SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
(Amendment No. 1 )
MTR GAMING GROUP, INC.
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(Name of Issuer)
Common Stock
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(Title of Class of Securities)
974902108
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(CUSIP Number)
Stephen Feinberg
450 Park Avenue
New York, New York 10022
(212) 891-2100
- ------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 27, 1996
- ------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and
is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box. [ ]
Check the following box if a fee is being paid with this statement [ ]. (A
fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such
class.
See Rule 13d-7.)
Page 1 of 16 Pages
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_____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Stephen Feinberg
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
Not applicable (a) [ ]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
WC
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
2,170,241*
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
2,170,241*
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
2,170,241
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
10.21%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
IN
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT
Page 2 of 16 Pages
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* The person filing this statement is Stephen Feinberg. Stephen Feinberg
indirectly, through one or more partnerships or other entities, possesses
voting and investment power over all Securities (as defined herein) owned by
(i) The Long Horizons Fund, L.P. ("Long Horizons"), Illiad, L.P. ("Illiad")
and Styx Partners, L.P. ("Styx"), each of which are Delaware limited
partnerships and (ii) Styx International, Ltd. ("International") and The Long
Horizons Overseas Fund, Ltd. ("Overseas"), each of which are corporations
organized under the laws of the Bahamas.
Although Madeleine LLC ("Madeleine") is the record holder of 3,858,206
Securities, pursuant to participation agreements with Madeleine, as of the
date
hereof, Long Horizons is the beneficial owner of 1,167,125 Securities, Illiad
is the beneficial owner of 358,442 Securities, Styx is the beneficial owner
of 463,402 Securities, International is the beneficial owner of 52,389
Securities and Overseas is the beneficial owner of 128,882 Securities.
Madeleine disclaims beneficial ownership of any Securities.
Page 3 of 16 Pages
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This Amendment No. 1 (the "Amendment") amends the Statement on Schedule 13D
dated July 2, 1996 (the "13D"), filed by Madeleine LLC ("Madeleine"),
Feinberg Management, L.P. ("Feinberg Management") and Stephen Feinberg with
respect to the shares of Common Stock, par value $.00001 per share (the
"Shares"), and Shares underlying certain warrants (the "Warrants" and,
together with the Shares, the "Securities") of MTR Gaming Group, Inc.
(formerly Winners Entertainment, Inc.) (the "Company") whose principal
executive offices are located at 1461 Glenneyre Street, Suite F, Laguna
Beach, California 92651. Certain capitalized terms used herein and not
defined in this Amendment have the meaning ascribed to them in the 13D.
ITEM 2. IDENTITY AND BACKGROUND
Item 2 as reported in the 13D is hereby amended and restated as follows:
(a) This statement is filed by Stephen Feinberg. Mr. Feinberg indirectly,
through one or more partnerships or other entities, possesses voting and
investment power over all Securities owned by (i) The Long Horizons Fund,
L.P. ("Long Horizons"), Illiad, L.P. ("Illiad") and Styx Partners, L.P.
("Styx"), each of which are Delaware limited partnerships and (ii) Styx
International, Ltd. ("International") and The Long Horizons Overseas Fund,
Ltd. ("Overseas"), each of which are corporations organized under the laws of
the Bahamas. Long Horizons, Illiad, Styx, International and Overseas are
engaged in the investment in personal property of all kinds, including but
not limited to capital stock, depository receipts, investment companies,
mutual funds, subscriptions, warrants, bonds, notes, debentures, options and
other securities of whatever kind and nature.
(b) The address of the principal place of business and principal office of
Stephen Feinberg is 450 Park Avenue, New York, New York, 10022.
(c) The principal occupation of Stephen Feinberg is as the General Partner
of Feinberg Management L.P. and other related investment firms.
(d) Stephen Feinberg has not, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) Stephen Feinberg has not, during the last five years, been a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, Federal or state securities
laws or finding any violation with respect to such laws.
(f) Stephen Feinberg is a citizen of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 as reported on the 13D is hereby amended and restated as follows:
Pursuant to the Amended and Restated Term Loan Agreement (the "Loan
Agreement"), dated as of July 2, 1996, as amended and restated as of
December 10, 1996, among Mountaineer Park, Inc. ("Mountaineer"), as borrower,
the Company, as guarantor, and Madeleine LLC, a New York limited liability
company ("Madeleine"), as lender, Madeleine agreed to extend to Mountaineer a
term loan in the amount of $16.1 million. Pursuant to the Loan Agreement, on
July 2, 1996, Madeleine issued to Mountaineer an initial loan (the "Initial
Loan") in the amount of $5 million. In addition, pursuant to the Loan
Agreement, on December 27, 1996, Madeleine issued to Mountaineer an
additional loan (the "Additional Loan") in the amount of $11.1 million.
Page 4 of 16 Pages
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Mountaineer is a wholly-owned subsidiary of the Company. In partial
consideration of making the Initial Loan to Mountaineer, the Company issued
in the name of Madeleine 183,206 Shares (the "Initial Shares") and Warrants
for the purchase of 1,492,860 Shares (the "Initial Warrants", and together
with the Initial Shares, the "Initial Securities"). In addition, in partial
consideration of making the Additional Loan to Mountaineer, the Company
agreed to issue in the name of Madeleine 550,000 Shares (the "Additional
Shares") and Warrants for the purchase of 1,632,140 Shares (the "Additional
Warrants", and, together with the Additional Shares, the "Additional
Securities").
Pursuant to the Loan Agreement, the Additional Shares were issued or
are to be issued, as the case may be, as follows: 42,316 Shares were
delivered to Madeleine on December 27, 1996, and an additional 42,307 Shares
are to be delivered to Madeleine on the first day of each calendar month
beginning January 1, 1997, and ending on December 1, 1997. Pursuant to the
Loan Agreement, the Additional Warrants were issued or are to be issued, as
the case may be, as follows: a Warrant to purchase 125,552 Shares was
delivered to Madeleine on December 27, 1996, and an additional Warrant to
purchase 125,549 Shares is to be delivered to Madeleine on the first day of
each calendar month beginning on January 1, 1997, and ending on December 1,
1997.
All funds used to make the Initial Loan came directly from the net assets
of Long Horizons, Illiad, Styx and International. All funds used to make the
Additional Loan came directly from the net assets of Long Horizons, Illiad,
Styx, International and upon its organization in December 1996, also from
Overseas.
ITEM 4. Item 4 as reported in the 13D is hereby amended and restated as
follows:
The purpose of the acquisition of the Securities on behalf of Long
Horizons, Illiad, Styx, International and Overseas is for investment.
Other than as set forth above, Stephen Feinberg does not have any
plans or proposals which relate to, or could result in, any of the matters
referred to in paragraphs (b) through (j), inclusive, of Item 4 of Schedule
13D. Such entities and persons may, at any time and from time to time,
review or reconsider their position with respect to any of such matters, but
have no present intention of doing so.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 as reported in the 13D is hereby amended and restated as follows:
(a) The approximate aggregate percentage of Shares reported
beneficially owned by each person herein is based on 21,248,033 Securities,
including 18,940,220 Shares outstanding at November 1, 1996, as reflected in
the Form 10-Q of the Company for the period ending September 30, 1996, plus
(i) the 839,734 Shares underlying the Warrants, beneficially owned by Stephen
Feinberg, that were issued pursuant to the Initial Loan, (ii) the 550,000
Shares issued pursuant to the Additional Loan and (iii) the 918,079 Shares
underlying the Warrants, beneficially owned by Stephen Feinberg, that were
issued pursuant to the Additional Loan. For purposes of calculating the
percentages herein, the number of Shares underlying the Warrants beneficially
owned by the reporting person have been added to the number of Shares
outstanding as though such Warrants had been exercised. In addition, for
purposes of calculating the percentages herein, the number of Shares and
Warrants to be delivered to Madeleine on the first of each calendar month
beginning January 1, 1997, and ending on December 1, 1997, in connection
with the Additional Loans have been added to the number of Securities
outstanding as though such Shares and Warrants had been delivered.
Although Madeleine is the record holder of 3,858,206 Securities,
pursuant to participation agreements with Madeleine, as of the date hereof,
Long Horizons is the beneficial owner of 1,167,125 Securities, Illiad is the
beneficial owner of
Page 5 of 16 Pages
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358,442 Securities, Styx is the beneficial owner of 463,402 Securities,
International is the beneficial owner of 52,389 Securities and Overseas is
the beneficial owner of 128,882 Securities. The remaining Securities were
transferred to entities over which Stephen Feinberg possesses no voting or
investment power. The transactions were private transactions. Madeleine
disclaims beneficial ownership of any Securities.
(b) Stephen Feinberg possesses voting and investment power over all
Securities owned by Long Horizons, Illiad, Styx, International and Overseas.
Stephen Feinberg owns directly no Securities. By reason of the provisions of
Rule 13d-3 of the Act, Stephen Feinberg may be deemed to own beneficially
2,170,241 Securities, constituting approximately 10.21% of the Securities
outstanding. Madeleine disclaims beneficial ownership of any Securities.
(c) Other than the Loan Agreement, as more specifically described
in Item 3, Stephen Feinberg has not effected any transactions in the
Securities.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Item 6 as reported on the 13D is hereby amended and restated as follows:
Other than as described above, there are no contracts,
understandings or relationships (legal or otherwise) among the persons named
in Item 2 hereof and between such persons or any person with respect to any
securities of the Company, including but not limited to transfer or voting of
any of theShares, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the
giving or withholding of proxies; other than as follows:
(a) the Loan Agreement, as more specifically described in Item 3,
pursuant to which the Company has agreed that the Company shall, on each
November 15, commencing November 15, 1997, until all of the amounts due to
Madeleine in connection with the Loan Agreement have been satisfied in full
(i) deliver toMadeleine stock certificates, in such denominations as Madeleine
may request,validly issued to Madeleine or its designee, representing the
number of Shares equal to the quotient of (I) the product of (A) the
outstanding principal amount of the loan on the day of such delivery and (B)
5%, and (II)the average daily closing price of the Shares on each business
day, as reported in a publication of generally recognized standing in the
securities industry, for the 30 business days immediately preceding the third
business day prior to such November 15 and (ii) issue and deliver to Madeleine
or its designee validly issued Warrants for the purchase of: (I) 250,000
Shares with an expiration date of five years from the date of issuance of such
Warrant, and an exercise price equal to $1.06, and (II) Shares, with an
Expiration Date of five years from the date issuance, for an exercise price
equal to the average daily closing price of the Shares on each business day,
as reported in a publication of generally recognized standing in the
securities industry, for the 30 business days immediately preceding the third
business day prior to the Final Term Funding Date (as defined in the Loan
Agreement),rounded to the nearest penny, and for that number of Shares equal
to the product of (A) the product of (x) a fraction, the numerator of which is
the exercise price and the denominator of which is 1.06, and (y) 550,000, and
(B) the quotient of (x) the outstanding principal amount of the loan on the
day of such delivery and (y) $16,100,000;
(b) Madeleine and the Company have entered into an agreement pursuant to
which, in the event that (i) Madeleine shall fail to secure the approval (the
"Approval") under the Company's License issued by the West Virginia Lottery
Commission (the "Commission") pursuant to Section 29-22A-1, et. seq., of the
West Virginia Code (together with all rules and regulations promulgated
thereunder, the "Code") to engage in the video lottery business, (ii)
Madeleine shall fail to secure an opinion of counsel to the Commission (the
"Opinion") that, in the event that the Approval is
Page 6 of 16 Pages
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not in effect, Madeleine may own in excess of 5% of the issued and outstanding
Shares at any time, and from time to time, provided that Madeleine does not,
at any such time, have the authority to vote or control the vote of over 5%
of all of the issued and outstanding Shares, (iii) Madeleine owns more than
5% of the issued and outstanding Shares, and (iv) there is no other
reasonable alternative that, in the opinion of counsel to the Company, would
satisfy the Code, promptly after notice by the Company, Madeleine shall be
obligated to sell to the Company and the Company obligated to purchase, from
time to time, the minimum number of Shares such that, after giving effect to
such purchase, Madeleine will own 5% or less of the Shares then outstanding;
provided, however, that if the Shares are registered pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
Madeleine shall use its best efforts to divest such number of Shares in the
public market;
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 as reported on the 13D is hereby amended and restated as follows:
There is filed herewith as Exhibit 1 a written agreement relating to
the sale by Madeleine and the purchase by the Company of Securities as more
specifically described in Item 6(b).
Page 7 of 16 Pages
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After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set
forth in this statement is true, complete and correct.
March 31,1997
/s/ STEPEHN FEINBERG
Stephen Feinberg, on behalf of The Long
Horizons Fund, L.P., Illiad, L.P., Styx
Partners, L.P., Styx International, Ltd.
and The Long Horizons Overseas Fund, Ltd.
Page 8 of 16 Pages
EXHIBIT 1
WINNERS ENTERTAINMENT, INC.
STOCK TRANSFER AGREEMENT
AGREEMENT, dated as of July 2, 1996, between WINNERS ENTERTAINMENT,
INC., a Delaware corporation (the "Company"), and MADELEINE LLC, a New York
limited liability company (the "Stockholder").
WHEREAS, the Company is authorized to issue 25,000,000 shares of
common stock, par value $0.00001 per share (the "Common Stock");
WHEREAS, in consideration for the Stockholder's making (i) a loan
pursuant to a Term Loan Agreement, dated as of July 2, 1996 (the "Loan
Agreement") among Mountaineer Park, Inc., a West Virginia corporation and a
wholly-owned subsidiary of the Company (the "Subsidiary"), the Company, as
Guarantor, and the Stockholder, and (ii) a commitment, pursuant to a
commitment letter, dated as of July 2, 1996, to make an $11,100,000 loan to
the Subsidiary pursuant to the terms and conditions set forth therein (the
"Commitment"), the Company has issued, and will in the future issue, shares
of Common Stock (together with any and all other shares of Common Stock owned
by the Stockholder from time to time, the "Shares") and warrants for the
purchase of Common Stock (the "Warrants");
WHEREAS, the Company and the Stockholder acknowledge that, in the
event that (i) the Stockholder were to own more than 5% of the outstanding
Common Stock of the Company, (ii) the Stockholder was not approved under the
Company's license (the "License") issued by the West Virginia Lottery
Commission (the "Commission") pursuant to Section 29-22A-1, et. seq., of the
West Virginia Code (together with all rules and regulations promulgated
thereunder, the "Code") to engage in the video lottery business, and (iii)
the Stockholder had the authority to vote the Shares, that the License may be
revoked by the Commission;
WHEREAS, the Stockholder and the Company desire to avoid the
occurrence of any event that would cause the revocation of the License, and,
in addition to the provisions contained in the Warrants preventing the
exercise thereof if such exercise would jeopardize the License, have agreed to
take the actions as provided in this Agreement to assure that (i) the License
will not be revoked and (ii) the Stockholder will be compensated for any
required divestiture of all or a portion of the Shares;
NOW, THEREFORE, in consideration of the mutual premises and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
Page 9 of 16 Pages
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ARTICLE I.
Representations and Warranties
Sec. 1.01. Representations and Warranties. Each of the parties
hereto represents and warrants that it has full power and authority to execute
and deliver this Agreement, and the execution and delivery of this Agreement
will not result in the breach of or default under, with or without the giving
of notice or the passage of time or both, any other agreement or arrangement
to which such party is a party or by which such party is bound.
ARTICLE II.
Indemnification of the Stockholder
Sec. 2.01 Indemnification of the Stockholder. To the fullest
extent permitted by law, the Company shall indemnify and hold harmless the
Stockholder, and any assignee of, or participant in, Stockholder's rights
under and relating to the Loan Agreement and the Commitment and their
respective agents, officers, directors, members and legal representatives
(collectively, an "Indemnified Party") from and against any loss or expense
suffered or sustained by it by reason of the fact that it is or was a
Stockholder, including without limitation any judgment, settlement, reasonable
attorney's fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action or proceeding, provided that such
loss or expense did not result from the gross negligence, willful misconduct,
dishonesty or bad faith of the Indemnified Party. The Company shall advance
to the Indemnified Party reasonable attorney's fees and other costs and
expenses incurred in connection with the defense of any action or proceeding
which arises out of such conduct. The Indemnified Party hereby agrees that,
in the event it receives any such advance, it shall reimburse the Company for
such fees, costs and expenses to the extent that it shall be determined that
it was not entitled to indemnification under this Sec. 2.01.
Page 10 of 16 Pages
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ARTICLE III.
Undertakings of the Parties
Sec. 3.01 Approval of the West Virginia Lottery Commission. Each
party hereto agrees to use its best efforts to secure the approval (the
"Approval") of the Stockholder under the License such that the Stockholder may
own in excess of 5% of the issued and outstanding Common Stock of the Company
at any time and from time to time. In connection with the undertaking
provided for in this Section 3.01, the Company shall, without limitation:
(i) prepare and submit to the Commission all applicable
forms under the Code with respect to the Approval, use its best efforts to
cause such Approval to become effective as soon as reasonably possible,
promptly prepare and submit to the Commission such amendments and supplements
as may be necessary to keep the Approval effective and current and to comply
with the provisions of the Code;
(ii) notify the Stockholder promptly and, if requested
by the Stockholder, confirm such advice in writing, (a) of any request by the
Commission for amendments and supplements to any statement submitted to the
Commission hereunder and related information or for additional information and
(b) if, between the effective date of any Approval and the closing of any
issuance of Shares by the Company, the representations and warranties of the
Company contained in any information provided to the Commission cease to be
true and correct in all material respects or if the Company receives any
notification with respect to the suspension or qualification of the Approval
or the initiation of any proceeding for such purpose;
(iii) make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Approval at the
earliest possible moment and provide prompt notice to the Stockholder of the
withdrawal of any such order;
(iv) within a reasonable time prior to the submission
of any information to the Commission concerning the Stockholder, provide to
the Stockholder and its counsel a copy of such information, and shall not at
any time submit or make any amendment or supplement to any such submission of
which the Stockholder and its counsel shall not have previously been advised
and furnished a copy; and
(v) take, or refrain from taking, such other actions,
and execute and deliver such other documents, as may reasonably be requested
by the Stockholder or the Commission to obtain and maintain the Approval.
Page 11 of 16 Pages
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3.02 Opinion of Counsel to the Commission. The Company agrees to
use its best efforts to secure an opinion of counsel to the Commission (the
"Opinion") that in the event that the Approval is not in effect, the
Stockholder may own in excess of 5% of the issued and outstanding Common Stock
of the Company at any time and from time to time, provided that the
Stockholder does not, at any such time, have the authority to vote or control
the vote of over 5% of all of the issued and outstanding Common Stock. In
connection with the undertaking provided for in this Section 3.02, the Company
shall, without limitation, (i) prepare and submit to the Commission and
counsel to the Commission all applicable information with respect to the
Opinion, (ii) use its best efforts to cause the issuance of the Opinion as
soon as reasonably possible, and (iii) promptly prepare and submit to the
Commission and counsel therefor such amendments and supplements as may be
necessary to obtain and keep in effect the Opinion.
3.03. Expenses of Approval and Opinion. All expenses incurred in
effecting the Approval and obtaining the Opinion (collectively, "Expenses"),
including, without limitation, all registration and filing fees, listing fees,
printing expenses, fees and disbursements of counsel for the Company and the
Stockholder and expenses of any audits incidental to or required for the
Approval (other than with respect to the financial statements of the
Stockholder), shall be borne by the Company.
ARTICLE IV.
Mandatory Put
Sec. 4.01 Put Requirement. In the event that (i) the Approval is
not in effect, (ii) the Opinion has not been obtained, (iii) the Stockholder
owns more than 5% of the issued and outstanding Common Stock, and (iv) there
is no other reasonable alternative that, in the opinion of counsel to the
Company, would satisfy the requirements of the Code (such alternative being
acceptable to the Stockholder in its sole and absolute discretion), then,
promptly after notice to the Stockholder by the Company, the Stockholder shall
be obligated to sell, and the Company obligated to purchase, from time to
time, the minimum number of Shares such that after giving effect to such
purchase, the Stockholder will own 5% or less of the Common Stock; provided,
however, that if the Shares are registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended, the
Stockholder shall use its best efforts to divest such number of Shares in the
public market.
Page 12 of 16 Pages
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Sec. 4.02 Purchase Price. The price per Share at which the
Company shall purchase the Shares from the Stockholder pursuant to Sec. 4.01
hereof (the "Purchase Price") shall be equal to the average Closing Price of
the Common Stock for the twenty (20) Business Days (as defined in the Loan
Agreement) immediately preceding the date of such purchase. "Closing Price"
means the last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the closing bid and asked prices
regular way for such day, in each case (i) on the principal national
securities exchange on which such security is listed or to which the Common
Stock is admitted to trading or (ii) if the Common Stock is not listed or
admitted to trading on a national securities exchange, in the over-the-counter
market as reported by The Nasdaq National Market, The Nasdaq Small Cap or a
comparable system, or (iii) if the Common Stock is not listed on The Nasdaq
National Market, The Nasdaq Small Cap or a comparable system, as furnished by
two members of the National Association of Securities Dealers, Inc. selected
from time to time in good faith by the Board of Directors of the Company for
that purpose. In the absence of all of the foregoing, or if for any other
reason the Closing Price of such security cannot be determined pursuant to the
foregoing sentence, the Closing Price shall be the fair market value of such
security as determined in good faith by an appraiser mutually agreed upon by
the parties hereto.
Sec. 4.03 Payment of the Purchase Price. The Purchase Price
shall be payable with respect to each Share, in cash, upon surrender thereof
to the Company; provided, however, that to the extent that the payment of the
Purchase Price in cash would result in the insolvency of the Company or, in
the good faith opinion of the Board of Directors of the Company, would reduce
the Company's working capital below the level required for the ongoing
operation of the Company's business in its ordinary course, the Purchase Price
shall be paid by the making of a loan therefore by the Stockholder, evidenced
by a note made by the Company (the "Note"). The principal of the Note shall
be payable in full on the date that is one year from the date of the purchase
of Shares by the Company. Interest on the Note shall be payable monthly and
at maturity at a rate of 24% per annum (calculated on the basis of a year of
360 days) or, if such rate would be higher than the maximum rate allowed by
applicable law, such maximum allowable rate. The Note shall be governed by
the laws of the State of New York, and shall be payable to the order of the
Stockholder or its designee. If requested by the Stockholder, the Company
shall cause the Note to be secured by a first or second priority lien,
pursuant to a deed of trust in form and substance satisfactory to the
Stockholder, on the Property (as defined in the Loan Agreement).
Sec. 4.04 Escrow Shares. In the event that a Note is issued
pursuant to Sec. 4.03 hereof the Company shall validly issue that number of
duly authorized shares of Common Stock (the "Escrow Shares") equal to the
number of Shares purchased by the Company and paid for with the Note, in the
name of an escrow agent (the "Agent"), to be selected by the Stockholder, and
held by the Agent pursuant to an escrow agreement (the "Escrow Agreement")
containing such terms and conditions as are customary for such transactions
including, without limitation, the following:
(i) upon receipt of a certificate of the Company,
countersigned by the Stockholder, that all or any portion of the Note has been
repaid, the Agent will surrender to the Company all or a pro rata portion, as
the case may be, of Escrow Shares as set forth in such certificate;
Page 13 of 16 Pages
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(ii) upon receipt of a certificate of the Stockholder,
countersigned by the Company, that the conditions that required the purchase
of Shares by the Company have been cured, the Agent shall transfer the number
of Escrow Shares set forth in such certificate to the Stockholder; and
(iii) such other provisions with respect to the voting
rights of the Escrow Shares as the Commission may deem necessary in writing to
keep in effect the License;
provided, however, that if the Shares have been registered pursuant to a valid
and effective registration statement under the Securities Act of 1933, as
amended, at the time of the issuance of the Note, the Stockholder will
transfer the Shares directly to the Agent to be held pursuant to the Escrow
Agreement upon receipt by the Stockholder of the Note, duly executed.
Sec. 4.05 Conditions to Release of Escrow Shares. (i) At any
time after all or a portion of the principal amount of the Note is paid to the
Stockholder, upon request by the Company, the Stockholder shall countersign a
certificate to the Agent authorizing the release to the Company of the number
of Escrow Shares equal to the quotient of (a) the amount of the principal of
the Note that has been paid, and (b) the Purchase Price.
(ii) At any time that there are Escrow Shares, if the
acquisition of any number of such Escrow Shares by the Stockholder would not
cause the revocation of the License, then, upon request by the Stockholder,
the Company shall countersign a certificate to the Agent for the transfer of
such number of Escrow Shares to the Stockholder. Upon receipt by the
Stockholder of any Escrow Shares, the principal balance of the Note shall be
reduced by the product of (a) the number of Escrow Shares transferred to the
Stockholder and (b) the Purchase Price.
Each party hereto agrees to execute and deliver any and all documents,
agreements, instruments and certificates necessary or desirable to carry out
the intent of this Sec. 4.05. The expenses of the parties in connection with
the Agent and the transfers of the Escrow Shares shall be born by the Company;
provided, however, that the Company shall not be required to pay the fees of
the Agent in excess of the amount of a bona-fide offer by a potential escrow
agent, selected by the Company, submitted to the Stockholder prior to the
engagement of the Agent.
Page 14 of 16 Pages
<PAGE>
ARTICLE V.
Effect of Other Agreements
5.01 Articles of Incorporation. The terms, conditions and
agreements contained herein set forth the rights of the parties hereto with
respect to any repurchase of Shares by the Corporation, whether pursuant to
Article VII of the Restated Certificate of Incorporation (or any successor
provision) of the Company or otherwise; provided, however, that the Company
hereby agrees that so long as the Approval is effective, the Stockholder shall
not be a "Disqualified Holder" (as defined in the Restated Certificate of
Incorporation of the Company as in effect as of the date hereof) unless and
until (i) the Company receives written notification from a governmental
authority with jurisdiction over it that the continued ownership of the Shares
by the Stockholder would result in the loss or revocation of any license or
franchise of a material nature necessary for the conduct of the Company's
business, and (ii) the Stockholder has not cured the events giving rise to
such notice within the time provided by such governmental authority.
5.02 Other Rights. Except as otherwise expressly set forth
herein, notwithstanding any other right that the Company may have to redeem
Shares from the Stockholder, the Company hereby expressly covenants that no
such right shall be exercised by it without the prior written consent of the
Stockholder.
ARTICLE VI.
Miscellaneous
Sec. 6.01. General. This Agreement may be executed through the
use of separate signature pages or in any number of counterparts with the same
effect as if the parties executing such counterparts had all executed one
counterpart, provided, that the counterparts, in the aggregate, shall have
been duly executed by each of the parties hereto. The parties hereto hereby
stipulate that the transmission of a facsimile counterpart of this Agreement
bearing a signature purporting to be that of a party hereto received by either
party at such party's principal place of business shall (i) constitute an
original of this Agreement, and (ii) constitute delivery of this Agreement by
the party transmitting such facsimile.
Sec. 6.02. Amendments to Stockholder Agreement. The terms and
provisions of this Agreement may be modified or amended at any time and from
time to time with the written consent of all of the parties hereto.
Sec. 6.03. Choice of Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the
laws of the State of New York.
Sec. 6.04. Conflicts; Ratification; etc. In the event that the
performance by any party hereto of any provision hereof would conflict with or
cause a default, whether with or without the passage of time, under any other
instrument, document or other agreement under which such party is bound (any
such occurrence a "Conflict"), such party shall use its good faith best
efforts to remedy or waive the Conflict such that the full intent of this
Agreement shall prevail.
Page 15 of 16 Pages
<PAGE>
Sec. 6.05. Notices. Each notice or other communication relating
to this Agreement shall be in writing and delivered in person or by registered
or certified mail. All such communications shall be addressed to the
appropriate party (or his legal representative) at such party's address set
forth under such party's name on the signature page hereto. Either party
hereto may designate a new address by notice to that effect given to the other
party hereto. Unless otherwise specifically provided in this Agreement, a
notice shall be deemed to have been effectively given when mailed by
registered or certified mail to the proper address or delivered in person.
Sec. 6.07. Headings. The titles of the Articles and the
headings of the Sections of this Agreement are for convenience of reference
only, and are not to be considered in construing the terms and provisions of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
WINNERS ENTERTAINMENT, INC.
/s/ EDSON ARNEAULT
Edson Arneault
President
1461 Glenneyre Street, Suite F
Laguna Beach, California 92651
MADELEINE LLC
/s/ KEVIN GENDA
Kevin Genda
Power of Attorney
950 Third Avenue, 20th Floor
New York, New York 10022
Attention: Mr. Kevin P. Genda
Page 16 of 16 Pages
