to be given hereunder shall be deemed to have been given if delivered, or five (5) days after mailing by certified or registered mail, return receipt requested, first class postage prepaid, or one business day after the time dispatched by telecopy; in every case addressed as follows: (a) If to the Company: WINNERS ENTERTAINMENT, INC. MOUNTAINEER PARK, INC. 30448 Rancho Viejo Road, Suite 110 San Juan Capistrano, California 92675 Attention: Thomas K. Russell, Secretary & General Counsel Telephone: (714) 222-2220 Telecopier: (714) 222-0806 (b) If to the Holder: JACKPOT ENTERPRISES, INC. 1110 Palms Airport Drive Las Vegas, Nevada 89119 Attention: William R. Sherman Vice President & General Counsel Telephone: (702) 263-5555 Telecopier: (702) 263-5500 or at such address as the party addressed may from time to time designate in writing to the other parties in like manner. Any communication dispatched by telecopy shall be confirmed by letter. 8. Miscellaneous. (a) No inconsistent agreements. Without the written consent of the Holder of the then outstanding Registerable Shares, the Company will not on or after the date of this Agreement enter into any agreement with respect to its securities which is inconsistent with the rights granted to the Holder in this Agreement or otherwise conflicts with the provisions hereof. (b) Assignment. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. (c) Descriptive headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. (d) Governing law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California without reference to the principles of conflicts of laws. (e) Counterparts. This Agreement may be executed simultaneously in any number of counterparts, and may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. (f) Entire agreement. This Agreement together with the Settlement Agreement embodies the entire agreement and understanding between the Company and the Holder and supersedes all prior agreements and understandings related to the subject matter hereof. IN WITNESS WHEREOF, the parties have caused this agreement to be executed and delivered as of the date first above written. JACKPOT ENTERPRISES, INC. /s/ Thomas K. Russell By: /s/ Jeffrey L. Gilbert Secretary, Winners Name: Entertainment, Inc. Title: Secretary, Mountaineer Park, Inc. EX-11 4 JACKPOT ENTERPRISES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE AND NINE MONTHS ENDED MARCH 31, 1995 and 1994 (Dollars and shares in thousands, except per share data) Three Months Ended Nine Months Ended March 31, March 31, 1995 1994 1995 1994 _______ _______ _______ _______ Primary: Earnings: Net income $ 1,672 $ 1,307 $ 4,765 $ 3,756 Add after-tax interest, net (A) 271 _______ _______ _______ _______ Net income, as adjusted $ 1,672 $ 1,307 $ 4,765 $ 4,027 ======= ======= ======= ======= Shares: Weighted average number of common shares outstanding 9,247 9,230 9,229 9,208 Common shares issuable upon exercise of stock options and warrants, net of common shares assumed to be repurchased from the proceeds at the average market price for the period 739 _______ _______ ______ _______ Weighted average number of common shares and common share equivalents outstanding 9,247 9,230 9,229 9,947 ======= ====== ====== ====== Primary earnings per share: Net income $ .18 $ .14 $ .52 $ .40 ======= ====== ====== ====== Fully diluted (B): Earnings: Net income $ 1,672 $ 1,307 $ 4,765 $ 3,756 Add after-tax interest, net (A) 461 370 1,375 970 _______ _______ _______ _______ Net income, as adjusted $ 2,133 $ 1,677 $ 6,140 $ 4,726 ======= ======= ======= ======= Shares: Weighted average number of common shares and common share equivalents outstanding 9,247 9,230 9,229 9,947 Common shares issuable upon exercise of stock options and warrants, net of common shares assumed to be repurchased from the proceeds using the greater of the average market price for the period or the period-end price 2,571 2,159 2,485 1,466 _______ ______ ______ ______ Weighted average number of common shares and common share equivalents outstanding, as adjusted 11,818 11,389 11,714 11,413 ======= ======= ======= ======= Fully diluted earnings per share: Net income $ .18 $ .15 $ .52 $ .41 ======= ======= ======= =======
_____________________ (A) Amounts represent a decrease in interest expense and an increase in interest income as a result of the assumed reduction in borrowings and increase in investments in U. S. government securities from the application of the portion of the proceeds from the assumed exercise of stock options and warrants which were not applied towards the repurchase of outstanding common shares (equivalent to 20% of the common shares outstanding at the end of the applicable period). (B) These calculations are submitted in accordance with Regulation S-K Item 601 (b) (ii) although not required by Footnote 2 to paragraph 14 of APB Opinion No. 15 because they had no effect or were antidilutive on earnings per share. -----END PRIVACY-ENHANCED MESSAGE-----