SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934*
(Amendment No. )
WINNERS ENTERTAINMENT, INC.
- - ----------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- - ----------------------------------------------------------------------------
(Title of Class of Securities)
974902108
- - ----------------------------------------------------------------------------
(CUSIP Number)
Stephen Feinberg
Feinberg Management, L.P.
950 Third Avenue
New York, New York 10022
(212) 421-6300
- - ----------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
July 2, 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 [x]. (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 18 Pages
<PAGE>
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Madeleine LLC
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [x]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
OO
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
New York
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
0
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
1,676,066
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
0
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,676,066
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,676,066
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
8.40%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
CO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT
Page 2 of 18 Pages
<PAGE>
_____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Feinberg Management, L.P.
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [ ]
(b) [x]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
OO
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
0
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
1,676,066
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
0
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,676,066
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,676,066
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
8.40%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
PN
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT
Page 3 of 18 Pages
<PAGE>
_____________________________________________________________________________
(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 **
(a) [ ]
(b) [x]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS
OO
_____________________________________________________________________________
(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
0
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
1,676,066
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
0
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
1,676,066
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
1,676,066
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
8.40%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
IN
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT
Page 4 of 18 Pages
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to shares of Common Stock, par value $0.00001
per share (the "Shares"), and Shares underlying warrants (the
"Warrants" and, together with the Shares, the "Securities") of Winners
Entertainment, Inc. (the "Company").
ITEM 2. IDENTITY AND BACKGROUND.
(a) This statement is filed by (i) Madeleine LLC ("Madeleine"),
with respect to Securities beneficially owned by it, (ii) Feinberg
Management, L.P. ("Feinberg Management"), with respect to Securities
beneficially owned by Madeleine, and (iii) Stephen Feinberg, with
respect to Securities beneficially owned by Madeleine.
Feinberg Management is the sole Managing Member of Madeleine.
Stephen Feinberg is the sole General Partner of Feinberg
Management.
(b) The address of the principal place of business and principal
office of each person referred to in paragraph (a) is 950 Third Avenue,
New York, New York, 10022.
(c) The principal business of Madeleine is that of a special
purpose vehicle formed to facilitate certain financing transactions by
affiliated investment funds.
The principal business of Feinberg Management is as the General
Partner of Madeleine.
The principal occupation of Stephen Feinberg is as the General
Partner of Feinberg Management and other related investment firms.
(d) None of the persons referred to in paragraph (a) above has,
during the last five years, been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) None of the persons referred to in paragraph (a) above has,
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. Madeleine is
a limited liability company formed under the laws of the State of New
York. Feinberg Management is a limited partnership formed under the
laws of the State of Delaware.
Page 5 of 18 Pages
<PAGE>
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
On July 2, 1996, Madeleine, as lender, Mountaineer Park, Inc.
("Mountaineer"), as borrower, and Winners Entertainment, Inc.
("Winners"), as guarantor, entered into a term loan agreement whereby
Madeleine agreed to extend to Mountaineer a loan. In addition,
Madeleine made a commitment to make additional loans to Mountaineer
(the loan and the commitment to extend loans in the future will
hereinafter be referred to, collectively, as the "Loans"). Mountaineer
is a wholly-owned subsidiary of Winners. In partial consideration of
making the Loans to Mountaineer, Winners issued to Madeleine 183,206
Shares and Warrants for the purchase of 1,492,860 Shares.
In connection with the Loans, Brownstone Holdings, LLC
("Brownstone") acted as business broker. As compensation for its
brokerage services, Madeleine has agreed (the "Brownstone Agreement")
to either transfer a percentage of the Shares and Warrants to
Brownstone, or to grant to Brownstone a right to participate in the
economic benefits of a percentage of the Shares and the Warrants.
Although there is an understanding between Madeleine and Brownstone, as
of the date hereof, Madeleine and Brownstone have not reached a
definitive agreement and are in negotiations with respect to the terms
of a definitive agreement. Following any transfer or grant of
participation rights, with respect to the Shares and Warrants, by
Madeleine to Brownstone pursuant to the Brownstone Agreement, this
Schedule 13D will promptly be amended to reflect such transfer or grant
of participation rights.
The Loans were, or will be, as the case may be, funded by
Long Horizons Fund, L.P. ("Long Horizons"), Illiad, L.P. ("Illiad"),
Stix Partners, L.P. ("Stix Partners") and a discretionary account
managed by Partridge Hill Management, LLC ("Partridge Hill") as
follows:
Long Horizons: 60% of the Loans
Illiad: 25% of the Loans
Stix Partners: 14% of the Loans
The discretionary account managed by Partridge Hill:
1% of the Loans
In consideration of providing such funding, subject to the Brownstone
Agreement, Madeleine will assign (i) to Long Horizons, 60% of such
Shares and Warrants, (ii) to Illiad, 25% of such Shares and Warrants,
(iii) to Stix Partners, 14% of such Shares and Warrants, and (iv) to
the discretionary account managed by Partridge Hill, 1% of such Shares
and Warrants.
ITEM 4. PURPOSE OF THE TRANSACTION.
The purpose of the acquisition of the Shares by each of the Reporting
Persons is for investment. Each may make further purchases of Shares from
time to time and may dispose of any or all of the Shares held by it or him
at any time.
Other than as set forth above, none of the Reporting Persons has 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.
Page 6 of 18 Pages
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The approximate aggregate percentage of Shares reported
beneficially owned by each person herein is based on 19,944,741 Shares
including 18,268,675 Shares outstanding as of May 16, 1996, as
reflected in the Form 10Q of the Company for the period ending March
31, 1996, plus the 183,206 Shares and the 1,492,860 Shares underlying
the Warrants. For purposes of calculating the percentages herein, the
number of Shares underlying the Warrants beneficially owned by the
reporting persons have been added to the number of Shares outstanding
and the number of Shares beneficially owned by the Reporting Persons as
though such Warrants had been exercised.
As of the date hereof:
(i) Madeleine owns directly 183,206 Shares and
1,492,860 Warrants. In consideration of the funding of the Loans by
Lost Horizons, Illiad, Stix Partners and the discretionary account
managed by Partridge Hill, as more specifically described in Item 3,
Madeleine, subject to the Brownstone Agreement, as described in Item 3,
will assign to Long Horizons, Illiad, Stix Partners and to a
discretionary account managed by Partridge Hill all of the Securities
such that, upon such assignments, the Securities will be owned as
follows: Long Horizons - 109,923.6 Shares and 895,716 Warrants,
constituting approximately 5.04% of the Shares outstanding; Illiad -
45,801.5 Shares and 373,215 Warrants, constituting approximately 2.10%
of the Shares outstanding; Stix Partners - 25,648.84 Shares and
209,000.4 Warrants, constituting approximately 1.17% of the Shares
outstanding; and the discretionary account managed by Partridge Hill -
1,832.06 Shares and 14,928.6 Warrants, constituting approximately .08%
of the shares outstanding. Following such assignments, this Schedule
13D will promptly be amended to reflect such ownership and Madeleine
will own directly no Shares.
(ii) Feinberg Management owns directly no Shares.
By reason of the provisions of Rule 13d-3 of the Act, Feinberg
Management may be deemed to own beneficially 183,206 Shares and
1,492,860 Warrants, constituting approximately 8.40% of the Shares
outstanding.
(iii) Stephen Feinberg owns directly no Shares. By
reason of the provisions of Rule 13d-3 of the Act, Stephen Feinberg may
be deemed to own beneficially 183,206 Shares and 1,492,860 Warrants,
constituting approximately 8.40% of the Shares outstanding.
(b) Madeleine has the power to vote and dispose of the
Shares owned by it, which power may be exercised by Stephen Feinberg,
as managing member of Feinberg Management, the general partner of
Madeleine.
(c) On July 2, 1996, Winners issued to Madeleine 183,206
Shares and 1,492,860 Warrants. None of the Reporting Persons has
entered into any other transaction in the Shares. The July 2, 1996,
transaction was a private transaction as further described in Item 3.
Page 7 of 18 Pages
<PAGE>
(d) Other than as set forth in Item 3 with respect to (i)
the Brownstone Agreement and (ii) the assignment of the Securities by
Madeleine to Long Horizons, Illiad, Stix Partners and to a
discretionary account managed by Partridge Hill, no person other than
each Reporting Person referred to herein is known to have the right to
receive or the power to direct the receipt of dividends from or the
proceeds of sale of such Securities.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT
TO SECURITIES OF THE ISSUER
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
the Shares, 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)
Madeleine and Winners have entered into an agreement pursuant to which,
in the event that (i) Madeleine shall fail to secure the approval (the
"Approval") under Winners' 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
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 Winners, would satisfy the Code, promptly after
notice by Winners, Madeleine, shall be obligated to sell to Winners and
Winners 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; (b) the Brownstone Agreement, as described in Item 3; and (c)
in consideration for the funding of the Loans, Madeleine will assign to
Long Horizons, Illiad, Stix Partners and to a discretionary account
managed by Partridge Hill all of the Securities, as more fully
described in Item 3.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
There is filed herewith as Exhibit 1, a written agreement
relating to the sale by Madeleine and the purchase by Winners of Shares
as more specifically described in Item 6. There is filed herewith as
Exhibit 2, a written agreement relating to the filing of a joint
acquisition statement, as required by Rule 13d-1(f)(1) of the
Securities Act of 1934. The Brownstone Agreement, as described in Item
3, is currently being negotiated. The assignments by Madeleine to Long
Horizons, Illiad, Stix Partners and to a discretionary account managed
by Partridge Hill, respectively, as more fully described in Item 3, are
currently being prepared.
Page 8 of 8 Pages
<PAGE>
After reasonable inquiry and to the best of their knowledge
and belief, the undersigned certify that the information set forth in
this statement is true, complete and correct.
July 12, 1996
/s/ STEPHEN FEINBERG
Stephen Feinberg, as
General Partner of
Feinberg Management, L.P., as
Managing Member of
Madeleine LLC
/s/ STEPHEN FEINBERG
Stephen Feinberg, as
General Partner of
Feinberg Management, L.P.
/s/ STEPHEN FEINBERG
Stephen Feinberg
Page 9 of 18 Pages
<PAGE>
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 10 of 18 Pages
<PAGE>
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 11 of 18 Pages
<PAGE>
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 12 of 18 Pages
<PAGE>
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 13 of 18 Pages
<PAGE>
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 14 of 18 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 15 of 18 Pages
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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 16 of 18 Pages
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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 17 of 18 Pages
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EXHIBIT 2
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(f)1
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as amended, is filed on behalf of each of the undersigned
and that all subsequent amendments to this statement on Schedule 13D,
as
amended, shall be filed on behalf of each of the undersigned without
the
necessity of filing additional joint acquisition statements. The
undersigned acknowledge that each shall be responsible for the timely
filing of such amendments, and for the completeness and accuracy of the
information concerning him or it contained therein, but shall not be
responsible for the completeness and accuracy of the information
concerning
the other, except to the extent that he or it knows or has reason to
believe
that such information is inaccurate.
/s/ STEPHEN FEINBERG
Stephen Feinberg, as
General Partner of
Feinberg Management, L.P., as
Managing Member of
Madeleine LLC
/s/ STEPHEN FEINBERG
Stephen Feinberg, as
General Partner of
Feinberg Management, L.P.
/s/ STEPHEN FEINBERG
Stephen Feinberg
Page 18 of 18 Pages
