-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PzBBQiPFLMRzrZtaPOE8SrAPLof7guf+ALGVG2lhnbrRtMBcPHelsu1E9nxuLMPQ gyWyz9YrASzYbKjpaK039g== 0000893750-99-000067.txt : 19990126 0000893750-99-000067.hdr.sgml : 19990126 ACCESSION NUMBER: 0000893750-99-000067 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19990125 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MTR GAMING GROUP INC CENTRAL INDEX KEY: 0000834162 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 841103135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-50735 FILM NUMBER: 99512354 BUSINESS ADDRESS: STREET 1: ROUTE 2 STREET 2: PO BOX 356 CITY: CHESTER STATE: WV ZIP: 26034 BUSINESS PHONE: 3043875712 MAIL ADDRESS: STREET 1: ROUTE 2 STREET 2: P O BOX 356 CITY: CHESTER STATE: WV ZIP: 26034 FORMER COMPANY: FORMER CONFORMED NAME: WINNERS ENTERTAINMENT INC DATE OF NAME CHANGE: 19931117 FORMER COMPANY: FORMER CONFORMED NAME: EXCALIBUR HOLDING CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EXCALIBUR SECURITY SERVICES INC DATE OF NAME CHANGE: 19920202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BREEDEN RICHARD C CENTRAL INDEX KEY: 0001077421 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: TWO CLINTON SQUARE CITY: SYRACUSE STATE: NY ZIP: 13202 BUSINESS PHONE: 3154229000 MAIL ADDRESS: STREET 1: TWO CLINTON SQUARE CITY: SYRACUSE STATE: NY ZIP: 13202 SC 13D/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 1) MTR Gaming Group, Inc. (Name of Issuer) Common Stock, $0.00001 par value per share (Title of Class of Securities) 300 64J 10 8 (CUSIP Number) Richard C. Breeden, Trustee The Bennett Funding Group, Inc. and Bennett Management & Development Corp. Two Clinton Square Syracuse, New York 13202 (315) 422-9000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 19, 1998 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d- 1(g), check the following box / /. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 7 Pages) [FN] The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 300 64J 10 8 13D Page 2 of 7 Pages 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Richard C. Breeden, as Trustee 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SECURITIES USE ONLY 4 SOURCE OF FUNDS* WC 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) /x/ 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 522,700 OWNED 8 SHARED VOTING POWER BY EACH 780,000 REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 1,302,700 10 SHARED DISPOSITIVE POWER 0 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,302,700 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.2% 14 TYPE OF REPORTING PERSON* 00 *SEE INSTRUCTIONS BEFORE FILLING OUT! -2- The cover page and Items 1 through 7 of the Statement filed pursuant to Rule 13d-1 under Section 13(d) of the Securities Exchange Act of 1934, as amended, on behalf of The Bennett Funding Group, Inc. ("BFG") and Bennett Management & Development Corp. ("BMDC"), with respect to a reportable event occurring on October 22, 1996, are amended and restated as set forth below. Item 1. Security and Issuer. This statement relates to the common stock, $0.00001 par value per share (the "Common Stock"), of MTR Gaming Group, Inc., a Delaware corporation ("MTR"). MTR's principal executive offices are located at State Route 2 South, Chester, West Virginia 26034. MTR was formerly known as Winners Entertainment, Inc. Item 2. Identity and Background. This statement is being filed by Richard C. Breeden, as trustee in bankruptcy (the "Trustee") for BFG, BMDC and certain other related debtors. The Trustee's business address is Two Clinton Square, Syracuse, New York 13202. In addition to his position as Trustee, Mr. Breeden is the Chief Executive Officer of Equivest Finance, Inc. ("Equivest"), a holding company which, through its wholly-owned subsidiary, Resort Funding, Inc., finances consumer timeshare receivables and makes acquisition and development loans to fund construction of timeshare resorts. The address of Equivest is Two Clinton Square, Syracuse, New York 13202. The Trustee neither has been convicted in a criminal proceeding, nor was a party to a civil proceeding as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, Federal or State securities laws or finding any violation with respect to such laws. The Trustee is a citizen of the United States. BFG is a New York corporation whose principal business activity is equipment leasing. BMDC is a New York corporation whose principal business activity is the provision of various financial services. The address of the principal business and offices of each company is Two Clinton Square, Syracuse, New York 13202. On March 29, 1996, BFG and BMDC filed voluntary petitions (the "Petitions") for reorganization (Case Nos. 96-61376 and 96-61379, respectively) under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of New York (the "Bankruptcy Court"). On April 18, 1996, the Court appointed Mr. Breeden as Trustee for BFG and BMDC, as well as for certain other related debtors. On July 25, 1997, the Bankruptcy Court consolidated the estates of all such debtors (such consolidated estate, the "Estate"). The Petitions were filed after (i) the Securities and Exchange Commission filed a civil complaint (the "Civil Complaint") in the United States District Court for the Southern District of New York (the -3- "District Court") against BFG, BMDC, certain of their affiliates and Patrick R. Bennett, the former Chief Financial Officer of BFG (Case No. 96 Civ. 2237 (JES)) and (ii) the United States Attorney for the Southern District of New York filed a criminal complaint (the "Criminal Complaint") in the District Court against Patrick Bennett alleging perjury and criminal violations of the anti-fraud provisions of the federal securities laws. The Civil Complaint alleges numerous violations of the anti-fraud provisions of the federal securities laws, based in part on allegations of sales of fictitious equipment leases, fraudulent misrepresentations to investors in private placements of debt securities and misappropriation of corporate assets. In June 1996 the Trustee filed an adversary proceeding seeking more than $1 billion in damages from, among others, prior controlling stockholders of BFG and its affiliates and certain of their business associates, the previous auditing firm and others. On June 26, 1997, a federal grand jury issued a 43-count indictment against Patrick Bennett, his brother Michael, and two associates on charges ranging from conspiracy to obstruction of justice. The defendants were arraigned on July 3, 1997, and were released after posting personal recognizance bonds. The two indicted associates of Patrick Bennett, Charles Genovese and Gary Peiffer, pled guilty to charges of obstruction of justice on December 3, 1998. Michael Bennett also pled guilty to obstruction of justice and certain other related crimes in late November 1998. Patrick Bennett's criminal trial began in the United States Court for the Southern District of New York on December 7, 1998. Item 3. Source and Amount of Funds or Other Consideration. MTR, its wholly-owned subsidiary Mountaineer Park, Inc. ("MPI") and BMDC, as lender, entered into a Construction Loan Agreement (the "Construction Loan Agreement") dated as of June 27, 1994, which was subsequently amended on September 27, 1994; December 7, 1994; February 10, 1995; April 10, 1995; July 7, 1995; and September 19, 1996, and certain repayment terms of which were extended on October 31, 1995; November 9, 1995; November 28, 1995; and January 12, 1996. Pursuant to the Construction Loan Agreement, MPI borrowed $10.2 million (the "Construction Loan") from BMDC primarily for renovations at the Mountaineer Racetrack and Gaming Resort located in Chester, Hancock County, West Virginia. As part of the consideration for the loan and in connection with one of the amendments to the loan, MTR was obligated to issue to BMDC in the aggregate 1,530,000 shares of Common Stock and did in fact issue and deliver such shares to BMDC and BFG beginning in June 1994. The Trustee believes that BMDC obtained the $10.2 million loaned to MPI from its working capital. On December 26, 1996, MPI prepaid in full the outstanding balance of the Construction Loan. Item 4. Purpose of Transaction. The Common Stock was acquired by BMDC and BFG for their own account for investment purposes as partial consideration for the granting of the Construction Loan described in Item 3 above and one of the amendments -4- thereto. The Trustee expects from time to time to sell shares, which may be in registered and unregistered transactions. Item 5. Interest in Securities of the Issuer. (a) According to MTR's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, there were 20,855,775 shares of Common Stock issued and outstanding as of November 9, 1998. The total number of shares beneficially owned by the Estate and by the Trustee, after the transactions described in Item 5(c) below, is 1,302,700 shares, representing approximately 6.2% of the total issued and outstanding shares of Common Stock. (b) Prior to the filing of the Petitions, BFG assigned the voting rights for an aggregate of 780,000 shares to the board of directors of MTR pursuant to an amendment to the Construction Loan Agreement described in Item 6 below. After the closing of the transaction described in Item 5(c) below, the Trustee has sole power to vote or direct the vote as to 522,700 shares and sole power to dispose or direct the disposition of 1,302,700 shares. (c) The Trustee disposed of a total of 227,300 shares of Common Stock as follows: Number of Price Per Shares Date Sold Share Manner --------- --------- --------- ------ 9,000 November 17, 1998 $2.3958 open market sale 10,000 November 18, 1998 $2.3750 open market sale 10,600 November 20, 1998 $2.5059 open market sale 12,500 November 25, 1998 $2.5060 open market sale 6,000 November 27, 1998 $2.5885 open market sale 10,000 November 30, 1998 $2.5625 open market sale 5,000 December 1, 1998 $2.4375 open market sale 9,000 December 1, 1998 $2.3958 open market sale 1,700 December 2, 1998 $2.4375 open market sale 9,000 December 3, 1998 $2.3750 open market sale 10,000 December 9, 1998 $2.3400 open market sale 2,000 December 10, 1998 $2.3438 open market sale 16,000 December 11, 1988 $2.3750 open market sale 12,500 December 16, 1998 $2.1250 open market sale 13,000 December 17, 1998 $2.1538 open market sale 20,000 December 21, 1998 $2.3547 open market sale 15,000 December 22, 1998 $2.2940 open market sale 8,500 December 23, 1998 $2.3879 open market sale 22,500 January 15, 1999 $2.3125 open market sale 15,000 January 19, 1999 $2.2658 open market sale 10,000 January 20, 1999 $2.3156 open market sale (d) Not applicable. (e) Not applicable. -5- Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer. Pursuant to Construction Loan Agreement Amendment V, dated July 7, 1995, among BMDC, MPI and MTR, BMDC granted full voting authority with respect to 780,000 shares to the board of directors of MTR to satisfy licensing requirements of the West Virginia Lottery Commission. The board of directors of MTR will retain this authority for so long as the Estate owns at least 5% of the shares of Common Stock. The Amendment of Construction Loan Agreement, dated September 19, 1996, among the Trustee, MPI and MTR, grants the Trustee certain registration rights relating to the shares of MTR issued pursuant to the Construction Loan Agreement, to the extent the public sale of such shares is restricted. Item 7. Material to be Filed as Exhibits. Exhibit 1: Construction Loan Agreement, dated as of June 27, 1994, among BMDC, MPI and Winners Entertainment, Inc. ("Winners"). Exhibit 2: Construction Loan Agreement Amendment, dated as of September 27, 1994, among BMDC, MPI and Winners. Exhibit 3: Construction Loan Agreement Amendment, dated December 7, 1994, among BMDC, MPI and Winners. Exhibit 4: Construction Loan Agreement Amendment, dated February 10, 1995, among BMDC, MPI and Winners. Exhibit 5: Amendment to Construction Loan Agreement, dated April 10, 1995, among BMDC, MPI and Winners. Exhibit 6: Construction Loan Agreement Amendment V, dated July 7, 1995, among BMDC, MPI and Winners. Exhibit 7: Letter from Stewart Weisman, Acting Secretary and General Counsel of BMDC, to MPI, dated October 31, 1995. Exhibit 8: Letter Agreement, dated November 9, 1995, among Winners, MPI and BMDC. Exhibit 9: Letter Agreement, dated November 28, 1995, among BMDC, Winners and MPI. Exhibit 10: Letter Agreement, dated January 12, 1996, among Winners, MPI and BMDC. Exhibit 11: Amendment of Construction Loan Agreement, dated September 19, 1996, among the Trustee, Winners and MPI. -6- SIGNATURE After reasonable inquiry and to the best of his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. DATED: January 20, 1999 /s/ Richard C. Breeden -------------------------------------- Name: Richard C. Breeden, as Trustee -7- EX-1 2 EXHIBIT 1 CONSTRUCTION LOAN AGREEMENT Construction Loan Agreement, dated as of June 27, 1994 among BENNETT MANAGEMENT & DEVELOPMENT CORP., a New York corporation ("Lender"), MOUNTAINEER PARK, INC., a West Virginia corporation ("Borrower"), and WINNERS ENTERTAINMENT, INC., a Delaware corporation and parent of Borrower ("Winners"). WHEREAS, Borrower desires to obtain a loan of $10,200,000 in order to finance the refurbishment of Mountaineer Racetrack and Resort, located in Chester, West Virginia, which is owned by Borrower and to finance certain other expenditures; and WHEREAS, Gamma International, Ltd. ("Gamma") has been designated as the manager of non pari-mutuel gaming activities at Mountaineer Racetrack and Resort pursuant to the Management Agreement dated June 2, 1994 (as it may be amended from time to time, the "Management Agreement"); and WHEREAS, the Management Agreement provides that Borrower may terminate the Management Agreement on June 30, 1994, if Gamma has not obtained a commitment for a $10,000,000 secured financing for Borrower; and WHEREAS, Lender is willing to provide Borrower with a $10,200,000 line of credit to be used to finance the refurbishment of Mountaineer Racetrack and Resort and to pay certain other expenses; and WHEREAS, Lender is also willing to permit Borrower to make a short term loan of up to $500,000 to Winners with a portion of the proceeds from the Loans (as defined below); and WHEREAS, to induce the Lender to make the Loans contemplated hereby, Winners has agreed to issue shares of its common stock to the Lender in accordance herewith; and WHEREAS, Borrower has agreed to secure such line of credit with a first priority mortgage and security interest in Mountaineer Racetrack and Resort pursuant to a credit line deed of trust dated as of June 27, 1994 between Borrower and Louis S. Southworth, II and Ellen S. Cappellanti, as Trustees (the "Deed of Trust"). NOW, THEREFORE, in consideration of the premises and agreements herein contained, the parties hereto, hereby agree as follows: ARTICLE I. Amount and Terms of the Loans 1.1 Commitment. Subject to the terms and conditions hereof, Lender agrees to make loans (each, a "Loan" and collectively the "Loans") to Borrower from time to time in accordance with the funding schedule set forth on Exhibit A (the "Funding Schedule") in an aggregate principal amount not to exceed $10,200,000; provided, however, that Lender shall not relend any amount which has been prepaid by Borrower. 1.2 Note; Payment of Interest. The Loans made by Lender shall be evidenced by a promissory note of Borrower, substantially in the form of Exhibit B hereto with appropriate insertions as to the date and principal amount of each Loan (the "Note"), payable to the order of Lender. The principal amount of the Loan shall bear interest at the rate of 12.5% per annum; provided, however, that (x) in the event that Borrower fails to make any payment of principal of, or interest on, the Loans when due (whether at the stated maturity, by acceleration or otherwise), any such overdue principal or interest amount shall bear interest at a rate of 14.5% per annum from the date of such non-payment until paid in full and (y) the interest rate shall be subject to increase in accordance with Section 2.4(a) and 2.4(b). Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed. Interest shall be payable monthly in arrears on the last business day of each month commencing July 1994. 1.3 Procedure for Borrowing. Borrower may borrow on any business day in accordance with the Funding Schedule; provided that Borrower shall give Lender written notice (the "Borrowing Notice") at least five business days prior to the requested borrowing date specifying the amount to be borrowed, the requested borrowing date, and the name of the bank and account number to which funds shall be transferred. Each Borrowing Notice shall be accompanied by a certificate of either of the Co-Chairmen of the Board of Directors of Borrower stating that (i) each of the representations and warranties made by Borrower in or pursuant to this Agreement and the Deed of Trust are true and correct on and as of such date as if made on and as of such date, (ii) as of such date, Borrower is in compliance with all the covenants contained in Article V of this Agreement, (iii) no Default or Event of Default (as such terms are defined in Section 7.1 hereof) shall have occurred and be continuing on such date, and (iv) the proceeds of the Loan requested pursuant to such Borrowing Notice will be used in accordance with Section 3.10 hereof. Such borrowing will then be made available to Borrower by Lender by wire transfer in immediately available funds to the bank account specified in the Borrowing Notice. 1.4 Optional Prepayments of Loans. Borrower may at any time and from time to time, prepay the Loans, in whole or in part, without premium or -2- penalty upon one business day's notice to Lender, specifying the date and amount of prepayment. 1.5 Repayment of Loans. To the extent the Loans are not prepaid in full on or prior to July 1, 1995 in accordance with Section 1.4 hereof, Borrower shall repay the outstanding principal amount of the Loans as of such date in 36 equal monthly installments on the last business day of each month commencing in July 1995. 1.6 Special Repayment Terms. In the event that Gamma's management services under the Management Agreement are not approved by the West Virginia Lottery Commission by October 1, 1994, then notwithstanding any other provision of this Agreement, Lender shall have no further obligations to make additional Loans under this Agreement and Borrower shall repay the principal amount of the Loans outstanding as of such date in 18 equal monthly installments on the last business day of each month commencing October 1994. 1.7 Security for Loans. The Loans shall be secured by the Collateral (as defined in the Deed of Trust) pursuant to the Deed of Trust. ARTICLE II. Issuance of Common Stock, Registration Rights, Call and Put 2.1 Grant of Common Stock to Lender. In order to induce Lender to enter into this Agreement and to make the Loans, Winners hereby agrees to issue to Lender, from time to time, shares of its common stock, par value $.00001 per share ("Winners Common Stock"), as follows. For each $1.00 of Loans made hereunder, Lender shall be entitled to receive .05 of a share of Winners Common Stock subject to adjustment by Winners in an equitable manner in the event of a stock split, combination, reclassification or similar event with respect to Winners Common Stock. Such shares to be issued substantially contemporaneously with the making of any such Loan and will be held by Lender in accordance with the terms of this Agreement. 2.2 Issuance of Additional Shares. (a) In addition to any issuance of shares of Winners Common Stock pursuant to Sections 2.1 or 2.2(b), in the event that the Loans have not been prepaid in full by October 1, 1995, Winners shall issue to Lender on October 2, 1995, a number of shares of Winners Common Stock equal to (x) .175 multiplied by the outstanding principal amount of the Loans as of October 1, 1995, divided by (y) the Average Market Price (as defined below) on October 1, 1995. For purposes of this Agreement (i) the "Average Market Price" at any date shall be deemed to be the average of the Current Market Prices for the 20 consecutive trading days prior to such date and (ii) the "Current -3- Market Price" on any given day shall be (w) if the Winners Common Stock is listed or admitted to unlisted trading privileges on a National Securities Exchange (defined as any exchange registered with the Securities and Exchange Commission as a "national securities exchange" under the Securities Exchange Act of 1934), the last sales price of Winners Common Stock on the National Securities Exchange in or nearest the City of New York on which the shares of Winners Common Stock shall be listed or admitted to unlisted trading privileges (or the quoted closing bid price if there are no sales on such Exchange) on such day, (y) if the Winners Common Stock is included in the Nasdaq National Market ("NM") or on Nasdaq, the last sales price of Winners Common Stock in the NM or on Nasdaq, as the case may be (or the quoted closing bid price if there are no sales on the NM or on Nasdaq) on such day, or (z) if the Winners Common Stock is not so listed, admitted or included, the mean between the high and low bid prices of Winners Common Stock in the over-the-counter market on such day as reported by the National Quotation Bureau Incorporated, or any similar organization designated by Winners, or if not so available in any such manner, as shall be determined by Winners, which determination shall be conclusive. (b) In addition to any issuance of shares of Winners Common Stock pursuant to Sections 2.1 or 2.2(a), in the event that the Loans have not been prepaid in full by January 1, 1997, Winners shall issue to Lender on January 2, 1997, a number of shares of Winners Common Stock equal to (x) .175 multiplied by the outstanding principal amount of the Loans as of January 1, 1997, divided by (y) the Average Market Price on January 1, 1997. 2.3 Reservation of Winners Common Stock. Winners hereby agrees to reserve and keep available out of authorized but unissued shares of Winners Common Stock, a sufficient number of shares of Winners Common Stock for the purpose of enabling it to satisfy any obligation to issue shares of Winners Common Stock in accordance with Sections 2.1 and 2.2. 2.4 Registration Rights. (a) Winners shall file a registration statement on the appropriate form to register the sale from time to time in the open market by Lender of all of the shares of Winners Common Stock acquired by the Lender in accordance with Section 2.1. Winners shall cause such registration statement to be declared effective no later than October 1, 1995. Winners shall use its reasonable best efforts to keep such registration statement effective until the earlier of (i) the date Lender has disposed of all of the shares of Winners Common Stock that it acquired pursuant to Section 2.1, (ii) the date that Lender is able to sell all such shares in accordance with Rule 144 within a 90-day period or (iii) July 1, 1998. If such registration statement is not declared effective by October 1, 1995, then during the period from October 1, 1995 until the date that such registration statement is declared effective, the interest rate on the outstanding principal amount of the Loans -4- shall be increased to 22.5% per annum. Lender shall have no remedy for Winners' breach of its obligation to cause such registration statement to be effective by October 1, 1995 except for such increase in the interest rate on the Loans. (b) Winners shall cause shares of Winners Common Stock issued to the Lender pursuant to Sections 2.2(a) and (b) to be registered for sales in the open market as soon as practicable after the issuance thereof on the same terms and conditions as relate to the shares of Winners Common Stock to be registered under Section 2.4(a), including the increase in the interest rate during the default period, except that each registration statement with respect to such shares must be declared effective no later than eight months after the date of issuance of the shares covered thereby. (c) It shall be a condition precedent to the obligation of Winners to take any action under this Section 2.4, that Lender shall furnish to Winners such information regarding Lender and the offering as Winners shall reasonably request. 2.5 Call. (a) For so long as any of the Loans remain outstanding, but in no event later than July 1, 1998, Winners shall have the right (the "Call") from time to time to repurchase any shares of Winners Common Stock that are acquired by the Lender pursuant to this Agreement and which have not been sold by Lender in accordance with this Agreement for a price per share equal to the Repurchase Price, as defined below. If Winners desires to exercise the Call, it shall give Lender written notice thereof (a "Call Notice"), which notice shall specify the number of shares to be purchased (the "Purchased Shares"), the total purchase price and a date and place for closing which must be within 15 days of such notice or, if later and if applicable, on the second business day following receipt of all required governmental approvals. Lender may not sell any shares of Winners Common Stock subject to a Call Notice from and after the date of receipt of the Call Notice; provided, however, that such restriction shall terminate if Winners shall not have consummated such purchase within 60 days after delivery of the Call Notice. At such closing, Lender shall deliver to Winners the Purchased Shares, free and clear of all liens, claims and other encumbrances (collectively, "Liens"), in the form of certificates representing such shares, accompanied by appropriate stock powers duly executed or endorsed in blank with appropriate transfer tax stamps affixed, against payment of the purchase price therefor in immediately available funds. (b) From the date hereof until October 1, 1995, the "Repurchase Price" shall equal $6.00 per share, provided, however, that such repurchase price shall be subject to adjustment by Winners in an equitable manner in the event of a stock split, combination, reclassification or -5- similar event with respect to Winners Common Stock. From October 2, 1995 until January 2, 1997, the "Repurchase Price" shall be an amount equal to the Average Market Price on October 1, 1995, plus $1.50. From January 3, 1997 until July 1, 1998, the "Repurchase Price" shall be an amount equal to the Average Market Price on January 2, 1997, plus $1.50. Notwithstanding anything contained herein to the contrary, the Repurchase Price for the shares of Winners Common Stock acquired by Lender pursuant to Section 2.1 shall not be less than $4.50 per share, subject to adjustment by Winners in an equitable manner in the event of a stock split, combination, reclassification or similar event with respect to Winners Common Stock. 2.6 Price Guarantee. If, during the period from the date hereof until the earlier of July 1, 1998 or the date that all of the Loans have been repaid in full, Lender sells any shares of Winners Common Stock acquired by it pursuant to this Agreement in the open market, for a price less than the then applicable Repurchase Price, as soon as practicable following receipt by Winners of appropriate evidence (the "Sale Notice") of such sale, including the number of shares of Winners Common Stock that were sold, the sales dates and the sales price or prices, Winners shall issue to Lender a number of shares of Winners Common Stock with a value based on the Average Market Price on the date of receipt of the Sale Notice equal to (x) the number of shares of Winners Common Stock which were sold and referred to in the Sales Notice multiplied by (y) the difference between (i) the then applicable Repurchase Price and (ii) the per share sale price for such shares; provided, however, that Winners shall not be required to issue any of such shares if the applicable sale by Lender was not then permitted under this Agreement. If there are multiple sales prices and/or different Repurchase Prices, a separate computation shall be made for each such sales price and/or different Repurchase Prices to determine the appropriate number of shares of Winners Common Stock to be issued. ARTICLE III. Representations and Warranties of Winners and Borrower Winners and Borrower hereby jointly and severally represent and warrant to Lender that: 3.1 Organization, Existence, and Qualification. Each of Winners and Borrower is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all requisite corporate power and authority to own its properties and carry on its business as now conducted and as presently proposed to be conducted. Borrower is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires it to be so qualified (other than such -6- jurisdictions where the failure to so qualify would not have a material adverse effect on Borrower's business, operations, results of operations or financial condition). 3.2 Authority. Each of Winners and Borrower has the corporate power and authority to execute, deliver and perform this Agreement, the Note (in the case of Borrower only) and the Deed of Trust (in the case of Borrower only). The execution, delivery and performance of this Agreement, the Note (in the case of Borrower only) and the Deed of Trust (in the case of Borrower only) have been duly authorized by all requisite corporate action on behalf of Winners and Borrower. This Agreement, the Note (in the case of Borrower only) and the Deed of Trust (in the case of Borrower only) are the legal, valid and binding obligations of Winners and Borrower, enforceable against Winners and Borrower in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally or by principles governing the availability of equitable remedies. 3.3 Consents; No Violation. No approval or action of, or filing, registration or declaration with, or notice to, any governmental or regulatory body, authority, bureau or agency or any other person or entity is required to be made by Winners or Borrower in connection with the execution, delivery and performance of this Agreement, the Note (in the case of Borrower only) and the Deed of Trust (Borrower only). The execution, delivery and performance of this Agreement, the Note (in the case of Borrower only) and the Deed of Trust (Borrower only) by Winners and Borrower will not (a) conflict with or result in a breach of any provision of its Certificate of Incorporation or By-laws, (b) result in a default (or give rise to any right of termination, cancellation or acceleration) under any agreement, contract or other instrument to which Winners or Borrower is a party, by which Winners or Borrower is bound or to which any part of Winners' or Borrower's properties or assets is subject, or (c) violate any judgment, decree or order of any court or governmental authority or any law, statute, rule or regulation. 3.4 Financial Statements (a) Winners has previously furnished to Lender (i) audited consolidated balance sheets of Winners and its subsidiaries as of December 31, 1993 and 1992, and (ii) the related audited consolidated statements of operations and retained earnings and cash flows of Winners and its subsidiaries for the fiscal years ended December 31, 1993 and 1992, together with the respective reports thereon of Corbin & Wertz, Winners' independent certified public accountants. The consolidated financial statements referred to in this Section (including the related notes thereto) present fairly, in all material respects, the consolidated financial position of Winners and its subsidiaries as of their respective dates, and the consolidated results of -7- their operations and their cash flows for their respective periods, in conformity with generally accepted accounting principles consistently applied. (b) Winners has also previously furnished to Lender (i) the unaudited consolidated balance sheet of Winners and its subsidiaries as of March 31, 1994 and (ii) the related unaudited consolidated statements of operations and retained earnings and cash flows of Winners and its subsidiaries for the three-month period then ended. The consolidated financial statements referred to in this Section present fairly, in all material respects, the consolidated financial position of Winners and its consolidated subsidiaries as of March 31, 1994, and the consolidated results of their operations and cash flows for the three-month period then ended, in conformity with the accounting principles historically followed by Winners in preparing its unaudited internal financial statements. 3.5 Litigation. There are no actions, suits, proceedings or investigations pending or, to the best of Winners' or Borrower's knowledge and belief, any basis therefor or threat thereof, against or affecting Winners or Borrower which challenge the validity of this Agreement, the Note or the Deed of Trust or the right of Winners and/or Borrower to enter into this Agreement, the Note or the Deed of Trust, or to consummate the transactions contemplated hereby and thereby, or, except as disclosed in Winners' Annual Report on Form 10-K for the year ended December 31, 1993, which are reasonably expected by Winners or Borrower to result, either individually or in the aggregate, in any material adverse change in the business, operations, prospects, conditions, affairs or results of operations of Winners or Borrower or in any of Winners' or Borrower's properties or assets, or in any material impairment of the right or ability of Winners or Borrower to carry on its business as now conducted or as proposed to be conducted. 3.6 Winners Common Stock to Be Issued to Lender. All shares of Winners Common Stock, when issued to Lender in accordance with this Agreement, will be validly authorized, issued and outstanding, fully paid and nonassessable with no personal liability attaching to the holder thereof and will be issued without violation of any preemptive right. 3.7 Deed of Trust; Collateral. Borrower has good and marketable title to the Collateral free and clear of all Liens. The Deed of Trust, when executed and delivered in accordance with this Agreement and upon the proper filing of financing statements under the Uniform Commercial Code with respect to the Deed of Trust and the Collateral as provided therein will vest in Lender a valid and perfected first priority security interest in the Collateral free and clear of all Liens and enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other -8- similar laws affecting creditors' rights generally or by principles governing the availability of equitable remedies. 3.8 Environmental Matters. Except as described on Schedule 3.8, each parcel of real property owned or operated by Borrower and included in the Collateral (the "Properties") and all operations and facilities at the Properties and Facility (as defined in the Management Agreement) are in compliance with all environmental laws (as defined in the Deed of Trust) and there is no contamination at any of the Properties or the Facility (including contamination with respect to hazardous materials (as defined in the Deed of Trust)) or violation of any environmental law which could interfere with the continued operation of any of the Properties or the Facility in the manner in which they are currently conducted or are proposed to be conducted. Except as described on Schedule 3.8, no hazardous materials have been generated, treated, stored, disposed of, at, on or under any of the Properties or the Facility in violation of environmental laws. 3.9 Compliance With Law. Borrower is in compliance with all federal, state and local laws, rules and regulations which are applicable to or binding upon Borrower or any of its Properties or to which Borrower or any of its Properties is subject. 3.10 Purpose of Loans. The proceeds of the Loans will be used by Borrower only to finance the refurbishment of Mountaineer Racetrack and Resort in accordance with plans which have been approved by Gamma, as such plans may be revised from time to time in accordance with the approval of Gamma, to pay up to $200,000 of investment banking fees and to loan up to $500,000 to Winners, which loan must be repaid to Borrower no later than December 31, 1994. ARTICLE IV. Representations, Warranties and Covenants of Lender Lender hereby represents and warrants to and covenants with Borrower and Winners that: 4.1 Purchase for Investment. (a) 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 a view to distribute any of the shares of Winners Common Stock in any transaction which would be in violation of the Securities Act of 1933, as amended. -9- (b) Each certificate representing the shares of Winners Common Stock acquired by Lender in accordance with this Agreement shall be endorsed with the legends set forth below. Lender shall not make any transfer of such shares of Winners Common Stock without first complying with the restrictions on transfer described in all such legends. "THE SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN OR RIGHT WITH RESPECT THERETO MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF LOAN AGREEMENT DATED AS OF JUNE 27, 1994 AMONG BENNETT MANAGEMENT & DEVELOPMENT CORP., MOUNTAINEER PARK, INC., AND WINNERS ENTERTAINMENT, INC., AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH WINNERS ENTERTAINMENT, INC. A TRANSACTION IN VIOLATION OF SUCH LOAN AGREEMENT WILL BE INEFFECTIVE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN PURCHASE OPTIONS DESCRIBED IN SUCH LOAN AGREEMENT." "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO WINNERS ENTERTAINMENT, INC. STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT." 4.2 No Sale Prior to October 1, 1995. Lender agrees that it shall not sell, transfer, assign, hypothecate or otherwise dispose of any of the shares of Winners Common Stock acquired under this Agreement prior to October 1, 1995; provided, however, that upon the occurrence of an Event of Default (as defined below) and until such Event of Default has been cured there shall be no restrictions under this Section 4.2 on the ability of Lender to sell any shares of Winners Common Stock acquired under this Agreement. 4.3 Notice to Transfer Agent. Upon satisfaction of Winners' obligations to issue shares of Winners Common Stock hereunder to Lender, Lender shall join with Winners in a notice to the transfer agent for Winners Common Stock which notice shall state that such transfer agent shall remove any reservation of shares of Winners Common Stock for issuance to the Lender then on its records. -10- ARTICLE V. Covenants of Borrower Borrower hereby agrees that at all times the Loans may be made in accordance with the Funding Schedule and thereafter for as long as the Note remains outstanding and unpaid or any other amount is owing to Lender hereunder or under the Deed of Trust. Borrower shall: 5.1 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it, preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business and comply with all contractual obligations and requirements of law. 5.2 Maintenance and Repair of Collateral. Keep and maintain the Collateral in good condition and repair free and clear of all Liens (other than the Lien of the Deed of Trust), make or cause to be made, as and when necessary, all repairs, renewals and replacements, structural and nonstructural, exterior and interior, ordinary and extraordinary, foreseen and unforeseen which are necessary to so maintain the Collateral and comply with all laws, ordinances, rules and regulations now or hereafter affecting the Collateral or any part thereof or the use thereof or requiring any alterations or improvements. 5.3 Insurance. Maintain with financially sound and reputable insurance companies, insurance on the Collateral in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business and furnish to Lender, upon written request, full information as to the insurance carried. 5.4 Environmental Laws. (a) Comply with, and insure compliance by all tenants and subtenants, if any, with, all environmental laws with respect to the Properties and the Facility and comply with and obtain and maintain and insure that all tenants and subtenants obtain and comply with and obtain and maintain any and all licenses, approvals, registrations or permits required with respect to the Properties and the Facility by environmental laws; (b) Conduct and complete all investigations, studies, sampling and testing and all remedial, remedial removal and other actions required with respect to the Properties and the Facility under environmental laws and promptly comply with all lawful orders and directives of all governmental authorities respecting environmental laws; and -11- (c) Defend, indemnify and hold harmless Lender from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of or noncompliance with environmental laws applicable to the Properties and the Facility, or any orders, requirements or demands of governmental authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, court costs and litigation expenses. 5.5 Access to Information. Permit representatives of Lender to visit and inspect the Properties and the Facility, to examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, Properties and financial and other condition of Borrower with officers and employees of Borrower and with Borrower's certified public accountants. 5.6 Use of Loans. Use the proceeds of the Loans in accordance with Section 3.10. 5.7 Notices. Promptly give notice to Lender of the occurrence of any event that with the giving of notice or the passage of time or both would constitute an Event of Default (a "Default") or an Event of Default. ARTICLE VI. Conditions Precedent to the Making of Loans 6.1 Conditions Precedent to Making Loans. Lender's obligation pursuant to this Agreement to make the Loans available to Borrower in accordance with the Funding Schedule is subject to the receipt on or prior to the date hereof of the following documents by Lender in form and substance satisfactory to Lender: (a) the Note; (b) a duly executed counterpart of the Deed of Trust; (c) copies, certified by the Secretary of Winners of resolutions of the board of Directors of Winners authorizing the execution, delivery and performance by Winners of this Agreement and the transactions contemplated hereby; (d) certificates of incumbency and signatures of the officers of Winners authorized to sign this Agreement; -12- (e) copies, certified by the Secretary of Borrower, of resolutions of the Board of Directors of Borrower authorizing the execution, delivery and performance by Borrower of this Agreement, the Note, the Deed of Trust, and the Management Agreement and the transactions contemplated hereby and thereby; (f) certificates of incumbency and signatures of the officer of Borrower authorized to sign this Agreement, the Note, the Deed of Trust, and the Management Agreement; (g) evidence of the filing of financing statements under the Uniform Commercial Code with respect to the Deed of Trust and the Collateral duly completed and executed by Borrower; (h) an opinion of Jackson & Kelly, counsel to Winners and Borrower in form and substance satisfactory to Lender with respect to such matters as are reasonably requested by Lender; (i) all required approvals, if any, from the West Virginia Lottery Commission to make the Loans and obtain a first priority security interest in the Collateral; (j) title insurance on the Properties satisfactory to it; and (k) such other instruments and documents with respect to Borrower as Lender may reasonably request. ARTICLE VII. Events of Default 7.1 Events of Default. Upon the occurrence of any of the following events ("Events of Default"); (i) Borrower shall fail to pay any principal of or interest on the Loan on the date that any such amount becomes due in accordance with the terms hereof; or (ii) The Borrower or Winners shall fail to perform or comply with any covenant or agreement to be observed or performed by it under this Agreement (other than those covered by clause (i) above and except the covenant contained in Section 2.4(b) or the second sentence of Section 2.4(a)) and such failure shall continue unremedied for a period of ten days after written notice thereof shall have been given by Lender to Borrower; or -13- (iii) There shall occur an Event of Default (as defined in the Deed of Trust) under the Deed of Trust; or (iv) There shall occur a default by Borrower under the Management Agreement; or (v) Any representation or warranty made by Borrower and/or Winners in this Agreement, the Deed of Trust, or the Management Agreement or which is contained in any certificate, document or financial or other statement furnished at any time by Borrower and/or Winners under this Agreement, the Deed of Trust or the Management Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (vi) one or more final judgments for the payment of money in excess in the aggregate of $500,000 shall be rendered against Borrower or any of its subsidiaries and the same shall remain undischarged for a period of sixty (60) days during which execution of such judgment shall not be effectively stayed; or (vii) Any breach or default shall occur under any other agreement involving the borrowing of money under which Borrower or any of its subsidiaries may be obligated as borrower or guarantor; or (viii) (a) Winners or Borrower or any of their subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief or debtors seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other similar relief with respect to it or its debts or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or Winners or any of its subsidiaries shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against Winners or Borrower or any of their subsidiaries any case, proceeding or other action of a nature referred to in clause (a) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days or (c) Winners or Borrower or any of their subsidiaries shall admit in writing its inability to pay its debts as they become due; then, (w) upon the occurrence of any such event specified in paragraphs (i)- (vii) above, Lender may, by notice to Borrower suspend or terminate its commitment to make Loans hereunder and/or, declare the Loans and all other amounts owing under this Agreement, the Note and the Deed of Trust to be immediately due and payable, whereupon they shall immediately become due and -14- payable without presentment, demand, protest or any other notice of any kind all of which are hereby expressly waived, (x) upon the occurrence of any such event specified in paragraph (viii) above, lender shall have no further obligation to make Loans hereunder and the Loans and all other amounts owning under this Agreement, the Note and the Deed of Trust shall immediately become due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, (y) in the case of either clause (w) or (x), proceed, by appropriate court action either at law or in equity to enforce performance by Winners and/or Borrower of the applicable covenants and agreements contained in this Agreement and/or the Deed of Trust or to recover damages for breach thereof, and (z) in the case of either clause (w) or (x), exercise any other right, power, privilege or remedy provided by law or in this Agreement or the Deed of Trust. 7.2 Waivers. Lender may, at its election, waive any Event of Default and its consequences by notice to Borrower to that effect, and thereupon the respective rights of the parties shall be as they would have been if no such Event of Default had occurred and no such notice had been given. Notwithstanding the provisions of this Section, it is expressly understood and agreed by Borrower that no such waiver, rescission or annulment shall extend to or affect any other or subsequent Event of Default or impair any rights, powers or privileges consequent thereon. ARTICLE VIII. Miscellaneous 8.1 Amendments and Waivers. Neither this Agreement, the Note, nor any terms hereof or thereof may be changed, waived, discharged or terminated without the prior written consent of the party against whom enforcement is sought. 8.2 Expenses. Borrower shall promptly upon the receipt of evidence thereof pay to Lender (i) all reasonable out-of-pocket expenses of Lender and Gamma, including reasonable fees and disbursements of counsel in connection with this Agreement, the Note, the Deed of Trust and the transactions contemplated hereby and thereby, including fees, and expenses incurred in connection with any waiver or consent under such agreements or any amendment thereof and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by Lender and Gamma, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. Borrower shall indemnify Lender against any taxes, assessments or charges made by any governmental authority by reason of the execution, delivery and performance of this Agreement, the Note or the Deed of Trust. -15- 8.3 Headings. The section headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. 8.4 Notices. All notices or other communications required or permitted hereunder shall be given in writing and shall be deemed sufficient if (i) delivered by hand or mailed by registered or certified mail, postage prepaid (return receipt requested), or (ii) delivered or sent by facsimile as follows: If to Borrower: c/o Winners Entertainment, Inc. 30448 Rancho Viejo Road, Suite 110 San Juan Capistrano, California 92675 Attention: President Telecopy No.: (714) 443-6092 If to Lender: c/o The Bennett Funding Group 2 Clinton Square Syracuse, New York 13202 Attention: Kevin J. Kuppel Telecopy No.: (315) 422-9361 With a copy to: Gamma International, Ltd. Suite 300 Bayport One Yacht Club Drive West Atlantic City, New Jersey 08232 Attention: President Telecopy No: (609) 272-7772 or such other address as shall be furnished in writing by such party, and any such notice or communication shall be effective and be deemed to have been given as of the date so delivered or three days after the date so mailed; provided, however, that any notice or communication changing any of the addresses set forth above shall be effective and deemed given only upon its receipt. Any notice, demand or other communication sent by facsimile shall be deemed given upon receipt in a legible form by the party being served, provided that the sending party shall, immediately prior to providing such notice by facsimile, notify the intended recipient by telephone that such notice is being provided by facsimile. -16- 8.5 Assignment; No Third Party Beneficiary. This Agreement shall be binding upon and inure to the benefit solely of the parties hereto and their permitted assigns and no other person shall be entitled to any rights or benefits hereunder. This Agreement may not be assigned by any party without the prior written consent of the other parties hereto; provided, however, that Lender may assign its rights hereunder (except insofar as it related to Winners Common Stock) but not its obligations hereunder without the prior written consent of Borrower. Nothing expressed or implied in this Agreement is intended to or shall be construed to confer upon or give to any person other than the parties hereto and their successors or permitted assigns any rights or remedies under or by reason of this Agreement. 8.6 Counterparts. This Agreement may be executed in any number of counterparts and shall become effective when executed by all of the parties hereto, notwithstanding the fact that all of them may not have executed the same counterpart. 8.7 Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 8.8 APPLICABLE LAW AND JURISDICTION. THE VALIDITY OF THIS AGREEMENT AND THE NOTE, THEIR CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE DETERMINED UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WIT THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. EACH PARTY HERETO AGREES THAT ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE NOTE SHALL BE BROUGHT AND LITIGATED ONLY IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF NEW YORK (IF SUCH COURT WILL ACCEPT JURISDICTION AND, IF NOT, THE COURTS OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF ONONDAGA, STATE OF NEW YORK) AND EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO PERSONAL JURISDICTION AND VENUE IN ANY SUCH COURT AND HEREBY WAIVES ANY CLAIM IT MAY HAVE THAT SUCH COURT IS AN INCONVENIENT FORUM FOR THE PURPOSES OF ANY SUCH SUIT, ACTION OR OTHER PROCEEDING. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS OF SUCH PARTY SPECIFIED IN SECTION 8.4 OF THIS AGREEMENT. 8.9 Limitation. Anything herein or in the Note to the contrary notwithstanding, no provision of this Agreement or the Note shall require the payment, or permit the collection, of interest to the extent that receipt of such payment by Lender would be contrary to the provisions of any applicable -17- law limiting the maximum rate of interest or the fees that may be charged or collected by Lender. 8.10 WAIVER OF CONSEQUENTIAL AND OTHER DAMAGES AND TRIAL BY JURY. EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE EXTENT PERMITTED BY APPLICABLE LAW) (i) ANY RIGHT TO OR CLAIM OF ANY CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES AND (ii) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT, THE NOTE OR ANY OTHER AGREEMENT OR DOCUMENT REFERRED TO HEREIN OR THEREIN AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ E.T. "Bud" Bennett -------------------------------------- Name: E.T. "Bud" Bennett Title: CEO MOUNTAINEER PARK, INC. By: /s/ Michael R. Dunn -------------------------------------- Name: Michael R. Dunn Title: Secretary and Co-Chairman WINNERS ENTERTAINMENT, INC. By: /s/ Michael R. Dunn -------------------------------------- Name: Michael R. Dunn Title: President -19- Exhibit A The following table indicates the date on which the indicated amounts will become available for borrowing: Commencing on June 28, 1994 $2.2 Million Commencing on August 1, 1994 $2.0 Million Commencing on September 1, 1994 $1.5 Million Commencing on October 1, 1994 $1.5 Million Commencing on November 1, 1994 $1.5 Million Commencing on December 1, 1994 $1.5 Million Exhibit B NOTE $10,200,000 June 27, 1994 FOR VALUE RECEIVED, MOUNTAINEER PARK, INC., a West Virginia corporation (the "Company"), hereby promises to pay, on July 1, 1998, to the order of Bennett Development & Management Corp. (the "Lender"), at the principal office of the Lender in Syracuse, New York, the principal sum of the lesser of TEN MILLION, TWO HUNDRED THOUSAND DOLLARS ($10,200,000) or the aggregate unpaid principal amount of the Loans made by the Lender to the Company pursuant to the Loan Agreement referred to below, which amount shall be indicated from time to time on the table attached hereto (provided, that no failure to make such a notation shall affect the obligations of the Company to repay its Loans outstanding from time to time made under the Loan Agreement), in lawful money of the United States, and to pay interest on the unpaid principal amount of the Loans from the date hereof, in like money and funds in accordance with the terms of the Loan Agreement. This Note is the Note referred to in the Construction Loan Agreement, dated as of June 27, 1994, among the Lender, the Company and Winners Entertainment, Inc. (together with all extensions, renewals, amendments, substitutions or replacements (the "Loan Agreement")), and is entitled to the security and benefits therein provided and provided in the Credit Line Deed of Trust dated as of June 27, 1994 between the Company, and Louis S. Southworth, II, and Ellen S. Cappellanti, as Trustees. All of the terms, conditions, covenants, representations and warranties of the Loan Agreement are incorporated herein by reference as if the same were fully set forth herein, including, but not limited to, the provisions thereof relating to the repayment of, prepayment of, and the acceleration of the maturity of, the indebtedness evidenced by this Note. All terms used herein as defined terms which are not defined herein but are defined in the Loan Agreement shall have the respective meanings herein as are given them in the Loan Agreement. Upon the occurrence of an Event of Default specified in the Loan Agreement, the principal of the Loans and accrued interest thereon may be declared to be and shall thereupon become, or may automatically become, forthwith due and payable, as provided in the Loan Agreement. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to the principles thereof regarding conflicts of laws. MOUNTAINEER PARK, INC. By: _____________________________________ Title: -2- NOTE Principal Principal Date of Amount Amount Repaid Balance Transaction Loaned or Prepaid Outstanding Entered By - ----------- --------- ------------- ----------- ---------- -3- EX-2 3 EXHIBIT 2 Construction Loan Agreement Amendment Construction Loan Agreement Amendment: dated as of September 27, 1994 among Bennett Management & Development Corp., a New York corporation ("Lender"), Mountaineer Park, Inc., a West Virginia Corporation ("Borrower"), and Winners Entertainment, Inc., a Delaware corporation and parent of Borrower ("Winners"). WHEREAS, Borrower and Lender desire to amend a Construction Loan Agreement executed by the parties on June 27, 1994 ("Agreement"); and WHEREAS, Article VIII, Section 8.1 Amendment and Waivers provides "Neither this Agreement, the Note, nor any terms hereof or thereof may be changed, waived, discharged or terminated without the prior written consent of the party against whom enforcement is sought."; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.1, Commitment, specifically and only Exhibit A the Funding Schedule; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.2, Note; Payment of Interest; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.4, Optional Prepayment of Loans; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.5, Repayment of Loans; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.6, Special Repayment Terms; and WHEREAS, Borrower and Lender desire to amend Article II, Section 2. 1, Grant of Common Stock to Lender; and WHEREAS, all other terms and conditions as set forth in the Agreement and the Note shall remain as originally executed. NOW, THEREFORE, in consideration of the premises and agreements herein contained, the parties, hereto, hereby agree as follows: (1) ARTICLE I, Section 1.1 Exhibit A ("The Funding Schedule") is amended in its entirety as follows: Previously Funded 2,600,000 November 4, 1994 3,100,000 December 2, 1994 1,500,000 January 6, 1994 1,500,000 February 3, 1994 1,500,000 (or within seven days of the Lottery Commission's approval of the Gamma Management Agreement, whichever is sooner) (2) ARTICLE I, Section 1.2, Note; Payment of Interest is amended in its entirety as follows: 1.2 Note; Payment of Interest. The Loans made by Lender shall be evidenced by a promissory note of Borrower, substantially in the form of Exhibit B hereto with appropriate insertions as to the date and principal amount of each Loan (the "Note"), payable to the order of Lender. The principal amount of the Loan shall bear interest at the rate of 12..5% per annum; provided, however, that (x) in the event that Borrower fail to make any payment of principal of or interest on the Loans when due (whether at the stated maturity, by acceleration or otherwise), any such overdue principal or interest amount shall bear interest at a rate of 14.5% per annum from the date of such non- payment until paid in full and (y) the interest rate shall be subject to increase in accordance with Sections 2.4(a) and 2.4(b). Interest shall be calculated on the basis of a 360-day year for the actual number of days lapsed. Interest shall be payable monthly in arrears on the last business day of each month commencing November 1994 or within seven (7) days of the approval of the West Virginia Lottery Commission, whichever is sooner. (3) ARTICLE I, Section 1.4, Optional Prepayment of Loans is amended in its entirety as follows: 1.4 Optional Prepayments of Loans. Borrower may at any time from time to time, prepay the Loans, in whole or in part, without premium or penalty upon one business day's notice to Lender specifying the date and amount of prepayment. Borrower and Lender agree that any partial prepayment shall be applied against the principal of the Loans in the order in which such Loans were made. -2- (4) ARTICLE I, Section 1.5, Repayment of Loans is amended in its entirety as follows: 1.5 Repayment of Loans. To the extent the Loans extended prior to August 18, 1994 are not prepaid in full on or prior to July 1, 1995 in accordance with Section 1.4 hereof, Borrower shall repay the outstanding principal amount of such Loans as of such date in 36 equal monthly installments on the last business day of each month commencing in July 1995. To the extent the Loans extended after August 18, 1994 are not prepaid in full on or prior to November 1, 1995 in accordance with Section 1.4 hereof, Borrower shall repay the outstanding principal amount of such Loans as of such date in 36 equal monthly installments on the last business day of each month commencing in November 1995. (5) ARTICLE I, Section 1.6, Special Repayment Terns is amended in its entirety as follows: 1.6 Special Repayment Terms. In the event that Gamma's management services under the management agreement are not approved by the West Virginia Lottery Commission by November 1, 1994, then notwithstanding any other provision of this agreement, Lender shall have no further obligation to make additional Loans under this agreement and Winner shall repay the principal amount of the Loans outstanding as of such date in 18 equal monthly installments on the last business day of each month, commencing November 1994. (6) ARTICLE II, Section 2. 1, Grant of Common Stock to Lender is amended by adding the following sentence to the end of such Section: In the event that Borrower sends Lender a valid Borrowing Notice and Lender fails to wire transfer such funds within ten business (10) days of receiving such, Lender shall not be entitled to any shares of Winners Common Stock under this Section II and shall immediately deliver to Winners any shares issued to Borrower by Winners pursuant hereto free and clear of all liens, claims and other encumbrances, in the form of certificates representing such shares, accompanied by appropriate stock powers duly executed or endorsed in blank with appropriate transfer tax stamps affixed. This Amendment is not intended to nor shall not alter or amend any other sections of the Construction Loan Agreement. Any terms not herein defined shall have the terms set forth in the Construction Loan Agreement. -3- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by the proper and duly authorized officers as of the day and year first written above. Bennett Management & Development Corp. By: /s/ Kevin Kuppel -------------------------------------- Name: Kevin Kuppel Title: Treasurer Mountaineer Park, Inc. By: /s/ Edson R. Arneault -------------------------------------- Name: Edson R. Arneault Title: Pres. Winners Entertainment, Inc. By: /s/ Michael R. Dunn -------------------------------------- Name: Michael R. Dunn Title: -4- EX-3 4 EXHIBIT 3 CONSTRUCTION LOAN AGREEMENT AMENDMENT Construction Loan Agreement Amendment dated December 7, 1994, among Bennett Management and Development Corp., a New York corporation ("Lender"), Mountaineer Park, Inc., a West Virginia corporation ("Borrower"), and Winners Entertainment, Inc., a Delaware corporation and parent of Borrower ("Winners"). WHEREAS, Borrower and Lender desire to amend a Construction Loan Agreement executed by the parties on June 27, 1994 ("Agreement"); and WHEREAS; Borrower and Lender desire to amend a Construction Loan Agreement Amendment executed by the parties on September 27, 1994; and WHEREAS, Borrower and Lender desire to amend Article I, Section 1.1, commitment, specifically and only Exhibit A the funding schedule; and WHEREAS, Borrower and Lender desire to amend Article III, Section 3.10 - Purpose of the Loans; and WHEREAS, all other terms and conditions as set forth in the Agreement and the Amendment and the Note shall remain as originally executed. NOW, THEREFORE, in consideration of the premises and agreements herein contained, the parties, hereto, hereby agree as follows: Article I, Section 1.1. Exhibit A ("the funding schedule") is amended in its entirety as follows: Lender shall be obligated to transfer funds within ten (10) business days of receiving a valid borrowing notice. A preliminary draw schedule will be prepared upon completion of the budgets for the next series of renovations with such draws being taken on an "as needed" basis consistent with the construction schedule. That document will form the basis of the funding schedule. Article III, Section 3.10, Purpose of Loans is amended in its entirety as follows: 3.10 Purpose of Loans. The proceeds of the loan will be used by Borrower only to finance operations, the refurbishment of Mountaineer Race Track and Resort in accordance with plans which have been approved by Gamma International, Ltd., as such plans may be revised from time to time in accordance with the approval of Gamma International, Ltd., to pay up to Two Hundred Thousand Dollars ($200,000) of investment banking fees, to loan up to Seven Hundred Thousand Dollars ($700,000) to Winners which loan must be repaid to Borrower no later than April 15, 1995, and to fund certain operating deficiencies as approved by Gamma International. This amendment is not intended to nor shall not alter or amend any other Sections of the Construction Loan Agreement. Any terms not herein defined shall have the term set forth in the Construction Loan Agreement. IN WITNESS HEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by the proper and duly authorized officers as of the day and year first written above. BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ Patrick R. Bennett -------------------------------------- Name: Title: MOUNTAINEER PARK, INC. By: /s/ Michael R. Dunn -------------------------------------- Name: Michael R. Dunn Title: Chairman WINNERS ENTERTAINMENT, INC. By: /s/ Michael R. Dunn -------------------------------------- Name: Michael R. Dunn Title: Chairman -2- EX-4 5 EXHIBIT 4 CONSTRUCTION LOAN AGREEMENT AMENDMENT Construction Loan Agreement Amendment dated February 10, 1995, among Bennett Management and Development Corp., a New York corporation ("Lender"), Mountaineer Park, Inc., a West Virginia corporation ("Borrower"), and Winners Entertainment, Inc., a Delaware corporation and parent of Borrower ("Winners"). WHEREAS, Borrower and Lender desire to amend a Construction Loan Agreement executed by the parties on June 27, 1994 as amended on September 27, 1994 and December 7, 1994 ("Agreement"); and WHEREAS, Borrower and Lender desire to amend Article III, Section 3.10 - Purpose of the Loans; and WHEREAS, all other terms and conditions as set forth in the Agreement and the Amendment and the Note shall remain as originally executed. NOW, THEREFORE, in consideration of the premises and agreements herein contained, the parties, hereto, hereby agree as follows: 1. Article III, Section 3.10, Purpose of Loans is amended in its entirety as follows: 3.10 Purpose of Loans. The proceeds of the loan will be used by Borrower only to (i) finance operations, (ii) refurbish Mountaineer Race Track and Resort in accordance with plans which have been approved by AGEL, as such plans maybe revised from time to time in accordance with the approval of AGEL, (iii) pay up to Two Hundred Thousand Dollars ($200,000) of investment banking fees, (iv) loan up to Seven Hundred Thousand Dollars ($700,000) to Winners to fund certain operating deficiencies as approved by AGEL in its sole discretion which loan must be repaid to Borrower no later than April 15, 1995, and (v) loan up to Eight Hundred Thousand Dollars ($800,000) to Winners to fund certain operating deficiencies as approved by AGEL in its sole discretion, which loan must be repaid to Borrower no later then June 15, 1995. This amendment is not intended to nor shall not alter or amend any other Sections of the Agreement. Any terms not herein defined shall have the term set forth in the Agreement. IN WITNESS HEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by the proper and duly authorized officers as of the day and year first written above. BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ Patrick R. Bennett -------------------------------- Name: Title: MOUNTAINEER PARK, INC. By: /s/ Michael R. Dunn -------------------------------- Name: Michael R. Dunn Title: Chairman of the Board WINNERS ENTERTAINMENT, INC. By: /s/ Michael R. Dunn -------------------------------- Name: Michael R. Dunn Title: Chairman of the Board -2- EX-5 6 EXHIBIT 5 Bennett Management & Development Corporation April 10, 1995 Mr. Edson R. Arneault, President Mr. Michael R. Dunn, President Mountaineer Park, Inc. Winners Entertainment, Inc. State Route 2 South 30448 Rancho Viejo Road, Suite 110 Chester, WV 26034 San Juan Capistrano, CA 92675 RE: AMENDMENT TO CONSTRUCTION LOAN AGREEMENT DATED JUNE 27,1994 ("AGREEMENT"), AS AMENDED SEPTEMBER 27,1994, DECEMBER 7,1994 AND FEBRUARY 10, 1995 ("AMENDMENT(S)") Dear Messrs. Arneault and Dunn: In response to the request of the Mountaineer Racetrack & Resort Management Committee by letter from Thomas K Russell dated March 31, 1995, Bennett Management & Development Corporation ("Bennett") hereby agrees to extend certain deadlines contained in the Agreement and Amendments, as follows: 1). The April 15, 1995 due date for repayment by Winners Entertainment, Inc. ("Winners") of the $700,000 Loan from Mountaineer Park, Inc. ("Mountaineer") authorized pursuant to the December 7, 1994 and February 10, 1995 Amendments shall be extended to October 1, 1995; 2). The June 15, 1995 due date for repayment of the $800,000 in working capital expenditures by Mountaineer authorized pursuant to the February 10, 1995 Amendment, shall be extended to October 1, 1995, and said February 10, 1995 Amendment shall be further amended to state that the obligor for said $800,000 is Mountaineer and that Winners shall serve only as guarantor for said amount; and 3). As a result of the extension of the payment due for Loans under the Agreement from July 1, 1995 to November 1, 1995 pursuant to Section 1.5 of the September 27, 1994 Amendment, the payment due date of October 1, 1995 and the issuance date for additional shares on October 2, 1995 contained in Section 2.2(a) of the Agreement, shall be extended to November 1, 1995 and November 2, 1995, respectively. Bennett acknowledges that Mountaineer and Winners will rely upon this amendment for purposes of establishing construction and operating budgets at Mountaineer Racetrack & Resort and for reports required by the West Virginia Lottery Commission, the State agency responsible for governing such activities. This amendment is not intended nor shall it alter or amend any other Sections of the Agreement or Amendments. Please execute your acceptance and acknowledgment of these Amendments by your signature below. Very truly yours, BENNETT MANAGEMENT & DEVELOPMENT CORPORATION /s/ Patrick R. Bennett ------------------------------------------ PATRICK R. BENNETT Chief Financial Officer PRB/ld MOUNTAINEER PARK, INC. WINNERS ENTERTAINMENT, INC. By: /s/ Edson R. Arneault By: /s/ Michael R. Dunn ---------------------------- ------------------------------------- Edson r. Arneault, President Michael R. Dunn, President -2- EX-6 7 EXHIBIT 6 CONSTRUCTION LOAN AGREEMENT AMENDMENT V Construction Loan Agreement Amendment, dated July 7, 1995 among Bennett Management and Development Corp., a New York Corporation ("Lender"), Mountaineer Park, Inc., a West Virginia Corporation ("Borrower"), and Winners Entertainment, Inc., a Delaware Corporation and parent of Borrower ("Winners"). WHEREAS, Borrower and Lender desire to amend the construction loan agreement executed by the parties on June 27, 1994 and further amended on September 27, 1994, December 7, 1994, February 10, 1995, and April 10, 1995 ("Agreement"); and WHEREAS, Lender and Borrower wish to complete the construction loan draws by loaning the final $803,333.34 to Borrower and WHEREAS, Lender and Borrower want to clarify and modify the granting of common stock by the Borrower to the Lender and WHEREAS, Lender desires to change the amortization start date on the original $2.6 Million of borrowings NOW, THEREFORE, in consideration of the premises and agreements herein contained, the parties hereto, hereby agree as follows: 1. ARTICLE I, Section 1.1 Commitment is amended in its entirety as follows: Lender hereby accepts as of June 30, 1995 Borrower's offset of the interest payment due June 30, 1995 in the amount of $96,666.66 and agrees that such payment was timely made in full on that date. Lender acknowledges that as of this date, there has not been a default or event of default by either Borrower or Winners. Lender has loaned $9.3 Million as of July 7, 1994 and agrees to loan the remaining $803,333.34 to Borrower no later than two business days after the signing by all parties of this construction loan agreement amendment. Lender and Borrower agree that Lender's obligation to loan $10.2 Million would be satisfied in full in a satisfactory manner and Lender is entitled to all of its rights including interest rates, common stock grants etc. as set forth under the AGREEMENT unless amended herein. 2. ARTICLE I, Section 1.3 Procedure for Borrowing is amended in its entirety as follows: Borrower has previously furnished sufficient information to draw down $9.3 Million from the Lender. Borrower would not be required to furnish any additional information to borrow the remaining $803,333.34 other than described in the amended Section 1.1 above. 3. ARTICLE I, Section 1.5 Repayment of Loans is amended in its entirety as follows: To the extent that loans are not prepaid in full on or prior to November 1, 1995, in accordance with Section 1.4 hereof, Borrower shall repay the outstanding principal amount of the loans as of such date in 36 equal monthly installments on the last business day of each month commencing on November 1, 1995. 4. ARTICLE II, Section 2.1, Grant of Common Stock to Lender is amended in its entirety as follows: In order to induce Lender to enter into this agreement to make the loans, Winner hereby agrees to issue to Lender, from time to time, shares of its common stock, par value $.00001 per share ("Winners Common Stock"), as follows. For each one dollar of loans made hereunder, Lender shall be entitled to receive .05 of a share of Winners Common Stock subject to adjustment by Winners in an equitable manner in the event of a stock split, combination, reclassification or similar event with respect to Winners Common Stock. Winners has previously issued 465,000 shares of Winners Common Stock to Lender which has been earned by Lender from the funding of $9.3 Million. Winners further agrees to issue an additional 45,000 shares of Winners Common Stock substantially contemporaneously with a making of the remaining $803,333.34 loan from Lender in accordance with the terms of this agreement. Provided, however, that if Lender fails to wire transfer such funds in accordance with Section 1 of this Amendment, then Lender shall not be entitled to any shares of Winners common stock under this Section II and shall immediately deliver to Winners any shares previously issued to Lender by Winners pursuant hereto free and clear of all liens, claims and other encumbrances, in the form of certificates representing such shares, accompanied by appropriate stock powers duly executed or endorsed in blank with appropriate transfer tax stamps affixed. 5. ARTICLE II, Section 2.2 Issuance of Additional Shares is amended in its entirety as follows: Winners agrees to issue an additional 1,020,000 shares of Winners Common Stock to Lender in return for which Lender agrees to delete Section 2.6 -2- in its entirety. This issuance will take place contemporaneously with the signing of this agreement and Winners will provide evidence of this issuance at the time that this agreement is ratified. Lender further agrees that it would not be entitled to any additional shares from Winners in any respect except for shares to be earned if Borrower has not prepaid the loss by January 2, 1997 as set forth below. In the event the loans have been prepaid in full by October 1, 1995, then Winners shall be entitled to the return of 510,000 shares from Lender. Notwithstanding the provisions of Section 4.1(b) to the contrary, the additional shares will be divided into certificates bearing legends as follows: One certificate for 240,000 shares will bear the following legends: THE SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN OR RIGHT WITH RESPECT THERETO MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF THE LOAN AGREEMENT DATED AS OF JUNE 27, 1994 AMONG BENNETT MANAGEMENT & DEVELOPMENT CORP., MOUNTAINEER PARK, INC., AND WINNERS ENTERTAINMENT, INC., AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH WINNERS ENTERTAINMENT, INC. A TRANSACTION IN VIOLATION OF SUCH LOAN AGREEMENT WILL BE INEFFECTIVE. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO WINNERS ENTERTAINMENT, INC. STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. One certificate for 780,000 shares will bear the following legends: THE SALE, TRANSFER, ASSIGNMENT, OR HYPOTHECATION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY INTEREST THEREIN OR RIGHT WITH RESPECT THERETO MAY BE MADE ONLY IN ACCORDANCE WITH THE TERMS OF THE LOAN AGREEMENT DATED AS OF JUNE 27, 1994 AMONG BENNETT MANAGEMENT & DEVELOPMENT CORP., MOUNTAINEER PARK, INC., AND WINNERS ENTERTAINMENT, INC., AS IT -3- MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH WINNERS ENTERTAINMENT, INC. A TRANSACTION IN VIOLATION OF SUCH LOAN AGREEMENT WILL BE INEFFECTIVE. UNDER SUCH LOAN AGREEMENT, THE HOLDER OF THESE SECURITIES HAS GRANTED THE BOARD OF DIRECTORS OF WINNERS ENTERTAINMENT, INC. COMPLETELY AND EXCLUSIVELY THE VOTING RIGHTS WITH RESPECT TO THE SECURITIES REPRESENTED BY THIS CERTIFICATE. SUCH GRANT IS IRREVOCABLE EXCEPT IN CERTAIN CIRCUMSTANCES SET FORTH IN THE LOAN AGREEMENT. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR WINNERS ENTERTAINMENT, INC. RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO WINNERS ENTERTAINMENT, INC. STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. In the event that the loans have not been prepaid in full by January 1, 1997, Winners shall issue to Lender on January 2, 1997 the number of Winners shares times the average market price which would equal $2.5 Million. For purposes of this agreement the "average market price" shall be deemed to be the average of the current market prices for the 20 consecutive trading days prior to January 2, 1997. The number of shares issued would be calculated by dividing $2.5 Million by the average market price of Winners Common Stock and in rounding to the nearest whole share. 6. ARTICLE II, Section 2.5 Call is deleted in its entirety. 7. ARTICLE II, Section 2.6 Price Guarantee is deleted in its entirety. 8. ARTICLE II, Section 2.7 Voting Control (a new section) is added to the agreement as follows: As long as Lender or any affiliates shall own 5% or more of Winners Common Stock as granted to Lender under the Agreement and amendments, Lender hereby grants full voting authority in these common shares owned to the Winners Board of Directors completely and exclusively. This grant of voting rights is irrevocable for as long as Lender or an affiliate owns the shares and Lender would be responsible for informing Winners in writing upon any sale of shares for which voting control would revert back to the purchasing shareholder. Lender hereby covenants that neither it nor any of its affiliates will acquire any of -4- Winners' equity or convertible debt securities, either in the open market or in private transactions to the extent such acquisitions would result (or could result upon conversion of debt securities) in Lender owning in the aggregate more than 5% of any class of Winners' securities as to which the voting rights have not been granted to the Winners board. 9. ARTICLE III, Section 5.5 Access to Information is amended by adding the following sentence to the end of such section: Borrower will supply Lender with monthly financial statements and quarterly projections of operations completed on a timely basis. This amendment is not intended to alter or amend any other sections of the Agreement. Any terms not herein defined shall have the terms set forth in the Agreement. If any provisions of the agreement or any amendments contradict the terms herein, then the terms herein shall control. -5- IN WITNESS HEREOF, the parties hereto have caused this amendment to be duly executed and delivered by the proper and duly authorized officers of the day and your first written above. BENNETT MANAGEMENT AND DEVELOPMENT CORP. By: /s/ Patrick R. Bennett --------------------------------- Name: Patrick R. Bennett Title: CFO MOUNTAINEER PARK, INC. By: /s/ Edson R. Arneault --------------------------------- Name: Edson R. Arneault Title: President WINNERS ENTERTAINMENT, INC. By: /s/ Edson R. Arneault --------------------------------- Name: Edson R. Arneault Title: President EX-7 8 EXHIBIT 7 Bennett Management & Development Corporation October 31, 1995 Mountaineer Park, Inc. (Borrower) c/o Winners Entertainment, Inc. 30448 Rancho Viejo Road, Suite 110 San Juan Capistrano, CA 92675 RE: Credit in the principal amount of $10,200,000 extended by Bennett Management & Development Corp. (the "Loan") pursuant to a certain June 27, 1994 Construction Loan Agreement by and among Bennett Management & Development Corp., Lender, Mountaineer Park, Inc., Borrower, and Winners Entertainment, Inc., Winners, as amended Gentlemen: For a period of thirty days from the date hereof, Bennett Management & Development Corp. will pursuant to section 7.2 waive any Event of Default during such period and will not in any way during such period (a) seek repayment of the Loan from Mountaineer Park, Inc., or Winners Entertainment, Inc.; (b) seek to enforce the promissory note made by Mountaineer Park, Inc., evidencing the loan (including its rights under the Credit Line Deed of Trust securing the same); or, (c) claim that an Event of Default (as that term is defined in the Construction Loan Agreement) has occurred. The foregoing forbearance is provided upon Bennett Management & Development Corp.'s understanding and upon the condition that it will receive an interest-only payment (at the interest rate of 12.5%) for the month of October, in the amount of $109,791.67 on or before November 10, 1995. Very truly yours, BENNETT MANAGEMENT & DEVELOPMENT CORPORATION /s/ Stewart Weisman ------------------------------------ STEWART WEISMAN Acting Secretary and General Counsel SW/ld cc: Edson R. Arneault EX-8 9 EXHIBIT 8 November 9, 1995 Mr. Kevin J. Kuppel Treasurer Bennett Management & Development Corp. Two Clinton Square Syracuse, NY 13202 Re: Construction Loan Agreement between Bennett Management & Development Corp., Mountaineer Park, Inc. and Winner's Entertainment, Inc., dated June 24, 1994, as amended (the "Loan") Dear Mr. Kuppel: This letter sets forth the agreement between Bennett Management & Development Corp., Mountaineer Park, Inc. and Winner's Entertainment, Inc. that if: (a) the Loan from Bennett Management & Development Corp. to Mountaineer Park, Inc. in the principal amount of $10.2 million is paid in full by December 1, 1995, and (b) Mountaineer Park, Inc. and Winner's Entertainment, Inc. deliver to Bennett Management & Development Corp. a broad form general release of all liability arising out of or related to the Loan, Bennett Management & Development Corp. will transfer to Winner's Entertainment, Inc. all of its current and future rights to any shareholder interest in Winner's Entertainment, Inc. at no additional cost to Winner's Entertainment, Inc., and a duly executed release of the deed of trust. If the foregoing correctly sets forth our agreement, please sign the enclosed copy of this letter and return the same to me. Very truly yours, WINNER'S ENTERTAINMENT, INC. By /s/ Edson R. Arneault -------------------------------------- Its President --------------------------------- MOUNTAINEER PARK, INC. By /s/ Edson R. Arneault -------------------------------------- Its President -------------------------------- Agreed to this ____ day of November, 1995: BENNETT MANAGEMENT & DEVELOPMENT CORP. By /s/ Patrick R. Bennett -------------------------------------- Its CFO -------------------------------- -2- EX-9 10 EXHIBIT 9 November 28, 1995 Mr. Edson R. Arneault, President Winner's Entertainment, Inc. Route 2 South, P.O. Box 358 Chester, WV 26034 RE: CONSTRUCTION LOAN AGREEMENT BETWEEN BENNETT MANAGEMENT & DEVELOPMENT CORP., MOUNTAINEER PARK, INC. AND WINNER'S ENTERTAINMENT, INC., DATED JUNE 24, 1994, AS AMENDED AND FURTHER MODIFIED ON NOVEMBER 9, 1995 (THE "LOAN") Dear Mr. Arneault: You have asked Bennett Management & Development Corp. ("BMDC"), to further extend the repayment date in order to further assist you with your contemplated financing. This letter sets forth the agreement between BMDC, Mountaineer Park, Inc. and Winner's Entertainment, Inc. that if (a) the Loan from BMDC to Mountaineer Park, Inc. in the principal amount of $10.2 Million plus all accrued and unpaid interest** is paid in full by December 10, 1995, and (b) Mountaineer Park, Inc. and Winner's Entertainment, Inc. deliver to BMDC a broad form general release of all liability arising out of or related to the Loan, BMDC will transfer to Winner's Entertainment, Inc. all of its current and future rights to any shareholder interest in Winner's Entertainment, Inc. at no additional cost to Winner's Entertainment, Inc., and a duly executed release of the deed of trust. If the foregoing correctly sets forth our agreement, please sign the enclosed copy of this letter and return the same to me. Very truly yours, BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ Patrick R. Bennett ------------------------------------- Its CFO -------------------------------- AGREED TO: WINNER'S ENTERTAINMENT, INC. MOUNTAINEER PARK, INC. By: /s/ Edson R. Arneault By: /s/ Edson R. Arneault ---------------------------- ------------------------------ Title: Pres. Title: Pres. ------------------------- --------------------------- ** at an interest rate of 12.5% per annum -2- EX-10 11 EXHIBIT 10 MOUNTAINEER PARK, INC. Route 2, South P. 0. Box 358 Chester, West Virginia 26034 January 12, 1996 Patrick R. Bennett, CFO Bennett Management & Development Corp. Two Clinton Square Syracuse, NY 13202 RE: Construction Loan Agreement between Bennett Management & Development Corp., Mountaineer Park, Inc. and Winner's Entertainment, Inc. dated June 24, 1994, as amended (the "Loan") Dear Mr. Bennett: This letter sets forth the recent agreement between Bennett Management & Development Corp., Mountaineer Park, Inc. and Winner's Entertainment, Inc., relative to the Loan and Mountaineer Park, Inc.'s need for more time to commence Loan amortization payments. The undersigned, intending to be legally bound, agree: 1. With the understanding of both parties that Bennett Management & Development Corp. never intended to be a permanent lender but only to act as a construction lender Mountaineer Park, Inc. and Winner's Entertainment, Inc. will cooperate with and assist Bennett Management & Development Corp. in its continuing efforts to sell the Loan to some third party and will extend such cooperation and assistance so long as such does not unreasonably interfere with Mountaineer Park, Inc.'s day-to-day operations or unreasonably infringe upon Mountaineer Park, Inc.'s need to protect its proprietary information. 2. The Loan interest payment that would have been due on November 30, 1995, but for Bennett's prior extension agreements, shall be paid on or before January 16, 1996. The Loan interest payment that would have been due on December 31, 1995, but for Bennett's prior extension agreements, shall be paid on or before February 15, 1996. 3. The Loan payments due on January 31, February 29, March 31, and April 30 of 1996 shall be payments of interest only and shall be paid on or before each of said dates. 4. In the event all amounts owing to Bennett Management & Development Corp., or its successors or assigns (the "Lender"), pursuant to the Loan documents have not been paid in full on or before May 31, 1996, then in such event, principal and interest payments based on the 36-month amortization specified in the Loan documents shall commence on May 31, 1996, and shall be due and paid monthly on the last day of each month thereafter for a total of 36 months. Be assured that Lender will not be again requested by Mountaineer Park, Inc. to delay the commencement of payments on the principal. 5. The interest rate applicable to the Loan shall be 12.5%, provided, however, that in the event any payment amounts due and owing under the Loan, as altered by this letter agreement, are delinquent, the interest rate applicable on the entire outstanding principal for as long as such amounts remain delinquent shall be the rate specified in paragraph 2.4 of the Construction Loan Agreement, if said paragraph 2.4 rate would then apply pursuant to its own terms. It is further agreed that the enforcement of such "default rate" shall not preclude the Lender from exercising any other rights or remedies available to it under the Loan documents by reason of such default. 6. In the event amounts owing to Lender pursuant to the Loan are not paid in full on or before April 30, 1996, Mountaineer Park, Inc. shall, prior to May 31, 1996, extend to Lender a security interest in all of its assets except for (i) those assets already covered by the Loan deed of trust, and (ii) those assets which are covered by a prior lien accompanied by covenants precluding a junior lienholder and for which consent for a junior lien is unobtainable after a good faith effort by Mountaineer Park, Inc., to secure same. Such security interest will, to the extent not precluded by law or by a prior non-consenting lienholder, include the right upon default for Lender to be in receipt of funds otherwise flowing to Mountaineer Park, Inc., and the discretion in favor of Lender to apply such funds to the payment of sums due and owing Lender under the Loan documents. 7. Mountaineer Park, Inc. agrees that between the date hereof and the date it provides the additional collateral as contemplated by paragraph 6 above, it will not grant or create a security interest in such additional collateral in favor of any other person or entity (except for purchase money security interests) unless Lender, as a part of such transaction, has been paid in full all amounts owing to it under the Loan documents. 8. In the event some action is required to inform or seek approval of this letter agreement from the West Virginia Lottery Commission or the West Virginia Racing Commission or any other West Virginia regulatory agency, then in such event, Mountaineer Park, Inc. shall be solely responsible to accomplish such and shall do so in such manner and upon such schedule as Mountaineer Park, Inc. deems appropriate. 9. Except as amended, modified or altered by this letter agreement, the documents evidencing the Loan and all terms and provisions thereof shall remain in full force and effect. Additionally, it is agreed that nothing contained in the Mutual Release Agreement described in paragraph 11 below will preclude Lender from pursuing and enforcing its remedies under the Loan documents upon an occurrence of an event of default as defined in Article VII of the Construction Loan Agreement. Additionally, it is agreed that the benefits and obligations existing by reason of a certain November 9, 1995 letter agreement by and among Winner's Entertainment, Inc, Mountaineer Park, Inc. and Bennett Management & Development Corp. (and being a letter addressed to Kevin J. Kuppel) will be at an end and will forever cease and terminate as of the 16th day of January, 1996. 10. In the event Lender shall initiate a foreclosure under the Loan deed of trust based upon a failure to pay amounts owing to Lender pursuant to the Loan documents, as altered by this letter agreement, then in such event no action will be taken by Mountaineer Park, Inc., or Winners Entertainment, Inc. by legal proceedings or otherwise to delay, hinder or interrupt the Lender in its foreclosure or other efforts of enforcing its rights under said deed of trust. It is understood that this covenant would not preclude and is not intended to preclude Mountaineer Park, Inc. or Winners Entertainment, Inc. from seeking the protections and benefits existing through federal bankruptcy laws, if it should elect to do so. 11. As a part of the consideration for the benefits hereof, the Mutual Release Agreement dated January 12, 1996, a copy of which is attached hereto marked Exhibit A, shall be agreed to, executed and delivered by Mountaineer Park, Inc., Winners Entertainment, Inc., Bennett Management & Development Corp., and The Bennett Funding Group, Inc. If the foregoing correctly sets forth our agreement, please cause Bennett Management & Development Co. to sign the enclosed copy of this letter and return the same to me. Very truly yours, WINNERS ENTERTAINMENT, INC. By: /s/ Edson R. Arneault ------------------------------------------ Its: Pres. ------------------------------------------ MOUNTAINEER PARK, INC. By: /s/ Edson R. Arneault ------------------------------------------ Its: Pres. ------------------------------------------ AGREED to as of the 12th day of January, 1996. BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ Patrick R. Bennett ------------------------------------------ Its: CFO ------------------------------------------ Letter Agreement EXHIBIT "A" MUTUAL RELEASE AGREEMENT THE RELEASE EXTENDED BY MOUNTAINEER/WINNERS: The undersigned, Mountaineer Park, Inc., and Winner's Entertainment, Inc. (herein sometimes referred to collectively as "Mountaineer/Winners"), for and in consideration of the execution and delivery by Bennett Management & Development Corp. and The Bennett Funding Group, Inc. of this Mutual Release Agreement, and for other good and valuable consideration, including, but not limited to, $100.00 cash in hand paid by Bennett Management & Development Corp. and The Bennett Funding Group, Inc. to Mountaineer Park, Inc. and Winner's Entertainment, Inc., the receipt and sufficiency of all of which are hereby acknowledged, and subject to the limitations hereinafter set forth, hereby RELEASE and FOREVER DISCHARGE Bennett Management & Development Corp., and The Bennett Funding Group, Inc., and their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, subsidiaries, and each and every other corporate or other type entity affiliated directly or indirectly with The Bennett Funding Group, Inc. ("Bennett affiliated entities"), and also their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, of and from any and all claims, suits and causes of action of whatsoever kind or character Mountaineer/Winners, or either of them, now has or may hereafter have, by reason of any damages, losses or expenses incurred or to be incurred and of whatever kind or character by the undersigned Mountaineer Park, Inc. or Winner's Entertainment, Inc., arising from or growing out of or in any way related to (i) the borrower lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp., or (ii) the relationships between or among any of the undersigned or any of the other parties released by this or the following paragraph ("other relationships") arising by reason of or growing out of or in any way related to said borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp. THE RELEASE EXTENDED BY BENNETT/BENNETT: The undersigned, Bennett: Management & Development Corp. and The Bennett Funding Group, Inc. (herein sometimes referred to collectively as "Bennett/Bennett"), for and in consideration of the execution and delivery by Mountaineer Park, Inc. and Winner's Entertainment, Inc., of this Mutual Release Agreement, and for other good and valuable consideration, including, but not limited to, $100.00 cash in hand paid by Mountaineer Park, Inc. and Winner's Entertainment, Inc. to Bennett Management & Development Corp. and to The Bennett Funding Group, Inc., the receipt and sufficiency of all of which are hereby acknowledged, and subject to the limitations hereinafter set forth, hereby RELEASE and FOREVER DISCHARGE Mountaineer Park, Inc. and Winner's Entertainment, Inc., and their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, subsidiaries, and each and every other corporate or other type entity affiliated directly or indirectly with Winner's Entertainment, Inc. ("Winner's affiliated entities"), and also their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, of and from any and all claims, suits and causes of action of whatsoever kind or character Bennett/Bennett, or either of them, now has or may hereafter have, by reason of any damages, losses or expenses incurred or to be incurred and of whatever kind or character by the undersigned Bennett Management & Development Corp. or The Bennett Funding Group, Inc., arising from or growing out of or in any way related to (i) the borrower- lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp., or (ii) the relationships between or among any of the undersigned or any of the other parties released by this or the preceding paragraph ("other relationships") arising by reason of or growing out of or in any way related to said borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp. LIMITATIONS: By way of clarification, if needed, the undersigned declare it to be their understanding and intentions that whether or not the said borrower-lender relationship is ended on or before January 15, 1996, the acts and omissions of the undersigned, or any of them, in the performance of their obligations under or related to the loan documents evidencing said borrower-lender relationship occurring prior to January 15, 1996, shall never be or become the basis of (or a part of the basis of) a claim, suit or cause of action by or against any of the undersigned. However, it is agreed that the releases hereby extended will not preclude a claim, suit or cause of action by any of the undersigned, nor an enforcement of remedies available to Bennett Management & Development Corp. (or its successors or assigns) under said loan documents, so long as such claim, suit, cause of action or enforcement of remedies is based solely upon a breach of obligation, or breach of duty, or failure to pay or failure to perform occurring on or after January 15, 1996 (e.g., the failure of Mountaineer Park, Inc. to timely tender the January 15, 1996 interest payment would be a failure for which Bennett Management & Development Corp. could pursue a claim, suit, cause of action or an enforcement of its remedies under said loan documents). Mountaineer/Winners understand and agree that the aforesaid claims hereby released by them include, but are not limited to, any claims and possible claims stated in, implied by or inferred from (i) the content of a certain letter dated September 25, 1995, from Mountaineer Park, Inc. to Bennett Management & Development Corp. (signed by Edson R. Arneault and addressed to Kevin J. Kuppel) , and (ii) the content of a certain letter dated September 6, 1995, from Mountaineer Park, Inc. to Bennett Management & Development Corp. (also, signed by Edson R. Arneault and addressed to Kevin J. Kuppel). Mountaineer/Winners further understand and agree that the aforesaid Bennett affiliated entities hereby released include, but are not limited to, American Gaming & Entertainment, Inc., Gamma of West Virginia, Inc., and Gamma International, Ltd., insofar as claims, suits and causes of action by the undersigned would relate directly or indirectly to the loan which is the basis of the aforesaid borrower-lender relationship. The undersigned hereby declare that the terms of this Release have been completely read and are fully understood and voluntarily accepted for the purpose of making a full anti final compromise, adjustment and settlement, subject to the above-stated limitations, of any and all claims, disputed or otherwise, known or unknown, discovered or not discovered, on account of said borrower-lender relationship or said other relationships and for the express purpose of precluding forever, subject to the above-stated limitations, any further or additional claims, demands or suits against any and all entities and persons named or referred to herein as a released party, arising out of the aforesaid borrower lender relationships or said other relationships. The undersigned understand and agree that the aforesaid payments of cash and execution and delivery of this Mutual Release Agreement were made by way of settlement and that liability for any claims hereby released have been and are specifically denied by the parties released hereby. The undersigned represent and warrant that the terms hereof were reached by them after full and complete opportunity to consult with counsel regarding the settlement and the effect of this release; that they execute this release voluntarily, freely, without compulsion or duress and mindful that it has legal consequences precluding any further action, subject to the above stated limitations, on any claim they have or might have as to said borrower-lender relationship or said other relationships against the parties released; and that no person has made any promise or given any inducement whatsoever to encourage them to make this settlement other than the considerations above recited; and, that (i) no limitation or restriction exists as to the power or the authority of the undersigned to execute this release, (ii) the persons executing same on behalf of the undersigned have been duly authorized so to do, and (iii) this release is valid and binding and the provisions hereof are enforceable against the undersigned in accordance with its terms. This Mutual Release Agreement may be executed in any number of counterparts, each of which shall, for all purposes, be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. WITNESS the following signatures as of the 12th day of January, 1996. MOUNTAINEER PARK, INC. By: --------------------------------- Its: - ---------------------------- -------------------------------- Witness WINNER'S ENTERTAINMENT, INC. By: --------------------------------- Its: - ---------------------------- -------------------------------- Witness BENNETT MANAGEMENT & DEVELOPMENT CORP. By: --------------------------------- Its: - ---------------------------- -------------------------------- Witness THE BENNETT FUNDING GROUP, INC. By: --------------------------------- Its: - ---------------------------- -------------------------------- Witness EX-11 12 EXHIBIT 11 AMENDMENT OF CONSTRUCTION LOAN AGREEMENT This Agreement, entered this 19th day of September, 1996, by and between Winners Entertainment, Inc. and its wholly owned subsidiary Mountaineer Park, Inc. ("WINS/MPI") and Richard C. Breeden, solely in his official capacity as trustee of the estate of Bennett Management and Development Corp. and Bennett Funding Group (the "Trustee"). WHEREAS, MPI as borrower, WINS as guarantor, and Bennett Management and Development Corp. ("BMDC") as lender entered a Construction Loan Agreement dated as of June 27, 1994, which was amended by agreements dated September 27, 1994, December 7, 1994, February 10, 1995, April 10, 1995, and July 7, 1995, and certain repayment terms of which were extended by agreements dated October 31, 1995, November 28, 1995, and January 12, 1996 (the "Amended Loan Agreement"); and WHEREAS, MPI borrowed from BMDC in the aggregate $10.2 million principally for renovations at the Mountaineer Racetrack and Gaming Resort located in Chester, Hancock County, West Virginia; and WHEREAS, the loans made pursuant to the Amended Loan Agreement are evidenced by a Promissory Note dated June 28, 1994 and are secured by (i) the real estate and improvements constituting the Mountaineer Racetrack and Gaming Resort pursuant to a Credit Line Deed of Trust made June 27, 1994, which is of record in Hancock County, West Virginia; and (ii) pursuant to the agreement of January 12, 1996, certain personalty reflected by a UCC-1 Financing Statement dated July 2, 1996, which is of record in Charleston, West Virginia; and WHEREAS, pursuant to the Amended Loan Agreement MPI was obligated to make payments of interest only through April of 1996 and since May of 1996 has been obligated to make payments of principal and interest on a thirty-six (36) month schedule of amortization and has met all of its obligations with respect to such payments through and including the payment that became due on August 31, 1996; and WHEREAS, pursuant to the Amended Loan Agreement WINS was obligated to issue BMDC in the aggregate 1,530,000 shares of WINS common stock and did in fact issue and deliver such shares (1,125,000 of which were mistakenly issued in the name of Bennett Funding Group) (the "Shares"); and WHEREAS, on July 1, 1996, MPI and WINS filed an adversary proceeding against BMDC in the United States Bankruptcy Court for the Northern District of New York, seeking compensatory and punitive damages, recoupment and setoff, and other equitable relief, including declaratory and injunctive relief for lender liability (the "Litigation"), and alleging, among other things, that the conduct of BMDC had impaired WINS' and MPI's ability to refinance the Amended Loan Agreement prior to the commencement of the principal payments; and WHEREAS, the Trustee desires to obtain the voluntary dismissal of the Litigation in order to conserve the resources of the estate of BMDC; and WHEREAS, in order to realize such cost savings, as well as to enhance the value of the Shares, the Trustee is willing, subject to (i) the approval of the United States Bankruptcy Court for the Northern District of New York (the "Court") and (ii) the terms and conditions set forth below, to make the accommodations set forth below: NOW THEREFORE, in consideration of the mutual promises contained herein, the adequacy and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Bankruptcy Court Approval. The parties hereto acknowledge that this Agreement is expressly subject to the approval of the Court, upon application to be made by the Trustee upon proper notice to BMDC's creditors. The Trustee shall use his best efforts to file this amendment with the Court as soon as possible. 2. Effective Date. If this Agreement is approved by the Court, then the Agreement shall become effective as of October 31, 1996 such that the payment due from MPI on that date shall be subject to the terms hereof (the "Effective Date"). 3. Dismissal of the Litigation; Mutual Releases. WINS and MPI shall dismiss the Litigation with prejudice. Each party shall bear its own legal fees and expenses. The parties hereby agree to execute the Amended and Restated Mutual Releases attached hereto as Exhibit A. 4. Settlement with American Gaming & Entertainment, Ltd. On the Effective Date of this Agreement, the Trustee shall deliver to MPI the acknowledgment of American Gaming & Entertainment, Ltd. and its wholly owned subsidiary, Gamma of West Virginia, Inc. ("AGEL"), in the form attached hereto as Exhibit B, that the Settlement Agreement dated as of June 30, 1995 (the "Settlement Agreement"), a copy of which is attached hereto as Exhibit C, is in full force and effect and that WINS, MPI, and AGEL shall assume, for purposes of such acknowledgment, that Termination, as that term is defined in the Settlement Agreement, has occurred. 5. Modification of Principal Amortization. The Amended Loan Agreement shall be further amended such that rather than thirty-six (36) equal payments of principal (together with interest at the rate of 12.5% per annum) on the last day of each month, MPI shall make payments of principal in the amount of $75,000 per month for the months of October through March inclusive and -2- $125,000 per month for the months of April through September inclusive as follows: October 31, 1996 $ 75,000 November 30, 1996 $ 75,000 December 31, 1996 $ 75,000 January 31, 1997 $ 75,000 February 28, 1997 $ 75,000 March 31, 1997 $ 75,000 April 30, 1997 $125,000 May 31, 1997 $125,000 June 30, 1997 $125,000 July 31, 1997 $125,000 August 31, 1997 $125,000 September 30, 1997 $125,000 October 31, 1997 $ 75,000 November 30, 1997 $ 75,000 December 31, 1997 $ 75,000 January 31, 1998 $ 75,000 February 28, 1998 $ 75,000 March 31, 1998 $ 75,000 April 30, 1998 $125,000 May 31, 1998 $125,000 June 30, 1998 $125,000 July 31, 1998 $125,000 August 31, 1998 $125,000 September 30, 1998 $125,000 October 31, 1998 $ 75,000 November 30, 1998 $ 75,000 December 31, 1998 $ 75,000 January 31, 1999 $ 75,000 February 28, 1999 $ 75,000 March 31, 1999 $ 75,000 April 30, 1999 Remaining Principal Balance The interest rate shall remain the same (unless increased pursuant to Paragraph 7 below). The term of the loans, however, shall not be changed, and any principal balance outstanding on the termination date, together with any accrued but unpaid interest, shall be due and payable on the date set forth in the Amended Loan Agreement. MPI will give the Lender ten (10) days notice of any prepayment. 6. WINS Shares: Right to Match/Option to Purchase. WINS hereby acknowledges and confirms that BMDC is the owner of the Shares and that the Shares are fully-paid and non-assessable. In the event the Trustee desires to sell the Shares, in whole or in part, the Trustee shall provide WINS written notice of a bona fide offer of a non-affiliate to purchase the -3- Shares. Upon receipt of the Trustee's notice, WINS shall have seven (7) business days in which to provide the Trustee written notice of its desire to match such offer and purchase the Shares. Within three (3) business days after providing notice, WINS shall deliver good funds representing the purchase price to the Trustee against delivery of the certificates representing the Shares, duly endorsed with Medallion signature guarantee. If WINS does not desire to purchase the Shares or fails timely to deliver the purchase price after providing notice of an intent to match a bona fide offer, then the Trustee shall be permitted to sell the Shares to the offeror without any further obligation to WINS. WINS shall have no liability for any damages suffered by the Trustee or the estate of BMDC in the event WINS provides notice of an intent to exercise its right to match, but for whatever reason determines not to purchase the Shares. The right to match shall terminate on December 31, 1997. For a period commencing on the date MPI fully satisfies the loans (the "Satisfaction Date") and terminating at the close of business (Eastern Time) ten (10) business days thereafter (the "Option Period") -- assuming BMDC (or the Bennett Funding Group) still owns the Shares -- WINS shall have the option to purchase all (but not part) of the Shares 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 Satisfaction Date, but in no event less than $1.125 per share; provided that if the exercise of the option by WINS during the Option Period would result in liability under Section 16(b) of the Securities Exchange Act of 1934, as amended, because of the matching of the sale of shares upon the exercise of the option with an acquisition of shares under the Amended Loan Agreement, the option shall not become exercisable until the earliest date at which such liability would not be triggered and shall extend for ten additional business days from such date. Any delay of the date on which the option may be exercised occasioned by compliance with Section 16(b) shall have no effect on the price per share to be paid by WINS upon exercise of the option. Unless the Shares have been sold prior to the Satisfaction Date in a transaction consistent with this Agreement, the Trustee shall not sell the Shares to anyone other than WINS or its assignee during the Option Period or any extension thereof. The option is not applicable in the context of an acquisition of all of the stock of WINS. 7. Additional Stock; Increased Interest Rate. (a) Article II, Section 2.2 of the Amended Loan Agreement, "Issuance of Additional Shares," which was amended in its entirety on July 7, 1995 pursuant to Section 5 of Construction Loan Agreement Amendment V, is hereby amended such that the heading for Article II, Section 2.2 shall be "Issuance of Additional Shares; Increased Interest Rate" and the final paragraph of such section is deleted and replaced by the following: -4- In the event the loans have not been prepaid in full by January 1, 1997, Winners shall at its sole option on January 2, 1997 either (i) pay the Lender $500,000 or (ii) issue to Lender that number of Winners shares which when multiplied by the average market price would equal $750,000. In the event the loans have not been prepaid in full by July 1, 1997, Winners shall at its sole option on July 2, 1997 either (i) pay the Lender $750,000 or (ii) issue to Lender that number of Winners shares which when multiplied by the average market price would equal $1,000,000. In the event the loans have not been prepaid in full by December 31, 1997, Winners shall at its sole option on January 2, 1998 either (i) pay the Lender $1,000,000 or (ii) issue to Lender that number of Winners shares which when multiplied by the average market price would equal $1,250,000. (b) In the event the loans have not been prepaid in full by December 31, 1997, the interest rate on any outstanding balance shall, as of January 1, 1998, increase from 12.5% to 14.5% until paid in full; provided, however, that (i) if the holder of the second trust on MPI's property (currently Madeleine, LLC pursuant to a Deed of Trust and Term Loan Agreement dated as of July 2, 1996) for any reason does not approve such interest rate increase, then the interest rate shall not increase; and (ii) in lieu thereof, the schedule of amortization set forth in Section 5 above shall be further amended, beginning with the payment due January 31, 1998, as follows: January 31, 1998 $100,000 February 28, 1998 $100,000 March 31, 1998 $100,000 April 30, 1998 $200,000 May 31, 1998 $200,000 June 30, 1998 $200,000 July 31, 1998 $200,000 August 31, 1998 $200,000 September 30, 1998 $200,000 October 31, 1998 $100,000 November 30, 1998 $100,000 December 31, 1998 $100,000 January 31, 1999 $100,000 February 28, 1999 $100,000 March 31, 1999 $100,000 April 30, 1999 Remaining Principal Balance To the extent additional amounts are not paid or shares issued pursuant to Section 7(a), Lender shall be paid the original additional consideration -5- of $2,500,000 of shares valued as of January 2, 1997 as provided in the amendment of the Construction Loan Agreement dated July 5, 1995, less any amounts paid or shares issued under Section 7(a). To the extent any Shares issued pursuant to the Construction Loan Agreement as hereby amended are restricted and are not eligible for public sale pursuant to Court order or exemption, then such Shares shall have piggyback registration rights with respect to any registered offering of shares by WINS or any shareholder of WINS, except for registered offerings undertaken in connection with the Term Loan Agreement dated as of July 2, 1996 among MPI, WINS, and Madeleine, LLC, until December 31, 1997 and demand registration rights after December 31, 1997 or any other time at which there is a registered offering in connection with the Term Loan Agreement. 8. No Other Changes. No amendment, change, or modification of the Amended Loan Agreement is intended except as specifically set forth herein. During the term of the Construction Loan Agreement as amended hereby, MPI will not amend any other loan agreement to which it is a party or become an obligor under any new loan agreement without the permission of the Lender, which permission will not be unreasonably withheld. 9. Notices. Any notices permitted or required hereunder shall be deemed effective when actually received by the parties as follows: If to WINS and MPI: Edson R. Arneault, President Mountaineer Park, Inc. State Route 2 Chester, West Virginia 26034 with a copy to: Robert L. Ruben, Esq. Freer & McGarry, P.C. 1000 Thomas Jefferson Street, N.W. Sixth Floor Washington, D.C. 20007 If to the Trustee: Richard C. Breeden, Trustee Bennett Management and Development Corp. 2 Clinton Square Syracuse, New York 13202 -6- with a copy to: James M. Cotter, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3954 10. Court Jurisdiction; Cooperation. All parties to this agreement submit to the jurisdiction of the Court for any disputes arising out of this agreement. The parties agree to cooperate in effecting the intentions of this agreement and to deliver additional documentation as may be required or deemed appropriate to implement the intentions of the parties. 11. Trustee. The Trustee is entering into this settlement as Trustee only and shall have no personal responsibility. -7- IN WITNESS WHEREOF, the parties hereto have approved and executed this Settlement Agreement as of the date first set forth above. WINNERS ENTERTAINMENT, INC. By: /s/ Edson R. Arneault -------------------------------------- Edson R. Arneault, President MOUNTAINEER PARK, INC. By: /s/ Edson R. Arneault -------------------------------------- Edson R. Arneault, President By: /s/ Richard C. Breeden -------------------------------------- Richard C. Breeden, Solely in His Capacity as Trustee of the Estate of Bennett Management and Development Corp. and Bennett Funding Group -8- Acknowledged and Agreed as to Paragraph 4 by: AMERICAN GAMING & ENTERTAINMENT, LTD. By: /s/ J. Douglas Wellington - -------------------------------------- Its: President -9- EXHIBIT A AMENDED AND RESTATED MUTUAL RELEASE AGREEMENT THE RELEASE EXTENDED BY MOUNTAINEER/WINNERS: The undersigned, Mountaineer Park, Inc., and Winner's Entertainment, Inc. (herein sometimes referred to collectively as "Mountaineer/Winners", for and in consideration of the execution and delivery by Richard C. Breeden, solely in his capacity as trustee (the "Trustee") of the estate of Bennett Management & Development Corp. and The Bennett Funding Group, Inc. of this Mutual Release Agreement, and subject to the limitations hereinafter set forth, hereby RELEASE and FOREVER DISCHARGE Bennett Management & Development Corp., The Bennett Funding Group, Inc., and their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, subsidiaries, and each and every other corporate or other type entity affiliated directly or indirectly with The Bennett Funding Group, Inc. ("Bennett affiliated entities"), and also their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives and Richard C. Breeden, both personally and as Trustee, of and from any and all claims, suits and causes or action of whatsoever kind or character Mountaineer/Winners, or either of them, now has or may hereafter have, by reason of any damages, losses or expenses incurred or to be incurred and of whatever kind of character by the undersigned Mountaineer Park, Inc. or Winner's Entertainment, Inc., arising from or growing out of or in any way related to (1) the borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp., or (ii) the relationships between or among any of the undersigned or any of the other parties released by this or the following paragraph ("other relationships") arising by reason of or growing out of or in any way related to said borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp. THE RELEASE EXTENDED BY BENNETT/BENNETT: The undersigned, Bennett Management & Development Corp. and The Bennett Funding Group, Inc. (herein sometimes referred to collectively as "Bennett/Bennett"), for and in consideration of the execution and delivery by Mountaineer Park, Inc. and Winner's Entertainment, Inc., of this Mutual Release Agreement, and subject to the limitations hereinafter set forth, hereby RELEASE and FOREVER DISCHARGE Mountaineer Park, Inc. and Winner's Entertainment, Inc., and their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, subsidiaries, and each and every other corporate or other type entity affiliated directly or indirectly with Winner's Entertainment, Inc. ("Winner's affiliated entities"), and also their officers, directors, shareholders, employees, agents, servants, attorneys, successors, assigns, insurers, heirs and personal representatives, of and from any and all claims, -1- suits and causes of action of whatsoever kind of character Bennett/Bennett, or either of them, now has or may hereafter have, by reason of any damages, losses or expenses incurred or to be incurred and of whatever kind or character by the undersigned Bennett Management & Development Corp. or The Bennett Funding Group, Inc., arising from or growing out of or in any way related to (i) the borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp., or (ii) the relationships between or among any of the undersigned or any of the other parties released by this or the preceding paragraph ("other relationships") arising by reason of or growing out of or in any way related to said borrower-lender relationship between Mountaineer Park, Inc. and Bennett Management & Development Corp. LIMITATIONS: The undersigned declare it to be their understanding and intentions that their obligations under or related to the loan documents evidencing said borrower-lender relationship occurring prior to September 19, 1996, shall never be or become the basis of (or a part of the basis of) a claim, suit or cause of action by or against any of the undersigned. However, it is agreed that the releases hereby extended will not preclude a claim, suit or cause of action by any of the undersigned, nor an enforcement of remedies available to Bennett Management & Development Corp. (or its successors or assigns) under said loan documents, so long as such claim, suit, cause of action or enforcement of remedies is based solely upon a breach of obligation, or breach of duty, or failure to pay or failure to perform occurring on or after September 20, 1996. Mountaineer/Winners understand and agree that the aforesaid claims hereby released by them include, but are not limited to, any claims and possible claims stated in, implied by or inferred from (i) the content of a certain letter dated September 25, 1996, from Mountaineer Park, Inc. to Bennett Management & Development Corp. (signed by Edson R. Arneault and addressed to Kevin J. Kuppel), and (ii) the content of a certain letter dated September 6, 1995, from Mountaineer Park, Inc. to Bennett Management & Development Corp. (also, signed by Edson R. Arneault and addressed to Kevin J. Kuppel). Mountaineer/Winners further understand and agree that the aforesaid Bennett affiliated entities hereby released include, but are not limited to, American Gaming & Entertainment, Ltd., Gamma of West Virginia, Inc., and Gamma International, Ltd., insofar as claims, suits and causes of action by the undersigned would related directly or indirectly to the loan which is the basis of the aforesaid borrower-lender relationship. The undersigned hereby declare that the terms of this Release have been completely read and are fully understood and voluntarily accepted for the purpose of making a full and final compromise, adjustment and settlement, subject to the above-stated limitations, of any and all claims, disputed or otherwise, known or unknown, discovered or not discovered, on account of said borrower-lender relationship or said other relationships and for the express -2- purpose of precluding forever, subject to the above-stated limitations, any further or additional claims, demands or suits against any and all entities and persons named or referred to herein as a released party, arising out of the aforesaid borrower-lender relationship or said other relationships. The undersigned understand and agree that the aforesaid payments of cash and execution and delivery of this Mutual Release Agreement were made by way of settlement and that liability for any claims hereby released have been and are specifically denied by the parties released hereby. The undersigned represent and warrant that the terms hereof were reached by them after full and complete opportunity to consult with counsel regarding the settlement and the effect of this release; that they execute this release voluntarily, freely, without compulsion or duress and mindful that it has legal consequences precluding any further action, subject to the above-stated limitations, on any claim they have or might have as to said borrower-lender relationship or said other relationships against the parties released; and that no person has made any promise or given any inducement whatsoever to encourage them to make this settlement other than the considerations above recited; and, that (i) no limitation or restriction exists as to the power or the authority of the undersigned to execute this release, (ii) the persons executing same on behalf of the undersigned have been duly authorized so to do, and (iii) this release is valid and binding and the provisions hereof are enforceable against the undersigned in accordance with its terms. This Mutual Release Agreement may be executed in any number of counterparts, each of which shall, for all purposes, be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. WITNESS the following signatures as of the 19th day of September, 1996. MOUNTAINEER PARK, INC. /s/ Naomi J. Balt By: /s/ Edson R. Arneault - ------------------------------ ------------------------------ Witness Its: President WINNER'S ENTERTAINMENT, INC. /s/ Naomi J. Balt By: /s/ Edson R. Arneault - ------------------------------ ------------------------------ Witness Its: President -3- BENNETT MANAGEMENT & DEVELOPMENT CORP. By: /s/ Richard C. Breeden ------------------------------ Richard C. Breeden, Solely in His Capacity as Trustee of the Estate of the Bennett Management and Development Corp. - ------------------------------ Witness THE BENNETT FUNDING GROUP, INC. By: /s/ Richard C. Breeden ------------------------------- Richard C. Breeden, Solely in His Capacity as Trustee of the Estate of the Bennett Funding Group, Inc. - ------------------------------ Witness -4- EXHIBIT B AMERICAN GAMING & ENTERTAINMENT, LTD. Bayport One Yacht Club Drive, Suite 300 West Atlantic City, New Jersey 08232 September 19, 1996 Mr. Edson R. Arneault President Mountaineer Park, Inc. State Route 2 Chester, West Virginia 26034 Dear Mr. Arneault: On behalf of American Gaming & Entertainment, Ltd. and its wholly owned subsidiary, Gamma of West Virginia, Inc., I am writing to acknowledge that the Settlement Agreement dated as of June 30, 1995 and executed by Winners Entertainment, Inc., Mountaineer Park, Inc., Gamma of West Virginia, Inc., and American Gaming & Entertainment, Inc. (the "Settlement Agreement") is in full force and effect. Winners Entertainment, Inc. and Mountaineer Park, Inc. may assume for purposes of this acknowledgment that Termination, as that term is defined in the Settlement Agreement, has occurred. Accordingly, the Management Agreement dated June 2, 1994 has automatically terminated and the relationship among the parties to the Settlement Agreement is as set forth therein. ACKNOWLEDGED THIS 19th DAY OF September, 1996 BY: /s/ J. Douglas Wellington -------------------------------- J. Douglas Wellington, President -1- EXHIBIT C SETTLEMENT AGREEMENT This Settlement Agreement is entered as of June 30, 1995 among Winners Entertainment, Inc., a Delaware corporation ("Winners"), Mountaineer Park, Inc., a West Virginia corporation wholly owned by Winners ("Mountaineer"), and Gamma of West Virginia, Inc., a West Virginia corporation wholly owned by American Gaming & Entertainment, Ltd. ("Gamma"). WHEREAS, Mountaineer and Gamma (by assignment from American Gaming & Entertainment, Ltd.) are parties to that certain Management Agreement made as of June 2, 1994, as subsequently amended, concerning the management of Permitted Activities (as that term is defined therein) at the Mountaineer Racetrack & Resort (the "Management Agreement"); and WHEREAS, Winners agreed to be bound by certain provisions of the Management Agreement; and WHEREAS, as of this date Winners, Mountaineer, and Gamma entered into a Stay Agreement with respect to the Management Agreement (the "Stay Agreement"); and WHEREAS, as of July 1, 1995, Mountaineer and American Newco, Inc., a corporation of which Alfred J. Luciani and J. Timothy Smith are sole shareholders, are entering into a Consulting Agreement; and WHEREAS, Gamma and/or its affiliates and Mountaineer and Winners wish to provide for the termination of the Management Agreement subject to and in accordance with the terms of the Stay Agreement. NOW, THEREFORE, for and in consideration of the mutual covenants, acknowledgments, and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Termination of Agreements. The Management Agreement and, except as otherwise specifically provided herein, all relationships established thereby and obligations arising thereunder, shall immediately and automatically terminate upon the termination of the Stay Agreement pursuant to Section 2(a) thereof or the termination of the Consulting Agreement pursuant to Section 2(a), (b) or (c) thereof ("Termination"). Upon Termination, no party to this Settlement Agreement shall have any further rights or obligations under either the Management Agreement or any other written or oral agreement that may have been in effect prior to the execution of this Settlement Agreement -1- (except for the Consulting Agreement), all of which shall be of no further force or effect. This Settlement Agreement shall not take effect and no party shall have any rights or obligations hereunder until Termination. 2. Settlement of Accounts; Return of Records. Upon Termination, Gamma will immediately cause its employees to vacate any rooms they are occupying at the Mountaineer Lodge. Upon presentation of an invoice for (i) any long distance telephone calls placed by Gamma employees from the Mountaineer Lodge to a number other than the offices of AGEL; and (ii) any alcoholic beverages charged by Gamma employees in the sixty (60) days preceding the effective date of the Stay Agreement, Gamma shall be responsible for full payment to Mountaineer. All such charges shall be made without pre-invoice interest at the rates Mountaineer customarily charges its patrons for the same products and services. Promptly upon determining in the ordinary course any management fees due Gamma under the Management Agreement through June 30, 1995, Mountaineer will pay such fees in full. Gamma expressly agrees, however, that Mountaineer may deduct from such payment as a setoff all sums due Mountaineer from Gamma pursuant to this Section 2. Upon Termination, Gamma shall return to Mountaineer all software, records, manuals, books, forms, documents, notes, letters, memoranda, reports, data tables, devices, and apparatus owned or possessed by Mountaineer or Winners, regardless of who prepared them. 3. Mutual Releases. Except for those obligations expressly provided for in this Settlement Agreement, including but not limited to Section 4 below (limited indemnity) Winners and Mountaineer on the one hand, and Gamma and AGEL on the other hand, hereby forever release and discharge the other and each of the other's officers, directors, shareholders, employees, agents, affiliates, attorneys, successors, and assigns of and from any and all claims, rights, duties, obligations, debts, liabilities, damages, injuries, actions, and causes of action of every kind and nature, foreseen and unforeseen, contingent and actual, liquidated and unliquidated, suspected and unsuspected, disclosed and undisclosed, whether direct or by way of indemnity, contribution, or otherwise, including without limitation all claims which either party has or might have arising from or related to the Management Agreement or any prior oral or written agreement among the parties. Each of the parties hereby acknowledges that it has been advised and is aware of the provisions of Section 1542 of the Civil Code of the State of California, and does hereby expressly waive and relinquish all rights and benefits which it has or may have under said Section 1542, which reads as follows: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor -2- at the time of executing the release, which if known by him, must have materially affected his settlement with the debtor. Each party also waives any similar law or rule. 4. Limited Indemnity. Notwithstanding anything herein to the contrary, Gamma and AGEL hereby agree to indemnify and hold Mountaineer and Winners harmless from and against any and all claims, liabilities, losses, actions, suits, or proceedings, at law or in equity, that if may incur or with which it may be threatened by reason of either (i) allegations by third parties that Gamma or AGEL employees engaged in willful or intentional tortious conduct or wrongdoing; or (ii) allegations of willful or intentional violations of the West Virginia Racetrack Video Lottery Act (though the parties are currently unaware of any such allegations). This indemnification shall include but not be limited to expenses (including attorneys' fees) reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever. 5. Express Waiver of Covenant Not To Compete; Services of American Newco, Inc. Mountaineer and Winners each expressly waives and releases Gamma from non-competition provisions set forth in Section 7 of the Management Agreement. Gamma and AGEL hereby consent to Mountaineer's or Winners' future use of the services of American Newco, Inc., a corporation wholly owned by Alfred Luciani, president of Gamma and AGEL, and J. Timothy Smith, on a consulting basis on terms upon which they may agree. Gamma and AGEL acknowledge that such employment will not give rise to claims that Mountaineer or Winners thereby engaged in unfair competition, or any similar wrongful conduct with Gamma or AGEL. 6. Confidentiality. Gamma acknowledges that during the term of the Management Agreement, it has had access to non-public information, including trade secrets, that are the property of Mountaineer or Winners. From and after the date hereof, Gamma agrees that it will not disclose to any person information concerning Mountaineer, Winners, or the operation of Mountaineer Racetrack & Resort that is not in the public domain. 7. Further Action. The parties hereto agree to provide, upon reasonable notice, any further documents and to undertake any further action reasonably required to effectuate the purposes of this Settlement Agreement, including, but not limited to, compliance with requests made by state regulators. -3- 8. Heirs, Successors and Assigns. This Settlement Agreement shall inure to the benefit of, and shall be binding upon, the heirs, successors, and assigns of the parties hereto as well as each party's present and former affiliated corporations, predecessors, parent corporations, subsidiaries, divisions, operating companies, officers, directors, agents, employees, administrators, representatives, shareholders, accountants, and attorneys, individually as well as in the capacity indicated. However, except as expressly provided herein, this Settlement Agreement is not for the benefit of any person not a party hereto or specifically identified as a beneficiary herein, and is not intended to constitute a third party beneficiary contract. 9. Merger and Integration. This Settlement Agreement constitutes a single, integrated written contract expressing the entire agreement of the parties hereto with respect to the subject matter hereof. No covenants, agreements, representations or warranties of any kind have been made by any party hereto, except as specifically set forth in this Settlement Agreement. All prior claims, discussions and negotiations have been and are merged and integrated into, and are superseded by this Settlement Agreement. 10. Governing Law; Forum Selection. This Settlement Agreement shall be construed in accordance with, and governed by, the laws of the State of West Virginia. The parties hereto agree that any dispute concerning this Settlement Agreement shall be litigated in the Circuit Court of Hancock County, West Virginia, and the parties hereto agree to submit to the jurisdiction of such court. IN WITNESS WHEREOF, the parties hereto have approved and executed this Settlement Agreement as of the date first set forth above. WINNERS ENTERTAINMENT, INC. By: /s/ Edson R. Arneault ------------------------------------- Edson R. Arneault, President MOUNTAINEER PARK, INC. By: /s/ Edson R. Arneault ------------------------------------- Edson R. Arneault, President GAMMA OF WEST VIRGINIA, INC. By: /s/ Alfred Luciani ------------------------------------- Alfred Luciani, President -4- AMERICAN GAMING & ENTERTAINMENT, LTD. By: /s/ Alfred Luciani ------------------------------------- Alfred Luciani, President By: /s/ J. Timothy Smith ------------------------------------- J. Timothy Smith, Executive Vice President & Chief Operating Officer -5- -----END PRIVACY-ENHANCED MESSAGE-----