SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                    FORM 8-K

                                 CURRENT REPORT

                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934


Date of Report (Date earliest event reported)                December 26, 1996
                                                       ------------------------


                             MTR GAMING GROUP, INC.

             (exact name of registrant as specified in its charter)


                                    DELAWARE
                 (State or other jurisdiction of incorporation)


        33-22521                                       84-1103135
        --------                                       ----------

(Commission File Number)                  (IRS Employer Identification Number)


            1461 GLENNEYRE STREET, SUITE F, LAGUNA BEACH, CALIFORNIA

                    (Address of principal executive offices)
                                      92651
                                   (Zip Code)


Registrant's Telephone Number, Including Area Code:             (714) 376-3010
                                                                --------------

                                       N/A
          (Former name or former address, if changed since last report)



<PAGE>





Item 5.           Other Events.

Prepayment of Loans Made by Bennett Management
and Development Corp.
---------------------

                  On  December  26,   1996,   the   Registrant's   wholly  owned
subsidiary,  Mountaineer  Park,  Inc.  ("Mountaineer"),   prepaid  in  full  the
outstanding  $8,711,273.16  balance  of a  construction  loan  made  by  Bennett
Management and Development Corp. of Syracuse, New York ("Bennett").  The Bennett
loan, which was in the original  principal amount of $10.2 million and was drawn
in 1994 and 1995 pursuant to a June 27, 1994  Construction  Loan  Agreement,  as
later  amended,  was  secured by a first  priority  credit line deed of trust on
Mountaineer's  real property and a perfected  security  interest  evidenced by a
UCC-1 Financing Statement with respect to its personal property.

                  The Bennett loan  required  Mountaineer  on January 2, 1997 to
pay Bennett either $500,000 in cash or $750,000 worth of the Registrant's common
stock if the loan was not prepaid by January 1, 1997.  Prior to a September  19,
1996 amendment of the Construction  Loan Agreement,  which was effective October
31,  1996,  the  January 2 payment  would  have been $2.5  million  worth of the
Registrant's  common stock.  The prepayment  permitted  Mountaineer to avoid the
January  2  payment.  Bennett  has  delivered  releases  of  the  liens  against
Mountaineer's real and personal  property.  The prepayment was from the proceeds
of a new $11.1 million loan discussed below.

                  Pursuant  to  the  Bennett  Construction  Loan  Agreement,  as
amended, for a period commencing upon prepayment and terminating at the close of
business  (Eastern Time) ten (10) business days  thereafter,  the Registrant has
the  option  to  repurchase  all (but not part) of the  1,530,000  shares of the
Registrant's  common stock  previously  issued to Bennett in connection with the
loan for a price per share equal to 90% of the average  closing bid price of the
Shares as  reported  by Nasdaq  for the twenty  (20)  consecutive  trading  days
immediately  preceding the date of prepayment,  but in no event less than $1.125
per share (the "Repurchase Option").

                  In consideration of the efforts of Meyer, Duffey & Associates,
a New York  consulting  and investment  firm, in  introducing  the Registrant to
potential  sources of  permanent  financing  from  commercial  bank  lenders for
Mountaineer  (though no transactions  have been consummated with respect to such
financing  and,  indeed,  no  substantive  negotiations  have  commenced),   the
Registrant may assign the Repurchase Option to Meyer, Duffey & Associates.

$11.1 Million Loan and $5,376,500 Revolving Line of Credit
----------------------------------------------------------

                  On December 26, 1996,  Mountaineer borrowed $11.1 million from
Madeleine  L.L.C.  of New York,  New York,  which had provided  Mountaineer a $5
million second mortgage loan on July 2, 1996, enabling Mountaineer to prepay the
Bennett loan. The total loan of $16.1 million, which is governed by the parties'
Amended and  Restated  Term Loan  Agreement  and Amended  and  Restated  General
Security Agreement, is evidenced by


<PAGE>



Mountaineer's  Promissory  Note and is secured by a first  priority  Credit Line
Deed of Trust with  respect  to  Mountaineer's  real  property  and a  perfected
security interest  evidenced by a UCC-1 Financing  Statement with respect to its
personal property.

                  The loan bears interest at the rate of 12% per annum and calls
for payments of interest  only with the principal due at the end of a three-year
term. The loan is guaranteed by the Registrant. As part of the transaction,  the
Registrant  has agreed to issue the lender,  over a period of  thirteen  months,
550,000  shares of the  Registrant's  common  stock and  warrants to purchase an
additional  1,632,140  shares for $1.06 per share. A further fee of $888,000 (8%
of the loan amount) is due on July 2, 1997,  but will be waived by the lender if
the loan has been  prepaid  prior to that  date.  In that  event,  however,  the
Registrant has agreed to pay a fee of approximately  $250,000 to Bridge Capital,
L.L.C., which arranged the transaction. If not prepaid by November 15, 1997, the
loan is also subject to annual fees of stock,  cash,  and warrants.  Annual fees
with respect to the $5 million loan made in July of 1996 have been deferred from
July 2 to November 15, 1997.

                  The shares and warrants, as well as the warrants issued to the
lender in  connection  with the $5 million  loan made in July,  are  entitled to
protection from dilution in certain circumstances.  The Registrant has agreed to
register the shares and  warrants  for public sale  pursuant to the terms of the
warrants and the Registration  Rights Agreement entered July 2, 1996.  Amendment
No. 1 to Registration Rights Agreement, which was entered in connection with the
transaction,  limits  the  lender's  right to  demand  registration  to once per
calendar year absent default by Mountaineer or the Registrant, prepayment of the
loan, or a change in control of the Registrant.

                  The  Registrant   will  use  the  net  proceeds  of  the  loan
(approximately  $2.4 million  after  prepayment  of the Bennett loan and certain
costs of the  transaction)  for  further  improvements  at  Mountaineer  and for
general  corporate  purposes.  Specific  projects  under  consideration  are the
construction  of a convention  facility,  expansion of the 101 room  Mountaineer
Lodge,  construction  of a  bowling  alley,  a second  addition  to the  popular
Speakeasy Gaming Saloon, the purchase of additional video slot machines, and the
construction of a production facility capable of broadcasting Mountaineer's live
racing product to other racetracks and off track wagering facilities, though all
such proposals are subject to, among other things,  approval by the Registrant's
board of directors and any applicable  governmental  approvals.  There can be no
assurances, however, that all or any of the projects under consideration will be
undertaken.

                  Pursuant to the Amended and Restated Term Loan Agreement,  the
lender also  provided  Mountaineer a $5,376,500  revolving  line of credit to be
used for capital improvements,  the acquisition of equipment and/or other gaming
businesses,  or the  acquisition of properties for use in the gaming and lottery
businesses consistent with the current business of Mountaineer.



<PAGE>



                  Borrowing  under the line of credit  is  conditioned  upon (i)
compliance with all loan documents;  (ii)  affirmation that all prior warranties
and representations  remain true; (iii) submission of a notice of borrowing that
is for a sum not less than $500,000 and which contains a detailed description of
the use of proceeds;  and (iv)  maintenance by Mountaineer  for the six calendar
months preceding the date of the notice of borrowing (at Mountaineer's election,
exclusive of the months of December  and January) a monthly  average of $750,000
in earnings before interest, taxes, depreciation, and amortization.

                  Loans under the line of credit bear interest at 15% per annum.
In connection  with the line of credit,  Mountaineer has agreed to pay an annual
fee of $376,500,  the first of which is payable over 13 months.  The  Registrant
has agreed to guarantee any loans made under the line of credit.


Item 7.  Financial Statements and Agreements.

          (c)  Exhibits

     1. Amended and Restated Term Loan  Agreement,  dated as of July 2, 1996, as
amended and restated as of December 10, 1996, among  Mountaineer Park, Inc., MTR
Gaming Group, Inc., and Madeleine L.L.C.

     2. Amended and Restated General  Security  Agreement dated July 2, 1996, as
amended and restated as of December 10, 1996, made by Mountaineer  Park, Inc. in
favor of Madeleine L.L.C.

     3. Credit Line Deed of Trust,  Leasehold Deed of Trust, Security Agreement,
Assignment,  Fixture  Filing and  Financing  Statement by and among  Mountaineer
Park,  Inc. as grantor,  Deborah A. Sink and Carl D.  Andrews as  trustees,  and
Madeleine L.L.C. as the secured party, dated December 10, 1996.

     4. Promissory  Note dated December 10, 1996 made by Mountaineer  Park, Inc.
in the principal amount of $16,100,000 in favor of Madeleine L.L.C.

     5.  Registration  Rights  Agreement  dated  July 2,  1996  between  Winners
Entertainment,  Inc. and Madeleine  L.L.C.  (incorporated  by reference from the
Registrant's  Quarterly Report on Form 10-Q for the quarter ended June 30, 1996,
Exhibit 10(11))

     6. Amendment No. 1 to Registration Rights Agreement dated December 10, 1996
between MTR Gaming Group, Inc. and Madeleine L.L.C.



<PAGE>



     7. Promissory  Note dated December 10, 1996 made by Mountaineer  Park, Inc.
in the principal amount not to exceed $5,376,500 in favor of Madeleine L.L.C.

     8. Warrant Certificate No. 6 issued to Madeleine L.L.C., dated December 10,
1996, to purchase  125,552  shares of common stock of MTR Gaming Group,  Inc. at
$1.06 per share for five years commencing December 10, 1996.

     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.

                                             MTR GAMING GROUP, INC.


                                             By  /s/ Edson R. Arneault
                                                 Edson R. Arneault,
                                                 President


Date: January 7, 1997


<PAGE>



                                                                      EXHIBIT 1
                    AMENDED AND RESTATED TERM LOAN AGREEMENT




                            Dated as of July 2, 1996




                 as amended and restated as of December 10, 1996


                                      among


                      MOUNTAINEER PARK, INC., as Borrower,

                      MTR GAMING GROUP, INC., as Guarantor

                                       and

                           MADELEINE L.L.C., as Lender



<PAGE>



                                TABLE OF CONTENTS


                                                                       Page


                      ARTICLE I DEFINITIONS; CERTAIN TERMS
SECTION 1.01.   Definitions.............................................1
SECTION 1.02.   Accounting and Other Terms..............................8

                  ARTICLE II AMOUNT AND TERMS OF THE TERM LOAN
SECTION 2.01.   Term Commitment.........................................8
SECTION 2.02.   Making the Term Loan....................................8
SECTION 2.03.   Term Loan Interest......................................9
                (a)   Loan..............................................9
                (b)   Interest Payment..................................9
SECTION 2.04.   Repayment...............................................9
SECTION 2.05.   Termination or Reduction of Commitment..................9
SECTION 2.06.   Optional Prepayment of the Term Loan....................9

                 ARTICLE III AMOUNT AND TERMS OF THE LINE LOANS
SECTION 3.01.   Line Commitment.........................................9
SECTION 3.02.   Making the Line Loans..................................10
SECTION 3.03.   Line Loan Interest.....................................10
                (a)   Loans............................................10
                (b)   Interest Payment.................................10
SECTION 3.04.   Repayment..............................................10
SECTION 3.05.   Termination of Line Commitment.........................10

              ARTICLE IV FEES, PAYMENTS, DEFAULT INTEREST AND OTHER
                                  COMPENSATION
SECTION 4.01.   Fees and Other Consideration...........................11
                (a)   Loan Fee.........................................11
                (b)   Administration Fee...............................11
                (c)   Audit and Collateral Monitoring Fees.............11
                (d)   Common Stock.....................................11
                (e)   Warrants.........................................13
SECTION 4.02.   Payments and Computations..............................14
SECTION 4.03.   Taxes..................................................14
SECTION 4.04.   Default Interest.......................................15
SECTION 4.05.   Principal Repayments...................................15
SECTION 4.06.   Refinance of Term Loan.................................15

                ARTICLE V CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 5.01.   Conditions to Funding of the Tranche B Portion of the Term
                Loan...................................................15
                (a)   Payment of Fees, Etc.............................16

                                      - i -

<PAGE>



                (b)   Representations and Warranties; No Event of Default.16
                (c)   Legality.........................................16
                (d)   Delivery of Documents............................16
                (e)   Proceedings; Receipt of Documents................18
                (f)   Material Adverse Change..........................18
                (g)   Due Diligence....................................18
SECTION 5.02.   Conditions to Funding of Line Loans....................18
                (a)   Payment of Fees, Etc.............................18
                (b)   Representations and Warranties; No Event of Default.19
                (c)   Legality.........................................19
                (d)   Delivery of Documents............................19
                (e)   Material Adverse Change..........................19
                (f)   Other Conditions.................................19
SECTION 5.03.   Conditions of Funding each Line Loan...................19
                (a)   Representations and Warranties; No Event of Default.19
                (b)   Borrowing Notice.................................20
                (c)   Use of Proceeds..................................20
                (d)   EBITDA Average...................................20

                    ARTICLE VI REPRESENTATIONS AND WARRANTIES
SECTION 6.01.   Representations and Warranties of the Borrower and the
                Guarantor..............................................20
                (a)   Organization, Good Standing, Etc.................20
                (b)   Authorization, Etc...............................20
                (c)   Governmental Approvals...........................20
                (d)   Enforceability of Loan Documents.................21
                (e)   Certificates.....................................21
                (f)   Subsidiaries.....................................21
                (g)   Litigation.......................................21
                (h)   Financial Condition..............................21
                (i)   Compliance with Law, Etc.........................21
                (j)   ERISA............................................21
                (k)   Taxes, Etc.......................................21
                (l)   Regulation U.....................................22
                (m)   Adverse Agreements, Etc..........................22
                (n)   Holding Company and Investment Company Acts......22
                (o)   Permits, Etc.....................................22
                (p)   Title to Properties..............................22
                (q)   Full Disclosure..................................22
                (r)   Operating Lease Obligations......................22
                (s)   Indebtedness.....................................23
                (t)   Environmental Matters............................23
                (u)   Schedules........................................23
                (v)   Insurance........................................23
                (w)   Use of Proceeds..................................23
                (x)   Solvency of the Borrower.........................23

                                     - ii -

<PAGE>



                (y)   Solvency of the Guarantor........................23
SECTION 6.02.   Representations, Warranties and Covenants of Lender....24

             ARTICLE VII COVENANTS OF THE BORROWER AND THE GUARANTOR
SECTION 7.01.   Affirmative Covenants..................................24
                (a)   Reporting Requirements...........................24
                (b)   Compliance with Laws, Etc........................27
                (c)   Preservation of Existence, Etc...................27
                (d)   Keeping of Records and Books of Account..........27
                (e)   Inspection Rights................................27
                (f)   Maintenance of Properties, Etc...................27
                (g)   Maintenance of Insurance.........................27
                (h)   Environmental Indemnity..........................28
                (i)   Notification of Event of Default.................28
                (j)   Further Assurances...............................28
                (k)   Additional Security..............................28
                (l)   Environmental Actions............................28
SECTION 7.02.   Negative Covenants.....................................28
                (a)   Liens, Etc.......................................29
                (b)   Indebtedness.....................................29
                (c)   Guaranties, Etc..................................30
                (d)   Merger, Consolidation, Sale of Assets, Etc.......31
                (e)   Change in Nature of Business.....................31
                (f)   Investments, Etc.................................31
                (g)   Lease Obligations................................31
                (h)   Salaries and Withdrawals.........................31
                (i)   Dividends, Etc...................................31
                (j)   Federal Reserve Regulations......................32
                (k)   Transactions with Affiliates.....................32
                (l)   Fiscal Year, Accounting Policies.................32
                (m)   Improvements.....................................32
                (n)   Issuance of Stock................................32
SECTION 7.03.   Covenants of the Guarantor.............................32
SECTION 7.04.   Additional Line Loan Covenant..........................33

                         ARTICLE VIII EVENTS OF DEFAULT
SECTION 8.01.   Events of Default......................................33

                            ARTICLE IX MISCELLANEOUS
SECTION 9.01.   Notices, Etc...........................................35
SECTION 9.02.   Amendments, Etc........................................36
SECTION 9.03.   No Waiver; Remedies, Etc...............................36
SECTION 9.04.   Fees, Costs, Expenses and Taxes........................36
SECTION 9.05.   Right of Set-off.......................................37
SECTION 9.06.   Severability...........................................37
SECTION 9.07.   Successors and Assigns.................................37

                                     - iii -

<PAGE>



SECTION 9.08.   Counterparts...........................................38
SECTION 9.09.   Headings...............................................38
SECTION 9.10.   Governing Law..........................................38
SECTION 9.11.   WAIVER OF JURY TRIAL, ETC..............................38
SECTION 9.12.   Reinstatement; Certain Payments........................39
SECTION 9.13.   Indemnification........................................39

                               ARTICLE X GUARANTY
SECTION 10.01.   Guaranty..............................................40
SECTION 10.02.   Obligations Unconditional.............................40
SECTION 10.03.   Waivers...............................................41
SECTION 10.04.   Subrogation...........................................41
SECTION 10.05.   No Waiver; Remedies...................................41
SECTION 10.06.   Taxes.................................................41
SECTION 10.07.   Stay of Acceleration..................................42
SECTION 10.08.   Continued Effectiveness of Guaranty...................42


SCHEDULE I               Description of Property
SCHEDULE II              Litigation
SCHEDULE III             Licenses, Permits, Authorizations and Approvals
SCHEDULE IV              Lease Obligations of the Borrower
SCHEDULE V               Indebtedness of the Borrower
SCHEDULE VI              Existing Liens
SCHEDULE VII             Guarantees of the Borrower
SCHEDULE VIII            Investments
SCHEDULE IX              Stock Rights, Warrants and Options
SCHEDULE X               Shares of Common Stock Issued
SCHEDULE XI              Permitted Issuances of Warrants

EXHIBIT A                Form of Term Note
EXHIBIT B                Form of Line Note
EXHIBIT C                Form of First Priority Deed of Trust
EXHIBIT D                Form of Notice of Borrowing
EXHIBIT E                Form of Notice of Line Borrowing
EXHIBIT F                Form of Warrants
EXHIBIT G                Form of Opinion of Freer & McGarry, Counsel to the
                         Borrower  and the Guarantor
EXHIBIT H                Form of Opinion of Jackson & Kelly, West Virginia
                         Counsel to the Borrower and the Guarantor
EXHIBIT I                Corrective Action Plan


                                     - iv -

<PAGE>








                    AMENDED AND RESTATED TERM LOAN AGREEMENT


                  AMENDED AND RESTATED TERM LOAN AGREEMENT,  dated as of July 2,
1996, as amended and restated as of December 10, 1996, among  MOUNTAINEER  PARK,
INC., a West Virginia  corporation  (the  "Borrower"),  MTR Gaming Group,  Inc.,
f/k/a WINNERS ENTERTAINMENT, INC., a Delaware corporation (the "Guarantor"), and
MADELEINE L.L.C., a New York limited liability company (the "Lender").

                                    RECITALS

                  WHEREAS,  the  Borrower,  the  Guarantor  and the  Lender  are
parties  to a  Term  Loan  Agreement,  dated  as  of  July  2,  1996  (the  "Old
Agreement"),  pursuant to which the Lender has made a term loan to the  Borrower
in the original principal amount of $5,000,000.

                  WHEREAS,  the Borrower and the Guarantor  have  requested that
the Lender (a) amend and  restate  the Old  Agreement  to  provide,  among other
things,  an  increase in the amount  available  under the Old  Agreement  to the
Borrower  thereunder  from  $5,000,000  to  $16,100,000  (the  "Term  Loan")  to
refinance  the o ligations of the Borrower  under the Senior Loan  Agreement (as
defined in the Old Agreement),  and (b) extend additional credit to the Borrower
in the form of a three  year line of credit for loans in the  aggregate  maximum
principal  amount not to exceed  $5,376,500 at any time  outstanding  (the "Line
Loans" and, collectively with the Term Loan, the "Loans");

                  WHEREAS, the Lender is willing, on the terms and conditions
herein, to amend and restate the Old Agreement;

                  WHEREAS, in order to  induce the  Borrower to  borrow, and the
Guarantor  to  guarantee,  the  additional  funds  provided  and to  be provided
hereunder, the Lender is willing to lend the  additional $11.1 million  over and
above the loan made under the Old Agreement pursuant to the terms hereof and  to
provide the Line Loans.

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
agreements  herein and in order to induce the  Lender to make and  maintain  the
Loans, the Lender, the Borrower and the Guarantor hereby agree as follows:


                                    ARTICLE I

                           DEFINITIONS; CERTAIN TERMS

                  SECTION  1.01.  Definitions.  As used in this  Agreement,  the
following  terms  shall  have the  respective  meanings  indicated  below,  such
meanings to be applicable  equally to both the singular and plural forms of such
terms:


<PAGE>




                  "Affiliate" means, as to any Person, (i) any o her Person that
directly,  or  indirectly  through  one or  more  intermediaries,  controls,  is
controlled by, or is under common control with,  such Person,  or (ii) any trade
or business (whether or not incorporated)  which is a member of a group of which
such Person is a member and which is under common  control within the meaning of
Section  414  of the  Internal  Revenue  Code  and  the  rules  and  regulations
promulgated thereunder from time to time.

                  "Amended and Restated Security Agreement means the Amended and
Restated Security  Agreement,  dated as of July 2, 1996, as amended and Restated
on the date hereof, made by the Borrower in favor of the Lender.

                  "Borrower" has the meaning specified therefor in the preamble
hereto.

                  "Business  Day" means any day not a Saturday,  Sunday or legal
holiday on which the Lender is open for  business  in New York City and banks in
the State of West Virginia are not required or authorized to close.

                  "Capital Leases" means, with respect to any Person,  leases or
agreements to lease by such Person and its  Consolidated  Subsidiaries  that, in
accordance  with  GAAP, have  been or should be capitalized on the books of such
Person.

                  "Capitalized  Lease  Obligations"  means,  with respect to any
Person, any obligation of such Person and its Consolidated  Subsidiaries for the
payment of rent for any real or personal  property under Capital Leases and, for
pu poses  hereof,  the amount of any such  obligation  shall be the  capitalized
amount  thereof,  all computed and  consolidated  in accordance  with  generally
accepted accounting principles applied on a consistent basis.

                  "Collateral"  means all of the property (real and personal) of
the Borrower  purported to be subject to the lien or security interest purported
to be  created  by any  mortgage,  deed of  trust,  security  agreement,  pledge
agreement,  assignment  or  other  security  document  heret  fore or  hereafter
executed by the  Borrower in favor of the Lender as security for all or any part
of the Obligations, including, without limitation, any asset purchased, in whole
or in part, with proceeds of a Line Loan, subject to the limitation set forth in
Section 7.01(k) hereof.

                  "Commitment" means the Term Commitment and the Line Commitment

                  "Common Stock" means  the common  stock of the  Guarantor, par
value $0.00001 per share.



                                      - 2 -

<PAGE>



                   "Consolidated EBITDA" means  for each  fiscal  quarter of any
Person, all earnings of such Person and its  Consolidated  Subsidiaries for such
period  as  determined  in  accordance  with  GAAP,  before (a) the sum, without
duplication, of (i) gross  interest expense for such period minus gross interest
income  for  such  period,  in  each  case  determined  in accordance with GAAP,
(ii) income tax expense, (iii) depreciation expense, (iv)  amortization  expense
net of negative goodwill amortization, and (v) extraordinary or unusual non-cash
losses (provided  such extraordinary or unusual losses do not at any time result
in a cash outlay by such  Person), less (b)  extraordinary  gains of such Person
and each Consolidated  Subsidiary,  each determined on a consolidated basis  for
such Person and its Consolidated Subsidiaries in accordance with GAAP.

                  "Consolidated  Subsidiary"  of a Person at any time shall mean
those Subsidiaries of such Person whose accounts are or should in accordance wit
GAAP be consolidated with those of such Person.

                                      - 3 -

<PAGE>




                  "Deed of Trust"  means the Deed of Trust,  dated July 2, 1996,
made by the Borrower in favor of the Lender.

                  "Default"  means any event that,  with the giving of notice or
the passage of time or both, would result in an Event of Default.

                  "EBITDA   Average"   means,   as  of  any  date,  the  average
Consolidated  EBITDA for each of the six calendar  onths  immediately  preceding
such date; provided,  however, that for the purpose of the calculation of EBITDA
Average,  at the discretion of the Borrower,  the months of December and January
may be excluded  from such  calculation  and such months  shall be deemed not to
have occurred.

                  "Effective Date" has the meaning specified therefor in Article
IV of the Old Agreement.

                  "Employee  Plan" means an employee  benefit plan (other than a
Multiem loyer Plan) covered by Title IV of ERISA and maintained for employees of
the Borrower or any of its Affiliates.

                  "Environmental  Law"  means  the  Comprehensive  Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss. 1801, et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.), the
Federal Water Pollution Control Act (33 U.S.C  ss. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss. 2601 et seq.), the Occupational Safety and Health Act (29 U.S.C. ss. 6451 et
seq.), and the Medical Waste Tracking Act of 1988, Pub. L. No. 100-582, 102
Stat. 2950 (1988), as such laws have been amended or supplemented from time to
time, and any similar present or future Federal, state or local statute,
ordinance, rule or regulation.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended from time to time, and, unless the context otherwise  requires,
the rules and regulations promulgated thereunder from time to time.

                  "Event of Default" means any of the events set forth in
Section 8.01 hereof.

                  "Final Term  Funding  Date" has the  meaning  assigned to such
term in Section 5.01 hereof.

                  "Financial  Statement  " means the  Financial  Statements  (as
defined in the Old  Agreement)  and the  unaudited  financial  statements of the
Borrower and the Guarantor for the fiscal quarter ended June 30, 1996.

                  "First  Priority  Deed of Trust"  means the Deed of Trust with
respect to the  Property  in  substantially  the form of Exhibit C, which  First
Priority  Deed of Trust shall,  when duly executed and filed and the Senior Loan
Agreement is satisfied  and released of record,  create a first  priority lien o
the  property in favor of the Lender and  securing  all of the  Obligations  set
forth in clause (i) of the definition thereof.

                  "GAAP" means generally  accepted  accounting  principles as in
effect from time-to-time in the United States, consistently applied.

                  "Governmental  Authority" means any nation or government,  any
federal,  state,  city,  town,  municipality,  county,  local or other political
subdivision thereof or thereto and any department, commiss on,

                                      - 4 -

<PAGE>



board,  bureau,  instrumentality,  agency or other entity exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government and having jurisdiction over the Parties to the Loan Documents.

                  "Guaranty"  means the Guaranty  made by the Guarantor in favor
of the Lender pursuant to Article X hereof,  guaranteeing the Obligations  under
the Loan Documents.

                  "Guarantor" has t e meaning specified therefor in the preamble
hereto.

                  "Hazardous  Materials"  means,  without limit,  any pollutant,
waste,  flammable  explosives,   radioactive  materials,   hazardous  materials,
hazardous wastes,  hazardous or toxic substances,  or other materials defined in
or regulated under any Environmental Law.

                  "Indebtedness" means (i) all indebtedness or other obligations
of the Borrower for borrowed  money or for the deferred  purchase price of prope
ty or services,  (ii) Capitalized Lease  Obligations of the Borrower,  (iii) all
obligations of the Borrower under direct or indirect  guaranties,  contingent or
other  obligations of the Borrower to purchase or otherwise  acquire or assure a
creditor against loss in respect thereof,  indebtedness or other  obligations of
any other  Person  for  borrowed  money or for the  deferred  purchase  price of
property or services or Capitalized Lease Obligations of any other Person,  (iv)
all indebtedness or other  obligations of the Borrower for borrowed money or for
the deferred purchase price of property or services secured by (or for which the
holder of such indebtedness has an existing right,  contingent or otherwise,  to
be secured by) any lien,  security  interest or other charge or encumbrance upon
or in property  owned by the Borrower,  (v) all  obligations  of the Borrower in
respect of letters of credit and bankers'  acceptances with the exception of any
such letter of credit or bankers' acceptance issued in favor of, or required by,
a Governmental Authority, (vi) liabilities incurred under Title IV of ERISA with
respect to any plan covered by Title IV of ERISA and maintained for employees of
the Borrower or any of its Affiliates,  and (vii) withdrawal  liability incurred
under ERISA by the Borrower or any of its Affiliates to any Multiemployer Plan.

                  "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time.

                  "Lender" has the meaning spec fied therefor in the preamble
hereto.

                  "Lien"  means  any  security   interest,   mortgage,   pledge,
hypothecation,  assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise),  charge  against or interest in property to secure payment of a debt
or performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.

                  "Line  Commitment"  means the commitment of the Lender to make
the Line Loans to the B rrower  pursuant to Article III hereof in the  aggregate
principal amount outstanding at any one time not to exceed $5,376,500.

                  "Line Fee" has the meaning assigned to such term in Section
4.01 hereof.

                  "Line  Loans"  means  the  loans  made  by the  Lender  to the
Borrower pursuant to Article III of this Agreement.

                                      - 5 -

<PAGE>




                  "Line  Note"  means  a  promissory   note  of  the   Borrower,
substantially  in the for of  Exhibit  B  hereto,  evidencing  the  Indebtedness
resulting from the making of the Line Loans and delivered to the Lender pursuant
to Article III hereof,  as such  promissory note may be modified or amended from
time to time, and any promissory note or notes issued in exchange or replacement
therefor.

                  "Line Obligations" means all Obligations in respect of the
Line Loans.

                  "Loan" or "Loans" means the Term Loan and the Line Loans.
                  "Loan Documents" means this Agreement,  the Notes, the Deed of
Trust, the Security Agreement,  the Amended and Restated Security Agreement, the
First  Priority  Deed of  Trust,  the  Guaranty,  the  Stock  Certificates,  the
Warrants,  the Registration  Rights  Agreement,  Amendment No. 1 to Registration
Rights  Agreement,  the Stock  Transfer  Agreement  and all  other  instruments,
documents and agreements executed and delivered pursuant hereto or thereto.

                  "Loan Fees" means ll of the fees and expenses payable, whether
in cash,  in kind,  in Common  Stock or in  Warrants,  by the  Borrower  and the
Guarantor under Section 4.01 of this Agreement.

                  "Loan Parties" means the Borrower and the Guarantor.

                  "Maturity Date" means the third  anniversary of the Final Term
Funding  Date,  or such  earlier  date on which the Loans  shall  become due and
payable,  in whole or in part, in accordance  with the terms of this  Agreement,
whether by cceleration or otherwise.

                  "Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA.

                  "Note" or "Notes" means the Original Term Note, the Term Note
and the Line Note.

                  "Notice of Borrowing" has the meaning specified in Section
2.02 hereof.

                  "Notice of Line Borrowing" has the meaning specified in
Section 3.02 hereof.

                  "Obligations"  means (i) the  obligation  of any Loan Party to
pay, as and when due and  payable (by  scheduled  maturity  or  otherwise),  all
amounts from time to time owing by it in respect of any Loan  Document,  whether
for principal,  interest, (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Borrower or the
Guarantor whether or not a claim for post-filing interest is allowed pursuant to
11 U.S.C.  ss. 506, or otherwise in such cases),  fees or otherwise and (ii) the
obligation of any Loan Party to perform or observe all of its other  obligations
from time to time existing under any Loan Document.

                  "Operating Leases" means leases or agreements to lease of the
Borrower, other than Capital Leases.

                  "Operating  Lease  Obligations"  means all  obligations of the
Borrower for the payment of rent for any real or personal  property under leases
or agreements to lease,  other than Capitalized Le se Obligations,  all computed
in accordance with GAAP.

                                      - 6 -

<PAGE>




                  "Original Term Note" means the promissory note of the Borrower
evidencing the  Indebtedness  resulting from the making of the Tranche A portion
of the Term Loan and  delivered to the Lender  pursuant to Article IV of the Old
Agreement, as such promissory note may be modified or amended from time to time,
and any promissory note or notes issued in exchange or replacement therefor.

                  "Payment Office" means Madeleine L.L.C., 950 Third Avenue, New
York, New York 10022, Attn.: Mr. Kevin P. Genda.

                  "Permitted    Investments"   means   (i)   marketable   direct
obligations   issued  or   unconditionally   guaranteed  by  the  United  States
Government,  or issued by any  agency  thereof  and backed by the full faith and
credit of the United States, in each case maturing within one year from the date
of acquisition  thereof,  (ii) commercial paper,  maturing not more than 70 days
after the date of issue,  issued by a corporation rated P-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation or issued by the Lender or
its Affiliates, (iii) time certificates of deposit, issued by commercial banking
institutions,  each of which is a member of the Federal Reserve System and has a
combined  capital and surplus of not less than  $100,000,000,  (iv) money market
accounts maintained with mutual funds having assets in excess of $2,500,000,000,
and (v) tax exempt  securities rated A or better by Moody's  Investors  Service,
Inc. or A+ or better by Standard & Poor's Corporation;  provided,  however, that
deposits or certificates of deposits with commercial banking  institutions which
are a member of the Federal Reserve System are Permitted  Investments so long as
any such deposit does not exceed $250,000.

                  "Person"  means  an  individual,   corporation,   partnership,
association,  joint-stock  company,  trust,  unincorporated  organization,  join
venture or governmental authority.

                  "Plan of Remediation"  means the Corrective Action Plan, dated
August 14, 1995, a copy of which is annexed hereto as Exhibit I.

                  "Post-Default Rate" means a rate per annum equal to 22%.

                  "Property" means the real property described in Schedule I
hereto.

                  "Refinance" has the meaning assigned to such term in Section
4.06 hereof.

                  "Registration Rights Agreement" means the Registration Rights
Agreement, dated July 2, 1996, between the Lender and the Guarantor.

                  "Security Agreement" means the Security Agreement,  dated July
2, 1996, made by the Borrower in favor of the Lender.

                  "Senior  Loan  Agreement"  means the (i)  Credit  Line Deed of
Trust,  dated  June 27,  l994;  (ii) the Note in  original  principal  amount of
$l0,200,000.00,  dated June 28, 1994, and (iii) the Constru tion Loan Agreement,
dated June 27, l994; as amended and supplemented by the Agreement,  dated August
l8,  1994;  the  Construction  Loan  Agreement,  dated  December  7,  l994;  the
Construction  Loan  Agreement  Amendment,  dated  February l0, l995;  the Letter
Amendment to Construction Loan Agreement, dated April l0, l995; the Construction
Loan  Agreement   Amendment  V,  dated  July  l995;  the  Letter   Amendment  to
Construction  Loan  Agreement,  dated October 3l, l995; the Letter  Amendment to
Construction Loan Agreement, dated November

                                      - 7 -

<PAGE>



28, l995; the Letter  Amendment to Construction  Loan Agreement,  dated December
21, l995; the Letter Amendment to Construction Loan Agreement, dated January 12,
l996, and the Amendment of Construction Loan Agreement dated September 19, 1996,
and effective on October 31, 1996, each among the Senior Secured  Creditor,  the
Borrower and the Guarantor.

                  "Senior   Secured   Creditor"   means  Bennett   Management  &
Development Corp., the bankruptcy estate hereof under chapter 11 Bankruptcy Case
No. 9661379,  presently  pending in the United States  Bankruptcy  Court for the
Northern  District of New York and any and all  successors and assigns of either
of them, any of which has the legal and/or  equitable  rights in the Property as
of the Final Term Funding Date.

                  "Surveyor" means ____________________________________________.

                  "Stock  Certificate"  means  any  original  stock  certificate
issued by th Guarantor representing shares of Common Stock.

                  "Stock Transfer Agreement" means the Stock Transfer Agreement,
dated as of July 2, 1996, between the Lender and the Guarantor.

                  "Subsidiary"  means any  corporation of which more than 50% of
the outstanding  capital stock or similar rights of holders of equity having (in
the absence of  contingencies)  ordinary  voting  power to elect  directors  (or
Persons  performing  similar  functions) of such  corporati n is, at the time of
determination, owned directly, or indirectly through one or more intermediaries,
by any Person.

                  "Taxes" means any tax imposed by the State of West Virginia or
any subdivision thereof.

                  "Term Commitment" means the commitment of the Lender to make a
Loan to the Borrower  pursuant to Article II hereof in the principal  amount not
to exceed $16,100,000.00.

                  "Term Loan" means the loans made by the Le der to the Borrower
pursuant to Article II hereof.

                  "Term  Note"  means  a  promissory   note  of  the   Borrower,
substantially  in the form of  Exhibit A  hereto,  evidencing  the  Indebtedness
resulting from the making of the Term Loan and delivered to the Lender  pursuant
to Article II hereof,  as such  promissory  note may be modified or amended from
time to time, and any promissory note or notes issued in exchange or replacement
therefor.

                  "Term Obligations"  as the meaning assigned to such term in
Section 9.13 hereof.

                  "Termination  Date"  means  the  earlier  to  occur of (a) the
Maturity Date and (b) the date on which all of the  Obligations  have been fully
performed.

                  "Title  Insurance  Policy" means the mortgagee's  loan policy,
together with all endorsements  made from time to time thereto,  issued by or on
behalf of a title insurance  company  satisfactory  to the Lender,  insuring the
Lien  created  by the Fir t  Priority  Deed of Trust in an  amount  and on terms
satisfactory  to the  Lender,  delivered  to the  Lender  pursuant  to Article V
hereof.

                  "Tranche A" has the meaning specified therefore in Section
2.02 hereof.

                  "Tranche B" has the meaning specified therefore in Section
2.02 hereof.

                                      - 8 -

<PAGE>




                  "Title  Insurance  Policy" means the mortgagee's  loan policy,
together with all  endorsements  made from time o time thereto,  issued by or on
behalf of a title insurance  company  satisfactory  to the Lender,  insuring the
Lien  created  by the First  Priority  Deed of Trust in an  amount  and on terms
satisfactory  to the  Lender,  delivered  to the  Lender  pursuant  to Article V
hereof.

                  "Transaction Costs" has the meaning specified therefore in
Section 9.04 hereof.

                  "Unfunded Liability" has the meaning specified therefore in
Subsection 6.01(j) hereof.

"Warrants"  means validly  issued  warrants for the purchase of shares of Common
Stock, in substantially the form attached hereto as Exhibit F.

                  SECTION 1.02.  Accounting  and Other Terms.  Unless  otherwise
expressly stated herein, all accounting  determinations hereunder shall be made,
all  accounting  terms  used  herein  shall be  interpreted,  and all  financial
statements  required to be delivered  hereunder  shall be prepared in accordance
with GAA . All terms used in this  Agreement  which are  defined in Article 9 of
the  Uniform  Commercial  Code in  effect  in the  State of New York on the date
hereof and which are not otherwise  defined  herein shall have the same meanings
herein as set forth therein.


                                   ARTICLE II

                        AMOUNT AND TERMS OF THE TERM LOAN

                  SECTION 2.01. Term Commitment. The Lender agrees, on the terms
and conditions here nafter set forth, to make the Term Loan to the Borrower in a
principal amount not to exceed the Term Commitment.  Any principal amount of the
Term Loan which is repaid or prepaid by the Borrower may not be reborrowed.

                  SECTION  2.02.  Making the Term  Loan.  The Term Loan shall be
made by the Lender to the Borrower in two loan tranches.  The first loan tranche
("Tranche A") in the original  principal  amount of  $5,000,000  was made by the
Lender to the Borrowe  pursuant to the Old  Agreement.  The second loan  tranche
("Tranche B") shall be in the maximum  principal amount of $11,100,000 and shall
be made on the Final Term  Funding  Date.  Prior to the making of the  Tranche B
portion of the Term Loan,  the  Borrower  shall  give the Lender  prior  written
notice in  substantially  the form of Exhibit D hereto (a "Notice of Borrowing")
no later  than  11:00  A.M.  (New  York  City  time) on the day of the  proposed
borrowing.  Such Notice of Borrowing  shall be irrevocable and shall specify the
principal amount of the proposed  borrowing and the proposed borrowing date: and
(i) the Borrower shall be bound to make a borrowing in accordance therewith; and
(ii) the Lender shall be required to make the Tranche B portion of the Term Loan
requested  in such  Notice of  Borrowing  in  accordance  with the terms of this
Agreement. The Lender may act without liability upon the basis of written notice
believed  by the  Lender  in good  faith  to be from the  Borrower  (or from any
officer thereof  designated in writing to the Lender) and the Loan Parties shall
execute a  "Settlement  Statement" or "Use of Proceeds"  which shall  constitute
prima facie evidence as to the terms of the borrowing. On the Final Term Funding
Date and upon  fulfillment of the  applicable  conditions set forth in Article V
hereof,  the Lender will make  available the requested  Tranche B portion of the
Term Loan to the Borrower in an amount not to exceed  $11,100,000  by delivering
the proceeds  thereof,  in immediately  available funds (either in the form of a
certified bank check or

                                      - 9 -

<PAGE>



wire  transfer)  less the fees and  expenses  due under  Sections  4.01 and 9.04
hereof.  The Borrower shall execute and deliver to the Lender, on the Final Term
Funding  Date,  a Term Note  payable to the order of the Lender to evidence  the
Term  Loan in the  original  principal  amount of the Term  Commitment,  and the
Lender shall return the Original  Term Note in the amount of  $5,000,000  to the
Borrower.  The Term Loan amount may be  increased to provide for the funding and
payment of the Lender's fees and costs incurred in connection herewith, together
with interest due thereon, which are unpaid as of the Termination Date and which
accrue  thereafter.  The books and  records of the Lender  shall be  presumptive
evidence of the amount of Obligations  under the Term Loan outstanding from time
to time,  whether in excess of the  principal  amount of the Original Term Note,
the Term Note or otherwise, absent manifest error.
                  SECTION 2.03.         Term Loan Interest.

                           (a) Loan.  The Term Loan shall bear interest on the
principal amount thereof  rom time to time  outstanding from the Effective Date
until such principal amount becomes due at an interest rate per annum of twelve
percent (12%).

                           (b) Interest Payment. Interest on the Term Loan shall
be payable monthly, in arrears, on the last day of each month, commencing
December 31, 1996, and on the Termination Date (whether by demand, acceleration 
or otherwise). Interest at the Post-Default Rate shall be payable on demand.

                  SECTION 2.04.         Repayment.  The Term Loan shall be
payable as to principal in full on the Maturity Date, together with all such
other amounts as may be necessary to repay in full all unpaid Term Obligations
to the Lender.

                  SECTION 2.05.         Termination or Reduction of Commitment.
The Term Commitment shall terminate at 5:00 p.m. (New York City time) on the
Final Term Funding Date.

                  SECTION 2.06. Optional Prepayment of the Term Loan. Subject to
Sections  4.05 and 4.06 hereof,  the Borrower  may, on the same  Business  Day's
telephone  notice no later  than  11:00  A.M.  (New York  City  time)  (promptly
confirmed in writing) prepay without cost or penalty,  the outstanding amount of
the Term  Loan in whole or in part  with  accrued  interest  to the date of such
prepayment on the amount prepaid.


                                   ARTICLE III

                       AMOUNT AND TERMS OF THE LINE LOANS

                  SECTION 3.01. Line Commitment. The Lender agrees, on the terms
and conditions  hereinafter  set forth,  to make loans (the "Line Loans") to the
Borrower in an aggregate  principal  amount  outstanding  at any one time not to
exceed the Line  Commitment.  Any  principal  amount of the Line Loans  which is
repaid by the Borrower may be reborrowed  prior to the Termination Date provided
that no Event of Default or event that, with the giving of notice or the p ssing
of time or both,  would  constitute  an Event of  Default  has  occurred  and is
continuing.

                  SECTION 3.02.  Making the Line Loans.  The Borrower shall give
the Lender prior written notice in substantially the form of Exhibit E hereto (a
"Notice of Line  Borrowing")  no later  than 11:00 A.M.  (New York City time) at
least two Business Days prior to each proposed Line Loan borrowing.  Such Notice
of Line Borrowing shall be irrevocable and shall specify the principal amount of
the proposed borrowing, which

                                     - 10 -

<PAGE>



shall be at least  $500,000.00,  and the proposed  borrowing  date:  and (i) the
Borrower shall be bound to make a borrowing in accordance therewith and (ii) the
Lender shall be required to make the Line Loan  requested in such Notice of Line
Borrowing in  accordance  with the terms of this  Agreement.  The Lender may act
without  liability  upon the basis of written  notice  believed by the Lender in
good faith to be from the Borrower (or from any officer  thereof  designated  in
writing  to the  Lender),  and the Loan  Parties  shall  execute  a  "Settlement
Statement" or "Use of Proceeds" which shall  constitute  prima facie evidence as
to the  terms  of such  borrowing.  On the  Final  Term  Funding  Date  and upon
fulfillment  of the  applicable  conditions  set forth in Article V hereof,  the
Lender will make available the requested Line Loans to the Borrower in an amount
not to exceed  the Line  Commitment  by  delivering  the  proceeds  thereof,  in
immediately  available  funds  (either in the form of a certified  bank check or
wire transfer) less the Line Fees and expenses then due and payable, if any, due
under Sections  4.01(a) and 9.04 hereof.  The Borrower shall execute and deliver
to the Lender,  on the Final Term  Funding  Date,  the Line Note  payable to the
order of the Lender to evidence  the Line Loans in the  principal  amount of the
Line  Commitment.  The outstanding  amount of the Line Loans may be increased to
provide for the funding and payment of the Lender's  fees and costs  incurred in
connection  with the Line Loans,  together with interest due thereon,  which are
unpaid as of the Termination  Date and which accrue  thereafter.  The records of
the Lender shall be presumptive  evidence of the amount of Obligations under the
Line  Loans  outstanding  from time to time  whether  in  excess of the  initial
principal amount of the Line Note or otherwise, absent manifest error.

                  SECTION 3.03.         Line Loan Interest.

                           (a) Loans.  Each Line Loan shall bear interest on the
principal amount thereof from time to time outstanding from the Final Term
Funding Date until such principal amount becomes due at an interest rate per
annum of fifteen percent (15%).

                           (b) Interest Payment. Interest on the outstanding
principal amount of each Line Loan  shall be  payable  monthly,  in  arrears, on
the last day of each month, commencing December 31, 1996, and on the Termination
Date (whether by demand, acceleration or otherwise).  Interest at the Post-
Default Rate shall be payable on demand.

                  SECTION 3.04.         Repayment.  The Line Loans shall be
payable as to principal in full on the Maturity Date, together with all such
other amounts as may be necessary to repay in full all unpaid Line
Obligations to the Lender.

                  SECTION 3.05.         Termination of Line Commitment. The Line
Commitment shall terminate in full at 5:00 P.M. (New York C ty time) on the
Termination Date.


                                   ARTICLE IV

             FEES, PAYMENTS, DEFAULT INTEREST AND OTHER COMPENSATION

                  SECTION 4.01.         Fees and Other Consideration.  The fees 
and other consideration provided for herein are in addition to the fees and
other consideration due and payable on the Effective Date pursuant to the
Old Agreement.

                           (a) Loan Fees.  On July 2, 1997, the Borrower shall
pay to the Lender, in immediately available funds, a non-refundable fee of
$888,000; provided, however, that if there has occurred a Refinance

                                     - 11 -

<PAGE>



prior to July 2, 1997,  the foregoing fee shall be waived by the Lender.  On the
Final Term Funding Date,  the Borrower  shall pay to the Lender,  in immediately
available funds, a  non-refundable  fee of $376,350.00 (the "Initial Line Fee");
provided,  however,  that the  Borrower  may elect to pay such fee in 13 monthly
installments,  the first  installment  in the amount of $28,950.00 to be due and
payable on the Final Term Funding Date , and the remaining twelve  installments,
each in the amount of $28,950.00, to be due and payable in immediately available
funds on the first day of each calendar month  beginning on January 1, 1997, and
ending on December 1, 1997.  The  Borrower  shall also pay to the Lender on each
January 1 prior to the Termination Date, if any, in immediately available funds,
a non-refundable  fee (collectively  with the Initial Line Fee, the "Line Fees")
of $376,350.  The Borrower hereby  instructs the Lender,  commencing  January 1,
1998,  to  withhold  the Line  Fees  from the Line  Commitment  in  satisfaction
thereof,  and the  amount  so  withheld  shall be a Line  Loan for all  purposes
hereunder.

                           (b) Administration Fee.  The Borrower shall pay to
the Lender, on each anniversary of the Final Term Funding Date, in immediately
available funds, a non-refundable fee equal to 8% of the outstanding  principal
amount of the Term Loan as of the date of such anniversary; provided, however,
that on the first such anniversary, such fee shall equal 8% of the  outstanding
principal  balance of the Tranche A portion of the Term Loan only.

                           (c) Audit and Collateral Monitoring Fees.  The
Borrower shall pay to the Lender on each anniversary of the Effective Date, the
costs and expenses  incurred by the Lender in  connection  with  the  periodic
collateral appraisals  and audit reviews performed by or on behalf of the Lender
in such year; provided, however, that so long as no Event of Default has
occurred  and is  continuing,  the  Borrower's obligation  under this Subsection
3.01(c) shall be limited to $25,000 for each 365 (or 366, as applicable) day
period following the Effective Date.

                           (d) Common Stock.

                           (i)      The Guarantor shall, on each November 15,
commencing November  15,  1997,  until all of the  amounts  due to the  Lender
(including, without limitation, all principal, interest, fees  (whether due in
cash, in Common Stock, in Warrants or in kind),  expe ses and  indemnities) in
connection with the Term Loan (the "Term Loan Payments") have been satisfied  in
full, deliver to the Lender Stock  Certificates,  in such  denominations as the
Lender may request,  validly  issued to the Lender or its designee, representing
the number of shares of Common Stock equal to the quotient of (i) the product of
(A) the outstanding principal amount of the Term Loan on the day of such
delivery and (B) 5%, and (ii) the average daily closing price of the Common
Stock 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)     On the Final Term Funding Date, deliver to
the Lender Stock Certificates, in such  denominations as the Lender may request,
validly issued to the  Lender or its  designee,  representing  550,000 shares of
Common Stock; provided,  however, that the Borrower may elect to issue and
deliver such shares in 13  installments,  the first such  installment  to be
delivered on the Final Term Funding Date in the amount of 42,316 shares of
Common Stock,  and the remaining 12 installments of 42,307 shares of Common

                                     - 12 -

<PAGE>



Stock to be  delivered  on the first day of each  calendar  month  beginning  on
January 1, 1997, and ending on December 1, 1997;

provided,  however,  that  such  shares  shall be  issued  to the  Lender or its
designee only upon the payment by the Lender to the Guarantor of an amount equal
to the  product of (i) the par value of the Common  Stock and (ii) the number of
shares of Common  Stock to be  issued;  provided,  further,  that the  number of
shares of Common Stock of the Guarantor to be received by the Lender pursuant to
Section  4.01(d)(i)(II)  after the Final Term Funding Date shall, subject to the
provisions  of Section 7 of the  Warrants  which  relate to  limitations  on the
Lender's right to anti-dilution  protection, be adjusted to the extent necessary
to insure that the Lender will  receive a number of shares of Common Stock equal
in percentage to the percentage of the Common Stock (on a  fully-diluted  basis)
that such  shares  represent  of the Common  Stock of the  Guarantor  issued and
outstanding (on a fully-diluted basis) on the Final Term Funding Date.

                  Notwithstanding the foregoing,  if (i) an Event of Default has
occurred,  (ii) the  Obligations  relating  to the Term Loan have been repaid in
full, (iii) any single Person, group of Affiliated Persons, or Affiliate thereof
controls, or acquires control of, the voting rights of 35% or more of the Common
Stock,  or (iv) the  Guarantor  merges or  becomes  consolidated  with any other
Person in a transaction in which the Guarantor is not the surviving  entity,  or
sells all or s bstantially  all of its assets,  then the Guarantor shall deliver
to the Lender all of the shares of Common  Stock due to the Lender  pursuant  to
paragraph 4.01(d)(ii) above upon demand by the Lender.

                  If the  issuance of shares to the Lender would result in a put
obligation (the "Put") pursuant to Section 4.01 of the Stock Transfer Agreement,
then the maximum number of shares that may be issued without  resulting in a Put
shall be issued to the Lender as hereinabove  set forth,  and the Borrower shall
issue to the Lender Warrants for the purchase of the remaining  shares due to be
issued  to the  Lender  hereunder  with an  Exercise  Price (as  defined  in the
Warrant)  equal to the par value of the Common  Stock.  Each  Stock  Certificate
issued hereunder shall bear the following legend:

         "The Shares represented by this certificate have not been registered or
qualified  under the Securities Act of 1933, as amended,  or the "blue sky" laws
of any  state,  and may be  offered  or sold only if  registered  and  qualified
pursuant to the relevant  provisions of federal and state securities laws, or if
an exemption from such  registration  or  qualification  is applicable,  upon an
opinion of counsel to the issuer that such transfer will not violate any federal
or state securities laws applicable thereto."

                  The parties  hereto agree that,  for income tax purposes,  the
purchase  price to be  attributed  to the shares of Common  Stock  issued to the
Lender hereunder on the date hereof is $___________________.

                  (e) Warrants.  (i) The Guarantor shall, on each November 15,
commencing November 15, 1997, until all of the Term Loan Payments have been
satisfied in full, issue and deliver to the Lender or its designee validly
issued Warrants for the purpose of:

                         (I)  250,000 shares of Common Stock with an Expiration
Date (as defined in the Warrant) of five years from the date of issuance of such
Warrant, and an Exercise Price (as defined in the Warrant) equal to $1.06, and 

                         (II) shares of Common Stock, with an Expiration Date of
five years from the date of issuance, for an Exercise Price (as defined in the
Warrant) equal to the average daily closing price of the Common Stock 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, rounded to the nearest
penny, and for that number of shares of Common Stock 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  Term  Loan  on the  day of  such
delivery  and  (y) $16,100,000;


                           (ii)  On the Final Term Funding Date, the Guarantor
shall issue and deliver to the Lender or its designee  validly issued  Warrants,
for the  purchase of 1,632,140  shares of Common Stock, with an  Expiration Date
(as defined in the Warrant) of five  years  from  the date of  issuance  of such
Warrant,  and an Exercise  Price (as defined in the Warrant) equal to $1.06;
provided,  however, that the  Borrower  may elect to issue and  deliver  such
Warrants  in 13 equal installments (provided that the first installment may be
increased such that the remaining twelve installments shall be for a non-
fractional number of Warrants), the first such  installment  to be  delivered on
the Final Term Funding Date and the remaining 12 installments to be delivered on
the first day of each calendar month beginning on January 1, 1997, and ending on
December 1, 1997.

                  Notwithstanding the foregoing,  if (i) an Event of Default has
occurred,  (ii) the  Obligations  relating  to the Term Loan have been repaid in
full, (iii) any single Person,  group of affiliated Persons or Affiliate thereof
controls,  or acquires control of the voting rights of 35% or more of the Common
Stock, or (iv) the Guarantor merges,  becomes consolidated with any other Person
in a transaction  in which the Guarantor is not the surviving  entity,  or sells
all or substantially all of its assets,  then the Guarantor shall deliver to the
Lender all of the Warrants due to the Lender  pursuant to paragraph  4.01(e)(ii)
above upon demand by the Lender.

                  Notwithstanding the foregoing,  to the extent that there shall
occur at any time,  pri r to any such issuance of Warrants,  any event of a type
that would require adjustment of the number of shares issuable upon the exercise
of the Warrants or the Exercise Price (as defined in the Warrant) of such shares
to the extent that such Warrants  already had been issued,  the number of shares
to be issued under such Warrant, and the Exercise Price thereof,  shall prior to
issuance,  be adjusted in the manner  provided in Section 7 of the Warrant.  Any
such  adjusted  number of shares  issuable  pursuant  to a Warrant  and any such
adjusted  Exercise  Price shall be  reflected  in the Warrant at the time of the
issuance thereof.

                                     - 13 -

<PAGE>




                  The parties  hereto agree that,  for income tax purposes,  the
purchase price to be attributed to the Warrants  issued to the Lender  hereunder
on the date hereof is $_____________.

                  SECTION  4.02.  Payments and  Computations.  The Borrower will
make each payment under the Loan Documents to wh ch it is a party not later than
2:30  P.M.  (New York City  time) on the day when  due,  in lawful  money of the
United States of America and in immediately  available  funds,  to the Lender at
the Payment Office,  or at such other place or to such account as the Lender may
designate by notice to the Borrower.  All payments shall be made by the Borrower
without defense,  set-off or counterclaim to the Lender. Subject to Section 8.01
below,  all  interest,  fees,  costs and  expenses  for which  the  Borrower  is
obligated under any Loan Document shall, if not timely paid by the Borrower,  be
added to the principal amount of the Loan and the Borrower hereby authorizes the
Lender to, and the Lender may, from time to time,  increase the principal amount
of the  Loan by any such  amounts  due  under  any Loan  Document  to which  the
Borrower is a party. The Borrower  confirms that any addition to principal which
the  Lender  so  makes  to the  Loan  as  herein  provided  will  be  made as an
accommodation  to the Borrower and solely at the Lender's  discretion.  Whenever
any payment to be made under any such Loan Document shall be stated to be due on
a day  other  than a  Business  Day,  such  payment  shall  be made on the  next
succeeding  Business  Day and  such  extension  of time  shall  in such  case be
included in the  computation of interest and fees. All  computations of interest
under this  Agreement  and any other Loan Document and all fees shall be made by
the  Lender  on the  basis of a year of 360 days for the  actual  number of days
occurring in the period for which such interest is payable;  provided,  however,
that  with  respect  to any date on which  the  Borrower  makes a  repayment  or
prepayment  of  principal,  interest in respect of such  principal  repayment or
prepayment amount shall be calculated on the basis of a year of 360 days for the
actual number of days occurring in the period for which such interest is payable
but  excluding  the day on which such  repayment or  prepayment  of principal is
made. In no event shall prior recourse to any  Collateral be a  prerequisite  to
the Lender's right to demand  payment of any  Obligation.  The Lender's  records
kept in the ordinary  course of its business shall be presumed to be correct and
shall  constitute  prima facie evidence of the amount owing or paid with respect
to any Obligation, absent manifest error.

                  SECTION 4.03.  Taxes. (a) If the Borrower shall be required by
any  applicable  law, rule or regulation to deduct or withhold any Taxes from or
in respect of any amount payable hereunder, then (i) the amount so payable shall
be  increased  to the  extent  necessary  so  that  after  making  all  required
deductions and  withholdings  (including  Taxes on amounts payable to the Lender
pursuant to this  sentence)  the Lender shall receive an amount equal to the sum
it would have received had no such  deductions or  withholdings  been made, (ii)
the Borrower shall make such deductions or  withholdings  and (iii) the Borrower
shall pay to the relevant  taxation  authority the full amount required to be so
deducted  or  withheld.  Whenever  any Taxes are  payable  by the  Borrower,  as
promptly as possible  thereafter  the Borrower shall send the Lender an official
receipt  or other  documentation  satisfactory  to the  Lender  evidencing  such
payment to such authority.  If, due to the imposition of any Taxes, the Lender's
tax liability with respect to any amounts payable  hereunder to any other taxing
authority is reduced,  the amount of such reduction  shall be paid by the Lender
to the Borrower upon Borrower's demand therefor;  provided,  however, that in no
event shall the Lender be required to pay to the Borrower an amount in

                                     - 14 -

<PAGE>



excess of the amount withheld by the Borrower in respect of Taxes due from or in
respect of any amount payable hereunder.

                           (b) If the Lender shall be required to pay any Taxes
in respect of any amount  payable by the Borrower  hereunder,  then the Borrower
shall,  upon demand by the Lender, pay to the Lender a amount equal to the
difference between (i) the Taxes required to be paid by the Lender, and (ii) the
amount, if any, of the  reduction  of the Lender's  tax  liability  to any other
taxing  authority resulting from the payment of such Taxes;  provided,  however,
that in no event shall the Lender be required  to pay to the  Borrower an amount
in excess of the amount paid by the Borrower to the Lender pursuant to this
paragraph 4.03(b).

                  SECTION 4.04.  Default  Interest.  Any  Obligation  hereunder,
including the principal of the Loans,  fees and (to the extent permitted by law)
interest which is not paid when due (after any applicable  grace period therefor
set forth in  Section  8  hereof),  whether  upon  demand,  by  acceleration  or
otherwise,  and  all  amounts  payable  after  the  occurrence  and  during  the
continuance  of an Event of Default,  shall bear  interest from the day when due
until such amount is paid in full at a rate per annum equal to the  Post-Default
Rate.  In the event that any amount of principal of, or interest on, any Loan is
not paid within 10 days of the due date thereof (whether by demand, acceleration
or otherwise) when due, the Borrower shall,  upon demand,  pay an additional fee
equal to 5% of the amount of such principal and/or interest not timely paid.

                  SECTION 4.05. Principal Repayments.  All payments of principal
shall be applied first, to the outstanding  principal  amount of Line Loans, and
secon , to the  outstanding  principal  amount  of the  Term  Loan,  unless  the
Borrower  specifies  otherwise in a written notice  received by the Lender prior
to, or concurrently with, such principal payment.

                  SECTION  4.06.  Refinance of Term Loan.  In the event that the
Borrower  receives a bona fide offer from a third  party to  refinance  the Term
Loan on terms more favorable than the ongoing terms contained herein  applicable
to the Term Loan (a  "Refinance"),  then, on n less than 30-day's  prior written
notice to the Lender from the  Borrower  that the  Borrower has agreed to accept
such Refinance:

                  (a) the Borrower shall pay to the Lender all of the Term
Obligations;

                  (b)  upon  receipt  of  payment  in  full  of all of the  Term
Obligations,  the Borrower and the Lender shall execute,  and the Borrower shall
duly record, such documents,  instruments and agreements,  in form and substance
satisfactory  to the Lender and i s counsel,  such that the Lender  shall have a
valid and  perfected  Lien on the Property  securing the Line Loans in an amount
equal to the Line  Commitment  on the same  terms  and  conditions  as the First
Priority  Deed of Trust,  subject  only to a Lien on the  Property  securing the
Refinance up to a maximum amount of $16,100,000,  any then-existing  lien senior
to the First  Priority Deed of Trust and such other Liens as the Lender,  in its
sole discretion, may agree to in writing.

                  The Borrowe hereby acknowledges and agrees that all reasonable
fees,  costs,  expenses  and taxes  incurred  by or on  behalf of the  Lender in
connection with its obligations under this Section 4.06 are Transaction Costs.

                                     - 15 -

<PAGE>





                                    ARTICLE V

                     CONDITIONS TO EFFECTIVENESS AND LENDING

                  SECTION  5.01.  Conditions to Funding of the Tranche B Portion
of the Term  Loan.  The Lender sha l have no  obligation  to fund the  Tranche B
portion of the Term Loan until the date (the "Final Term Funding Date") on which
each of the following conditions precedent shall have been satisfied:

                           (a) Payment of Fees, Etc.  The Borrower shall have
paid on or before the Final Term Funding Date all fees, costs,  expenses and
Taxes then payable by the Borrower  pursuant to Sections  4.01,  4.03 and 9.04
hereof,  and the  Guarantor shall have satisfied all of its Obligations pursuant
to Section 4.01(d) and (e) hereof.

                           (b) Representations and Warranties; No Event of
Default.  The representations  and warranties  contained in Section 6.01 of this
Agreement and in each other Loan Document and  certificate  or other writing
delivered to the Lender  pursuant  hereto on or prior to the Final Term Funding 
Date,  including, without limitation,  each document,  certificate or agreement 
delivered pursuant to, or in connection with, the Old Agreement, shall be
correct on and as of the Final Term Funding  Date as though made on and as of
such date; and no Event of Default, or event  which with the giving of notice or
the lapse of time or both would  constitute an Event of Default,  shall have
occurred and be continuing on the Final Term  Funding  Date or would result from
the making of the Tranche B portion of the Term Loan.

                           (c) Legality.  The making of the Term Loans shall not
contravene a y law, rule or regulation applicable to the Lender, the Borrower or
the Guarantor.

                           (d) Delivery of Documents.  The Lender shall have
received on or before the Final Term Funding  Date the  following,  each in form
and  substance satisfactory to the Lender and, unless indicated otherwise, dated
the Final Term Funding Date :

                                    (i) the Term Note representing the Term
Loan, duly executed by the Borrower;

                           (ii)     the Amended and Restated Security Agreement,
duly executed by the Borrower;

                           (iii)    a copy of the First Priority Deed of Trust,
duly executed by the Borrower and the Lender, and certified as filed by the
Clerk of the County Commission of  ancock, West Virginia;

                           (iv)     evidence of the recording of the First
Priority Deed of Trust in such other  office or offices as may be  necessary or,
in the opinion of the Lender,  desirable  to perfect each Lien  purported to be 
created  thereby or to otherwise protect the rights of the Lender thereunder;

                                     - 16 -

<PAGE>




                           (v)      the Title Insurance Policy;

                           (vi)     evidence satisfactory to the Lender and  its
counsel that all obligations of the Borrower and the Guarantor  under the Senior
Loan Documents have been satisfied in full  including,  without  limitation,  a 
general release duly executed by the Senior Secured Creditor;

                           (vii)    a certificate of the Surveyor certifying
that since the latest survey of the Property, there have been no material
changes thereto;

                           (viii)   a certificate executed by an authorized
officer of the Borrower that to the best of its  knowledge,  the Property is not
located in an area designated by a Governmental Authority as a flood or similar 
hazard area in form  and  substance  satisfactory  to the  Lender,  in its  sole
and  absolute discretion;

                           (ix)     acknowledgment copies of appropriate
financing statements on Form UCC-1,  duly  executed by the  Borrower and duly
filed in such office or offices as may be  necessary  or, in the  opinion of the
Lender, desirable to perfect  the  security  interests  purported  o be  created
by the  Amended  and Restated Security Agreement;

                           (x)      duly executed UCC termination statements
with respect to UCC filings by the Senior Secured Creditor in connection with
any of the Collateral;

                           (xi)     Release of the Credit Line Deed of Trust,
dated June 27, l994, in favor of the Senior Secured Creditor;

                           (xii)    a title report with respect to the Property 
showing only those exceptions as are accept ble to the Lender, in its sole and
absolute discretion;

                           (xiii)   certified copies of requests for copies of
information on Form UCC-11, listing all effective financing statements which
name as debtor the Borrower  and which are filed in the  offices  referred to in
clause (x) above, together  with copies of such  financing  statements,  none of
which,  except as otherwise agreed to in writing by the Lender, shall cover any 
of the Collateral;

                           (xiv)    a copy of the resolutions adopted by the
Board of Directors of each Loan Party, certified as of the Final Term Funding
Date by an authorized officer thereof,  authorizing (A) the borrowings hereunder
and the transactions contemplated  by the Loan Documents to which such entity is
or will be a party, and (B) the execution, delivery and performance by each Loan
Party of each Loan Document to which it is or will be a party and the execution 
and delivery of the other documents to be delivered by the Loan Parties in
connection herewith;

                           (xv)     a certificate of an authorized officer of
each Loan Party certifying  the names and true  signatures  of the  officers  of
such Loan Party authorized to sign each Loan Document to which such entity is or
will be a party and the other

                                     - 17 -

<PAGE>



documents  to be  executed  and  delivered  by the Loan  Parties  in  connection
herewith, together with evidence of the incumbency of such authorized officers;

                           (xvi)    a certificate, dated as of a date not more
than ten (10) Business Days prior to the Final Term Funding Date, of the
appropriate  official of  the  jurisdiction  of  incorporation   and  each
jurisdiction of foreign qualification, both inside and outside the United States
of each Loan Party, certifying as to the  subsistence  in good standing of, and 
the payment of taxes by, each Loan Party in such  jurisdictions  and listing all
charter documents of each Loan Party on file with such  official(s),  together
with  confirmation  by telephone or telegram (where available) on the Final Term
Funding Date from such official(s) as to such matters;

                           (xvii)   a copy of the charter of each Loan Party,
certified as of a date  not  more  than  30 days  prior  to the  Final  Term
Funding Date by the appropriate official(s) of the jurisdiction of incorporation
of each Loan Party and as of the Final  Term  Funding  Date by an  authorized
officer of such Loan Party;

                           (xviii)  a copy of the by-laws of each Loan Party,
certified as of the Final Term Funding Date by an authorized officer of such
Loan Party;

                           (xix)    an opinion of Freer & McGarry, counsel to
the Borrower and the Guarantor, substantially in the form of Exhibit G hereto
and as to such other matters as the Lender may reasonably request;

                           (xx)     an opinion of Jackson and Kelly, West
Virginia counsel to the Borrower and the Guarantor, substantially in the form of
Exhibit H hereto and as to such other matters as the Lender may reasonably
request;

                           (xxi)    a copy of the Financial Statements, together
with a certificate of the chief  executive  officer or chief  financial  officer
of the  Borrower, setting forth all existing  guarantees and other  contingent  
liabilities of the Borrower;

                           (xxii)   a certificate of insurance evidencing
insurance on all property of the Borrower as is required by Section 7.01(h)
thereof, naming the Lender as additional insured as its interests may appear for
all insurance maintained by the Borrower;

                           (xxiii)  a schedule of all existing leases under
which the Borrower is a lessee for the use of real property, certified by the
chief financial officer of the Borrower;

                           (xxiv)   such other agreements, instruments,
approvals, opinions and other documents as the Lender may reasonably request.

                           (e) Proceedings; Receipt of Documents.  All
proceedings in connection with the transactions  contemplated by this Agreement,
and all documents  incidental thereto, shall be satisfactory to the Lender and
its counsel, and the Lender and such counsel shall have received

                                     - 18 -

<PAGE>



all such information and such counterpart originals or certified or other copies
of such documents as the Lender or such counsel may reasonably request.

                           (f) Material Adverse Change.  The Lender shall have
determined, in its sole and absolute discretion, that no material adverse change
shall have occurred in the  business,  operations,  assets,  financial condition
or  prospects of the Borrower or the Guarantor after June 30, 1996.

                           (g) Due Diligence.  The Lender shall have completed
its due diligence  with  respect to the Loan  Parties and the results  thereof
shall be acceptable to the Lender, in its sole and absolute discretion.

                  SECTION 5.02.         Conditions to Funding of Line Loans.
The obligation of the Lender to make the initial Line Loan hereunder is subject
to the satisfaction in full of each of the following conditions precedent:
     nt of Fees,  Etc. The Borrower  shall have paid on or before the Final Term
Funding  Date all fees,  costs,  expenses and taxes then payable by the Borrower
pursuant  to  Sections  4.01 and  9.04  hereof,  and the  Guarantor  shall  have
satisfied all of its Obligations  pursuant to Section 4.01(d) and (e) hereof, in
each case with respect to the Line Loans.

                           (b) Representations and Warranties; No Event of
Default. The representations  and warranties  contained in Section 6.01 of this 
Agreement and in each other Loan Document and  certificate  or other writing
delivered to the Lender pursuant hereto, including, without   limitation,   each
document, certificate or agreement  delivered  pursuant to, or in connection
with, the Old Agreement, shall be correct on and as of the date of the making of
the requested Line Loan as though made on and as of such date,  other than as
reflected  in a written  certificate  delivered to the Lender at least three (3)
Business Days prior to the making of the initial Line  Loan,  which  certificate
shall be reasonably  acceptable  in form and  substance  to the  Lender;  and no
Event of Default, or event  which with the giving of notice or the lapse of time
or both would  constitute an Event of Default,  shall have occurred and be
continuing on such date either before or after giving effect to the requested
Line Loan.

                           (c) Legality.  The making of the Li e Loans shall not
contravene any law, rule or regulation applicable to the Lender, the Borrower or
the Guarantor.

                           (d) Delivery of Documents.  The Lender shall have
received the Line Note duly executed by the Borrower.

                           (e) Material Adverse Change.  The Lender shall have
determined, in its sole and absolute discretion, that no material adverse change
shall have occurred in the  business,  operations,  ass ts,  financial condition
or  prospects of the Borrower or the Guarantor after June 30, 1996.

                           (f) Other Conditions.  All of the conditions set
forth in Section 5.01 hereof shall have been satisfied and the Lender shall have
made the Tranche B portion of the Term Loan.

                                     - 19 -

<PAGE>




                  SECTION 5.03. Conditions of Funding each Line Loan. The Lender
shall have no obligation to make any Line Loan after the Final Term Funding Date
unless and until each of the following conditions have been satisfied:

                           (a) Representations and Warranties; No Event of
Default.  The representations  and warranties  contained in Section 6.01 of this
Agreement and in each other Loan Document and  certificate  or other writing
delivered to the Lender pursuant hereto, including,  without   limitation,  each
document, certificate or agreement  delivered  pursuant to, or in connection
with, the Old Agreement, shall be correct on and as of the date of the making of
the requested Line Loan as though made on and as of such date,  other than as
reflected in a written  certificate  delivered to the Lender at least three (3) 
Business Days prior to the  making  of the  initial Line Loan, which certificate
shall be reasonably  acceptable  in form and  substance  to the  Lender;  and no
Event of Default, or event  which with the giving of notice or the lapse of time
or both would  constitute an Event of Default,  shall have occurred and be
continuing on such date either before or after giving effect to the requested
Line Loan.  The Borrower shall be deemed to have  represented  and warranted the
foregoing upon any request, by delivery of a Notice of Line Borrowing or
otherwise,  for a Line Loan.

                           (b) Borrowing Notice.  The Lender shall have received
a Notice of Line  Borrowing in accordance with Section 3.02 with respect to such
Line Loan. Such  Notice of Line Borrowing shall contain a  detailed  description
of the proposed use of funds with appropriate  additional materials as are
requested by the Lender to review the proposed use of funds,  including, without
limitation, any bids,  contracts,  plans, purchase agreements or the like in
connection with such use of proceeds, and the calculation of the then current
EBITDA Average.

                           (c) Use of Proceeds.  The proceeds of the Line Loans 
shall be used only for capital i  provements,  the  acquisition  of  equipment  
and/or other gaming businesses, or the  acquisition of properties for use in the
gaming and lottery business consistent with the current businesses of the
Borrower.

                           (d) EBITDA Average.  The EBITDA Average at the time
of such request for a Line Loan is at least $750,000.00.


                                   ARTICLE VI

                         REPRESENTATIONS AND WARRANTIES

SECTION 6.01.         Representations and Warranties of the Borrower and the
Guarantor.  The Borrower and the Guarantor, as appropriate, each represent and
warrant as follows:

                           (a) Organization, Good Standing, Etc. Each Loan Party
(i) is a corporation duly  organized,  validly  existing and in good  standing
under the laws of the jurisdiction of its incorporation, (ii) has all requisite
power and authority to conduct its business as now onducted

                                     - 20 -

<PAGE>



and as presently contemplated to make the borrowings hereunder and to consummate
the transactions  contemplated hereby and by each of the Loan Documents to which
it is a  party,  and  (iii)  is duly  qualified  to do  business  and is in good
standing in each  jurisdiction  and territory,  inside and outside of the United
States,  in which the  character of the  properties  owned or leased by it or in
which the transaction of its business makes such  qualification  necessary.  The
Borrower is a wholly-owned subsidiary of the Guarantor.

                           (b) Authorization, Etc.  The execution, delivery and 
performance by each Loan  Party of each Loan  Document  to which it is a party
(i) have been duly  authorized by all  necessary  corporate  action, (ii) do not
and will not contravene the charter or by-laws, law or any contractual
restriction binding on or otherwise  affecting it or any of its  properties,
(iii) do not and will not result in or require the c eation of any lien,
security interest or other charge or  encumbrance  (other than  pursuant to any
such Loan  Document)  upon or with respect  to any of its  properties,  and (iv)
do not and will not  result in any suspension,  revocation,  impairment,
forfeiture  or  nonrenewal of any permit, license,  authorization  or approval
applicable to its operations or any of its properties.

                           (c) Governmental Approvals.  No authorization or
approval or other action by,  and no  notice to or  filing  with,  any
Governmental  Authority  or other regulatory body is required in connection with
the due execution, delivery and performance by the Borrower or the Guarantors of
any Loan Document to which such Persons are or will be parties.

                           (d) Enforceability of Loan Documents.  This Agreement
is, and each other Loan  Document  to which the  Borrower  or the  Guarantor  is
or will be a party, when delivered  hereunder,  will be a legal, valid and
binding obligation of such Person, enforceable against such Person in accordance
with its terms.

                           (e) Certificates.  Each Stock Certificate issued and
delivered pursuant to subsection 3.01(d) or pursuant to the terms of any Warrant
shall, upon issuance and delivery  pursuant to the terms hereof or the terms of 
such Warrant,  as may be the case, represent validly issued, fully paid and non-
assessable  shares of Common Stock.

                           (f) Subsidiaries.  There are no Subsidiaries of the
Borrower other than Mountaineer Magic, Inc.

                           (g) Litigation.  Except as set forth on Schedule II
hereto and in the Financial  Statements,  there  is no  pending  or  threatened
action,  suit  or proceeding  affecting the Borrower or the  Guarantors  before 
any court or other Governmental  Authority  or any  arbitrator.  There is no
pending or  threatened action,  suit or  proceeding  affecting  the  Borrower or
any of the  Guarantors before any court or other  Governmental  Authority or any
arbitrator  which may materially adversely affect the operations or condition,
financial or otherwise, of such Person or the ability of such  Person to perform
its  obligations  under any Loan Document to which such Person is or will be a
party.

                           (h) Financial Condition.  The Financial Statements,
copies of which have been delivered to the Lender, fairly present the financial
condition of the Loan Parties as of the respective dates thereof and the results
of operations of the Loan Parties for the fiscal

                                     - 21 -

<PAGE>



periods ended on such respective  dates, all in accordance with GAAP. Since June
30,  1996,  there  has been no  material  adverse  change in such  condition  or
operations.  There has been no change  in the  number of shares of Common  Stock
outstanding since May 16, 1996, as reported on the Form 10Q of the Guarantor for
the period ending March 31, 1996, other than as set forth on Schedule X hereto.

     (i) Compliance with Law, Etc.  Neither the Borrower nor the Guarantor is in
violation  of its  charter  or  by-laws,  any  law or any  material  term of any
agreement  or  instrument  binding on or  otherwise  affecting  it or any of its
properties.

     (j) ERISA.  Neither  Loan Party  maintains,  or is obligated to maintain or
contribute  to, any Employee  Plan or  Multiemployer  P an. As of the Final Term
Funding Date,  neither Loan Party has any employee  benefit plan with respect to
which the present value of all vested,  nonforfeitable  benefits under such plan
exceeds  the fair  market  value of the  assets of such plan  allocable  to such
benefits (any such amount constituting an "Unfunded Liability").

     (k) Taxes, Etc. After giving effect to any lawful  extension,  all Federal,
state and local tax returns and other  reports  required by pplicable  law to be
filed  by the  Borrower  or the  Guarantors  have  been  filed,  and all  taxes,
assessments  and other  governmental  charges  imposed  upon the Borrower or the
Guarantors or any property of the Borrower or the  Guarantors  which have become
due and  payable on or prior to the date  hereof  have been paid,  except to the
extent contested in good faith by proper  proceedings  which stay the imposition
of any penalty,  fine or lien  resulting from the  non-payment  thereof and with
respect to which adequate reserves have been set aside for the payment thereof.

     (l)  Regulation U. Neither the Borrower nor the Guarantor is or will not be
engaged in the business of  extending  credit for the purpose of  purchasing  or
carrying margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal  Reserve  System),  and no proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purch sing or carrying any margin stock.

     (m) Adverse  Agreements,  Etc.  Neither the Borrower nor the Guarantor is a
party to any  agreement  or  instrument,  or  subject  to any  charter  or other
corporate  restriction  or any  judgment,  order,  regulation,  ruling  or other
requirement of a court or other Governmental Authority or regulatory body, which
materially  adversely affects,  or, to the best knowledge of the Borrower or the
Guarantor,  in the future is reasonably li ely to materially  adversely  affect,
the  condition or  operations,  financial or  otherwise,  of the Borrower or the
Guarantor  or the  ability of the  Borrower  or the  Guarantor  to  perform  its
obligations under any Loan Document to which the Borrower is or will be a party.

     (n) Holding Company and Investment  Company Acts.  Neither the Borrower nor
the Guarantor is (i) a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "ho ding company",  as such terms are defined in
the  Public  Utility  Holding  Company  Act of  1935,  as  amended,  or  (ii) an
"investment  company" or an "affiliated  person" or "promoter" of, or "principal
underwriter"  of or for, an "investment  company",  as such terms are defined in
the Investment Company Act of 1940, as amended.

                                     - 22 -

<PAGE>




     (o)  Permits,  Etc.  The  Borrower  and the  Guarantor  have  all  permits,
licenses,  authorizations  and  approval  required  for it to  lawfully  own and
operate its respective businesses.  Schedule III hereto sets forth all licenses,
permits, authorizations and approvals required by any Governmental Authority for
the lawful  conduct of the  Borrower's  business,  and each of the foregoing has
been  obtained by the  Borrower  and is in full force and effect as of the Final
Term Funding Date.

     (p) Title to Properties.  The Borrower has good and marketable title to all
of its p operties and assets,  free and clear of all liens,  security  interests
and other charges and encumbrances and other types of preferential arrangements,
except  such as are  permitted  by Section  7.02(a)  hereof.  All of  Borrower's
properties are titled in Borrower's legal name.  Borrower has not used, or filed
a financing statement (or other evidence of a lien, charge or Security Interest)
under, any other name in any United States jurisdiction or territory outside the
United States for at least the last five (5) years.

     (q) Full Disclosure. No Loan Document or schedule or exhibit thereto and no
certificate, report, statement or other document or information furnished to the
Lender in  connection  herewith  or with the  consummation  of the  transactions
contemplated  hereby,  contains any  misstatement  of material  fact or omits to
state a material  fact or any fact  necessary to make the  statements  contained
herein or therein  not  misleading.  There is no  contingent  liabi ity or other
material fact of which the Borrower or the  Guarantor is aware after  reasonable
inquiry that may  adversely  affect the  condition or  operations,  financial or
otherwise,  or the business or prospects of the Borrower or the Guarantor  which
has not been set forth in a footnote  included in the Financial  Statements or a
Schedule hereto or thereto.

     (r) Operating Lease Obligations.  The Borrower does not have any obligation
as lessee for the payment o rent for any real or personal property other than as
set forth in Schedule IV hereto.

     (s) Indebtedness.  The Borrower has no Indebtedness other than Indebtedness
set forth on Schedule V hereto.

     (t) Environmental Matters.  Except as set forth in the Plan of Remediation,
(i) the Borrower is in compliance  with all applicable  Environmental  Laws, and
(ii) none of the operations of the Borrower is the sub ect of any Federal, state
or local  investigation  to determine  whether any remedial  action is needed to
address the presence,  disposal,  release or threatened release of any Hazardous
Material into the  environment  which may have a material  adverse effect on the
business,  operations,  property,  assets or financial or other condition of the
Borrower,  and the Borrower does not have any contingent liability in connection
with any release of any Hazardous Material into the environment which may have a
material  adverse  effect  on its  business,  operations,  property,  assets  or
financial or other condition.

     (u) Schedules.  All of the information which is required to be scheduled to
this Agreement is correct and accurate in all material respects.

                                     - 23 -

<PAGE>




     (v)  Insurance.  Each of Borrower  and the  Guarantor  keeps its  insurable
properties  adequately  insured and  maintains  (i) insurance to such ext nt and
against such risks,  including  fire, as is customary with companies in the same
or similar  businesses,  (ii)  workmen's  compensation  insurance  in the amount
required by  applicable  law,  (iii)  personal  liability  insurance  and public
liability  insurance,  in the amount  customary  with  companies  in the same or
similar  business  against  claims for  personal  injury or death or  properties
owned,  occupied or  controlled  by it, and (iv) such other  insurance as may be
required by law or as may be reasonably required in writing by the Lender.

     (w) Use of  Proceeds.  The  proceeds  of the Loans shall be used (i) in the
case of the Tranche B portion of the Term Loan, to refinance the Obligations (as
defined in the Senior Loan  Agreement) and fund the costs and expenses  thereof,
and in working  capital  and (ii) in the case of the Line Loans,  in  compliance
with Section 5.03 (c) hereof.

     (x) Solvency of the Borrower. As of t e date first written above, and after
giving  effect to the Loans and to liens  created by the Borrower in  connection
therewith,  (i) the sum of the assets, at a fair valuation, of the Borrower will
exceed its debts ("debt"  means any liability on a claim,  and "claim" means (A)
right  to  payment,  whether  or not  such  a  right  is  reduced  to  judgment,
liquidated,  unliquidated,  fixed,  contingent,  matured,  unmatured,  disputed,
undisputed, legal, equitable, secured, or unsecured or (B) right to an equitable
remedy for breach of performance  if such breach gives rise to payment,  whether
or not such  right  to an  equitable  remedy  is  reduced  to  judgment,  fixed,
contingent,  matured, unmatured,  disputed,  undisputed,  secured or unsecured);
(ii) the Borrower  has not  incurred and does not intend to incur,  and does not
believe  that it will incur,  debts beyond its ability to pay such debts as such
debts mature; and (iii) the Borrower has, and will have, sufficient capital with
which to conduct its business.

     (y) Solvency of the  Guarantor.  As of the date first  written  above,  and
after  giving  effect to the  Loans  and to liens  created  by the  Borrower  in
connection  therewith,  (i)  the  sum  of  the  consolidated  assets,  at a fair
valuation, of the Guarantor will exceed its consolidated debts ("debt" means any
liability  on a claim,  and "claim"  means (A) right to payment,  whether or not
such  a  right  is  reduced  to  judgment,  liquidated,   unliquidated,   fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured,
or unsecured or (B) right to an equitable  remedy for breach of  performance  if
such  breach  gives rise to payment,  whether or not such right to an  equitable
remedy is reduced to judgment, fixed, contingent,  matured, unmatured, disputed,
undisputed,  secured or unsecured); (ii) the Guarantor has not incurred and does
not intend to incur,  and does not believe that it will incur,  debts beyond its
ability to pay such debts as such debts  mature;  and (iii) the  Guarantor  will
have sufficient capital with which to conduct its business.

     SECTION 6.02.  Representations,  Warranties and Covenants of Lender. Lender
hereby represents and warrants to and covenants with Borrower and Winners that:

     All shares of Winners  Common Stock  acquired by Lender in accordance  with
this  Agreement are being  acquired by lender for its own account for investment
and without

                                     - 24 -

<PAGE>



a view to distribut any of the shares of Winners Common Stock in any transaction
which would be in violation of the Securities Act of l933, as amended.


                                   ARTICLE VII

                   COVENANTS OF THE BORROWER AND THE GUARANTOR

                  SECTION 7.01. Affirmative Covenants.  So long as any principal
of or  interest  on any Loan shall  remain  unpaid or the Lender  shall have any
commitment to make a Loan  hereunder,  the Borrower and where  appropriate,  the
Guarantor will, unless the Lender shall otherwise consent in writing:

                           (a) Reporting Requirements.  Furnish to the Lender:

     (i) as soon as  available  and in any event within 30 days after the end of
each month, an interim (A) consolidated and consolidating  balance sheets of the
Borrower as at the end of such month and for the period commencing at the end of
the immediately preceding fiscal year and ending with the end of such month, (B)
consolidated and consolidating statement of income of the Borrower as at the end
of such  month  and  for the  period  commencing  at the end of the  immediately
preceding  fiscal  year  and  ending  with  the  end  of  such  month,  and  (C)
consolidated and  consolidating  statement of cash flow of the Borrower for such
month and for the  period  commencing  at the end of the  immediately  preceding
fiscal year and ending with the end of such month,  setting forth in comparative
form the  corresponding  figures  for the  corresponding  date or  period of the
immediately  preceding  fiscal year and setting forth the budget for such period
all in reasonable  detail and prepared in  accordance  with  generally  accepted
accounting  principles  consistently  applied,  each duly certified by the chief
financial  officer  of the  Borrower  as (1)  fairly  presenting  the  financial
condition  of the  Borrower  at the end of such  month,  and the  results of the
operations  of the Borrower  for such month  (subject to normal  year-end  audit
adjustments), and (2) having been prepared in accordance with generally accepted
accounting principles consistently applied;

     (ii) as soon as available  and in any event within 45 days after the end of
each  fiscal  quarter  of  the  Borrower,   an  inter  m  (A)  consolidated  and
consolidating  balance  sheet of the  Borrower as at the end of such quarter and
for the period  commencing at the end of the immediately  preceding  fiscal year
and ending with the end of such  quarter,  (B)  consolidated  and  consolidating
statement  of income of the  Borrower as at the end of such  quarter and for the
period commencing at the end of the immediately preceding fiscal year and ending
with the end of such quarter,  and (C) consolidated and consolidating  statement
of cash flow of the Borrower for such quarter and for the period  commencing  at
the end of the immediately preceding fiscal year and ending with the end of such
quarter  setting forth in  comparative  form the  corresponding  figures for the
corresponding  date or  period  of the  immediately  preceding  fiscal  year and
setting forth the budget for such period,  all in reasonable detail and prepared
in  accordance  with  generally  accepted  accounting  principles   consistently
applied, each duly

                                     - 25 -

<PAGE>



certified  by the  chief  financial  officer  of  the  Borrower  as  (1)  fairly
presenting  the financial  condition of the Borrower at the end of such quarter,
and the results of the  operations of the Borrower for such quarter  (subject to
normal year-end audit  adjustments),  and (2) having been prepared in accordance
with generally accepted accounting principles consistently applied;

     (iii) as soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower,  a (A) co solidated and consolidating  balance
sheet of the Borrower as at the end of such fiscal year,  (B)  consolidated  and
consolidating  statement  of income of the Borrower as at the end of such fiscal
year,  and (C)  consolidated  and  consolidating  statement  of cash flow of the
Borrower  for  such  fiscal  year  setting   forth  in   comparative   form  the
corresponding  figures  for the  immediately  preceding  fiscal year and setting
forth the budget for such fiscal year, all in reasonable  detail and prepared in
accordance with generally accepted accounting  principles  consistently  applied
and, in the case of balance  sheets and  statement of income,  accompanied  by a
report  and an  unqualified  opinion,  prepared  in  accordance  with  generally
accepted auditing  standards,  of an independent  certified public accountant of
recognized  standing  selected by the Borrower and  satisfactory  to the Lender,
together with any management  letter  prepared by such  accountant and a written
statement of such  accountant  (1) to the effect that in making the  examination
necessary  for  its  certification  of  such  financial  statements,  it has not
obtained  any  knowledge of the  existence  of an Event of Default,  or an event
which,  with the giving of notice or the lapse of time or both, would constitute
an Event of Default, or (2) if such accountant shall have obtained any knowledge
of the existence of an Event of Default,  or an event which,  with the giving of
notice  or the  lapse of time or both,  would  constitute  an Event of  Default,
describing the nature thereof;

     (iv) within 30 days after the end of any fiscal quarter of the Guarantor or
such  time  that the  information  required  to be  delivered  pursuant  to this
subparagraph  6.01(a)(iv) is delivered to the Securities and Exchange Commission
without  violation of any rule,  regulation or order thereof,  balance sheets of
the  Guarantor  and its  subsidiaries  as of the end of such fiscal  quarter and
statements of income and retained earnings of the Guarantor and its subsidiaries
for the period  commenci  g at the  beginning  of the fiscal  year in which such
fiscal  quarter  falls  through the end of such  fiscal  quarter,  certified  as
accurate and correct by the chief financial officer of the Guarantor;

     (v) within 120 days after the end of each fiscal year of the  Guarantor  or
such  time  that the  information  required  to be  delivered  pursuant  to this
subparagraph  6.01(a)(v) is delivered to the Securities and Exchange  Commission
without violation of any rule, regulation or order the eof, a copy of the annual
report for such fiscal year for the  Guarantor and its  subsidiaries  containing
financial statements for such year certified in a manner acceptable to Lender by
independent public accountants of recognized standing;

     (vi) promptly  after the sending or filing  thereof,  copies of all reports
that the Guarantor sends to any of its security  holders,  reports and copies of
all

                                     - 26 -

<PAGE>



reports and  registration  statements that the Gua antor or any subsidiary files
with the Securities and Exchange Commission or any national securities exchange;

     (vii) promptly upon delivery  thereof,  all reports and filings made by the
Borrower and/or the Guarantor to the West Virginia Racing Commission or the West
Virginia Lottery Commission;

     (viii)  simultaneously  with  the  delivery  of  the  financial  statements
required by clauses (i), (ii), (iii), (iv) and (v) of this Section 7.01(a),  (A)
certificate  of the chief  financial  officer  of the  appropriate  Loan  Party,
stating that such officer has reviewed the  provisions of this Agreement and the
other Loan  Documents to which such Loan Party is a party and has made or caused
to be made under his  supervision a review of the  condition  and  operations of
such Loan Party during the period  covered by such financial  statements  with a
view to  determining  whether the  Borrower  was in  compliance  with all of the
provisions of such Loan Documents,  and that such review has not disclosed,  and
such officer has no knowledge of, the  existence  during such period of an Event
of Default, or an event which, with the giving of notice or the lapse of time or
both, would constitute an Event of Default;

     (ix) as soon as available, and in any event no later than 90 days after the
end of each year,  annual financial  projections  (including  forecasted  income
statements,  cash flow statements,  schedules of cash receipts and disbursements
and  borrow  ngs  hereunder)  of the  Borrower  and the  Guarantor  for the next
succeeding  three-year period, all in reasonable detail,  together with all such
supporting information as the Lender shall reasonably request;

     (x) promptly after submission to any  Governmental  Authority not otherwise
referred to in this subsection 7.01(a), all documents and information  furnished
to such  Governmental  Authority,  unless such  documents  and  information  are
furnished in the  ordinary  course of business nd will not result in any adverse
action to be taken by such Governmental Authority;

     (xi) promptly after obtaining  knowledge thereof but in any event not later
than five (5) days  after the  occurrence  of an Event of  Default,  or an event
which,  with the giving of notice or the lapse of time or both, would constitute
an  Event  of  Default,  or a  material  adverse  change  in  the  condition  or
operations,  financial or otherwise,  of the Borrower,  the written statement of
the chief exe utive  officer or the chief  financial  officer  of the  Borrower,
setting  forth the details of such Event of Default,  event or material  adverse
change and the action which the Borrower proposes to take with respect thereto;

     (xii)  as soon as  possible  and in any  event  within  10 days  after  the
Borrower,  the Guarantor or any of their  Affiliates knows or has reason to know
of the existence of any Unfunded Liability, a notice setting forth the amount of
such  Unfunded  Liability,  cert  fied by the  chief  financial  officer  of the
applicable Loan Party.

                                     - 27 -

<PAGE>




     (xiii) promptly after the  commencement  thereof but in any event not later
than five (5) Business Days after service of process with respect thereto on, or
the obtaining of knowledge thereof by, the Borrower or the Guarantor,  notice of
each action, suit or proceeding before any court or other Governmental Authority
or other regulatory body or any arbitrator which may materially adversely affect
the  condition or  operations,  financial or  otherwise,  of the Borrower or the
Guarantor; and

     (xiv)  promptly  upon  request,  such  other  information   concerning  the
condition  or  operations,  financial  or  otherwise,  of  the  Borrower  or the
Guarantor as the Lender from time to time may reasonably request.

     (b) Compliance  with Laws,  Etc.  Comply in all material  respects with all
applicable  laws,  rules,  regulations  and orders,  such compliance to include,
without  limitation,  (i) paying  before the same become  delinquent  all taxes,
assessments  and  governmental  charges  or levies  imposed  upon it or upon its
income or profits or upon any of their  properties,  and (ii)  paying all lawful
claims  which  if  npaid  might  become  a lien  or  charge  upon  any of  their
properties,  except to the extent contested in good faith by proper  proceedings
which  stay the  imposition  of any  penalty,  fine or lien  resulting  from the
non-payment  thereof and with respect to which  adequate  reserves have been set
aside for the payment thereof.

     (c)  Preservation of Existence,  Etc.  Maintain and preserve its existence,
rights and privileges,  and become or remain duly qualified and in g od standing
in each jurisdiction in which the character of the properties owned or leased by
it or in  which  the  transaction  of  its  business  makes  such  qualification
necessary.  Maintain all licenses  and  accreditations  necessary to conduct the
business of the Borrower and the Guarantor.

     (d)  Keeping of Records  and Books of Account.  Keep  adequate  records and
books of account, with complete entries made in accordance with GAAP.

     (e)  Inspection  Rights.  Permit the  Lender or any agent or representative
thereof at any reasonable  time and from time to time to examine and make copies
of and abstracts from its records and books of account, to visit and inspect its
properties,  to conduct  audits or  examinations,  and to discuss  its  affairs,
finances  and  accounts  with  any  of  the  directors,   officers,   employees,
independent accountants or other representatives thereof. The Borrower agrees to
pay the cost of each  such  audit  or  examination  as  provided  in  subsection
4.01(c).

     (f)  Maintenance  of  Properties,  Etc.  Maintain  and  preserve all of its
properties  which are necessary or useful in the proper  conduct of its business
in good working order and condition, ordinary wear and tear excepted, and comply
at all times  with the  provisions  of all leases to which the  Borrower  or the
Guarantor  is a party as lessee or under  which the  Borrower  or the  Guarantor
occupies property, o as to prevent any loss or forfeiture thereof or thereunder.

     (g)  Maintenance  of Insurance.  Maintain  insurance with  responsible  and
reputable  insurance companies or associations  (including,  without limitation,
comprehensive  general liability,  personal liability and hazard insurance) with
respect to its properties and

                                     - 28 -

<PAGE>



business,  in such  amounts  and  covering  such  risks,  as is  required by any
Governmental  Authority or other egulatory body having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice by
companies in similar businesses similarly situated.

     (h) Environmental Indemnity. Comply with the requirements of all applicable
Environmental  Laws,  provide to the Lender all documentation in connection with
such compliance that the Lender may reasonably request,  and defend,  indemnify,
and hold harmless the Lender,  its employe s, agents,  officers,  and directors,
from  and  against  any  claims,   demands,   penalties,   fines,   liabilities,
settlements,   damages,  costs,  or  expenses  (including,  without  limitation,
attorney and consultant  fees,  investigation  and laboratory fees, court costs,
and litigation expenses) arising out of (i) the presence,  disposal, release, or
threatened release of any Hazardous  Materials on any property at any time owned
or occupied by the Borrower (or its predecessors in interest or title); (ii) any
personal injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Materials;  (iii) any investigation,
lawsuit brought or threatened,  settlement reached, or government order relating
to such Hazardous Materials; and/or (iv) any violation of any Environmental Law.

     (i) Notification of Event of Default  Immediately  notify Lender in writing
of any default of  nonpayment or any other default or event of default or no ice
thereof under any agreements or instruments  representing  material Indebtedness
of Borrower or the Guarantor or any Lien on their respective assets.

     (j) Further Assurances. Each Loan Party shall do, execute,  acknowledge and
deliver, at the sole cost and expense of such Loan Party, all such further acts,
deeds, conveyances,  mortgages,  assignments,  estoppel certificates,  financing
statements,  notices of  assignment,  transfers and assurances as the Lend r may
reasonably require from time to time in order to better assure,  convey,  grant,
assign,  transfer  and  confirm  unto the Lender  the  rights  now or  hereafter
intended to be granted to the Lender under this Agreement,  any Loan Document or
any other  instrument under which such Loan Party may be or may hereafter become
bound to convey,  mortgage  or assign to the Lender to effect the  intention  or
facilitate the performance of the terms of the Agreement.

     (k)  Additional  Securi  y.  The  Borrower  shall,  within  10  days of the
acquisition  of any  asset by the  Borrower  with the  proceeds  of a Line  Loan
(whether  such  acquisition  is  funded  in whole or in part by such  proceeds),
execute and deliver all  documents  necessary  or  desirable,  in the opinion of
counsel to the Lender,  to perfect a first  priority  security  interest in such
asset in favor of the Lender; provided,  however, that with respect to any asset
that is partially funded by a purchase money mortgage or purchase money security
interest  in  accordance  with  subsection  7.02(a)(vii)  hereof,  the  Lender's
security  interest may be subject to such  purchase  money  mortgage or security
interest;  and  provided,  further,  however,  that the  Lender  shall  not have
additional  security  in the event such  purchase  money  mortgage  or  security
agreement  precludes  junior  financing.  Each of the Borrower and the Guarantor
hereby acknowledge and agree that (i) any asset other than an equity interest in
a Person acquired by it after the date hereof shall be automatically  subject to
a Lien in favor of the Lender  pursuant  to the Amended  and  Restated  Security
Agreement and be subject to the terms thereof, and (ii) any

                                     - 29 -

<PAGE>



asset that is an equity interest in another Person shall be subject to the terms
and  conditions  of  a  pledge  agreement  in  form  and  substance   reasonably
satisfactory to the Lender.

     (l)  Environmental  Actions The  Borrower sh ll take all remedial and other
actions as set forth in the Plan of Remediation in a timely manner.

                  SECTION 7.02. Negative Covenants.  So long as any principal of
or interest on any Loan,  or any  Obligation,  shall remain unpaid or the Lender
shall have any  commitment to make any Loan,  the Borrower  will not and,  where
appropriate,  the Guarantor will not,  without the prior written  consent of the
Lender:

     (a) Liens,  Etc. Create or suffer to exist any Lien upon or with respect to
any of its  properties,  rights or other assets,  whether now owned or hereafter
acquired,  or assign or otherwise  transfer any right to receive  income,  other
than:

     (i) Liens cr ated pursuant to the Loan Documents;

     (ii) Liens existing on the date hereof, as set forth in Schedule VI hereto,
and the renewal and replacement of such liens, provided that any such renewal or
replacement  lien shall be limited to the property or assets covered by the lien
renewed  or  replaced  and the  indebtedness  secured  by any  such  renewal  or
replacement  lien  shall  be in  an  amount  not  greater  than  the  amount  of
indebtedness  secured by the lien  renewed or  replaced;  (iii) Liens for taxes,
assessments  or  governmental  charges or levies to the extent  that the payment
thereof shall not be required by Section 7.01(b)(i) hereof;

     (iv) Liens  created  by  operation  of law,  such as  materialmen's  liens,
mechanics'  liens and other  similar  liens,  arising in the ordinary  course of
business  and  securing  claims the  payment of which  shall not be  required by
Section 7.01(b)(ii) hereof;

     (v) depos ts,  pledges or Liens  (other  than liens  arising  under  ERISA)
securing  (A)  obligations   incurred  in  respect  of  workers'   compensation,
unemployment insurance or other forms of governmental insurance or benefits, (B)
the performance of bids, tenders,  leases, contracts (other than for the payment
of money) and  statutory  obligations,  or (C)  obligations  on surety or appeal
bonds,  but only to the extent such  deposits,  pledges or liens are incurred or
otherwise arise in the ordinary course of business and secure  obligations which
are not past due;

     (vi)  restrictions on the use of real property and minor  irregularities in
the title thereto which do not (A) secure  obligations  for the payment of money
or (B) materially impair the value of such property or its use by any Loan Party
in the normal conduct of such Loan Party's business;

                                     - 30 -

<PAGE>




     (vii) (A) purchase money liens on or purchase  money security  interests in
equipment acquire or held by the Borrower in the ordinary course of its business
to secure the purchase price of such property or  Indebtedness  incurred  solely
for the purpose of financing the  acquisition of such property,  or (B) liens or
security  interests  existing on such  property at the time of its  acquisition,
provided,  that (1) no such lien or security interests shall extend to cover any
other property of the Borrower, and (2) the principal amount of the Indebtedness
secured  by any such lien or  security  interest  shall not  exceed  100% of the
lesser of the fair market value or the cost of the property so held or acquired;
and

     (viii) any other Lien in favor of the Lender.

     (b) Indebtedness.  Create, incur or suffer to exist ny Indebtedness,  other
than:

     (i) Indebtedness to the Lender;

     (ii) Indebtedness created hereunder or under the Notes;

     (iii) Indebtedness  existing on the date hereof, as set forth in Schedule V
heret , and any extension of maturity,  refinancing or other modification of the
terms  thereof,   provided,   however,  that  such  extension,   refinancing  or
modification  (A) is  pursuant  to  terms  that are not  less  favorable  to the
Borrower  than the  terms of the  Indebtedness  being  extended,  refinanced  or
modified,  and  (B)  after  giving  effect  to  the  extension,  refinancing  or
modification of such Indebtedness,  the amount of such Indebtedness  outstanding
is not  greater  than the amount of such  Indebtedness  outstanding  immediately
prior to such extension, refinancing or modification;

     (iv) Indebtedness  represented by accounts payable incurred in the ordinary
course of business;

     (v) Indebtedness secured by liens or security interests permitted by clause
(vii) of subsection (a) of this Section 7.02;

     (vi)  Subordinated  Indebtedness  of the  Borrower  on terms  approved,  in
writing, by the Lender; and

     (vii)  Indebtedness  under  Operating  Leases  permitted by Section 7.02(g)
hereof.

     (c)  Guaranties,  Etc.  Assume,  guarantee,  endorse  or  otherwise  become
directly or contingently liable (including,  without limitation, liable b way of
agreement,  contingent or otherwise,  to purchase, to provide funds for payment,
to supply funds to or otherwise  invest in the debtor or otherwise to assure the
creditor against loss), in connection with any Indebtedness of any other Person,
other than:

                                     - 31 -

<PAGE>




     (i) guaranties created hereunder or under any Loan Document;

     (ii)  guaranties by  endorsement of negotiable  instruments  for deposit or
collection in the ordinary course of business;

     (iii) guaranties  existing on the date hereof, as set forth in Schedule VII
hereto, including any renewal or other modification thereof, provided,  however,
that such  renewal or  modification  (A) is  pursuant to t rms that are not less
favorable  to the  Borrower  than the terms of the  guaranty  being  renewed  or
modified,  and (B) after giving  effect to the renewal or  modification  of such
guaranty, the amount of the outstanding indebtedness guaranteed by such guaranty
is not greater than the amount of the  outstanding  indebtedness  guaranteed  by
such guaranty immediately prior to such renewal or modification; and

     (iv)  guaranties of any other  Indebtedness  to the Lender or  Indebtedness
permi ted by subsection (b) of this Section 7.02.

     (d) Merger, Consolidation, Sale of Assets, Etc.

     (i) merge or consolidate with any Person; or

     (ii)  sell,  assign,  lease,  engage  in  sale  leaseback  transactions  or
otherwise  transfer or dispose of, whether in one  transaction or in a series of
related transactions, any substantial portion of its properties, rights or other
assets  (whether now owned or hereafter  acquired) to any Person.  (e) Change in
Nature of Business.  Make any  material  change in the nature of its business as
conducted on at the date hereof.

     (f) Investments,  Etc. Make any loan,  advance or contribution to an Person
or  purchase or  otherwise  acquire any  capital  stock,  properties,  assets or
obligations  of, or any  interest  in,  any  Person,  other  than (i)  Permitted
Investments,  (ii)  investments  existing  on the date  hereof,  as set forth in
Schedule  VIII  hereto,  (iii)  advances  to  employees  or vendors  made in the
ordinary course of its business as presently conducted, not to exceed at any one
time  outstanding an aggregate of $500,000 for all such loans and advances,  and
(iv) in connection  with the exercise,  or the  assignment,  of the  Guarantor's
right to purchase  certain  Common  Stock  pursuant to Section 6 of Amendment to
Construction  Loan  Agreement  entered  the  19th day of  September  1996 by and
between the  Borrower,  the  Guarantor and Richard C. Breeden in his capacity as
trustee of the estates of Bennett  Management and Development  Corp. and Bennett
Funding Group.

     (g) Lease Obligations.  Create,  incur or suffer to exist any obligation as
lessee  (i) for  the  payment  of re t for any  real  or  personal  property  in
connection with any sale and leaseback  transaction,  or (ii) for the payment of
rent for any real or personal  property under Operating Leases which would cause
the aggregate  amount of all obligations in respect of Operating  Leases payable
by the Borrower in any fiscal year of the Borrower to exceed 105%

                                     - 32 -

<PAGE>



of the  Operating  Leases  outstanding  as of the end of the prior  fiscal year;
provided,  however, that the Borrower may incur such obligations with respect to
the leasing of video lottery terminals in an amount not to exceed  $3,000,000.00
per year.

     (h)  Salaries  and  Withdrawals.  Pay or become  obligated to pay any fees,
wages,  distributions,  salary,  bonus,  commission,  contributions  to deferred
benefit plans or any other compensation  ("Compensation") to, or for the benefit
of, the  Guarantor  or any  officers  of the  Borrower or the  Guarantor  in any
calendar year in excess of 120% of uch Persons  Compensation  in the immediately
preceding calendar year.

     (i)  Dividends,  Etc.  Declare or pay any  dividend,  purchase or otherwise
acquire for value any of its capital stock now or hereafter outstanding,  return
any  capital  to its  stockholders  as  such,  or  make  any  other  payment  or
distribution  of assets to its  stockholders as such or to purchase or otherwise
acquire for value any stock of the  Borrower;  provided,  however,  that noth ng
herein shall prevent the Borrower from making  distributions to the Guarantor in
the aggregate in any fiscal year equal to the lesser of (i) the amount necessary
to pay the expenses of the Guarantor, and (ii) $500,000.00 plus expenses paid to
any third parties,  in each case minus the funds available to the Guarantor from
other sources other than through the issuance of securities.

     (j) Federal Reserve Regulations. Permit the Loan or the proceeds of th Loan
under  this  Agreement  to  be  used  for  the  purpose  which  violates  or  is
inconsistent  with the  provisions of  Regulations  G, T, U or X of the Board of
Governors of the Federal Reserve System.

     (k) Transactions with Affiliates. The Borrower shall not enter into or be a
party to any  transaction  with any of its  Affiliates,  except in the  ordinary
course of business for fair  consideration and on terms no less favorable to the
Borrower as are available from naffiliated third parties.

     (l) Fiscal Year,  Accounting  Policies.  Permit any material  change in the
fiscal year or  accounting  policies and  procedure of the Borrower  without the
prior written consent of the Lender.

     (m)  Improvements.  Make or commit to make any improvements on the Property
with a total cost in excess of $250,000.00  without the prior written consent of
the Lender, after Lender's review f all plans, permits and other items necessary
to ensure that any such improvement will comply with all applicable building and
safety  requirements  as the Lender,  in its sole and absolute  discretion,  may
determine;  provided, however, that the foregoing limitations shall not apply to
the  proceeds  of the  Tranche A portion of the Term Loan and  proceeds  of Line
Loans made for improvements to the Property pursuant to Article III hereof.

     (n) Issuance of Stock of (i) any additional  shares of any class of capital
stock,  (ii) any  securities  convertible  voluntarily  by the holder thereof or
automatically  upon the occurrence or  non-occurrence  of any event or condition
into,  or  exchangeable  for,  any such  shares  of  capital  stock or (iii) any
warrants, options, contracts or

                                     - 33 -

<PAGE>



other  commitments  entitlelize any Person to purchase or otherwise  acquire any
such shares of capital stock.

     SECTION 7.03. Additional Covenants of the Guarantor.  So long as any of the
Obligations remains outstanding, the Guarantor:

     (a)  shall  not take any  action to  increase  the par value of the  Common
Stock;

     (b) shall not issue any Common Stock,  any preferred  stock or any security
providing  for the purchase of or  convertibility  into,  or  exchangeable  for,
Common Stock or preferred stock, other than;

d 4% of the number of outstanding shares of
Common Stock in any fiscal year;

     (iii) in the ordinary  course of business of the Guarantor not to exceed 2%
of the number of outstanding shares of Common Stock in any fiscal year;

     (iv) in connection with any merger,  acquisition or sale of a major portion
of the assets of the Guarantor approved in writing by the Lender,  such approval
not to be unreasonably withheld;

     (v) as provided under Section 4.01 hereof; and

     (vi) as set forth in Schedule XI hereto;

     (c) shall not  create or suffer to exist any Lien upon or with  respect  to
any of the common stock of the Borrower other than a Lien in favor of he Lender;
and

     (d) shall,  after the filing with the West Virginia  Lottery  Commission by
the Lender of its  application  for approval  under the license of the Borrower,
use its best  efforts to obtain the  approval  of each  applicable  Governmental
Authority to the pledge of all of the shares of the common stock of the Borrower
pursuant to a pledge  agreement and, upon such approval,  or the written opinion
of counsel to the Guarantor that such pledge would not result in a revocati n of
any approval,  license or permit required by the Borrower for the conduct of its
gaming businesses, shall execute and deliver a pledge agreement to the Lender in
form and substance  reasonably  satisfactory  to the Lender,  together with such
other documents as are  customarily  delivered and /or executed and delivered in
connection therewith.

                                     - 34 -

<PAGE>




     SECTION 7.04.  Additional  Line Loan  Covenant.  So long as any of the Line
Obligations remains  outstanding,  the Borrower shall maintain an EBITDA Average
of at least $500,000.



                                  ARTICLE VIII

                                EVENTS OF DEFAULT

     SECTION 8.01. Events of Default.  If any of the following Events of Default
shall occur and be continuing:

     (a) the  Borrower  shall  fail to pay any  principal  on any Loan  when due
(whether by scheduled maturity,  required  prepayment,  acceleration,  dema d or
otherwise);

     (b) the  Borrower  shall fail to pay any interest on any Loan or any fee or
other amount (whether by scheduled payment,  acceleration,  demand or otherwise)
within three (3) Business  Days of the date when due;  provided,  however,  that
failure to make payments when due with respect to Obligations in this Subsection
7.01(b)  more  than  three (3)  times in any  twelve  (12)  month  period  shall
constitute an Event of Default hereunder;

     (c) any representation or warranty made by any Loan Party or any officer of
any Loan Party under or in  connection  with any Loan  Document  shall have been
incorrect in any material respect when made;

     (d) any Loan Party  shall fail to perform or observe  any of the  covenants
contained in Sections 7.01, 7.02, or 7.03 hereof, or Article X hereof;

     (e) any Loan  Party  shall  fail to  perform  or  observe  any other  term,
covenant or  agreement c ntained in any Loan  Document  and to be  performed  or
observed by such Loan Party;

     (f) there  shall  occur any  breach or  default  under any other  agreement
involving  the  borrowing  of money  under  which  such Loan Party or any of its
subsidiaries may be obligated as borrower or guarantor;

     (g) any Loan Party (i) shall  institute any  proceeding  or voluntary  case
seeking  to  adjudicate  it a bankrupt  or  insolvent,  or seeking  dissolution,
liquidation, wi ding up, reorganization,  arrangement,  adjustment,  protection,
relief or  composition  of it or its debts under any law relating to bankruptcy,
insolvency,  reorganization  or relief of  debtors,  or seeking  the entry of an
order for relief or the appointment of a receiver,  trustee,  custodian or other
similar  official for such Person or for any  substantial  part of its property,
(ii) shall be generally  not paying its debts as such debts become due, or shall
admit in writing its  inability to pay its debts  generally,  (iii) shall make a
general  assignment for the benefit of creditors,  or (iv) shall take any action
to  authorize  or effect any of the actions  set forth above in this  subsection
(g);

     (h) any  proceeding  shall be instituted  against any Loan Party seeking to
adjudicate  it a bankrupt or  insolvent,  or seeking  dissolution,  liquidation,
winding  up,  reorganization,  arrangement,  adjustment,  protection,  relief of
debtors,  or  seeking  the entry of an order for relief or the  appointment  f a
receiver, trustee, custodian or other similar official for

                                     - 35 -

<PAGE>



such  Person  or for any  substantial  part of its  property,  and  either  such
proceeding  shall remain  undismissed or unstayed for a period of 60 days or any
of the actions sought in such proceeding  (including,  without  limitation,  the
entry of an order  for  relief  against  it or the  appointment  of a  receiver,
trustee,  custodian or other similar official for it or for any substantial part
of its property) shall occur;

     (i) any provision of any Loan Document  shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall be
contested  by any Loan Party,  or a  proceeding  shall be  commenced by any Loan
Party,  or by  any  Governmental  Authority  or  other  regulatory  body  having
jurisdiction  over any Loan  Party,  seeking  to  establish  the  invalidity  or
unenforceability  thereof, or any Loan Party shall deny that such Loan Party has
any liability or obligat on purported to be created under any Loan Document;

     (j) the Security  Agreement,  the Amended and Restated Security  Agreement,
the Deed of  Trust,  the  First  Priority  Deed of Trust or any  other  security
document,  after delivery thereof pursuant hereto,  shall for any reason fail or
cease to create a valid and  perfected  and, to the extent  provided  for by the
terms hereof or thereof,  first or second priority lien on or security  interest
in any Collateral purported to be covered hereby;

     (k) one or more  judgments  or  orders  (other  than a  judgment  or  award
described in  subsections  (g) and (h) of this Section  8.01) for the payment of
money exceeding any applicable  insurance coverage shall be rendered against any
Loan Party, and either (i) enforcement  proceedings shall have been commenced by
any creditor upon any such judgment or order,  or (ii) there shall be any period
of 30  consecutive  days during which a stay of enforcement of any such judgment
or o der, by reason of a pending appeal or otherwise, shall not be in effect;

     (l) any Loan Party or any  Affiliate  of a Loan Party shall suffer to exist
any Unfunded Liability in excess of $100,000; or

     (m) the Borrower shall fail to perform or observe the covenant contained in
Section 7.04 hereof;

then,  and in any such event,  the Lender may,  by notice to the  Borrower,  (i)
declare its  Commitment to make any Loan  hereunder to be term nated,  whereupon
such Commitment shall forthwith terminate,  (ii) declare the Loans, all interest
thereon and all other amounts  payable under this  Agreement to be forthwith due
and payable,  whereupon the Loans,  all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further  notice of any kind,  all of which are  hereby  expressly  waived by the
Borrower;  provided,  however,  that upon the  occurrence of an Event of Default
described in  subsections  (g) and (h) of this Section 8.01,  the  Commitment to
make any Loan  hereunder  shall  immediately  terminate and the Loans,  all such
interest thereon and all other amounts shall become payable and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by the Borrower;  provided further,  that upon
the  occurrence  of an Event of  Default  other  than the  events  described  in
Subsections  (a),  (b), (g) and (h), the Borrower  shall have three (3) Business
Days in which to cure such Event of Default and

                                     - 36 -

<PAGE>



(iii) exercise any and all of its other rights under  applicable law,  hereunder
and under the other Loan Documents; provided, further, that the Event of Default
described in  subsection  (m) of this Section 8.01 shall apply to the Line Loans
only,  and shall not be deemed a default  under  subsection  (f) of this Section
8.01 with respect to the Term Loan.


                                   ARTICLE IX

                                  MISCELLANEOUS

     SECTION 9.01. Notices,  Etc. All notices and other communications  provided
for hereunder shall be in writing and shall be mailed,  telecopied,  with a copy
sent promptly thereafter by U.S. mail, return receipt requested or delivered, if
to the Borrower or the Guarantor, at the following address:

Mountaineer Park, Inc.
Route 2 South
Chester, West Virginia  26034
Attention:                   Mr. Edson Arneault, President
Telephone No.:               (304) 387-2400
Telecopy No.:                (304) 387-1598

with copies to:

Freer & McGarry, a Professional Corporation
1000 Thomas Jefferson Street, NW, Suite 600
Washington, DC 20007
Attention:                   Robert Ruben, Esq.
Telephone No.:               (202) 965-6565
Telecopy No.:                (202) 965-4839

and if to the Lender, to it at the following address:

Madeleine L.L.C.
950 Third Avenue
New York, New York  10022
Attention:                   Mr. Kevin P. Genda
Telephone No.:               (212) 758-5110
Telecopy No.:                (212) 421-2947

with copies to:

                                     - 37 -

<PAGE>




Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention:                   Mark A. Neporent, Esq.
Telephone No.:               (212) 756-2238
Telecopy No.:                (212) 593-5955

or, as to each party, at such other address as shall be designated by such party
in a written  notice to the other party  complying as to delivery with the terms
of this  Section  9.01.  All such  notices  and  other  communications  shall be
effective (i) if mailed,  when received or three days after  mailing,  whichever
first  occurs,  (ii) if  telecopied,  when  transmitted,  provided  same is on a
Business Day and, if not, on the next Business Day, or (iii) if delivered,  upon
delivery,  provided  same is on a Business Day and, if not, on the next Business
Day,  except that notices to the Lender  pursuant to Article II hereof shall not
be effective until received by the Lender.

                  SECTION 9.02.  Amendments,  Etc. No amendment of any provision
of this Agreement, any Note or any other Loan Document shall be effective unless
it is in  writing  and signed by the  Borrower,  each of the  Guarantor  and the
Lender, and no waiver of any provision of this Agreement,  any Note or any other
Loan  Document,  nor consent to any  departure by the Borrower or the  Guarantor
therefrom,  shall be effective unless it is in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

                  SECTION 9.03. No Waiver;  Remedies, tc. No failure on the part
of the Lender to exercise,  and no delay in exercising,  any right  hereunder or
under any other Loan Document shall operate as a waiver  thereof;  nor shall any
single or partial  exercise of any right under any Loan  Document  preclude  any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Lender  provided  herein and in the other Loan Documents are
cumulative  and are in addition  to, and not  exclusive  of, any right or remedy
provided by law.  The rights of the Lender under any Loan  Document  against any
party thereto are not  conditional or contingent on any attempt by the Lender to
exercise any of its rights under any other Loan  Document  against such party or
against any other Person.

                  SECTION 9.04.  Fees,  Costs,  Expenses and Taxes. The Borrower
will pay on demand  (i) all fees,  costs and  expenses  in  connection  with the
preparation, execution, delivery, filing, recording, amendment, modification and
waiver of the Loan Documents and the other documents to be delivered pursuant to
the  Loan  Documents,   including,  without  limitation,  the  reasonable  fees,
out-of-pocket  expenses  and other  client  charges of Schulte Roth & Zabel LLP,
counsel to the  Lender,  and Bowles Rice  McDavid  Graff & Love,  West  Virginia
counsel to the Lender and the reasonable fees,  out-of-pocket expenses and other
client  charges of all  accountants,  auditors and  consultants  retained by the
Lender in connection with the transactions  contemplated by this Agreement,  and
(ii)  all  costs  and  expenses,  if any  (including  reasonable  counsel  fees,
out-of-pocket  expenses  and  other  client  charges),  in  connection  with the
enforcement  of the Loan  Documents  and the  other  documents  to be  delivered
pursuant to the Loan Documents.  In addition,  the Borrower will pay any and all
stamp and other taxes and fees payable or

                                     - 38 -

<PAGE>



determined to be payable in connection with the execution,  delivery, filing and
recording of the Loan Documents and the other documents to be delivered pursuant
to the Loan  Documents,  and will save the Lender  harmless from and against any
and all  liabilities  with respect to or  resulting  from any delay in paying or
omission to pay such taxes and fees. All of the foregoing fees, costs,  expenses
and taxes are herein referred to as "Transaction Costs".

                  SECTION 9.05. Right of Set-off. Upon the occurrence and during
the  continuance  of any  Event  of  Default,  the  Lender  may,  and is  hereby
authorized to, at any time and from time to time, without notice to the Borrower
(any such notice  being  expressly  waived by the  Borrower)  and to the fullest
extent  permitted by law, set off and apply any and all indebtedness at any time
owing by the Lender to or for the credit or the account of the Borrower  against
any and all  Obligations now or hereafter  existing,  irrespective of whether or
not the Lender shall have made any demand  hereunder or thereunder  and although
such Obligations may be contingent or unmatured. The Lender agrees to notify the
Borrower  promptly  after any such set-off and  application  made by the Lender,
provided  that the failure to give such notice  shall not affect the validity of
such set-off and  application.  The rights of the Lender under this Section 9.05
are in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which the Lender may have.

                  SECTION 9.06.  Severability.  Any provision of this Agreement,
or of any other Loan Document to which the Borrower or any of the  Guarantors is
a party,  which is prohibited or unenforceable in any jurisdiction  shall, as to
such  jurisdiction,  be  ineffective  to  the  extent  of  such  prohibition  or
unenforceability  without  invalidating the remaining portions hereof or thereof
or  affecting  the  validity or  enforceability  of such  provision in any other
jurisdiction.

                  SECTION 9.07.  ccessors and Assigns.  This Agreement  shall be
binding upon and inure to the benefit of the  Borrower,  the  Guarantor  and the
Lender and their  respective  successors  and  assigns,  except that neither the
Borrower  nor any  Guarantor  may assign its rights  hereunder  or any  interest
herein without the prior written consent of the Lender. The Lender may assign to
one or  more  banks  or  other  entities  all  or  any  part  of,  or may  grant
participations  to one or more banks or other  entities in or to all or any part
of the  Commitment,  the  Loans or the  Notes  and,  to the  extent  of any such
assignment or participation  (unless otherwise stated therein),  the assignee of
such assignment shall have the same rights and benefits hereunder and under such
Note(s) as it would have if it were the Lender hereunder. In connection with any
assignment by the Lender  pursuant  hereto,  the Borrower  shall,  promptly upon
request by the Lender,  execute and deliver a new Note or Notes,  in replacement
of the then effective Note or Notes, in an aggregate  principal  amount equal to
the outstanding  principal  amount of the applicable Loan or Loans at such time,
payable to the order of the Lender  and/or an  assignee(s).  The Lender  may, in
connection  with any such assignment or  participation  or as may be required by
law or any Governmental  Authority or other regulatory body, disclose any public
and non-public  information  relating to the Borrower and each of the Guarantors
furnished  by or on behalf of the  Borrower or any of the  Guarantors  or any of
their Affiliates to the Lender.

     SECTION 9.08. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate  counterparts,  each of
which shall be

                                     - 39 -

<PAGE>



deemed to be an original,  but all of which taken together shall  constitute one
and the same agreement.

     SECTION  9.09.   Headings.   Section  headings  herein  are  in  luded  for
convenience  of reference only and shall not constitute a part of this Agreement
for any other purpose.

                  SECTION 9.10.  Governing Law. This  Agreement,  each Note, and
the other Loan Documents shall be governed by, and construed in accordance with,
the  law of the  State  of New  York  applicable  to  contracts  made  and to be
performed in such State without regard to conflicts of law principles. Any legal
action or  proceeding  with respect to this Agreem nt or any other Loan Document
may be brought  in the  courts of the State of New York or of the United  States
for the Southern  District of New York,  and, by execution  and delivery of this
Agreement,  the  Borrower  and  the  Guarantor  hereby  irrevocably  accept  for
themselves  in respect of their  property,  generally and  unconditionally,  the
jurisdiction  of the aforesaid  courts.  The Borrower and the Guarantor  further
irrevocably  consent to the service of process out of any of the  aforementioned
courts and in any such action or proceeding by the mailing of copies  thereof by
registered or certified mail,  postage  prepaid,  to the Borrower at its address
for notices  contained in Section 9.01, such service to become  effective thirty
(30) days after such mailing.  The Borrower and the Guarantor hereby irrevocably
appoint Mr.  Robert A. Blatt,  c/o CRC Group,  1890  Palmer  Avenue,  Suite 303,
Larchmont,  New York 10538,  or such other Person as shall be  acceptable to the
Lender,  as their  agent for service of process in respect of any such action or
proceeding.  Nothing  herein  shall affect the right of the Lender to service of
process in any other manner permitted by law or to commence legal proceedings or
otherwise   proceed  against  the  Borrower  and  the  Guarantor  in  any  other
jurisdiction.

                  SECTION 9.11. WAIVER OF JURY TRIAL, ETC. EACH OF THE BORROWER,
THE  GUARANTOR  AND THE LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION,  PROCEEDING OR  COUNTERCLAIM  CONCERNING ANY RIG T UNDER THIS AGREEMENT,
ANY NOTE,  OR OTHER LOAN  DOCUMENT,  OR UNDER ANY  AMENDMENT,  WAIVER,  CONSENT,
INSTRUMENT,  DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH,  OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION,  PROCEEDINGS OR
COUNTERCLAIM  SHALL BE TRIED  BEFORE A COURT AND NOT BEFORE A JURY.  EACH OF THE
BORROWER  AND THE  GUARANTOR  HEREBY  WAIVES  ANY  RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM  ANY  SPECIAL,  EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL  DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL  DAMAGES.  THE  BORROWER  AND THE  GUARANTOR  CERTIFY  THAT  NO  OFFICER,
REPRESENTATIVE,  AGENT OR ATTORNEY OF THE LENDER HAS  REPRESENTED,  EXPRESSLY OR
OTHERWISE,  THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM,  SEEK TO ENFORCE  THE  FOREGOING  WAIVERS.  THE  BORROWER  AND THE
GUARANTOR HEREBY  ACKNOWLEDGE  THAT THIS PROVISION IS A MATERIAL  INDUCEMENT FOR
THE LENDER ENTERING INTO THIS AGREEMENT.

                                     - 41 -

<PAGE>




                  SECTION 9.12.  Reinstatement;  Certain Payments. If a claim is
ever made upon the Lender for  repayment  or  recovery  of any amount or amounts
received by the Lender in payment or on account of any of the Obligations  under
this  Agreements,  the  Lender  shall  give  prompt  notice of such claim to the
Borrower,  and if the Lender  repays all or part of said amount by reason of (i)
any j  dgment,  decree  or order  of any  court or  administrative  body  having
jurisdiction  over the Lender or any of its property,  or (ii) any settlement or
compromise of any such claim effected by the Lender with any such claimant, then
and in such  event  the  Borrower  and the  Guarantor  (A)  agree  that any such
judgment,  decree,  order,  settlement or  compromise  shall be binding upon the
Borrower and the Guarantor notwithstanding the cancellation of any Note or other
instrument  evidencing  the  Obligations  under this Agreement or the other Loan
Documents or the termination of this Agreement or the other Loan Documents,  and
(B) shall be and remain liable to the Lender  hereunder for the amount so repaid
or  recovered  to the same  extent as if such amount had never  originally  been
received by the Lender.

                  SECTION  9.13.  Indemnification.  In  addition to all of their
other Obligations  under this Agreement,  the Borrower and the Guarantor jointly
and severally  agree to defend,  prote t, indemnify and hold harmless the Lender
and any assignee of the Lenders rights  hereunder,  and all of their  respective
officers, directors,  employees,  attorneys,  consultants and agents (including,
without  limitation,  those  retained in  connection  with the  satisfaction  or
attempted  satisfaction  of any of the conditions  set forth in this  Agreement)
(collectively  called the  "Indemnitees")  from and  against any and all losses,
damages,   liabilities,   obligations,   penalties,  fees,  costs  and  expenses
(including, without limitation, attorneys' fees, costs and expenses) incurred by
such Indemnitees, whether prior to or from and after the Effective Date, whether
direct, indirect or consequential, as a result of or arising from or relating to
any suit, investigation,  action or proceeding by any Person, whether threatened
or initiated,  asserting a claim for any legal or equitable  remedy  against any
Person  under any statute or  regulation,  including,  without  limitation,  any
Federal or state securities or labor laws, or under any Federal,  state or local
environmental,  health or safety laws,  regulations  or, common law  principles,
arising from or in connection with the past, present or future operations of the
Borrower or its predecessors in interest, arising from or in connection with any
of the following: (i) the negotiation,  preparation, execution or performance of
this Agreement or of any document  executed in connection with the  transactions
contemplated  by this  Agreement,  (ii) the Lender's  furnishing of funds to the
Borrower under this Agreement,  including, without limitation, the management of
the  Loans,  or  (iii)  any  matter  relating  to  the  financing   transactions
contemplated  by this Agreement or by any document  executed in connection  with
the transactions contemplated by this Agreement (collectively,  the "Indemnified
Matters");  provided, however, that the Borrower and the Guarantor shall have no
obligation to any Indemnitee  hereunder for any Indemnified  Matter caused by or
resulting from the gross negligence or willful misconduct of such Indemnitee, as
determined  by a final  judgment  of a court  of  competent  jurisdiction.  Such
indemnification  for all of the  foregoing  losses,  damages,  fees,  costs  and
expenses of the Lender shall be part of the  Obligations  in respect of the Term
Loan  (the  "Term  Obligations"),  secured  by the  Collateral  and added to the
principal amount of the Term Loan; provided,  further, however, that if the Term
Loan has been paid in full,  then all of the foregoing  losses,  damages,  fees,
costs and expenses of the Lender shall be part of the Line Obligations,  secured
by the  Collateral and added to the principal  amount of the Line Loans.  To the
extent that the

                                     - 42 -

<PAGE>



undertaking  to indemnify,  pay and hold harmless set forth in this Section 9.13
may be  unenforceable  because it is violative of any law or public policy,  the
Borrower and the  Guarantor  shall  contribute  the maximum  portion which it is
permitted  to  pay  and  satisfy  under  applicable  law,  to  the  payment  and
satisfaction  of  all  Indemnified  Matters  incurred  by the  Indemnitees.  The
provisions of this Section 9.13 shall survive termination of this Agreement.


                                    ARTICLE X

                                    GUARANTY

                  SECTION  10.01.  Guaranty.  the  Guarantor,   and  each  other
Guarantor that may become party hereto,  hereby (i) irrevocably,  absolutely and
unconditionally  guarantees  the  prompt  payment,  as and when due and  payab e
(whether by scheduled maturity,  required  prepayment,  acceleration,  demand or
otherwise),  of (A) all the  Obligations,  including,  without  limitation,  all
amounts now or  hereafter  owing in respect of the Loan  Documents,  whether for
principal,  interest,  fees,  expenses or otherwise,  and (B) all  indebtedness,
obligations and other liabilities,  direct or indirect,  absolute or contingent,
now existing or hereafter arising of the Borrower to the Lender and (ii) agrees,
to pay any and all expenses  (including  reasonable  counsel fees and  expenses)
incurred  by the Lender in  enforcing  its  rights  under  this  Agreement,  the
Guarantee and each other Loan Document.

                  SECTION 10.02.        Obligations Unconditional.

     (i) the uarantor  and each other  Guarantor  that may become party  hereto,
hereby  guarantees that the Obligations will be paid strictly in accordance with
the terms of the Loan Documents,  regardless of any law, regulation or order now
or hereafter in effect in any  jurisdiction  affecting  any of such terms or the
rights  of the  Lender  with  respect  thereto.  the  Guarantor  and each  other
Guarantor  agrees that its guarantee  constitutes a guaranty of payment when due
and not of collection, and waives any right to require that any resort be had by
the Lender to any security held for payment of the Obligations or to any balance
of any  deposit  account  or credit  on the books of the  Lender in favor of the
Borrower or for any other reason.  The liability of the Guarantor and each other
Guarantor hereunder shall be absolute and unconditional irrespective of: (i) any
lack of validity or  enforceability  of any Loan  Document or any  agreement  or
instrument relating thereto; (ii) any extension or change in the time, manner or
place of  payment  of, or in any other  term in  respect  of,  all or any of the
Obligations  (including,  without limitation,  any extension for longer than the
original  period),  or any  other  amendment  or  waiver  of or  consent  to any
departure from any provision of any Loan Document; (iii) any exchange or release
of, or non-perfection of any lien on or security interest in, any Collateral, or
any release or amendment or waiver of or consent to any departure from any other
guaranty,  for all or any of the  Obligations;  or (iv) any  other  circumstance
which might otherwise  constitute a defense available to, or a discharge of, the
Borrower or any other  Guarantor in respect of the  Obligations or the Guarantor
and each other Guarantor in respect hereof.

                                     - 43 -

<PAGE>




     (ii) This  Guaranty (i) is a  continuing  guaranty and shall remain in full
force and effect until such date on which all of the  Obligations  and all other
expenses  to be paid by the  Guarantor  or any other  Guarantor  pursuant he eto
shall  have  been  satisfied  in full  after  the  Commitment  shall  have  been
terminated,  (ii) shall continue to be effective or shall be reinstated,  as the
case may be, if at any time any payment of any of the  Obligations  is rescinded
or must otherwise be returned by the Lender upon the  insolvency,  bankruptcy or
reorganization of the Borrower or otherwise,  all as though such payment had not
been made, and (iii) shall be binding upon the Guarantor, any other Guarantor or
their respective heirs, executors, successors and assigns.

                  SECTION 10.03.  Waivers.  The Guarantor hereby waives,  to the
extent permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any  Obligation,  (iii) no ice of any
action taken by the Lender or the Borrower or any other  agreement or instrument
relating thereto,  (iv) all other notices,  demands and protests,  and all other
formalities of every kind in connection  with the enforcement of the Obligations
or of the obligations of the Guarantor and each other Guarantor  hereunder,  the
omission of or delay in which,  but for the  provisions  of this Section  10.03,
might  constitute  grounds for relieving the Guarantor or any other Guarantor of
its  obligations  hereunder,  and (v) any  requirement  that the Lender protect,
secure,  perfect or insure any security interest or lien or any property subject
thereto  or  exhaust  any right or take any  action  against  any  Person or any
Collateral.  All such waivers by the  Guarantor  shall be effective  only to the
extent permitted by applicable law.

                  SECTION 10.04.  Subrogation.  The Guarantor  hereby waives and
agrees that it will not exercise any rights which it may acquire by way of subro
ation hereunder, by any payment made by it hereunder or otherwise. If the amount
shall be paid to the  Guarantor  or such  other  Guarantor  on  account  of such
subrogation  rights  at any time  when  all of such  Obligations  and all  other
Obligations shall not have been paid in full, such amount shall be held in trust
for the benefit of the Lender,  shall be segregated  from the other funds of the
Guarantor or such other Guarantor and shall forthwith be paid over to the Lender
to be applied in whole or in part by the Lender against the Obligations, whether
matured or unmatured, in accordance with the terms of this Agreement.

                  SECTION 10.05. No Waiver;  Remedies. No failure on the part of
the Lender to exercise,  and no delay in exercising,  any right  hereunder shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right hereunder  preclude any other or further  exercise thereof or the exercise
of any other right. The remedies herein provided re cumulative and not exclusive
of any remedy provided by law.

                                     - 44 -

<PAGE>




                  SECTION 10.06.        Taxes.

     (a) Each payment by the Guarantor  under this Loan Agreement  shall be made
without  withholding  for or on account of any present or future taxes,  levies,
imposts, deductions,  charges or withholdings,  and all liabilities with respect
thereto,  excluding, in the case of the Lender, taxes imposed on its income, and
franchise taxes imposed on it by the jurisdiction (or any political  subdivision
thereof) under the laws of which the Lender is organized  (all such  nonexcluded
taxes, levies, imposts, deductions,  charges, withholdings and liabilities being
hereinafter referred to as "Other Taxes"); provided, however, that if such Other
Taxes are required by law to be withheld  from any such  payment,  the Guarantor
shall make such  withholding for the account of the Lender,  make timely payment
thereof to the  appropriate  governmental  authority,  and forthwith pay for the
account of the Lender such  additional  amount as may be necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this Section  10.06.) the Lender  receives an amount equal to
the sum it would have received had no such  deductions been made. All such Other
Taxes shall be paid by the Guarantor prior to the date on which penalties attach
thereto or  interest  accrues  thereon;  provided,  however,  that,  if any such
penalties  or  interest  become due,  the  Guarantor  shall make prompt  payment
thereof to the appropriate governmental authority.

     (b) the  Guarantor  will  indemnify the Lender for the full amount of Other
Taxes  (including any Other Taxes on amounts  payable under this Section 10.06.)
paid  by the  Lender  and  any  liability  (including  penalties,  interest  and
expenses) arising  therefrom or with respect thereto,  whether or not such Other
Taxes were correctly or legally  asserted.  This  indemnification  shall be made
within 30 days from the date the Lender makes written demand therefor.

     (c)  Within  30 days  after the date of any  payment  of Other  Taxes,  the
Guarantor  will  furnish to the Lender the  original  or a  certified  copy of a
receipt evidencing payment thereof.  If no Other Taxes are payable in respect of
any payment  hereunder  or under any Note,  the  Guarantor  will  furnish to the
Lender a certificate  from each appropriate  taxing a thority,  or an opinion of
counsel  acceptable  to the Lender,  in either case stating that such payment is
exempt from or not subject to Other Taxes.

                  SECTION 10.07.  Stay of  Acceleration.  If acceleration of the
time for payment of any amount  payable by any of the Borrower in respect of the
Obligations is stayed upon the insolvency,  bankruptcy or  reorganization of any
of the Borrower,  all such amounts otherwise  subject to acceleration  under the
terms of thi Agreement shall  nonetheless be payable by the Guarantor  forthwith
on demand by the Lender.

                  SECTION 10.08. Continued Effectiveness of Guaranty. The within
Guarantee is in addition to the Guaranty  contained  in the Old  Agreement  (the
"Old Guaranty"),  and, notwithstanding that the within Guaranty is a Guaranty of
all of the Obligations hereunder (including, without limitation, the Obligations
as defined in the Old  Agreement),  the Guarantor  hereby  confirms that the Old
Guaranty  is,  and shall  continue  to be, in full  force and  effect and hereby
ratifies and confirms the Old Guaranty in all respects.

                                     - 45 -

<PAGE>





                  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.

MOUNTAINEER PARK, INC.


By: /s/ Edson R. Arneault
Name:
Title:


MTR GAMING GROUP, INC.


By: /s/ Edson R. Arneault
Name:
Title:


MADELEINE L.L.C.


By:
---------------------------------------
Name:
Title:



                                     - 46 -

<PAGE>



                                   SCHEDULE I

                             Description of Property



                                     - 47 -

                                     <PAGE>



                                   SCHEDULE II

                                   Litigation



                                     - 47 -

<PAGE>



                                  SCHEDULE III

                 Licenses, Permits, Authorizations and Approvals



                                     - 48 -

<PAGE>



                                   SCHEDULE IV

                        Lease Obligations of the Borrower



                                     - 49 -

<PAGE>



                                   SCHEDULE V

                          Indebtedness of the Borrower



                                     - 50 -

<PAGE>



                                   SCHEDULE VI

                                 Existing Liens



                                     - 51 -

<PAGE>



                                  SCHEDULE VII

                           Guarantees of the Borrower



                                     - 52 -

<PAGE>



                                  SCHEDULE VIII

                                   Investments

                                     - 53 -

<PAGE>



                                   SCHEDULE IX

                       Stock Rights, Warrants and Options



                                     - 54 -

<PAGE>



                                   SCHEDULE X

                          Shares of Common Stock Issued



                                     - 55 -

<PAGE>



                                    EXHIBIT A

                                  Form of Note






                                     - 56 -

<PAGE>



                                    EXHIBIT B

                              Form of Deed of Trust





                                     - 57 -

<PAGE>



                                    EXHIBIT C

                      Form of Registration Rights Agreement



                                     - 58 -

<PAGE>



                                    EXHIBIT D

                           Form of Security Agreement





                                     - 59 -

<PAGE>



                                    EXHIBIT E

                                Form of Warrants



                                     - 60 -

<PAGE>



                                    EXHIBIT F

                            Form of Borrowing Notice





                                     - 61 -

<PAGE>



                                    EXHIBIT G

                       Form of Opinion of Freer & McGarry,
                    Counsel to the Borrower and the Guarantor




                                     - 62 -

<PAGE>



                                    EXHIBIT H

                      Form of Opinion of Jackson & Kelley,
             West Virginia Counsel to the Borrower and the Guarantor




                                     - 63 -

<PAGE>



                                    EXHIBIT I

                        Form of Stock Transfer Agreement




                                     - 64 -

<PAGE>



                                    EXHIBIT J

                             Corrective Action Plan



                                     - 65 -

<PAGE>




                                                                       EXHIBIT 2
                 AMENDED AND RESTATED GENERAL SECURITY AGREEMENT

                  AMENDED AND RESTATED GENERAL SECURITY  AGREEMENT dated June 2,
1996, as amended and restated as of December 10, 1996, made by Mountaineer Park,
Inc., a West Virginia corporation (the "Grantor"), in favor of Madeleine L.L.C.,
as lender (the "Lender") for the Lenders (as hereinafter defined).

                              W I T N E S S E T H :

                  WHEREAS,  the Grantor,  WINNERS  ENTERTAINMENT,  INC., and the
Lender  are  parties  to a Term Loan  Agreement,  dated as of July 2,  1996,  as
amended and restated as of December 10, 1996 (such Agreement, as further amended
or otherwise  modified from time to time, being  hereinafter  referred to as the
"Loan Agreement");

                  WHEREAS, pursuant to the Loan Agreement, the Lender has agreed
to make (i) a term loan (the "Term  Loan") to the  Borrower  in an  aggregate  p
incipal  amount  not to  exceed  the Term  Commitment  (as  defined  in the Loan
Agreement),  and (ii) a line of credit  available for loans to the Borrower (the
"Line Loans" and,  collectively with the Term Loan, the "Loans") in an aggregate
principal  amount  not to exceed  the Line  Commitment  (as  defined in the Loan
Agreement);

                  WHEREAS,  it is a  condition  precedent  to the  making of any
Loans by the Lender  pursuant to the Loan  Agreement that the Grantor shall have
executed and  delivered  to the Lender a security  agreement  providing  for the
grant to the Lender of a security interest in all personal property and fixtures
of the Grantor;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
agreements  herein and in order to induce the  Lender to make and  maintain  the
Loans pursuant to the Loan Agreement,  the Grantor hereby agrees with the Lender
as follows:

                  SECTION 1.  Definitions.  Reference is hereby made to the Loan
Agreement for a state ent of the terms thereof. All terms used in this Agreement
which  are  defined  in the  Loan  Agreement  or in  Article  9 of  the  Uniform
Commercial  Code (the  "Code")  currently in effect in the State of New York and
which are not otherwise  defined  herein shall have the same meanings  herein as
set forth therein.

                  SECTION 2. Grant of Security Interest.  As collateral security
for all of the Obligations (as defined in Section 3 hereof),  the Grantor hereby
pledges  and  assigns  to the Le der,  and  grants  to the  Lender a  continuing
security  interest  in, all  personal  property  and  fixtures  of the  Grantor,
wherever located and whether now or hereafter  existing and whether now owned or
hereafter acquired,  of every kind and description,  tangible or intangible (the
"Collateral"), including, without limitation, the following:

                  (a) all equipment of any kind including,  without  limitation,
the equipment described in Schedule I hereto, all furniture, fixtures, machinery
and all motor  vehicles,  tractors and other like  property,  whether or not the
title  thereto is governed by a certificate  of title or ownership  (hereinafter
collectively referred to as the "Motor Vehicles"),  wherever located and whether
now or hereafter existing and whether now owned or hereafter acquired,  together
with all substitutes, replacements,


<PAGE>



accessions  and  additions  thereto,  and  all  tools,  parts,  accessories  and
attachments used in connection therewith  (hereinafter  collectively referred to
as the "Equipment");

                  (b) all of the Grantor's  right,  title and interest in and to
all  inventory  of any kind,  wherever  located  and  whether  now or  hereafter
existing and whether now owned or hereafter acquired, and all accessions thereto
and products thereof (any and all such inventory,  accessions and products being
hereinafter referred to as the "Inventory");

                  (c) all of the Grantor's  right,  title and intere t in and to
(i) all  accounts,  contract  rights,  chattel  paper,  instruments,  documents,
general  intangibles and other rights or obligations of any kind, whether now or
hereafter existing and whether now owned or hereafter  acquired,  arising out of
or in connection with the sale or lease of goods or the rendering of services or
otherwise  and (ii) all rights now or hereafter  existing in and to all security
agreements,  leases and other contracts,  now or hereafter existing and securing
or otherwise  relating to any such  accounts,  contract  rights,  chattel paper,
instruments,  general intangibles or obligations  (including without limitation,
the  contracts  described  in  Schedule II hereto)  (any and all such  accounts,
contract rights, chattel paper, instruments, general intangibles and obligations
being  hereinafter  referred  to as the  "Receivables",  and any  and  all  such
security agreements, leases and other contracts being hereinafter referred to as
the "Related Contracts"); and

                  (d) all pr  ceeds of any and all of the  foregoing  Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not the Lender is the loss payee  thereof),  or any  indemnity,  warranty  or
guaranty,  payable by reason of loss or damage to or  otherwise  with respect to
any of the foregoing Collateral;  in each case, howsoever the Grantor's interest
therein may arise or appear (whether by ownership,  security interest,  claim or
otherwise).

                  SECTION 3.  Security  for Ob igations.  The security  interest
created hereby in the Collateral  constitutes continuing collateral security for
all of the  following  obligations,  whether now existing or hereafter  incurred
(the "Obligations"):

                  (a) the  prompt  payment by the  Grantor,  as and when due and
payable,  of all  amounts  from time to time  owing by it in respect of the Loan
Agreement, the Notes and the other Loan Documents; and

                  (b) the due  performance  and observance by the Grantor of all
of its other  obligations  from time to time  existing  in  respect  of the Loan
Documents.

     SECTION 4.  Representations  and  Warranties.  The Grantor  represents  and
warrants as follows:

                  (a) The Grantor (i) is a corporation  duly organized,  validly
existing and in good standing  under the laws of the state of its  incorporation
as set forth on the first  page  hereof,  and (ii) has all  requisite  power and
authority to execute, delive and perform this Agreement.

                  (b) The execution,  delivery and performance by the Grantor of
this Agreement (i) have been duly authorized by all necessary  corporate action,
(ii)  do not  and  will  not  contravene  its  charter  or  by-laws,  law or any
contractual restriction binding on or affecting the Grantor or any of its

                                      - 2 -

<PAGE>



properties,  and (iii) do not and will not result in or require the  creation of
any lien,  security interest or other charge or enc mbrance upon or with respect
to any of its properties, except as contemplated by the Loan Documents.

                  (c) This Agreement is a legal, valid and binding obligation of
the Grantor, enforceable against the Grantor in accordance with its terms.

                  (d) All  Equipment  and  Inventory  now  existing  is, and all
Equipment and Inventory  hereafter  existing will be, located at the address(es)
specified  therefor in Schedule III hereto. The Grantor's chief plac of business
and chief  executive  office,  the place  where the  Grantor  keeps its  records
concerning  Receivables and all originals of all chattel paper which  constitute
Receivables are located at the address specified  therefor in Schedule III. None
of the  Receivables is evidenced by a promissory note or other  instrument.  Set
forth as  Schedule IV hereto is a complete  and correct  list of each trade name
used by the Grantor.

                  (e) The  Grantor  has  delivered  to the Lender  complete  and
correct  copies of each  Related  Contract  described  in  Schedule  II  hereto,
including all schedules and exhibits  thereto.  Each such Related  Contract sets
forth the entire agreement and  understanding of the parties thereto relating to
the subject matter thereof,  and there are no other agreements,  arrangements or
understandings,  written or oral, relating to the matters covered thereby or the
rights of the Grantor or any of its Affiliates in respect thereof.  Each Related
Contract  now existing is, and each other  Related  Contract  will be the legal,
valid and binding  obligation of the parties thereto,  enforceable  against such
parties in accordance  with its terms.  No default  thereunder by any such party
has occurred,  nor does any defense,  offset,  deduction or  counterclaim  exist
thereunder in favor of any such party.

                  (f) The  Grantor  is and will be at all times the owner of the
Collateral  free and clear of any lien,  security  interest  or other  charge or
encumbrance  except for (i) he security  interest  created by this Agreement and
(ii) the  security  interests  and other  encumbrances  described  in Schedule V
hereto. No effective  financing  statement or other instrument similar in effect
covering all or any part of the Collateral is on file in any recording or filing
office except (i) such as may have been filed in favor of the Lender relating to
this  Agreement  and (ii) such as may have been filed to perfect or protect  any
security interest or encumbrance described in Schedule V hereto.

                  (g) The  exercise  by the Lender of its  rights  and  remedies
hereunder will not contravene any law or contractual  restriction  binding on or
affecting the Grantor or any of its properties and will not result in or require
the creation of any lien,  security interest or other charge or encumbrance upon
or with respect to any of its properties.

                  (h) No  authorization  or approval or other  action by, and no
notice to or filing with, any Governmental A thority or other regulatory body is
required for (i) the due execution,  delivery and  performance by the Grantor of
this  Agreement,  (ii)  the  grant by the  Grantor,  or the  perfection,  of the
security interest  purported to be created hereby in the Collateral or (iii) the
exercise by the Lender of any of its rights and remedies  hereunder,  except for
the filing  under the Code of the  financing  statement(s)  required to be filed
pursuant to the Loan Agreement, all of which financing statements have been duly
filed and are in full force and effect.

                                      - 3 -

<PAGE>




                  (i) This Agreement  creates a valid security interest in favor
of the Lender in the  Collateral as security for the  Obligations.  The Lender's
having possession of all instruments and cash constituting  Collateral from time
to time and the filing of the financing statements required to be filed pursuant
to the Loan Agreement results in the perfection of such security interest.  Such
security  interest is, or in t e case of Collateral in which the Grantor obtains
rights after the date  hereof,  will be, a perfected,  first  priority  security
interest,  subject  only  to  the  security  interests  and  other  encumbrances
described in Schedule V hereto.  Such filings and all other action  necessary or
desirable to perfect and protect such  security  interest  have been duly taken,
except for the Lender's having  possession of instruments and cash  constituting
Collateral after the date hereof.

                  SECTION 5. C venants as to the  Collateral.  So long as any of
the  Obligations  (as such term is defined in clause (i) of Section  1.01 of the
Loan  Agreement)  shall remain  outstanding,  unless the Lender shall  otherwise
consent in writing:

                  (a) Further  Assurances.  The Grantor will at its expense,  at
any  time and from  time to time,  promptly  execute  and  deliver  all  further
instruments  and documents and take all further  action that may be necessary or
desirable or that the Lender may request in order (i) to perfect and protect the
security interest  purported to be created hereby,  (ii) to enable the Lender to
exercise  and  enforce  its  rights  and  remedies  hereunder  in respect of the
Collateral  or  (iii)  to  otherwise  effect  the  purposes  of this  Agreement,
including,  without  limitation:  (A) marking  conspicuously  each chattel paper
included in the Receivables and each Related Contract and, at the request of the
Lender,  each of its records pertaining to the Collateral with a legend, in form
and substance  satisfactory  to the Lender,  indicating that such chattel paper,
Related  Contract or  Collateral  is subject to the  security  interest  created
hereby,  (B) if any Receivable  shall be evidenced by a promissory note or other
instrument or chattel  paper,  delivering  and pledging to the Lender  hereunder
such note, instrument or chattel paper duly indorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Lender, (C) executing and filing such financing or continuation  statements,
or amendments  thereto,  as may be necessary or desirable or that the Lender may
request in order to perfect and preserve the security  interest  purported to be
created  hereby,  (D) furnishing to the Lender from time to time  statements and
schedules  further  identifying  and  describing  the  Collateral and such other
reports in connection with the Collateral as the Lender may reasonably  request,
all in reasonable  detail, and (E) upon the acquisition after the date hereof by
the Grantor of any  Equipment  covered by a  certificate  of title or ownership,
cause the Lender to be listed as the lienholder (or, in the event such Equipment
is subject to a purchase  money  security  interest (a "Permitted  Lien"),  as a
junior  lienholder)  on such  certificate  of title  and  within  60 days of the
acquisition thereof and deliver evidence of the same to the Lender..

                  (b) Location of Equipment and Inventory. The Grantor will keep
the Equipment and Inventory (other than Inventory and used Equipment sold in the
ordinary  course of business) at the location[s]  specified  therefor in Section
4(d) hereof.

                  (c)  Condition  of  Equipment.  The  Grantor  will  cause  the
Equipment  to be  maintained  and  preserved in the same  condition,  repair and
working  order  as when  acquired,  ordinary  wear  and  tear  excepted,  and in
accordance with any manufacturer's manual, and will forthwith, or in the case of
any  loss or  damage  to any  Equipment  as  quickly  as  racticable  after  the
occurrence thereof, make

                                      - 4 -

<PAGE>



or  cause  to be made all  repairs,  replacements,  and  other  improvements  in
connection  therewith  which are  necessary  or desirable or that the Lender may
request to such end. The Grantor will promptly furnish to the Lender a statement
respecting any loss or damage in excess of $10,000 to any Equipment.

                  (d) Taxes. The Grantor will pay promptly when due all property
and other taxes,  assessments and  governmental  charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment  and  Inventory,  except to the extent the  validity  thereof is being
contested in good faith by proper  proceedings  which stay the imposition of any
penalty, fine or lien resulting from the non-payment thereof and with respect to
which adequate reserves have been set aside for the payment thereof.

                  (e) Insurance.

    (i) The Grantor will, at its own expense, maintain insurance with respect to
the Equipment and  Inventory in such amounts,  against such risks,  in such form
and with such  insurers,  as shall be  satisfactory  to the Lender  from time to
time.  Each policy for  liability  insurance  shall provide for all losses to be
paid on behalf of the Lender and the Grantor as their  respective  interests may
appear,  and each policy for property  damage  insurance  shall  provide for all
losses to be adjusted with, and pai directly to, the Lender; provided,  however,
that with respect to Equipment  subject to a Permitted Lien, the Lender's rights
may be subject to the rights of the  holder of such  Permitted  Lien.  Except as
required by any agreement which creates a Permitted Lien, each such policy shall
in addition  (A) name the Grantor and the Lender as insured  parties  thereunder
(without any  representation  or warranty by or  obligation  upon the Lender) as
their  interests  may appear,  (B) contain the agreement by the insurer that any
loss  thereunder  shall be  payable to the Lender  notwithstanding  any  action,
inaction or breach of  representation  or warranty by the  Grantor,  (C) provide
that there  shall be no  recourse  against the Lender for payment of premiums or
other amounts with respect  thereto and (D) provide that at least 30 days' prior
written notice of  cancellation  or of lapse shall be given to the Lender by the
insurer. The Grantor will, if so requested by the Lender,  deliver to the Lender
original or duplicate policies of such insurance and, as often as the Lender may
reasonably  request,  a report of a reputable  insurance  broker with respect to
such  insurance.  The Grantor  will also,  at the  request of the  Lender,  duly
execute and deliver  instruments  of assignment of such  insurance  policies and
cause the respective insurers to acknowledge notice of such assignment.

     (ii) Reimbursement under any liability insurance  maintained by the Grantor
pursuant to this  Section 5(e) may be paid dir ctly to the Person who shall have
incurred liability covered by such insurance.  In the case of any loss involving
damage to Equipment or  Inventory  as to which  paragraph  (iii) of this Section
5(e) is not applicable,  the Grantor will make or cause to be made the necessary
repairs to or replacements  of such Equipment or Inventory,  and any proceeds of
insurance  maintained by the Grantor pursuant to this Section 5(e) shall be paid
to the Grantor as reimbursement for the costs of such repairs or replacements.

     (iii) Upon the occurrence and during the continuance of an Event of Default
or the actual or  constructive  total loss (in excess of $10,000 per occurrence)
of any  Equipment  or  Inventory,  all  insurance  payments  in  respect of such
Equipment or  Inventory  shall be paid to the Lender and applied as specified in
Section 7(b) hereof.

                                      - 5 -

<PAGE>




     (f) Provisions Concerning the Receivables and the Related Contracts.

     (i) The Grantor will (A) give the Lender prompt notice of any change in the
Grantor's  name,  identity or corporate  structure,  (B) keep its chief place of
business and chief executive office and all originals of all chattel paper which
constitute  Receivables at the  location[s]  specified  therefor in Section 4(d)
hereof,  and (C) keep  adequate  records  concerning  the  Receivables  and such
chattel paper and permit representatives of the Lender at any time during normal
business  hours to insp ct and make  abstracts  from such  records  and  chattel
paper.

     (ii) The Grantor will duly perform and observe all of its obligations under
each Related Contract and, except as otherwise  provided in this Subsection (f),
continue to collect, at its own expense,  all amounts due or to become due under
the Receivables.  In connection with such collections,  the Grantor may (and, at
the Lender's direction,  will) take such action as the Grantor or the Lender may
deem  necessary  or advi  able  to  enforce  collection  or  performance  of the
Receivables;  provided,  however,  that the  Lender  shall have the right at any
time,  upon the occurrence and during the  continuance of an Event of Default or
an event  which,  with the giving of notice or the lapse of time or both,  would
constitute  an Event of Default,  and upon written  notice to the Grantor of its
intention  to do so,  to  notify  the  account  debtors  or  obligors  under any
Receivables  of the  assignment of such  Receivables to the Lender and to direct
such account debtors or obligors to make payment of all amounts due or to become
due to the Grantor thereunder directly to the Lender and, upon such notification
and at the expense of the Grantor and to the extent permitted by law, to enforce
collection  of any such  Receivables  and to adjust,  settle or  compromise  the
amount or payment  thereof,  in the same  manner  and to the same  extent as the
Grantor  might have done.  After  receipt by the  Grantor of the notice from the
Lender referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including  instruments) received by the Grantor in respect
of the  Receivables  shall be  received  in trust for the  benefit of the Lender
hereunder,  shall be  segregated  from other  funds of the  Grantor and shall be
forthwith  paid over to the  Lender in the same  form as so  received  (with any
necessary  indorsement) to be held as cash collateral and either (1) released to
the Grantor so long as no Event of Default shall have occurred and be continuing
or (2) if any Event of Default shall have occurred and be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust, settle or
compromise  the amount or payment of any  Receivable or release wholly or partly
any account debtor or obligor thereof or allow any credit or discount thereon.

     (iii)  Upon the  occurrence  and during  the  continuance  of any breach or
default under any Related Contract  referred to in Schedule II hereto or otherwi
e specified by the Lender from time to time by any party  thereto other than the
Grantor, (A) the Grantor will, promptly after obtaining knowledge thereof,  give
the Lender written notice of the nature and duration  thereof,  specifying  what
action, if any, it has taken and proposes to take with respect thereto,  (B) the
Grantor will not,  without the prior written  consent of the Lender,  declare or
waive any such breach or default or affirmatively consent to the cure thereof or
exercise any of its remedies in respect thereof,  and (C) the Grantor will, upon
written  instructions  from the Lender and at the Grantor's  expense,  take such
action as the Lender may deem necessary or advisable in respect thereof.

     (iv) The Grantor  will,  at its expense,  promptly  deliver to the Lender a
copy of each  notice or other  communication  received  by it by which any other
party to any Related

                                      - 6 -

<PAGE>



Contract referred to in Schedule II hereto or otherwise  specified by the Lender
rom time to time  purports  to  exercise  any of its rights or affect any of its
obligations  thereunder,  together  with a  copy  of any  reply  by the  Grantor
thereto.

     (v) The Grantor will not,  without the prior written consent of the Lender,
cancel,  terminate,  amend,  modify,  or waive any  provision  of,  any  Related
Contract referred to in Schedule II hereto or otherwise  specified by the Lender
from time to time.

     (g) Motor  Vehicles.

     (i) Within 60 days of the date  hereof,  the Grantor  shall  deliver to the
Lender  photocopies  of the  certificates  of title or  ownership  for the Motor
Vehicles owned by it with the Lender listed as lienholder.

     (ii) Upon the acquisition after the date hereof by the Grantor of any Motor
Vehicle, the Grantor shall deliver to the Lender photocopies of the certificates
of title or ownership for such Motor Vehicle,  together with the  manufacturer's
statement of rigin, with the Lender listed as lienholder.

     (iii) The  Grantor  hereby  appoints  the  Lender as its  attorney-in-fact,
effective  the  date  hereof  and  terminating  upon  the  termination  of  this
Agreement,  for the purpose of (i)  executing on behalf of the Grantor  title or
ownership applications for filing with appropriate  Governmental  Authorities to
enable  Motor  Vehicles  now owned or  hereafter  acquired  by the Grantor to be
retitled  and  the  Lender  listed  as  lienholder  thereof,   (ii)  iling  such
applications  with such state agencies and (iii)  executing such other documents
and  instruments  on behalf of, and taking such other action in the name of, the
Grantor as the Lender may deem necessary or advisable to accomplish the purposes
hereof (including,  without limitation,  for the purpose of creating in favor of
the Lender a perfected  lien on the Motor Vehicles and exercising the rights and
remedies of the Lender  hereunder).  This  appointment  as  attorney-in-fact  is
irrevocable and coupled with an interest.

     (iv) Any  photocopies  of  certificates  of title  or  ownership  delivered
pursuant to the terms hereof shall be  accompanied  by odometer  statements  for
each Motor Vehicle covered thereby.

     (v) So long as no Event of  Default  or event  which,  with the  giving  of
notice or the lapse of time or both,  would constitute an Event of Default shall
have  occurred and be  continuing,  upon the request of the Grantor,  the Lender
shall execute and d liver to the Grantor such  instruments  as the Grantor shall
reasonably  request to remove the  notation of the Lender as  lienholder  on any
certificate of title for any Motor Vehicle;  provided that any such  instruments
shall be delivered,  and the release effective,  only upon receipt by the Lender
of a  certificate  from the Grantor,  stating that the Motor Vehicle the lien on
which is to be  released  is to be sold or has  suffered a  casualty  loss (with
title thereto passing to the casualty  insurance  company therefor in settlement
of the claim for such loss) and any proceeds of such sale or casualty loss being
paid to the Lender  hereunder to be applied to the Obligations  then outstanding
in the manner contemplated by Section 7(b) hereof.

                                      - 7 -

<PAGE>




                  (h)  Inspection  and  Reporting.   The  Grantor  shall  permit
representatives  of the Lender,  upon  reasonable  notice and at any time during
normal  business hours, to inspect and make abstracts from its books and records
ertaining  to the  Collateral,  and permit  representatives  of the Lender to be
present  at  the  Grantor's   place  of  business  to  receive   copies  of  all
communications and remittances relating to the Collateral, and to forward copies
of any notices or communications received or made by the Grantor with respect to
the Collateral, all in such manner as the Lender may require.

                  (i) Transfers and Other Liens.  The Grantor will not (i) sell,
assign (by operation of law or otherwis ), exchange or otherwise  dispose of any
of the Collateral  (except for sales or other dispositions of Inventory and used
Equipment in the ordinary  course of business) or (ii) create or suffer to exist
any lien,  security interest or other charge or encumbrance upon or with respect
to any of the Collateral except for (A) the security interest created hereby and
(B) the  security  interests  and other  encumbrances  described  in  Schedule V
hereto.

                  SECTION 6.  Additional Provisions Conce ning the Collateral.

                  (a) The Grantor hereby authorizes the Lender to file,  without
the  signature of the Grantor where  permitted by law, one or more  financing or
continuation statements, and amendments thereto, relating to the Collateral.

                  (b) The Grantor  hereby  irrevocably  appoints  the Lender the
Grantor's attorney-in-fact and proxy, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
the Lender's discretion,  to take any action and to execute any instrument which
the Lender may deem  necessary or advisable to  accomplish  the purposes of this
Agreement,  including,  without  limitation:  (i) to obtain and adjust insurance
required to be paid to the Lender pursuant to Section 5(e) hereof,  (ii) to ask,
demand,  collect, sue for, recover,  compound,  receive and give acquittance and
receipts for moneys due and to become due under or in respect of any Collateral,
(iii) to  receive,  indorse,  and  collect  any  drafts  or  other  instruments,
documents and chattel paper in connection with clause (i) or (ii) above and (iv)
to file any claims or take any action or  institute  any  proceedings  which the
Lender may deem  necessary or desirable for the  collection of any Collateral or
otherwise to enforce the rights of the Lender with respect to any Collateral.

                  (c) If the G antor  fails to perform any  agreement  contained
herein after the expiry of any  applicable  grace period,  the Lender may itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Lender  incurred in connection  therewith shall be payable by the Grantor
pursuant to Section 8 hereof.

                  (d) The powers conferred on the Lender hereunder are solely to
protect its interest in the  Collateral  and shall no impose any duty upon it to
exercise any such powers.  Except for the safe custody of any  Collateral in its
possession and the accounting for moneys actually received by it hereunder,  the
Lender  shall  have no  duty as to any  Collateral  or as to the  taking  of any
necessary  steps to preserve  rights  against  prior parties or any other rights
pertaining to any Collateral.

                  (e) Anything herein to the contrary  notwithstanding,  (i) the
Grantor shall remain liable under the Related  Contracts to the extent set forth
therein to perform all of its  obligations  thereunder  to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Lender of any

                                      - 8 -

<PAGE>



of  its  rights  hereunder  shall  not  release  the  Grantor  from  any  of its
obligations  under the Related Contracts and (iii) the Lender shall not have any
obligation or liability by reason of this Agreement under the Related  Contracts
nor shall the Lender be obligated to perform any of the obligations or duties of
the Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

     SECTION  7.  Remedies  Upon  Default.  If an Event of  Default  shall  have
occurred and be continuing:

                  (a) The Lender may exercise in respect of the  Collateral,  in
addition to other rights and remedies provided for herein or o herwise available
to it, all of the rights and  remedies of a secured  party on default  under the
Code (whether or not the Code applies to the affected Collateral),  and also may
(i) require the  Grantor to, and the Grantor  hereby  agrees that it will at its
expense and upon  request of the Lender  forthwith,  assemble all or part of the
Collateral  as directed by the Lender and make it  available  to the Lender at a
place to be  designated  by the Lender which is  reasonably  convenient  to both
parties and (ii) without notice except as specified  below,  sell the Collateral
or any part thereof in one or more parcels at public or private  sale, at any of
the Lender's  offices or elsewhere,  for cash, on credit or for future delivery,
and at such  price or prices  and upon such  other  terms as the Lender may deem
commercially  reasonable.  The Grantor agrees that, to the extent notice of sale
shall be required  by law,  at least 10 days'  notice to the Grantor of the time
and place of any public sale or the time after  which any private  sale is to be
made shall constitute reasonable notification. The Lender shall not be obligated
to make any sale of  Collateral  regardless of notice of sale having been given.
The  Lender  may  adjourn  any  public  or  private  sale  from  time to time by
announcement  at the time and place fixed therefor,  and such sale may,  without
further notice, be made at the time and place to which it was so adjourned.  The
Grantor  hereby  waives any claims  against the Lender  arising by reason of the
fact that the price at which the Collateral may have been sold at a private sale
was less than the price which  might have been  obtained at a public sale or was
less than the aggregate  amount of the  Obligations,  even if the Lender accepts
the first  offer  received  and does not offer the  Collateral  to more than one
offeree.

                  (b) Any cash  held by the  Lender as  Collateral  and all cash
proceeds  received by the Lender in respect of any sale of,  collection  from, r
other  realization  upon, all or any part of the Collateral  shall be applied as
follows:

     (i) First, to the payment of the reasonable  costs and expenses,  including
reasonable  attorneys'  fees and  legal  expenses,  incurred  by the  Lender  in
connection  with (A) the  administration  of this  Agreement,  (B) the  custody,
preservation,  use or operation  of, or the sale of,  collection  from, or other
realization upon, any Collateral,  (C) the exercise or enforcement of any of the
rights of the Lender  hereunder  or (D) the failure of the Grantor to perform or
observe any of the provisions hereof;

     (ii)  Second,  at  the  option  of the  Lender,  to the  payment  or  other
satisfaction of any liens and other encumbrances upon any of the Collateral;

                                      - 9 -

<PAGE>




     (iii) Third, ratably to the payment of the Obligations, first in respect of
any fees not  covered  by clause (i) above,  second,  in respect of accrued  but
unpaid in erest on the Loans,  and third, in respect of unpaid  principal of the
Loans;

     (iv) Fourth, to the payment of any other amounts required by applicable law
(including, without limitation, Section 9-504(1)(c) of the Code or any successor
or similar, applicable statutory provision); and

     (v) Fifth,  the surplus  proceeds,  if any, to the Grantor or to whomsoever
shall be  lawfully  entitled  to  receive  the  same or as a court of  competent
jurisdiction s all direct.

                  (c)  In  the  event  that  the  proceeds  of  any  such  sale,
collection  or  realization  are  insufficient  to pay all  amounts to which the
Lender is legally  entitled,  the  Grantor  shall be liable for the  deficiency,
together  with  interest  thereon at the highest rate  specified in any Note for
interest  on overdue  principal  thereof or such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees of
any attorneys employed by the Lender to collect such deficiency.

                  SECTION 8.  Indemnity and Expenses.

                  (a) The  Grantor  agrees  to  indemnify  the  Lender  from and
against any and all claims,  losses and liabilities  growing out of or resulting
from  this  Agreement  (including,  without  limitation,   enforcement  of  this
Agreement),  except claims,  losses or liabilities resulting solely a d directly
from the Lender's gross negligence or willful misconduct.

                  (b) The Grantor  will upon demand pay to the Lender the amount
of  any  and  all  costs  and  expenses,   including  the  reasonable  fees  and
disbursements of the Lender's counsel and of any experts and Lenders,  which the
Lender may incur in connection  with (i) the  administration  of this Agreement,
(ii) the custody,  preservation, use or operation of, or the sale of, co lection
from,  or  other  realization  upon,  any  Collateral,  (iii)  the  exercise  or
enforcement of any of the rights of the Lender hereunder, or (iv) the failure by
the Grantor to perform or observe any of the provisions hereof.

                  SECTION 9. Notices,  Etc. All notices and other communications
provided for hereunder  shall be in writing and shall be mailed,  telegraphed or
delivered,  if to  the  Grantor,  to it at  its  address  specified  in he  Loan
Agreement;  if to  the  Lender,  to it at its  address  specified  in  the  Loan
Agreement;  or as to  either  such  Person  at such  other  address  as shall be
designated by such Person in a written notice to such other Persons complying as
to  delivery  with the  terms of this  Section  9. All such  notices  and  other
communications  shall be effective (i) if mailed,  when  deposited in the mails,
(ii) if  telegraphed,  when  delivered  to the  telegraph  company,  or (iii) if
delivered, upon delivery.

                  SECTION 10.  Miscellaneous.

                  (a) No amendment of any provision of this  Agreement  shall be
effective unless it is in writing and signed by the Grantor and the Lender,  and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is

                                     - 10 -

<PAGE>



in writing  and signed by the Lender,  a d then such waiver or consent  shall be
effective only in the specific  instance and for the specific  purpose for which
given.

                  (b) No failure on the part of the Lender to  exercise,  and no
delay in exercising,  any right hereunder or under any other Loan Document shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
such right preclude any other or further exercise thereof or the exercise of any
other right.  The rights and remedies of the Lender  provided  herein and in the
other Loan  Documents are  cumulative  and are in addition to, and not exclusive
of, any rights or remedies  provided by law.  The rights of the Lender under any
Loan Document against any party thereto are not conditional or contingent on any
attempt  by the  Lender to  exercise  any of its  rights  under  any other  Loan
Document against such party or against any other Person.

                  (c) Any  provision of this  Agreement  which is  prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the  extent  of such  prohibition  or  invalidity  without  invalidating  the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.

                  (d) This Agreement shall create a continuing security interest
in the  Collate  al and shall  (i)  remain in full  force and  effect  until the
indefeasible  payment  in full or release  of the  Obligations  (as such term is
defined in clause (i) of Section 1.01 of the Loan Agreement), (ii) be binding on
the Grantor and its  successors  and assigns and shall inure,  together with all
rights and  remedies of the Lender  hereunder,  to the benefit of the Lender and
its  respective  successors,  transferees  and  assigns.  Without  limiting  the
generality  of the  foregoing,  the Lender may assign or otherwise  transfer any
Note or portion  thereof  held by it,  and the  Lender  may assign or  otherwise
transfer its rights under any other Loan Document to any other Person,  and such
other Person shall  thereupon  become vested with all of the benefits in respect
thereof  granted  to the  Lender,  herein or  otherwise.  None of the  rights or
obligations  of the Grantor  hereunder may be assigned or otherwise  transferred
without the prior written consent of the Lender.

                  (e) Upon the satisfaction in full of the Obligations, (i) this
Agreement  and the security  interest  created  hereby shall  terminate  and all
rights to the Collateral shall revert to the Grantor,  and (ii) the Lender will,
upon the  Grantor's  request  and at the  Grantor's  expense,  (A) return to the
Grantor such of the Collateral as shall not have been sold or otherwise disposed
of or applied  pursuant  to the terms  hereof and (B) execute and deliver to the
Grantor such documents as the Grantor shall reasonably  request to evidence such
termination.

                  (f) This  Agreement  shall be  governed  by and  construed  in
accordance  with  the law of the  State  of New  York,  except  as  required  by
mandatory  provisions  of law and  except to the  extent  that the  validity  or
perfection or the perfection and the effect of the perfection or  non-perfection
of the security  interest created hereby, or remedies  hereunder,  in respect of
any particular  Col ateral are governed by the law of a jurisdiction  other than
the State of New York.

                  (g) Any  legal  action  or  proceeding  with  respect  to this
Agreement  or any document  related  thereto may be brought in the courts of the
State of New York or the United  States of America for the Southern  District of
New York, and, by execution and delivery of this  Agreement,  the Grantor hereby
accepts   for   itself  and  in  respect   of  its   property,   generally   and
unconditionally, the

                                     - 11 -

<PAGE>



jurisdiction of the aforesaid courts.  The Grantor hereby irrevocably waives any
objection,  including,  without limitation, any objection to the laying of venue
or based on the grounds of forum non  conveniens,  which it may now or hereafter
have to the  bringing  of any  such  action  or  proceeding  in such  respective
jurisdictions  and consents to the granting of such legal or equitable relief as
is deemed appropriate by the court.

                  (h) The Grantor rrevocably  consents to the service of process
of any of the  aforesaid  courts in any such action or proceeding by the mailing
of copies  thereof by registered or certified  mail,  postage  prepaid,  to such
Grantor at its address provided herein, such service to become effective 30 days
after such mailing.

                  (i) Nothing  contained  herein  shall  affect the right of the
Lender to serve process in any other manner  permitted by law or commence  legal
proceedings  or otherwise  proceed  agai st the Grantor or any of the  Grantor's
property in any other jurisdiction.

                  (j)  EACH  OF THE  GRANTOR  AND  (BY  ITS  ACCEPTANCE  OF THIS
AGREEMENT)  THE LENDER  WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT
OF ANY  LITIGATION  BASED ON,  ARISING OUT OF, UNDER OR IN CONNECTION  WITH THIS
AGREEMENT  OR ANY OTHER  LOAN  DOCUMENT,  OR ANY  COURSE OF  CONDUCT,  COURSE OF
DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.



                                     - 12 -

<PAGE>



IN WITNESS  WHEREOF,  the Grantor has caused this  Agreement  to be executed and
delivered by its officer  thereunto duly authorized,  as of the date first above
written.

MOUNTAINEER PARK, INC.

By: /s/ Edson R. Arneault

Title: _______________________________


                                     - 13 -

<PAGE>



                                   SCHEDULE I

                                       TO

                               SECURITY AGREEMENT

                                    Equipment


                                     - 14 -

<PAGE>



                                   SCHEDULE II

                                       TO

                               SECURITY AGREEMENT

                            Certain Related Contracts



                                     - 15 -

<PAGE>



                                  SCHEDULE III

                                       TO

                               SECURITY AGREEMENT

     1. Location(s) of Equipment and Inventory:











     2.  Grantor's  chief place of business,  chief  executive  office and place
where the Grantor keeps its records concerning Receivables.



                                     - 16 -

<PAGE>



                                   SCHEDULE IV

                                       TO

                               SECURITY AGREEMENT

                                Trade Names, Etc.




                                     - 17 -

<PAGE>



                                   SCHEDULE V

                                       TO

                               SECURITY AGREEMENT

                             Permitted Encumbrances



                                     - 18 -

<PAGE>



                                                                      EXHIBIT 3
                           CREDIT LINE DEED OF TRUST,
                  LEASEHOLD DEED OF TRUST, SECURITY AGREEMENT,
               ASSIGNMENT, FIXTURE FILING AND FINANCING STATEMENT


     THIS  CREDIT  LINE  DEED  OF  TRUST,  LEASEHOLD  DEED  OF  TRUST,  SECURITY
AGREEMENT,  ASSIGNMENT,  FIXTURE  FILING AND  FINANCING  STATEMENT  (hereinafter
referred  to as "Trust  Deed" or "Deed of Trust")  made and  entered  into as of
December  ,  1996  by  and  among   MOUNTAINEER  PARK,  INC.,  a  West  Virginia
corporation,  party of the first  part  ("Grantor"),  and  Deborah  A.  Sink,  a
resident of Kanawha County,  West Virginia,  and Carl D. Andrews,  a resident of
Kanawha  County,  West  Virginia,  as  Trustees,  parties  of  the  second  part
(collectively,  the "Trustees) and MADELEINE L.L.C.,  ("Madeleine"),  a New York
limited liability company, shall be referred to herein as the "Lender".

                              W I T N E S S E T H:

              WHEREAS,   the   Borrower,   Winners   Entertainment,   Inc.  (the
"Guarantor")  and the Lender are parties to a Term Loan  Agreement,  dated as of
July 2, 1996 (the "Old  Agreement"),  pursuant  to which the Lender  made a term
loan to the Borrower in the original principal amount of $5,000,000.

              WHEREAS,  the Borrower and the Guarantor  have  requested that the
Lender (a) amend and restate the Old  Agreement to provide,  among other things,
an increase in the amount  available  under the Old  Agreement  to the  Borrower
thereunder  from  $5,000,000 to  $16,100,000  (the "Term Loan") to refinance the
obligations  of the Borrower  under the Senior Loan Agreement (as defined in the
Old Agreement),  and (b) extend additional credit to the Borrower in the form of
a three year line of credit for loans in the aggregate  maximum principal amount
not to  exceed  $5,376,500  at any  time  outstanding  (the  "Line  Loans"  and,
collectively with the Term Loan, the "Loans").

              WHEREAS,  the  obligation  of Lender to  extend  credit  under the
Restated Loan Agreement is subject to the condition,  among others, that Grantor
grant the Property (as hereinafter defined) to Trustees in trust for the benefit
of Lender; and

              WHEREAS,  to induce  Lender to extend  credit to  Grantor,  and as
security  for the Loans,  Grantor  desires to execute and  deliver  this Deed of
Trust to  Trustees  for the  benefit of Lender  pursuant  to the  Restated  Loan
Agreement; and

              WHEREAS,  this is a Credit Line Deed of Trust for the  purposes of
West Virginia Code ss. 38-1-14,  and secures a maximum  principal  amount not to
exceed  $21,500,000.00,  and this Deed of Trust is also security for the payment
of interest on such principal sums and for taxes,  insurance premiums, and other
expenses,  including interest thereon,  undertaken by Trustee or Lender pursuant
to West Virginia Code ss. 38-1-14; and

              WHEREAS,  this credit line deed of trust  provides for and secures
future advances which are intended to be obligatory advances for the purposes of
West Virginia Code ss. 38-1-14.



<PAGE>



              WHEREAS,  this Deed of Trust also  secures  the  repayment  of all
advances that Lender may extend to Grantor under the Loans and other  agreements
provided in the Note and Restated Loan Agreement described therein, this Deed of
Trust, or any other present or future written agreement. Upon written request of
Grantor,  and in the absence of default or breach of any  covenant or  agreement
contained in the Note, this Deed of Trust or the Restated Loan Agreement and the
Loan  Documents as defined in the Restated  Loan  Agreement,  the Lender  hereby
agrees to make future advances of principal up to an amount which, when added to
the then  outstanding  principal  balance  owing on the Loans,  shall not exceed
$21,500,000.00.

              NOW,  THEREFORE,  in order to  further  secure  the  payment  of a
maximum  principal  amount not to exceed  $21,500,000.00  and all sums due or to
become due under the Restated Loan Agreement,  the Loans, and the Loan Documents
(as defined in the Restated Loan Agreement),  or any extensions or modifications
thereof,  as well as to secure the  performance  of all Grantor's  covenants and
agreements  contained  in this  Trust  Deed or any  amendments  thereof,  and in
consideration  of the  premises  and the further sum of Ten Dollars  ($10.00) to
Grantor in hand well and truly paid by Lender at and before the delivery hereof,
the receipt whereof is hereby acknowledged,  Grantor has granted,  bargained and
sold, mortgaged,  conveyed, aliened, enfeoffed,  released, confirmed,  assigned,
transferred  and set over, and by these  presents does grant,  bargain and sell,
mortgage,  convey, alien, enfeoff,  release,  confirm,  assign, transfer and set
over unto Trustees,  their successors and assigns, in trust, with power of sale,
Grantor's  interest  (including  without  limitation  all  surface  and  mineral
interests,  if any,  including  coal)  in  those  certain  tracts  of land  more
particularly  described  in Exhibit "A"  attached  hereto and made a part hereof
(the "Land").

              TOGETHER with  Grantor's  interest in all the coal, if any, in all
seams underlying the Land in which Grantor has rights.

              TOGETHER with all  Grantor's  interest in sand,  stone,  water and
gravel  found on the Land and  Grantor's  right to dump refuse from such coal on
the surface of the Land.

              TOGETHER with the tenements, hereditaments,  appurtenances and all
the estates and rights of Grantor in and to the Land.

              TOGETHER with all the right,  title and interest of Grantor in and
to all streets, roads and public places, opened or proposed, adjoining the Land,
and all easements and rights-of-way, public or private, now or hereafter used in
connection with the Land,  including without  limitation,  all roads and ways on
the  surface  of or  underground  on the  Land for the  mining,  transportation,
ventilation  and  drainage  of coal and for the  transportation  of workmen  and
supplies  and all other  necessary  or useful  purposes in  connection  with the
exploration, mining, processing, production and removal of coal.

              TOGETHER with  Grantor's  interest in all the oil and gas, if any,
underlying the Land.

              TOGETHER with all right, title and interest of Grantor,  now owned
or hereafter  acquired,  in and to any land lying in the bed of any street, road
or avenue,  opened or proposed,  in front of or adjoining the Land to the extent
of the interest of Grantor therein, now or hereafter acquired.


                                      - 2 -

<PAGE>



              TOGETHER with all right, title and interest of Grantor,  now owned
or  hereafter  acquired,  in and to any and all  sidewalks  and alleys,  and all
strips and gores of land, adjacent to or used in connection with the Land.

              TOGETHER with all buildings,  tipples,  inclines,  ma chine shops,
structures, improvements, rail spurs, dams and reservoirs in connection with the
mining  of coal  (the  "Improvements")  of  every  kind and  description  now or
hereafter erected or-placed on the Land.

              TOGETHER with all of Grantor's present and future right, title and
interest in (i) all fixtures including without  limitation,  all standing or cut
timber, and all minerals,  including without  limitation,  coal, minerals before
extraction,  minerals as extracted and accounts  resulting from the sale thereof
("Fixtures")  heretofore  or  hereafter  placed on the Lands or Leased Lands and
(ii)  all  machinery  and  equipment,  including  without  limitation,  all coal
preparation plants, docks, transloading, coal storage, cleaning and transporting
facilities or other  improvements  located on any of the Lands, now or hereafter
used by Grantor and all equipment and  machinery  comprising,  or related to the
operation of such facilities or improvements  ("Equipment"),  wherever  located,
and all attachments, accessories, and parts used or intended to be used with any
of such Equipment or Fixtures  whether now or hereinafter  installed  therein or
thereon or affixed thereto as well as all substitutes and  replacements  thereof
in whole or in part,  and (iii) all products  and all cash and noncash  proceeds
(including insurance policies and proceeds) and all guaranties,  claims, rights,
remedies  and  privileges  relating to any or all of the items listed in (i) and
(ii) above.

              TOGETHER with all the mining rights and easements owned by Grantor
and appurtenant to the Land.

              TOGETHER  with all right,  title and interest of Grantor as lessee
under any and all leases relating to any Fixtures,  together with any options to
purchase  the Fixtures  which are subject to such leases and  together  with the
benefit of any payments now or hereafter made thereon.

     TOGETHER with the  reversions,  remainders,  easements,  rents,  issues and
profits  arising or  issuing  from the Land and from the  Improvements  thereon,
including, but not limited to, the rents, royalties,  issues and profits arising
or issuing from all leases and subleases now or hereafter  entered into covering
all or any  part  of the  Land  and  for the  Improvements,  including,  without
limitation,   all   accounts   receivable,   maintenance,   tax  and   insurance
contributions,  percentage rents, minimum rents, any damages or awards following
suit or arbitration  damages following default,  capital reserve funds, any sums
to which  Grantor may become  entitled in any court  proceedings  involving  the
bankruptcy,  insolvency  or  reorganization  of any tenants or  operators of the
Land;  any  guaranties  of any rents,  royalties,  income and  profits due or to
become  due  under any  lease,  and any  proceeds  payable  under any  policy of
insurance  covering  loss of rents  under any lease for any cause,  all of which
leases, subleases,  rents, issues and profits are hereby assigned (collectively,
the "Rents") and, if.requested by Lender, shall be caused to be further assigned
to Lender by Grantor. The foregoing assignment shall include without limitation,
cash or securities  deposited  under leases to secure  performance by tenants or
operators of their obligations  thereunder,  whether such cash or securities are
to be held until the expiration of the terms of such leases or applied to one or
more  installments of rent coming due prior to the expiration of such terms. The
foregoing  assignment  is  intended by Grantor and Lender to create and shall be
construed  to  create  an  absolute,   unconditional  and  presently   effective
assignment

                                      - 3 -

<PAGE>



to Lender of all of Grantor's  right,  title and interest in the Rents and shall
not be deemed to create  merely a security  interest  therein for the payment of
any  indebtedness or the performance of any obligations of Grantor  evidenced by
the Restated Loan Agreement,  the Loans,  and the Loan  Documents.  Grantor will
execute and  deliver to Lender on demand such  assignments  and  instruments  as
Lender may require to implement,  confirm,  maintain and continue the assignment
hereunder.

              TOGETHER  with any and all  awards,  damages,  payments  and other
compensation and any and all claims therefor and rights thereto which may result
from taking or injury by virtue of the  exercise of the power of eminent  domain
of or to, or any  damage,  injury or  destruction  in any manner  caused to, the
Land,  the  Improvements,  or any part  thereof,  or from any change of grade or
vacation of any street abutting thereon, all of which awards, damages, payments,
compensation, claims and rights are hereby assigned, transferred and set over to
Trustees  on behalf of Lender to the fullest  extent that  Grantor may under the
law so do.

              TOGETHER with all of Grantor's right, title and interest in and to
all rights and claims  arising  under and by virtue of the covenants of warranty
contained in those deeds conveying the Land to Grantor.

              ALL of which property and rights therein hereinabove  described or
mentioned and all of which collateral is now existing or hereafter arising,  now
owned or hereafter acquired, due or to become due, including proceeds, products,
and  insurance  proceeds  to secure  payment of all  indebtedness  of Grantor to
Lender now existing or hereafter arising, being hereinafter collectively called,
the  "Property".  It is the  intention  of the parties  hereto that this Deed of
Trust  shall  embrace and  Grantor  does  hereby  grant to Trustees on behalf of
Lender a mortgage, deed of trust and security interest in all of the properties,
rights, interests, claims, demands and privileges of every kind and character as
are owned by the Grantor or in which the  Grantor has rights in and  appurtenant
to all lands in the county in which this  instrument  is recorded,  whether fee,
mineral,   surface,   leasehold,   easement,   right-of-way  or  otherwise,  and
wheresoever situate, and whether or not specifically described herein,  together
with all rents,  royalties and other income arising from the various coal leases
and other instruments and agreements affecting the same.

              BUT THIS CONVEYANCE IS IN TRUST, HOWEVER, to secure the payment of
the Debt (as hereinafter  defined) and  performance of the other  obligations of
Grantor referred to herein.

              And without  limiting any of the other  provisions of this Deed of
Trust, Grantor, as debtor,  expressly grants unto Lender, a security interest in
all  those  portions  of the  Property  which  may  be  subject  to the  Uniform
Commercial Code (the "Code") provisions applicable to secured transactions under
the  laws of any  state  and this  Deed of Trust  shall  constitute  a  Security
Agreement under the Code.

              TO HAVE AND TO HOLD the same unto Trustees,  their  successors and
assigns, forever.

              PROVIDED,  HOWEVER,  that if Grantor  shall pay to Lender the Debt
(as  hereinafter  defined),  and  shall  keep  and  perform  each  of its  other
covenants,  conditions  and agreements set forth herein and in the Restated Loan
Agreement,  the  Loans,  and the Loan  Documents,  upon the  termination  of all
obligations, duties and commitments of Grantor under the Restated Loan

                                      - 4 -

<PAGE>



Agreement, the Loans, and the Loan Documents,  this Deed of Trust and the estate
hereby granted and conveyed shall become null and void.

              This  conveyance  is intended as a Trust Deed and is given for the
purpose of securing payment of the Debt and performance of the other obligations
of Grantor referred to above.

              This Trust Deed is executed and delivered subject to the following
covenants, conditions and agreements.

     1.  Definition.  Words and terms  defined in the  Restated  Loan  Agreement
shall,  unless the context  hereof  clearly  requires  otherwise,  have the same
meanings herein as therein provided.

     2. Debt Secured. "Debt" means,  collectively,  (i) all indebtedness whether
of  principal,  interest,  fees,  expenses  or  otherwise  of  Grantor to Lender
incurred in connection with the Restated Loan Agreement, the Loans, and the Loan
Documents,  as the same may from time to time be amended,  together with any and
all extensions, renewals, refinancings or refundings thereof in whole or in part
and (ii) all costs and expenses,  including  without  limitation,  to the extent
permitted by law,  reasonable  attorneys,  fees and legal expenses,  incurred by
Trustees  or  Lender  or Lender  in the  collection  of any of the  indebtedness
referred to in clause (i) above, and (iii) any advances made by Lender or Lender
for the maintenance,  preservation, protection or enforcement of, or realization
upon,  any  property  or assets now or  hereafter  made  subject to a  mortgage,
pledge,  lien or  security  interest  granted  pursuant to this Deed of Trust or
pursuant  to any  agreement,  instrument  or note  relating  to any of the Debt,
including  without  limitation  advances for taxes,  insurance,  repairs and the
like;  interest on the  principal  sums  hereby  secured,  and taxes,  insurance
premiums and other obligations,  including interest thereon undertaken by Lender
or Lender herein or in any other agreement  securing or otherwise  pertaining to
all  indebtedness  evidenced or guaranteed by the Restated Loan  Agreement,  the
Loans, and the Loan Documents.

     The beneficial owner of the Debt is MADELEINE L.L.C.,  the Lender,  and the
residence  and  principal  place of  business of said  beneficial  owner and the
Lender is as follows:

                               Madeleine, L.L.C.
                               950 Third Avenue
                               New York, New York 10022
                               Attention: Kevin Genda

     3. (a) Possession.  Until an Event of Default, Beneficiary shall permit the
Grantor to possess and enjoy the Property  and to receive the Rents,  issues and
profits thereof.

     (b) Condition of Grant. The condition of this Deed of Trust is such that if
the Grantor shall fulfill all of its promises under the Old Agreement,  Restated
Loan Agreement and Notes, as such terms are defined therein,  and shall observe,
perform and  discharge  the  obligations  contained in this deed of trust,  then
Beneficiary  shall  release and reconvey unto and at the cost of the Grantor the
Property.

              4.      Impositions and Other Charges.

                                      - 5 -

<PAGE>




     (a) Duty to Pay.  Until  payment in full of the clause (i)  Obligations  as
such item is defined at Section 1.01 of the  Restated  Loan  Agreement,  Grantor
will,  except  as  otherwise  provided  in  Article  VIII of the  Restated  Loan
Agreement, (i) at least five (5) days prior to the date on which any interest or
penalties shall commence to accrue thereon, pay, discharge and, upon the request
of Lender furnish to Lender copies of (unless originals are requested by Lender)
proper  receipts  for all  taxes,  general  and  special,  water and sewer  rent
charges,  excise levies, transit taxes, levies and assessments of every kind and
all charges for utilities and utility  services,  and which may have been or may
hereafter be charged,  assessed,  levied,  confirmed,  imposed  upon, or grow or
become due and payable out of, or in respect to, or against,  the  Property,  or
any part thereof, or any appurtenances thereto (collectively,  the Impositions),
by any lawful  authority or public utility,  or which may become a lien thereon,
unless the same shall have been fully paid to Lender as provided in subparagraph
3(b) hereof,  (ii) pay and  discharge  all  mechanics,  liens which may be filed
against said premises,  (iii) pay and discharge any documentary,  stamp or other
tax, including interest and penalties thereon, if any, now or hereafter becoming
payable  hereon,  (iv)  provide,  renew and keep alive by paying  the  necessary
premiums and charges  thereon such  policies of hazard and  liability  insurance
upon the  property  and upon the  buildings  and  improvements  now or hereafter
erected upon the Property as are required by the Lender.

     (b) Escrow by Lender.  Upon the  written  request  of  Trustees  or Lender,
Grantor  will pay or  cause to be paid to  Lender  contemporaneously  with  each
monthly payment of interest,  principal or principal and interest a sum equal to
one-twelfth  (1/12th)  of the real  estate  taxes  and  premiums  for  insurance
required by  subparagraph  3(a) hereof so as to enable Lender to pay the same at
least  thirty (30) days before they become due.  Amounts so paid shall be deemed
not to be trust funds but may at the option of Lender be commingled with general
funds of Lender. No interest shall be paid oft such amounts. If, pursuant to any
provision of this Trust Deed,  the whole amount of the principal  debt remaining
or any installment of interest,  principal or principal and interest becomes due
and payable prior to its originally  scheduled  maturity,  Lender shall have the
right,  at its  election,  to a apply  any  amounts  paid to Lender  under  this
subparagraph  3(b), with accrued interest,  thereon,  against all or any part of
the indebtedness  secured by this Trust Deed, any interest thereon or in payment
of the premiums or payments for which the amounts were paid.  If the real estate
taxes and insurance  premiums required to be escrowed pursuant to this paragraph
shall exceed the  estimate  therefor and the amounts paid into escrow under this
subparagraph  3(b),  Grantor shall on demand forthwith make good the deficiency.
Grantor will furnish to Lender tax and  insurance  bills in  sufficient  time to
enable  Lender to pay such taxes and  premiums  before  interest  and  penalties
accrue thereon.

     (c) Proof of Payment.  Unless the same shall have been fully paid to Lender
as provided in subparagraph  3(b) hereof,  Grantor,  upon the written request of
Lender,  will furnish or will cause to be furnished to Lender within thirty (30)
days  after the date when any  Impositions  would  become  delinquent,  official
receipts of the  appropriate  taxing  authority or other  authority to which the
charge  is  payable,  or  other  evidences  reasonably  satisfactory  to  Lender
evidencing the payment thereof.

     (d)  Evidence  of  Payment.  The  certificate,  or bill of the  appropriate
official  designated  by law to make or issue the same or to receive  payment of
any Imposition, of nonpayment

                                      - 6 -

<PAGE>



of such Imposition shall be prima facie evidence that such Imposition is due and
unpaid at the time of the  making or  issuance  of such  certificate,  advice or
bill.

              5.  Risk  of  Loss;  Insurance.  Risk  of loss  or,  damage  to or
destruction  of the Property is and shall remain upon Grantor.  If Grantor fails
to effect and keep in force  insurance  covering the Property as required by the
Lender,  or fails to pay the premiums thereon when due,  Trustees or Lender upon
receipt of notice of default  may do so for the  account  of  Grantor.  Upon the
existence of an Event of Default beyond any  applicable  cure and grace periods,
Grantor  hereby  assigns  and sets over to Lender  all  monies  which may become
payable on account of all  insurance  covering  the Property  including  without
limitation any return of unearned premiums which may be due upon cancellation of
any such  insurance,  and  directs the  insurers  to pay  directly to Lender any
amount so due which  shall be  applied  to the  principal  balance  of the Note,
provided the Note is current and no Event of Default  exists subject only to the
rights of the  holder(s) of the note secured by the  Bennett-  Management  Trust
Deed.  Trustees  on  behalf of  Lender  are  hereby  irrevocably  appointed  the
attorneys-in-fact  of Grantor to endorse any draft or check which may be payable
to Grantor in order to collect the  proceeds of such  insurance or any return of
unearned  premiums  which Lender is entitled to collect under this  paragraph 4.
Lender shall apply such proceeds of all casualty  insurance in  accordance  with
the  provisions  of paragraph  16 of this Deed of Trust.  Lender may deduct from
such proceeds any expense  incurred by Lender in collecting the same  (including
reasonable counsel fees).

              6. Property Maintenance, Alterations,  Improvements. Grantor shall
maintain the Property and all buildings and improvements subject to this Deed of
Trust in good working order and condition,  ordinary wear and tear excepted, and
shall not  commit or suffer  waste.  In no event  shall  Grantor  undertake  any
alteration or addition to the Property  which reduces the economic  value of the
Property.  Lender  shall  have  the  right to enter  upon  the  Property  at any
reasonable hour and upon 24-hour notice for the purpose of inspecting the order,
condition and repair of the buildings and Improvements erected thereon.

              7. Location of Personal Property. The personal property covered by
this Trust Deed is located in Hancock  County,  West Virginia more  particularly
described  on  Exhibit A to this Deed of Trust or in  another  county in which a
priority security interest in such personal property has been granted to Lender.
Except as otherwise  permitted under the Restated Loan  Agreement,  Grantor will
not move  (except to any county in which Lender has a prior  perfected  security
interest in such items of personal property),  remove, transfer, sell, convey or
otherwise assign any of the items of personal  property included in the Property
until the Debt secured hereby is paid in full.

     8.  Compliance  with Laws.  Grantor will promptly  comply,  in all material
respects, with all present and future laws, ordinances, rules and regulations of
any governmental authority having an effect on Grantor or the Property.

     9. Further  Assurances.  Grantor will, from time to time, make, do, execute
and  acknowledge,  as may be  reasonably  necessary  such further  acts,  deeds,
conveyances,  mortgages, security agreements, financing statements, continuation
statements  and other  assurances  in law as may be required  for the purpose of
effectuating the intent hereof.


                                      - 7 -

<PAGE>



              10. Failure to Pay  Impositions  and other Charges;  Protection of
Property.  Except as otherwise  provided in the Restated Loan Agreement,  in the
event  Grantor  neglects  or  refuses  to pay or cause  to be paid  the  charges
mentioned  in  paragraph  3 of this  Deed of  Trust,  or fails to  maintain  the
buildings and Improvements as aforesaid,  Lender after notice  to.Grantor may do
so, add to the Debt the cost thereof, and collect the same as part of said Debt.
Lender shall,  after the  expiration of notice and grace period  provided in the
Restated Loan Agreement,  have the power and authority to institute and maintain
any suits and  proceedings  as Lender  may deem  advisable  (a) to  prevent  any
impairment of the Property by any acts which may be unlawful or any violation of
this Deed of Trust, and (b) to preserve or protect its interest in the Property.

              11.  Prohibition of Liens;  Debt.  Grantor will pay, or bond, from
time to time  when  the same  shall  become  due,  all  claims  and  demands  of
mechanics, materialmen,  laborers, and others which, if unpaid, might result in,
or permit the creation of, a lien on the Property or any part thereof, or on the
revenues,  rents, issues, income and profits arising therefrom.  Grantor will do
everything  necessary  so that  the  lien  and  priority  hereof  shall be fully
preserved,  at the  cost of  Grantor,  without  expense  to  Lender,  except  as
otherwise provided in the Restated Loan Agreement.

               Grantor will not,  without the written consent of Lender,  create
or suffer to be created any security interest under the Code,  together with any
amendments or supplements  thereto,  or other encumbrances in favor of any party
other  than  Lender,  or create or suffer any  reservation  of title by any such
other  party,  with  respect to any  fixtures,  nor shall any such  fixtures  or
property be the  subject  matter of any lease or other  transaction  whereby the
ownership  or any  beneficial  interest  in any of such  property is held by any
person or entity  other than  Grantor  (or Lender as provided  herein)except  as
permitted in the Restated  Loan  Agreement.  Except as permitted in the Restated
Loan Agreement,  all such property shall be purchased for cash or in such manner
that no lien shall be created  thereon except the lien of this Mortgage,  unless
Mortgagee  shall agree in writing to the contrary  before a contract to purchase
any such property is executed.

              12. Prohibition of Assumption,  Transfer.  Grantor hereby warrants
and covenants  that it is the lawful owner of the Property that Grantor has good
right and lawful authority to convey and encumber the same, that the Property is
free and clear from all liens and encumbrances  except for liens in favor of the
Lender and liens permitted  under the Restated Loan Agreement,  and that it will
warrant and defend such title to the Property  against the claims of all persons
whomsoever.  Except as  disclosed in the  Restated  Loan  Agreement or otherwise
permitted under the Restated Loan Agreement,  Grantor shall not create, ' incur,
assume or suffer to exist any mortgage, pledge, security interest,  encumbrance,
lien  or  charge  of any  kind  (including  any  agreement  to  give  any of the
foregoing),  any conditional sale or other title retention agreement,  any lease
intended as  security,  (and the filing of or  agreement  to give any  financing
statement under the Uniform Commercial Code of any jurisdiction) on the Property
or any other part of the collateral  mentioned above. Except as disclosed in the
Restated  Loan  Agreement  or  otherwise   permitted  under  the  Restated  Loan
Agreement, Grantor shall not, without the prior written consent of Lender, sell,
lease,  transfer  or  otherwise  dispose  of  any of  the  Property  or all or a
substantial  portion of its assets,  or liquidate or  consolidate  with or merge
with or into any entity.

     13.  Priority  of Lien.  This Deed of Trust  shall be a first  lien deed of
trust and shall be superior in right to other deeds of trust encumbering part or
all of the Property except for liens

                                      - 8 -

<PAGE>



or  encumbrances  disclosed in the Restated  Loan  Agreement and accepted by the
Lender.  Except as otherwise  provided herein or in the Restated Loan Agreement,
Grantor will not create or permit to accrue upon all or any part of the Property
any  debt,  lien or  charge  except  the lien of this  Deed of Trust  and  shall
promptly pay and discharge,  any lien or charge  whatsoever which by any present
or future  law may be or become  superior  to, or on a parity  with this Deed of
Trust,  either in lien or in  distribution  out of the  proceeds of any judicial
sale of the Property, 'or any part thereof, and any lien or charge not permitted
by Paragraph 11.

              14.     Default.

     (a)  Default and  Remedies.  In the event sums are due and owing by Grantor
under the terms of the  Restated  Loan  Agreement,  the Note and by reason of an
Event of Default (as defined in the Restated Loan Agreement), Trustees or Lender
may forthwith  proceed to enforce payment of the amounts due and owing under the
Note or the performance of any term hereof,  whether by foreclosure,  by suit in
law or equity or otherwise,  and without further delay undertake any one or more
of the following:

                               (1)  Foreclosure.  At any times  sums are due and
                      owing  under  the  Restated  Loan  Agreement,  the Note as
                      aforesaid,  beyond any applicable grace periods, Trustees,
                      upon the written request of Lender, may foreclose upon and
                      sell the Property to satisfy the Debt. After the giving of
                      notice as provided  pursuant  to W. Va.  Code ss.  38-1-4,
                      Trustees shall sell all the Property herein  conveyed,  or
                      so much thereof as the Trustees shall deem  necessary,  at
                      public auction, at the front door of the courthouse in the
                      county (or any county if more than one) where the Property
                      is located,  or such other places as permitted by law, for
                      cash in hand on the day of  sale.  Further,  Trustees  may
                      take such other action as the law may allow,  at law or in
                      equity, for the enforcement and realization of the Deed of
                      Trust  security or any other  security  which is herein or
                      elsewhere  provided  for,  and  proceed  thereon  to final
                      judgment  and  execution  thereon  for the  entire  unpaid
                      balance of the principal  indebtedness,  with interest, at
                      the rates  and  pursuant  to the  methods  of  calculation
                      specified in the Note,  the Restated Loan  Agreement,  and
                      this Deed of Trust to the date of default  and  thereafter
                      at the rate  provided  in the Note and the  Restated  Loan
                      Agreement  together  with all other  sums  secured by this
                      Deed of  Trust,  all costs of suit,  interest  at the rate
                      specified in the Note,  and the Restated Loan Agreement on
                      any judgment obtained by Lender from and after the date of
                      any foreclosure sale of the Property (which may be sold in
                      one parcel or in such parcels, manner or order as Trustees
                      shall elect) until actual  payment is made pursuant to the
                      foreclosure  sale of the full  amount due  Lender,  and an
                      attorneys,  reasonable  commission for collection  without
                      further  stay,  any law,  usage or custom to the  contrary
                      notwithstanding.  Upon any such foreclosure  sale,  Lender
                      may bid for and purchase  the  Property in a  commercially
                      responsible  manner and, upon compliance with the terms of
                      sale,  may hold,  retain and  possess  and dispose of such
                      property  in  its  own  absolute  right  without   further
                      accountability.  In addition to the rights,  remedies  and
                      powers  hereinabove set forth,  Lender and  Trustees-shall
                      have as to any and all fixtures and personal

                                      - 9 -

<PAGE>



                      property  covered  by this  Deed  of  Trust,  all  rights,
                      remedies and powers of a Lender under the Code.

                               (2)  Receivership.  Have a receiver  appointed to
                      enter  into  possession  of  the  Property,   collect  the
                      earnings,  revenues,  rents,  issues,  profits  and income
                      therefrom  and apply the same as the court may direct.  It
                      is understood and agreed by and between the parties hereto
                      that  nothing  herein  contained  shall be  construed as a
                      substitute   for,  or  in  derogation  of,  the  right  to
                      foreclose  this Deed of Trust or as  imposing  any duty or
                      obligation  upon Lender or upon Trustees,  or any of them,
                      to take charge of the  Property or to collect  said rents,
                      issues or profit or to have a receiver  appointed for such
                      purposes.

                               (3) Sale of personal property.  Lender shall have
                      such  rights  and  remedies  in  respect of so much of the
                      Property as may, under applicable law, including the Code,
                      be personal property, or any part thereof, as are provided
                      by the Code and such other  rights and remedies in respect
                      thereof  which  it may have at law or in  equity  or under
                      this Deed of Trust, including without limitation the right
                      to take possession of the Property wherever located and to
                      sell all or any portion thereof at public or private sale,
                      without  prior  notice to  Grantor,  except  as  otherwise
                      required by law (and if notice is  required by law,  after
                      ten (10) days, prior written notice,  which Grantor agrees
                      is a reasonable period of notice), at such place or places
                      and at such time or times and in such manner and upon such
                      terms,  whether  for cash or on  credit,  as Lender in its
                      sole  discretion  may  determine.  Lender  shall apply the
                      proceeds of any such sale to the payment of the Debt. Upon
                      the  occurrence  of any Event of  Default,  Grantor,  upon
                      demand by Lender,  shall  promptly  assemble any equipment
                      and  fixtures  included  in the  Property  and  make  them
                      available to Lender at a place to be  designated by Lender
                      which  shall  be  reasonably   convenient  to  Lender  and
                      Grantor.

                         (4) Sale of the  Property.  Lender  may sell any of the
                    Property,  not specifically  designated as personal property
                    and subject to  subparagraph(iii)above,  in accordance  with
                    any applicable law.

                               (5)   Additional   rights   and   remedies;   not
                      exclusive. In addition to all the foregoing,  Trustees and
                      Lender  shall have such other  rights as the law allows in
                      the pursuit of the foregoing  specified remedies and shall
                      have  such  other  remedies  as the  law  allows  for  the
                      realization  of security  interests  herein  granted.  The
                      rights and remedies herein provided to Trustees and Lender
                      shall  be  cumulative  and  not  alternative,  and are not
                      exclusive of any other  remedies  that may be available to
                      the  Trustees  and Lender,  whether at law, in equity,  or
                      otherwise.

     (b)  Provisions  Regarding  Sale.  (i)  Grantor  agrees  that any sale made
hereunder  may be  adjourned  from time to time  without  notice other than oral
proclamation  of such  adjournment at the time and place of sale, or at the time
and place of any adjourned  sale,  and (ii) Grantor agrees that any sale of real
property or interest in real property hereunder shall be made in

                                     - 10 -

<PAGE>



accordance  with the laws of the state of West Virginia  relating to sales under
deeds of trust, with the exceptions herein stated and with the further exception
that the Grantor covenants and agrees.

     (c)  Rights in  Pursuit  of  Remedies.  In the event sums are due and owing
under the Note or the Loan  Documents as  aforesaid,  Lender in pursuance of the
foregoing remedies,  or in addition thereto,  (i) shall be entitled to resort to
its several  securities for the payment of the sums secured hereby in such order
and manner as Lender may think fit without impairing Lender's lien in, or rights
to, any of such  securities  and without  affecting the liability of any person,
firm or corporation for the sums secured  hereby,  except to the extent that the
Debt shall  have been  reduced by the  actual  monetary  consideration,  if any,
received by Lender from the  proceeds  of such  security;  (ii) may, in Lender's
sole  discretion,  release for such  consideration,  or none,  as the Lender may
require,  any  portion  of the  Property  without,  as to the  remainder  of the
security, in otherwise impairing or affecting the lien of this Deed of Trust, or
the priority  thereof,  or improving the position of any subordinate  lienholder
with respect thereto, except to the extent that the Debt shall have been reduced
by the  actual  monetary  consideration,  if any,  received  by Lender  for such
release;  and/or (iii) may accept the assignment or pledge of any other property
in place thereof as Lender may require without being accountable for so doing to
any other lienor.

     (d) Continued Lien of Deed of Trust. No entry of any judgment by Lender and
no levy of an execution  under any judgment  upon the Property or upon any other
property of Grantor  shall  affect in any manner or to any  extent,  the lien of
this Deed of Trust upon the Property or any part thereof, or any liens,  rights,
powers or  remedies of Lender  hereunder,  but such  liens,  rights,  powers and
remedies of Lender shall continue unimpaired as before.

     (e)  Subordination  of  Tenants'  Rights  Under  Leases.  In the event that
Trustees  shall  have  the  right  to  foreclose  this  Deed of  Trust,  Grantor
authorizes Trustees at their option to foreclose this Deed of Trust,  subject to
the rights of any tenants of the  Property if Trustees or Lender elect that this
Deed of Trust shall be subordinate to rights of tenants, and the failure to make
any such tenants  parties  defendant to any such  foreclosure  proceeding and to
foreclose  their  rights  will not be  asserted  by  Grantor as a defense to any
proceeding  instituted  by  Trustees  or  Lender  to  collect  the  Debt  or any
deficiency remaining unpaid after the foreclosure sale of the Property.

     (f)  Discontinuance  of  Proceedings;  Position  of  Parties  Restored . If
Trustees or Lender  shall have  proceeded  to enforce any right or remedy  under
this Deed of Trust by foreclosure, or otherwise, any such proceedings shall have
been  discontinued or abandoned for any reason,  then in every such case Grantor
and Trustees or Lender,  shall be restored to their former  positions and rights
hereunder, and all rights, powers and remedies of Lender shall continue as if no
such proceeding had occurred or had been taken.

     15. Application of Proceeds of Foreclosure.  Trustees or Lender shall apply
the proceeds of any  foreclosure  sale of or other  disposition  or  realization
upon, or rents or profits from, the Property:

                      (a)  First,  to  the  payment  or   reimbursement  of  all
              reasonable  advances,  expenses and  disbursements of Trustees and
              Lender  (including,  without  limitation,  the reasonable fees and
              costs of their counsel and agents and not less than $500 as

                                     - 11 -

<PAGE>



              commission to Trustees for acting as Trustees  hereunder) incurred
              in connection with the  administration  and enforcement of, or the
              preservation  of any  rights  under,  this Deed of Trust or in the
              collection  of the  obligations  of Grantor under the Note and the
              Loan Documents;

                    (b)  Second,  in  satisfaction  of  the  Debt,  whether  for
               principal,  interest  or  expenses  in such order as  Trustees or
               Lender shall designate; and

                    (c)  Third,  the  balance,  if  any,  to be  distributed  as
               required by law.

              If the  proceeds  from any such  sale of or other  disposition  or
realization  upon the Property  are  insufficient  to pay the Debt,  the Grantor
shall remain liable for such deficiency.

              16.     Trustees.

     (a) Removal. It is hereby expressly  covenanted and agreed that Lender may,
at any time  and from  time to time  hereafter,  upon  notice  to  Trustees  and
Grantor,  but without any other notice,  appoint and substitute another Trustee,
corporation or person,  in place of either or both of the Trustees  herein named
to execute  the trust  herein  created.  Upon such  appointment,  either with or
without a  conveyance  to said  substituted  Trustee or Trustees by the Trustees
herein  named,  or by any other  substituted  Trustee  in case the said right of
appointment is exercised more than once, the new and substituted Trustee in each
instance shall be vested with all the rights, titles, interests,  powers, duties
and trusts in the premises  which are vested in and  conferred  upon the Trustee
herein named;  and such new and  substituted  Trustee  shall be  considered  the
successor and assign of the Trustee in his place and stead. Each appointment and
substitution  shall be evidenced by an instrument in writing,  which instrument,
executed and  acknowledged  by Lender and recorded in the office of the Clerk of
the County  Commission of the County wherein said property is situate,  shall be
conclusive  proof of the proper  substitution  and appointment of such successor
Trustee or Trustees,  and notice of such proper  substitution and appointment to
all  parties  in  interest.  The  Trustees,  or either  of them or the  survivor
thereof,  may act in the  execution of this trust and in the event either of the
Trustees  shall act alone,  the  authority  and power of the  Trustees so acting
shall be as full and  complete  as if the  powers and  authority  granted to the
Trustees  herein jointly had been granted to such Trustee alone.  Either or both
of the  Trustees  are  hereby  authorized  to act by  agent or  attorney  in the
execution of this trust.

     (b) Fees. In the event foreclosure  proceedings  instituted under the terms
and  provisions  of this  Trust Deed are not  completed  through no fault of the
Trustees,  Trustees  shall be  entitled  to receive  and  forthwith  be paid the
necessary costs and expenses  incurred by them,  together with a fee of not less
than Five Hundred Dollars ($500.00).

     (c) Action.  The Trustees herein may act by agent or attorney  appointed by
them in the  execution  of this  Deed of Trust  and the  Trustees  shall  not be
required to be present in person.

              17.      Casualty Loss.


                                     - 12 -

<PAGE>



     (a)  Notice  to  Lender.  In  case  of  casualty  resulting  in  damage  or
destruction to the Property,  Grantor shall promptly give written notice thereof
to Trustees and Lender.

     (b)  Restoration  of  Property.  Unless  Lender  elects to apply  insurance
proceeds to reduce the Debt,  then,  regardless of the amount of any such damage
or destruction,  Grantor shall at its sole cost and expense,  and whether or not
the insurance  proceeds,  if any, shall be sufficient for the purpose,  restore,
repair,  replace,  rebuild or alter the same as nearly as possible to its value,
condition and character  immediately prior to such damage or destruction or with
such changes or alterations  as may be made at Grantor's  election in conformity
with and subject to the  conditions  of  paragraph 8 hereof.  Such  restoration,
repairs, replacements,  rebuilding or alteration shall be commenced promptly and
prosecuted with reasonable diligence. If (i) estimates received, and/or made, by
Lender disclose that the cost or restoration would be in excess of the amount of
the  insurance  proceeds  available  therefor,  or (ii)  during  the  period  of
restoration  by  Grantor  the  amount  of the  insurance  proceeds  shall not be
sufficient to complete such restoration,  then in either of such events, Grantor
shall deposit with Lender the amount  required to complete such  restoration  or
such other security as shall be satisfactory to Lender.

     (c)  Application of Proceeds.  All proceeds of and payments under insurance
policies with respect to any casualty  event shall be paid to Lender and applied
by Lender  first to payment  of the actual  costs,  fees and  expenses,  if any,
incurred by Lender in connection with adjustment of the loss and settlement with
the insurance company. The remainder of such insurance proceeds shall be applied
by Lender,  at the sole  discretion  of Lender,  either (i) in  reduction of the
outstanding Debt, as Lender may elect, or (ii) to the payment of the cost of the
aforesaid  restoration,   repairs,   replacement,   rebuilding  or  alterations,
including  the cost of temporary  repairs and the cost of protection of property
pending  the  completion  of  permanent   restoration,   repairs,   replacement,
rebuilding  or  alterations  (all of  which  temporary  and  permanent  repairs,
restoration, replacement, rebuilding, alterations and protection of property are
hereinafter collectively referred to as the "restoration").

     (d) Advancement of Proceeds.  If under the provisions of this paragraph 16,
insurance  proceeds are to be applied to the cost of  restoration,  Lender shall
hold such insurance  proceeds,  together with any amounts  deposited with Lender
pursuant to subparagraph  16(b) hereof,  and advance the same for application to
the cost of the  restoration  from time to time as the  restoration  progresses.
Such funds  will be  advanced  upon the  written  request  of  Grantor  and upon
Grantor's compliance with such reasonable  requirements therefor as Lender shall
impose.  Upon  completion of all of the  restoration  in a good and  workmanlike
manner  and  substantially  in  accordance  with any  plans  and  specifications
therefor which Lender may have required,  and upon receipt by Lender of evidence
satisfactory  to Lender that the  restoration  has been  completed  and that the
Property is not and will not become subject to any  mechanic's or  materialmen's
liens on account of the  restoration  or any part  thereof,  any  balance of the
insurance  proceeds or sums deposited with Lender pursuant to subparagraph 16(b)
hereof and not applied to the cost of restoration shall be applied to reduce the
Debt, and any balance  remaining  after repayment of the Debt shall be paid over
to Grantor.

     (e) Effect of Default.  Notwithstanding  any provision of this paragraph 16
to the contrary, if at any time during any restoration of the Property, an Event
of Default in the payment

                                     - 13 -

<PAGE>



on the Note shall exist,  Lender shall have no  obligation  to continue to apply
insurance  money to restoration  and may apply such insurance money to reduction
of the Debt.

     (f) No Postponement, Abatement of Scheduled Installments. In no event shall
the  application  to the  obligation  of  Grantor,  whether  or not  then due or
payable, of any insurance proceeds postpone, abate or reduce any of the periodic
installments  of principal and interest  thereafter to become due under the Debt
until the Debt is completely satisfied and paid in full. If Lender shall acquire
title to the  Property  either by virtue of a deed in lieu of  foreclosure  or a
judicial  sale thereof  pursuant to  proceedings  under the Note or this Deed of
Trust,  then all of Grantor's  estate,  right,  title and interest in and to all
such policies,  including  unearned  premiums thereon and the proceeds  thereof,
shall vest in Lender.

              18.     Condemnation.

     (a) Notice,  Right to  Participate.  Grantor shall give Trustees and Lender
immediate  notice  of any  actual or  threatened  commencement  of  condemnation
proceedings  or the exercise of the right of eminent  domain.  In the event that
the Property, or any part thereof, shall be taken in condemnation proceedings or
by exercise of any right of eminent  domain  (hereinafter  called  collectively,
"condemnation proceedings"),  Lender may on behalf of Grantor participate in any
such  condemnation  proceedings and may on behalf of and with the concurrence of
Grantor  adjust,  contest,  accept,  reject or compromise any proposed award and
collect  and,  without  the  concurrence  of Grantor,  may receive the  proceeds
thereof  and  endorse  drafts,  and  Lender  is  hereby  irrevocably   appointed
attorney-in-fact of Grantor for such purposes,  such power being coupled with an
interest.  The decision of Lender with the concurrence of Grantor with regard to
the  adjustment,  contest,  acceptance,  rejection or compromise of any proposed
award issued in connection with any  condemnation  proceedings  shall be binding
upon Grantor.  The award that may be made in any such proceeding or the proceeds
thereof shall be deposited  with Lender and  distributed in the manner set forth
in this paragraph 18. The parties agree to execute any and all further documents
that may be required in order to  facilitate  collection  of any award or awards
and the making of any such deposits with Lender.

     (b) Condemnation of All or Material Part of Property. If at any time during
the term of this  Deed of Trust  title to the  whole or a  material  part of the
Property  shall be taken in  condemnation  proceedings  or by agreement  between
Grantor and Lender and those  authorized  to exercise  such right,  Lender shall
apply such award or proceeds which it receives  pursuant to  subparagraph  17(a)
hereof to payment of the Debt and any balance  then  remaining  shall be paid to
Grantor.  In the event  that the  amount of the award or  proceeds  received  by
Lender shall not be sufficient to pay the Debt,  Grantor shall,  within ten (10)
days after the application of the award or proceeds as aforesaid pay or cause to
be paid such deficiency to Lender.  For the purposes of this subparagraph  17(b)
"a  material  part"  shall be deemed to have been  taken if the  portion  of the
Property  taken shall  preclude,  in Lender's sole judgment the effective use of
the Property as an economically viable unit for the permitted purposes for which
Grantor utilizes such Property.

     (c)  Condemnation  of Less than Material  Part of Property.  If at any time
during the term of this Deed of Trust  title to a portion of the  Property  that
does  not  constitute  "a  material  part"  of the  Property  shall  be taken as
aforesaid, all of the award or proceeds collected by

                                     - 14 -

<PAGE>



Lender  pursuant  to  subparagraph  17(a)  hereof,  shall,  at the option of the
Lender, (i) be applied to reduce the Debt or (ii) be held by Lender, and applied
and  paid  over  toward  the  costs  of  demolition,   repair  and  restoration,
substantially  in the same  manner and subject to the same  conditions  as those
provided in paragraph 16 hereof with respect to insurance and other monies.  Any
balance  remaining  in the  hands  of  Lender  after  payment  of such  costs of
demolition,  repair and  restoration  shall be retained by Lender and applied in
reduction of the Debt. In the event that the costs of such  demolition,  repairs
and restoration  shall exceed the new amount collected by Lender,  Grantor shall
pay the deficiency.

     (d) Temporary Use or Taking. If at any time during the term of this Deed of
Trust the temporary use of the whole or any part of the Property  shall be taken
in condemnation  proceedings,  all of the award or proceeds  collected by Lender
pursuant to  subparagraph  17(a)  hereof  shall be held by Lender and applied by
Lender  toward the  payment of the  monthly  interest  payment or of the monthly
payments of  principal  and interest due on the Debt until such time as the Debt
is completely  satisfied and paid,  except that, if such taking by  condemnation
proceedings  results in changes  and  alterations  to the  Property  or any part
thereof which would  necessitate  an  expenditure to restore the Property or any
part thereof to its former condition, then such portion of the award or proceeds
as in Lender's  reasonable  estimation  shall be  necessary to cover the cost of
restoration  shall at the  option of  Lender  be  retained  by  Lender,  without
application as aforesaid, and be applied and paid over toward the restoration of
the Property,  or any part thereof, to its former condition in substantially the
same manner and subject to the same conditions as those provided in paragraph 16
hereof with respect to insurance and other  monies.  In the event that the costs
of such  restoration  shall exceed the net amount  collected by Lender,  Grantor
shall pay or cause to be paid the deficiency.

     (e)  Taking of Rights of Light,  Air,  Access  and the Like.  Any award for
compensation made in condemnation  proceedings for consequential  damages or for
the taking of rights in, under and above the streets adjoining such Property, or
the rights and  benefits  of light,  air or access to said  streets,  or for the
taking of  space,  or  rights  therein,  below  the  surface  of, or above,  the
Property,  shall  be  paid  over to and  received  by  Lender.  Such  awards  or
compensation shall at the option of Lender be either applied to the reduction of
the  Debt,  or  paid  over  toward  the  cost  of such  demolition,  repair  and
restoration  of  the  Property  as  shall  be   necessitated   by  such  taking,
substantially  in the same  manner and subject to the same  conditions  as those
provided in paragraph 17 hereof with respect to insurance and other monies,  and
any balance  remaining in the hands of Lender  shall be retained by Lender,  and
applied in reduction of the Debt in the same manner as provided in  subparagraph
17(c) with respect to the balance of the award or awards therein referred to.

     (f)  Reimbursement  of Costs,  Fees and the Like. In the case of any taking
covered by the  provisions of this  paragraph 17, Grantor shall be entitled as a
first  priority to  reimbursement  out of any award or awards for all reasonable
costs,  fees, and expenses  incurred in the  determination and collection of any
such awards.

     (g)  Payments  Pending  Receipt  of Award.  Notwithstanding  any  taking by
condemnation proceedings,  Grantor shall continue to pay interest on the Debt at
the rates  provided in the Note until any such award or payment  shall have been
actually received by Lender and applied to the principal sum as provided in this
paragraph 18, if it is to be so applied under this paragraph

                                     - 15 -

<PAGE>



     18. Any reduction in the principal sum resulting from Lender's  application
of such award or payment as hereinafter set forth shall be deemed to take effect
only on the date of such application. If prior to Lender's receipt of such award
or  payment  the  Property  shall have been  sc',.d to Lender or its  nominee on
foreclosure  of this Deed of Trust,  Lender  shall have the right to receive and
retain the entire award or payment.

     (h) No Postponement. Abatement or Scheduled Installments. In no event shall
the  application to the Debt of any payment to Lender pursuant to this paragraph
18 postpone,  abate or reduce any of the periodic  installments  of principal or
interest  thereafter to become due under the Note and the Loan  Documents  until
such amounts are paid in full.

              19. Indemnity for Costs.  Grantor will indemnify  against,  and on
demand repay  Trustees or Lender for any loss,  damage,  expense,  or reasonable
attorneys,  fees which may be  incurred  by reason of any  action or  proceeding
affecting  the Property or the title  thereto or Trustee's or Lender's  interest
under  this  Deed of Trust to  which  Trustees  or  Lender  is made a party  (by
intervention or otherwise).

              20.  Change in Trust  Deed Tax Laws.  In the event of the  passage
after the date of this  Deed of Trust of any law of the  State of West  Virginia
deducting  from the value of the  Property  for the purpose of taxation any lien
thereon,  or  changing  in any way the  laws now in force  for the  taxation  of
mortgages,  or debts secured thereby, for state or local purposes, or the manner
of the  operation  of any such taxes so as to affect the interest of Trustees or
Lender,  then and in such event,  Grantor  shall bear and pay the full amount of
such taxes.

              21.   Agreements   Continuing,   Absolute.   The   agreements  and
obligations of Grantor hereunder are continuing agreements and obligations,  and
are absolute and  unconditional  irrespective  of the  genuineness,  validity or
enforceability  of the  Note  or any  other  instrument  or  instruments  now or
hereafter  evidencing  the Debt or any  other  agreement  or  agreements  now or
hereafter  entered into by Lender and Grantor  pursuant to which the Debt or any
part  thereof  is issued  or of any other  circumstance  which  might  otherwise
constitute a legal or equitable  discharge of such  agreements and  obligations;
without limitation upon the foregoing, the agreements and obligations of Grantor
shall  not in any  such  way be  affected  by (i) any  renewal,  refinancing  or
refunding  of the Debt in whole or in part,  (ii) any  extension  of the time of
payment of the amounts due and owing under the Note or any other  instrument  or
instruments now or hereafter evidencing the Debt or any part thereof,  (iii) any
amendment to or  modification  of the terms of the Note or other  instrument  or
instruments  now or  hereafter  evidencing  the Debt or any part  thereof or any
other  agreement  or  agreements  now or  hereafter  entered  into by Lender and
Grantor  pursuant  to which the Debt or any part  thereof is issued or  secured,
(iv) any substitution,  exchange or release of, or failure to preserve,  perfect
or protect,  or other dealing in respect of, the Property or any other  property
or any  security  for the  payment  of the  Debt or any  part  thereof,  (v) any
bankruptcy, insolvency, arrangement,  composition, assignment for the benefit of
creditors  or similar  proceeding  commenced  by or against  Grantor or (vi) any
other matter or thing  whatsoever  whereby the  agreements  and  obligations  of
Grantor hereunder would or might otherwise be released or discharged.


                                     - 16 -

<PAGE>



     22. Partial Invalidity.  The invalidity per se or in any application of any
one or more  paragraphs  of this Deed of Trust or any part of any thereof  shall
not  affect  the  remaining  portions  of this Deed of  Trust,  all of which are
inserted conditionally on their being held valid in law.

              23. Notices. All notices, requests,  demands, directions and other
communications  (collectively  "notices")  under the  provisions of this Deed of
Trust  must be in  writing  unless  otherwise  expressly  permitted  under  this
Agreement and must be sent by  first-class  express mail,  private  overnight or
next  Business Day  courier,  in all cases with  charges  prepaid,  and any such
properly given notice will be effective when received.  All notices will be sent
to the applicable  party at the addresses stated below or in accordance with the
last  unrevoked  written  direction  from such party to the other  parties.  Any
notice to be provided  by a  subordinate  lienholder,  as  contemplated  by West
Virginia Code 38-1-4,  shall be forwarded to Lender at the address stated below.
A copy of any notice of Trustee's  sale under this Deed of Trust shall be served
on Grantor by certified mail, return receipt requested,  directed to the address
stated below.

     If to Grantor:            Mountaineer Park, Inc.
                               8 Route 2 South
                               Chester, West Virginia 26034
                               Attn: Mr. Edson Arneault

     and copy to:              Freer, McGarry, Bodansky & Rubin, P.C.
                               1000 Thomas Jefferson St., N.W.
                               Suite 600
                               Washington, DC 20007
                               Attention: Robert Ruben, Esquire


                                     - 17 -

<PAGE>





     If to Secured
              Party:           Madeleine, L.L.C.
                               950 Third Avenue
                               New York, New York 10022
                               Attention: Kevin Genda

     and copy to:              Schulte Roth & Zabel
                               900 Third Avenue
                               New York, New York  10022
                               Attention: Mark A. Neporent, Esquire

     If to Trustees:
                               Deborah A. Sink, Esq.
                               Carl D. Andrews, Esq.
                               P.O. Box 1386
                               Charleston, Vest Virginia  25301

              IN WITNESS  WHEREOF the parties have caused this  instrument to be
executed by their respective  officers thereunder duly authorized as of the date
first written above.


ATTEST                                    MOUNTAINEER PARK, INC


By: /s/ Robert L. Ruben                   By: /s/ Edson R. Arneault
Title: Assistant Secretary                Title:____________________________

                                          MADELINE L.L.C. as Lender


By:________________________               By:_____________________________
Title:______________________              Title:____________________________

This Deed of Trust was prepared by
     Carl D. Andrews, Esq.
     Bowles Rice McDavid Graff & Love
     P.O. Box 1386
     Charleston, W. VA  25325-1386
     (301) 347-1109

                                     - 18 -

<PAGE>



STATE OF                                )
COUNTY OF                               ) SS:

     ON THIS, the _____ day of  _____________  1997,  before me, the undersigned
officer, personally appeared  ________________________________  who acknowledged
himself to be the
         of Mountaineer Park, Inc., a West Virginia corporation, and that he, as
such officer,  being authorized to do so, executed the foregoing  instrument for
the  Inc.  for  the  purposes  therein  contained  by  singing  the  name of the
corporation by himself as such officer.

     IN WITNESS WHEREOF, I have hereunto set my hand and official seal.


                                                 ----------------------------
                                                 Notary Public

My Commission Expires:_______________________________


                                     - 19 -

<PAGE>





STATE OF                                )
COUNTY OF                               ) SS:

     ON THIS, the _____ day of  _____________  1997,  before me, the undersigned
officer, personally appeared  ________________________________  who acknowledged
himself to be the
         of MADELEINE L.L.C., and that he, as such officer,  being authorized to
do so, executed the foregoing  instrument for the Inc. for the purposes  therein
contained by singing the name of the corporation by himself as such officer.

     IN WITNESS WHEREOF, I have hereunto set my hand and official seal.


                                                 ----------------------------
                                                 Notary Public

My Commission Expires:_______________________________







                                     - 20 -

<PAGE>



                                                                       EXHIBIT 4





                                 PROMISSORY NOTE


$16,100,000                                       Dated:   December ___, 1996
                                                           New York, New York


              FOR  VALUE  RECEIVED,  MOUNTAINEER  PARK,  INC.,  a West  Virginia
corporation (the  "Borrower"),  HEREBY PROMISES TO PAY to the order of MADELEINE
L.L.C.,  a New York limited  liability  company (the  "Lender")  (i) the initial
principal amount of SIXTEEN MILLION ONE HUNDRED THOUSAND DOLLARS  ($16,100,000),
or, the aggregate  unpaid  principal  amount of the Loan (as defined in the Loan
Agreement  hereinafter referred to) made by the Lender to the Borrower,  payable
on the Maturity  Date (as defined in the Loan  Agreement),  and (ii) interest on
the unpaid  principal  amount of the Term  Obligations  (as  defined in the Loan
Agreement)  under the Loan  Agreement  from the date such Loan is made until all
such Term  Obligations are paid in full, at such interest rates,  and payable at
such times, as are specified in the Loan Agreement.

              Notwithstanding any other provision of this Note, interest paid or
becoming  due  hereunder  or  under  the  Loan  Agreement,  or any  document  or
instrument  executed  in  connection  herewith or  therewith,  shall in no event
exceed the maximum rate permitted by applicable law. Both principal and interest
are  payable  in lawful  money of the United  States of  America in  immediately
available  funds to Madeleine  L.L.C.  at 950 Third Avenue,  New York,  New York
10022,  Attention:  Mr.  Kevin  Genda,  or such  other  office as the Lender may
designate.

              The Loan made by the Lender to the  Borrower  pursuant to the Loan
Agreement,  and all  payments  made on account  of  principal  hereof,  shall be
recorded by the Lender and, prior to any transfer hereof, indorsed on Schedule A
attached hereto which is a part of this Note.

              This Note is the Term Note referred to in the Amended and Restated
Term Loan  Agreement,  dated as of July 2, 1996, as amended on December 10, 1996
(as  further  amended  or  otherwise  modified  from  time to  time,  the  "Loan
Agreement"),  among the Borrower,  MTR Gaming Group, Inc. and the Lender, and is
entitled to the benefits of the Loan Agreement, the First Priority Deed of Trust
and the Amended and Restated  Security  Agreement  as provided for therein.  The
Loan Agreement,  among other things, contains provisions for the acceleration of
the maturity of the unpaid  principal  amount of this Note upon the happening of
certain  stated Events of Default (as defined in the Loan  Agreement),  and also
for prepayments on account of principal hereof prior to the maturity hereof upon
the  terms  and  conditions   specified  therein.  The  Borrower  hereby  waives
presentment for payment, demand, protest and notice of dishonor of this Note.


                                      - 1 -

<PAGE>



              This Note shall be governed by, and construed and  interpreted  in
accordance  with,  the  internal  laws of the  State of New York  applicable  to
contracts made and to be performed therein without consideration as to choice of
law.

                                                  MOUNTAINEER PARK, INC.


                                                  By: /s/ Edson R. Arneault
                                                  Name:
                                                  Title:


                                      - 2 -

<PAGE>



                          SCHEDULE A TO PROMISSORY NOTE

                         LOAN AND REPAYMENT OF PRINCIPAL



Amount of Loan        Principal Paid      Principal Balance     Notation Made By
















                                      - 3 -

<PAGE>



                                                                       EXHIBIT 6



                               AMENDMENT NO. 1 TO
                          REGISTRATION RIGHTS AGREEMENT



             AMENDMENT NO. 1, dated as of ________ __, 1996, to the
REGISTRATION  RIGHTS  AGREEMENT,  dated as of July 2,  1996,  between  Madeleine
L.L.C., a New York limited liability company  ("Lender"),  and MTR Gaming Group,
f/k/a Winners Entertainment, Inc., a Delaware corporation ( he "Company").

                  WHEREAS,  the Company and Lender are parties to an AMENDED AND
RESTATED TERM LOAN AGREEMENT (the "Loan  Agreement"),  dated as of July 2, 1996,
as amended and restated as of November __, 1996, among MOUNTAINEER PAR , INC., a
West Virginia corporation (the "Borrower"), the Company and Madeleine;

                  WHEREAS,  pursuant to the Loan  Agreement,  the  Company  will
issue  shares of Common  Stock and  Warrants  (as those terms are defined in the
Loan Agreement) to the Lender;

                  WHEREAS,  the  Company  and  the  Lender  wish  to  amend  the
Registration   Rights  Agreement  to  effect  certain  provisions  of  the  Loan
Agreement.

                  NOW,  THEREFORE,  the Company and the Lender  hereby  agree as
follows:

     1.  Definitions.  All  terms  used  herein  which are  defined  in the Loan
Agreement o the Registration  Rights Agreement and not otherwise  defined herein
are used herein as defined therein.

     2. Changes to Registration Rights.

     (a) Section 2.2 of the Registration  Rights Agreement is hereby amended and
restat d in its entirety to read as follows:

     "2.2  Additional  Securities.  To the extent that the Holder  acquires  any
additional securities of the Company that constitute Registrable Securities, the
Company  shall  use its  best  efforts  to,  within  120  days  after  the  date
registration of such Registrable  Securities is requested by the Holder,  effect
the registration on an applicable form under the Securities Act of the resale of
such Registrable  Securities and, to the extent tha such Registrable  Securities
are convertible into or exercisable for any other  securities,  the issuance or,
if not permissible  under the Securities  Act, resale of such other  securities;
provided,  however,  that if (i) no Event of  Default  has  occurred  under  the
AMENDED AND RESTATED TERM LOAN  AGREEMENT  (the "Loan  Agreement"),  dated as of
July 2, 1996, as amended and restated as of November __, 1996, among MOUNTAINEER
PARK, INC., a West Virginia  corporation,  the Company and the Lender,  (ii) the
Obligations relating to the Term Loan (as defined in the Loan Agreement) have


<PAGE>



not been indefeasibly repaid in full and in cash, (iii) no single Person,  group
of affiliated  Persons or Affiliate thereof controls the voting rights of 35% or
more of the Common  Stock,  and (iv) the Company has not merged or  consolidated
with any other Person in a transaction in which the Company is not the surviving
entity,  or sold all or substantially  all of its assets,  then the Holder shall
not request such registration more than once in any calendar year."

     3.  Conditions.  This  Amendment  shall  become  effective on the date (the
"Effective Date") on which each of the following conditions precedent shall have
been satisfied in a manner satisfactory to the Lender:

     (a) The Lender  shall have  received  on or before the  Effective  Date the
following, each in form and substance satisfactory to each Lender:

     (i) this Amendment, duly executed by the parties hereto;

     (ii) the Loan Agreement, duly executed by the parties thereto;

     (iii) all of the other Loan Documents duly executed by the parties thereto;

     (b) The  Lender  shall  have made the  Tranche  B portion  of the Term Loan
pursuant to the Loan Agreement,  and all of the conditions to making the Tranche
B portion of the Term Loan shall have been satisfied.

     (c) All  proceedings in connection  with the  transactions  contemplated by
this Amendment,  and all documents inciden al thereto,  shall be satisfactory to
the Lender in form and substance.

     (d) All fees,  expenses and taxes  accrued and unpaid or otherwise  due and
payable  by the  Borrower  or a  Loan  Party  pursuant  to  the  Loan  Agreement
(including,  without  limitation,  the fees and other client  charges of Schulte
Roth & Zabel LLP in connection  with this Amendment and the related  agreements,
instruments and other documents) shall have been paid in full.

                  4.       Miscellaneous.

     (a) Continued Effectiveness of the Registration Rights Agreement. Except as
otherwise  expressly provided herein, the Registration  Rights Agreement is, and
shall  continue  to be, in full  force and  effect  and is hereby  ratified  and
confirmed in al respects.

     (b)  Counterparts.  This  Amendment  may  be  executed  in  any  number  of
counterparts and by different parties hereto in separate  counterparts,  each of
which shall be deemed to be an original,  but all of which taken  together shall
constitute one and the same agreement.

     (c)  Headings.  Section  headings  herein are included for  convenience  of
reference  only and shall not  constitute a part of this Amendment for any other
purpos .

                                      - 2 -

<PAGE>




     (d) Governing  Law. This  Amendment  shall be governed by, and construed in
accordance  with, the law of the State of New York  applicable to contracts made
and to be performed in such State without regard to conflicts of law principles.
Any legal action or proceeding  with respect to this Amendment may be brought in
the  courts of the State of New York or of the United  States  for the  Southern
District of New York,  and, by  execution  and d livery of this  Amendment,  the
Borrower and the Company hereby  irrevocably accept for themselves in respect of
their property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Borrower and the Company further  irrevocably consent to the service
of process  out of any of the  aforementioned  courts and in any such  action or
proceeding by the mailing of copies  thereof by  registered  or certified  mail,
postage prepaid, to the Borrower at its address for notices contained in Section
9.01 of the Loan Agreement,  such service to become  effective  thirty (30) days
after such mailing.  The Borrower and the Company hereby irrevocably appoint Mr.
Robert A. Blatt, c/o CRC Group, 1890 Palmer Avenue,  Suite 303,  Larchmont,  New
York 10538, or such other Person as shall be acceptable to the Lender,  as their
agent for  service  of process  in  respect  of any such  action or  proceeding.
Nothing herein shall affect the right of the Lender to service of process in any
other manner  permitted  by law or to commence  legal  proceedings  or otherwise
proceed against the Borrower and the Company in any other jurisdiction.

     (e) Costs and Expenses. The Borrower and the other Loan Parties will pay on
demand (i) all fees,  costs and  expenses in  connection  with the  preparation,
execution,  delivery,  filing, recording,  amendment,  modification,  waiver and
administration of this Amendment,  including, without limitation, the reasonable
fees,  out-of-pocket  expenses and other client  charges of S hulte Roth & Zabel
LLP, counsel to the Lender,  and Bowles Rice McDavid Graff & Love, West Virginia
counsel to the Lender and the reasonable fees,  out-of-pocket expenses and other
client  charges of all  accountants,  auditors and  consultants  retained by the
Lender in connection with the transactions  contemplated by this Amendment,  and
(ii)  all  costs  and  expenses,  if any  (including  reasonable  counsel  fees,
out-of-pocket  expenses  and  other  client  charges),  in  connection  with the
enforcement of this Amendment and the other  documents to be delivered  pursuant
to the Loan Documents.

     (f) Amendment as Loan Document.  The Borrower and other Loan Parties hereby
acknowledge  and agree that this Amendment  constitutes a "Loan  Document" under
the Loan Agreement.  Accordingly, it shall be an Event of Default under the Loan
Agreement  if (i) any  representation  or warranty  made by the  Borrower or any
other Loan Party  under or in  connection  with this  Amendment  shall have been
untrue,  false o  misleading  in any  material  respect  when made,  or (ii) the
Borrower  or any other  Loan Party  shall  fail to perform or observe  any term,
covenant or agreement contained in this Amendment.

     (g) Waiver of Jury Trial. EACH OF THE BORROWER,  THE COMPANY AND THE LENDER
HEREBY  WAIVES  ANY  RIGHT  TO A  TRIAL  BY JURY IN ANY  ACTION,  PROCEEDING  OR
COUNTERCLAIM  CONCERNING  ANY RIGHT UNDER THIS  AMENDMENT,  OR UNDER ANY FURTHER
AMENDMENT, WAIVER, CONSENT,  INSTRUMENT,  DOCUMENT OR OTHER AG EEMENT, DELIVERED
OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR

                                      - 3 -

<PAGE>



ARISING FROM ANY  RELATIONSHIP  EXISTING IN CONNECTION WITH THIS AMENDMENT,  AND
AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.  EACH OF THE BORROWER AND THE COMPANY HEREBY WAIVES
ANY  RIGHT  IT MAY  HAVE TO  CLAIM  OR  RECOVER  IN ANY  ACTION,  PROCEEDING  OR
COUNTERCLAIM ANY SPECIAL,  EXEMPLARY,  PUNITIVE OR CONSEQUENTIAL  DAMAGES OR ANY
DAMAGES  OTHER THAN,  OR IN ADDITION TO,  ACTUAL  DAMAGES.  THE BORROWER AND THE
COMPANY CERTIFY THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE LENDER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT
OF ANY  ACTION,  PROCEEDING  OR  COUNTERCLAIM,  SEEK TO  ENFORCE  THE  FOREGOING
WAIVERS.  THE BORROWER AND THE COMPANY HEREBY ACKNOWLEDGE THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AMENDMENT.

                   IN  WITNESS  WHEREOF,  the partie  hereto  have  caused  this
Amendment to be executed and delivered as of the date first above written.



                         MTR GAMING GROUP, INC.

                         By:  /s/ Edson R. Arneault
                              Name:
                              Ti le:


                         MADELEINE L.L.C.

                         By:  _______________________________________
                              Name:
                              Title:



                                      - 4 -

<PAGE>



                                                                       EXHIBIT 7
                                 PROMISSORY OTE


$5,376,500                                           Dated:   December ___, 1996
                                                             New York, New York


                  FOR VALUE RECEIVED,  MOUNTAINEER  PARK,  INC., a West Virginia
corporation (the  "Borrower"),  HEREBY PROMISES TO PAY to the order of MADELEINE
L.L.C.,  a New York limited  liability  company (the  "Lender")  (i) the initial
principal  amount not to exceed FIVE MILLION THREE HUNDRED  SEVENTY SIX THOUSAND
FIVE HUNDRED DOLLARS ($5,376,500),  or, the aggregate unpaid principal amount of
the Line Loans (as defined in the Loan Agreement hereinafter referred to) mad by
the Lender to the Borrower, payable on the Maturity Date (as defined in the Loan
Agreement),  and  (ii)  interest  on the  unpaid  principal  amount  of the Line
Obligations (as defined in the Loan Agreement) under the Loan Agreement from the
date each Line Loan is made until all such Line Obligations are paid in full, at
such  interest  rates,  and payable at such times,  as are specified in the Loan
Agreement.

                  Notwithstanding  any other  provision  of this Note,  interest
paid or becoming due  hereunder r under the Loan  Agreement,  or any document or
instrument  executed  in  connection  herewith or  therewith,  shall in no event
exceed the maximum rate permitted by applicable law. Both principal and interest
are  payable  in lawful  money of the United  States of  America in  immediately
available  funds to Madeleine  L.L.C.  at 950 Third Avenue,  New York,  New York
10022,  Attention:  Mr.  Kevin P. Genda,  or such other office as the Lender may
designate.

                  Each Line Loan made by the Lender to the Borrower  pursu nt to
the Loan Agreement,  and all payments made on account of principal hereof, shall
be  recorded  by the Lender  and,  prior to any  transfer  hereof,  indorsed  on
Schedule A attached hereto which is a part of this Note.

     This Note is the Line Note  referred to in the Amended  and  Restated  Term
Loan Agreement, dated as of July 2, 1996, as amended as of December 10, 1996 (as
further amended or otherwise  modified from time to time, the "Loan Agreement"),
among the Borrower, MTR Gaming Group, Inc. and th Lender, and is entitled to the
benefits of the Loan Agreement, the First Priority Deed of Trust and the Amended
and Restated  Security  Agreement as provided for therein.  The Loan  Agreement,
among other things,  contains provisions for the acceleration of the maturity of
the unpaid  principal  amount of this Note upon the happening of certain  stated
Events of Default (as defined in the Loan  Agreement),  and also for prepayments
on account of principal  hereof prior to the maturity  hereof upon the terms and
conditions  specified  therein.  The  Borrower  hereby  waives  presentment  for
payment, demand, protest and notice of dishonor of this Note.

                                      - 1 -

<PAGE>



                  This Note shall be governed by, and construed and  interpreted
in accordance  with,  the internal  laws of the State of New York  applicable to
contracts made and to be performed therein without consideration as to choice of
law.


                                                 MOUNTAINEER PARK, INC.


                                                 By: /s/ Edson R. Arneault
                                                 Name:
                                                 Title:



                                      - 2 -

<PAGE>



                         SCHEDULE A TO PROMISSORY NOTE1

                      LINE LOANS AND REPAYMENT OF PRINCIPAL

<TABLE>
<CAPTION>

<S>                      <C>                        <C>                       <C>                       <C>
                                                    Date of
                                                    Borrowing or              Principal                 Notation Made
Amount of                 Principal Paid            Repayment                 Balance                   By
Loan





</TABLE>

//


1 This  Schedule is the  Schedule  referred  to in the  Promissory  Note,  dated
December __,  1996,  made by  Mountaineer  Park,  Inc.,  payable to the order of
Madeleine L.L.C., in the original principal amount of $5,376,500.

                                      - 3 -

<PAGE>



                                                                       EXHIBIT 8

                     THE WARRANTS EVIDENCED BY THIS WARRANT
                  CERTIFICATE, AND THE WARRANT SHARES ISSUABLE
                 UPON EXERCISE THEREOF, HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                    AND MAY BE TRANSFERRED ONLY IN ACCORDANCE
                   WITH SECTION 5 OF THIS WARRANT CERTIFICATE

                               WARRANT CERTIFICATE


                      For the Purchase of 125,552 Shares of
                     Common Stock of MTR GAMING GROUP, INC.

WARRANT CERTIFICATE NO. 6

                  This Warrant Certificate  certifies that Madeleine L.L.C. (the
"Original  Holder") is the registered  holder of 125,55 Warrants (as hereinafter
defined)  to purchase  shares of Common  Stock (as  hereinafter  defined) of MTR
Gaming  Group,  Inc.,  a Delaware  corporati  n (the  "Company").  Each  Warrant
entitles  the Holder (as  hereinafter  defined)  upon  exercise  to receive  one
Warrant Share (as  hereinafter  defined) at the Purchase  Price (as  hereinafter
defined),  which shall  initially be $1.06 per share,  which shall be payable in
lawful  funds of the United  States of  America.  The number of shares of Common
Stock  purchasable  hereunder  and the  Purchase  Price  therefor are subject to
adjustment  as  hereinafter  provided in Section 7 and Section 13. The  Warrants
evidenced by this Warrant  Certificate  have been issued in connection  with the
transactions contemplated by the Amended and Restated Term Loan Agreement, dated
as of July 2, 1996, as amended as of December 10, 1996, among  Mountaineer Park,
Inc., a West Virginia  corporation and a wholly-owned  subsidiary of the Company
("Mountaineer"),   the  Company  and  the   Original   Holder  (the  "Term  Loan
Agreement").

                  The Warrants are subject to the  following  further  terms and
conditions:

l.   DEFINITIONS

                  "Commission" shall mean the Securities and Exchange Commission
and any other  similar or  successor  agency of the  federal  government  of the
United States of America then  administering  the Securities Act or the Exchange
Act.

                  "Common Stock" shall mean and include the Company's authorized
voting Common Stock, $0.00001 par value per share, as constituted at the Date of
Issuance,  and shall also include any class of t e capital  stock of the Company
hereafter  authorized  which shall  neither:  (i) be limited to a fixed sum or a
percentage  of par value in  respect  of the  rights of the  holders  thereof to
receive  dividends and to  participate  in the  distribution  of assets upon the
voluntary or involuntary liquidation,  dissolution or winding-up of the Company;
nor (ii) be subject at any time to redemption by the Company; provided, however,
that, except as provided in Section 7, the Common Stock receivable upon exercise
of any Warrant shall include only


<PAGE>



shares of the capital stock of the Company  designated as voting Common Stock on
the Date of  Issuance,  or shares of any class or classes of the voting  capital
stock of the Company resulting from any reclassification or reclassifications of
such Common Stock which are not limited to any such fixed sum or  percentage  of
par value and which are not subject to any such redemption.

                  "Company"  shall  have the  meaning  given to such  term n the
first paragraph of this Warrant Certificate.

                  "Controlling  Interest"  shall have the meaning  given to such
term in Section 4.3(h).

                  "Convertible  Securities" shall have the meaning given to such
term in Section 7.2.

                  "Date of Issuance"  shall have the meaning  given to such term
in Section 12.

     "Event" shall have the meaning given to such term in Section 7.2.

                  "Exchange Act" shall ean the Securities  Exchange Act of 1934,
as  amended,  or any similar or  successor  federal  statute,  and the rules and
regulations of the Commission thereunder,  all as the same shall be in effect at
the time.

                  "Exercise Period" shall have the meaning given to such term in
Section 4.2.

                  "Exercise  Time" shall have the meaning  given to such term in
Section 4.3.

                  "Generally Accepted Accounting  Principles" shall mean, at any
particular time generally  accepted  accounting  principles as in effect at such
time; provided, however, that, if employment of more than one principle shall be
permissible  at  such  time  in  respect  of  a  particular  accounting  matter,
"Generally Accepted Accounting Principles" shall refer to the principle which is
then employed by the Company with the concurrence of its  independent  certified
public accountants.

                  "Holder" shall mean the Original Holder and its successors and
permitted assigns. U less the context otherwise requires, "Holder" shall include
a registered owner of Warrant Shares.

                  "indemnified  party" shall have the meaning given to such term
in Section 5.7(b).

                  "Mountaineer" shall have the meaning given to such term in the
first paragraph of this Warrant Certificate.

     "Options" shall have the meaning given to such term in Section 7.2.

                  "Original  Holder"  shall have the meaning  given such term in
the first paragraph of this Warrant Certificate.

                  "Person"  shall  mean  a  corporation,   an   association,   a
partnership,  an  organization,  a business,  an  individual  or a government or
political subdivision thereof or any governmental agency.

                  "Purchase  Price"  shall have the  meaning  given such term in
Section 7.1.

                                      - 2 -

<PAGE>




                  "Registrable  Securities"  shall  mean  the  Warra  ts and all
Warrant  Shares  issuable or issued  upon  exercise  of the  Warrants.  Any such
securities  shall  cease  to  constitute  "Registrable   Securities"  when  such
securities  have  been  disposed  of by  the  Holder  pursuant  to an  effective
registration  statement under the Securities Act or pursuant to Rule 144 (or any
successor  rule)  of the  Commission  under  the  Securities  Act.  "Registrable
Securities" shall include any securities issued as a dividend or distribution on
account  of  Registrable  Securities  or  resulting  from a  subdivision  of the
outstanding  Registrable  Securities  into a greater  number of  securities  (by
reclassification, stock split or otherwise) or that may be issued in respect of,
in exchange for or in substitution of any Registrable Securities, whether by the
Company or its successors or assigns.

     "Registration Expenses" shall have the meaning set forth in Section 5.6.

                  "Registration   Rights   Agreement"   shall   the   mean   the
Registrations Right Agreement, dated as of July 2, 1996, as amended by Amendment
No. 1 to  Registration  Rights  Agreement  dated as of December  10, 1996 and as
further  amended or  modified  from time to time,  between  the  Company and the
Original Holder.

                  "Securities  Act" shall mean the  Securities  Act of 1933,  as
amended,  or any  similar  or  successor  federal  statute,  and the  rules  and
regulations of the Commission thereunder,  all as the same shall be in effect at
the time.

                  "Term Loan  Agreement"  shall have the meaning given such term
in the first paragraph of this Warrant Certificate.

                  "Transfer"  shall  include any sale,  transfer,  assignment or
other  disposition  of any  Warrants or Warrant  Shares,  or of any  interest in
either thereof,  which would constitute a sale thereof within the meaning of the
Securities Act.

     "Underwriter" shall have the meaning given such term in Section 5.4.

                  "Wa rant Certificates"  means this Warrant Certificate and the
other Warrant  Certificates  of the Company issued on the Date of Issuance or at
any time  thereafter in connection  with the  transactions  contemplated by Term
Loan Agreement, and any certificates issued in exchange or replacement thereof.

                  "Warrants" shall mean the Warrants represented hereby and such
other  warrants  as are  issued in  exchange,  transfer  or  replacement  of any
Warrants.

                  "Warran   Shares"  shall  mean  the  shares  of  Common  Stock
purchased or purchasable in connection with the exercise of Warrants pursuant to
Section 4 hereof.

                  Any  terms  used in this  Warrant  Certificate  which  are not
defined in this Section 1 have the meanings  respectively set forth elsewhere in
this Warrant Certificate.

                  2.  OWNERSHIP OF THE WARRANTS

                                      - 3 -

<PAGE>




                  The  Company  may deem and treat the  Person in whose n me the
Warrants are  registered  as the Holder for all  purposes,  notwithstanding  any
notations  of ownership or writing made hereon by anyone other than the Company,
and shall not be affected by any notice to the contrary,  until  presentation of
this Warrant  Certificate for registration of transfer as provided in Section 3.
The Company  shall  maintain  at its office in Laguna  Beach,  California  or in
Chester,  West Virginia, a register for the Warrants, in which the Company shall
record the name and  address of the Person in whose name each  Warrant  has been
issued,  as well as the name and address of each transferee and each prior owner
of such  Warrant.  Within five days after the Holder shall by written  notice to
the  Company  request  the  same,  the  Company  will  deliver  to the  Holder a
certificate,  signed by one of its officers,  listing the names and addresses of
every other  holder of Warrants  and/or  Warrant  Shares who is a successor or a
direct or indirect assignee of the Original Holder, as such information  appears
in said register and in the stock  transfer books of the Company at the close of
business on the day before such certificate is signed.

                  3.  EXCHANGE, TRANSFER AND REPLACEMENT

                  This Warrant  Certificate is exchangeable,  upon the surrender
hereof by the  Holder to the  Company at its  office or agency  provided  for in
Section 2, for new  Warrant  Certificates  of like  tenor,  representing  in the
aggregate the right to purchase the number of shares of Common Stock purchasable
hereunder,  each of such new  Warrant  Certificates  to  represent  the right to
purchase  such number of shares of Common  Stock as shall be  designated  by the
Holder at the time of such surrender.  Subject to Section 5 hereof, this Warrant
Certificate and all rights hereunder are  transferable,  in whole or in part, in
accordance  with Section 2, by the Holder hereof in person or by duly authorized
attorney,  and a new Warrant Certificate shall promptly be made and delivered by
the Company, of the same tenor as this Warrant Certificate but registered in the
name of the transferee, upon surrender of this Warrant Certificate together with
a duly  completed  Assignment,  substantially  in the form  attached  hereto  as
Exhibit I, at the  office of the  Company  where the  register  provided  for in
Section 2 is maintained.  Upon receipt by the Company at its office provided for
in  Section 2 of  evidence  reasonably  satisfactory  to it of the loss,  theft,
destruction or mutilation of this Warrant Certificate, and, in the case of loss,
theft or destruction,  of indemnity or security  reasonably  satisfactory to it,
and upon surrender of this Warrant Certificate,  if mutilated,  the Company will
make and deliver a new Warrant  Certificate of like tenor in replacement of this
Warrant Certificate.  This Warrant Certificate shall be promptly canceled by the
Company upon the surrender thereof in connection with any exchange,  transfer or
replacement.  The Company shall pay all taxes and all other expenses and charges
payable in connection  with the  preparation,  execution and delivery of Warrant
Certificates pursuant to this Section 3.

                  4.  EXERCISE

     4.1. Right to Exercise.  The Holder may exercise,  in whole or in part (but
not as to a fractional share of Common Stock),  the purchase rights  represented
by this Warrant Certificate at the times set forth in Section 4.2.

                                      - 4 -

<PAGE>




                  4.2. Exercise Period.  The Holder may xercise,  in whole or in
part (but not as to a fractional  share of Common  Stock),  the purchase  rights
represented by this Warrant  Certificate at any time and from time to time after
the date hereof and until 5:00 p.m.,  Pacific  Time,  on December  10, 2001 (the
"Exercise Period").

     4.3. Exercise Procedure. (a) Warrants will be deemed to have been exercised
as of the date during the  Exercise  Period when the Company has received all of
the following items (the "Ex rcise Time"):

     (i) a completed  Exercise  Agreement,  as  described  in Section 4.4 below,
executed by the Holder;

                  (ii) this Warrant Certificate; and

                  (iii) cash or a certified  or official  bank check  payable to
the  Company in an amount  equal to the then  effective  Purchase  Price for the
shares for which this Warrant Certificate is being exercised.

                  (b)  Certificates  for  Warrant  S  ares  purchased  upon  the
exercise of Warrants  will be delivered by the Company to the Holder within five
business days after the date of the Exercise Time. Unless the remaining Warrants
have  expired or have been  exercised,  the Company  will  prepare a new Warrant
Certificate,  substantially identical hereto, representing the Warrants formerly
represented by this Warrant Certificate which have not expired or been exercised
and will, within such five-day period,  deliver such new Warrant  Certificate to
the Holder.  Notwithstanding  anything to the  contrary  set forth  herein,  the
business day periods provided for in this paragraph  shall,  without any further
action,  be reduced to such  shorter  time period as shall be necessary in order
for the  Holder  to  effect  any  Transfer  of  Warrants  or  Warrant  Shares in
accordance with any applicable clearing procedures or other procedures governing
registration  of transfer.  In the case of a public  offering of any Registrable
Securities, the provisions set forth in this Section 4.3(b) shall, to the extent
applicable, be subject to clause (vi) of Section 5.5.

                  (c) The Warrant Shares shall, when issued, be duly authorized,
validly issued,  previously  unissued,  fully paid and nonassessable and will be
free from all taxes, liens and charges with respect thereto.

                  (d)  Warrant  Shares will be deemed to have been issued at the
Exercise Time,  and the Person in whose name such shares are registered  will be
deemed for all purposes
 o have become the Holder of such shares at the Exercise Time.

                  (e) The issuance of  certificates  for Warrant Shares upon the
exercise of Warrants will be made without charge for any issuance tax in respect
thereof or other cost incurred by the Company in  connection  with such exercise
and the related issuance of shares of Common Stock.

                  (f) The Company will not close its books  against the transfer
of the Warrants or of any of the Warrant  Share in any manner  which  interferes
with the timely exercise of the

                                      - 5 -

<PAGE>



Warrants or the timely  transfer of all or any part of this Warrant  Certificate
or the Warrant  Shares.  The Company will from time to time take all such action
as may be  necessary  to assure  that the par  value  per share of the  unissued
Common Stock  acquirable  upon the exercise of Warrants is at all times equal to
or less than the Purchase Price then in effect.

                  (g) Upon the  exercis of  Warrants,  the Holder of the Warrant
Shares issued upon the exercise of the Warrants  shall be entitled to all of the
rights,  and shall be subject to all of the  obligations,  set forth herein,  in
each case to the extent provided for herein.

                  (h) The right of the Holder to exercise any Warrants hereunder
shall be  expressly  limited to the extent  that the Holder  (together  with its
affiliates  or other persons or entities  controlled by or under common  control
with the Holder) w ll thereafter  own in the aggregate  more than 5% of the then
issued and  outstanding  Common  Stock (a  "Controlling  Interest"),  unless the
Holder's ownership of such a Controlling  Interest has been approved by the West
Virginia  Lottery  Commission or such approval shall no longer be required under
applicable  law.  The  Company  shall use its best  efforts to  obtain,  or help
obtain, as applicable, any such approval.

                  4.4.  Exercise  Agreement.  Upon any exercise of the War ants,
the Exercise Agreement will be substantially in the form set forth in Exhibit II
hereto,  except that if the  Warrant  Shares are not to be issued in the name of
the  Holder,  the  Exercise  Agreement  will also state the name or names of the
Person or Persons to whom the  certificates for Warrant Shares are to be issued,
and the Holder  shall  comply  with  Sections  5.1 and 5.2 hereof in  connection
therewith.  The Exercise  Agreement  shall be dated the actual date of execution
thereof.

                  5   TRANSFER AND REGISTRATION

                  5.1.  Restrictions on Transfer Generally.  Notwithstanding any
provisions  contained in this Warrant Certificate to the contrary,  the Warrants
shall not be  transferable  and the related Warrant Shares shall not be issuable
to any Person,  or transferable by the Holder thereof,  except upon satisfaction
of the conditions specified in this Section 5.1. Such conditions are intended to
insure  compliance  with the  provisions of the Securities Act in respect of the
exercise of the Warrants or the Transfer of the Warrants or Warrant Shares.  The
Holder agrees that it will not: (i) Transfer  Warrants  prior to delivery to the
Company of the opinion of counsel  referred  to in, and to the effect  described
in, Section 5.2, or until  registration under the Securities Act of the Warrants
and all related Warrant Shares has become  effective;  (ii) request the issuance
to any Person of Warrant Shares  issuable upon the exercise of Warrants prior to
delivery  to the  Company of the  opinion of counsel  referred to in, and to the
effect  described in, Section 5.2, or until  registration of the related Warrant
Shares under the  Securities  Act has become  effective;  or (iii)  Transfer any
Warrant  Shares  prior to  delivery  to the  Company  of the  opinion of counsel
referred  to in,  and  to  the  effect  described  in,  Section  5.2,  or  until
registration  of such  Warrant  Shares  under  the  Securities  Act  has  become
effective.  Compliance with the foregoing  provisions  shall not be required for
any Transfer of Warrants or of Warrant Shares by the Holder to the Company.

                                      - 6 -

<PAGE>




                  5.2.  Opinion of Counsel.  Subject to Section 5.11, so long as
this Warrant Certificate,  or any certificate for Warrant Shares issued upon the
exercise of  Warrants,  bears the legend  required by Section  5.10,  the Holder
agrees that, prior to any Transfer or attempted  Transfer of Warrants or Warrant
Shares  evidenced  by such  certificate,  it shall  give  written  no ice to the
Company of its intention to effect such Transfer. Any such notice shall describe
the manner and timing of the proposed Transfer in reasonable detail. Such notice
shall be  accompanied  by an  opinion  of counsel  for the  Holder,  in form and
substance  reasonably  satisfactory  to the  Company,  stating that the proposed
Transfer  may  be  effected  without   registration  of  the  securities  to  be
transferred  under the Securities  Act,  following  receipt of which the Company
shall promptly, at such time as shall be requested by the Holder, give effect to
such Transfer in accordance with the terms of the notice delivered by the Holder
to the Company.  Each Warrant  Certificate  or certificate  evidencing  Warrants
Shares,  as the case may be, issued to a transferee in such Transfer  shall bear
the legend set forth in Section 5.10 if required by such Section, unless, in the
opinion of counsel for the Company,  such legend is not required or  appropriate
in order to insure compliance with the Securities Act.  Notwithstanding anything
to the contrary in this Section 5.2, if in the reasonable opinion of counsel for
the Company,  the proposed  Transfer  may not be effected  without  registration
under the Securities  Act, the Company shall promptly (and, in any case,  within
two  business  days after  receiving  the notice of proposed  Transfer  from the
Holder) so notify the Holder and the Holder shall not  consummate  such Transfer
until the required  registration  under the Securities Act has become effective,
except in another  transaction exempt from the registration  requirements of the
Securities Act.

                  5.3.  Registration.  The Company shall effect the registration
on an applicable form under the Securities Act of the resale of the Warrants and
the issuance or, if not permissible  under the Securities Act, the resale of the
Warrant Shares,  pursuant to the terms and conditions of the Registration Rights
Agreement.  The  Company  shall use its best  efforts to keep such  registration
statement  filed and  declared eff ctive  pursuant to this  Warrant  Certificate
continuously  effective until such time as (i) none of the securities covered by
such registration  statement shall constitute Registrable Securities or (ii) all
of the Registrable  Securities covered by such registration statement are freely
transferable pursuant to Rule 144(k); provided,  however, that,  notwithstanding
the foregoing,  prior to the suspension or termination of the  effectiveness  of
any registration  statement pursuant to either clause (i) or clause (ii) of this
sentence,  (A) the  Company  shall  have  delivered  to the Holder an opinion of
counsel to the Company  satisfactory in form and substance to the Holder and its
counsel  stating that the applicable  condition  precedent to the termination of
the  effectiveness of the registration  statement set forth in this sentence has
been  satisfied and (B) the Holder and its counsel shall have concurred with the
conclusions  set out in such  opinion.  If the  Company  shall  fail to file any
registration  statement  required  to be filed by the  Company  pursuant to this
Section  5.3 on or before  the date that is 90 days from the date of demand  for
the filing of such  registration  statement (the date of such demand the "Demand
Date"),  the Company shall,  within five days thereafter,  pay to the Holder, in
cash,  with respect to each Warrant Share held by the Holder  (determined  on an
as-converted  basis),  an amount  that is equal to the greater of (i) 10% of the
closing price of the Common Stock on the business day immediately preceding such
90th day and (ii) $350,000  divided by the number of Warrant Shares  (determined
on  an  as-converted  basis)  required  to  be  included  on  such  registration
statement.  In the event  that a  registration  statement  required  to be filed
pursuant to this

                                      - 7 -

<PAGE>



Agreement shall fail to be declared effective on or before the date (the "Second
Penalty Date") that is seven  calendar  months from the Demand Date, the Company
shall pay to the Holder an additional amount equal to 5% of the closing price of
the Common Stock on the business day  immediately  preceding the Second  Penalty
Date for each Warrant Share (determined on an as-converted basis) to be included
on such registration  statement.  If such registration statement is not declared
effective on or before the date (the "Third Penalty Date") that is nine calendar
months from the Demand Date,  the Company  shall pay to the Holder an additional
penalty of 10% of the  closing  price of the Common  Stock on the Third  Penalty
Date,  and on the last day of each month  thereafter  (each a "10% Due Date") on
the business day immediately  preceding such 10% Due Date for each Warrant Share
(determined  on an  as-converted  basis)  to be  included  on such  registration
statement until such  registration  statement is declared  effective (the "Final
Penalties").  For purposes of this paragraph, the closing price of such security
for any day shall be 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 such
security  is  admitted  to  trading  or (ii) if such  security  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 or a  comparable  system,  or
(iii)  if such  security  is not  listed  on The  Nasdaq  National  Market  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 the Board of
Directors of the Company. Without limiting the remedies available to the Holder,
the  Company  acknowledges  that any  failure by the  Company to comply with its
obligations under this Section 5.3 may result in material  irreparable injury to
the Holder (and/or subsequent  holders) for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Holder (or any subsequent holder
of  Registrable  Securities)  may  obtain  such  relief  as may be  required  to
specifically   enforce  the  Company's   obligations  under  this  Section  5.3.
Notwithstanding anything in this Warrant certificate to the contrary, so long as
the Company is in compliance with its obligations with respect to the payment of
any  penalties  pursuant to this  Section  5.3, it shall not be in breach of its
obligation  to register  Common  Stock or Warrants  under this  Section 5.3. The
Company hereby acknowledges that any Holder of this Warrant shall be entitled to
the benefits of the Registration Rights Agreement.

                  5. . Underwritten  Offering. The Holder may sell any or all of
its Registrable Securities in an underwritten offering; provided, however, that,
nothing contained in this Section 5.4 shall in any way accelerate the obligation
of the  Company set forth in the first  sentence  of Section  5.3. If the Holder
desires to do so, it shall so notify the  Company  in  writing,  stating in such
notice the number and class of securities  proposed to be sold. Within five days
after receipt of such notice,  the Company shall mail a notice  stating that the
Holder has requested an underwritten  offering of all or part of its Registrable
Securities (which notice shall state the number and class of securities proposed
to be sold by the Holder) to any other holders of Registrable  Securities and to
any  other  holders  of  "Registrable   Securities"   under  any  other  Warrant
Certificates  or the  Registration  Rights  Agreement.  Any  such  other  holder
desiring to

                                      - 8 -

<PAGE>



participate in the  underwritten  offering shall be entitled to do so,  provided
that  such  holder  notifies  the  Company  of  its  intent  to  so  participate
(specifying  in its notice the number of securities  proposed to be sold, all of
which  shall be  required  to be of the same  class  as those  set  forth in the
Holder's  notice) not later than the date that is fifteen days after the date on
which the  Company  mailed  notice of such  underwritten  offering to such other
holder.  In  any  such  underwritten  offering  requested  by  the  Holder,  the
investment   banker  or   investment   bankers  and  manager  or  managers  (the
"Underwriters")  that will  administer  the  offering  will be  selected  by the
Holder,  subject to the reasonable  approval of the holders of a majority of the
securities  (determined  on an  as-converted  basis and  including  the Holder's
Registrable  Securities)  proposed  to be  included  in  such  offering  and the
reasonable approval of the Company. Notwithstanding anything to the contrary set
forth  herein,  if the  Underwriter  determines  that the  number of  securities
includable in an underwritten offering requested by the Holder is limited due to
market conditions,  priority shall be given first to the Registrable  Securities
and any other securities constituting  "Registrable  Securities" under any other
Warrant  Certificate or the Registration Rights Agreement held by the Holder and
then to securities  held by all other  holders of  securities  proposing to sell
securities in such  underwritten  offering on a pro rata basis (determined on an
as-converted  basis).  Any holder of  securities  requesting  the  inclusion  of
securities  held by such  holder in an  underwritten  offering  pursuant to this
Section 5.4 (including the Holder) may, at any time (subject to any arrangements
entered into with the Underwriters),  withdraw all or any part of its securities
from  such  underwritten  offering.  Notwithstanding  anything  to the  contrary
herein,  the  provisions  of this Section 5.4 shall not apply to any  securities
that are freely transferable pursuant to Rule 144(k) under the Securities Act.

                  5.5. Registration  Procedures;  Obligations of the Company. In
connection with its  obligations  under Section 5.3 and Section 5.4, the Company
shall, in addition to such other requirements as are set forth elsewhere in this
Warrant Certificate,  including,  without limitation, in Section 5.3 and Section
5.4:

                  (i)  prepare  and file  with  the  Commission  a  registration
statement on an  applicable  form under the  Securities  Act with respect to the
applicable securities, use its best efforts to cause such registration statement
to become  effective  within the applicable time period and promptly prepare and
file with the Commission  such  amendments and  supplements to the  registration
statement and the prospectus used in connection therewi h as may be necessary to
keep the  registration  statement  effective  and current and to comply with the
provisions of the Securities  Act with respect to the sale or other  disposition
of all securities  covered by the  registration  statement,  including,  without
limitation,  such  amendments and supplements as may be necessary to reflect the
intended method of disposition  from time to time of the  prospective  seller or
sellers of such  securities  or as may be necessary  upon the  occurrence  of an
event  contemplated by clause (E) of paragraph (ii) of this Section 5.5, and use
its best  efforts  to cause  any such  amendment  to become  effective  and such
registration statement to become usable as soon as thereafter practicable;

         (ii)  notify the  Holder  promptly  and,  if  requested  by the H lder,
confirm such advice in writing, (A) when any registration statement filed

                                      - 9 -

<PAGE>



hereunder  has  become  effective  and when any  post-effective  amendments  and
supplements thereto have been filed and become effective,  (B) of any request by
the Commission or any state securities  authority for amendments and supplements
to any  registration  statement  filed  hereunder and related  prospectus or for
additional  information  after the registration  statement has become effective,
(C) of the issuance by the Commission or any state  securities  authority of any
stop order  suspending the  effectiveness  of any  registration  statement filed
hereunder or the initiation of any proceedings for that purpose, (D) if, between
the effective date of any registration statement filed hereunder and the closing
of any sale of Registrable  Securities covered thereby,  the representations and
warranties of the Company  contained in any underwriting  agreement,  securities
sales agreement or other similar  agreement,  if any,  relating to such offering
cease to be true and correct in all material respects or if the Company receives
any  notification  with respect to the  suspension of the  qualification  of the
Registrable  Securities  for sale in any  jurisdiction  or the initiation of any
proceeding  for such purpose,  (E) of the happening of any event which makes any
statement  made in any  registration  statement  filed  hereunder or the related
prospectus  untrue in any material  respect or which  requires the making of any
changes  in the  registration  statement  or  prospectus  in  order  to make the
statements  therein not misleading and (F) of any  determination  by the Company
that a post-effective  amendment to any  registration  statement filed hereunder
would be appropriate;

         (iii) make every  reasonable  effort to obtain  the  withdrawal  of any
order suspending the effectiveness of any registration statement filed hereunder
at the earliest  possible  moment and provide prompt notice to the Holder of the
withdrawal of an such order;

         (iv) promptly  furnish to the Holder and any Underwriter such number of
copies of a prospectus,  including a preliminary  prospectus  and any prospectus
supplement,  in conformity with the requirements of the Securities Act, and such
other documents as the Holder and/or Underwriter may reasonably request in order
to facilitate the public sale or other disposition of Registrable Securities;

         (v) use its best  efforts to register or qu lify on a timely  basis the
Registrable  Securities  covered by any  registration  statement filed hereunder
under  such  other  securities  or blue  sky or  other  applicable  laws of such
jurisdictions within the United States as the Holder shall reasonably request to
enable the Holder to  consummate  the public sale or other  disposition  in such
jurisdictions of Registrable Securities;

         (vi) cooperate with the Holder to facilitate the timely preparation and
delivery of certificates rep esenting Registrable  Securities to be sold and not
bearing any restrictive legends and enable such Registrable  Securities to be in
such amounts and registered in such names as the Holder may  reasonably  request
at least two  business  days  prior to the  closing  of any sale of  Registrable
Securities;

                                     - 10 -

<PAGE>




         (vii) upon the  occurrence of any event  contemplated  by clause (E) of
paragraph (ii) of this Section 5.5,  notify the Holder to suspend use of any app
icable  prospectus as promptly as  practicable  after the  occurrence of such an
event;

         (viii) within a reasonable time prior to the filing of any registration
statement to be filed hereunder, prospectus to be included therein, or amendment
or supplement to either of the foregoing, provide copies of such document to the
Holder and its counsel,  and make such of the  representatives of the Company as
shall be reasonably requested by the Holder or its counsel available for discuss
on of such  document,  and shall not at any time file or make any  amendment  or
supplement  to any such  document of which the Holder and its counsel  shall not
have  previously  been  advised  and  furnished a copy or in a form in which the
holders of a majority of the securities  covered by such registration  statement
(determined on an as-converted  basis) or their counsel shall reasonably  object
on a timely basis;

         (ix) make available for inspection by a  representative  of the Holder,
any Underwriter  participating  in any disposition  pursuant to any registration
statement filed hereunder and attorneys and accountants designated by the Holder
or any  Underwriter,  at  reasonable  times  and  in a  reasonable  manner,  all
financial and other records,  pertinent documents and properties of the Company,
and cause the  respective  officers,  directors  and employees of the Company to
supply  all  information   reasonably  requested  by  any  such  representative,
Underwriter,   attorney  or  accountant  in  connection  with  the  registration
statement; provided, however that such representatives,  Underwriters, attorneys
or accountants agree to keep confidential any records,  information or documents
that are  designated by the Company in writing as  confidential  and to use such
information  obtained  pursuant to this  provision  only in connection  with the
transaction  for which  such  information  was  obtained,  and not for any other
purpose, unless (A) such records,  information or documents (I) are available to
the  public,  (II)  were  already  in  such   representatives',   Underwriters',
attorneys' or  accountants'  possession  prior to their receipt from the Company
and they do not otherwise have any obligation to keep such records,  information
or  documents  confidential  or  (III)  are  obtained  by such  representatives,
Underwriters,  attorneys or accountants  from a third person who,  insofar as is
known to such representatives,  Underwriters,  attorneys or accountants,  is not
prohibited  from   transmitting   the   information  to  such   representatives,
Underwriters,  attorneys or  accountants  by a  contractual,  legal or fiduciary
obligation to the Company or a third party,  or (B)  disclosure of such records,
information or documents is required by court or administrative  order after the
exhaustion of appeals therefrom;

         (x) use its best  efforts  to cause all  Registrable  Securities  to be
listed or traded on any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed or tr ded, to the

                                     - 11 -

<PAGE>



extent  such  Registrable  Securities  satisfy  applicable  listing  or  trading
requirements;  provided,  that,  for  purposes of this clause (x),  the Warrants
shall not be deemed to be similar to the Common Stock.

         (xi)  enter  into such  customary  agreements  and take all such  other
reasonable  actions in  connection  therewith in order to expedite or facilitate
the  disposition  of  Registrable  Securities  (including,  but not  limited to,
pursuant to an underwritten offering), and in such connection, (A) to the extent
possible,  make  such  representations  and  warranties  to the  Holder  and any
Underwriters  of  Registrable  Securities  with  respect to the  business of the
Company and its subsidiaries and its or its  subsidiaries'  joint ventures,  the
applicable  registration  statement,  prospectus and documents  incorporated  by
reference or deemed  incorporated  by reference,  if any, in each case, in form,
substance  and scope as are  customarily  made by  issuers  to  Underwriters  in
underwritten offerings,  and confirm the same if and when requested,  (B) obtain
opinions of counsel to the Company (which counsel and opinions,  in form,  scope
and  substance,   shall  be  reasonably  satisfactory  to  the  Holder  and  any
Underwriters  and their  respective  counsel)  addressed  to the  Holder and any
Underwriter,  covering the matters  customarily covered in opinions requested in
underwritten  offerings,  (C) obtain "cold comfort" letters from the independent
certified  public  accountants  of the Company  (and,  if  necessary,  any other
certified  public  accountant  of any  subsidiary  of the  Company  or any joint
venture in which the Company or any of its subsidiaries is a partner,  or of any
business  acquired by the Company for which  financial  statements and financial
data  are  or  are  required  to be  included  in  the  applicable  registration
statement)  addressed to the Holder and any  Underwriter,  such letters to be in
customary  form and covering  matters of the type  customarily  covered in "cold
comfort" letters in connection with underwritten offerings, and (D) deliver such
documents and  certificates as may be reasonably  requested by the Holder or any
Underwriter,  and which are customarily delivered in underwritten  offerings, to
evidence the continued  validity of the  representations  and  warranties of the
Company made  pursuant to clause (A) above and to evidence  compliance  with any
customary conditions contained in any underwriting agreement.

         (xii) take, or refrain from taking, such other actions, and execute and
deliver such other  documents,  as may  reasonably be requested by the Holder or
any Underwriter.

                  5.6.  Expenses  of  Registration.  All  expenses  incurred  in
effecting  any   registration   pursuant  to  this  Section  5  (colle   tively,
"Registration Expenses"),  including,  without limitation,  all registration and
filing fees, listing fees,  printing expenses,  expenses of compliance with blue
sky laws, fees and  disbursements of counsel for the Company and expenses of any
audits incidental to or required by any such registration, shall be borne by the
Company; provided, that, in the case of all registrations,  the Holder shall pay
the fees and  disbursements  of its own counsel and  underwriting  discounts and
commissions in connection with an underwriter offering.

                                     - 12 -

<PAGE>




              5.7. Indemnification. (a) The Company hereby indemnifies and holds
harmless the Holder and each  officer,  director and  controlling  person of the
Holder  against  all claims,  losses,  damages  and  liabilities  (or actions in
respect  thereof)  arising out of or based on any untrue  statement  (or alleged
untrue  statement)  of a material  fact  contained in any  prospectus,  offering
circular  or other  document  incident  to any  registration,  qualification  or
compliance (or in any related registration statement,  notification or the like)
or any omission (or alleged  omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation  promulgated under the
Securities  Act or any  state  securities  law  applicable  to the  Company  and
relating to any action required of or inaction by the Company in connection with
any such  registration,  qualification  or  compliance,  and will  reimburse the
Holder and each such officer,  director and controlling person for any legal and
any other expenses  incurred in connection with  investigating  or defending any
such claim,  loss,  damage,  liability or action;  provided,  however,  that the
Company will not be liable to the Holder in any such case to the extent that any
such claim,  loss,  damage or liability  arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company in
an instrument duly executed by the Holder and stated to be specifically  for use
in the document  containing such untrue statement of a material fact or omitting
to state the material fact required to be stated therein.

                  (b) Each party entitled to indemnification  hereunder (each an
"indemnified  party")  shall  give  notice to the  Company  promptly  after such
indemnified  party has actual knowledge of any claim as to which indemnity ay be
sought,  and shall  permit the Company (at its expense) to assume the defense of
any claim or any litigation resulting  therefrom,  provided that counsel for the
Company  who shall  conduct  the  defense of such claim or  litigation  shall be
reasonably  satisfactory to the  indemnified  party.  The indemnified  party may
participate in such defense,  but only at such indemnified party's expense.  The
omission by any  indemnified  party to give notice as provided  herein shall not
relieve the Company of its  obligations  under this Section 5.7(b) except to the
extent that the  omission  results in a failure of actual  notice to the Company
and the Company is damaged solely as a result of the failure to give notice. The
Company shall not, in the defense of any such claim or  litigation,  except with
the consent of each indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional  term thereof the
giving by the claimant or plaintiff to such indemnified  party of a release from
all liability with respect to such claim or litigation.

                  (c) The  reimbursement  required by this  Section 5.7 shall be
made by periodic payments during the course of the investigation or defense,  as
and when bills are received or expenses incurred.

                  (d) To the  extent  any  indemnification  by  the  Company  is
prohibited  or  limited  by  law,  the  Company   agrees  to  make  the  maximum
contribution  permitted by applicable  law with respect to any am unts for which
it would otherwise be liable under Section 5.7(a).

                  (e)  The   Company   will  enter  into   indemnification   and
contribution   arrangements   with   the   Holder,   any   other   participating
securityholders  and the  Underwriters  that  are  usual  and  customary  and/or
reasonable under the circumstances in connection with any underwritten

                                     - 13 -

<PAGE>



offering  to be  effected  pursuant  to Section  5.4;  provided,  that,  nothing
contained  herein  shall  require  the Company o indemnify  any  Underwriter  in
connection  with  any  statement   expressly   provided  for  inclusion  in  any
registration statement by such Underwriter.

                  5.8. Other Registrations. (a) The Company may not, without the
prior  written  consent  of the  holders  of a  majority  of  the  participating
Registrable  Securities (determined on an as-converted basis), permit present or
subsequent  investors  in the Company  (other than  transferees  of  Registrable
Securities) to participate  in any r gistrations  initiated  pursuant to Section
5.3 or  underwritten  offerings  requested  pursuant to Section  5.4;  provided,
however,  that,  nothing contained herein shall be interpreted so as to prohibit
the Company from entering into and performing its obligations under Section 5.4,
under  Section  5.4  of  any  of  the  other  Warrant  Certificates,  under  the
Registration  Rights  Agreement  (including,  but not  limited to, in respect of
securities to be received on future dates  pursuant to the Term Loan  Agreement)
or under any of the registration rights agreements listed on Schedule 5.8(a).

                  (b) To the extent that an  underwritten  offering is requested
pursuant to any other Warrant  Certificate or the Registration Rights Agreement,
the  Holder  shall be given  the  opportunity  to elect to  participate  in such
underwritten  offering on the terms and subject to the  conditions  set forth in
the Registration Rights Agreement. The Company shall not amend any of such terms
in any Warrant  Certificate or in t e Registration  Rights Agreement in a manner
adverse to the Holder  without  the prior  written  consent of the  holders of a
majority of the Registrable Securities (determined on an as-converted basis).

                  5.9. Rule 144 Requirements;  Adequate  Information for Private
Sales.  (a) At all times and from time to time,  the Company shall  undertake to
make publicly available and available to the Holder, pursuant to Rule 144 of the
Commission  under the Securities Act, such informati n as is necessary to enable
the Holder to make sales of  Registrable  Securities  pursuant to that Rule. The
Company shall furnish to the Holder,  upon request, a written statement executed
by the Company as to the steps it has taken to comply  with the  current  public
information requirements of Rule 144. Notwithstanding the foregoing, the Company
shall have no further  obligations  under this  Section  5.9 at such time as all
then outstanding Registrable Securities may be sold pursuant to paragraph (k) of
Rule 144,  as  determined  by,  and set forth in an opinion  of,  counsel to the
Company who is reasonably  acceptable to the Holder. The Holder shall notify the
Company promptly after it ceases to hold any Registrable Securities.

                  (b) If the Holder  desires to effect a Transfer of Registrable
Securities  without  registration  under the Securities Act, and if at such time
such Transfer cannot be effected pursuant to Rule 144, then the Company,  at the
Holder's request and at the Company's e pense, shall provide the Holder with all
such  information  regarding the Company as would be required in order to enable
the Holder to comply with the exemption  from  registration  provided by Section
4(l) of the Securities Act (or any successor  provision) or any other applicable
exemption from registration.

     5.10. Legends.  (a) Each Warrant Certificate issued in exchange,  transfer,
or replacement of this Warrant  Certificate shall (unless otherwise permitted by
Section .2 or unless the Warrants to be  evidenced  by such Warrant  Certificate
shall have been transferred

                                     - 14 -

<PAGE>



pursuant to an effective  registration  statement  under the  Securities  Act or
pursuant to Rule 144 or any  successor  rule) be stamped or otherwise  imprinted
with a legend  substantially  in the form of the legend  appearing at the top of
the first page of this Warrant Certificate.

                  (b) Each  certificate for Warrant  Shares,  including any such
certificate issued to a subsequent transferee, shall (unless otherwise permitted
by Section 5.2 or unless the Warrant Shares to be evidenced by such  certificate
shall have been  issued or  transferred  pursuant to an  effective  registration
statement  under the  Securities  Act or pursuant  to Rule 144 or any  successor
rule) be stamped  or  otherwise  imprinted  with a legend in  substantially  the
following form:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED,  AND THE TRANSFER OF SAID  SECURITIES IS SUBJECT TO THE
RESTRICTIONS  SET FORTH IN  SECTION 5 OF THE  WARRANT  CERTIFICATE,  DATED AS OF
DECEMBER  __,  1996,  OF WINNERS  ENTERTAINMENT,  INC., A COPY OF WHICH HAS BEEN
DELIVERED TO THE  REGISTERED  HOLDER OF THE  SECURITIES  REPRESENTED  HEREBY AND
WHICH IS AVAILABLE FOR  INSPECTION AT THE HEAD OFFICE OF WINNERS  ENTERTAINMENT,
INC. NO TRANSFER OF SAID SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL
THE TERMS AND CONDITIONS OF SECTION 5 OF THE WARRANT CERTIFICATE SHALL HAVE BEEN
COMPLIED WITH."

     (c) The  provisions of Sections  4.3(h),  5.1 and 5.2 and this Section 5.10
shall be binding upon all subsequent Holders.

                  5.11.  Exchange  of  Certificates.   At  such  time  as  shall
reasonably be requested by the Holder,  subject to applicable  law regarding the
unrestricted  transfer of  securities,  the Company  will deliver to the Holder,
upon  delivery  to the Company of a  certificate  or  certificates  representing
Warrants or Warrant  Shares  bearing the legend set forth in S ction 5.10, a new
certificate or certificates representing such Warrants or Warrant Shares but not
bearing such legend.

                  6.  COMPANY'S ACKNOWLEDGMENT OF OBLIGATIONS

                  The Company  will,  at the time of any  exercise of  Warrants,
upon the request of the Holder, acknowledge in writing its continuing obligation
to afford to the  Holder all rights to which the  Holder  shall  continue  to be
entitled  after such exercise in accordance  with the provisions of this W rrant
Certificate;  provided, however, that, if the Holder shall fail to make any such
request,  such failure shall not affect the continuing obligation of the Company
to afford to the Holder any such rights.

                  7.  ADJUSTMENTS

                  The number of Warrant Shares  purchasable  pursuant hereto and
the Purchase Price per Warrant Share shall be subject to adjustment from time to
time on and after the Date of Issuance as  hereinafter  provided in this Section
7.

                                     - 15 -

<PAGE>




                  7.1.  Adjustment of Purchase Price. The initial purchase price
per Warrant Share of $1.06 per share shall be subject to adjustment from time to
time as  hereinafter  provided on or after the Date of Issuance  (as so adjusted
from time to time, the "Purchase Price").  Upon each adjustment of the number of
Warrant Shares purchasable  pursuant hereto, the Purchase Price shall be reduced
to  a  price  determined  by  dividing  the  aggregate  Purchase  Price  of  all
unexercised Warrant Shares in effect immediately prior to such adjustment by the
maximum  total  number of  Warrant  Shares  purchasable  immediately  after such
adjustment.

                  7.2. Adjustment of Number of Shares. If and whenever after the
Date of Issuance the Company shall in any manner (i) issue or sell any shares of
its Common Stock, (ii) grant any rights to subscribe for or to purchase,  or any
options for the purchase of, Common Stock or any stock or securiti s convertible
into or  exchangeable  for Common  Stock (such  rights or options  being  herein
called "Options" and such convertible or exchangeable  stock or securities being
herein  called  "Convertible  Securities"),  (iii)  issue  or  sell  Convertible
Securities,  whether or not the rights to  exchange  or convert  thereunder  are
immediately  exercisable,   or  (iv)  declare  a  dividend  or  make  any  other
distribution  upon any stock of the Company payable in Common Stock,  Options or
Convertible  Securities  (any of the matters  referred to in clauses (i),  (ii),
(iii) and (iv) being an  "Event"),  the Holder shall  thereafter  be entitled to
purchase in the aggregate,  at the Purchase Price  resulting from the adjustment
provided by Section 7.1, the number of Warrant  Shares equal to that  percentage
of the total number of shares of Common  Stock  (determined  on an  as-converted
basis) that the Holder was entitled to purchase immediately prior to such Event;
provided,  however,  that,  if an  adjustment is required to be made pursuant to
this sentence in respect of any Event that involves the offer and/or issuance of
securities  to  all  of the  holders  of the  Common  Stock,  the  Holder  shall
thereafter be entitled to receive the number of Warrant  Shares which the Holder
would have owned immediately following such Event (on an as-converted basis) had
the Warrants been  exercised  immediately  prior  thereto.  Notwithstanding  the
foregoing,  no adjustment  shall be made pursuant to any Event:  (i) at any time
prior to the date that is 30 months  after the  repayment  in full of all of the
outstanding principal under the Term Loan Agreement if (A) the securities issued
in  connection  with  the  Event  were  sold  for  a  price  (determined  on  an
as-converted  basis) exceeding the Purchase Price or (B) if the Event that would
result in such adjustment was approved in advance in writing by the holders of a
majority of the shares of Common Stock  (determined  on an  as-converted  basis)
issuable  upon  the  exercise  of  the  warrants   represented  by  the  Warrant
Certificates,  which  approval  shall  not be  unreasonably  withheld;  and (ii)
following  the date that is 30 months after the  repayment in full of all of the
outstanding principal under the Term Loan Agreement;  provided,  however,  that,
notwithstanding  anything  to the  contrary  set forth in  clauses  (i) and (ii)
above,  the  adjustments  provided for in the first sentence of this Section 7.2
shall  continue to be made in respect of any Event to the extent that such Event
involves the offer and/or  issuance of  securities  to all of the holders of any
class of securities of the Company;  provided,  further,  however, that, nothing
contained in this sentence  shall limit the effect of any  adjustment to be made
pursuant to any other Section of this Warrant  Certificate.  Notwithstanding the
first sentence of this paragraph,  no adjustment  shall be made pursuant to this
Section  7.2 in  respect  of the  issuance  of (i)  Common  Stock or  Options to
employees, directors and officers of the Company and its subsidiaries under bona
fide employee  benefit  plans  adopted by the Board of Directors,  to the extent
that,  with respect to any  applicable  fiscal  year,  shares of Common Stock or
Options representing (on an as-converted basis) no more

                                     - 16 -

<PAGE>



than 1% of the  issued  and  outstanding  shares of Common  Stock on the Date of
Issuance are issued,  (ii) Common Stock in the ordinary course of business,  the
issuance  of which has been  approved by the Board of  Directors,  to the extent
that,  with  respect  to any  applicable  fiscal  year,  shares of Common  Stock
representing  (on an  as-converted  basis)  no more than .5% of the  issued  and
outstanding  shares of Common  Stock on the Date of Issuance are issued or (iii)
warrants  or  shares  of  Common  Stock  pursuant  to the terms of the Term Loan
Agreement.

                  7.3. Record Date. In case at any time the Company shall take a
record of the holders of the Common Stock for the purpose of entitling  them (i)
to receive a dividend or other  distribution  payable in shares of Common  Stock
Options or in Convertible Securities or (ii) to subscribe for or purchase shares
of Common Stock, Options or Convertible Securities, then such record date shall,
for purposes of the adjustments to be made pursuant to this Section 7, be deemed
to be the date of the issue or sale of the shares of Common Stock deemed to have
been  issued  or sold  upon  the  payment  of  such  dividend  or of such  other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

                  7.4.  Liquidating  Dividends.  The Company  will not declare a
dividend  upon the  Common  Stock  payable  other  (i) than out of  consolidated
earnings  for the fiscal year of the Company in respect of which the dividend is
paid,  determined in accordance with Generally  Accepted  Accounting  Principles
consistently applied by the Company's  independent certified public accountants,
including the making of appropriate  deductions for minority interests,  if any,
in  subsidiaries,  or (ii) than in ommon  Stock,  unless,  in either  case,  the
Company shall pay over to the Holder,  on the dividend  payment date,  the cash,
stock or other  securities  and other  property  which  the  Holder  would  have
received if the Holder had  exercised  the Warrants in full to purchase  Warrant
Shares  and had been the  record  holder of such  Warrant  Shares on the date on
which a record is taken for the purpose of such dividend, or, if a record is not
taken,  the date as of which the holders of Common  Stock of record  entitled to
such  dividend  are to be  determined.  For the  purposes  of the  foregoing,  a
dividend other than in cash shall be considered  payable out of earnings only to
the extent that such  earnings  are charged an amount equal to the fair value of
such  dividend  as  determined  in good faith by the Board of  Directors  of the
Company.

                  7.5. Subdivision or Combination of Shares. In case the Company
shall at any time  subdivide  its  outstanding  shares  of Common  Stock  into a
greater number of share , the Purchase Price in effect immediately prior to such
subdivision shall thereafter be proportionally  reduced and the number of shares
of Common Stock purchasable hereunder shall be proportionately increased so that
the Holder  shall be entitled to receive the number of Warrant  Shares which the
Holder would have owned immediately  following such action had the Warrants been
exercised  immediately  prior thereto at the aggregate  Purchase Price in effect
immediately prior to such action. In case the outstanding shares of Common Stock
shall be combined into a smaller number of shares,  the Purchase Price in effect
immediately prior to such combination shall be  proportionately  increased,  and
the  number  of  shares  of  Common  Stock   purchasable   hereunder   shall  be
proportionately  reduced so that the Holder  shall  thereafter  be  entitled  to
receive  the  number  of  Warrant  Shares  which the  Holder  would  have  owned
immediately  following such action had the Warrants been  exercised  immediately
prior thereto at the aggregate  Purchase  Price in effect  immediately  prior to
such action.

                                     - 17 -

<PAGE>




                  7.6.    Reorganization,    Merger,   etc.   If   any   capital
reorganization  or  reclassification  of the capital stock of the Company (other
than as provided in Section 7.5), or consolidation or merger of the Company with
another corporation,  or the sale or conveyance,  of all or substantially all of
its assets to another corporation,  shall be effected in such a way that holders
of the Common Stoc shall be entitled to receive stock, securities or assets with
respect to or in exchange for shares of Common  Stock,  then,  prior to and as a
condition of such reorganization, reclassification,  consolidation, merger, sale
or conveyance,  lawful and adequate  provision  shall be made whereby the Holder
shall  thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions  specified in this Warrant  Certificate  and in lieu of
the Warrant Shares immediately  theretofore  purchasable and receivable upon the
exercise of the Warrants,  such shares of stock,  securities or assets as may be
issued or payable  with  respect to or in exchange  for a number of  outstanding
shares of Common Stock equal to the number of shares of Common Stock immediately
theretofore   purchasable  and  receivable  upon  the  exercise  of  the  rights
represented  hereby had such  reorganization,  reclassification,  consolidation,
merger,  sale or  conveyance  not taken  place.  In any such  case,  appropriate
provision  shall be made with respect to the rights and  interests of the Holder
to the end that the provisions hereof (including, without limitation, provisions
for  adjustment  of the  Purchase  Price  and of the  number of  Warrant  Shares
purchasable  upon the  exercise  of the  Warrants  and for the  registration  of
Registrable  Securities to the extent provided in Section 5) shall thereafter be
applicable,  as nearly as may be in relation to any stock,  securities or assets
thereafter  deliverable upon the exercise  hereof.  The Company shall not effect
any  such  consolidation,   merger,  sale  or  conveyance  unless  prior  to  or
simultaneously   with  the  consummation   thereof  the  survivor  or  successor
corporation  (if other than the Company)  resulting from such  consolidation  or
merger or the  corporation  purchasing or otherwise  acquiring such assets shall
(i) assume by written instrument executed and sent to the Holder, the obligation
to deliver  to the  Holder  such  shares of stock,  securities  or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to receive,
and containing the express assumption by such survivor or successor  corporation
of the due and punctual  performance  and observance of every  provision of this
Warrant  Certificate  to be  performed  and  observed  by the Company and of all
liabilities  and obligations of the Company  hereunder,  and (ii) deliver to the
Holder an opinion of counsel, in form and substance  reasonably  satisfactory to
the Holder, to the effect that such written instrument has been duly authorized,
executed and delivered by such survivor or successor corporation and constitutes
a legal,  valid and binding  instrument  enforceable  against  such  survivor or
successor  corporation in accordance with its terms, and to such further effects
as the Holder may request.

                  7.7.  Exceptions  to Adjustment  of Purchase  Price.  Anything
herein to the  contrary  notwithstanding,  the Company  shall not be required to
make any  adjustment of the Purchase  Price upon the issuance of Warrants or the
issuance of Warrant Shares upon the exercise of Warrants.

                  7.8.  Treasury  Shares.  The number of shares of Common  Stock
outstanding  at any time shall not  include  shares  owned or held by or for the
account  of the  Company,  and the  disposition  of any  such  shares  shall  be
considered an issue or sale of Common Stock for the purposes of Section 7.

                                     - 18 -

<PAGE>




                  7.9. Company to Prevent Dilution.  In case at any time or from
tim to time conditions arise, which are not adequately covered by the provisions
of this Section 7, and which might  materially and adversely affect the exercise
rights of the Holder, the Board of Directors of the Company shall appoint a firm
of independent  certified public  accountants of recognized  national  standing,
which may be the firm regularly retained by the Company,  which shall give their
opinion  upon the  adjustment,  if any,  necessary  with respect to the Purchase
Price  and/or  number  of  Warrant  Shares  issuable  upon the  exercise  of the
Warrants,  on a basis  consistent  with the standards  established  in the other
provisions of this Section 7, so as to preserve,  without dilution, the exercise
rights of the Holder.  Upon receipt of such  opinion,  the Board of Directors of
the Company shall forthwith make the adjustments described therein.

                  7.10.  Adjustment  Notices to  Holder.  Upon any  increase  or
decrease in the number of Warrant  Shares  purchasable  upon the exercise of the
arrants,  or upon any  adjustment  in the  Purchase  Price  (in each case to the
extent  applicable),  then,  and in each such case,  the  Company  within 5 days
thereafter,  shall deliver  written notice  thereof to the Holder,  which notice
shall state the increased or decreased number of Warrant Shares purchasable upon
the exercise of the Warrants,  setting forth in reasonable  detail the method of
calculation  and the  facts  upon  which  such  calculations  are  based.  Where
appropriate,  such notice may be given in advance and  included as a part of the
notice required to be mailed under the provisions of Section 9.

                  8.  SPECIAL COVENANTS OF THE COMPANY

                  The Company covenants and agrees that:

                  (a) The Company will not, by amendment of its  Certificate  of
Incorporation  or  through  any  capital  reorganization,  transfer  of  assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary  action,  directly or indirectly avoid or seek to avoid the observance
or  performance  of any of the terms of the  Warrants,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (i) will not increase the par value of the Warrant
Shares above the Purchase Price payable therefor upon such exercise, or take any
other action that would cause the  Purchase  Price to be less than the par value
of the Warrant  Shares,  (ii) will take all such action as may be  necessary  or
appropriate in order that the Company may at all times validly and legally issue
fully paid and  non-assessable  Warrant Shares upon the exercise of all Warrants
from time to time  outstanding and (iii) will not issue any capital stock of any
class which is preferred as to  dividends  or as to the  distribution  of assets
upon voluntary or involuntary dissolution, liquidation or winding-up, unless the
rights of the holders  thereof  shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in any such  distribution
of assets.

                  (b) If any shares of Common Stock  required to be reserved for
the purpose of exercising the Warrants require  registration with or approval of
any governmental authority under any federal law (other than the Securities Act)
or under any state law before su h shares  may be issued  upon  exercise  of the
Warrants, the Company will, at its expense, as expeditiously

                                     - 19 -

<PAGE>



as possible,  use its best efforts to cause such shares to be duly registered or
approved, as the case may be.

                  (c) The Company will give notice to the Holder within ten days
after the  Company  shall have  filed  with the  Commission  an  application  to
register any securities of the Company pursuant to the Exchange Act. The Company
will review ts stock ledgers,  stock transfer books and other corporate  records
periodically  (and not less  than  once in each  calendar  quarter)  in order to
determine  whether the Holder is or shall have become,  directly or  indirectly,
the owner of record of more than such  percentage  of any class of the Company's
equity securities (as defined in the Exchange Act) as shall cause such Holder to
be required to make any filing or declarations to the Company, the Commission or
any  securities  exchange  or  inter-dealer  quotation  system  pursuant  to the
provisions  of the  Exchange  Act or  the  rules  and  regulations  of any  such
securities  exchange or  inter-dealer  quotation  system.  The Company will give
prompt  notice to the Holder  whenever it shall have so  determined,  but in any
event  not  less  than  quarterly,  and  such  notice  shall  also  specify  the
information upon which the Company bases such determination; provided, that, the
Company  shall be  required to give such notice only once in each fiscal year to
the Holder if its  percentage  of  ownership of record of the  Company's  equity
securities  has not changed  since the date that the last such notice was given.
Nothing  contained  in this  paragraph  (c) of Section 8 be  construed  so as to
qualify or limit any reporting obligation of the Holder under the Exchange Act.

                  9.  NOTIFICATION BY THE COMPANY

                  In case at any time:

     (i) the Company shall declare any dividend or any other  distribution  upon
its Common Stock;

     (ii) the Company  shall offer for  subscription  pro rata to the holders of
its Common Stock any additional  shares of stock of any class or any Convertible
Securities or Options;

         (iii) the Board of Directors of the Company shall authorize any capital
reorganization  or  reclassification  of the capital stock of the Company,  or a
sale or conveyance of all or substantially all of the assets of the Company,  or
a consolidation or merger of the Company with or into another Person;

     (iv)  actions  or  proceedings  shall  be  authorized  or  commenced  for a
voluntary or involuntary dissolution,  liquidation or winding-up of the Company;
or

         (v) the  Company  shall  propose  to take any other  action  that would
require a vote of the Company's  stockholders;  then, in any one or more of such
cases, the Company shall give written notice to the Holder, at the earliest time
legally  practicable  (and to the extent legally  practicable  and to the extent
determined  as of such  time),  not less than 30 days  before any record date or
other date set for definitive  action) of the date on which (A) the books of the
Company  shall close or a record shall be taken with  respect to such  dividend,
distribution, subscription rights or Options or (B) such

                                     - 20 -

<PAGE>



reorganization,   reclassification,  sale,  conveyance,  consolidation,  merger,
dissolution,  liquidation,  winding-up  or other  action  shall take place or be
voted on by the  stockholders  of the  Company,  as the case may be. Such notice
shall also  specify the date as of which the  holders of Common  Stock of record
shall participate in said dividend, distribution, subscription rights or Options
or shall be entitled to exchange  their  Common  Stock for  securities  or other
property   deliverable  upon  such   reorganization,   reclassification,   sale,
conveyance,  consolidation,  merger, dissolution,  liquidation or winding-up, as
the case may be. If the action in  question or the record date is subject to the
effectiveness  of a  registration  statement  under the  Securities  Act or to a
favorable vote of  stockholders,  the notice required by this Section 9 shall so
state.

                  10. LIMITATION ON EXERCISE

                  Notwithstanding  any other provision hereof,  the Holder shall
not be entitled to exercise the Warrants if, as a result of such  exercise,  the
Holder would own, control or have power to vote a greater quantity of securities
of any kind  issued by the  Company  than the Holder  shall be  ermitted to own,
control or have the power to vote under any law or under any regulation, rule or
other  requirement or any  governmental  authority at any time applicable to the
Holder.  For purposes of this Section 10, a written  statement of the Holder, to
the effect that the Holder is legally  entitled to  exercise  Warrants  and that
such  purchase  of the  Warrant  Shares  purchasable  upon the  exercise of such
Warrants will not violate the prohibitions set forth in the preceding  sentence,
shall be  sufficient  evidence of the  legality  thereof and shall  obligate the
Company to deliver certificates  representing the Warrant Shares so purchased in
accordance with the other provisions  hereof unless the Company shall reasonably
disagree as to the accuracy of any material portion of such written statement.

                  11. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY

                  The Warrants  will not entitle the Holder to any voting rights
or other rights as a stockholder  of the Company.  No provision  hereof,  in the
absence of affirmative  action by the Holder to purchase Warrant Shares,  and no
enumeration herein of the rights or privileges of the Holder, shall give rise to
any  liability  of the Holder  for any  portion  of the  Purchase  Price or as a
stockholder of the Company.

                  12. DATE OF ISSUANCE

                  The date the Company  initially  issues the  Warrants  will be
deemed to be the "Date of  Issuance"  thereof and of each new Warrant  issued in
xchange, transfer or replacement thereof,  regardless of the number of times new
certificates   representing  the  unexplored  and  unexercised  rights  formerly
represented by this Warrant Certificate shall be issued.

                  13. AMENDMENT AND WAIVER

                  Except as otherwise  provided  herein,  the  provisions of the
Warrant  Certificates  may be amended and the  Company  may take  action  herein
prohibited,  or omit to perform any act herein  required to be  performed by it,
only if the Company has obtained the prior  written  consent of the holders of a
majority  of the  "Warrant  Shares"  then  outstanding  under all of the Warrant
Certificates  (determined  on an  as-converted  basis),  or,  in the case of any
amendment to, or action

                                     - 21 -

<PAGE>



prohibited  or required  under,  Section 5.3,  5.4,  5.5, 5.6, 5.8 or 5.9 of any
Warrant Certificate,  the holders of a majority of the "Registrable  Securities"
under all of the Warrant  Certificates  (determined on an  as-converted  basis);
provided,  that,  changes that are detrimental to the Holder in (i) the Purchase
Price,  (ii) the number of or class of securities  issuable upon the exercise of
Warrants,  (iii) the conversion adjustment provisions set forth in Section 7 and
(iv) the indemnification  and contribution  provisions set forth in Section 5.7,
shall not be made as to the Holder without the consent of the Holder.

                  14. NO FRACTIONAL SHARES

                  The Company shall not be required to is ue stock  certificates
representing  fractions  of  shares of Common  Stock,  but may at its  option in
respect  of any final  fraction  of a share  make a payment in cash based on the
then effective Purchase Price.

                  15. RESERVATION OF SHARES

                  The Company will authorize,  reserve and keep available at all
times,  free from  preemptive  rights,  a sufficient  number of shares of Common
Stock or other  securities,  if so  required,  to satisfy  the  exercise  of the
Warrants

                  16. NOTICES

                  All  notices,  requests,  consents  and  other  communications
hereunder  shall be in  writing  and  shall be  deemed  to have  been  made when
delivered or mailed first-class postage prepaid or when delivered by courier:

         (i) if to the Original Holder, at 950 Third Avenue,  New York, New York
10022,  or at such other  address as may have been  furnished  to the Company in
writing by the Holder; and

         (ii) if to the Company, at Route 2 South, Chester, West Virginia 26034,
Attention: President, or at such other address as may have been furnished to the
Holder in writing by the Company,  with a copy to Robert L. Ruben, Esq., Freer &
McGarry, 1000 Thomas Jefferson Stree , N.W., Suite 600, Washington, D.C. 20007.

                  17. HEADINGS

                  The headings of the Sections and  subsections  of this Warrant
Certificate  are  inserted  for  convenience  only and  shall be  deemed  not to
constitute a part of this Warran Certificate.

                  18. GOVERNING LAW; CONSENT TO JURISDICTION

                  This Warrant  Certificate  shall be governed by, and construed
in accordance  with,  the laws of the State of New York,  without  regard to the
principles of conflicts of laws of such State. If any action or proceeding shall
be brought by the Holder in order to enforce any right or  obligation in respect
of this Warrant Certificate or the Warrants, the Company hereby consents

                                     - 22 -

<PAGE>



and will submit to the  jurisdiction  of any state or federal court of competent
jurisdiction  sitting within the area  comprising  the Southern  District of New
York, and agrees that venue will be proper in any such court.

                  19. BINDING EFFECT

     The terms and  provisions  of this Warrant  Certificate  shall inure to the
benefit of the Original  Holder and its  successors  and  permitted  assigns and
shall be binding  upon the  Company  and its succe sors and  permitted  assigns,
including,  without limitation,  any Person succeeding to the Company by merger,
consolidation  or  acquisition  of all  or  substantially  all of the  Company's
assets.

                  20. CALCULATION OF AMOUNTS AND PERCENTAGES

     To the extent that any provision of this Warrant  Certificate  requires the
approval  of the  holders  of a  stated  percentage  or  amount  (to the  extent
constituting  less  than all) of the  Warrants,  Warrant  Shares or R  gistrable
Securities,   all  of  the  "Warrants,"   "Warrant   Shares"  and   "Registrable
Securities," as the case may be, under all of the Warrant  Certificates  held by
the "Original  Holders"  thereof and their  respective  successors and permitted
assigns shall be included when making such calculation.

                  21. REPRESENTATIONS OF ORIGINAL HOLDER

     The  Original  Holder  represents  and warrants  that it is an  "accredited
investor"  as such term is defined in the R le 501(c) of  Regulation D under the
Securities  Act and that it is acquiring the Warrants for its own account or for
one or more accounts (each of which is an "accredited  investor") as to which it
exercises  sole  investment  discretion,  for  investment and not with a view to
resale or distribution thereof.

                  22. OTHER REPRESENTATIONS

                  (a)  The  Company  represents  and  warrants  that  it has not
entered into,  and covenants  that, on and after the Date o Issuance it will not
enter into,  any agreement that is  inconsistent  with or that may prejudice the
rights  granted  to the Holder in this  Warrant  Certificate  or that  otherwise
conflicts with the provisions hereof. The rights granted to the Holder hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to the holders of the Company's other issued and outstanding  securities,  other
than rights underlying agreements set forth on Schedule 5.8(a) hereto, copies of
which have been provided to the Holder.

                  (b)  The  Company  has  validly  reserved  for  issuance  upon
exercise  of all of the  Warrants,  out of its  authorized  but  unissued  share
capital,  a  sufficient  number of shares  of Common  Stock so as to enable  the
Holder to exercise the Warrants in full.

                  WITNESS the seal of the Company and the signatures of its duly
authorized officers.

Dated: _________ __, 1997                                 MTR GAMING GROUP, INC.



                                                     By: /s/ Edson R. Arneault
                                                         Name: Edson R. Arneault
                                                         Title: President

Attest:

/s/ Robert L. Ruben
Assistant Secretary



                                     - 23 -

<PAGE>



                                                                       EXHIBIT I

                                   ASSIGNMENT

               To Be Executed by the Registered Holder Desiring to

                      Transfer Purchase Rights Evidenced by
                        the Within Warrant Certificate of

                             MTR GAMING GROUP, INC.


FOR VALUE RECEIVED,  the undersigned registered Holder hereby sells, assigns and
transfers unto  _________________  the right to purchase ________ Warrant Shares
(as  defined  in  the  Warrant   Certificate)  covered  by  the  within  Warrant
Certificate,    and   does   hereby    irrevocably    constitute   and   appoint
_____________________  Attorney to transfer the applicable number of Warrants on
the books of the  Company (as  defined in the  Warrant  Certificate),  with full
power of substitution.

Name of
Registered Holder

Signature

Title

Address



Dated: __________, 19__
In the presence of

____________________________

                                     NOTICE:

The signature to the foregoing  Assignment  must  correspond to the name written
upon the face of the within  Warrant  Certificate in every  particular,  without
alteration or enlargement or any change whatsoever.


                                     - 24 -

<PAGE>



                                                                      EXHIBIT II


                               EXERCISE AGREEMENT


               To Be Executed by the Registered Holder Desiring to
       Exercise Warrants Represented by the Within Warrant Certificate of


                             MTR GAMING GROUP, INC.


                  The undersigned  registered  holder hereby exercises the right
to  purchase  _____  shares of the Common  Stock  covered by the within  Warrant
Certificate,  according to the conditions thereof,  and herewith make payment in
full of he Purchase Price of such shares,
$------.

                                   Name of
                                   Registered Holder

                                   Signature

                                   Title

                                   Address



Dated: __________, 19__


                                     - 25 -