SECURITIES AND EXCHANGE COMMISSION
         WASHINGTON, D.C. 20549

                FORM 8-K

            CURRENT REPORT

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


    Date of Report: August 24, 2001




      ALPHA HOSPITALITY CORPORATION

 (Exact Name of Registrant as Specified in Charter)





         Delaware                     1-12522                13-3714474

(State or other jurisdiction     (Commission File No.)       (IRS
     of incorporation)                                       Employer
                                                             Identification No.)








12 East 49th Street, 24th Floor, New York, New York           10017

(Address of Principal Executive Offices)                   (Zip Code)



Registrant's telephone number, including area code: (212) 750-3500




Item 5.     Other Events

            On August 10, 2001, the Company entered into an agreement
with Watertone Holdings, LP ("Watertone") providing for the
acquisition of Watertone's economic interests in the casino and
racetrack business components of the business of Catskill
Development, L.L.C. ("Catskill").  Consummation of the transactions
contemplated by that agreement is subject to various conditions,
including (a) conversion of all shares of the Company's outstanding
Series B and C Preferred Stock into shares of common stock, (b) the
payment of accrued but unpaid dividends on such Preferred Stock in
shares of common stock and (c) obtaining shareholder and, if
necessary, governmental approval.  If those transactions are completed,
the Company's interest in any net revenues derived from Catskill's
business component related to the casino and wagering operations on
the trust lands that may be developed at the Monticello Raceway will
effectively increase from 40% to approximately 57% and its interest in
net revenues derived from Monticello Raceway's pari-mutuel
operations will effectively increase from 25% to 50%.   In
consideration for such economic interests, the Company has agreed to
issue approximately 940,000 shares of its common stock, which would
be equal to approximately 23.2% of its outstanding shares of common
stock (as determined prior to the issuance of such shares for
Watertone's account) on an as-diluted basis (inclusive of approximately
235,000 shares committed to be issued by the Company with respect to
the June 13, 2001 conversion of $1.9 million of outstanding
indebtedness owed by the Company to Bryanston Group, Inc. into
shares of common stock, approximately 982,000 shares contemplated
to be issued upon conversion of shares of the Company's outstanding
Series B and C Convertible Preferred Stock and such additional shares
(currently estimated at approximately 385,000 shares based upon an
assumed market price of $9.00 per share) as are contemplated to be
issued upon payment of accrued but unpaid dividends of such Preferred
Stock in shares of common stock).  Additionally, as part of the
proposed transaction, the Company would enter into employment
agreements with two principals of Watertone providing for annual
aggregate compensation of $500,000 (which is subject to deferral under
certain circumstances) and options to purchase, at an exercise price of
approximately $22.50 per share, up to a number of shares of common
stock equal to approximately 14% of the Company's outstanding shares
of common stock on an as-diluted basis (as determined above), which
number is currently estimated to be approximately 556,000 shares.



Item 7.       Financial Statements, Pro Forma Financial Information and
Exhibits

              (C) Exhibits

              10(a)  Form of Contribution Agreement (with  exhibits)
              10(b)  Form of Amendment and Supplement to Contribution
Agreement



              SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Dated: August 24, 2001                         ALPHA HOSPITALITY CORPORATION
                                                 (Registrant)


                                          By: /s/Robert Steenhuisen
                                                 Robert Steenhuisen
                                                 Chief Accouting Officer





                                                   Exhibit 10(a)








        CONTRIBUTION AGREEMENT


                between


     ALPHA HOSPITALITY CORPORATION


                  and


        WATERTONE HOLDINGS, LP

              dated as of


            August 10, 2001






        CONTRIBUTION AGREEMENT

               CONTRIBUTION AGREEMENT (this
"Agreement"), dated as of August 10, 2001, by and
between ALPHA HOSPITALITY CORPORATION
("Alpha"), a Delaware corporation, and Watertone
Holdings, LP ("Watertone," and collectively with
Alpha, the "Parties" and each a "Party"), a Delaware
limited partnership.

         W I T N E S S E T H:

               WHEREAS, Catskill Development, L.L.C.
("Catskill") was formed in 1995 as a New York limited
liability company to develop real property for three
business components (the "Business Components"),
which are: (1) casino and wagering operations on trust land
(the "Casino Component"); (2) harness, horse racing and
other pari-mutuel and gaming operations (the "Horse
Racing Component"); and (3) real estate ownership,
development and operations, inclusive of amusement,
entertainment, retail, hotel, office and residential structures
(the "Real Estate Component");

               WHEREAS, that certain First Amended &
Restated Operating Agreement of Catskill Development,
L.L.C. (as the same may hereafter be amended,
supplemented or otherwise changed, the "Catskill
Operating Agreement"), dated as of January 1, 1999,
provides, inter alia, for distributions and allocations to
members based on their respective percentage interests in
each separate Business Component;

          WHEREAS, under the Catskill Operating
Agreement, Watertone holds a 29.167% economic interest
in the Casino Component (the "Watertone Casino
Interest") and a 25% economic interest in the Horse
Racing Component (the "Watertone Horse Racing
Interest," and collectively with the Watertone Casino
Interest, the "Transferred Interests," which, for the
purposes of this Agreement, shall not be deemed to include
any right or interest of Watertone under the Catskill
Operating Agreement with regard to Watertone's
entitlement to receive repayment of any loans made by it to
Catskill, or payment of any Preferred Capital Contributions
or Priority Returns (as those terms are defined in the
Catskill Operating Agreement)) and is a Voting Member
(as such term is defined in the Catskill Operating
Agreement);

          WHEREAS, Alpha Monticello, Inc. ("AMI"), an
Affiliate of Alpha, is a Non-Voting Member of Catskill (as
such term is defined in the Catskill Operating Agreement),
with no economic interest in the Casino Component, a 25%
economic interest in the Horse Racing Component and a
5% economic interest in the Real Estate Component;

          WHEREAS, Catskill is currently a plaintiff with
Mohawk Management in



litigation brought against Park
Place Entertainment Corporation, which litigation could
yield considerable cash flow in the form of an award of
damages or settlement payments to Catskill;

WHEREAS, Catskill may also engage in gaming
or similar activities with one or more Native American
Tribes, other than the Mohawk Tribe, as contemplated by
the Catskill Operating Agreement, which, if successful,
could result in considerable cash flow attributable to the
Transferred Interests;

WHEREAS, Alpha currently has outstanding
2,457,190 shares of its common stock (exclusive of shares
of common stock committed to be issued in consideration
for the cancellation of indebtedness owed to Bryanston (as
defined below));

WHEREAS, Watertone desires to obtain the
benefits of an investment in Alpha and Alpha desires to
obtain the economic and related benefits attributable to the
Transferred Interests; and

          WHEREAS, in order to fulfill those respective
desires, Watertone and Alpha have, as set forth more fully
below, have agreed (subject to the terms and conditions set
forth herein) to cause a limited liability company to be
formed under the laws of the State of Georgia (the "LLC"),
with Watertone to transfer and contribute to the LLC the
Transferred Interests and Alpha or its designee (Alpha or
such designee being hereinafter referred to as the "Alpha
Designee") to transfer and contribute to the LLC 850,943
shares of the common stock of Alpha (the "Transfer
Shares"), par value $.01 per share.

               NOW THEREFORE, in consideration of
the foregoing premises and the mutual representations,
warranties, covenants and agreements contained herein,
and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged,
intending to be legally bound hereby, the parties hereto
agree as follows:

               ARTICLE I

              DEFINITIONS

SECTION 1.01.                Certain Definitions.  For
purposes of this Agreement, the following terms shall have
the following respective meanings:

          "Affiliate" of a Person means another Person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with,
such first-mentioned Person.  The term "control" (including
the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.


          "Assignment Agreement" has the meaning set
forth in Section 2.01.

          "Business Day" means any day other than a
Saturday, Sunday or other day on which banks are
authorized or required to be closed in the State of New
York.

          "Closing" has the meaning set forth in Section 2.02.

          "Employment Agreements" has the meaning set
forth in Section 2.02(B).

          "Exchange Act" means the Securities Exchange
Act of 1934, as amended.

          "Gaming Authority" means any Governmental
Authority that is involved in the regulation of, or has
authority to regulate (including, without limitation, the
right or authority to determine whether any director,
officer, employee or other agent of any Person engaged in
gaming or gambling activities or any beneficial owner of
any prescribed percentage of capital stock or other equity
interest in any such Person is suitable or appropriate and
the right to assess or collect taxes, fees or other
assessments), gaming or gambling activities in any
jurisdiction in which Alpha, directly or through any
subsidiary, conducts any gaming or gambling activities.

          "Governmental Authority" means the government
of any nation, state, city, locality or other political
subdivision thereof, any regulatory agency or other entity
or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise,
by any of the foregoing.

          "Materially Adverse Effect" has the meaning set
forth in Section 3.01.

          "Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or
other) or preference, priority, right or other security interest
or preferential arrangement of any kind or nature
whatsoever, including, without limitation, those created by,
arising under or evidenced by any conditional sale or other
title retention agreement, the interest of a lessor under a
capital lease obligation or any financing lease having
substantially the same economic effect as any of the
foregoing and any contractual or other restriction on sale or
other disposition.

          "LLC Operating Agreement" means the
Operating Agreement for the LLC in the form attached
hereto as Exhibit A, as the same may after the Closing, in
accordance with its terms, be amended, supplemented or
otherwise changed.

          "Person" means an individual or a corporation,
partnership (limited or general), trust, incorporated or
unincorporated association, joint venture, joint stock
company, Governmental Authority or other entity of any
kind.



          "PPE Litigation" means that certain litigation
commenced in the United States District Court, Southern
District of New York, entitled Catskill Development, L.L.C.
et al v. Park Place Entertainment Corporation (Index
Number 00 CIV 08660) and any successor or other
litigation involving the same or similar claims.

              "SEC" means the Securities and Exchange
Commission.

          "SEC Reports" means, collectively, Alpha's
Annual Report on Form 10-K for the year ended December
31, 2000 and all other reports filed by Alpha with the SEC
on or after January 1, 2001.

          "Securities Act" means the Securities Act of 1933,
as amended.

          "Tag-Along Agreement" has the meaning set forth
in Section 2.02(C)(iv).

"Transaction Documents" means, collectively,
this Agreement, the Assignment Agreement, the LLC
Operating Agreement and the Employment Agreements.

              ARTICLE II

               EXCHANGE

SECTION 2.01.                Agreement to Form the
LLC and Make Contributions Thereto.  On the terms
and subject to the conditions set forth in this Agreement, at
the Closing, (a) Alpha shall execute and deliver (or shall
cause the Alpha Designee to execute and deliver), and
Watertone shall execute and deliver, the LLC Operating
Agreement in the form attached hereto as Exhibit A, with
such changes thereto as may be mutually agreed to by the
Parties, (b) Alpha shall contribute or cause the Alpha
Designee to contribute the Transfer Shares, free and clear
of all Liens (exclusive of any restrictions imposed or
referred to herein or in the LLC Operating Agreement or
imposed by applicable federal or state securities laws),  to
the LLC by issuing or delivering to the LLC a certificate
representing the Transfer Shares, and (c) Watertone shall
contribute the Transferred Interests, free and clear of all
Liens, to the LLC by executing and delivering to the LLC
an assignment agreement (the "Assignment Agreement"),
in the form attached hereto as Exhibit B.  In addition, at the
Closing each of the Parties hereto shall execute, file and/or
deliver such other and further certificates, agreements,
documents and instruments as the other Party may
reasonably request to effectuate and evidence the
consummation of the transactions contemplated hereby to
be consummated at the Closing (provided that, in lieu of
executing, filing and/or delivering any such other or further
certificate, agreement, document or instrument, Alpha may
cause the Alpha Designee to do so).

SECTION 2.02.                Closing and Conditions of
Closing.



          (A)  The closing of the transactions contemplated
by Section 2.01 (the "Closing") shall take place at the
offices of Parker, Duryee, Rosoff & Haft at 529 Fifth
Avenue, 8th floor, New York New York at 10:00 A.M. on
the fifth (5th) Business Day after the satisfaction or waiver
of the conditions to Closing set forth in clause (ix), (x) and
(xi) of subsection (B) below or at such other place, at such
other time and/or on such other date as may be mutually
agreed upon by the Parties.  If any of the conditions set
forth in subsection (B) or (C) below has not been met,
satisfied or waived prior to the forty-fifth (45th) day (or
such later date as may be agreed to in writing by the
Parties) following the execution and delivery of this
Agreement, then this Agreement shall terminate and be null
and void in all respects and neither Party shall have any
further obligation to the other hereunder or with respect
hereto.

          (B) Alpha's obligation to close the transactions
contemplated hereby, including the issuance of the Transfer
Shares and the contribution of same to the LLC, shall be
conditioned upon each of the following conditions having
been met, except to the extent that the same have been
waived in writing by Alpha:

          (i)       Each of Robert Berman and Scott
Kaniewski (collectively, the "Employees") shall
have executed and delivered to Alpha an
employment agreement in the form attached hereto
as Exhibit C-1 and C-2, respectively (such
employment agreements, collectively, the
"Employment Agreements");
     (ii) Each of the representations and warranties made
by Watertone in Article IV shall be true and correct
on the date of the Closing as if made again on and
as of the date of the Closing;
     (iii) The Transferred Interests shall be free and clear
of any and all Liens;
     (iv)Watertone shall have delivered to Alpha (and, if
different, the Alpha Designee) (a) a certificate,
executed by the General Partner of Watertone,
signing in such capacity, dated the date of the
Closing, (i) certifying that attached thereto is a true
and complete copy of the partnership agreement of
Watertone (including all amendments, supplements
and modifications thereof or thereto) as then in
effect, (ii) certifying that (A) the consents of all
such partners of Watertone as are necessary or
appropriate in order properly to authorize the
execution and delivery by Watertone of this
Agreement and each of the other Transaction
Documents contemplated hereunder to be executed
by Watertone prior to or at the Closing and for the
consummation by Watertone of the transactions
contemplated thereby and thereby to be performed
by Watertone (including, without limitation, the
execution and delivery of the Assignment
Agreement and the LLC Operating Agreement and
the transfer and contribution of the Transferred
Interests to the LLC), have been obtained, have not
been revoked, rescinded or amended and are in full
force and effect and (B) attached thereto are true
and complete copies of all such consents, and (iii)
certifying and attesting to the office, incumbency,
due



authority and specimen signatures of each
Person who executed or will execute any
Transaction Document for or on behalf of
Watertone, which certificate shall be in form and
substance reasonably acceptable to Alpha and its
counsel and (b) a certificate, executed by the
Managing Member of the general partner in
Watertone (the "Watertone General Partner"),
signing in such capacity, dated the date of the
Closing, (i) certifying that attached thereto is a true
and complete copy of the articles of formation (or
similar document) and operating agreement of the
General Partner (including all amendments,
supplements and modifications thereof or thereto)
as then in effect, (ii) certifying that (A) the consents
of all such members of the Watertone General
Partner as are necessary or appropriate in order
properly to authorize the execution and delivery by
the Watertone General Partner on behalf of
Watertone of this Agreement and each of the other
Transaction Documents contemplated hereunder to
be executed by Watertone prior to or at the Closing
and for the consummation by Watertone of the
transactions contemplated thereby and thereby to be
performed by Watertone (including, without
limitation, the execution and delivery of the
Assignment Agreement and the LLC Operating
Agreement and the transfer and contribution of the
Transferred Interests to the LLC), have been
obtained, have not been revoked, rescinded or
amended and are in full force and effect and (B)
attached thereto are true and complete copies of all
such consents, and (iii) certifying and attesting to
the office, incumbency, due authority and specimen
signatures of each Person who executed or will
execute any Transaction Document for or on behalf
of the Watertone General Partner, which certificate
shall be in form and substance reasonably
acceptable to Alpha and its counsel and shall be
accompanied by a copy of a recently dated
certificate of good standing, subsistence or
existence of the Watertone General Partner from
the office of the Secretary of State of the State of
New York;

     (v)Watertone shall have delivered to Alpha (and, if
different, the Alpha Designee) an opinion of
counsel, in form and substance reasonably
acceptable to Alpha and its counsel, confirming that
(a) the execution and delivery of this Agreement
and the LLC Operating Agreement, as
contemplated hereby, and the consummation of
transactions contemplated by this Agreement and
the LLC Operating Agreement, do not require the
consent or approval of, or notice to, any of the other
members of Catskill, (b) the execution, delivery and
performance of this Agreement, the Assignment
Agreement and the LLC Operating Agreement by
Watertone have been approved by all necessary
partnership action on the part of Watertone, (c) this
Agreement, the Assignment Agreement and the
LLC Operating Agreement are enforceable against
Watertone in accordance with the terms hereof and
thereof, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the
enforcement of creditors' rights generally and by
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or
at law), (d) the LLC Operating Agreement, together
with the Assignment Agreement, is effective to




transfer to the LLC all of the economic benefits
attributable to the Transferred Interests, the holding
of the Transferred Interests by the LLC as
contemplated by the LLC Operating Agreement
will not create a legal basis to preclude the
distribution and payment to the LLC of any of the
distributions or payments contemplated under the
Catskill Agreement to be made with respect thereto,
without taking into consideration any prohibition or
preclusion provided for in Section 4.1(d) of the
Catskill Operating Agreement, and the transfer of
the Transferred Interests as contemplated hereby
and by the Assignment Agreement will not cause or
result in the loss or forfeiture of any voting rights
related to the Transferred Interests, (e) to the best of
the knowledge of such counsel, the Transferred
Interests have been transferred to the LLC free and
clear of all Liens and (f) such other matters as
Alpha may request;
     (vi) No decision, order or similar ruling shall have
been issued in the PPE Litigation dismissing the
complaint therein or having a similar affect;
     (vii) Each of the representations and warranties
contemplated to be made by Watertone under and
pursuant to the LLC Operating Agreement shall be
true and correct;
     (viii) Watertone shall have delivered to Alpha (and,
if different, the Alpha Designee) a certificate signed
by Watertone, in form and substance reasonably
acceptable to Alpha and its counsel, confirming that
(a) each of the representations and warranties made
by Watertone in Article IV is true and correct on
the date of the Closing as if made again on and as
of the date of the Closing, (b) and (b) each of the
other conditions to Alpha's obligation to close the
transactions contemplated hereby, as set forth in the
preceding clauses (i) through (vii), has been met,
satisfied or waived in writing by Alpha;
     (ix) The Board of Directors of Alpha shall have
received from an investment banking house or other
appropriate expert a fairness opinion acceptable to
such Board with respect to the transactions
contemplated by this Agreement;
     (x) All consents and approvals of any
Governmental Agency (including, without
limitation, the Mississippi Gaming Commission)
necessary or appropriate for the consummation of
the transactions contemplated hereby and/or by the
LLC Operating Agreement shall have been
obtained; and
     (xi)The shareholders of Alpha shall have duly
approved the transactions contemplated hereby to
be performed by Alpha, including the issuance of
the Transfer Shares and the issuance of stock
options as contemplated by the Employment
Agreements.
(C)       Watertone's obligation to close the
transactions contemplated hereby, including the transfer
and contribution of the Transferred Interests to the LLC,
shall be



conditioned upon each of the following conditions
having been met, except to the extent that the same have
been waived in writing by Watertone:

(i)       Alpha shall have shall have executed, and
shall have delivered to each of the Employees, his
respective Employment Agreement;
        (ii)  Each of the
        representations and warranties
        made by Alpha in Article III
        shall be true and correct on the
        date of the Closing as if made
        again on and as of the date of
        the Closing;
        (iii)  Alpha and/or the Alpha
        Designee, as applicable, shall
        have delivered to Watertone a
        certificate, executed by the
        Secretary or President of Alpha
        or the Alpha Designee, signing
        in such capacity, dated the date
        of the Closing, (a) certifying
        that attached thereto is a true
        and complete copy of the
        charter of Alpha (including all
        amendments, supplements and
        modifications thereof or thereto)
        as then in effect, (b) certifying
        that attached thereto is a true
        and complete copy of the by-
        laws of Alpha (including all
        amendments, supplements and
        modifications thereof or thereto)
        as then in effect, (c) certifying
        that attached thereto are true and
        complete copies of the
        resolutions duly adopted by the
        Board of Directors of Alpha or
        the Alpha Designee authorizing
        the execution and delivery of
        the Transaction Documents
        contemplated hereby to be
        executed by Alpha or the Alpha
        Designee, as applicable, and the
        consummation of the
        transactions contemplated
        thereby (including, without
        limitation, the issuance and
        contribution of the Transfer
        Shares to the LLC) to be
        performed by Alpha or the
        Alpha Designee, which
        authorization shall be in full
        force and effect on and as of the
        date of such certificate, and (d)
        certifying and attesting to the
        office, incumbency, due
        authority and specimen
        signatures of each Person who
        executed or will execute any
        Transaction Document for or on
        behalf of Alpha or the Alpha
        Designee, which certificate shall
        be in form and substance
        reasonably acceptable to
        Watertone and its counsel and
        shall be accompanied by a copy
        of a recently dated certificate of
        good standing, subsistence or
        existence of Alpha from the
        office of the Secretary of State
        of the State of Delaware;
        (iv)  Alpha shall have delivered
        to Watertone an opinion of
        counsel, in form and substance
        reasonably acceptable to
        Watertone and its counsel,
        confirming that (a) the transfer
        and contribution of the Transfer
        Shares to the LLC as
        contemplated hereby is exempt
        from registration under the
        Securities Act, (b) the
        execution, delivery and
        performance of this Agreement
        and the LLC Operating
        Agreement by Alpha or the
        Alpha Designee, as applicable,
        have been approved by all
        necessary corporate action on
        the part of Alpha or the Alpha
        Designee, as applicable, (c) this
        Agreement is enforceable
        against Watertone in accordance
        with the terms hereof, except as
        enforceability may be limited by
        applicable bankruptcy,
        insolvency, reorganization,
        moratorium or similar laws
        affecting the enforcement of
        creditors' rights generally and
        by general principles of equity



        (regardless of whether
        enforcement is sought in a
        proceeding in equity or at law),
        (d) the Transferred Shares,
        when issued to the LCC as
        contemplated hereby, will be
        duly issued, fully paid and non-
        assessable and (e) such other
        matters as Alpha may request;
        (v)   No decision, order or
        similar ruling shall have been
        issued in the PPE Litigation
        dismissing the complaint therein
        or having a similar affect
        (vi)  Each of the
        representations and warranties
        contemplated to be made by the
        Alpha Designee under and
        pursuant to the LLC Operating
        Agreement shall be true and
        correct;
        (vii)  Alpha shall have
        delivered to Watertone a
        certificate signed by Alpha, in
        form and substance reasonably
        acceptable to Watertone and its
        counsel, confirming that (a)
        each of the representations and
        warranties made by Alpha in
        Article III is true and correct on
        the date of the Closing as if
        made again on and as of the date
        of the Closing and (b) each of
        the other conditions to
        Watertone's obligation to close
        the transactions contemplated
        hereby, as set forth in the
        preceding clauses (i) through
        (vi), has been met, satisfied or
        waived in writing by Watertone;
        and
        (viii)           Alpha shall have delivered
        to Watertone a Tag-Along
        Agreement (the "Tag-Along
        Agreement") executed by
        Bryanston Group Inc.
        ("Bryanston") and in the form
        attached hereto as Exhibit D;
        (ix)   All of the issued and
        outstanding shares of Alpha's
        Class B and C Preferred Stock
        shall have been converted into
        shares of Alpha's common
        stock; and
        (x)    All consents and
        approvals of any Governmental
        Agency (including, without
        limitation, the Mississippi
        Gaming Commission) necessary
        or appropriate for the
        consummation of the
        transactions contemplated
        hereby and/or by the LLC
        Operating Agreement shall have
        been obtained.

              ARTICLE III

   REPRESENTATIONS AND WARRANTIES OF
                 ALPHA

               As a material inducement to
Watertone to transfer and contribute the Transferred
Interests to the LLC, Alpha hereby represents and warrants
to Watertone as follows:

SECTION 3.01.                Organization and Standing.
Alpha is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority, and all
authorizations, licenses,



permits and certifications,
necessary for it to own its properties and assets and to carry
on its business as it is now being conducted.  Alpha is duly
qualified to transact business and is in good standing in
each jurisdiction in which the character of the properties
owned or leased by it or the nature of its business therein
conducted makes such qualification necessary, except
where the failure to so qualify or be in good standing
would not have a material and adverse effect on the
business, assets, operations, properties, condition (financial
or otherwise) or prospects of Alpha and its subsidiaries,
taken as a whole, or any material and adverse effect on
Alpha's ability to consummate the transactions
contemplated by, and to execute, deliver and perform its
obligations under, each of the Transaction Documents
contemplated hereby to be executed and delivered by
Alpha (a "Materially Adverse Effect").

SECTION 3.02.                Securities of Alpha.  As of
the date of this Agreement, the authorized capital stock of
Alpha consists of the securities set forth in Part I of
Schedule 3.02 attached hereto; and as of the Closing, the
authorized capital stock of Alpha will consists of the
securities set forth in Part II of such Schedule 3.02.  Except
as disclosed in the SEC Reports or disclosed in such
Schedule 3.02 or has been or may be issued to Watertone
or as may be contemplated to be issued to the Employees
under the Employment Agreements, Alpha has no other
authorized, issued or outstanding equity securities or
securities containing any equity features, or any other
securities convertible into, exchangeable for or entitling
any person to otherwise acquire any capital stock of Alpha.
All of the issued and outstanding shares of capital stock of
Alpha have been duly and validly authorized and issued,
and are fully paid and nonassessable.  Except as set forth in
the SEC Reports or as set forth in such Schedule 3.02 or as
may be contemplated hereunder or under the Employment
Agreements, there are no outstanding options, warrants,
conversion rights, subscription rights, preemptive rights,
rights of first refusal or other rights or agreements of any
nature outstanding to subscribe for or to purchase any
shares of capital stock of Alpha.  The issuance of the
Transfer Shares is not subject to any preemptive rights,
rights of first refusal or other similar limitation.  Except as
otherwise required by law or as disclosed in the SEC
Reports or such Schedule 3.02, there are no restrictions
upon the voting or transfer of any shares of Alpha's capital
stock pursuant to Alpha's Certificate of Incorporation, by-
laws or other documents to which Alpha is a party.  Except
as provided herein or by the Transaction Documents or as
disclosed in the SEC Reports or such Schedule 3.02, there
are no agreements or other obligations (contingent or
otherwise) that may require Alpha to repurchase or
otherwise acquire any shares of its capital stock.

SECTION 3.03.                Authorization;
Enforceability.  Alpha has the corporate power and
authority to execute and deliver this Agreement and each of
the other Transaction Documents contemplated hereby to
be executed and delivered by Alpha and perform the terms
and provisions of this Agreement and such other
Transaction Documents to be performed by it and (except
for the obtaining of shareholder approval) has taken all
necessary corporate action to authorize the execution,
delivery and performance of this Agreement and such other
Transaction Documents by it and to



consummate the
transactions contemplated hereby and thereby to be
performed by it.  No other corporate proceedings on the
part of Alpha are necessary, and no consent of the
shareholders of Alpha is required, for the valid execution
and delivery by Alpha of this Agreement and such other
Transaction Documents, and except for the approval of
Alpha's shareholders, no other corporate proceedings on
the part of Alpha are necessary for the performance and
consummation by Alpha of the transactions contemplated
by this Agreement and such other Transaction Documents
to be performed by Alpha.  Alpha has duly executed this
Agreement, and assuming the due execution of this
Agreement by Watertone, this Agreement constitutes the
legal, valid and binding obligations of Alpha, enforceable
against Alpha in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and
by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Each of the other Transaction Documents contemplated
hereby to be executed and delivered by Alpha, when
executed and delivered by Alpha and Watertone, will
constitute the legal, valid and binding obligations of Alpha,
enforceable against Alpha in accordance with its terms,
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or
at law).

SECTION 3.04.                No Violation; Consents.


(A)       The execution and delivery of this Agreement
by Alpha and, subject to obtaining approval by Alpha's
shareholders, the consummation by Alpha of the
transactions contemplated hereby to be performed by
Alpha do not and will not, (i) contravene the applicable
provisions of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any Governmental
Authority to or by which Alpha is a party or by which any
of its property or assets is bound, (ii) violate, result in a
breach of or constitute a default (which has not been
waived or consented to) or give rise to an event of
acceleration under any shareholder agreement, contract,
lease, loan or credit agreement, mortgage, security
agreement, trust indenture or other agreement or instrument
to which Alpha is a party or by which it is bound or to
which any of its properties or assets is subject, nor result in
the creation or imposition of any lien, security interest,
charge or encumbrance of any kind upon any of the
properties, assets or capital stock of Alpha, or (iii) violate
any provision of the organizational and other governing
documents of Alpha.  Notwithstanding anything contained
herein or in any of the other Transaction Documents to the
contrary, Alpha makes no representation or warranty to the
effect that the execution or delivery of this Agreement by
Alpha or the execution or delivery of any of the other
Transaction Documents by the Alpha Designee or the
consummation by Alpha (or, if different, the Alpha
Designee) of any of the transactions contemplated hereby
or thereby will not violate, result in a breach of or
constitute a default the Catskill Operating Agreement.



(B)       Except for those consents or authorizations
previously obtained and those filings previously made and
the approval of Alpha's shareholders, no consent, approval,
authorization or order of, or filing or registration with, any
Governmental Authority or other Person is required to be
obtained or made by Alpha for the execution and delivery
of this Agreement and the consummation by Alpha of the
transactions contemplated hereby to be performed by it;
provided, however, that notwithstanding anything
contained herein to the contrary, no representation or
warranty is made herein or hereby (i) that the issuance of
the Transfer Shares to Watertone or the consummation of
the other transactions contemplated hereby will comply
with, or not be in violation of, any of the rules and
regulations of the Mississippi Gaming Commission or any
other Gaming Authority or (ii) as to whether any consent or
approval of, or notice to, any other member in Catskill is
necessary in connection with the execution or delivery of
this Agreement by Alpha or the execution or delivery of
any of the other Transaction Documents by the Alpha
Designee or the consummation by Alpha (or, if different,
the Alpha Designee) of any of the transactions
contemplated hereby or thereby.

SECTION 3.05.                Securities Act
Representations.  Assuming the accuracy of Watertone's
representations in Article IV and in the LLC Operating
Agreement, the transfer and contribution of the Transfer
Shares to the LLC as contemplated hereby will be exempt
from the registration requirements of the Securities Act and
will not constitute a violation by Alpha of any federal or
state securities laws.  Alpha has not engaged in any form of
general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Transfer Shares.

SECTION 3.06.                No Default.  Alpha is not,
and immediately after the consummation of the
transactions contemplated hereby to be performed by
Alpha at the Closing will not be, in default (which has not
otherwise been waived or consented to) under or in
violation (which has not otherwise been waived or
consented to) of its organizational and other governing
documents, or any provision of any security issued by
Alpha, or of any agreement, instrument or other
undertaking (other than the Catskill Agreement) to which
Alpha is a party or by which it or any of its property or
assets is bound, or the applicable provisions of any law,
statute, rule, regulation, order, writ, injunction, judgment or
decree of any court or governmental authority to or by
which Alpha or any of its property or assets is bound,
which default or violation could reasonably be expected to
have a Materially Adverse Effect.

SECTION 3.07.                No Brokers.  No broker,
finder, agent or similar intermediary is entitled to any
broker's, finder's, placement or similar fee or other
commission in connection with the transactions
contemplated hereby based on any agreement, arrangement
or understanding with Alpha.





SECTION 3.08.                SEC Reports; Financial
Condition; No Adverse Changes.

(A) The audited consolidated financial statements
(the "Financial Statements") of Alpha and the related
notes thereto as at December 31, 2000 reported on by
Rothstein & Kass, LLP, independent accountants, copies of
which have heretofore been furnished to Watertone, present
fairly the financial condition, results of operations and cash
flows of Alpha (on a consolidated basis) at such date and
for the periods set forth therein.  The Financial Statements,
including the related schedules and notes thereto, have
been prepared in accordance with generally accepted
accounting principles as set forth in the opinions and
pronouncements of the Accounting Principles Board of
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial
Accounting Standards Board as in effect on the date of
filing of such documents with the Commission, applied on
a consistent basis (except for changes concurred in by
Alpha's independent public accountants) unless otherwise
expressly stated therein.  Except as disclosed in the SEC
Reports or has been conducted in the ordinary course of
business, during the period from January 1, 2001 to and
including the date hereof, there has been no sale, transfer or
other disposition by Alpha of any material part of the
business, property or securities of Alpha and no purchase
or other acquisition of any business, property or securities
by Alpha material in relation to the financial condition of
Alpha.

(B)       Except as are reflected or reserved against in
the Financial Statements and the notes thereto or disclosed
in the SEC Reports, other than funding obligations with
respect to the PPE Litigation there are no debts, liabilities
or obligations with respect to Alpha or any of its
consolidated subsidiaries that, either individually or in the
aggregate, after taking into account (a) the maximum
amount of any liability that is reasonably anticipated to
arise on account of any litigation or any other contingent
liability or obligation (other than amounts that would be
remote), (b) the time at which any such liability or
obligation is anticipated to become due and (c) any
expected insurance recovery with respect thereto, are
reasonably expected to have a Materially Adverse Effect.

(C)       Since December 31, 2000, except as set forth
in the SEC Reports, there has been no development or
event, nor any prospective development or event known to
Alpha, or any litigation, proceeding or other action
commenced against Alpha seeking an injunction or other
restraining order, damages or other relief from a court or
administrative agency of competent jurisdiction pending,
threatened or, to Alpha's knowledge, contemplated, or any
action of any Governmental Authority, that is reasonably
expected to have a Materially Adverse Effect.

SECTION 3.09.                Subsidiaries.  As of the date
hereof, Alpha has no subsidiaries other than (a) those listed
on Exhibit 21 of Alpha's Annual Report on Form 10-K for
the year ended December 31, 2000 and (b) the Alpha
Designee.



SECTION 3.10                 No Litigation.  No litigation
or claim (including those for unpaid taxes) or
environmental proceeding against Alpha is pending,
threatened or, to Alpha's knowledge, contemplated that, if
determined adversely, would (after taking into
consideration any reasonably expected insurance recovery
with respect thereto), have a Materially Adverse Effect on
Alpha.

SECTION 3.11.                Disclosure.  The SEC
Reports contain all material information concerning Alpha
required to be set forth therein, and no event or
circumstance has occurred or exists since the most recent
SEC Report, that would require Alpha to disclose such
event or circumstance in order to make the statements in
the SEC Reports not misleading as of the date of the
Closing, but that has not been so disclosed.

              ARTICLE IV

   REPRESENTATIONS AND WARRANTIES OF
               WATERTONE

          As a material inducement to Alpha to issue and
contribute (or cause the Alpha Designee to contribute) the
Transfer Shares to the LLC, Watertone hereby represents
and warrants to Alpha as follows:

SECTION 4.01.                 Authorization;
Enforceability; No Violations.

(A)     Watertone is a limited
partnership, duly organized, validly existing
and in good standing under the laws of the
State of Delaware and has all requisite
partnership power and authority to execute
and deliver this Agreement and each of the
other Transaction Documents and perform
the terms and provisions of this Agreement
and each of the other Transaction
Documents to be performed by it and has
taken all necessary partnership action to
authorize the execution, delivery and
performance of this Agreement and each of
the other Transaction Documents by it and
to consummate the transactions
contemplated hereby and thereby to be
performed by it.  No other proceedings on
the part of Watertone, and no consent of the
members or partners in Watertone is
required, for the valid execution and
delivery by Watertone of this Agreement
and each of the other Transaction
Documents or the performance and
consummation by Watertone of the
transactions contemplated by this
Agreement and each of the other
Transaction Documents to be performed by
it.  Watertone has duly executed this
Agreement, and assuming the due execution
of this Agreement by Alpha, this Agreement
constitutes the legal, valid and binding
obligations of Watertone, enforceable
against Watertone in accordance with its
terms, except as enforceability may be
limited by applicable bankruptcy,
insolvency, reorganization, moratorium or
similar laws affecting the enforcement of
creditors' rights generally and by general
principles of equity (regardless of whether
enforcement is sought



in a proceeding in
equity or at law).  Each of the other
Transaction Documents, when executed and
delivered by Watertone (and, if
contemplated hereby, the Alpha Designee),
will constitute the legal, valid and binding
obligations of Watertone, enforceable
against Watertone in accordance with its
terms, except as enforceability may be
limited by applicable bankruptcy,
insolvency, reorganization, moratorium or
similar laws affecting the enforcement of
creditors' rights generally and by general
principles of equity (regardless of whether
enforcement is sought in a proceeding in
equity or at law).

(B)     Catskill is a limited liability
company, duly organized, validly existing
and in good standing under the laws of the
State of New York and has all requisite
limited liability company power and
authority, and all authorizations, licenses,
permits and certifications, necessary for it to
own its properties and assets and to carry on
its business as it is now being conducted and
as it is anticipated to be conducted.

(C)     The execution, delivery and
performance of this Agreement and each of
the other Transaction Documents by
Watertone and the consummation by
Watertone of the transactions contemplated
hereby and thereby to be performed by it do
not and will not (i) violate any provision of,
or contravene the applicable provisions of,
any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any
Governmental Authority to or by which
Watertone is a party or by which any of its
property or assets is subject or bound, (ii)
violate, result in a breach of or constitute a
default (which has not been waived or
consented to) or give rise to an event of
acceleration under the Catskill Operating
Agreement or any other contract, lease, loan
or credit agreement, mortgage, security
agreement, trust indenture or other
agreement or instrument to which Watertone
is a party or by which it is bound or to which
any of its properties or assets is subject, nor
result in the creation or imposition of any
Lien of any kind upon any of the properties
or assets of, or interests in, Watertone
(including, without limitation, the
Transferred Interests), (iii) violate any
provision of the organizational and other
governing documents of Watertone or
Catskill, (iv) preclude (pursuant to Section
4.1(d) of the Catskill Operating Agreement
or otherwise) the distribution or payment to
the LLC of any of the proceeds or revenues
from the Casino and Wagering Operations
component of the Business (as those terms
are used in the Catskill Operating
Agreement) that would be payable to
Watertone on account of, for or with respect
to the Transferred Interests if the same had
not been transferred to the LLC as
contemplated hereby or (v) result in the loss,
termination or forfeiture by Watertone of
any voting, management or similar rights or
benefits pursuant to Section 11.3 of the
Catskill Operating Agreement or otherwise.



(D)     The Catskill Operating
Agreement is valid and binding on the
parties thereto and is enforceable against
Watertone and the other parties thereto in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the
enforcement of creditors' rights generally
and by general principles of equity
(regardless of whether enforcement is
sought in a proceeding in equity or at law).
Watertone is not, and immediately after the
consummation of the transactions
contemplated hereby to be performed by
Watertone will not be, in default or breach
(with or without the giving of notice, the
lapse of time or both) of any of its
obligations under the Catskill Operating
Agreement.  Watertone is in full compliance
in all respects with all of its obligations
under the Catskill Operating Agreement,
and to Watertone's knowledge, each of the
other parties to the Catskill Operating
Agreement is in compliance with all of its
respective obligations thereunder.

(E)      Watertone currently owns
and holds, and as of the Closing will own
and hold, a 29.167% economic interest in
the Casino Component and a 25% economic
interest in the Horse Racing Component and
is, and as of the Closing will be, a Voting
Member (as such term is defined in the
Catskill Operating Agreement).

SECTION 4.02.                Securities Act
Representations; Legends.

(A)     Watertone understands that:  (i)
the offering and sale of the Transfer Shares
to be issued as contemplated hereby are
intended to be exempt from the registration
requirements of the Securities Act; (ii) the
Transfer Shares have not been registered
under the Securities Act or any other
applicable securities laws and such
securities may be resold only if registered
under the Securities Act and any other
applicable securities laws or if an exemption
from such registration requirements is
available; and (iii) Alpha is not required to
register any sale or resale of any of the
Transfer Shares under the Securities Act and
any other applicable securities laws.

(B) The Transfer Shares to be issued
and contributed to the LLC as contemplated
by this Agreement are being acquired by the
LLC for its own account, for investment
purposes, and not with a view to, or for sale
in connection with, any distribution thereof
in violation of the Securities Act or any
other securities laws that may be applicable.
(C)       Watertone is not an affiliate (as
such term is defined in the Securities Act) of
Alpha.



(D) Watertone (i) has sufficient
knowledge and experience in financial and
business matters so as to be capable of
evaluating the merits and risks of its
investment in the Transfer Shares and is
capable of bearing the economic risks of
such investment, including a complete loss
of its investment in the Transfer Shares; (ii)
believes that its investment in the Transfer
Shares is suitable for it based upon its
objectives and financial needs, and it has
adequate means for providing for its current
financial needs and business contingencies
and has no present need for liquidity of
investment with respect to the Transfer
Shares; (iii) has no present plan, intention or
understanding, and has made no
arrangement, to sell or otherwise dispose of
(or to have the LLC sell or otherwise
dispose of) any of the Transfer Shares at any
predetermined time or for any
predetermined price; (iv) has not purchased,
sold or entered into any put option, short
position or similar arrangement with respect
to (and will not cause or permit the LLC to
purchase, sell or enter into any put option,
short position or similar arrangement with
respect to) the common stock of Alpha, and
will not, for so long as the LLC owns any of
the Transfer Shares, purchase, sell or enter
into any such put option, short position or
similar arrangement (or cause or permit the
LLC to purchase, sell or enter into any such
put option, short position or similar
arrangement) in any manner that violates the
provisions of the Securities Act or the
Exchange Act.  Watertone is, and the LLC
will at the Closing be, an "accredited
investor," as that term is defined in Rule
501(a) promulgated under the Securities
Act.

(E)       No oral or written statements or
representations have been made to
Watertone by or on behalf of Alpha in
connection with the offering and sale of the
Transfer Shares hereunder other than those
expressly set forth herein, and Watertone is
not (directly or through the LLC as
contemplated hereby) subscribing for, or
seeking to acquire, the Transfer Shares as a
result of, or in response to, any
advertisement, article, notice or other
communication published in any newspaper,
magazine or similar media or broadcast over
television or radio, or presented at any
seminar or meeting.
(F) Watertone acknowledges that the
Securities Act restricts the transferability of
securities, such as the Transfer Shares,
issued in reliance upon the exemption from
the registration requirements of the
Securities Act provided by Section 4(2)
thereunder, and that, subject to Section 5.02,
the certificate representing the Transfer
Shares will bear a legend in substantially the
following form, by which the LLC and each
subsequent holder of such securities will be
bound:



THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS
AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH SECURITIES
LAWS.  THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OTHER
THAN (A) TO ALPHA HOSPITALITY
CORPORATION ("ALPHA") OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT
TO RULE 144 UNDER THE SECURITIES
ACT,  (C) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (D) PURSUANT TO
AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES
ACT.  THE HOLDER OF THIS
CERTIFICATE AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED (UNLESS
SUCH SECURITY IS TRANSFERRED
PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.  IN CONNECTION WITH
ANY PROPOSED TRANSFER PURSUANT
TO CLAUSES (B) OR (C) ABOVE, ALPHA
MAY REQUIRE THAT THE TRANSFEROR
FURNISH IT WITH AN OPINION OF
COUNSEL CONFIRMING THAT SUCH
TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.

(G) Watertone acknowledges that as
the common stock of Alpha is currently
quoted on a U.S. automated interdealer
quotation system, Rule 144A under the
Securities Act may not be available with
respect to resale of the Transfer Shares.

SECTION 4.03.                   No Brokers.  No broker,
finder, agent or similar intermediary is entitled to any
broker's, finder's, placement or similar fee or other
commission in connection with the transactions
contemplated hereby based on any agreement, arrangement
or understanding with Alpha.

Section 4.04                    Compliance With
Regulations By Gaming Authorities.  Watertone
acknowledges and understands that Alpha is involved, and
anticipates being involved in the future, in gaming or
gambling activities and that Alpha is accordingly subject to
(and is expected to remain subject to) regulation by the
Mississippi Gaming Commission and/or other Gaming
Authorities.  Watertone further acknowledges and
understands that, as a consequence of the foregoing, (a)
Watertone and/or principals



thereof or therein may be
subject to a finding of suitability (or a similar
determination) by one or more Gaming Authorities.
Watertone agrees that it will, at its own expense, timely and
fully comply (and cause each of its principals to timely and
fully comply) with all rules and regulations of each
Gaming Authority having jurisdiction or authority over
Alpha or any of its operations, including, without
limitation, applying for a finding of suitability (or any
similar determination) and, if so ruled, ordered or otherwise
determined by any such Gaming Authorities, divesting
itself (or themselves) of any direct or indirect interest in
Alpha (including, without limitation, the Transfer Shares
and/or the LLC)), which may include, without limitation,
requiring the LLC to divest itself of the Transfer Shares or
any other direct or indirect interest in Alpha, and (b) in
addition to the legend referred to above in Section 4.02(F),
the certificate(s) representing the Transfer Shares will bear
a legend to the effect that the Transfer Shares are subject to
Mississippi law and the regulations of the Mississippi
Gaming Commission and such other legends as may be
required from time to time under the rules and regulations
of any applicable Gaming Authority.

               ARTICLE V

       RESTRICTIONS ON TRANSFER

          SECTION 5.01       Transfer Restrictions.

(A)       Watertone acknowledges that any proposed
offer, sale, pledge or other transfer of the Transfer Shares
prior to the date that is two (2) years from the date as of
which such securities were issued as contemplated
hereunder (or such other date as may be required pursuant
to Rule 144 under the Securities Act (or similar successor
provision) as in effect from time to time), in the absence of
registration under the Securities Act, is limited.
Accordingly, prior to such passage of time or such
registration, the Transfer Shares may be offered, sold,
pledged or otherwise transferred only to (i) Alpha, (ii) in an
offshore transaction in accordance with Rule 904 under the
Securities Act, (iii) pursuant to any other exemption from
registration provided by the Securities Act, (iv) pursuant to
Rule 144 under the Securities Act or (v) pursuant to an
effective registration statement under the Securities Act;
and in the case of any transfer pursuant to clause (ii), (iii)
or (iv), Alpha shall be entitled to receive an opinion of
counsel, in form and substance reasonably satisfactory to
Alpha, to the effect that registration is not required in
connection with such disposition.

(B)       Alpha agrees to issue certificates
representing the Transfer Shares without the legend
referenced in Section 4.02(F) at such time as (i) the holder
thereof is permitted to dispose of such Shares pursuant to
Rule 144(k) under the Securities Act (to the extent
applicable), (ii) such Shares are sold to a purchaser or
purchasers who (in the opinion of counsel to the seller of
such Shares, in form and substance reasonably satisfactory
to Alpha) are able to dispose of such securities publicly
without registration under the Securities Act and such
legend is no longer required to be included on the
certificates



representing such Shares or (iii) such Shares are
sold pursuant to an effective registration statement under
the Securities Act.

          SECTION 5.02.      Rules 144; Current
Information.  For so long as any of the Transfer Shares are
outstanding, Alpha will (i) cause its common stock to
continue to be registered under Section 12 of the Exchange
Act, file all reports required to be filed by it under the
Securities Act and the Exchange Act and will take such
further actions as Watertone may reasonably request, all to
the extent required from time to time to enable the LLC or
Watertone, as the case may be, to sell Transfer Shares
without registration under the Securities Act pursuant to the
safe harbors and exemptions provided by Rule 144 under
the Securities Act (to the extent applicable), as such Rule
may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC, and (ii) furnish
the LLC or Watertone, as the case may be, with all reports,
proxy statements and registration statements that Alpha
files with the SEC or distributes to its securityholders
pursuant to the Securities Act and the Exchange Act at the
times of such filings and distributions (unless such
documents are available electronically from the SEC or
elsewhere without charge and within a period reasonably
contemporaneous with the filing thereof with the SEC, in
which case such documents need not be provided to the
LLC or Watertone).

              ARTICLE VI

   WATERTONES'S COVENANTS REGARDING
         TRANSFERRED INTERESTS

          SECTION 6.01.      Exercise of Vote Attendant
to Transferred Interests.  If Watertone receives notice of
any vote (including, but not limited to, any majority vote of
Voting Members as contemplated by Section 3.11 or 4.20
of the Catskill Operating Agreement) to be taken under the
Catskill Operating Agreement, then Watertone shall
immediately give written notice thereof to Alpha (which
notice shall include all information available to Watertone
with respect to the matter to be voted upon), and, if, in the
reasonable judgment of Alpha, such vote could or might
affect any of the Transferred Interests (including, without
limitation, any economic benefits anticipated to be derived
therefrom), Watertone shall exercise its vote in connection
with the matter to be voted on as directed in writing by
Alpha.

          SECTION 6.02.      Exercise of Rights of
Consent Attendant to Transferred Interests.  If
Watertone otherwise has any opportunity under the Catskill
Operating Agreement or otherwise to exercise any vote
(including, but not limited to, any majority vote of Voting
Members as contemplated by Section 3.11 or 4.20 of the
Catskill Operating Agreement), or any right of consent or
approval, that could or might affect any of the Transferred
Interests (including, without limitation, any economic
benefits anticipated to be derived therefrom), Watertone
shall give prompt written notice thereof to Alpha and will
exercise such vote or right only as set forth in written
instructions received from Alpha.



          SECTION 6.03.      Obligation to Exercise Vote
as Directed.  If so requested in writing by Alpha,
Watertone shall exercise any vote (including, but not
limited to, any majority vote of Voting Members as
contemplated by Section 3.11 or 4.20 of the Catskill
Operating Agreement), or any right of consent or approval,
that is available under the Catskill Operating Agreement or
otherwise and that could or might affect any of the
Transferred Interests (including, without limitation, any
economic benefits anticipated to be derived therefrom) in
the manner so requested.

          SECTION 6.04.      Obligation to Give Notice of
Meetings.  Watertone shall immediately notify Alpha of
any and all meetings of Voting Members to be held
pursuant to Section 4.12 of the Catskill Operating
Agreement or otherwise, and if any vote to be taken at such
meeting could or might, in the reasonable judgment of
Alpha, affect any of the Transferred Interests (including,
without limitation, any economic benefits anticipated to be
derived therefrom), Watertone shall vote at such meeting as
Alpha directs in writing.

          SECTION 6.05.      No Amendments to Catskill
Operating Agreement.  Except as may be expressly
agreed to in writing by Alpha, Watertone shall not consent
or agree to any amendment or other modification of the
Catskill Operating Agreement if such amendment or other
modification could or might, in the reasonable judgment of
Alpha, affect any of the Transferred Interests (including,
without limitation, any economic benefits anticipated to be
derived therefrom).

          SECTION 6.06.      No Waivers Under Catskill
Operating Agreement.  Except as may be expressly
agreed to in writing by Alpha, Watertone shall not consent
or agree to any waiver of any provision of the Catskill
Operating Agreement (or the performance by any other
party to the Catskill Operating Agreement of any of its
obligations thereunder) if such waiver (or the non-
performance of such obligations) could or might, in the
reasonable judgment of Alpha, affect any of the
Transferred Interests (including, without limitation, any
economic benefits anticipated to be derived therefrom).



          SECTION 6.06.      No Attachment of Liens on
Transferred Interests.  Watertone will not, individually,
as a member or manager of the LLC or otherwise, (i) take
any action that would cause any Lien to attach to any of the
Transferred Interests (or any proceeds therefrom) or give
rise to any claim or right of set-off against any of the
Transferred Interests (or any proceeds therefrom) or (ii) fail
to take any action if the failure to take such action would
cause any Lien to attach to any of the Transferred Interests
(or any proceeds therefrom) or give rise to any claim or
right of set-off against any of the Transferred Interests (or
any proceeds therefrom).




              Article VI.

             MISCELLANEOUS

SECTION 7.01.                 Expenses.  Each
Party will bear all of its own expenses in connection with
the preparation and negotiation of this Agreement and the
other Transaction Documents and the consummation and
performance of its obligations hereunder and thereunder.

SECTION 7.02.                 Notices.  All notices,
demands, requests, consents, approvals or other
communications (collectively, "Notices") required to be
given hereunder shall be in writing and shall be personally
served or deposited in the mail, registered or certified,
return receipt requested, postage prepaid, or delivered by
reputable overnight air courier service with charges
prepaid, or transmitted by facsimile, addressed as set forth
below, or to such other address as such party shall have
specified most recently by written notice given in
accordance with this Section 7.02:

               (A) if to Alpha, to:     Alpha Hospitality Corporation
                              12 East 49th Street
                              New York, New York 10017
                              Attention: Thomas Aro, Secretary
                              Facsimile No.: (212) 750-5171

               with a copy thereof (which shall not
constitute notice) simultaneously and similarly sent to:
                              Parker Duryee Rosoff & Haft
                              529 Fifth Avenue
                              New York, New York 10017
                              Attention: Herbert F. Kozlov, Esq.
                              Facsimile No.: (212) 972-9487

                         (B) if to Watertone, to:  Watertone Holdings, LP
                             c/o Scott Kaniewski
                             2412 Central Park Avenue
                             Evanston, IL 60201
                             Facsimile No.: (847) 328-4032

               with a copy thereof (which shall not
               constitute notice) simultaneously and similarly sent to:
                            Stites & Harbison
                            Attn: William W. Hopson
                            3350 Riverwood Pkwy, Suite 1700
                            Atlanta, GA  30339
                            Facsimile No.: (770) 850-7070



Any Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by
facsimile with receipt confirmed.  Any Notice otherwise
sent as provided herein shall be deemed given on the third
(3rd) Business Day following the date mailed or on the next
Business Day following delivery of such notice to a
reputable overnight air courier service.

SECTION 7.03.                Entire Agreement.  This
Agreement, together with the other Transaction
Documents, constitutes the entire agreement of the parties
with respect to the subject matters hereof and thereof and
supersedes all prior and contemporaneous agreements,
representations, understandings, negotiations and
discussions between the parties, whether oral or written,
with respect to such subject matters.

SECTION 7.04.                Amendment and
Waiver.  This Agreement may
not be amended, modified or waived except by a writing
executed by the Party against which such amendment,
modification or waiver is sought to been enforced.
Waivers may be made in advance or after the right waived
has arisen or the breach or default waived has occurred.
Any waiver may be conditional.  No waiver of any breach
of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision herein
contained.  No waiver or extension of time for performance
of any obligation or act shall be deemed a waiver or
extension of the time for performance of any other
obligation or act.

SECTION 7.05.                Assignment; No Third
Party Beneficiaries.  This Agreement and the rights, duties
and obligations hereunder may not be assigned or delegated
by either Alpha, on the one hand, or Watertone, on the
other hand, without the prior written consent of the other
party hereto; provided, however, that Alpha may, as
contemplated herein, designate an Affiliate thereof to be
the Alpha Designee, which is contemplated herein to
become a party to the LLC Operating Agreement.  Except
as provided in the preceding sentence, any purported
assignment or delegation of rights, duties or obligations
hereunder made without the prior written consent of the
other Party shall be void and of no effect.  This Agreement
and the provisions hereof shall be binding upon and
enforceable against the Parties and their respective
successors and assigns and shall inure to the benefit of and
be enforceable by each of the Parties and their respective
successors and permitted assigns.  This Agreement is not
intended to confer any rights or benefits on any Persons
other than as set forth above.

SECTION 7.06.                Severability.  The terms and
provisions of this Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or
provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof.  Furthermore, in lieu of any such invalid
or unenforceable term or provision, the Parties intend that
there shall be added as a part of this Agreement a provision
as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.



SECTION 7.07.                Further Assurances.  Each
Party, upon the request of the other Party, shall do all such
further acts and execute, acknowledge and deliver all such
further instruments and documents as may be necessary or
desirable to carry out, effectuate and/or evidence or
memorialize the transactions contemplated by this
Agreement; provided, that, if there shall be a Alpha
Designee, Alpha may cause the Alpha Designee to do so in
lieu of Alpha doing so.

SECTION 7.08.                Titles and Headings;
Interpretation.  Titles, captions and headings of the
Articles and Sections of this Agreement are for
convenience of reference only and shall not affect the
construction of any provision of this Agreement.
Whenever the singular number is used in this Agreement
and when required by the context, the same shall include
the plural and vice versa, and the neuter, masculine and
feminine gender of any pronoun or possessive shall include
all other genders.  Unless otherwise provided herein,
references herein to any Section or Article are references to
the corresponding Section or Article of this Agreement.
Use of the terms "herein," "hereof" or "hereunder" or
similar terms shall refer to this Agreement as a whole and
not to any particular Article, Section or other provision of
this Agreement.

SECTION 7.09.                Right of First Refusal.   In
the event Alpha proposes to sell any shares of its common
stock to a third party prior to the Closing, it will give the
LLC at least ten (10) business days' notice of such
proposed sale (the "Proposed Sale") (which notice (the
"Proposed Sale Notice") shall set forth the principal terms
and conditions of the Proposed Sale and the scheduled date,
time and location of the Proposed Sale) and shall not
consummate the Proposed Sale unless the LLC is provided
with the opportunity to purchase, simultaneously with the
consummation of the Proposed Sale, eighteen and seventy-
nine one-hundredths percent (18.79%) of the number of
shares of Alpha's common stock being sold by Alpha to
such third party in the Proposed Sale (such number of
shares, the "Protected Number"); provided, however, that
(a) the foregoing obligation shall terminate if the
consummation of the transactions contemplated by this
Agreement have been presented for approval to the
stockholders of Alpha at a meeting of stockholders and
such stockholders have failed to approve the consummation
of such transactions, (b) the foregoing obligation shall not
extend or apply to any issuance of shares of Alpha's
common stock upon the exercise of any right to purchase,
convert or exchange any securities of Alpha that are
exercisable for, convertible into or exchangeable for shares
of Alpha's common stock or the issuance of shares of
Alpha's common stock in consideration of the cancellation
of indebtedness owed by Alpha and (c) Alpha's obligation
to sell any shares of common stock pursuant to the
foregoing shall be limited to the lesser of the Protected
Number and the number of shares of common stock that
the LLC has committed, as set forth in a notice delivered to
Alpha at least two (2) business days prior to the scheduled
closing of the Proposed Sale, to purchase from Alpha at the
time of the Proposed Sale on the terms and conditions set
forth in the Proposed Sale Notice.



SECTION 7.10.                Adjustment in Number of
Transfer Shares.  Notwithstanding anything contained
herein to the contrary, if, between the date hereof and the
date of the Closing, the number of outstanding shares of
Alpha's common stock shall be increased on account of a
stock dividend, stock split or similar event, the number of
the Transfer Shares shall be proportionately increased, and
if the number of outstanding shares of Alpha's common
stock shall be decreased on account of a reverse stock split
or similar event, the number of the Transfer Shares shall be
proportionately decreased.

SECTION 7.11.                 Indemnification.
(A)       Each of the Parties (an "Indemnifying
Party") shall indemnify and hold harmless each other Party
and its respective directors, officers, employees, agents and
affiliates and the heirs, estates, executors, legal
representatives, successors and assigns of any of the
foregoing (all of the foregoing, collectively, an
"Indemnified Party") from and against, and shall
reimburse each Indemnified Party for, any and all
liabilities, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and other
legal costs, including those related to any appeal, and costs
of any investigation) (all of the foregoing, collectively,
"Losses") that have been suffered or incurred by such
Indemnified Party and that have resulted from, or been
occasioned by, (a) any breach or violation by the
Indemnifying Party of any of its representations,
warranties, covenants and other agreements set forth herein
or any of the other Transaction Documents or (b) any claim
asserted by any third party that, if true, would constitute a
breach or violation by the Indemnifying Party of any of its
representations, warranties, covenants and other
agreements set forth herein or in any related agreement of
the other Transaction Documents (any such claim, a
"Third-Party Claim").
(B)       If any Indemnified Party shall receive notice
of, or otherwise become aware of the assertion of, a Third-
Party Claim with respect to which such Indemnified Party
intends to seek indemnification under this Section 7.11,
then such Indemnified Party shall give prompt written
notice thereof to the Indemnifying Party, which notice shall
include or be accompanied with a copy of any summons,
complaint or other written evidence of such Third-Party
Claim to the extent that such summons, complaint or other
written evidence has been received by such Indemnified
Party or by any attorney or other agent thereof.  The failure
of an Indemnified Party to give such notice or to give such
notice promptly shall not relieve the Indemnifying Party of
its obligation to indemnify such (or any other) Indemnified
Party under this Section 7.11 except to the extent that the
failure to give such notice or the delay in giving such
notice has materially prejudiced the Indemnifying Party in
its ability to defend against such Third-Party Claim.  The
Indemnifying Party shall, with counsel selected by it
(which selection shall be subject to the approval of the
Indemnified Parties, such approval not to be unreasonably
withheld or delayed), be entitled to defend against and
settle any Third Party Claim; provided, however, that its
right to do so shall be conditioned upon its having
confirmed in writing to the Indemnified Parties its
obligation to indemnify them with respect to such Claim



(any such confirmation, a "Notice to Indemnify") and,
provided, further, however, that the Indemnifying Party
shall not be entitled to enter into any settlement of any such
Claim without the prior written consent of the Indemnified
Parties, which consent shall not be unreasonably withheld
or delayed.  Notwithstanding anything contained herein to
the contrary, the Indemnifying Party's obligation to
indemnify the Indemnifying Parties against any Third-Party
Claim shall be conditioned upon the Indemnifying Parties
providing full and timely cooperation in the defense of
such Claim, which cooperation shall include, without
limitation, furnishing such records, information and
testimony, and attending such conferences, discovery
proceedings, hearings, trials and appeals, as may
reasonably be requested by the Indemnifying Party.
(C)       Notwithstanding anything contained herein
to the contrary, except as provided in the next following
sentence, the Indemnifying Party shall not be obligated to
indemnify any Indemnified Party for, or otherwise pay, any
attorneys' fees or other legal or related costs (or any costs
of any investigation) suffered or incurred by any
Indemnified Party in connection with any Third-Party
Claim after the Indemnified Parties receive any Notice to
Indemnify with respect to such Claim; provided, however,
that, if, after giving any Notice to Indemnify, the
Indemnifying Party reverses its position and claims that it
is not required to indemnify the Indemnified Parties against
the Third-Party Claim, then, in the event the Indemnifying
Party is obligated hereunder to indemnify the Indemnified
Parties with respect to such Claim, the Indemnifying Party
shall bear and pay the reasonable attorneys' fees and other
legal costs, including those related to any appeal, and costs
of any investigation, incurred by the Indemnified Parties
after the Indemnifying Party has reversed its position and
claimed that it is not required to indemnify the Indemnified
Parties against such Claim.  Notwithstanding the foregoing,
if there is a legitimate and good faith conflict of interest
between the Indemnifying Party and the Indemnified
Parties in connection with the defense of any Third-Party
Claim so that one counsel or law firm could not properly
represent both parties in connection with such defense, the
Indemnifying Party, in the event it is obligated hereunder to
indemnify the Indemnified Parties with respect to such
Claim, shall bear and pay the reasonable attorneys' fees
and other legal costs, including those related to any appeal,
and costs of any investigation, incurred by the Indemnified
Parties in connection with such defense, regardless of
whether the Indemnifying Party has given a Notice to
Indemnify.  However, under no circumstances shall the
Indemnifying Party be obligated to pay for the attorneys'
fees or related legal fees of more than one attorney or law
firm for or on behalf of one or any group of the
Indemnified Parties.
SECTION 7.12.                GOVERNING LAW and
JURY WAIVER.  THIS AGREEMENT SHALL BE
GOVERNED BY, INTERPRETED UNDER AND
CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED WHOLLY WITHIN SUCH STATE,
WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.   Each of the
parties expressly waives its right to a jury trial
with respect to any suit,



litigation or other
judicial proceeding REGARDING this Agreement
OR ANY OTHER TRANSACTION DOCUMENT or
any dispute hereunder OR THEREUNDER or
relating hereto OR THERETO.  Each of the parties
agrees that any dispute under or with respect to this
Agreement or any of the other Transaction Documents
shall be determined before the state or federal courts
situated in the City, County and State of New York, which
courts shall have exclusive jurisdiction over and with
respect to any such dispute, and each of the Parties hereby
irrevocably submits to the jurisdiction of such courts.  Each
Party hereby agrees not to raise any defense or objection,
under the theory of forum non conviens or otherwise, with
respect to the jurisdiction of any such court.

SECTION 7.13.                Counterparts.  This
Agreement may be executed in counterparts, each of which
shall be deemed an original, all of which taken together
shall constitute one and the same instrument.

IN WITNESS WHEREOF, each of the Parties
hereto has caused this Agreement to be executed on its
respective behalf by the undersigned, thereunto duly
authorized, as of the date first set forth above.

ALPHA HOSPITALITY CORPORATION           WATERTONE HOLDINGS, LP
                                        By: BKB, LLC,
                                        Its General Partner
By: /s/Brett G. Tollman
Name:  Brett G. Tollman
Title:  Vice President                  By: /s/ Scott A. Kaniewski
                                        Name:  Scott A. Kaniewski
                                        Title: Member/Manager




     SCHEDULE 3.02 TO CONTRIBUTION
               AGREEMENT

Part I   Authorized Capital Stock

75,000,000 shares of common stock
5,000,000 shares of preferred stock, of which _____ shares
have been designated as Class A Convertible Preferred
Stock, 821,496 shares have been designated as Class B
Convertible Preferred Stock, 135,162 shares have been
designated as Class C Convertible Preferred Stock and
4,000 shares have been designated as Class D Convertible
Preferred Stock

Part II   Authorized Capital Stock At Time Of
Closing

Same as under Part I above subject to (A) the issuance of
additional shares of common stock or preferred stock upon
the conversion of indebtedness owed to Bryanston, (B) the
issuance of additional shares of common stock upon the
conversion of shares of the Class B and C Convertible
Preferred Stock, (C) the issuance additional shares of
common stock upon the conversion of shares of the Class
D Convertible Preferred Stock, 4% Convertible Notes and
Warrants issued to Societe Generale and/or (D) the
issuance of shares of common stock in lieu of cash
dividends accrued on outstanding preferred stock.

Outstanding Securities (Which, As Of The
Closing, May Be Subject To Adjustment Based
Upon The Matters Set Forth Above Or Below):



              Securities
   Number Of Shares Of Common Stock
Actual Or On A Converted/Exercised Basis


Shares of common stock (exclusive of shares
committed to be issued in consideration for the
 cancellation of indebtedness owed to
              Bryanston)                                   2,457,190


 821,496 shares of Class B Convertible
Preferred Stock, convertible at the rate of 0.8
shares of common stock per share of preferred
                                 stock                      657,197


 135,162 shares of Class C Convertible
Preferred Stock, convertible at the rate of 2.4
shares of common stock per share of preferred
                                 stock                     324,339


                         Stock options                     252,800


Right granted to Stanley Tollman to convert up
to $2,000,000 of deferred compensation into
shares of common stock at $20 per share (the
equivalent number of shares of common stock
set forth in the column to the rights is premised
upon $1,655,000 of deferred compensation,
  which was the amount of compensation
deferred through June 30, 2001; which amount
will increase, unless waived by Mr. Tollman,
               by $62,500 per quarter)                    82,750



      Initial public offering warrants                    84,800


   Warrants issued to Societe Generale                    12,500


$1,250,000 of Alpha's 4% Convertible Notes
Class issued to Societe Generale, which are
convertible (inclusive of accrued but unpaid
interest) into shares of common stock at a price
(subject to a maximum of $24) based upon a
formula related to the current market value of
   the common stock at the time of the
conversion, determined as the average of the
two lowest Closing Prices during the 30
  consecutive trading days immediately
preceding the conversion (the equivalent
number of shares of common stock set forth in
the column to the rights is premised upon a
market price of $8.10 (the closing price on
August 3, 2001) and is calculated without
taking into consideration any accrued but
       unpaid interest on these Notes)                   154,321


Class D Convertible Preferred Stock issued to
Societe Generale with an outstanding stated
value of $1,250,000, which is convertible
(inclusive of accrued but unpaid dividends)
into shares of common stock at a price (subject
to a maximum of $60) based upon a formula
related to the current market value of the
common stock at the time of the conversion,
determined as the average of the two lowest
Closing Prices during the 30 consecutive
trading days immediately preceding the
conversion (the equivalent number of shares of
common stock set forth in the column to the
rights is premised upon a market price of $8.10
(the closing price on August 3, 2001) and is
calculated without taking into consideration
any accrued but unpaid dividends on the
                      preferred stock)

                                                         154,321



Under the terms of the Class B and C Convertible Preferred
Stock, Alpha may be obligated to issue shares of its
common stock in lieu of cash dividends accrued on such
Preferred Stock.

The issuance of shares of common stock upon conversion
of the Class D Convertible Preferred Stock is subject to
limitations as set forth in the certificate of designation with
respect to such Preferred Stock; and the issuance of shares
of common stock upon conversion of the 4% Convertible
Notes is subject to limitations as set forth in the
documentation relating to such Notes.

Under the terms of the certificate of designation with
respect to the Class D Convertible Preferred Stock, any
shares of such Preferred Stock outstanding on February 8,
2005 are subject to mandatory conversion, and under the
terms of such certificate of designation, shares of the Class
D Convertible Preferred Stock may be subject to
redemption in certain situations, such as a "Change of
Control Transaction" or a "Redemption Event" (as those
terms are defined therein).




                             EXHIBIT A






  ___________________________________

          OPERATING AGREEMENT

                  OF

         NEW YORK GAMING, LLC

  A Georgia Limited Liability Company

  ___________________________________





THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE GEORGIA SECURITIES ACT AND HAVE
NOT BEEN SOLD THROUGH PUBLICLY
DISSEMINATED ADVERTISEMENTS, NEWSPAPER
OR OTHER MASS SOLICITATION OR BY SEMINAR.
IN ADDITION, THESE SECURITIES HAVE NOT BEEN
REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM SUCH
REGISTRATION SET FORTH IN THE SECURITIES
ACT OF 1933 PROVIDED BY SECTION 4(2)
THEREOF, NOR HAVE THEY BEEN REGISTERED
WITH THE SECURITIES COMMISSIONER OF
GEORGIA IN RELIANCE UPON AN EXEMPTION
FROM SUCH REGISTRATION FOUND AT O.C.G.A.
10-5-9(13).  THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY
AND MAY NOT BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD OR TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE TERMS AND
CONDITIONS OF THIS AGREEMENT AND IN A
TRANSACTION THAT IS EITHER EXEMPT FROM
REGISTRATION UNDER SUCH SECURITIES ACTS
OR PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACTS.



  Article I.                                                Definitions
  1
  Article II.                                               FORMATION OF COMPANY
  5
2.1       Formation.
5
2.2       Further Filings.
5
2.3       Name.
6
2.4       Principal Place of Business.
6
2.5       Registered Office and Registered
Agent.
6
2.6       Business of the Company.
6
2.7       Duration.
6
  Article III.                                              Members; Membership
  Interests
  6
3.1       Members.
6
3.2       Classes of Members.
6
3.3       Representation as to Investment.
7
  Article IV.                                           Management by MANAGER
  9
4.1       General.
9
4.2       Actions Requiring the Approval of
All of the Members.
9
4.3       Actions Involving the Transferred
Interests.
10
4.4       Standard of Care.
10
4.5       Liability for Certain Acts.
10
4.6       Indemnity of Manager.
11
4.7       Appointment and Removal of
Manager.
11
  Article V.                                            Meetings of Members and
  Actions on Written Consent
  11
5.1       Annual Meeting.
11
5.2       Special Meetings.
11
5.3       Place of Meetings.
11
5.4       Notice of Meetings and Quorum.
12
5.5       Meetings of all Members.
12
5.6       Record Date.
12
5.7       Manner of Acting.
12
5.8       Proxies.
12
5.9       Action by Members Without a
Meeting.
12
5.10      Waiver of Notice.
13
5.11      Meeting by Telephone.
13
  Article VI.                                         Rights and Obligations of
  Members
  13
6.1       Limited Liability.
13
6.2       List of Members.
13




6.3       Priority and Return of Capital.
13
  Contributions to the Company and
  additional capital
  contributions; cash calls
  14
7.1       Members' Capital Contributions.
14
7.2       Additional Contributions.
14
7.3       Limited Obligations of Members.
14
7.4       Withdrawal or Reduction of
Members' Contributions to Capital.
14
7.5       No Third Party Beneficiaries.
14
  Article VIII.                                     Distribution to Members
  14
8.1       Distributions.
14
8.2       Limitation Upon Distributions.
15
8.3       Priority of Distributions.
15
8.4       Withholding.
15
8.5       Distributions Upon Dissolution.
15
8.6       Loans to Company.
15
  Article IX.                                               Allocations
  16
9.1       Allocation of Net Profits and Net
Losses.
16
9.2       Special Allocation of Gain and Loss
Upon Sale of Company's Property.
16



9.3       Qualified Income Offset; Minimum
Gain Chargeback; Losses Creating
Negative Capital Accounts.
16
9.4       Priority Returns.
18
9.5       Compliance With Code  704(b)
and 704(c).
18
9.6       Overriding Allocations.
18
  Article X.                                                COMPENSATION AND
  REIMBURSEMENTS OF
  MEMBERS and the Manager
  18
10.1      Compensation.
18
10.2      Out-of-Pocket Reimbursements.
18
  Article XI.                                           ACCOUNTING, BOOKS, AND
  RECORDS
  18
11.1      Accounting Method.
18
11.2      Accounting Period.
19
11.3      Records, Audits and Reports.
19
11.4      Additional Books and Records.
19
11.5      Financial Statements.
19
11.6      Tax Returns.
19
11.7      Tax Matters Person.
19
  Article XII.                                              Transferability
  20
12.1      General Prohibition.
20



12.2      Conditions of Substituted
Membership.
20
12.3      Right to Purchase Residual Rights.
21
12.4      Successors as to Economic Rights.
21
12.5      Restrictions on Resignation.
22
  Article XIII.                                             Substitute Members
  22
  Article XIV.                                    Dissolution and Termination
  22
14.1      Dissolution.
22
14.2      Effect of Dissolution.
24
14.3      Winding Up, Liquidation and
Distribution of Assets.
24
14.4      Certificate of Termination.
26
  Article XV.                                        Miscellaneous Provisions
  26
15.1      Application of Georgia Law.
26
15.2      No Action for Partition.
26
15.3      Execution of Additional Instruments.
26
15.4      Acceptance of Prior Acts by New
Members.
26
15.5      Construction.
27
15.6      Headings.
27
15.7      Waivers.
27



15.8      Rights and Remedies Cumulative.
27
15.9      Severability.
27
15.10     Heirs, Successors and Assigns.
27
15.11     Creditors.
27
15.12     Counterparts.
27
15.13     Federal Income Tax Elections.
27
15.14     Notices.
28
15.15     Amendments.
28
15.16     Provisions Conflicting with the Act.
28
15.17     Banking.
28
15.18     Title to Property.
28
15.19     Authority of the Manager and
Members to Engage in Other
Business.
28
15.20     Indemnification and Exculpation of
Members.
28
15.21     Indemnification for Breach.
29
15.22     Entire Agreement.
30
15.23     Determination of Matters Not
Provided For In This Agreement.
30
15.24     Further Assurances.
31



15.25     Time.
31




          OPERATING AGREEMENT
                  OF
         NEW YORK GAMING, LLC


          THIS OPERATING AGREEMENT (the
"Agreement") is made and entered into as of the ____ day
of ______, 2001, by and among Watertone Holdings,
LP ("Watertone"), a Delaware limited partnership, and
Alpha __________ Corporation ("Alpha," and
collectively with Watertone referred to as the "Parties" and
each as a "Party" and the Parties as members in the
Company (as hereinafter defined) are referred to
collectively as the "Members" and each as a "Member").

           R E C I T A L S:

          A.   A limited liability company was formed
under the name New York Gaming, LLC (such limited
liability company, the "Company") pursuant to and under
the provisions of the Georgia Limited Liability Company
Act by having the Articles of Organization of the Company
filed with the Georgia Secretary of State on July 20, 2001.

          B.   The Parties desire to enter into this
Agreement to establish their respective rights and
obligations with respect to the Company.

          NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein, the
Parties hereby agree as follows:

              Article I.
              Definitions
The following terms used in this Agreement shall
have the following respective meanings (unless otherwise
expressly provided herein):
"Act."  The Georgia Limited Liability Company
Act at O.C.G.A.  14-11-100, et seq., as such Act may be
amended from time to time (including corresponding
provisions of succeeding statutes).
"Affiliate."  A Person or Persons who (i) directly or
indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the
Person(s) in question, (ii) is a manager, officer, director,
member, equity holder or shareholder of the Person(s) in
question, or (iii) is related by blood or marriage to the
Person in question.  The term "control," as used in the
immediately preceding sentence, means, ownership of at
least 50% of the beneficial interest or the voting rights of
any entity, or the right to exercise, directly or indirectly, at
least 50% of the voting rights of any entity, including the
possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such
controlled Person.



"Agreement."  This Operating Agreement as
originally executed and as amended, supplement, modified
or otherwise changed from time to time.  This Operating
Agreement shall be effective as of ________, 2001.
"Articles of Organization."  The Articles of
Organization of the Company, as filed with the Secretary of
State of Georgia as the same may be amended from time to
time.
"Business."  The Company shall hold, manage,
control and distribute the following assets and any proceed
resulting therefrom or otherwise related thereto:
A.        The Twenty-Nine and One Hundred Sixty-
Five Thousandths Percent (29.165%) interest in the gaming
and wagering operations and the Twenty-Five Percent
(25%) interest in the horse racing operations of Catskill
Development, L.L.C. ("Catskill"), which was, or
concurrently herewith is being, contributed, transferred and
assigned by Watertone to the Company, as contemplated
by Section 2.01 of the Contribution Agreement (as
hereinafter defined) and as set forth in that certain
Assignment Agreement (the "Assignment"), dated as of
even date herewith, by Watertone in favor of the Company
and others (such interests are hereinafter referred to
collectively as the "Transferred Interests").
B.        The Eight Hundred Fifty Thousand Nine
Hundred Forty-Three (850,943) shares of common stock in
Alpha that have been, or concurrently herewith are being,
issued and contributed by Alpha to the Company as
contemplated by Section 2.01 of the Contribution
Agreement (such shares the "Transfer Shares").
The Company may, however, with, but only with
the prior written consent of all of the Members, also engage
in all business activities permitted by the Act and as may
be stated in its Articles of Organization, as amended.
"Business Day."  Any day other than a Saturday,
Sunday or other day on trading is not conducted on the
New York or American Stock Exchange.
"Capital Account."  A capital account maintained
in accordance with the rules contained in Treas. Reg.
1.704-1(b)(2) as maintained in accordance with applicable
rules under the Code and as set forth in [Treas. Reg.  704-
1(b)(2) as maintained in accordance with applicable rules
under the Code and as set forth in] Treas. Reg.  1.704-
1(b)(2)(iv) as amended from time to time. Consistent
therewith, each Member's Capital Account will be adjusted
from time to time pursuant to Article IX hereof, the
purpose of which is to set forth certain operating rules for
the allocation of book items of income, gain, loss and
deduction for Capital Account purposes. The provisions of
Article IX hereof shall be construed in a manner consistent
with Treasury Regulations Section 1.704-1 (b)(2)(iv).
Upon the transfer hereunder of all or part of a Member's
interest, other than a transfer that terminates the Company
as a partnership within the meaning of Code Section
708(b)(1)(B), the Capital Account of the transferor
Member that is attributable to the transferred Membership
Interest will carry over to the transferee Member.  In the
event of a transfer of all or part of a Member's interest that
causes a termination of the Company as a partnership
within the meaning of Code Section 708(b)(1)(B), the
Members' Capital Accounts will be adjusted in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv)(1).



"Capital Contribution."  Any contribution, as
defined in O.C.G.A.  14-11-101(4), to the capital of the
Company in cash or property by a Member whenever
made.
"Catskill Operating Agreement."  That certain
First Amended & Restated Operating Agreement of
Catskill Development, L.L.C., effective as of January 1,
1999, by and among Watertone and others, as such
agreement may be amended, supplemented or otherwise
changed from time to time.
"Cause."  (i) Committing a willful or grossly
negligent act or an act of fraud that adversely affects the
Company, (ii) committing a felony or (iii) abusing alcohol,
narcotics or any other controlled substance while
performing obligations under this Agreement.
"Classes of Members" and "Class of
Membership."  Class A Members and Class B Members
as further described and differentiated in Article III, and
any other classes, if any, that may be hereafter authorized
by the Company with the prior written consent of all of the
Members.
 "Code."  The Internal Revenue Code of 1986, as
amended from time to time.  Any reference to a specific
section or sections of the Code shall be deemed to include a
reference to any corresponding provision of succeeding
law.
"Company."  New York Gaming, LLC, a Georgia
limited liability company.
"Contribution Agreement."  That certain
Contribution Agreement, dated as of August 9, 2001, by
and between Alpha and Watertone, as the same may be
amended, supplemented, modified or otherwise changed.
"Distributable Cash."  All cash, revenues and
funds received by the Company from Company operations,
(which shall include all Transferred Interests Proceeds and
Transfer Shares Proceeds (as those terms are defined
below)), less the sum of the following to the extent paid or
set aside by the Company:  (i) all principal and interest
payments on indebtedness of the Company and all other
sums paid to creditors; (ii) all cash expenditures incurred
incident to the normal operation of the Company's
business; and (iii) such Reserve, if any, as all of the
members have agreed to in writing as reasonably necessary
to the proper operation of the Company's business.
"Exchange Act."  The Securities Exchange Act of
1934, as amended, together with the rules and regulations
promulgated thereunder.
"Economic Interest."  A Member's or Economic
Interest Owner's right to share in Net Profits, Net Losses
and distributions of the Company's assets to the extent
provided in this Agreement and the Act, but shall not
include any right to vote on, consent to or otherwise
participate in the management of the Company or any
decisions by the Members by nature of the interest alone.



"Economic Interest Owner."  The owner of an
Economic Interest who or that is not a Member.
"Entity."  Any general partnership, limited
partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative or association or
other business entity or any foreign trust or foreign
business organization.
"Fiscal year."  The Company fiscal year, which
shall be the calendar year.
"Initial Capital Contribution."  The initial
contribution to the capital of the Company made by a
Member pursuant to this Agreement.
"Majority Interest." In the case of a vote or action
taken by all the Members, Membership Interests of
Members which, taken together, exceed fifty percent (50%)
of the aggregate of all Membership Interests in the case of
a vote or action taken by all the Members or, in the case of
a Class of Members, the Membership Interests of any
particular Class of Membership which, taken together
exceed fifty percent (50%) of the aggregate of the
Membership Interests represented by that Class of
Members.
"Manager."  The Person serving pursuant to and
with the powers and responsibilities set forth in Article IV.
The initial Manager shall be Watertone.
"Member."  Each of the parties who or that
execute a counterparts of this Agreement as a member in
the Company and each of the parties who may hereafter
become members of the Company as agreed to in writing
by all of the then-members in the Company.  If a Person is
a Member immediately prior to the purchase or other
acquisition by such Person of a Membership Interest or an
Economic Interest, such Person shall have all the rights of a
Member with respect to such purchased or otherwise
acquired Membership Interest or Economic Interest, as the
case may be.
"Membership Interest."  A Member's entire
interest in the Company, including such Member's
Economic Interest and the right to participate in the
management of the business and affairs of the Company,
including the right to vote on, consent to or otherwise
participate in any decision or action of or by the Members
pursuant to this Agreement or the Act.
"Net Losses."  The Company's losses computed
pursuant to Section 9.l.
"Net Profits."  The Company's net income
computed pursuant to Section 9.1.
"O.C.G.A."  Official Code of Georgia Annotated.
 "Person."  Any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors
and assigns of such "Person" where the context so permits.
"Reserves."  With respect to any fiscal period,
funds set aside or amounts



allocated during such period to
reserves, which shall be maintained in amounts deemed
sufficient as set forth in writing agreed to by all of the
Members, for working capital and to pay taxes, insurance,
debt service or other costs or expenses incident to the
ownership or operation of the Company's business.
"Securities Act."  The Securities Act of 1933, as
amended, together with the rules and regulations
promulgated thereunder.
"Transfer." With respect to any Membership
Interest and Economic Interest, or any of the Transfer
Shares, any sale, assignment, gift or any other disposition,
or any pledge, hypothecation or other encumbrance, by a
Member or Economic Interest Owner, as the case may be,
whether voluntary, involuntary or by operation of law.
"Transferred Interests Proceeds."  All proceeds
and other distributions of any nature whatsoever (in cash or
any other property) received or entitled to be received by
the Company on account of or with respect to the
Transferred Interests or any portion thereof or any right or
interest therein and all payments received or entitled to be
received by the Company (as damages following judgment,
as settlement payments or otherwise) with respect to the
Assignment, any enforcement thereof or on account of or
with respect to any breach or violations thereof.
"Transfer Shares Proceeds."  All proceeds and
other distributions of any nature whatsoever (in cash or any
other property) received or entitled to be received by the
Company on account of or with respect to the Transfer
Shares or any portion thereof or any right or interest
therein.
"Transferring Member."  A Member or Economic
Interest Owner who or that Transfers for consideration or
gratuitously all or any portion of its Membership Interest or
Economic Interest.
"Treasury Regulations," "Regulations" or
"Treas. Reg."  The Federal Income Tax Regulations
promulgated under the Code, as such regulations may be
amended from time to time (including corresponding
provisions of succeeding regulations).
              Article II.
         FORMATION OF COMPANY
2.1       Formation.     On July 20, 2001, the
Members organized a limited liability company by having
Articles of Organization filed with the Secretary of State of
Georgia in accordance with the Act.  It is the Members'
intention that the Company is, and constitutes, a
partnership for purposes of federal income taxation.
2.2       Further Filings. The Members shall
execute such further documents (including amendments to
the Articles of Organization) and take such further action
as is



appropriate to comply with the requirements of law
for the formation or operation of a limited liability
company in Georgia.
2.3       Name.  The name of the Company is New
York Gaming, LLC.
2.4       Principal Place of Business.  The principal
place of business of the Company is 2412 Central Park
Avenue, Evanston, Illinois, 60201.  The Company may
locate its place of business and registered office at any
other place or places as the Manager may from time to
time, with the prior written consent of all of the Members,
deem advisable.
2.5       Registered Office and Registered Agent.
The Company's initial registered office shall be at the
office of its registered agent at 3350 Riverwood Parkway,
Suite 1700, Atlanta, GA  30339, and the name of its initial
registered agent at such address is S&H Atlanta, LLC.  The
registered office and registered agent may be changed from
time to time by filing the address of the new registered
office and/or the name of the new registered agent with the
Secretary of State of Georgia pursuant to the Act and the
applicable rules promulgated thereunder.
2.6       Business of the Company.  The business of
the Company is and shall be described in Article I in the
definition of "Business."
2.7       Duration.  The Company shall have
perpetual duration but may be dissolved by the Members in
accordance with Article XIV.
             Article III.
     Members; Membership Interests
3.1       Members.  The names and addresses, and
Classes of Membership of the Members are set forth in
Exhibit "A" attached hereto and incorporated herein by
reference.  The initial Membership Interests of the
Members are also set forth in Exhibit "A".
3.2       Classes of Members.  The Company has
two (2) Classes of Members.  The Classes of Members are
based on each component of the Business so that a
Member's Economic Interest in the Company is reflected
by the cash flow and profits from such Member's
respective interests in each of the two (2) separate
components of the Business.  The Class of Membership for
each Member is set forth on Exhibit "A."  The distributions
and allocations to the Members are based on the respective
Member's Class of Membership.  The Classes of Members
are as follows:



Classes
Business Component
Class A                  Control,
                         Management and All Rights to
                         Receive Distributions from the
                         Proceeds of the Transfer Shares

Class B                  Control,
                         Management and All Rights to
                         Receive Distributions from the
                         Proceeds of Transferred Interests

3.3       Representation as to Investment.  Each
Member represents and warrants to each of the other
Members that it acquired its Membership and Economic
Interests for investment purposes only and not with an
intention of reselling its Membership or Economic Interest.
3.4       Further Investment Representations.
Without limiting the scope of Section 3.3 above, each Class
A Member represents and warrants to the other Members
as follows:
(a)       Such Class A Member understands
that: (i) the offering and sale of the Transfer Shares being
issued and contributed to the Company as contemplated
hereby are intended to be exempt from the registration
requirements of the Securities Act; (ii) the Transfer Shares
have not been registered under the Securities Act or any
other applicable securities laws and such securities may be
resold only if registered under the Securities Act and any
other applicable securities laws or if an exemption from
such registration requirements is available; and (iii) the
issuer of the Transfer Shares (such issuer, "Issuer") is not
required to register any sale or resale of any of the Transfer
Shares under the Securities Act or any other applicable
securities laws.
(b)       The Transfer Shares being issued
and contributed to the Company as contemplated hereby
are being acquired by the Company for its own account, for
investment purposes, and not with a view to, or for sale in
connection with, any distribution thereof in violation of the
Securities Act or any other securities laws that may be
applicable.
(c)       Such Class A Member is not an
affiliate (as such term is defined in the Securities Act) of
Issuer.
(d)       Such Class A Member (i) has
sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the
merits and risks of its investment, through the Company, in
the Transfer Shares and is capable of bearing the economic
risks of such investment, including a complete loss of its
investment, through the Company, in the Transfer Shares;
(ii) believes that its investment, through the Company, in
the Transfer Shares is suitable for it based upon its
objectives and financial needs, and it has adequate means
for providing for its current financial needs and business
contingencies and has no present need for liquidity of
investment, through the



Company, with respect to the
Transfer Shares; (iii) has no present plan, intention or
understanding, and has made no arrangement, to Transfer
(or to have the Company Transfer) any of the Transfer
Shares at any predetermined time or for any predetermined
price; (iv) has not purchased, sold or entered into any put
option, short position or similar arrangement with respect
to (and has not caused or permitted the Company to
purchase, sell or enter into any put option, short position or
similar arrangement with respect to) the common stock of
Issuer, and will not, for so long as the Company owns any
of the Transfer Shares, purchase, sell or enter into any such
put option, short position or similar arrangement (or cause
or permit the Company to purchase, sell or enter into any
such put option, short position or similar arrangement) in
any manner that violates the provisions of the Securities
Act or the Exchange Act.  Each of such Class A Member
and the Company is an "accredited investor," as that term
is defined in Rule 501(a) promulgated under the Securities
Act.
(e)       No oral or written statements or
representations have been made to such Class A Member
by or on behalf of Issuer in connection with the offering
and sale of the Transfer Shares other than those expressly
set forth in the Contribution Agreement, and such Class A
Member is not (directly or through the Company as
contemplated hereby and by the Contribution Agreement)
subscribing for, or seeking to acquire, the Transfer Shares
as a result of, or in response to, any advertisement, article,
notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or
radio, or presented at any seminar or meeting.
(f)       Such Class A Member acknowledges
that the Securities Act restricts the transferability of
securities, such as the Transfer Shares, issued in reliance
upon the exemption from the registration requirements of
the Securities Act provided by Section 4(2) thereunder, and
that the certificate representing the Transfer Shares will
bear a legend in substantially the following form, by which
the Company and each subsequent holder of such securities
will be bound:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY
OTHER APPLICABLE SECURITIES LAWS
AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH SECURITIES
LAWS.  THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY NOT BE
OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OTHER
THAN (A) TO ALPHA HOSPITALITY
CORPORATION ("ALPHA") OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT
TO RULE 144 UNDER THE SECURITIES
ACT,  (C) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (D) PURSUANT TO
AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES
ACT.  THE HOLDER OF THIS
CERTIFICATE AGREES THAT IT WILL
GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED



(UNLESS
SUCH SECURITY IS TRANSFERRED
PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.  IN CONNECTION WITH
ANY PROPOSED TRANSFER PURSUANT
TO CLAUSES (B) OR (C) ABOVE, ALPHA
MAY REQUIRE THAT THE TRANSFEROR
FURNISH IT WITH AN OPINION OF
COUNSEL CONFIRMING THAT SUCH
TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.

(g)       Each Class A Member acknowledges
that as the common stock of Alpha is currently quoted on a
U.S. automated interdealer quotation system, Rule 144A
under the Securities Act may not be available with respect
to resale of the Transfer Shares.
              Article IV.
         Management by MANAGER
4.1       General.  Subject to Sections 4.2 and 4.3
below and the other applicable provisions of this
Agreement, the business and affairs of the Company shall
be managed by the Manager.  Except as otherwise provided
in this Agreement, all determinations, approvals and
actions affecting the Company and its business and affairs
shall be determined, made, provided or authorized only by
the Manager.  Provided, however, that, notwithstanding
anything contained herein to the contrary, the Manager
shall not be authorized to, and shall not, (A) without the
prior written consent of all of the Members, (i) cause or
allow the Company to engage in any business or activity
other than the Business or (ii) take or allow the Company
to take any action that would cause the Company to be or
become an "Affiliate" (as such term is defined in the
Catskill Operating Agreement) of Bryanston Group. Inc.
("Bryanston") or Alpha Monticello, Inc. ("Monticello") or
that would otherwise result in any prohibition or preclusion
of payment or distribution to the Company of any of the
proceeds related or attributable to the Transferred Interests,
(B) without the prior written consent of all of the Class A
Members, (i) grant or permit to exist any Lien on or with
respect to the Transfer Shares or the Transfer Shares
Proceeds (or any interest in either of the foregoing) or (ii)
otherwise take any action detrimental to the Transfer
Shares or the Transfer Shares Proceeds (or any interest in
either of the foregoing) or to the interests of any Class A
Member in the Company or (C) without the prior written
consent of all of the Class B Members, (i) grant or permit
to exist any Lien on or with respect to the Transferred
Interests or the Transferred Interests Proceeds (any interest
in either of the foregoing), (ii) grant or agree to any waiver,
amendment or modification of, or any variance from, the
Assignment or (iii) otherwise take any action detrimental to
the Transferred Interests or or the Transferred Interests
Proceeds (any interest in either of the foregoing) or to the



interests of any Class B Member in the Company.  The
Manager shall also oversee the day-to-day operations and
administration of the Business, including signing of
contracts.
4.2       Actions Requiring the Approval of All of
the Members.  Unless authorized in writing by all the
Class A and Class B Members, the Manager shall not have
authority in the name of or on behalf of the Company or
otherwise, and shall not:
     (a)       Sell, transfer, assign, alter, interfere,
     vote with respect to or otherwise
     manage or otherwise deal with the
     Transferred Interests, except in
     accordance with Section 4.3 and 4.5
     below;
(b)       Do any act that would make it
impossible to carry on the ordinary     business of the
Company;
(c)       Confess a judgment on behalf of the
Company;
(d)       Submit a claim or liability to
arbitration; or
(e)       Amend this Agreement.
4.3       Actions Involving the Transferred
Interests.   To the extent that the Company has the right to
vote, or to exercise any right of approval or consent on or
with respect to any action taken or to be taken by Catskill
that may, directly or indirectly, affect the Transferred
Interests (including, without limitation, any distributions or
proceeds to be received or derived therefrom) or otherwise
take action with respect to the Transferred Interests
(including, without limitation, the right to direct the
transfer or assignment of the entire Transferred Interests (or
any portion thereof) out of, from or by the Company or the
exercise of any other right attendant or attributable to the
Transferred Interests,) which right arises as a result of the
Company's ownership of the Transferred Interests, only
Class B Members shall be entitled to vote whether or not
and in what manner the Company should take exercise such
right or take such action and to direct the Manager to
exercise such right or take such actions in accordance with
the direction of the Class B Members, and the Manager
shall act in accordance with the directions of the Class B
Member (if there be but one) or Class B Members holding
a majority of the Economic Interests held by all Class B
Members with respect to the exercise of such rights or the
taking of such actions.  However, this entitlement in no
way shall be interpreted to give Class B Members the right
to manage or control the operations of the Company;
provided, however, that if the Manager refuses or fails to so
exercise such right or to otherwise take any such action
with respect to the Transferred Interests in accordance with
the written direction of the Class B Member or Members
(as contemplated above), then (notwithstanding anything
contained herein to the contrary) any Member individually
shall be authorized, empowered and entitled, acting for, on
behalf of and in the name of the Company, to exercise such
right or to otherwise take any such action with respect to
the Transferred Interests, but only in accordance with such
written direction.



4.4       Standard of Care.  The Manager shall
perform his duties in good faith and with that degree of
care that an ordinary prudent person in a like position
would use under similar circumstances.
4.5       Liability for Certain Acts.  Except as
herein provided, the Manager has not guaranteed and shall
not have any obligation with respect to the return of a
Member's capital contributions or profits from the
operation of the Company. The Manager shall not be liable
to the Company or to any Member for any loss or damage
sustained by the Company or any Member, whether arising
in tort, contract or otherwise, solely by reason of being a
Manager, and acting or omitting to act in such capacity;
provided, however, that the Manager shall be liable to the
Company and the Members for all losses, damages and
claims resulting from any failure of the Manager to comply
with its obligations under this Agreement.  The Manager
shall be entitled to rely on the records required to be
maintained under Article XI or on information, opinions,
reports or statements, including but not limited to, financial
statements or other financial data prepared or presented by:
(i) any one or more agents or employees of the Company,
(ii) legal counsel, public accountants or other Persons as to
matters the Manager believes are within the relevant
Person's professional or expert competence, or (iii)
information supplied by a Member or an Affiliate, so long
as in so relying it shall be acting in good faith.  The
Manager shall not be considered to be acting in good faith
if it has knowledge concerning the matter in question that
would cause such reliance to be unwarranted.
4.6       Indemnity of Manager.  The Company
shall indemnify and hold harmless the Manager from and
against any and all claims and demands whatsoever related
to the performance of by the Manager of its duties and
obligations hereunder; provided, however, that no
indemnification may be made to or on behalf of the
Manager if a judgment or other final adjudication adverse
to the Manager establishes (a) that its acts were committed
in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so
adjudicated; (b) that it personally gained a financial profit
or avoided a financial loss or obtained some other
advantage to which it was not legally entitled; or (c) that it
undertook acts that were not in the furtherance of the
Business or were in breach or violations of its obligations
under this Agreement.  This indemnity includes
reimbursement of actual and reasonable expenses incurred
in the defense of such matters.
4.7       Appointment and Removal of Manager.
The Manager may be appointed or removed by the
unanimous election of the Members.
              Article V.
Meetings of Members and Actions on Written
                Consent
5.1       Annual Meeting.  The annual meeting of
the Members shall be held on the First Tuesday in June at
11:00 A.M. or at such other time as shall be determined by
unanimous resolution of all of the Members, commencing
with the year 2002, for the purpose of transacting such
business as may come before the meeting.



5.2       Special Meetings.  Special meetings of the
Members, for any purpose or purposes, unless otherwise
indicated by the Act, may be called by the Manager or any
Member or Members holding at least twenty-five percent
(25%) of the Membership Interests.  Special meeting of any
Class of Members, for any purpose or purposes, unless
otherwise indicated by the Act, may be called by any
Member or Members holding at least twenty-five (25%) of
the Membership Interest of that Class of Membership.
5.3       Place of Meetings.  The Members may (by
unanimous resolution of all Members with respect to a
meeting of Members or by unanimous resolution of all
Members of a given Class of Members with respect to a
meeting of Members of that Class of Members) designate
any place, either within or outside the State of Georgia, as
the place of meeting for any meeting of the Members or
any Class of Members.  If no designation is made, or if a
special meeting be otherwise called, the place of meeting
shall be the principal place of business of the Company in
the State of Georgia.
5.4       Notice of Meetings and Quorum.  For any
annual or special meeting, written notice stating the place,
day and hour of the meeting and the purpose or purposes
for which such meeting is called shall be delivered not less
than ten (10) nor more than fifty (50) days before the date
of such meeting, either personally or by mail, by or at the
direction of the Person calling the meeting, to each
Member, or to each Member in the Class of Members, as
the case may be.  If mailed, such notice shall be deemed to
be delivered three (3) Business Days after being deposited
in the United States mail, addressed to the Member at its
address as it appears on the books of the Company, with
postage thereon prepaid.  A quorum, comprised of
Members (present in person or represented by proxy)
holding a majority of the Economic Interests for each Class
of Members entitled to vote at the relevant meeting, shall
be necessary for the conduct of any meeting of Members or
Class of Members, as applicable.
5.5       Meetings of all Members.  If all of the
Members shall meet at any time and place, either within or
outside of the State of Georgia, and consent to the holding
of a meeting at such time and place, such meeting shall be
valid without call or notice, and at such meeting any lawful
action may be taken.  If all of the Members in any
particular Class of Members shall meet at any time and
place, either within or outside of the State of Georgia, and
consent to the holding of a meeting at such time and place,
such meeting shall be valid without call or notice, and at
such meeting any lawful action may be taken.
5.6       Record Date.  For the purpose of
determining Members entitled to notice of or to vote at any
meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any distribution, or
in order to make a determination of Members for any other
purpose, the date on which notice of the meeting is mailed
or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the
record date for such determination of Members.  When a
determination of Members entitled to vote at any meeting
of Members has been made as provided in this Section,
such determination shall apply to any adjournment thereof.
5.7       Manner of Acting.  The affirmative vote of
Members holding a Majority



Interest shall be the act of the
Members, unless the vote of a greater or lesser proportion
or number is otherwise required by the Act, by the Articles
of Organization or by this Agreement.  If a Majority
Interest cannot be reached with respect to any matter not
covered by this Agreement, the Members agree to facilitate
an agreement by mediation, or, if necessary, binding
arbitration.
5.8       Proxies.  At all meetings of Members, a
Member may vote in person or by proxy executed in
writing by such Member or by a duly authorized attorney-
in-fact.  Such proxy shall be filed with the Manager of the
Company before or at the time of the meeting.  No proxy
shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in such proxy.
5.9       Action by Members Without a Meeting.
Action required or permitted to be taken at a meeting of
Members may be taken without a meeting if the action is
evidenced by one or more written consents describing the
action taken, signed by all of the Members required to
approve such action and delivered to the Manager for
inclusion in the minutes or for filing with the Company's
records.  Action taken under this Section is effective when
the Members required to approve such action have signed
the consent s, unless the consent specifies a different
effective date.  The record date for determining Members
entitled to take action by written consent without a meeting
shall be the date the first Member signs a written consent
with respect to such action.
5.10      Waiver of Notice.  When any notice is
required to be given to any Member, a waiver thereof in
writing signed by the Person entitled to such notice,
whether before, at or after the time stated therein, shall be
equivalent to the giving of such notice.
5.11      Meeting by Telephone.  Members may also
meet by conference telephone call if all Members can hear
one another on such call and the requisite notice is given or
waived.
              Article VI.
   Rights and Obligations of Members
6.1       Limited Liability.  Except as otherwise set
forth herein, no Member is liable for any debts, obligations
or liabilities of the Company or any agent of the Company,
whether arising in tort, contract or otherwise, solely by
reason of being a Member or acting (or omitting to act) in
such capacity or participating (as employee, consultant,
contractor or otherwise) in the conduct of the business of
the Company beyond their respective Capital
Contributions, except as provided by law.  No Affiliate of a
Member shall be liable for such Member's acts or failures
to act or any other obligations under this Agreement except
as provided by law.
6.2       List of Members.  Upon written request of
any Member, the Manager shall provide a list showing the
names, addresses, Classes of Membership, Membership
Interests and Economic Interests of all Members and
Economic Interest Owners and the other information
required by O.C.G.A.  14-11-313 and maintained pursuant
to Section



11.3.

6.3       Priority and Return of Capital.  Except as
may be expressly provided in this Section 6.3, or Article
VIII or IX, no Member or Economic Interest Owner shall
have priority over any other Member or Economic Interest
Owner, either as to the return of Capital Contributions or as
to Net Profits, Net Losses or distributions.  The
distributions, Net Profits and the Net Losses allocated to
the Members in accordance with their Class of Membership
may not be proportionate to their Membership Interests in
the Company.  Notwithstanding anything contained herein
to the contrary, the holders (whether Members or
Economic Interests Owners) of Class B Membership
Interests shall be entitled to all Transferred Interests
Proceeds and the holders (whether Members or Economic
Interest Owners) of Class A Membership Interests shall be
entitled to all Transfer Shares Proceeds.
             Article VII.

Contributions to the Company and additional
   capital contributions; cash calls
7.1       Members' Capital Contributions.  The
Members shall make Initial Capital Contributions in
consideration for their initial Membership Interests, which
are set forth in Exhibit "A" attached hereto.
7.2       Additional Contributions.   To the extent
the Company incurs operating expenses or needs additional
funds for the maintenance of the Company, the same shall
be contributed by the Class A Members.  The Class A
Members shall be entitled to reimbursement of such
contribution by the other Members on a prorated basis.
Other than as stated above, however, no Member shall be
required to make any additional capital contributions.
7.3       Limited Obligations of Members.  In no
event shall any Member have any obligation to any
creditor, trustee in bankruptcy or receiver of the Company
or any other Person not a party to this Agreement (other
than successor, heirs and assigns of the Parties) for any
such additional capital contributions.
7.4       Withdrawal or Reduction of Members'
Contributions to Capital.
     (a)       Except as otherwise provided herein
     to the contrary, a Member shall not
     demand or receive any return of such
     Member's Capital Contribution until
     all liabilities of the Company, except
     liabilities to Members on account of
     their Capital Contributions, have
     been paid or there remains property
     of the Company sufficient to pay
     them.
     (b)       A Member, irrespective of the nature
     of such Member's Capital



     Contribution, has only the right to
     receive distributions appropriate to
     such Member's Class of
     Membership in return for such
     Capital Contribution.
7.5       No Third Party Beneficiaries.  This Article
is for the sole benefit of the Company and the Members
and for the sole purpose of funding the Business.  Neither
this Article nor this Agreement shall confer any rights or
claims upon any third party not a party to this Agreement.
No third party beneficiaries are intended whatsoever by the
execution of this Agreement.
             Article VIII.
        Distribution to Members
8.1       Distributions.  Distributable Cash and other
distributions allocable to any Class of Members shall be
distributed at such time or times as determined by the
Members representing a Majority Interest in such Class of
Members and shall be distributed in accordance with the
Members' Class of Membership and Sections 3.2 and 6.3
hereof.  Prior to the issue of a distribution to the Members
and Economic Interest Owners in any particular Class of
Membership, the Members representing a Majority Interest
in that Class of Members must notify the Manager of the
amounts or percentages that have been approved by that
Class of Members and deliver written authorization and
request of distribution to the Manager at least ten (10)
Business Days prior to the intended date of distribution.
Notwithstanding anything contained herein to the contrary,
the Manager shall promptly (and, in any event, within five
(5) Business Days) following receipt of written direction
from Members holding a majority of the Class B
Membership Interests, cause the Company to pay over to
the holders of Economic Interests in Class B Membership
Interests (in proportion to their respective holdings of
Economic Interests in Class B Membership Interests) all of
the Transferred Interests Proceeds received by the
Company.  Notwithstanding anything contained herein to
the contrary, the Manager shall promptly (and, in any
event, within five (5) Business Days) following receipt of
written direction from Members holding a majority of the
Class A Membership Interests, cause the Company to pay
over to the holders of Economic Interests in Class A
Membership Interests (in proportion to their respective
holdings of Economic Interests in Class A Membership
Interests) all of the Transfer Shares Proceeds received by
the Company.  If the Manager fails or refuses to make any
distribution in accordance with the written instruction of
either the Class A or Class B Members as contemplated
above, then (notwithstanding anything contained herein to
the contrary) any Member acting alone shall be authorized,
empowered and entitled, acting for an on behalf of the
Company, to cause the Company to pay over to the holders
of Economic Interests in Class A or B Membership
Interests (in proportion to their respective holdings of
Economic Interests in Class A or B Membership Interests),
as the case may be, the requested distribution in accordance
with such written instruction.
8.2       Limitation Upon Distributions.  No
distribution shall be made to



Members or Economic
Interest Owners if prohibited by O.C.G.A.  14-11-407.
8.3       Priority of Distributions. No Member or
Economic Interest Owner shall be entitled to interest on its
Capital Contribution or to a return of its Capital
Contribution, except as otherwise provided for herein.
Distributions shall be in strict accordance with Section 8.1
hereof.
8.4       Withholding.  The Manager is authorized to
withhold from amounts to be distributed to any Member
hereunder any withholding required by the Code or any
provision of any statute or local tax law and pay such
amounts to the Internal Revenue Service or other
appropriate taxing authority.  Any such amounts withheld
shall be treated as having been distributed to such Member.

8.5       Distributions Upon Dissolution.   Upon the
occurrence of an event of dissolution as defined in Section
14.1, distributions shall be made as provided by Article
XIV.
8.6       Loans to Company.  Nothing in this
Agreement shall prevent any Member from making secured
or unsecured loans to the Company by agreement with the
Company, provided the same is consented to in writing by
all of the other Members.
              Article IX.
              Allocations
9.1       Allocation of Net Profits and Net Losses.
As of the end of each Fiscal Year, and after giving effect to
the special tax allocations set forth in Sections 9.2, 9.3 and
9.5, all Net Profits and Net Losses shall be allocated among
the Members and Economic Interest Owners for federal
income tax purposes in accordance with their Classes of
Membership and the distributions that each Member or
Economic Interest Owner received in that Fiscal Year.
9.2       Special Allocation of Gain and Loss Upon
Sale of Company's Property.  Notwithstanding the
provisions of Section 9.1 hereof and except as provided in
Sections 9.3 and 9.4, items of income and gain resulting
from the sale or exchange of any of the Company's
property shall be specially allocated pursuant to Code
704 in the following manners:
(a)       Gain:
          (i)       First, to the Members and
          Economic Interest Owners in
          accordance with their
          Membership Interests, until
          the cumulative income and
          gain allocated pursuant to
          Sections 9.2 and 9.3 for the
          current year and all prior
          fiscal years are equal to the
          cumulative losses allocated to
          each of the Members for all
          prior fiscal years; and



          (ii)      Second, the balance shall be
          allocated in accordance with
          the respective Membership
          Interests of the Members and
          the Economic Interest
          Owners.

(b)       Loss.  Loss shall be allocated in
accordance with the respective Membership Interests of the
Members and the Economic Interest Owners.
9.3       Qualified Income Offset; Minimum Gain
Chargeback; Losses Creating Negative Capital
Accounts.
     (a)       Except as provided in subsection (c)
     below, if any allocation of loss
     and/or deduction to a Member or
     Economic Interest Owner under the
     provisions of Section 9.1 or 9.2
     would cause or increase a deficit
     balance in such Member's or
     Economic Interest Owner's Capital
     Account as of the end of the
     Company's taxable year to which
     such allocation relates, taking into
     consideration reductions in capital
     accounts for any adjustments,
     allocations or distributions described
     in Treas. Reg. 1.704-
     1(b)(2)(ii)(d)(4), 1.704-
     a(b)(2)(ii)(d)(5) or 1.704-
     1(b)(2)(ii)(d)(6) in excess of the sum
     of (i) the amount of such Member's
     or Economic Interest Owner's
     obligation to restore such deficit
     Capital Account balance (pursuant to
     the terms of this Agreement) and (ii)
     the amount of such Member's or
     Economic Interest Owner's share of
     Minimum Gain determined pursuant
     to Treas. Reg. 704-1(b)(4)(iv)(f)
     which is treated as an amount such
     Member or Economic Interest
     Owner is obligated to restore, then
     such allocation of loss and/or
     deduction (or portion thereof) shall
     not be allocated to such Member or
     Economic Interest Owner.  Any
     allocation of loss or deduction
     disallowed pursuant to this
     subsection (a) shall be allocated to
     Members and Economic Interest
     Owners with positive Capital
     Accounts in proportion to their
     respective Economic Interests.  If
     any allocations of loss and/or
     deduction disallowed pursuant to this
     subsection (a) are reallocated to
     another Member or Economic
     Interest Owner, then there shall be
     specially allocated to the Member(s)
     or Economic Interest Owner(s)
     receiving such reallocation items of
     income or gain equal to the losses or
     deduction previously allocated
     hereunder.
     (b)       Except as provided in subsection (c)
     below, in the event any Member or
     Economic Interest Owner
     unexpectedly receives any
     adjustments, allocations or
     distributions described in Treas. Reg.
     1.704-1(b)(2) (ii)(d)(4), l.704-
     l(b)(2)(ii)(d)(5) or 1.704-
     l(b)(2)(ii)(d)(6) that cause such
     Member or Economic Interest
     Owner to have a deficit Capital
     Account at the end of any Fiscal
     Year which is in excess of the sum
     of (i) the amount such Member or
     Economic Interest Owner is
     obligated to restore under the terms



     of this Agreement, and (ii) the
     amount of such Member's or
     Economic Interest Owner's share of
     minimum gain determined pursuant
     to Treas. Reg. 1.704-1(b)(iv)(f)
     ("Minimum Gain"), which is
     treated as the amount such Member
     or Economic Interest Owner is
     obligated to restore, then items of
     income and gain shall be specially
     allocated to such Members or
     Economic Interest Owners in an
     amount and manner sufficient to
     eliminate the deficit balances in their
     respective Capital Accounts created
     by such adjustments, allocations or
     distributions as quickly as possible.
     (c)       Notwithstanding any other provision
     of this Section 9.3, if there is a net
     decrease in Minimum Gain during
     any Fiscal Year, each Member and
     Economic Interest Owner who or
     that would otherwise have a deficit
     balance in his or its Capital Account
     as of the end of such Fiscal Year
     shall be specially allocated items of
     Net Profits and gain for such Fiscal
     Year (and if necessary subsequent
     Fiscal Years) in an amount and
     manner sufficient to eliminate such
     deficit as quickly as possible.  The
     items to be allocated shall be
     determined in accordance with
     Treas. Reg. 1.704-1(b)(4)(iv)(e).
     This subsection (c) is intended to
     comply with the Minimum Gain
     chargeback requirement of such
     section of the Regulations and shall
     be interpreted consistently therewith.
     (d)       The items of income or gain
     pursuant to this Section 9.3 are
     intended to comply with certain
     requirements of Treas. Reg. 1.704-
     1(b) ("Regulatory Allocations").
     Notwithstanding any other
     provisions of this Section (other than
     the Regulatory Allocations), in
     computing subsequent allocations of
     Net Profits pursuant to this Section,
     the net amount of any item so
     allocated, and the Net Profits, Net
     Losses and all other items allocated
     to each Member or Economic
     Interest Owner pursuant to this
     Section 9.3 shall, to the extent
     possible, be equal to the net amount
     that would have been allocated to
     each such Member or Economic
     Interest Owner pursuant to the
     provisions of this Section if such
     unexpected adjustments, allocations,
     or distributions had not occurred.
9.4       Priority Returns.  Priority returns as
described in Section 6.3 shall not be treated as guaranteed
payments under Section 707(c) of the Code.
9.5       Compliance With Code 704(b) and
704(c).  The provisions of this Article are intended to
comply with Code 704(b) and 704(c), and Treas. Reg.
1.704-1(b), as amended.  In the event any provision hereof
is inconsistent with such Regulation, the provision of such
Regulation shall apply and shall be deemed a part hereof.
9.6       Overriding Allocations.  Notwithstanding
anything to the contrary



contained in this Article IX or
elsewhere in this Agreement, unless otherwise prohibited
by the Code, (i) all profits, losses, deductions and other
allocations associated with or attributable to the
Transferred Interests or the Transferred Interests Proceeds
shall be allocated to the holders (whether Members or
Economic Interest Owners) of the Class B Membership
Interests and (ii) all profits, losses, deductions and other
allocations associated with or attributable to the Transfer
Shares or the Transfer Shares Proceeds shall be allocated to
the holders (whether Members or Economic Interest
Owners) of the Class A Membership Interests.
              Article X.
  COMPENSATION AND REIMBURSEMENTS OF
        MEMBERS and the Manager
10.1      Compensation.  Except as otherwise
expressly provided herein, the Members, the Manager and
their Affiliates shall not be entitled to compensation in
connection with rendering any services to or for the
Company.
10.2      Out-of-Pocket Reimbursements.  Direct
and reasonable out-of-pocket costs and expenses incurred
by the Members and/or Manager on behalf of the Company
will be reimbursed by the Company.  These expenses are
Company expenses as opposed to expenses of Members.
              Article XI.
     ACCOUNTING, BOOKS, AND RECORDS
11.1      Accounting Method.  The Company will
maintain its books and records on such basis of account as
the Members shall unanimously determine.  Nevertheless,
the Company's books and records shall be maintained in
accordance with generally accepted accounting principles
applied on a consistent basis.
11.2      Accounting Period.  The Company's
accounting period shall be the calendar year.
11.3      Records, Audits and Reports.  At the
expense of the Company, the Manager shall maintain
records and accounts of all operations and expenditures of
the Company.  The Company shall keep at its principal
place of business the following records:
     (a)       A current list of the full name and
     last known address of each Member
     and Economic Interest Owner;
     (b)       Copies of records to enable a
     Member to determine the relative
     voting rights, if any;
     (c)       A copy of the Articles of
     Organization of the Company and all
     amendments thereto;



     (d)       Copies of the Company's federal,
     state and local income tax returns
     and reports, if any, for the three (3)
     most recent years;
     (e)       Copies of the financial statements of
     the Company for the three (3) most
     recent years.
11.4      Additional Books and Records.  The
Company shall also keep, at the Company's expense, full,
complete and accurate books of account and other records
showing the assets, liabilities, costs, expenditures, receipts
and such other matters as are required by the Code.  Such
books of account will be the property of the Company, will
be kept in accordance with sound accounting principles and
procedures consistently applied and will be open to
reasonable inspection and examination by the Members
and their duly authorized representatives.  Such books of
account will be maintained at the principal office of the
Company or at such other place as the Members may
unanimously determine.
11.5      Financial Statements.  Within one hundred
twenty (120) days following the end of each Fiscal Year,
the Manager shall cause annual statements to be prepared
and delivered to each Member for such Fiscal Year.
11.6      Tax Returns.  The Manager shall cause the
Company's tax returns and other governmental returns and
reports to be prepared and timely filed.  The Manager shall
deliver copies of Schedule K-1 of Form 1065 (or a
comparable schedule) and other necessary tax information
for each Fiscal Year to each Member no later than ninety
(90) days after the end of such Fiscal Year.
11.7      Tax Matters Person.  The Manager is
hereby designated the Tax Matters Person of the Company
as provided in Treasury Regulations pursuant to Code
Section 6231.  The Tax Matters Person shall represent the
Company (at the expense of the Company) in connection
with all examinations of the affairs of the Company by any
foreign, federal, state or local tax authorities, including any
resulting administrative and judicial proceedings, and
expend funds of the Company for professional services and
costs associated therewith. The provisions on limitation of
liability of the Manager and indemnification set forth in
Section 4.7 hereof will be fully applicable to the Tax
Matters Person in such capacity.



             Article XII.
            Transferability
12.1      General Prohibition.  No Transfer of any
Membership Interest or other interest in the Company shall
be made unless such Transfer is registered or exempt from
registration under the Securities Act and all applicable
federal and state securities laws.  Additionally, no Transfer
of any Membership Interest or other interest in the
Company shall be made without the consent of all of the
Members; provided, however, that each Member shall be
deemed to have consented to the Transfer by any Member
of its Membership Interest or other interest in the Company
to any Affiliate of such Member.  If a disposition of any
Membership Interest is made pursuant to the terms of this
Agreement as a Transfer or otherwise, the transferee,
including any Affiliate of a Member, shall, upon
compliance with the provisions of Section 12.2, succeed to
the transferred Membership Interest.  Any attempted
Transfer without the necessary approval shall result only in
the conveyance of an Economic Interest and nothing
further.  Notwithstanding anything herein to the contrary,
no transfer of a Member's Membership Interest shall be
permitted to occur if such transfer would cause the
Company to terminate under I.R.C. Section 708(b)(1)(B).
12.2      Conditions of Substituted Membership.
Notwithstanding any provision of this Agreement to the
contrary, no transferee (whether pursuant to a Transfer or
any other assignment) of any Membership Interest or other
interest in the Company will become a substituted Member
in the Company (a "Substitute Member") until all of the
following conditions have been satisfied:
     (a)       the Members must have consented to
     such Transfer or other assignment,
     which consent may not be
     unreasonably withheld;
     (b)       the transferor Member must have
     executed a written instrument of
     transfer of such Membership Interest
     or other interest in form and
     substance reasonably satisfactory to
     each of the other Members;
    (c)       the transferee (unless already a
    Member) must have executed a
    written agreement, in form and
    substance reasonably satisfactory to
    each of the Members, to assume all of
    the duties and obligations of the
    transferor Member under this
    Agreement and to be bound by and
    subject to all of the terms and
    conditions of this Agreement;
     (d)       the transferor Member and the
     transferee must have executed a
     written agreement, in form and
     substance reasonably satisfactory to
     each of the Members to indemnify
     and hold the Company and the non-
     transferring Members harmless from
     and against any loss or liabilities
     arising out of the Transfer;
     (e)       the transferee must have executed a
     power of attorney and such other
     documents and instruments as any of
     the Members may



     deem necessary to
     effect the admission of the transferee
     as a substituted Member;
     (f)       upon request by any other Member,
     the transferor Member must have
     delivered to the Company a written
     opinion of counsel for the Company
     or of other counsel reasonably
     satisfactory to such other Member
     (which opinion shall be obtained at
     the expense of the transferor
     Member) that such transfer will not
     result in (i) a violation of applicable
     law or this Agreement, (ii) the
     Company being classified as an
     association taxable as a corporation
     or (iii) the Company being deemed
     terminated pursuant to Code Section
     708 or any comparable future section
     of the Code; and
     (g)       unless otherwise waived by the non-
     transferring Members, the transferee
     or transferor must have paid the
     expenses incurred by the Company
     in connection with the admission of
     the transferee to the Company.
A transferee who has validly received a
Membership Interest pursuant to this Agreement, but does
not become a substituted Member, shall be an Economic
Interest Owner only and shall be entitled to receive only
that portion of the distribution or allocations to which its
transferor would otherwise be entitled.  In the case of a
transfer by a Member, such transferee will not be entitled
to vote on any question regarding the Company, and its
Membership Interest will not be considered to be
outstanding for voting purposes until the transferee has
become a substituted Member.
12.3      Right to Purchase Residual Rights.  Upon
and contemporaneously with any sale or gift of a Member's
Economic Interest that does not at the same time transfer
the balance of the rights associated with the Economic
Interest transferred by the transferring Member (including,
without limitation, the rights of the transferring Member to
vote on, consent to or otherwise participate in the
management of the business of the Company), the
Company shall purchase from the transferring Member,
and the transferring Member shall sell to Company for a
purchase price of $10.00, all remaining rights and interests
retained by the transferring Member that immediately prior
to such sale or gift were associated with the transferred
Economic Interest.
12.4      Successors as to Economic Rights.
References in this Agreement to Members shall also be
deemed to constitute a reference to Economic Interest
Owners where the provision relates to economic rights and
obligations.  By way of illustration and not limitation, such
provisions would include those regarding Capital
Accounts, distributions, allocations and contributions.  A
transferee who or that validly receives an Economic
Interest pursuant to this Agreement shall succeed to the
transferor's Capital Contributions and Capital Account to
the extent related to the Economic Interest transferred,
regardless of whether such transferee becomes a
Substituted Member.
12.5      Restrictions on Resignation.  Except as
agreed to in writing by all of the



other Members, no
Member may, nor shall any Member, resign or withdraw
from the Company or take any other action to terminate, or
that would result in the termination of, the Company.  In
the event a Member does resign or withdraw in violation of
the foregoing provision, (i) the Company shall not be
obligated to distribute or otherwise pay any amount to such
Member, (ii) such Member shall be deemed to have
forfeited any rights to legal or beneficial ownership of his
or its Membership Interest; and (iii) the Company and the
remaining Members may recover from such Member
damages for breach of this Agreement.
             Article XIII.
          Substitute Members
Any transferee acquiring the Membership Interest
of a Member as permitted under Article XII shall be
deemed admitted as a Substitute Member with respect to
the Membership Interest transferred concurrently with the
effectiveness of the Transfer (provided that such transferee,
unless already a Member, shall, as a condition to such
admission, execute a counterpart of this Agreement,
agreeing to be bound by the terms and condition hereof),
and such Substitute Member shall be entitled to all of the
rights and benefits under this Agreement of the transferor
of such Membership Interest.  No purported Transfer of
any Membership Interest in violation of the terms of this
Agreement (including any Transfer occurring by operation
of law) shall vest the purported transferee with any rights,
powers or privileges hereunder, except the related
Economic Interest, and no such purported transferee shall
be deemed for any purposes as a Member hereunder or
have any right to vote or consent with respect to Company
matters, to inspect Company records, to maintain derivative
proceedings, to maintain any action for an accounting or to
exercise any other rights of a Member hereunder or under
the Act.  A Substitute Member shall have the rights and
obligations of the former Member whose Membership
Interest he or it acquired.
             Article XIV.
      Dissolution and Termination
14.1      Dissolution.
     (a)       The Company shall be dissolved
     upon the occurrence of any of the
     following events:
               (i)       By the unanimous
               written agreement of
               all of the Members; or
               (ii)      Upon the withdrawal,
               removal, bankruptcy,
               insolvency, death or
               incompetence of a
               Member, the sale or
               redemption of a
               Member's entire
               Membership Interest,
               or the occurrence of
               any other event that
               terminates the
               continued
               membership of a
               Member in the
               Company pursuant to
               O.C.G.A.



               14-11-601
               or any other provision
               of the Act (a
               "Withdrawal
               Event"), unless the
               business of the
               Company is
               continued by the
               consent of all the
               remaining Members
               within ninety (90)
               days after the
               Withdrawal Event
               and there is at least
               one (1) remaining
               Member.  Each of the
               Members hereby
               agrees that within
               sixty (60) days after
               the occurrence of a
               Withdrawal Event
               (and provided that
               there is then at least
               one (1) remaining
               Member of the
               Company), they will
               promptly consent, in
               writing, to continue
               the business of the
               Company.  Each of
               the Members further
               agrees promptly to
               consent, in writing, to
               continue the business
               of the Company upon
               a sale or gift either of
               a Member's entire
               Economic Interest to
               which all of the
               remaining Members
               do not consent within
               forty-five (45) days
               after the occurrence
               of such a sale or gift,
               or upon a sale or gift
               of a Transferring
               Member's entire
               Membership Interest.
               Such consents shall
               be mailed or hand
               delivered to the
               principal place of
               business of the
               Company set forth in
               Section 2.4 hereof (or
               to such other address
               designated by the
               Manager) no later
               than forty-five (45)
               days after each
               Withdrawal Event or
               transfer by a Member
               of its entire Economic
               Interest or
               Membership Interest.
               The sole remedy for
               breach of a Member's
               obligation to consent
               to continue the
               business of the
               Company under this
               Section shall be
               money damages (and
               not specific
               performance).
     (b)       Notwithstanding anything to the
     contrary in this Agreement, if a
     Member or Members owning
     Membership Interests that in the
     aggregate constitute not less than
     Sixty Percent (60%) of each Class of
     Membership Interests vote to
     dissolve the Company at a meeting
     of the Company pursuant to Article
     V, then all of the Members shall
     agree in writing to dissolve the
     Company as soon as possible (but in
     any event not more than ten (10)
     days thereafter).
     (c)       If a Member who is an individual
     dies or a court of competent
     jurisdiction adjudges him to be
     incompetent to manage his person or
     his property, the Member's executor,
     administrator, guardian, conservator
     or other legal representative may
     exercise all of such Member's rights
     for the purpose of settling his estate
     or administering his property.



     (d)       Except as expressly permitted in this
     Agreement, a Member shall not
     voluntarily withdraw or take any
     other voluntary action that directly
     causes a Withdrawal Event.  Unless
     otherwise approved by Members
     owning Membership Interests that in
     the aggregate constitute not less than
     Sixty Percent (60%) of each Class of
     Membership Interests, a Member
     who or that withdraws (a
     "Withdrawing Member") or whose
     Membership Interest is otherwise
     terminated by virtue of a Withdrawal
     Event, regardless of whether such
     Withdrawal Event was the result of a
     voluntary act by such Member, shall
     not be entitled to receive any
     distributions to which such Member
     would have been entitled had such
     Member remained a Member.
     Damages for breach of this Section
     14.1(d) shall be monetary damages
     only (and not specific performance),
     and such damages may be offset
     against distributions by the Company
     to which the Withdrawing Member
     would otherwise be entitled.
14.2      Effect of Dissolution.  Upon dissolution,
the Company shall cease to carry on its business, except as
permitted by O.C.G.A. 14-11-605.  Upon dissolution, the
Members shall file a statement of commencement of
winding up pursuant to O.C.G.A. 14-11-606 and publish
the notice permitted by O.C.G.A.  14-11-608.
14.3      Winding Up, Liquidation and
Distribution of Assets.
     (a)       Upon dissolution, an accounting
     shall be made by the Company's
     independent accountants of the
     accounts of the Company and of the
     Company's assets, liabilities and
     operations, from the date of the last
     previous accounting until the date of
     dissolution.  The Members shall
     immediately proceed to wind up the
     affairs of the Company.
     (b)       If the Company is dissolved and its
     affairs are to be wound up, the
     Members shall:
               (i)       Sell or otherwise
               liquidate all of the
               Company's assets as
               promptly as
               practicable (except to
               the extent the
               Members may
               determine to
               distribute any assets
               to the Members in
               kind, provided, that
               (A) if the Members
               holding a majority of
               the Class A
               Membership Interests
               so elect (regardless of
               any vote or objection
               by any other
               Member), the
               Transfer Shares shall
               be distributed to the
               holders of Class A
               Membership Interests
               (whether Members or
               Economic Interest
               Owners) in proportion
               to their respective
               Class A Membership
               Interests and (B) if
               the Members holding
               a majority of the
               Class B



               Membership
               Interests so elect
               (regardless of any
               vote or objection by
               any other Member),
               the Transferred
               Interests shall be
               distributed to the
               holders of Class B
               Membership Interests
               (whether Members or
               Economic Interest
               Owners) in proportion
               to their respective
               Class B Membership
               Interests);
               (ii)      Allocate any profit or
               loss resulting from
               such sales to the
               Members and
               Economic Interest
               Owners in accordance
               with Article IX
               hereof;
               (iii)     Discharge all
               liabilities of the
               Company, including
               liabilities to Members
               and Economic
               Interest Owners who
               or that are creditors,
               to the extent
               otherwise permitted
               by law, other than
               liabilities to Members
               and Economic
               Interest Owners for
               distributions, and
               establish such
               Reserves as may be
               reasonably necessary
               to provide for
               contingent liabilities
               of the Company; and
               (iv)      Distribute the
               remaining assets (if
               any) in the following
               order:
                    (1)       If any assets
                    of the
                    Company are
                    to be
                    distributed in
                    kind, the net
                    fair market
                    value of such
                    assets as of the
                    date of
                    dissolution
                    shall be
                    determined by
                    independent
                    appraisal or by
                    agreement of
                    all of the
                    Members.
                    Such assets
                    shall be
                    deemed to
                    have been sold
                    as of the date
                    of dissolution
                    for their fair
                    market value,
                    and the
                    Capital
                    Accounts of
                    the Members
                    and Economic
                    Interest
                    Owners shall
                    be adjusted
                    pursuant to the
                    provisions of
                    this
                    Agreement to
                    reflect such
                    deemed sale.
                    (2)       The positive
                    balance (if
                    any) of each
                    Member's and
                    Economic
                    Interest
                    Owner's
                    Capital
                    Account (as
                    determined
                    after taking
                    into account
                    all Capital
                    Account
                    adjustments
                    for the
                    Company's
                    taxable year
                    during which
                    the liquidation
                    occurs) shall
                    be distributed
                    to the
                    Members and
                    Economic
                    Interest
                    Owners, either
                    in cash or in
                    kind, as
                    determined by
                    all of the
                    Members,
                    with any



                    assets
                    distributed in
                    kind being
                    valued for this
                    purpose at
                    their fair
                    market value.
                    Any such
                    distributions
                    to the
                    Members and
                    Economic
                    Interest
                    Owners in
                    respect of
                    their
                    respective
                    Capital
                    Accounts shall
                    be made in
                    accordance
                    with the time
                    requirements
                    set forth in
                    Section 1.704-
                    1(b)(2)(ii)(b)(
                    2) of the
                    Treasury
                    Regulations.
     (c)       Notwithstanding anything to the
     contrary in this Agreement, upon a
     liquidation within the meaning of
     Section 1.704-1(b)(2)(ii)(g) of the
     Treasury Regulations, if any
     Member or Economic Interest
     Owner has a deficit Capital Account
     (after giving effect to all
     contributions, distributions,
     allocations and other Capital
     Account adjustments for all taxable
     years, including the year during
     which such liquidation occurs), such
     Member or Economic Interest
     Owner shall have no obligation to
     make any Capital Contribution to the
     Company, and the negative balance
     of such Capital Account of such
     Member or Economic Interest
     Owner shall not be considered a debt
     owed by such Member or Economic
     Interest Owner to the Company or to
     any other Person for any purpose
     whatsoever.
     (d)       Upon completion of the winding up,
     liquidation and distribution of the
     assets, the Company shall be deemed
     terminated.
     (e)       The Members shall comply with any
     applicable requirements of
     applicable law pertaining to the
     winding up of the affairs of the
     Company and the final distribution
     of assets.
14.4      Certificate of Termination.  When all
debts, liabilities and obligations of the Company have been
paid and discharged or adequate provisions have been
made therefor and all of the remaining property and assets
of the Company have been distributed to the Members and
Economic Interest Owners, a Certificate of Termination
shall be executed and filed with the Georgia Secretary of
State in accordance with O.C.G.A.  14-11-610.



              Article XV.

       Miscellaneous Provisions
15.1      Application of Georgia Law.  This
Agreement, and the application and interpretation hereof,
shall be governed exclusively by its terms and by the laws
of State of Georgia, and specifically the Act.  EACH OF
THE PARTIES EXPRESSLY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY SUIT,
LITIGATION OR OTHER JUDICIAL PROCEEDING
REGARDING THIS AGREEMENT OR ANY
DISPUTE HEREUNDER OR RELATING HERETO.
15.2      No Action for Partition.  No Member or
Economic Interest Owner has any right to maintain any
action for partition with respect to the property of the
Company; provided, that the foregoing shall not in any
manner limit the right of any Member or Economic Interest
Owner to enforce any of the terms of this Agreement.
15.3      Execution of Additional Instruments.
Each Member hereby agrees to execute such other and
further statements of interest and holdings, designations,
powers of attorney and other instruments necessary to
comply with any applicable laws, rules or regulations.
15.4      Acceptance of Prior Acts by New
Members.  Each Person who becomes a Member, by
becoming a Member, ratifies, affirms and confirms, and
agrees to be bound by, all actions duly taken by the
Company, pursuant to the terms of this Agreement, prior to
the date such Person becomes a Member.
15.5      Construction.  Whenever the singular
number is used in this Agreement and when required by the
context; the same shall include the plural and vise versa,
and the masculine gender shall include the feminine and
neuter genders and vice versa.  References in this
Agreement to "herein," "hereof," or "hereunder" or
references of similar import refer to this Agreement as a
whole and not to any Article, Section, or other division of
this Agreement.  Unless otherwise provided herein, any
reference to any Article or Section is reference to such
Article or Section of this Agreement.
15.6      Headings.  The headings in this Agreement
are inserted for convenience only and are in no way
intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision hereof.
15.7      Waivers.  The failure of any Party to seek
redress for violation of or to insist upon the strict
performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would
have originally constituted a violation, from having the
effect of an original violation.
15.8      Rights and Remedies Cumulative.  The
rights and remedies provided in this Agreement are
cumulative, and the use of any one right or remedy by any
Party shall not preclude or waive the right to use any or all
other remedies.  Such rights and



remedies are given in
addition to any other rights the Parties may have by law,
statute, ordinance or otherwise.
15.9      Severability.  If any provision of this
Agreement or the application thereof to any Person or
circumstance shall be invalid, illegal or unenforceable to
any extent, the remainder of this Agreement and the
application thereof shall not be affected and shall be
enforceable to the fullest extent permitted by law.
15.10     Heirs, Successors and Assigns.  Each and
all of the covenants, terms, provisions and agreements
herein contained shall be binding upon and inure to the
benefit of the parties hereto and, to the extent permitted by
this Agreement, their respective heirs, legal representatives,
successors and assigns.
15.11     Creditors.  None of the provisions of this
Agreement shall be for the benefit of or enforceable by any
creditors of the Company.
15.12     Counterparts.  This Agreement may be
executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
15.13     Federal Income Tax Elections.  All
elections required or permitted to be made by the Company
under the Code shall be made by the Manager as
determined in his or her sole discretion; provided, however,
that no such election that would adversely effect any
Member shall be made without the written consent of such
Member.  For all purposes permitted or required by the
Code, the Members constitute and appoint Manager as the
Tax Matters Person until such other Person shall be so
designated by the Members owning a majority of each
Class of Membership Interests.
15.14     Notices.  Any and all notices, offers,
demands or elections required to be made under this
Agreement ("Notices") shall be in writing, signed by the
Party giving such Notice and shall be deemed given and
effective (i) when hand-delivered (either in person by the
Party giving such notice, or by its designated agent, or by
commercial courier) or (ii) on the third (3rd) Business Day
(as evidenced by proof of mailing) following the date such
Notice is deposited, postage pre-paid, certified mail, return
receipt requested, with the United States Postal Service,
and addressed to the intended Party at such Party's
respective address as set forth on Exhibit "A" hereto, or at
such other address as the such Party may have hereafter
designated by Notice to the Party giving such first-
mentioned Notice).
15.15     Amendments.  Any amendment to this
Agreement shall be made in writing and signed by all of
the Members.
15.16     Provisions Conflicting with the Act.  If
any particular provision herein is construed to be in conflict
with the provisions of the Act, the Act shall control and
such invalid or unenforceable provisions shall not affect or
invalidate the other provisions hereof, and this Agreement
shall be construed in all respects as if such conflicting



provision were omitted.
15.17     Banking.  All funds of the Company shall
be deposited in its name in an account or accounts as shall
be designated from time to time by the Manager with the
written consent of Members holding a majority of each
Class of Membership Interests.  All funds of the Company
shall be used solely for the business of the Company,
subject, however, to the terms of this Agreement.  Except
as herein otherwise provided, all withdrawals from the
Company bank accounts shall be made only upon a check
signed by the Manager or by such other Person(s) as the
Members holding a majority of each Class of Membership
Interests may designate from time to time.
15.18     Title to Property.  All real and personal
property owned by the Company shall be owned by the
Company as an entity, and, to the extent permitted by
applicable law, no Member shall have any ownership
interest in such property in his or its individual name or
right, and each Member's interest in the Company shall be
personal property for all purposes.  The foregoing shall in
no manner limit the right of the Members to elect to cause,
or to cause, the Company to distribute the Transferred
Interests, the Transferred Interests Proceeds, the Transfer
Shares or the Transfer Shares Proceeds as provided in
Article IV or VIII of this Agreement.
15.19     Authority of the Manager and Members
to Engage in Other Business.  The Manager and any
Member may engage in and/or possess an interest in other
business ventures, independently or with others, that do not
compete with the Company.
15.20     Indemnification and Exculpation of
Members.
(a)       No Member shall be liable to the
Company, to any Member or to any Economic Interest
Owner for or as a result of any act, omission or error in
judgment that was taken, omitted,or made by such Member
in accordance with the standards established by the Act.  In
any proceeding brought in the right of the Company or
brought by or on behalf of Members, a Member shall have
no liability for damages other than for willful misconduct
or a knowing violation of the criminal law.
Notwithstanding anything contained in the foregoing to the
contrary, each Member shall be and remain liable to the
Company and each other Member for any breach or
violation by such Member of this Agreement.
(b)       The Members shall be indemnified
and held harmless by the Company from any liability
resulting from any act performed by or omission made by
them on behalf of the Company, except for acts or
omissions of gross negligence or willful misconduct, to the
fullest extent allowed under the Act; provided, however,
that no Member shall be entitled to indemnification for any
damages, liabilities or claims arising from or occasioned by
any breach or violation of this Agreement by such Member.
15.21     Indemnification for Breach.



(a)       Each of the parties to this
Agreement, including the Manager, (an "Indemnifying
Party") shall indemnify and hold harmless each other party
to this Agreement and its respective directors, officers,
employees, agents and affiliates and the heirs, estates,
executors, legal representatives, successors and assigns of
any of the foregoing (all of the foregoing, collectively, an
"Indemnified Party") from and against, and shall
reimburse each Indemnified Party for, any and all
liabilities, losses, damages, costs and expenses (including,
without limitation, reasonable attorneys' fees and other
legal costs, including those related to any appeal, and costs
of any investigation) (all of the foregoing, collectively,
"Losses") that have been suffered or incurred by such
Indemnified Party and that have resulted from, or been
occasioned by, (a) any breach or violation by the
Indemnifying Party of any of its representations,
warranties, covenants and other agreements set forth herein
or (b) any claim asserted by any third party that, if true,
would constitute a breach or violation by the Indemnifying
Party of any of its representations, warranties, covenants
and other agreements set forth herein (any such claim, a
"Third-Party Claim").
(b)       If any Indemnified Party shall
receive notice of, or otherwise become aware of the
assertion of, a Third-Party Claim with respect to which
such Indemnified Party intends to seek indemnification
under this Section 15.21, then such Indemnified Party shall
give prompt written notice thereof to the Indemnifying
Party, which notice shall include or be accompanied with a
copy of any summons, complaint or other written evidence
of such Third-Party Claim to the extent that such summons,
complaint or other written evidence has been received by
such Indemnified Party or by any attorney or other agent
thereof.  The failure of an Indemnified Party to give such
notice or to give such notice promptly shall not relieve the
Indemnifying Party of its obligation to indemnify such (or
any other) Indemnified Party under this Section 15.21
except to the extent that the failure to give such notice or
the delay in giving such notice has materially prejudiced
the Indemnifying Party in its ability to defend against such
Third-Party Claim.  The Indemnifying Party shall, with
counsel selected by it (which selection shall be subject to
the approval of the Indemnified Parties, such approval not
to be unreasonably withheld or delayed), be entitled to
defend against and settle any Third Party Claim; provided,
however, that its right to do so shall be conditioned upon its
having confirmed in writing to the Indemnified Parties its
obligation to indemnify them with respect to such Claim
(any such confirmation, a "Notice to Indemnify") and,
provided, further, however, that the Indemnifying Party
shall not be entitled to enter into any settlement of any such
Claim without the prior written consent of the Indemnified
Parties, which consent shall not be unreasonably withheld
or delayed.  Notwithstanding anything contained herein to
the contrary, the Indemnifying Party's obligation to
indemnify the Indemnifying Parties against any Third-Party
Claim shall be conditioned upon the Indemnifying Parties
providing full and timely cooperation in the defense of
such Claim, which cooperation shall include, without
limitation, furnishing such records, information and
testimony, and attending such conferences, discovery
proceedings, hearings, trials and appeals, as may
reasonably be requested by the Indemnifying Party.
(c)       Notwithstanding anything contained
herein to the contrary, except



as provided in the next
following sentence, the Indemnifying Party shall not be
obligated to indemnify any Indemnified Party for, or
otherwise pay, any attorneys' fees or other legal or related
costs (or any costs of any investigation) suffered or
incurred by any Indemnified Party in connection with any
Third-Party Claim after the Indemnified Parties receive any
Notice to Indemnify with respect to such Claim; provided,
however, that, if, after giving any Notice to Indemnify, the
Indemnifying Party reverses its position and claims that it
is not required to indemnify the Indemnified Parties against
the Third-Party Claim, then, in the event the Indemnifying
Party is obligated hereunder to indemnify the Indemnified
Parties with respect to such Claim, the Indemnifying Party
shall bear and pay the reasonable attorneys' fees and other
legal costs, including those related to any appeal, and costs
of any investigation, incurred by the Indemnified Parties
after the Indemnifying Party has reversed its position and
claimed that it is not required to indemnify the Indemnified
Parties against such Claim.  Notwithstanding the foregoing,
if there is a legitimate and good faith conflict of interest
between the Indemnifying Party and the Indemnified
Parties in connection with the defense of any Third-Party
Claim so that one counsel or law firm could not properly
represent both parties in connection with such defense, the
Indemnifying Party, in the event it is obligated hereunder to
indemnify the Indemnified Parties with respect to such
Claim, shall bear and pay the reasonable attorneys' fees
and other legal costs, including those related to any appeal,
and costs of any investigation, incurred by the Indemnified
Parties in connection with such defense, regardless of
whether the Indemnifying Party has given a Notice to
Indemnify.  However, under no circumstances shall the
Indemnifying Party be obligated to pay for the attorneys'
fees or related legal fees of more than one attorney or law
firm for or on behalf of one or any group of the
Indemnified Parties.
15.22     Entire Agreement.  This Agreement
constitutes the entire agreement between or among the
Parties with respect to the subject matter hereof and
supersedes any and all prior understandings and
agreements (written or oral) between or among them
respecting such subject matter.  It is agreed and understood,
however, that this Agreement is not intended to supersede
or amend the Contribution Agreement, which shall remain
in full force and effect in accordance with its terms.  There
are no representations, arrangements, understandings or
agreements, oral or written, between or among the Parties
hereto relating to such subject matter except those fully
expressed herein.  No waiver of any provision hereof will
be valid or binding on any Party hereto unless such waiver
is in writing and signed by or on behalf such Party, and no
waiver on one occasion shall be deemed to be a waiver of
the same or any other provision hereof.
15.23     Determination of Matters Not Provided
For In This Agreement.  The Members holding a majority
of each Class of Membership Interests shall decide any
questions arising with respect to the Company and this
Agreement that are not specifically or expressly provided
for in this Agreement.
15.24     Further Assurances.  The Members each
agrees to cooperate, and to execute and deliver in a timely
fashion any and all additional documents necessary, to
effectuate the purposes of the Company and this
Agreement.



15.25     Time.  TIME IS OF THE ESSENCE OF
THIS AGREEMENT, AND TO ANY PAYMENTS,
ALLOCATIONS AND DISTRIBUTIONS SPECIFIED
UNDER THIS AGREEMENT.




IN WITNESS WHEREOF, this Agreement is
executed by the Members effective as of __________,
2001.
MEMBERS:

WATERTONE HOLDINGS, LP          ALPHA _____________ CORPORATION
By: BKB, LLC,
Its General Partner


_____________________________      _____________________________
Name:  Robert A. Berman                 Name:
Thomas Aro
Title:    Managing Member               Title:
Executive Vice President

ACCEPTED AND AGREED TO BY THE MANAGER:

WATERTONE HOLDINGS, LP
By: BKB, LLC
Its General Partner


______________________________
Name:  Robert A. Berman
Title: Managing Member



              EXHIBIT "A"





MEMBERS  ADDRESS                        INTEREST               CLASS

Watertone Holdings, LP
Attn:  Scott Kaniewski                  52%                     Class A
2412 Central Park Avenue
Evanston, Illinois  60201

Alpha _____ Corporation
Attn:  Thomas Aro                       48%                     Class B
12 E. 49th Street
New York, New York  10017




                             EXHIBIT B

         ASSIGNMENT AGREEMENT

This ASSIGNMENT AGREEMENT
("Agreement") is made as of ________, 2001, by
Watertone Holdings, LP ("Assignor"), a Delaware
limited partnership, in favor of New York Gaming,
LLC ("Assignee"), a Georgia limited liability company.

WHEREAS, Catskill Development, L.L.C.
("Catskill") was formed in 1995 as a New York limited
liability company to develop real property for three
business components (the "Business Components"),
which are: (1) casino and wagering operations on trust
land (the "Casino Component"); (2) harness, horse
racing and other pari-mutuel and gaming operations
(the "Horse Racing Component"); and (3) real estate
ownership, development and operations, inclusive of
amusement, entertainment, retail, hotel, office and
residential structures (the "Real Estate Component");

WHEREAS, Assignor is a party to a First Amended
& Restated Operating Agreement (as it may at the relevant
time have been amended, modified, supplemented or
otherwise changed, the "Catskill Operating Agreement") of
Catskill Development, L.L.C. ("Catskill"), dated as of
January 1, 1999, which provides, inter alia, for
distributions and allocations to members based on their
respective percentage interests in three separate Business
Components after the prior payment of the Senior
Obligation (as defined in the Catskill Operating
Agreement) and of outstanding loans (if any) and the prior
return of Preferred Capital Contributions and Priority
Returns (as those terms are defined in the Catskill
Operating Agreement);

WHEREAS, under the Catskill Operating
Agreement, Assignor is a Voting Member (as such term is
defined in the Catskill Operating Agreement) and currently
holds a 29.167% economic interest in the Casino
Component (the "Casino Interest") and a 25% economic
interest in the Horse Racing Component (the "Horse
Racing Interest," and collectively with the Casino Interest,
the "Transferred Interests") which, subject to the
payment of the Senior Obligation and of outstanding loans
(if any) and the prior return of Preferred Capital
Contributions and Priority Returns, entitle the holder of
such economic interests to the relative percentage
allocations and distributions attributable to the respective
Business Components in which such interests exist; and



WHEREAS, pursuant to a certain Contribution
Agreement (the "Contribution Agreement"), dated as of
August 10, 2001, by and between Assignor and Alpha
Hospitality Corporation ("Alpha"), (a) Assignor and Alpha
agreed to form Assignee as set forth in the Operating
Agreement (the "LLC Operating Agreement"), dated as
of even date herewith, by and between Assignor and Alpha
Designee (as defined in the Contribution Agreement)
providing for the operation of Assignee and (b) Assignor
agreed to assign all of its right, title and interest in the
Transferred Interests to Assignee as provided for herein.

NOW, THEREFORE, in consideration of
foregoing premises and the covenants and other agreements
set forth in the Contribution Agreement and the LLC
Operating Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, Assigner, intending to be bound
hereby, agrees as follows:

1.        Assignment. Assignor does
hereby sell, assign, convey, transfer and set over
unto, and does contribute to, Assignee all of
Assignor's present and future rights, title and
interests in, to, under and with respect to the
Transferred Interests, as such Interests are set forth
or described in Section 4.5 and the other provisions
of the Catskill Operating Agreement, and any and
all contracts, agreements, documents or instruments
entered into thereunder and any and all proceeds
(which shall include, without limitation, any and all
awards in any litigation or other proceeding
attributable or allocated to such Interests) with
respect to any of the foregoing, together with all
documents and instruments evidencing any of such
right, title and interest, free and clear of any Lien,
which, for purposes of this Agreement, means any
mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other)
or preference, priority, right or other security
interest or preferential arrangement of any kind or
nature whatsoever, including, without limitation,
those created by, arising under or evidenced by any
conditional sale or other title retention agreement,
the interest of a lessor under a capital lease
obligation or any financing lease having
substantially the same economic effect as any of the
foregoing and any contractual or other restriction on
sale or other disposition and any competing interest.
2.          Representations and
Warranties.  Assignor represents and warrants to
Assignee that:

     (A)       Assignor currently holds a 29.167%
     economic interest in the Casino
     Component and a 25% economic
     interest in the Horse Racing
     Component and is a Voting Member
     (as such term is defined in the
     Catskill Operating Agreement);
     (B)       Assignor is a limited partnership,
     duly organized, validly existing and
     in good standing under the laws of
     the State of Delaware and



     has all
     requisite partnership power and
     authority to execute and deliver this
     Agreement and perform the terms
     and provisions of this Agreement to
     be performed by it and has taken all
     necessary partnership action to
     authorize the execution, delivery and
     performance of this Agreement by it
     and to consummate the transactions
     contemplated hereby to be
     performed by it.  No other
     proceedings on the part of Assignor,
     and no consent of the members or
     partners in Watertone is required, for
     the valid execution and delivery by
     Assignor of this Agreement or the
     performance and consummation by
     Assignor of the transactions
     contemplated by this Agreement to
     be performed by it.  Assignor has
     duly executed this Agreement, this
     Agreement constitutes the legal,
     valid and binding obligations of
     Assignor, enforceable against
     Assignor in accordance with its
     terms, except as enforceability may
     be limited by applicable bankruptcy,
     insolvency, reorganization,
     moratorium or similar laws affecting
     the enforcement of creditors' rights
     generally and by general principles
     of equity (regardless of whether
     enforcement is sought in a
     proceeding in equity or at law).
     Assignor has all requisite power and
     authority and legal right to enter into
     and carry out the transaction
     contemplated hereby; and
     (C)       The execution, delivery and
     performance of this Agreement by
     Assignor and the consummation by
     Assignor of the transactions
     contemplated hereby to be
     performed by it do not and will not
     (i) violate any provision of, or
     contravene the applicable provisions
     of, any law, statute, rule, regulation,
     order, writ, injunction, judgment or
     decree of any Governmental
     Authority (as defined in the
     Contribution Agreement) to which
     Assignor is a party or to or by which
     Assignor or any of its property or
     assets is subject or bound, (ii)
     violate, result in a breach of or
     constitute a default (which has not
     been waived or consented to) or give
     rise to an event of acceleration under
     the Catskill Operating Agreement or
     any other contract, lease, loan or
     credit agreement, mortgage, security
     agreement, trust indenture or other
     agreement or instrument to which
     Assignor is a party or by which it is
     bound or to which any of its
     properties or assets is subject, nor
     result in the creation or imposition of
     any Lien of any kind upon any of the
     properties or assets of, or interests in,
     Assignor (including, without
     limitation, the Transferred Interests),
     (iii) violate any provision of the
     organizational documents of
     Assignor or Catskill, (iv) preclude
     (pursuant to Section 4.1(d) of the
     Catskill Operating Agreement or
     otherwise) the distribution or
     payment to Assignee of any of the
     proceeds or revenues from the
     Casino and Wagering Operations
     component of the Business (as those
     terms are used in the Catskill



     Operating Agreement) that would be
     payable to Assigner on account of,
     for or with respect to the Transferred
     Interests if the same had not been
     transferred to Assignee as
     contemplated hereby or (v) result in
     the loss, termination or forfeiture by
     Assignor of any voting, management
     or similar rights or benefits pursuant
     to Section 11.3 of the Catskill
     Operating Agreement or otherwise.
                 3.   Miscellaneous.
   (A)          Expenses.  Assignor will bear
   all of its own expenses in connection
   with the preparation and negotiation of
   this Agreement and the consummation
   and performance of its obligations
   hereunder and thereunder.
   (B)          Indemnification.  Assignor shall
   indemnify and hold harmless Assignee
   from and against, and shall reimburse
   Assignee for, any and all damages,
   liabilities, costs, claims, losses, costs
   and expenses (including, without
   limitation, reasonable attorneys' fees
   and other costs of collection or
   enforcement) that have been suffered or
   incurred and that have resulted from, or
   been occasioned by, any breach or
   violation by Assignor of any of its
   covenants, representations, warranties
   and other agreements set forth herein.
   (C)          Notices.  All notices, demands,
   requests, consents, approvals and other
   communications (collectively,
   "Notices") required to be given
   hereunder shall be in writing and shall
   be personally served or deposited in the
   mail, registered or certified, return
   receipt requested, postage prepaid, or
   delivered by reputable overnight air
   courier service with charges prepaid, or
   transmitted by facsimile, addressed as
   set forth below, or to such other address
   as the Person for which such Notice is
   intended shall have specified most
   recently by written notice given in
   accordance with this subsection (C):
    (I)  if to Assignor, to:
          Watertone Holdings, LP
          c/o Scott Kaniewski
          2412 Central Park Avenue
          Evanston, IL 60201
          Facsimile No.: (847) 328-4032

     with a copy thereof (which shall not
     constitute notice) simultaneously and
     similarly sent to:
          Stites & Harbison
          Attn:  William W. Hopson



          3350 Riverwood Pkwy, Ste 1700
          Atlanta, GA  30339
          Facsimile No.: (770) 850-7070

          (II)  if to Assignee, to:
          New York Gaming, LLC
          c/o Scott Kaniewski
          2412 Central Park Avenue
          Evanston, IL 60201
          Facsimile No.: (847) 328-4032

     with a copy thereof (which shall not
     constitute notice) simultaneously and
     similarly sent to:
          Alpha Hospitality Corporation
          12 East 49th Street
          New York, New York 10017
          Attention: Thomas Aro, Secretary
          Facsimile No.: (212) 750-5171

          and

          Parker Duryee Rosoff & Haft
          529 Fifth Avenue
          New York, New York 10017
          Attention: Herbert F. Kozlov,Esq.
          Facsimile No.: (212) 972-9487

Any Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by
facsimile with receipt confirmed.  Any Notice otherwise
sent as provided herein shall be deemed given on the third
(3rd) Business Day following the date mailed or on the next
Business Day following delivery of such notice to a
reputable overnight air courier service.
  (A)          Entire Agreement.  This Agreement
  constitutes the entire agreement of
  Assignor with respect to the subject
  matters hereof and supersedes all prior
  and contemporaneous agreements,
  representations, understandings,
  negotiations and discussions of
  Assignor, whether oral or written, with
  respect to such subject matter.
  (B)          Amendment and Waiver.  This Agreement may not be
  amended, modified or waived except by
  a writing executed by the entity against
  which such amendment, modification or
  waiver is sought to been enforced;
  provided, that no amendment,
  modification or waiver shall be effective
  as against Assignee unless such



  amendment, modification or waiver has
  also been agreed to in writing by
  Assignee.  Waivers may be made in
  advance or after the right waived has
  arisen or the breach or default waived
  has occurred.  Any waiver may be
  conditional.  No waiver of any breach of
  any agreement or provision herein
  contained shall be deemed a waiver of
  any preceding or succeeding breach
  thereof nor of any other agreement or
  provision herein contained.  No waiver
  or extension of time for performance of
  any obligation or act shall be deemed a
  waiver or extension of the time for
  performance of any other obligation or
  act.
  (C)          Assignment.  This Agreement and the
  rights, duties and obligations hereunder
  may not be assigned or delegated by
  Assignor without the prior written
  consent of Assignee.  Any purported
  assignment or delegation by Assignor of
  rights, duties or obligations hereunder
  made without the prior written consent
  of Assignee shall be void and of no
  effect.  This Agreement and the
  provisions hereof shall be binding upon
  and enforceable against Assignor and its
  successors and assigns and shall inure to
  the benefit of and be enforceable by
  Assignee and its successors and assigns.
  Assignee may, without the consent or
  approval of Assignor, assign this
  Agreement and/or any rights or benefits
  hereunder (including, without limitation,
  the right to enforce this Agreement or
  sue, and recover damages or settlement
  proceeds, on account of any violation or
  breach hereof), and any assignee
  contemplated by the foregoing shall
  succeed to all of the rights and benefits
  so assigned to it.
  (D)          Severability.  The terms and provisions
  of this Agreement shall be deemed
  severable, and the invalidity or
  unenforceability of any term or
  provision hereof shall not affect the
  validity or enforceability of this
  Agreement or of any other term or
  provision hereof.  Furthermore, in lieu of
  any such invalid or unenforceable term
  or provision, there shall be added as a
  part of this Agreement a provision as
  similar in terms to such invalid or
  unenforceable provision as may be
  possible and be valid and enforceable.
  (E)          Further Assurances.  Assignor, upon the
  request from time to time of Assignee,
  shall do all such further acts and
  execute, acknowledge and deliver all
  such further instruments and documents
  as may be necessary or desirable to carry
  out, effectuate and/or evidence or
  memorialize the transactions
  contemplated by this Agreement.
  (F)          Titles and Headings; Interpretation.
  Titles, captions and headings of the
  Sections of this Agreement are for
  convenience of reference only and shall
  not affect the construction of any
  provision of this Agreement.  Whenever
  the singular number is used in this
  Agreement and when required by the
  context, the same shall include the plural



  and vice versa, and the neuter, masculine
  and feminine gender of any pronoun or
  possessive shall include all other
  genders.  Unless otherwise provided
  herein, references herein to any Section
  are references to the corresponding
  Section of this Agreement.  Use of the
  terms "herein," "hereof" or "hereunder"
  or similar terms shall refer to this
  Agreement as a whole and not to any
  particular Section or other provision of
  this Agreement.
  (G)          GOVERNING LAW and JURY
  WAIVER.  THIS AGREEMENT
  SHALL BE GOVERNED BY,
  INTERPRETED UNDER AND
  CONSTRUED IN ACCORDANCE
  WITH THE INTERNAL LAWS OF
  THE STATE OF NEW YORK
  APPLICABLE TO AGREEMENTS
  MADE AND TO BE PERFORMED
  WHOLLY WITHIN SUCH STATE,
  WITHOUT GIVING EFFECT TO
  PRINCIPLES OF CONFLICTS OF
  LAWS THEREOF.   ASSIGNOR
  expressly waives its right to a
  jury trial with respect to any
  suit, litigation or other judicial
  proceeding REGARDING this
  Agreement or any dispute
  hereunder or relating hereto.
  Any dispute under or with respect to this
  Agreement shall be determined before
  the state or federal courts situated in the
  City, County and State of New York,
  which courts shall have exclusive
  jurisdiction over and with respect to any
  such dispute, and Assignor hereby
  irrevocably submits to the jurisdiction of
  such courts.  Assignor hereby agrees not
  to raise any defense or objection, under
  the theory of forum non conviens or
  otherwise, with respect to the
  jurisdiction of any such court.





IN WITNESS WHEREOF, Assignor has, by a
representative thereof thereunto duly authorized, signed
this Assignment Agreement as of the date first written
above.

                    WATERTONE HOLDINGS LP
                    By:  BKB, LLC
                    Its:  General Partner
                    By:




                    Name:     Robert A. Berman
                    Title:    Managing Member

ACKNOWLEDGMENT:

State of New York     )


                                    ss.:
County of New York )

          On the ____ day of ______________, 2001, before
me, the undersigned, personally appeared Robert A.
Berman, personally known to me or proved to me on the
basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and
acknowledged to me that he executed same in his capacity,
and that by his signature on the instrument, the individual,
or the entity upon behalf of which the individual acted,
executed the instrument.


____________________________
NOTARY



                           Exhibit c-1





         Employment Agreement

            By and Between

    Alpha Hospitality Corporation

                  And

            Robert Berman





This EMPLOYMENT AGREEMENT (the
"Agreement") is made as of ___________, 2001, by and
between Alpha Hospitality Corporation (the
"Company"), a corporation duly organized and existing
under the laws of the State of Delaware, with offices at 12
East 49th Street, New York, New York 10017, and Robert
Berman ("Employee"), an individual residing at 875
West Lakeshore Drive, Rockhill, New York  12775.
WHEREAS, pursuant to a certain Contribution
Agreement (the "Contribution Agreement"), dated as of
August 10, 2001, by and between the Company and
Watertone Holdings, LP ("Watertone"), the Company and
Watertone have agreed to form a limited liability company
under the name New York Gaming LLC (the "LLC") and
Watertone has agreed to transfer and contribute to the LLC
a portion of its interest in Catskill Development, LLC
("Catskill");
 WHEREAS, Employee has been a principal in
Watertone, and pursuant to the Contribution Agreement,
and as part of, the transactions contemplated thereby, the
Company has agreed to employ Employee as provided
herein; and
WHEREAS, Employee desires to be employed by
the Company in accordance with the terms and conditions
hereinafter set forth; and
WHEREAS, the Company is willing to employ
Employee in accordance with such terms and conditions;
NOW THEREFORE, in consideration of the
foregoing premises and the mutual agreements, covenants,
terms and conditions set forth herein, the parties agree as
follows:
1.      Employment; Title; Duties and
Responsibilities.
(a)          The Company hereby agrees to employ
Employee, and Employee hereby agrees to serve the
Company, on the terms and conditions set forth herein,
as the President of the Company, with such powers,
authorities, responsibilities and duties as may be
assigned to him from time to time by any Senior
Officer (as hereinafter defined) or the Board of
Directors of the Company (the "Board").
(b)          During the Term (as hereinafter defined),
Employee shall, during business hours, devote all of his
time, energy, skills, expertise, knowledge and abilities
on an exclusive basis to the performance of his duties
and obligations hereunder and shall, consistent with
Company's Policies (as hereinafter defined) and as
directed or requested from time to time by the Board or
any Senior Officer, diligently, conscientiously and in
good faith render and perform such services in such
areas and places as are so directed or requested of him
to carry out his duties; provided, however, that the
foregoing shall not be deemed to prohibit Employee,
outside of normal business hours, from engaging in any
other business activities that do not



conflict or interfere
with his obligations to the Company or its Affiliates (as
hereinafter defined) as set forth in this Agreement.
Employee, at all times during the Term, shall adhere to
and obey all Company Policies that have been
furnished or provided to him or of which he has
otherwise become or been made aware.  For purposes
of this Agreement, "Company Policies" means,
collectively, the practices, rules, procedures and polices
of the Company as in effect from time to time, whether
or not set forth in writing in any Company manual or
other directive or as may be imposed on the Company
under applicable law, and "Senior Officer" means (if
other than Employee) the Chairman of the Board, the
Chief Executive Officer and the President of the
Company.  Without limiting the effect or generality of
the foregoing, Employee shall at all times during the
Term:
  (1)       faithfully, diligently and timely perform such
duties, and exercise such powers, as may from time
to time be assigned to, or vested in, him by the
Board or any Senior Officer;
  (2)       obey all lawful and reasonable directions of
the Board or any Senior Officer;
  (3)       use his best efforts and endeavors to promote
the interests of the Company and its Affiliates;
  (4)       keep the Board (or such persons(s) as may
have been designated from time to time by the
Board) promptly and fully informed (in writing if so
requested) of his conduct of the business and affairs
of the Company and provide such explanations as
the Board may from time to time request;
  (5)       subject to the proviso in the first sentence of
Section 1(b) above, devote all of his professional
and business time to the conduct of the business of
the Company (and, if so requested by the Board or
any Senior Officer, one or more of its Affiliates)
and to the performance of his duties hereunder;
  (6)       not at any time engage in any self dealing or
conflict of interest that is material to the Company
or any of its Affiliates or to any client, customer,
supplier or vendor of the Company or of any of its
Affiliates; and
  (7)       not at any time make any materially untrue or
misleading statement relating to the Company or
any of its Affiliates or to any client, customer,
supplier or vendor of the Company or of any of its
Affiliates.
(c)          In addition, Employee shall perform such
other functions for the Company, including taking
positions with Affiliates and performing duties on their
behalf, as may be assigned to him from time to time by
the Board or any Senior Officer.  As used in this
Agreement, "Affiliate" of any person means any entity
(1)



that such person (directly or indirectly through one
or more subsidiaries or other entities, or by contract or
otherwise) controls, (2) that (directly or indirectly
through one or more subsidiaries or other entities, or by
contract, overlapping directors or management or
otherwise), controls such person or is under common
control with such person, (3) in which such person
(directly or indirectly through one or more subsidiaries
or other entities, or by contract or otherwise) owns (of
record or beneficially) or holds, or otherwise has the
right to vote, at least a five per cent (5%) of the equity
interest thereof or therein, (4) that, individually or with
others with which it is acting as a group or with a
common goal, (directly or indirectly through one or
more subsidiaries or other entities, or by contract or
otherwise) owns (of record or beneficially) or holds, or
otherwise has the right to vote, at least a ten per cent
(10%) of the equity interest of or in such person, (5) for
which such person, if an individual, is serving or acting
as an officer, employee, sales agent or representative,
consultant or adviser or in any similar capacity or (6)
for which such person, if an individual, is acting or
serving as a member of its board of directors or other
governing body.  Notwithstanding anything contained
herein to the contrary, Employee shall not be obligated
hereunder to devote more time to performing his duties
hereunder to the Company and/or its Affiliates than is
generally expected of other executives of the Company.
(d)          Employee further agrees to devote his best
efforts to assist the Company in obtaining financing
that is in the amount and has terms and conditions
(including, but not limited to, annual interest rate,
repayment schedule, maturity date, conversion terms,
prepayment premium or penalty and other terms) that
are acceptable to the Board; provided, that the
foregoing obligation shall not apply if and to the extent
that the Company (on account of the Company's receipt
of payments relating to any pending litigation or
otherwise) has no reasonable need for such financing.
(e)          It is the Company's anticipation that, during
the Term of this Agreement, Employee will be
nominated as a candidate for election to the Board at
each annual meeting of stockholders of the Company.
Employee, however, understands that the selection of
candidates to be nominated for election to the Board is
reserved to the discretion of the Board and that the
election of members to the Board is determined by vote
of the Company's stockholders and that there can
therefore be no assurance that Employee will be
nominated for election to the Board or, even if so
nominated, will be elected to the Board.
(f)          Notwithstanding anything contained herein
to the contrary, Employee shall not, except as otherwise
expressly authorized by the Board, (1) hire or retain any
employee or consultant or similar person or entity by or
on behalf of the Company or any of its Affiliates or (2)
otherwise cause the Company to incur, or incur on
behalf of the Company or any of its Affiliates, any
expenditure or liability or group of related expenditures
or liabilities.



(g)          The Company shall reimburse Employee for
all reasonable expenses expended by Employee in
connection with the investigation of Employee (as an
officer or director of the Company) or any finding or
determination of suitability of Employee (as an officer
or director of the Company) by any Gaming Authority
(as defined in the Contribution Agreement).
2.           Term of Employment.
       (a) The term of employment (the "Term") of
Employee under this Agreement commences as of the date
hereof (the "Commencement Date"), and shall thereafter
continue (subject to earlier termination as provided in
Section 8 hereof) for a fixed period of thirty-six (36)
consecutive months (the "Fixed Period").
            (b) Employee agrees to exclude, release and waive
any right to any payment and claim in respect of unfair or
illegal dismissal if the Fixed Period expires without this
Agreement or his employment hereunder being renewed or
extended or if this Agreement is terminated and the
Company pays Employee such sum of money as is
equivalent to the remuneration due to Employee for the
remainder of the unexpired Fixed Period, exclusive of any
deferred compensation, bonus or other discretionary
compensation that has not been granted to Employee prior
to such termination and exclusive of any other amount or
consideration that may be payable hereunder or pursuant
hereto (excepting such amount or consideration, if any, as
has accrued and become payable prior to such termination),
including, without limitation, on account of or with respect
to any insurance or other fringe benefits (provided, that the
foregoing shall not limit Employee's rights to obtain from
any insurance company or similar third party benefits that
arose or accrued prior to such termination).
3.      Travel.
            Travel during Employee's employment shall be in
accordance with Company Policies as in effect from time
to time.  Employee shall be entitled to reimbursement for
employment-related travel in accordance with Section 5
below.
4.           Compensation.
(A)          As compensation for his services and in
consideration for Employee's covenants contained in
this Agreement, the Company shall pay to Employee a
salary that on an annualized basis will equal Three
Hundred Thousand Dollars ($300,000).  Such annual
salary shall be payable in equal installments on a bi-
weekly basis and in accordance with Company Policies
and shall be subject to applicable federal, state and
local withholdings and deductions.  Notwithstanding
anything contained herein to the contrary, all salary due
hereunder shall accrue and be deferred and shall not be
payable until five (5) business days after the date on
which the Company is provided



with, accepts and
actually receives (including the actual funding of) the
Qualifying Financing (as hereinafter defined) (the date
on which the Company is provided with, accepts and
actually receives (including the actual funding of) the
Qualifying Financing is hereinafter referred to as the
"Financing Date"), and on the fifth (5th) business day
following the Financing Date all salary that is payable
hereunder to Employee and that has theretofore accrued
and been deferred hereunder shall become payable;
provided, however, that, if this Agreement or
Employee's employment hereunder shall expire or
terminate prior to the Financing Date, then no salary
theretofore accrued or deferred hereunder shall be
payable to Employee unless (i) negotiations with
respect to the Qualified Financing shall have
commenced prior to such expiration or termination and
(ii) the Company is provided with, accepts and actually
receives (including the actual funding of) the
Qualifying Financing within ninety (90) days following
such expiration or termination.  As used herein,
"Qualifying Financing" means financing that is in an
amount at least equal to the Threshold Amount (as
hereinafter defined) and is subject to such terms and
conditions (including, but not limited to, annual interest
rate, repayment schedule, maturity date, conversion
terms, prepayment premium or penalty and other terms)
as the Board, in its sole and absolute discretion (which
shall not be subject to judicial or other review), deems
adequate and appropriate to justify the termination of
the deferral of salary to Employee as provided above,
and "Threshold Amount" means an amount
(determined based upon the net amount actually
received by the Company), that, when added to the
aggregate net proceeds or distributions that have been
actually received by the Company with respect to the
PPE Litigation (as defined in the Contribution
Agreement) or any similar litigation (whether as the
result of any judgment entered therein or settlement
thereof), equals ten million dollars ($10,000,000).
(B)          The Company shall be entitled to withhold
from any payments due hereunder taxes, FICA,
contributory insurance participations and other normal
deductions, all in accordance with Company Policies.
5.          Expense Reimbursement.
       The Company shall, consistent with Company
Policies, reimburse Employee for reasonable out-of-pocket
business expenses incurred by him in his performance of
services hereunder to or for the Company or any Affiliate
of the Company, upon submission of reasonable
documentation therefor.
6.           Option Awards.
            The Company shall grant to Employee an option
(the "Option") to purchase up to 251,536 shares
(collectively, the "Option Shares") of the common stock
of the Company (the "Common Stock"), par value $.01
per share, with an exercise price of twenty-four



dollars and
nine-one cents ($24.91) per share.  The Option shall be
subject to an option agreement in the form attached hereto
as Exhibit A.
7.           Other Benefits.
(A)          Subject to his qualifying therefor and
complying with all relevant Company Policies,
Employee shall be entitled to participate in all benefit
plans, retirement plans, programs and arrangements of
the Company, if any, made available to its officers or
generally to its employees, on a basis at least equal to
that extended to other senior management employees of
the Company.
(B)          Employee shall be entitled to twenty (20)
days per year paid vacation and five (5) paid personal
days in accordance with the Company Policies in effect
from time to time.  Unused vacation and personal days
may not be carried over to a subsequent year, and the
Company shall have no obligation to compensate
Employee for any unused vacation or personal days
upon the expiration or earlier termination of this
Agreement or Employee's employment hereunder.
3.           Early Termination.
(a)          Employee's employment under this
Agreement shall terminate upon the occurrence of any
one of the following events or conditions:
(1)          Employee's death;
Employee's inability substantially to perform
his duties and fulfill his responsibilities
hereunder due to disability, illness or mental
incompetency having a duration of at least
twenty (20) consecutive business days or
existing for any sixty (60) business days in any
period of 200-consecutive business days (any of
the foregoing, a "Disability");
(A) Any conviction of Employee of any
criminal offense punishable with or by six (6)
months or more imprisonment (regardless of
whether Employee is actually imprisoned or
sentenced to imprisonment); (B) any conviction
of or finding against Employee of fraud,
embezzlement, theft, misappropriation or any
other defalcation relating to the Company or
any of its Affiliates or any customer, client,
vendor or supplier of the Company or any of its
Affiliates; (C) any finding that Employee has
engaged in any legally prohibited discrimination
or harassment with respect to any employee,
agent or representative of the Company or any
of its Affiliates; (D) any conviction of or finding
against Employee, whether judicial or
administrative, that has or has had, in the
reasonable discretion of the Board, a materially
adverse effect on the Company or any of its
Affiliates (including, without limitation, upon
the reputation thereof) or on Employee or his
conduct or performance of his



duties hereunder;
(E) any willful misconduct, gross negligence or
substance abuse by Employee that has or has
had a materially adverse effect on the Company
or any of its Affiliates (including, without
limitation, upon the reputation thereof) or on
Employee or his conduct or performance of his
duties hereunder; or (F) Employee being found
subject to an event that would lead to disclosure
in Item 7 of Form BD of the Securities and
Exchange Commission (any termination on
account of any of the events or circumstances
set forth in this clause (3) or in the following
clauses (4), (5), (6) or (7) shall be deemed a
termination for or with "Cause");
Any finding or determination by or of any
governmental agency or regulatory authority
that Employee is not qualified or suitably to
serve as an officer of the Company or any of its
Affiliates or any other legal prohibition against
Employee serving as an officer of the Company
or any of its Affiliates;
Any breach or violation by Employee of any of
his representations and warranties set forth in
Section 9 below or any breach by Employee of
any of his obligations under Section 10 or 12
below.
Any breach or violation by Employee of any of
his other representations, warranties, covenants
or other agreements set forth herein (other than
under circumstance leading to termination under
one or more of the prior clauses of this Section
8) and the failure of Employee to cure such
breach or violation within ten (10) days
following receipt of written notice (any such
notice, a "Breach Notice") from the Company
identifying such breach or violation and
demanding that such breach or violation be
cured; provided however, that no notice needs to
be given, and no such cure period shall apply,
with respect to any breach or violation that is
identical to, or of the same general or basic type
or nature as, a prior breach or violation with
respect to which Employee had been given a
Breach Notice (a) on at least two (2) prior
occasions or (b) within the thirty (30) business
days next proceeding such breach or violation,
in which case the Company shall have the right
to immediately terminate this Agreement
without giving any notice or allowing for any
cure period;
At the discretion of the Company, at any time
prior to the lapse of eighteen months (18)
months from the Commencement Date, provided
that the Qualifying Financing has not yet been
obtained; or
At the discretion of Employee, upon at least
sixty (60) days' prior written notice to the
Company.
(a)          If a circumstance contemplated by Section
8(a) arises, Employee's employment shall terminate
without the need for notice of termination from the



Company (other than as expressly provided for in
clauses (6) or (8) thereof, as applicable).  In such event,
no amounts due hereunder shall be payable, except for
Employee's base salary accrued hereunder through the
date of termination, subject, however, to the last
sentence of Section 4(a) above.
(b)          Any dispute arising regarding the existence,
extent or continuance of a Disability shall be resolved
within 90 days by the determination of three individuals
who are licensed to practice medicine in the State of
New York, one to be selected by the Company, one by
Employee and the third by the two physicians so
selected; and any determination made by a majority of
such individuals shall be determinative and binding on
the parties hereto.  In connection with any such
determination, each of the parties shall bear the costs
and expenses of the physician selected by it or him, and
the parties shall share the costs and expenses of the
third physician.
(c)          On the expiration or earlier termination of
this Agreement for any reason whatsoever, Employee
shall resign (and without any further action on the part
of Employee, shall be deemed to have resigned) from
any and all offices and positions that he may have or
hold with the Company or any of its Affiliates and from
the Board.
1.           Representations and Warranties of
Employee.  Employee hereby represents and warrants
to the Company, in order to induce the Company to
enter into this Agreement and employ him hereunder,
as follows:
(a)         Employee has not been convicted of any
felony or any other criminal offense that is
punishable with or by six (6) months or more
imprisonment (regardless of whether Employee has
actually been imprisoned or sentenced to
imprisonment).
(b)         Employee is under no contractual or other
impediment to undertake the offices and/or
employment provided or contemplated hereunder or
otherwise to perform hereunder and that, by so
doing, he will not be in violation of any
commitment, agreement or obligation to any other
person or entity.
2.   Confidential/Proprietary Information;
Non-Solicitation; Non-Competition.
     (a)         During the Term and
     thereafter, Employee shall, and shall
     cause each and all of his agents,
     representatives and Affiliates:
(1)         to treat all Confidential Information (as
hereinafter defined) in the strictest confidence;



(2)         not to disclose, publish, distribute,
disseminate, reproduce, utilize or make accessible
in any manner or in any form any Confidential
Information other than in connection with
performing the services required of Employee under
this Agreement; and
(3)         not to reproduce, retain, copy, publish,
plagiarize, appropriate or otherwise utilize (as a
model, precedent, form, template or otherwise), or
refer to in way, any of the Company's marketing
materials, forms of letters or agreements or other
business documents or any part or portion of, or
excerpt from, any of the foregoing.
(b)         As used herein, "Confidential
Information" means any proprietary, confidential and/or
other non-public information of, relating to or regarding the
business or interests of the Company or any of its
Affiliates, including, without limitation, (1) any trade
secrets, know-how, databases, company policies,
procedures and techniques, correspondence, agreements,
negotiations, offering packages, business descriptions and
profiles, business plans, financial information, product
literature and technical projects of, regarding or relating to
the Company or any of its Affiliates or the business,
operations, products and/or services of the Company or any
of its Affiliates, (2) any research datum, result or report
regarding the Company or any of its Affiliates or any
aspects of the business, operations, business dealings,
prospects or financial condition or financial results of the
Company or any of its Affiliates, (3) any report, analysis,
study, invention, process or other work product developed
by, for or on behalf of the Company or any of its Affiliates,
including, without limitation, that developed by Employee,
whether on the premises of the Company or elsewhere and
whether or not developed during normal business hours or
on normal business days, and (4) any list of customers,
clients, vendors, suppliers or prospects of the Company or
any of its Affiliates.  Notwithstanding the foregoing, the
provisions of this Agreement shall not apply to any
Confidential Information to the extent, but only to the
extent, that the same is, or has become, publicly known
under circumstances involving no breach of this Agreement
or any other agreement of confidentiality or has been
disclosed pursuant to an order or requirement of a court,
administrative agency or other governmental body of
competent authority, provided however, that the Company
has been given appropriate and reasonable notice of such
proceeding and a reasonable opportunity to contest such
disclosure.  Without limiting the generality of the
foregoing, except as consented to in writing by the Board
or a Senior Officer, Employee shall not in any way or at
any time disclose or publish the name(s) or description(s)
of any transaction by the Company or any of its Affiliates,
whether contemplated, pending or completed, or the
identity of any party to any such transaction.
(B)          All business, financial, product and
technical records, information and literature relating to
the business or operations, or any product or service, of
the Company or any of its Affiliates (all such business,
financial, product and technical



records, information
and literature being hereinafter referred to collectively
as "Business Records"), including, without limitation,
Confidential Information, fee agreements,
confidentiality agreements, papers, databases, contact
records, documents and correspondence and studies
containing information relating to the Company or any
of its Affiliates or any transaction (whether
contemplated, pending or completed) by the Company
or any of its Affiliates, in all cases irrespective of the
manner in which such information was obtained or is
kept or stored, made or kept by Employee or under
Employee's possession, custody or control or in the
possession, custody or control of any agent and
representative of Employee, shall be and remain the
sole and exclusive property of the Company and shall
be surrendered to the Company at the time of the
expiration or earlier termination of this Agreement or
Employee's employment hereunder for any reason
whatsoever or, if earlier, upon the request of the
Company.  Upon such expiration or termination or
earlier request, Employee shall not, and shall cause his
or her agents, representatives and Affiliates not to,
retain, publish or disclose, or otherwise use, without the
prior written consent of a Senior Officer, any Business
Records.
(C)          Employee hereby assigns, transfers and
conveys to the Company all of his respective right, title
and interest in and to any and all Company Property (as
hereinafter defined).  If any Company Property is
deemed in any way to fall within the definition of
"work for hire" as such term is defined in 17 U.S.C.
101, such Company Property shall be considered
"work for hire" and the Company shall be deemed the
author and sole and exclusive owner of any copyrights
and other rights and interests therein.  If any of the
Company Property is considered to be work not
included in the categories of work covered by the
"work for hire" definition contained in 17 U.S.C. 101,
such Company Property shall be owned by the
Company or assigned or transferred completely and
exclusively to the Company.  Employee agrees
promptly to execute any instruments, and to do all
things, reasonably requested by the Company in order
more fully to vest in the Company all ownership rights
in all Company Property.  As used herein, "Company
Property" means each and all of every idea, invention,
writing, composition and/or computer program
(whether or not patentable or protected by copyright
and including, without limitation, any Confidential
Information) that relates to the business or affairs of the
Company or any of its Affiliates and either (i) that has
been conceived, created, invented or otherwise
developed in whole or in part by Employee or (ii) with
respect to the conception, creation, invention or
development of which Employee may have aided
during the term of his employment by the Company.
(D)          During the period of his employment by the
Company and for a period of two (2) years following
the date upon which such employment shall terminate
(for any reason whatsoever), Employee shall not,
directly or indirectly or in any capacity, and shall not
direct, authorize, solicit, recommend, induce or
otherwise encourage any of his agents, representatives
or Affiliates or allow, permit or suffer any of his



agents,
representatives or Affiliates to, (1) hire, employ or
otherwise retain (which concept, as used herein, shall
include as a consultant, advisor, agent, representative or
otherwise), or attempt to hire, employ or otherwise
retain, or encourage or assist any other person or entity
in hiring, employing or otherwise retaining, or
otherwise participate or assist in the hiring, employing
or other retention of, any Person (which, for the
purposes of this Agreement, means any individual,
corporation, limited liability company, partnership
(general or limited), trust, joint venture or other
business entity of any nature) who or that, during the
period of Employee's employment by the Company or
thereafter, has been or is a director, officer or other
employee of, or sales agent or other representative,
consultant or other adviser to or for, the Company or
any of its Affiliates (any such person, a "Protected
Employee"), (2) induce, encourage or otherwise
attempt to influence, or direct, instruct or assist anyone
else to induce, encourage or otherwise attempt to
influence, any Protected Employee to leave or
otherwise terminate, or to renegotiate the terms of, his,
her or its employment or other arrangement or
association with the Company or any of its Affiliates,
(3) induce, encourage or otherwise attempt to influence,
or direct, instruct or assist anyone else to induce,
encourage or otherwise attempt to influence, any
Person who or that, during the period of Employee's
employment by the Company or thereafter, has been or
is, a customer, client, distributor, vendor or supplier of
or to the Company or any of its Affiliates to cease, to
not maintain or renew or to adversely modify or change
his, her or its arrangement, association or business with
the Company or any of its Affiliates or (4) otherwise
interfere, encourage anyone else to interfere or assist
anyone else in interfering with any contractual
relationship between the Company (or any of its
Affiliates) and any Person with which the Company (or
any of its Affiliates) had any contractual relationship
during the period of Employee's employment by the
Company or thereafter.  Nothing contained herein shall
be deemed to release or relieve Employee from any
liability Employee may incur at common law, under
any other contract or otherwise for interference with
contractual relations or any similar claim.
(E)          During the period of his employment by the
Company and for a period of two (2) years following
the date upon which such employment shall terminate
(for any reason whatsoever), Employee shall not (i) as a
director, officer, employee, consultant or advisor or in
any similar capacity or function, be employed or
retained by, or otherwise assist, any person or entity
that is directly or through any of its Affiliates engaged
in any gaming or gambling business or activity and that
has a place of business in the State of New York,
Florida or Mississippi or otherwise within one hundred
(100) miles of any gaming or gambling business,
operation or enterprise that is managed by the Company
or by any of its Affiliates or in which the Company or
any of its Affiliates has an equity interest (which, for
these purposes, shall include an interest in any measure
of profits or revenues) of five percent (5%) or greater
(any such person or entity being hereinafter referred to
as a "Competing Enterprise") or (ii) own, directly or
indirectly, any interest (which, for these purposes, shall
include



the right to receive or otherwise participate in
any measure of profits or revenues) in any Competing
Entity; provided, however, that Employee shall not be
prohibited by the foregoing from (x) continuing to hold
or retain his interest in Watertone and, through
Watertone, in Catskill, (y) continuing to participate in
the ownership or management of any business venture
engaged in any family limited partnership, trust or
similar vehicle established for estate planning purposes
or (z) from owning up to five percent (5%) of the
common stock or other equity interest in any publicly
traded company.
(F)          In furtherance of the covenants contained
herein and as a condition to the continuation of
Employee's employment hereunder, Employee shall
execute and deliver to the Company such further
agreements and commitments as the Company may
from time to time reasonably request in order more
fully to protect the Company's rights and interests in
and to the Confidential Information, the Business
Records and proprietary and other rights and interests
in and with respect to its business prospects.
7.           Injunctive Relief; Independence and
Severability of Covenants.
(a)          Employee acknowledges and agrees that, in
the event of any breach or likely breach of any of the
covenants of Section 9 above, the Company and any
relevant Affiliate(s) would be irreparably harmed and
could not be made whole solely by monetary damages.
It is accordingly agreed that such Persons, in addition to
any other remedies to which they may be entitled at law
or in equity, shall be entitled to equitable relief (in the
form of an injunction or otherwise) in respect of such
breach or likely breach (or any threatened breach).  In
the event the Company seeks any equitable relief or
remedy with respect to any such threatened or actual
breach, violation or default (1) Employee will not seek
to oppose or defend against such equitable relief or
remedy on the ground that the Company has an
adequate remedy at law or on any other similar or
related ground and (2) no bond or other security shall
be required for, or as a condition to, the seeking or
granting of any injunction or other equitable relief.  It is
intended to grant full third-party rights under this
provision.
(b)          Employee acknowledges and agrees that the
covenants and other provisions set forth in Section 10
above and in this Section 11 are reasonable in both
scope and content, including with respect to duration
and subject matter, that such covenants and other
provisions are necessary and appropriate for the
protection of the legitimate business interests of the
Company and its Affiliates, that he is receiving
valuable and adequate consideration for such covenants
under this Agreement and that his services are of a
special and unique nature.  The parties acknowledge
that it is their intention that all such covenants and
provisions be enforceable to the fullest extent possible
under applicable law.



(c)          For the purposes of this Section 11, the state
and federal courts of the State of New York will be the
proper and exclusive forums for any legal controversy
arising in connection with this Agreement.
                 12.  Miscellaneous.

(a)         Indemnification.
(1)         Each of the parties hereto (an "Indemnifying
Party") shall indemnify and hold harmless the
other party hereto (and, with respect to any breach
of Section 10 above, the Company's Affiliates) (the
"Indemnified Party") from and against, and shall
reimburse the Indemnified Party for, any and all
liabilities, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys'
fees and other legal costs, including those related to
any appeal, and costs of any investigation) (all of
the foregoing, collectively, "Losses") that have
been suffered or incurred by the Indemnified Party
and that have resulted from, or been occasioned by,
(a) any breach or violation by the Indemnifying
Party of any of its or his representations, warranties,
covenants and other agreements set forth herein or
(b) any claim asserted by any third party that, if
true, would constitute a breach or violation by the
Indemnifying Party of any of its or his
representations, warranties, covenants and other
agreements set forth herein  (any such claim, a
"Third-Party Claim").
(2)         If the Indemnified Party shall receive notice
of, or otherwise become aware of the assertion of,
any Third-Party Claim with respect to which the
Indemnified Party intends to seek indemnification
under this subsection (a), then the Indemnified
Party shall give prompt written notice thereof to the
Indemnifying Party, which notice shall include or
be accompanied with a copy of any summons,
complaint or other written evidence of such Third-
Party Claim to the extent that such summons,
complaint or other written evidence has been
received by such Indemnified Party or by any
attorney or other agent thereof.  The failure of the
Indemnified Party to give such notice or to give
such notice promptly shall not relieve the
Indemnifying Party of its obligation to indemnify
the Indemnified Party under this subsection (a)
except to the extent that the failure to give such
notice or the delay in giving such notice has
materially prejudiced the Indemnifying Party in its
or his ability to defend against such Third-Party
Claim.  The Indemnifying Party shall, with counsel
selected by it (which selection shall be subject to
the approval of the Indemnified Party, such
approval not to be unreasonably withheld or
delayed), be entitled to defend against and settle
any Third Party Claim; provided, however, that the
Indemnifying Party's right to do so shall be
conditioned upon its or his having confirmed in
writing to the Indemnified Party its or his obligation
to indemnify the Indemnified Party with respect to
such Claim (any such confirmation, a "Notice to
Indemnify") and,



provided, further, however, that
the Indemnifying Party shall not be entitled to enter
into any settlement of any such Claim without the
prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld
or delayed.  Notwithstanding anything contained
herein to the contrary, the Indemnifying Party's
obligation to indemnify the Indemnifying Parties
against any Third-Party Claim shall be conditioned
upon the Indemnifying Party providing full and
timely cooperation in the defense of such Claim.
(3)         Notwithstanding anything contained herein to
the contrary, except as provided in the next
following sentence, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party
for, or otherwise pay, any attorneys' fees or other
legal or related costs (or any costs of any
investigation) suffered or incurred by the
Indemnified Party in connection with any Third-
Party Claim after the Indemnified Party receive any
Notice to Indemnify with respect to such Claim;
provided, however, that, if, after giving any Notice
to Indemnify, the Indemnifying Party reverses its or
his position and claims that it or he is not required
to Indemnify the Indemnified Party against the
Third-Party Claim, then, in the event the
Indemnifying Party is obligated hereunder to
indemnify the Indemnified Party with respect to
such Claim, the Indemnifying Party shall bear and
pay the reasonable attorneys' fees and other legal
costs, including those related to any appeal, and
costs of any investigation, incurred by the
Indemnified Party after the Indemnifying Party has
reversed its or his position and claimed that it or he
is not required to Indemnify the Indemnified Party
against such Claim.  Notwithstanding the foregoing,
if there is a legitimate and good faith conflict of
interest between the Indemnifying Party and the
Indemnified Party in connection with the defense of
any Third-Party Claim so that one counsel or law
firm could not properly represent both parties in
connection with such defense, then the Indemnified
Party, in the event it or he is obligated hereunder to
indemnify the Indemnified Party with respect to
such Claim, shall bear and pay the reasonable
attorneys' fees and other legal costs, including those
related to any appeal, and costs of any investigation,
incurred by the Indemnified Party in connection
with such defense, regardless of whether the
Indemnifying Party has given a Notice to
Indemnify.  Under no circumstances, however, shall
the Indemnifying Party be obligated to pay for the
attorneys' fees or related legal fees of more than
one attorney or law firm.
(b)         Notices.  All notices, demands, requests,
consents, approvals or other communications (each of the
foregoing, a "Notice") required to be given hereunder or
pursuant hereto to either party hereto shall be in writing
and shall be (a) personally delivered, (b) sent by both
registered to certified mail, postage prepaid and return
receipt requested, and regular first class mail, (b) sent both
by facsimile transmission with receipt of transmission
confirmed electronically or by telephone and by regular
first class mail or (c) sent by reputable overnight courier
service with charges prepaid and delivery



confirmed, to the
intended recipient at its or his respective address as set
forth below; provided, however, that, if a party sending any
Notice has received written notice in accordance with this
subsection (b) of a more recent address for any intended
recipient referred to below, any Notice to such intended
recipient shall be delivered or sent to it or him at the most
recent address of which such party has received such a
notice:
if to the Company:

Alpha Hospitality Corporation
12 East 49th Street, 24th Floor
New York, New York  10017
Attn: Chairman of the Board
Facsimile number: (212) 570-5171

if to Employee:

Robert Berman
875 West Lakeshore Drive
Rockhill, New York  12775
Facsimile number:

Any Notice delivered or sent as provided above shall be
deemed given when so delivered or sent and shall be
deemed received (i) when personally delivered, (ii) three
(3) Business Days after being mailed as above provided,
(iii) when sent by facsimile transmission as above provided
or (iv) one (1) Business Day after being sent by courier as
above provided; provided, however, that any Notice
specifying a new address to which any Notice shall be sent
shall be deemed received only when actually received.

(c)         Entire Agreement.  This Agreement is
intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein,
constitutes the entire agreement of the parties with respect
to such subject matter and supersedes, and merges herein,
all prior and contemporaneous negotiations, discussions,
representations, understandings and agreements between
the parties, whether oral or written, with respect such
subject matter.  No representation, warranty, restriction,
promise, undertaking or other agreement with respect to
such subject matter has been made or given by either party
hereto other than those set forth in this Agreement.

(d)         Amendment and Waiver.  This Agreement may be amended, modified or
supplemented only to the extent expressly set forth in
writing that is signed by the party to be charged therewith
and that sets forth therein that its purpose is to amend,
modify or supplement this Agreement or some term,
condition or



provision hereof.  No waiver of any term,
condition or provision of this Agreement or of any breach
or violation of this Agreement or any provision hereof shall
be effective except to the extent expressly set forth in
writing that is signed by the party to be charged therewith.
Without limiting the generality of the foregoing, no
conduct (including, without limitation, any failure or delay
in enforcing this Agreement or any provision hereof or any
acceptance or retention of payment) or course of conduct
by either party hereto shall be deemed to constitute a
waiver by such party of the breach or violation of this
Agreement or of any provision hereof by the other party
hereto.  Any waiver may be made in advance or after the
right waived has arisen or the breach or default waived has
occurred, and any waiver may be conditional.  No waiver
of any breach or violation of any agreement or provision
herein contained shall be deemed a waiver of any
preceding or succeeding breach or violation thereof nor of
any other agreement or provision herein contained.  No
waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.

(e)         Assignment; No Third Party
Beneficiaries.  This Agreement and the rights, duties and
obligations hereunder may not be assigned or delegated by
either party hereto, without the prior written consent of the
other party hereto; provided that, consistent with the terms
hereof, the Company may from time to time direct that
Employee serve as a director and/or officer of, or otherwise
provide services to or work for, any Affiliate of the
Company.  Except as provided in the preceding sentence,
any purported assignment or delegation of rights, duties or
obligations hereunder made without the prior written
consent of the other party hereto shall be null and void and
of no effect.  This Agreement and the provisions hereof
shall be binding upon and enforceable against each of the
parties and their respective executors, heirs, legal
representatives, administrators, successors and assigns and
shall inure to the benefit of and be enforceable by each of
the parties and their respective executors, heirs, legal
representatives, administrators, successors and permitted
assigns.  Except as contemplated under Section 10 above
and subsection (a) of this Section 12, this Agreement is not
intended to confer any rights or benefits on any Persons
other than as set forth above.

(f)         Severability.  This Agreement shall be
deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof.  The parties intend that this Agreement
and each of the provisions hereof be enforced to the fullest
extent permitted by law.  Accordingly, in lieu of any such
invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid
or unenforceable provision as may be possible and be valid
and enforceable.

(g)         Further Assurances.  Each party hereto,
upon the request of any other party hereto, shall do all such
further acts and execute, acknowledge and deliver all such



further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by, and
the purpose and intent of, this Agreement.

(h)         Titles and Headings; Rules of
Interpretation.  Titles, captions and headings of the
sections, articles and other subdivisions of this Agreement
are for convenience of reference only and shall not affect
the construction or interpretation of any provision of this
Agreement.  References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise
stated.  Words such as "herein," "hereinafter," "hereof,"
"hereto," "hereby" and "hereunder," and words of like
import, unless the context requires otherwise, refer to this
Agreement taken as a whole and not to any particular
Section, Article or other provision hereof.  As used in this
Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context
requires, and if the context requires, the use of the singular
shall include the plural and visa versa.  This Agreement is
the product of mutual negotiations between the parties and
their respective counsels, and no party shall be deemed the
draftsperson hereof or of any portion or provision hereof.
Accordingly, in the event of any ambiguity or
inconsistency in any provision of this Agreement, the same
shall not be interpreted against either party hereto as the
party responsible for drafting such provision.

(i)         Waiver of Jury Trial; Consent to
Jurisdiction.    Each of the parties hereto expressly
waives its OR HIS right to a jury trial with respect
to any suit, litigation or other judicial proceeding
relating to this Agreement or any dispute
hereunder or relating hereto.
(j)         Governing Law; Jurisdiction of Courts.
This Agreement shall be governed by, interpreted under
and construed in accordance with the internal laws of the
State of New York applicable to contracts executed and to
be performed in that State without giving effect to the
choice of conflict of laws principles or provisions thereof.
Each of the parties hereto agrees that any dispute under or
with respect to this Agreement shall be determined before
the state or federal courts situated in the City, County and
State of New York, which courts shall have exclusive
jurisdiction over and with respect to any such dispute, and
each of the parties hereto hereby irrevocably submits to the
jurisdiction of such courts.  Each party hereby agrees not to
raise any defense or objection, under the theory of forum
non conviens or otherwise, with respect to the jurisdiction
of any such court.  In addition to such other method as may
available under applicable law, each party agrees that any
summons, complaint or other papers or process in
connection with any such dispute may be served on it or
him in the same manner in which a Notice may be given to
it or him pursuant to subsection (b) of this Section 12.

(k)         Counterparts.  This Agreement may be
executed in counterparts and by one or more of the parties
hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken
together shall constitute one and the same instrument.



            IN WITNESS WHEREOF, the parties hereto have
executed this Agreement effective as of the date first above
written.
                                       ALPHA HOSPITALITY CORPORATION

________________________                By:_________________________________
ROBERT BERMAN                           Name:
                                        Title:




               Exhibit a

THE SECURITY REPRESENTED BY THIS
CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF OR OF THE SALE OF SHARES OF STOCK
TO BE ISSUED UPON THE EXERCISE OF RIGHTS
HEREUNDER.  NO SUCH SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.


     ALPHA HOSPITALITY CORPORATION
        STOCK OPTION AGREEMENT


            THIS STOCK OPTION AGREEMENT (the
"Option Agreement") is made and entered into as of
_________, 2001, by and between Alpha Hospitality
Corporation (the "Company"), a Delaware corporation,
and Robert Berman (the "Optionee") as contemplated by
Section 6 of that certain Employment Agreement (the
"Employment Agreement"), dated as of even date
herewith, by and between the Company and the Optionee.
            The Company hereby grants to the Optionee an
option to purchase certain shares of common stock of the
Company (the "Option Shares"), in the manner and
subject to the provisions of this Option Agreement (such
option, the "Option").  If the Optionee does not execute
and return this Option Agreement to the Company within
thirty (30) days of the date first written above, the Option
shall terminate and be without further force and effect.
            1.   Definitions:
                 (a)  "Date of Option Grant" shall mean
the date of this Option Agreement.
                 (b)  "Number of Option Shares" shall
mean 251,536 shares of common stock of the Company, as
adjusted from time to time pursuant to paragraph 6 below.
     (c)    "Exercise
     Price" shall mean twenty-four
     dollars and ninety-one cents ($24.91)
     per share, as adjusted from time to
     time pursuant to paragraph 6 below.



     (d)    "Option
     Termination Date" shall mean the
     date five (5) years after the Date of
     Option Grant.
            2.   Exercise of the Option.
                 (a)  Right to Exercise. The Option shall
vest and be exercisable in accordance with the following
Vesting Schedule:
            (i)  The Option shall vest and
become exercisable with respect to one-third
(1/3) of the Number of Option Shares on the
date that is eighteen (18) months after the
Date of Option Grant, provided that the
Optionee is then employed by the Company
and subject to the terms and provisions of
this paragraph 3 and paragraphs 4 and 5
below;

       (ii) The Option shall vest and
become exercisable with respect to an
additional one-third (1/3) of the Number of
Option Shares on the second anniversary of
the Date of Option Grant, provided that the
Optionee is then employed by the Company
and subject to the terms and provisions of
this paragraph 3 and paragraphs 4 and 5
below; and
       (iii)     The Option shall vest and
become exercisable with respect to the
remaining one-third (1/3) of the Option
Shares on the third anniversary of the Date
of Option Grant, provided that the Optionee
is then employed by the Company and
subject to the terms and provisions of this
paragraph 3 and paragraphs 4 and 5 below.
                 (b)  Method of Exercise.  Exercise of the
Option must be by written notice to the Company, which
notice must state (i) the election to exercise the Option, (ii)
the number of shares of the Company's common stock for
which the Option is being exercised and (iii) such other
representations and agreements as to the Optionee's
investment intent with respect to such shares as may be
required pursuant to the provisions of this Option
Agreement.  Any such notice shall be in substantially the
same form as Exhibit A attached hereto.  Such written
notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return
receipt requested, to the President or Chief Executive
Officer of the Company, or other authorized representative
designated in writing by the Company for such purpose,
prior to the Option Termination Date, accompanied by full
payment of the exercise price for the number of shares
being purchased.  Payment of the exercise price for the
number of shares for which the Option is being exercised
shall be made in cash, by check or in cash equivalent.
                 (c)  Tax Withholding.  At the time the
Option is exercised, in whole or



in part, or at any time
thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees
to make adequate provision for foreign, federal and state
tax withholding obligations of the Company, if any, that
arise in connection with the Option or the exercise thereof,
including, without limitation, obligations arising upon (i)
the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest or (iv)
the lapsing of any restriction with respect to any shares
acquired on exercise of the Option.  The Optionee is
cautioned that the Option is not exercisable unless the
Company's withholding obligations are satisfied.
Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested and
the Company shall have no obligation to issue a certificate
for such shares.
                 (d)  Restrictions on Grant of the Option
and Issuance of Shares.  The grant of the Option and the
issuance of the Option Shares upon exercise of the Option
shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect
to such securities.  The Option may not be exercised if the
issuance of Option Shares upon such exercise would
constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations.  In
addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), shall at the time of
exercise of the Option be in effect with respect to the
Option Shares issuable upon exercise of the Option or (ii)
in the opinion of legal counsel to the Company, the Option
Shares issuable upon exercise of the Option may be issued
in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act.
THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISABLE UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE
ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED.  Questions
concerning this restriction should be directed to the Board
of Directors of the Company.  As a condition to the
exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be
necessary or appropriate to evidence compliance with any
applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the
Company.
                 (e)  Fractional Shares. The Company
shall not be required to issue fractional Option Shares.  If
fractions of an Option Share should result from any
adjustment pursuant to paragraph 6 below, such adjustment
shall be revised to the next lower whole number of Option
Shares.
            3.   Non-Transferability of the Option; Non-
Alienation of Benefits. The Option may be exercised
during the lifetime of the Optionee only by the Optionee
and may not be assigned or transferred in any manner
except by will or by the laws of descent



and distribution.
Following the death of the Optionee, the Option, to the
extent unexercised and exercisable by the Optionee on the
date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable
laws of descent and distribution, subject, however, to the
terms and conditions of this Option Agreement.
            Except with the prior written consent of the
Company, subject to the foregoing, or as otherwise
provided herein, no right or benefit under this Option
Agreement shall be subject to alienation, sale, transfer (by
gift or otherwise), assignment, pledge, encumbrance or
charge, and any attempt to alienate, sell, transfer, assign,
pledge, encumber or charge the same without such consent,
if applicable, shall be null and void and of no effect.
Except with such consent, no right or benefit under this
Option Agreement shall in any manner be liable for or
subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit.  Except to the extent
previously approved by the Company in writing, or as
otherwise provided herein, if the Optionee should become
bankrupt or attempt to alienate, sell, transfer, assign,
pledge, encumber or charge any right or benefit hereunder,
then such right or benefit shall cease and terminate, and in
such event, the Company may hold or apply the same or
any part thereof for the benefit of the Optionee, the
Optionee's spouse, children or other dependents, or any of
them, in such manner and in such proportion as the
Company may in its sole determination deem proper.
            4.   Termination of the Option.  The Option
shall terminate and may no longer be exercised on the first
to occur of (a) the Option Termination Date or (b) the last
date for exercising the Option following termination of
employment as described in paragraph 5 below.
            5.   Termination of Employment.
                 (a)  Termination Other Than by Death or
Disability.  Except as otherwise provided below, if the
Optionee ceases to be an employee of the Company for any
reason, except death or Disability (as defined in the
Employment Agreement), the Option, to the extent
unexercised and exercisable by the Optionee on the date on
which the Optionee ceases to be an employee, may be
exercised by the Optionee within thirty (30) days after the
date on which the Optionee's employment terminated, but
in any event no later than the Option Termination Date.
                 (b)  Termination by Death or Disability.
Except as otherwise provided below, if the Optionee's
employment with the Company is terminated because of
the death or Disability (as defined in the Employment
Agreement) of the Optionee, the Option, to the extent
unexercised and exercisable by the Optionee on the date on
which the Optionee ceases to be an employee, may be
exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of six (6)
months from



the date on which the Optionee's employment
terminated, but in any event no later than the Option
Termination Date.
                 (c)  Limitations on Exercise After
Termination. Except as provided in this paragraph 5 hereof,
the Option shall terminate and may not be exercised if the
Company finds or has found that the Optionee:
                      (i)  Willfully and deliberately
engaged in willful, deliberate or gross misconduct toward
the Company;
                      (ii) Willfully violated the terms
of any confidentiality agreement or confidentiality
obligation between the Optionee and the Company; or
                      (iii)     Has been terminated for
Cause (as defined in the Employment Agreement).
                 (d)  Leave of Absence.  For purposes
hereof, the Optionee's employment with the Company shall
not be deemed to terminate if the Optionee takes any
military leave, sick leave or other bona fide leave of
absence approved by the Company of ninety (90) days or
less.  In the event of a leave in excess of ninety (90) days,
the Optionee's employment shall be deemed to terminate
on the ninety-first (91st) day of the leave unless the
Optionee's right to reemployment with the Company
remains guaranteed by statute or contract.
            6.   Effect of Change in Stock Subject to the
Option.  Appropriate adjustments shall be made in the
number, exercise price and class of shares of stock subject
to the Option in the event of a stock split, reverse stock
split, recapitalization, combination, reclassification or like
change in the capital structure of the Company.  In the
event a majority of the shares that are of the same class as
the shares that are subject to the Option are exchanged for,
converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may
unilaterally amend the Option to provide that the Option is
exercisable for New Shares.  In the event of any such
amendment, the number of shares and the exercise price
shall be adjusted in a fair and equitable manner.
            7.   Rights as a Stockholder or Employee.  The
Optionee shall have no rights as a stockholder with respect
to any shares covered by the Option until the date, and
except to the extent, of the issuance of a certificate or
certificates for the shares for which the Option has been
exercised.  Nothing in the Option shall confer upon the
Optionee any right to continue in the employ of the
Company or interfere in any way with any right of the
Company to terminate the Optionee's employment in
accordance with the terms and provisions of the
Employment Agreement.
            8.   Notice of Sales Upon Disqualifying
Disposition.  The Optionee shall



dispose of the Option
Shares only in accordance with the provisions of this
Option Agreement.  In addition, the Optionee shall
promptly notify the President of the Company if the
Optionee disposes of any of the Option Shares within one
(1) year from the date the Optionee exercises all or part of
the Option or within two (2) years of the date of grant of
the Option.  Until such time as the Optionee disposes of
such Option Shares in a manner consistent with the
provisions of this Option Agreement, the Optionee shall
hold all Option Shares in the Optionee's name (and not in
the name of any nominee) for the one-year period
immediately after exercise of the Option and the two-year
period immediately after grant of the Option.  At any time
during the one-year or two-year periods set forth above, the
Company may place a legend or legends on any certificate
or certificates representing Option Shares requesting the
transfer agent for the Company's shares of common stock
to notify the Company of any such transfer(s) and may
place stop orders with such transfer agent against the
transfer of such shares.  The obligation of the Optionee to
notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the
certificate or certificates pursuant to the preceding sentence
or otherwise.
            9.   Legends.  The Company may at any time
place legends referencing limitations contained in any
applicable federal, state or foreign securities law
restrictions on all certificates representing shares of stock
issued upon the exercise of the Option or otherwise subject
to the provisions of this Option Agreement.  The Optionee
shall, at the request of the Company, promptly present to
the Company any and all certificates representing Option
Shares in the possession or under the control of the
Optionee or any of his agents or representatives in order to
carry out the provisions of this paragraph 9. Unless
otherwise specified by the Company, legends placed on
such certificates may include, but shall not be limited to,
the following:
               "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 SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701
UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT."
            10.  Binding Effect.  This Option Agreement
shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators,
successors and assigns.



            11.  Integrated Agreement.  This Option
Agreement constitutes the entire understanding and
agreement of the Optionee and the Company with respect
to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations or
warranties between the Optionee and the Company relating
to the Option or otherwise with respect to such subject
matter other than those as set forth or provided for herein.
To the extent contemplated herein, the provisions of this
Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.
            12.  Applicable Law.  This Option Agreement
shall be governed by, and interpreted in accordance with,
the internal laws of the State of New York applicable to
contracts executed and to be performed wholly within such
State, without giving effect to the conflict or choice of laws
provisions thereof.


                                     ALPHA HOSPITALITY CORPORATION

By:_____________________             By____________________________
                                     Name:
                                     Title:






           The Optionee represents that the Optionee is
familiar with the terms and provisions of this Option
Agreement and hereby accepts the Option subject to all of
the terms and provisions thereof.  The Optionee further
acknowledges and understands that the Option has not been
issued or granted under or pursuant to any employee stock
option plan and that the Option will not constitute an
"incentive stock option" under Section 422(b) of the
Internal Revenue Code of 1986, as amended.  The Optionee
hereby agrees to accept as binding, conclusive and final all
decisions or interpretations made in good faith by the
Board of Directors of the Company upon or with respect to
any questions arising under this Option Agreement.


Date:  __________________            OPTIONEE

                                     ______________________________



               EXHIBIT A



        OPTION EXERCISE NOTICE

[To Be Signed Only Upon Exercise Of The Option]


   To:ALPHA HOSPITALITY CORPORATION

The undersigned, the holder of the within Stock
Option Agreement, dated as of ________, 2001, hereby
irrevocably elects to exercise the purchase right represented
by the Option provided for therein for, and to purchase
thereunder, _____________________________
(_________) shares of Common Stock of ALPHA
HOSPITALITY CORPORATION (such shares, the
"Shares") and herewith makes payment of
____________________________ dollars (at the rate of
$_________ per share) therefor, and requests that the
certificate for the Shares be issued in the name of the
undersigned and delivered to him at the following address:
__________
________________________________________________
______________________.

The undersigned represents that his
purchase of the Shares is made for his own account for
investment and not with a view to or for sale or distribution
thereof in a public offering, but subject to the disposition of
the Shares being at all times within his control and without
prejudice to his right at all times to sell or otherwise
dispose of all or any part of the Shares in accordance with
applicable law.


Dated:
                           _________________________________________
                           (Signature must conform in all respects to
                                name of Holder as specified on face
                                of the Stock Option Agreement)


                          _________________________________________
                          Address

                          _________________________________________




                           exhibit c-2



         Employment Agreement

            By and Between

    Alpha Hospitality Corporation

                  And

           SCOTT KANIEWSKI




This EMPLOYMENT AGREEMENT (the
"Agreement") is made as of ___________, 2001, by and
between Alpha Hospitality Corporation (the
"Company"), a corporation duly organized and existing
under the laws of the State of Delaware, with offices at 12
East 49th Street, New York, New York 10017, and SCOTT
KANIEWSKI ("Employee"), an individual residing at 2412
Central Park Avenue, Evanston, IL  60201.
WHEREAS, pursuant to a certain Contribution
Agreement (the "Contribution Agreement"), dated as of
August 10, 2001, by and between the Company and
Watertone Holdings, LP ("Watertone"), the Company and
Watertone have agreed to form a limited liability company
under the name New York Gaming LLC (the "LLC") and
Watertone has agreed to transfer and contribute to the LLC
a portion of its interest in Catskill Development, LLC
("Catskill");
 WHEREAS, Employee has been a principal in
Watertone, and pursuant to the Contribution Agreement,
and as part of, the transactions contemplated thereby, the
Company has agreed to employ Employee as provided
herein; and
WHEREAS, Employee desires to be employed by
the Company in accordance with the terms and conditions
hereinafter set forth; and
WHEREAS, the Company is willing to employ
Employee in accordance with such terms and conditions;
NOW THEREFORE, in consideration of the
foregoing premises and the mutual agreements, covenants,
terms and conditions set forth herein, the parties agree as
follows:
1.      Employment; Title; Duties and Responsibilities.

(a)          The Company hereby agrees to employ
Employee, and Employee hereby agrees to serve the
Company, on the terms and conditions set forth herein,
as a Managing Director of the Company, with such
powers, authorities, responsibilities and duties as may
be assigned to him from time to time by any Senior
Officer (as hereinafter defined) or the Board of
Directors of the Company (the "Board").
(b)          During the Term (as hereinafter defined),
Employee shall, during business hours, devote all of his
time, energy, skills, expertise, knowledge and abilities
on an exclusive basis to the performance of his duties
and obligations hereunder and shall, consistent with
Company's Policies (as hereinafter defined) and as
directed or requested from time to time by the Board or
any Senior Officer, diligently, conscientiously and in
good faith render and perform such



services in such
areas and places as are so directed or requested of him
to carry out his duties; provided, however, that the
foregoing shall not be deemed to prohibit Employee,
outside of normal business hours, from engaging in any
other business activities that do not conflict or interfere
with his obligations to the Company or its Affiliates (as
hereinafter defined) as set forth in this Agreement.
Employee, at all times during the Term, shall adhere to
and obey all Company Policies that have been
furnished or provided to him or of which he has
otherwise become or been made aware.  For purposes
of this Agreement, "Company Policies" means,
collectively, the practices, rules, procedures and polices
of the Company as in effect from time to time, whether
or not set forth in writing in any Company manual or
other directive or as may be imposed on the Company
under applicable law, and "Senior Officer" means (if
other than Employee) the Chairman of the Board, the
Chief Executive Officer and the President of the
Company.  Without limiting the effect or generality of
the foregoing, Employee shall at all times during the
Term:
  (1)       faithfully, diligently and timely perform such
duties, and exercise such powers, as may from time
to time be assigned to, or vested in, him by the
Board or any Senior Officer;
  (2)       obey all lawful and reasonable directions of
the Board or any Senior Officer;
  (3)       use his best efforts and endeavors to promote
the interests of the Company and its Affiliates;
  (4)       keep the Board (or such persons(s) as may
have been designated from time to time by the
Board) promptly and fully informed (in writing if so
requested) of his conduct of the business and affairs
of the Company and provide such explanations as
the Board may from time to time request;
  (5)       subject to the proviso in the first sentence of
Section 1(b) above, devote all of his professional
and business time to the conduct of the business of
the Company (and, if so requested by the Board or
any Senior Officer, one or more of its Affiliates)
and to the performance of his duties hereunder;
  (6)       not at any time engage in any self dealing or
conflict of interest that is material to the Company
or any of its Affiliates or to any client, customer,
supplier or vendor of the Company or of any of its
Affiliates; and
  (7)       not at any time make any materially untrue or
misleading statement relating to the Company or
any of its Affiliates or to any client, customer,
supplier or vendor of the Company or of any of its
Affiliates.



(c)          In addition, Employee shall perform such
other functions for the Company, including taking
positions with Affiliates and performing duties on their
behalf, as may be assigned to him from time to time by
the Board or any Senior Officer.  As used in this
Agreement, "Affiliate" of any person means any entity
(1) that such person (directly or indirectly through one
or more subsidiaries or other entities, or by contract or
otherwise) controls, (2) that (directly or indirectly
through one or more subsidiaries or other entities, or by
contract, overlapping directors or management or
otherwise), controls such person or is under common
control with such person, (3) in which such person
(directly or indirectly through one or more subsidiaries
or other entities, or by contract or otherwise) owns (of
record or beneficially) or holds, or otherwise has the
right to vote, at least a five per cent (5%) of the equity
interest thereof or therein, (4) that, individually or with
others with which it is acting as a group or with a
common goal, (directly or indirectly through one or
more subsidiaries or other entities, or by contract or
otherwise) owns (of record or beneficially) or holds, or
otherwise has the right to vote, at least a ten per cent
(10%) of the equity interest of or in such person, (5) for
which such person, if an individual, is serving or acting
as an officer, employee, sales agent or representative,
consultant or adviser or in any similar capacity or (6)
for which such person, if an individual, is acting or
serving as a member of its board of directors or other
governing body.  Notwithstanding anything contained
herein to the contrary, Employee shall not be obligated
hereunder to devote more time to performing his duties
hereunder to the Company and/or its Affiliates than is
generally expected of other executives of the Company.
(d)          Employee further agrees to devote his best
efforts to assist the Company in obtaining financing
that is in the amount and has terms and conditions
(including, but not limited to, annual interest rate,
repayment schedule, maturity date, conversion terms,
prepayment premium or penalty and other terms) that
are acceptable to the Board; provided, that the
foregoing obligation shall not apply if and to the extent
that the Company (on account of the Company's receipt
of payments relating to any pending litigation or
otherwise) has no reasonable need for such financing.
(e)          It is the Company's anticipation that, during
the Term of this Agreement, Employee will be
nominated as a candidate for election to the Board at
each annual meeting of stockholders of the Company.
Employee, however, understands that the selection of
candidates to be nominated for election to the Board is
reserved to the discretion of the Board and that the
election of members to the Board is determined by vote
of the Company's stockholders and that there can
therefore be no assurance that Employee will be
nominated for election to the Board or, even if so
nominated, will be elected to the Board.



(f)          Notwithstanding anything contained herein
to the contrary, Employee shall not, except as otherwise
expressly authorized by the Board, (1) hire or retain any
employee or consultant or similar person or entity by or
on behalf of the Company or any of its Affiliates or (2)
otherwise cause the Company to incur, or incur on
behalf of the Company or any of its Affiliates, any
expenditure or liability or group of related expenditures
or liabilities.
(g)          The Company shall reimburse Employee for
all reasonable expenses expended by Employee in
connection with the investigation of Employee (as an
officer or director of the Company) or any finding or
determination of suitability of Employee (as an officer
or director of the Company) by any Gaming Authority
(as defined in the Contribution Agreement).
2.           Term of Employment.
       (a) The term of employment (the "Term") of
Employee under this Agreement commences as of the date
hereof (the "Commencement Date"), and shall thereafter
continue (subject to earlier termination as provided in
Section 8 hereof) for a fixed period of thirty-six (36)
consecutive months (the "Fixed Period").
            (b) Employee agrees to exclude, release and waive
any right to any payment and claim in respect of unfair or
illegal dismissal if the Fixed Period expires without this
Agreement or his employment hereunder being renewed or
extended or if this Agreement is terminated and the
Company pays Employee such sum of money as is
equivalent to the remuneration due to Employee for the
remainder of the unexpired Fixed Period, exclusive of any
deferred compensation, bonus or other discretionary
compensation that has not been granted to Employee prior
to such termination and exclusive of any other amount or
consideration that may be payable hereunder or pursuant
hereto (excepting such amount or consideration, if any, as
has accrued and become payable prior to such termination),
including, without limitation, on account of or with respect
to any insurance or other fringe benefits (provided, that the
foregoing shall not limit Employee's rights to obtain from
any insurance company or similar third party benefits that
arose or accrued prior to such termination).
3.      Travel.
            Travel during Employee's employment shall be in
accordance with Company Policies as in effect from time
to time.  Employee shall be entitled to reimbursement for
employment-related travel in accordance with Section 5
below.
4.           Compensation.
As compensation for his services and in
consideration for Employee's



covenants contained in this
Agreement, the Company shall pay to Employee a salary
that on an annualized basis will equal Two Hundred
Thousand Dollars ($200,000).  Such annual salary shall be
payable in equal installments on a bi-weekly basis and in
accordance with Company Policies and shall be subject to
applicable federal, state and local withholdings and
deductions.  Notwithstanding anything contained herein to
the contrary, all salary due hereunder shall accrue and be
deferred and shall not be payable until five (5) business
days after the date on which the Company is provided with,
accepts and actually receives (including the actual funding
of) the Qualifying Financing (as hereinafter defined) (the
date on which the Company is provided with, accepts and
actually receives (including the actual funding of) the
Qualifying Financing is hereinafter referred to as the
"Financing Date"), and on the fifth (5th) business day
following the Financing Date all salary that is payable
hereunder to Employee and that has theretofore accrued
and been deferred hereunder shall become payable;
provided, however, that, if this Agreement or Employee's
employment hereunder shall expire or terminate prior to the
Financing Date, then no salary theretofore accrued or
deferred hereunder shall be payable to Employee unless (i)
negotiations with respect to the Qualified Financing shall
have commenced prior to such expiration or termination
and (ii) the Company is provided with, accepts and actually
receives (including the actual funding of) the Qualifying
Financing within ninety (90) days following such
expiration or termination.  As used herein, "Qualifying
Financing" means financing that is in an amount at least
equal to the Threshold Amount (as hereinafter defined) and
is subject to such terms and conditions (including, but not
limited to, annual interest rate, repayment schedule,
maturity date, conversion terms, prepayment premium or
penalty and other terms) as the Board, in its sole and
absolute discretion (which shall not be subject to judicial or
other review), deems adequate and appropriate to justify
the termination of the deferral of salary to Employee as
provided above, and "Threshold Amount" means an
amount (determined based upon the net amount actually
received by the Company), that, when added to the
aggregate net proceeds or distributions that have been
actually received by the Company with respect to the PPE
Litigation (as defined in the Contribution Agreement) or
any similar litigation (whether as the result of any
judgment entered therein or settlement thereof), equals ten
million dollars ($10,000,000).
The Company shall be entitled to withhold from
any payments due hereunder taxes, FICA, contributory
insurance participations and other normal deductions, all in
accordance with Company Policies.
5.          Expense Reimbursement.
       The Company shall, consistent with Company
Policies, reimburse Employee for reasonable out-of-pocket
business expenses incurred by him in his performance of
services hereunder to or for the Company or any Affiliate
of the Company, upon



submission of reasonable documentation therefor.
6.           Option Awards.
            The Company shall grant to Employee an option
(the "Option") to purchase up to 251,536 shares
(collectively, the "Option Shares") of the common stock of
the Company (the "Common Stock"), par value $.01 per
share, with an exercise price of twenty-four dollars and
ninety-one cents ($24.91) per share.  The Option shall be
subject to an option agreement in the form attached hereto
as Exhibit A.
7.           Other Benefits.
Subject to his qualifying therefor and complying
with all relevant Company Policies, Employee shall be
entitled to participate in all benefit plans, retirement plans,
programs and arrangements of the Company, if any, made
available to its officers or generally to its employees, on a
basis at least equal to that extended to other senior
management employees of the Company.
Employee shall be entitled to twenty (20) days per
year paid vacation and five (5) paid personal days in
accordance with the Company Policies in effect from time
to time.  Unused vacation and personal days may not be
carried over to a subsequent year, and the Company shall
have no obligation to compensate Employee for any unused
vacation or personal days upon the expiration or earlier
termination of this Agreement or Employee's employment
hereunder.
8.           Early Termination.
(a)          Employee's employment under this
Agreement shall terminate upon the occurrence of any
one of the following events or conditions:
(1)          Employee's death;
Employee's inability substantially to perform
his duties and fulfill his responsibilities
hereunder due to disability, illness or mental
incompetency having a duration of at least
twenty (20) consecutive business days or
existing for any sixty (60) business days in any
period of 200-consecutive business days (any of
the foregoing, a "Disability");
(A) Any conviction of Employee of any
criminal offense punishable with or by six (6)
months or more imprisonment (regardless of
whether Employee is actually imprisoned or
sentenced to imprisonment); (B) any conviction
of or finding against Employee of fraud,
embezzlement, theft, misappropriation or any
other defalcation relating to the Company or
any of its Affiliates or any customer, client,
vendor or supplier of the



Company or any of its
Affiliates; (C) any finding that Employee has
engaged in any legally prohibited discrimination
or harassment with respect to any employee,
agent or representative of the Company or any
of its Affiliates; (D) any conviction of or finding
against Employee, whether judicial or
administrative, that has or has had, in the
reasonable discretion of the Board, a materially
adverse effect on the Company or any of its
Affiliates (including, without limitation, upon
the reputation thereof) or on Employee or his
conduct or performance of his duties hereunder;
(E) any willful misconduct, gross negligence or
substance abuse by Employee that has or has
had a materially adverse effect on the Company
or any of its Affiliates (including, without
limitation, upon the reputation thereof) or on
Employee or his conduct or performance of his
duties hereunder; or (F) Employee being found
subject to an event that would lead to disclosure
in Item 7 of Form BD of the Securities and
Exchange Commission (any termination on
account of any of the events or circumstances
set forth in this clause (3) or in the following
clauses (4), (5), (6) or (7) shall be deemed a
termination for or with "Cause");
Any finding or determination by or of any
governmental agency or regulatory authority
that Employee is not qualified or suitably to
serve as an officer of the Company or any of its
Affiliates or any other legal prohibition against
Employee serving as an officer of the Company
or any of its Affiliates;
Any breach or violation by Employee of any of
his representations and warranties set forth in
Section 9 below or any breach by Employee of
any of his obligations under Section 10 or 12
below.
Any breach or violation by Employee of any of
his other representations, warranties, covenants
or other agreements set forth herein (other than
under circumstance leading to termination under
one or more of the prior clauses of this Section
8) and the failure of Employee to cure such
breach or violation within ten (10) days
following receipt of written notice (any such
notice, a "Breach Notice") from the Company
identifying such breach or violation and
demanding that such breach or violation be
cured; provided however, that no notice needs to
be given, and no such cure period shall apply,
with respect to any breach or violation that is
identical to, or of the same general or basic type
or nature as, a prior breach or violation with
respect to which Employee had been given a
Breach Notice (a) on at least two (2) prior
occasions or (b) within the thirty (30) business
days next proceeding such breach or violation,
in which case the Company shall have the right
to immediately terminate this Agreement
without giving any notice or allowing for any
cure period;



At the discretion of the Company, at any time
prior to the lapse of eighteen months (18)
months from the Commencement Date, provided
that the Qualifying Financing has not yet been
obtained; or
At the discretion of Employee, upon at least
sixty (60) days' prior written notice to the
Company.
(a)          If a circumstance contemplated by Section
8(a) arises, Employee's employment shall terminate
without the need for notice of termination from the
Company (other than as expressly provided for in
clauses (6) or (8) thereof, as applicable).  In such event,
no amounts due hereunder shall be payable, except for
Employee's base salary accrued hereunder through the
date of termination, subject, however, to the last
sentence of Section 4(a) above.
(b)          Any dispute arising regarding the existence,
extent or continuance of a Disability shall be resolved
within 90 days by the determination of three individuals
who are licensed to practice medicine in the State of
New York, one to be selected by the Company, one by
Employee and the third by the two physicians so
selected; and any determination made by a majority of
such individuals shall be determinative and binding on
the parties hereto.  In connection with any such
determination, each of the parties shall bear the costs
and expenses of the physician selected by it or him, and
the parties shall share the costs and expenses of the
third physician.
(c)          On the expiration or earlier termination of
this Agreement for any reason whatsoever, Employee
shall resign (and without any further action on the part
of Employee, shall be deemed to have resigned) from
any and all offices and positions that he may have or
hold with the Company or any of its Affiliates and from
the Board.
1.           Representations and Warranties of
Employee.  Employee hereby represents and warrants
to the Company, in order to induce the Company to
enter into this Agreement and employ him hereunder,
as follows:
(a)         Employee has not been convicted of any
felony or any other criminal offense that is
punishable with or by six (6) months or more
imprisonment (regardless of whether Employee has
actually been imprisoned or sentenced to
imprisonment).
(b)         Employee is under no contractual or other
impediment to undertake the offices and/or
employment provided or contemplated hereunder or
otherwise to perform hereunder and that, by so
doing, he will not be in violation of any
commitment, agreement or obligation to any other
person or



entity.
2.   Confidential/Proprietary Information; Non-
Solicitation; Non-Competition.
     (a)         During the Term and
     thereafter, Employee shall, and shall
     cause each and all of his agents,
     representatives and Affiliates:
(1)         to treat all Confidential Information (as
hereinafter defined) in the strictest confidence;
(2)         not to disclose, publish, distribute,
disseminate, reproduce, utilize or make accessible
in any manner or in any form any Confidential
Information other than in connection with
performing the services required of Employee under
this Agreement; and
(3)         not to reproduce, retain, copy, publish,
plagiarize, appropriate or otherwise utilize (as a
model, precedent, form, template or otherwise), or
refer to in way, any of the Company's marketing
materials, forms of letters or agreements or other
business documents or any part or portion of, or
excerpt from, any of the foregoing.
(b)         As used herein, "Confidential Information"
means any proprietary, confidential and/or other non-public
information of, relating to or regarding the business or
interests of the Company or any of its Affiliates, including,
without limitation, (1) any trade secrets, know-how,
databases, company policies, procedures and techniques,
correspondence, agreements, negotiations, offering
packages, business descriptions and profiles, business
plans, financial information, product literature and
technical projects of, regarding or relating to the Company
or any of its Affiliates or the business, operations, products
and/or services of the Company or any of its Affiliates, (2)
any research datum, result or report regarding the Company
or any of its Affiliates or any aspects of the business,
operations, business dealings, prospects or financial
condition or financial results of the Company or any of its
Affiliates, (3) any report, analysis, study, invention, process
or other work product developed by, for or on behalf of the
Company or any of its Affiliates, including, without
limitation, that developed by Employee, whether on the
premises of the Company or elsewhere and whether or not
developed during normal business hours or on normal
business days, and (4) any list of customers, clients,
vendors, suppliers or prospects of the Company or any of
its Affiliates.  Notwithstanding the foregoing, the
provisions of this Agreement shall not apply to any
Confidential Information to the extent, but only to the
extent, that the same is, or has become, publicly known
under circumstances involving no breach of this



Agreement
or any other agreement of confidentiality or has been
disclosed pursuant to an order or requirement of a court,
administrative agency or other governmental body of
competent authority, provided however, that the Company
has been given appropriate and reasonable notice of such
proceeding and a reasonable opportunity to contest such
disclosure.  Without limiting the generality of the
foregoing, except as consented to in writing by the Board
or a Senior Officer, Employee shall not in any way or at
any time disclose or publish the name(s) or description(s)
of any transaction by the Company or any of its Affiliates,
whether contemplated, pending or completed, or the
identity of any party to any such transaction.
All business, financial, product and technical
records, information and literature relating to the business
or operations, or any product or service, of the Company or
any of its Affiliates (all such business, financial, product
and technical records, information and literature being
hereinafter referred to collectively as "Business Records"),
including, without limitation, Confidential Information, fee
agreements, confidentiality agreements, papers, databases,
contact records, documents and correspondence and studies
containing information relating to the Company or any of
its Affiliates or any transaction (whether contemplated,
pending or completed) by the Company or any of its
Affiliates, in all cases irrespective of the manner in which
such information was obtained or is kept or stored, made or
kept by Employee or under Employee's possession,
custody or control or in the possession, custody or control
of any agent and representative of Employee, shall be and
remain the sole and exclusive property of the Company and
shall be surrendered to the Company at the time of the
expiration or earlier termination of this Agreement or
Employee's employment hereunder for any reason
whatsoever or, if earlier, upon the request of the Company.
Upon such expiration or termination or earlier request,
Employee shall not, and shall cause his or her agents,
representatives and Affiliates not to, retain, publish or
disclose, or otherwise use, without the prior written consent
of a Senior Officer, any Business Records.
Employee hereby assigns, transfers and conveys to
the Company all of his respective right, title and interest in
and to any and all Company Property (as hereinafter
defined).  If any Company Property is deemed in any way
to fall within the definition of "work for hire" as such term
is defined in 17 U.S.C. 101, such Company Property shall
be considered "work for hire" and the Company shall be
deemed the author and sole and exclusive owner of any
copyrights and other rights and interests therein.  If any of
the Company Property is considered to be work not
included in the categories of work covered by the "work for
hire" definition contained in 17 U.S.C. 101, such
Company Property shall be owned by the Company or
assigned or transferred completely and exclusively to the
Company.  Employee agrees promptly to execute any
instruments, and to do all things, reasonably requested by
the Company in order more fully to vest in the Company
all ownership rights in all Company Property.  As used
herein, "Company



Property" means each and all of every
idea, invention, writing, composition and/or computer
program (whether or not patentable or protected by
copyright and including, without limitation, any
Confidential Information) that relates to the business or
affairs of the Company or any of its Affiliates and either (i)
that has been conceived, created, invented or otherwise
developed in whole or in part by Employee or (ii) with
respect to the conception, creation, invention or
development of which Employee may have aided during
the term of his employment by the Company.
During the period of his employment by the
Company and for a period of two (2) years following the
date upon which such employment shall terminate (for any
reason whatsoever), Employee shall not, directly or
indirectly or in any capacity, and shall not direct, authorize,
solicit, recommend, induce or otherwise encourage any of
his agents, representatives or Affiliates or allow, permit or
suffer any of his agents, representatives or Affiliates to, (1)
hire, employ or otherwise retain (which concept, as used
herein, shall include as a consultant, advisor, agent,
representative or otherwise), or attempt to hire, employ or
otherwise retain, or encourage or assist any other person or
entity in hiring, employing or otherwise retaining, or
otherwise participate or assist in the hiring, employing or
other retention of, any Person (which, for the purposes of
this Agreement, means any individual, corporation, limited
liability company, partnership (general or limited), trust,
joint venture or other business entity of any nature) who or
that, during the period of Employee's employment by the
Company or thereafter, has been or is a director, officer or
other employee of, or sales agent or other representative,
consultant or other adviser to or for, the Company or any of
its Affiliates (any such person, a "Protected Employee"),
(2) induce, encourage or otherwise attempt to influence, or
direct, instruct or assist anyone else to induce, encourage or
otherwise attempt to influence, any Protected Employee to
leave or otherwise terminate, or to renegotiate the terms of,
his, her or its employment or other arrangement or
association with the Company or any of its Affiliates, (3)
induce, encourage or otherwise attempt to influence, or
direct, instruct or assist anyone else to induce, encourage or
otherwise attempt to influence, any Person who or that,
during the period of Employee's employment by the
Company or thereafter, has been or is, a customer, client,
distributor, vendor or supplier of or to the Company or any
of its Affiliates to cease, to not maintain or renew or to
adversely modify or change his, her or its arrangement,
association or business with the Company or any of its
Affiliates or (4) otherwise interfere, encourage anyone else
to interfere or assist anyone else in interfering with any
contractual relationship between the Company (or any of
its Affiliates) and any Person with which the Company (or
any of its Affiliates) had any contractual relationship
during the period of Employee's employment by the
Company or thereafter.  Nothing contained herein shall be
deemed to release or relieve Employee from any liability
Employee may incur at common law, under any other
contract or otherwise for interference with



contractual
relations or any similar claim.
During the period of his employment by the
Company and for a period of two (2) years following the
date upon which such employment shall terminate (for any
reason whatsoever), Employee shall not (i) as a director,
officer, employee, consultant or advisor or in any similar
capacity or function, be employed or retained by, or
otherwise assist, any person or entity that is directly or
through any of its Affiliates engaged in any gaming or
gambling business or activity and that has a place of
business in the State of New York, Florida or Mississippi
or otherwise within one hundred (100) miles of any gaming
or gambling business, operation or enterprise that is
managed by the Company or by any of its Affiliates or in
which the Company or any of its Affiliates has an equity
interest (which, for these purposes, shall include an interest
in any measure of profits or revenues) of five percent (5%)
or greater (any such person or entity being hereinafter
referred to as a "Competing Enterprise") or (ii) own,
directly or indirectly, any interest (which, for these
purposes, shall include the right to receive or otherwise
participate in any measure of profits or revenues) in any
Competing Entity; provided, however, that Employee shall
not be prohibited by the foregoing from (x) continuing to
hold or retain his interest in Watertone and, through
Watertone, in Catskill, (y) continuing to participate in the
ownership or management of any business venture engaged
in any family limited partnership, trust or similar vehicle
established for estate planning purposes or (z) from owning
up to five percent (5%) of the common stock or other
equity interest in any publicly traded company.
In furtherance of the covenants contained herein
and as a condition to the continuation of Employee's
employment hereunder, Employee shall execute and
deliver to the Company such further agreements and
commitments as the Company may from time to time
reasonably request in order more fully to protect the
Company's rights and interests in and to the Confidential
Information, the Business Records and proprietary and
other rights and interests in and with respect to its business
prospects.
2.           Injunctive Relief; Independence and
Severability of Covenants.
(a)          Employee acknowledges and agrees that, in
the event of any breach or likely breach of any of the
covenants of Section 9 above, the Company and any
relevant Affiliate(s) would be irreparably harmed and
could not be made whole solely by monetary damages.
It is accordingly agreed that such Persons, in addition to
any other remedies to which they may be entitled at law
or in equity, shall be entitled to equitable relief (in the
form of an injunction or otherwise) in respect of such
breach or likely breach (or any threatened breach).  In
the event the Company seeks any equitable relief or
remedy with respect to any such threatened or actual
breach, violation or default (1) Employee will not seek
to



oppose or defend against such equitable relief or
remedy on the ground that the Company has an
adequate remedy at law or on any other similar or
related ground and (2) no bond or other security shall
be required for, or as a condition to, the seeking or
granting of any injunction or other equitable relief.  It is
intended to grant full third-party rights under this
provision.
(b)          Employee acknowledges and agrees that the
covenants and other provisions set forth in Section 10
above and in this Section 11 are reasonable in both
scope and content, including with respect to duration
and subject matter, that such covenants and other
provisions are necessary and appropriate for the
protection of the legitimate business interests of the
Company and its Affiliates, that he is receiving
valuable and adequate consideration for such covenants
under this Agreement and that his services are of a
special and unique nature.  The parties acknowledge
that it is their intention that all such covenants and
provisions be enforceable to the fullest extent possible
under applicable law.
(c)          For the purposes of this Section 11, the state
and federal courts of the State of New York will be the
proper and exclusive forums for any legal controversy
arising in connection with this Agreement.
                 12.  Miscellaneous.

(a)         Indemnification.
(1)         Each of the parties hereto (an "Indemnifying
Party") shall indemnify and hold harmless the other
party hereto (and, with respect to any breach of
Section 10 above, the Company's Affiliates) (the
"Indemnified Party") from and against, and shall
reimburse the Indemnified Party for, any and all
liabilities, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys'
fees and other legal costs, including those related to
any appeal, and costs of any investigation) (all of
the foregoing, collectively, "Losses") that have
been suffered or incurred by the Indemnified Party
and that have resulted from, or been occasioned by,
(a) any breach or violation by the Indemnifying
Party of any of its or his representations, warranties,
covenants and other agreements set forth herein or
(b) any claim asserted by any third party that, if
true, would constitute a breach or violation by the
Indemnifying Party of any of its or his
representations, warranties, covenants and other
agreements set forth herein  (any such claim, a
"Third-Party Claim").
(2)         If the Indemnified Party shall receive notice
of, or otherwise become aware of the assertion of,
any Third-Party Claim with respect to which the
Indemnified Party intends to seek indemnification
under this subsection (a),



then the Indemnified
Party shall give prompt written notice thereof to the
Indemnifying Party, which notice shall include or
be accompanied with a copy of any summons,
complaint or other written evidence of such Third-
Party Claim to the extent that such summons,
complaint or other written evidence has been
received by such Indemnified Party or by any
attorney or other agent thereof.  The failure of the
Indemnified Party to give such notice or to give
such notice promptly shall not relieve the
Indemnifying Party of its obligation to indemnify
the Indemnified Party under this subsection (a)
except to the extent that the failure to give such
notice or the delay in giving such notice has
materially prejudiced the Indemnifying Party in its
or his ability to defend against such Third-Party
Claim.  The Indemnifying Party shall, with counsel
selected by it (which selection shall be subject to
the approval of the Indemnified Party, such
approval not to be unreasonably withheld or
delayed), be entitled to defend against and settle
any Third Party Claim; provided, however, that the
Indemnifying Party's right to do so shall be
conditioned upon its or his having confirmed in
writing to the Indemnified Party its or his obligation
to indemnify the Indemnified Party with respect to
such Claim (any such confirmation, a "Notice to
Indemnify") and, provided, further, however, that
the Indemnifying Party shall not be entitled to enter
into any settlement of any such Claim without the
prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld
or delayed.  Notwithstanding anything contained
herein to the contrary, the Indemnifying Party's
obligation to indemnify the Indemnifying Parties
against any Third-Party Claim shall be conditioned
upon the Indemnifying Party providing full and
timely cooperation in the defense of such Claim.
(3)         Notwithstanding anything contained herein to
the contrary, except as provided in the next
following sentence, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party
for, or otherwise pay, any attorneys' fees or other
legal or related costs (or any costs of any
investigation) suffered or incurred by the
Indemnified Party in connection with any Third-
Party Claim after the Indemnified Party receive any
Notice to Indemnify with respect to such Claim;
provided, however, that, if, after giving any Notice
to Indemnify, the Indemnifying Party reverses its or
his position and claims that it or he is not required
to Indemnify the Indemnified Party against the
Third-Party Claim, then, in the event the
Indemnifying Party is obligated hereunder to
indemnify the Indemnified Party with respect to
such Claim, the Indemnifying Party shall bear and
pay the reasonable attorneys' fees and other legal
costs, including those related to any appeal, and
costs of any investigation, incurred by the
Indemnified Party after the Indemnifying Party has
reversed its or his position and claimed that it or he
is not required to Indemnify the Indemnified Party
against such Claim.  Notwithstanding the foregoing,
if there is a legitimate and good faith



conflict of
interest between the Indemnifying Party and the
Indemnified Party in connection with the defense of
any Third-Party Claim so that one counsel or law
firm could not properly represent both parties in
connection with such defense, then the Indemnified
Party, in the event it or he is obligated hereunder to
indemnify the Indemnified Party with respect to
such Claim, shall bear and pay the reasonable
attorneys' fees and other legal costs, including those
related to any appeal, and costs of any investigation,
incurred by the Indemnified Party in connection
with such defense, regardless of whether the
Indemnifying Party has given a Notice to
Indemnify.  Under no circumstances, however, shall
the Indemnifying Party be obligated to pay for the
attorneys' fees or related legal fees of more than
one attorney or law firm.
(b)         Notices.  All notices, demands, requests,
consents, approvals or other communications (each of the
foregoing, a "Notice") required to be given hereunder or
pursuant hereto to either party hereto shall be in writing
and shall be (a) personally delivered, (b) sent by both
registered to certified mail, postage prepaid and return
receipt requested, and regular first class mail, (b) sent both
by facsimile transmission with receipt of transmission
confirmed electronically or by telephone and by regular
first class mail or (c) sent by reputable overnight courier
service with charges prepaid and delivery confirmed, to the
intended recipient at its or his respective address as set
forth below; provided, however, that, if a party sending any
Notice has received written notice in accordance with this
subsection (b) of a more recent address for any intended
recipient referred to below, any Notice to such intended
recipient shall be delivered or sent to it or him at the most
recent address of which such party has received such a
notice:
if to the Company:

Alpha Hospitality Corporation
12 East 49th Street, 24th Floor
New York, New York  10017
Attn: Chairman of the Board
Facsimile number: (212) 570-5171

if to Employee:

Scott Kaniewski
 2412 Central Park Avenue
Evanston, IL  60201
Facsimile number: (847) 328-4032

Any Notice delivered or sent as provided above shall be
deemed given when so



delivered or sent and shall be
deemed received (i) when personally delivered, (ii) three
(3) Business Days after being mailed as above provided,
(iii) when sent by facsimile transmission as above provided
or (iv) one (1) Business Day after being sent by courier as
above provided; provided, however, that any Notice
specifying a new address to which any Notice shall be sent
shall be deemed received only when actually received.

(c)         Entire Agreement.  This Agreement is
intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein,
constitutes the entire agreement of the parties with respect
to such subject matter and supersedes, and merges herein,
all prior and contemporaneous negotiations, discussions,
representations, understandings and agreements between
the parties, whether oral or written, with respect such
subject matter.  No representation, warranty, restriction,
promise, undertaking or other agreement with respect to
such subject matter has been made or given by either party
hereto other than those set forth in this Agreement.

(d)         Amendment and Waiver.  This Agreement may be amended, modified or
supplemented only to the extent expressly set forth in
writing that is signed by the party to be charged therewith
and that sets forth therein that its purpose is to amend,
modify or supplement this Agreement or some term,
condition or provision hereof.  No waiver of any term,
condition or provision of this Agreement or of any breach
or violation of this Agreement or any provision hereof shall
be effective except to the extent expressly set forth in
writing that is signed by the party to be charged therewith.
Without limiting the generality of the foregoing, no
conduct (including, without limitation, any failure or delay
in enforcing this Agreement or any provision hereof or any
acceptance or retention of payment) or course of conduct
by either party hereto shall be deemed to constitute a
waiver by such party of the breach or violation of this
Agreement or of any provision hereof by the other party
hereto.  Any waiver may be made in advance or after the
right waived has arisen or the breach or default waived has
occurred, and any waiver may be conditional.  No waiver
of any breach or violation of any agreement or provision
herein contained shall be deemed a waiver of any
preceding or succeeding breach or violation thereof nor of
any other agreement or provision herein contained.  No
waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.

(e)         Assignment; No Third Party Beneficiaries.
This Agreement and the rights, duties and obligations
hereunder may not be assigned or delegated by either party
hereto, without the prior written consent of the other party
hereto; provided that, consistent with the terms hereof, the
Company may from time to time direct



that Employee
serve as a director and/or officer of, or otherwise provide
services to or work for, any Affiliate of the Company.
Except as provided in the preceding sentence, any
purported assignment or delegation of rights, duties or
obligations hereunder made without the prior written
consent of the other party hereto shall be null and void and
of no effect.  This Agreement and the provisions hereof
shall be binding upon and enforceable against each of the
parties and their respective executors, heirs, legal
representatives, administrators, successors and assigns and
shall inure to the benefit of and be enforceable by each of
the parties and their respective executors, heirs, legal
representatives, administrators, successors and permitted
assigns.  Except as contemplated under Section 10 above
and subsection (a) of this Section 12, this Agreement is not
intended to confer any rights or benefits on any Persons
other than as set forth above.

(f)         Severability.  This Agreement shall be
deemed severable, and the invalidity or unenforceability of
any term or provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof.  The parties intend that this Agreement
and each of the provisions hereof be enforced to the fullest
extent permitted by law.  Accordingly, in lieu of any such
invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such invalid
or unenforceable provision as may be possible and be valid
and enforceable.

(g)         Further Assurances.  Each party hereto,
upon the request of any other party hereto, shall do all such
further acts and execute, acknowledge and deliver all such
further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by, and
the purpose and intent of, this Agreement.

(h)         Titles and Headings; Rules of Interpretation.
Titles, captions and headings of the sections, articles and
other subdivisions of this Agreement are for convenience
of reference only and shall not affect the construction or
interpretation of any provision of this Agreement.
References to Sections and Articles refer to sections and
articles of this Agreement unless otherwise stated.  Words
such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," and words of like import, unless
the context requires otherwise, refer to this Agreement
taken as a whole and not to any particular Section, Article
or other provision hereof.  As used in this Agreement, the
masculine, feminine and neuter genders shall be deemed to
include the others if the context requires, and if the context
requires, the use of the singular shall include the plural and
visa versa.  This Agreement is the product of mutual
negotiations between the parties and their respective
counsels, and no party shall be deemed the draftsperson
hereof or of any portion or provision hereof.  Accordingly,
in the event of any ambiguity or inconsistency in any
provision of this Agreement, the same shall not be
interpreted against either party hereto as the



party responsible for drafting such provision.

(i)         Waiver of Jury Trial; Consent to
Jurisdiction.    Each of the parties hereto expressly
waives its OR HIS right to a jury trial with respect
to any suit, litigation or other judicial proceeding
relating to this Agreement or any dispute
hereunder or relating hereto.
(j)         Governing Law; Jurisdiction of Courts.  This
Agreement shall be governed by, interpreted under and
construed in accordance with the internal laws of the State
of New York applicable to contracts executed and to be
performed in that State without giving effect to the choice
of conflict of laws principles or provisions thereof.  Each of
the parties hereto agrees that any dispute under or with
respect to this Agreement shall be determined before the
state or federal courts situated in the City, County and State
of New York, which courts shall have exclusive
jurisdiction over and with respect to any such dispute, and
each of the parties hereto hereby irrevocably submits to the
jurisdiction of such courts.  Each party hereby agrees not to
raise any defense or objection, under the theory of forum
non conviens or otherwise, with respect to the jurisdiction
of any such court.  In addition to such other method as may
available under applicable law, each party agrees that any
summons, complaint or other papers or process in
connection with any such dispute may be served on it or
him in the same manner in which a Notice may be given to
it or him pursuant to subsection (b) of this Section 12.

(k)         Counterparts.  This Agreement may be
executed in counterparts and by one or more of the parties
hereto in separate counterparts, each of which when so
executed shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
            IN WITNESS WHEREOF, the parties hereto have
executed this Agreement effective as of the date first above
written.
                                        ALPHA HOSPITALITY CORPORATION

________________________                By:_________________________________
Scott Kaniewski                         Name:
                                        Title:



               Exhibit a

THE SECURITY REPRESENTED BY THIS
CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF OR OF THE SALE OF SHARES OF STOCK
TO BE ISSUED UPON THE EXERCISE OF RIGHTS
HEREUNDER.  NO SUCH SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.


     ALPHA HOSPITALITY CORPORATION
        STOCK OPTION AGREEMENT


            THIS STOCK OPTION AGREEMENT (the
"Option Agreement") is made and entered into as of
_________, 2001, by and between Alpha Hospitality
Corporation (the "Company"), a Delaware corporation,
and Scott Kaniewski  (the "Optionee") as contemplated by
Section 6 of that certain Employment Agreement (the
"Employment Agreement"), dated as of even date
herewith, by and between the Company and the Optionee.
            The Company hereby grants to the Optionee an
option to purchase certain shares of common stock of the
Company (the "Option Shares"), in the manner and subject
to the provisions of this Option Agreement (such option,
the "Option").  If the Optionee does not execute and return
this Option Agreement to the Company within thirty (30)
days of the date first written above, the Option shall
terminate and be without further force and effect.
            1.   Definitions:
                 (a)  "Date of Option Grant" shall mean
the date of this Option Agreement.
                 (b)  "Number of Option Shares" shall
mean 251,536 shares of common stock of the Company, as
adjusted from time to time pursuant to paragraph 6 below.
     (c)    "Exercise
     Price" shall mean twenty-four
     dollars and ninety-one cents ($24.91)
     per share, as adjusted



     from time to
     time pursuant to paragraph 6 below.
     (d)    "Option
     Termination Date" shall mean the
     date five (5) years after the Date of
     Option Grant.
            2.   Exercise of the Option.
                 (a)  Right to Exercise. The Option shall
vest and be exercisable in accordance with the following
Vesting Schedule:
            (i)  The Option shall vest and
become exercisable with respect to one-third
(1/3) of the Number of Option Shares on the
date that is eighteen (18) months after the
Date of Option Grant, provided that the
Optionee is then employed by the Company
and subject to the terms and provisions of
this paragraph 3 and paragraphs 4 and 5
below;
       (ii) The Option shall vest and
become exercisable with respect to an
additional one-third (1/3) of the Number of
Option Shares on the second anniversary of
the Date of Option Grant, provided that the
Optionee is then employed by the Company
and subject to the terms and provisions of
this paragraph 3 and paragraphs 4 and 5
below; and
       (iii)     The Option shall vest and
become exercisable with respect to the
remaining one-third (1/3) of the Option
Shares on the third anniversary of the Date
of Option Grant, provided that the Optionee
is then employed by the Company and
subject to the terms and provisions of this
paragraph 3 and paragraphs 4 and 5 below.
                 (b)  Method of Exercise.  Exercise of the
Option must be by written notice to the Company, which
notice must state (i) the election to exercise the Option, (ii)
the number of shares of the Company's common stock for
which the Option is being exercised and (iii) such other
representations and agreements as to the Optionee's
investment intent with respect to such shares as may be
required pursuant to the provisions of this Option
Agreement.  Any such notice shall be in substantially the
same form as Exhibit A attached hereto.  Such written
notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return
receipt requested, to the President or Chief Executive
Officer of the Company, or other authorized representative
designated in writing by the Company for such purpose,
prior to the Option Termination Date, accompanied by full
payment of the exercise price for the number of shares
being purchased.  Payment of the exercise price for the
number of shares for which the Option is



being exercised
shall be made in cash, by check or in cash equivalent.
                 (c)  Tax Withholding.  At the time the
Option is exercised, in whole or in part, or at any time
thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees
to make adequate provision for foreign, federal and state
tax withholding obligations of the Company, if any, that
arise in connection with the Option or the exercise thereof,
including, without limitation, obligations arising upon (i)
the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or
regulation providing for the imputation of interest or (iv)
the lapsing of any restriction with respect to any shares
acquired on exercise of the Option.  The Optionee is
cautioned that the Option is not exercisable unless the
Company's withholding obligations are satisfied.
Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested and
the Company shall have no obligation to issue a certificate
for such shares.
                 (d)  Restrictions on Grant of the Option
and Issuance of Shares.  The grant of the Option and the
issuance of the Option Shares upon exercise of the Option
shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect
to such securities.  The Option may not be exercised if the
issuance of Option Shares upon such exercise would
constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations.  In
addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), shall at the time of
exercise of the Option be in effect with respect to the
Option Shares issuable upon exercise of the Option or (ii)
in the opinion of legal counsel to the Company, the Option
Shares issuable upon exercise of the Option may be issued
in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act.
THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISABLE UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE
ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED.  Questions
concerning this restriction should be directed to the Board
of Directors of the Company.  As a condition to the
exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be
necessary or appropriate to evidence compliance with any
applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the
Company.
                 (e)  Fractional Shares. The Company
shall not be required to issue fractional Option Shares.  If
fractions of an Option Share should result from any
adjustment pursuant to paragraph 6 below, such adjustment
shall be revised to the



next lower whole number of Option
Shares.
            3.   Non-Transferability of the Option; Non-
Alienation of Benefits. The Option may be exercised
during the lifetime of the Optionee only by the Optionee
and may not be assigned or transferred in any manner
except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the
extent unexercised and exercisable by the Optionee on the
date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable
laws of descent and distribution, subject, however, to the
terms and conditions of this Option Agreement.
            Except with the prior written consent of the
Company, subject to the foregoing, or as otherwise
provided herein, no right or benefit under this Option
Agreement shall be subject to alienation, sale, transfer (by
gift or otherwise), assignment, pledge, encumbrance or
charge, and any attempt to alienate, sell, transfer, assign,
pledge, encumber or charge the same without such consent,
if applicable, shall be null and void and of no effect.
Except with such consent, no right or benefit under this
Option Agreement shall in any manner be liable for or
subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit.  Except to the extent
previously approved by the Company in writing, or as
otherwise provided herein, if the Optionee should become
bankrupt or attempt to alienate, sell, transfer, assign,
pledge, encumber or charge any right or benefit hereunder,
then such right or benefit shall cease and terminate, and in
such event, the Company may hold or apply the same or
any part thereof for the benefit of the Optionee, the
Optionee's spouse, children or other dependents, or any of
them, in such manner and in such proportion as the
Company may in its sole determination deem proper.
            4.   Termination of the Option.  The Option
shall terminate and may no longer be exercised on the first
to occur of (a) the Option Termination Date or (b) the last
date for exercising the Option following termination of
employment as described in paragraph 5 below.
            5.   Termination of Employment.
                 (a)  Termination Other Than by Death or
Disability.  Except as otherwise provided below, if the
Optionee ceases to be an employee of the Company for any
reason, except death or Disability (as defined in the
Employment Agreement), the Option, to the extent
unexercised and exercisable by the Optionee on the date on
which the Optionee ceases to be an employee, may be
exercised by the Optionee within thirty (30) days after the
date on which the Optionee's employment terminated, but
in any event no later than the Option Termination Date.



                 (b)  Termination by Death or Disability.
Except as otherwise provided below, if the Optionee's
employment with the Company is terminated because of
the death or Disability (as defined in the Employment
Agreement) of the Optionee, the Option, to the extent
unexercised and exercisable by the Optionee on the date on
which the Optionee ceases to be an employee, may be
exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of six (6)
months from the date on which the Optionee's employment
terminated, but in any event no later than the Option
Termination Date.
                 (c)  Limitations on Exercise After
Termination. Except as provided in this paragraph 5 hereof,
the Option shall terminate and may not be exercised if the
Company finds or has found that the Optionee:
                      (i)  Willfully and deliberately
engaged in willful, deliberate or gross misconduct toward
the Company;
                      (ii) Willfully violated the terms
of any confidentiality agreement or confidentiality
obligation between the Optionee and the Company; or
                      (iii)     Has been terminated for
Cause (as defined in the Employment Agreement).
                 (d)  Leave of Absence.  For purposes
hereof, the Optionee's employment with the Company shall
not be deemed to terminate if the Optionee takes any
military leave, sick leave or other bona fide leave of
absence approved by the Company of ninety (90) days or
less.  In the event of a leave in excess of ninety (90) days,
the Optionee's employment shall be deemed to terminate
on the ninety-first (91st) day of the leave unless the
Optionee's right to reemployment with the Company
remains guaranteed by statute or contract.
            6.   Effect of Change in Stock Subject to the
Option.  Appropriate adjustments shall be made in the
number, exercise price and class of shares of stock subject
to the Option in the event of a stock split, reverse stock
split, recapitalization, combination, reclassification or like
change in the capital structure of the Company.  In the
event a majority of the shares that are of the same class as
the shares that are subject to the Option are exchanged for,
converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may
unilaterally amend the Option to provide that the Option is
exercisable for New Shares.  In the event of any such
amendment, the number of shares and the exercise price
shall be adjusted in a fair and equitable manner.
            7.   Rights as a Stockholder or Employee.  The
Optionee shall have no rights as a stockholder with respect
to any shares covered by the Option until the



date, and
except to the extent, of the issuance of a certificate or
certificates for the shares for which the Option has been
exercised.  Nothing in the Option shall confer upon the
Optionee any right to continue in the employ of the
Company or interfere in any way with any right of the
Company to terminate the Optionee's employment in
accordance with the terms and provisions of the
Employment Agreement.
            8.   Notice of Sales Upon Disqualifying
Disposition.  The Optionee shall dispose of the Option
Shares only in accordance with the provisions of this
Option Agreement.  In addition, the Optionee shall
promptly notify the President of the Company if the
Optionee disposes of any of the Option Shares within one
(1) year from the date the Optionee exercises all or part of
the Option or within two (2) years of the date of grant of
the Option.  Until such time as the Optionee disposes of
such Option Shares in a manner consistent with the
provisions of this Option Agreement, the Optionee shall
hold all Option Shares in the Optionee's name (and not in
the name of any nominee) for the one-year period
immediately after exercise of the Option and the two-year
period immediately after grant of the Option.  At any time
during the one-year or two-year periods set forth above, the
Company may place a legend or legends on any certificate
or certificates representing Option Shares requesting the
transfer agent for the Company's shares of common stock
to notify the Company of any such transfer(s) and may
place stop orders with such transfer agent against the
transfer of such shares.  The obligation of the Optionee to
notify the Company of any such transfer shall continue
notwithstanding that a legend has been placed on the
certificate or certificates pursuant to the preceding sentence
or otherwise.
            9.   Legends.  The Company may at any time
place legends referencing limitations contained in any
applicable federal, state or foreign securities law
restrictions on all certificates representing shares of stock
issued upon the exercise of the Option or otherwise subject
to the provisions of this Option Agreement.  The Optionee
shall, at the request of the Company, promptly present to
the Company any and all certificates representing Option
Shares in the possession or under the control of the
Optionee or any of his agents or representatives in order to
carry out the provisions of this paragraph 9. Unless
otherwise specified by the Company, legends placed on
such certificates may include, but shall not be limited to,
the following:
               "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 SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701
UNDER THE ACT, OR THE COMPANY
RECEIVES AN



OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES
REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT."
            10.  Binding Effect.  This Option Agreement
shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators,
successors and assigns.
            11.  Integrated Agreement.  This Option
Agreement constitutes the entire understanding and
agreement of the Optionee and the Company with respect
to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations or
warranties between the Optionee and the Company relating
to the Option or otherwise with respect to such subject
matter other than those as set forth or provided for herein.
To the extent contemplated herein, the provisions of this
Option Agreement shall survive any exercise of the Option
and shall remain in full force and effect.
            12.  Applicable Law.  This Option Agreement
shall be governed by, and interpreted in accordance with,
the internal laws of the State of New York applicable to
contracts executed and to be performed wholly within such
State, without giving effect to the conflict or choice of laws
provisions thereof.


                                ALPHA HOSPITALITY CORPORATION

By:                             By____________________________
                                Name:
                                Title:






             The Optionee represents that the Optionee is
familiar with the terms and provisions of this Option
Agreement and hereby accepts the Option subject to all of
the terms and provisions thereof.  The Optionee further
acknowledges and understands that the Option has not been
issued or granted under or pursuant to any employee stock
option plan and that the Option will not constitute an
"incentive stock option" under Section 422(b) of the
Internal Revenue Code of 1986, as amended.  The Optionee
hereby agrees to accept as binding, conclusive and final all
decisions or interpretations made in good faith by the
Board of Directors of the Company upon or with respect to
any questions arising under this Option Agreement.


Date:  __________________            OPTIONEE

                                     ______________________________





               EXHIBIT A



        OPTION EXERCISE NOTICE

[To Be Signed Only Upon Exercise Of The Option]


   To:ALPHA HOSPITALITY CORPORATION

The undersigned, the holder of the within Stock
Option Agreement, dated as of ________, 2001, hereby
irrevocably elects to exercise the purchase right represented
by the Option provided for therein for, and to purchase
thereunder, _____________________________
(_________) shares of Common Stock of ALPHA
HOSPITALITY CORPORATION (such shares, the
"Shares") and herewith makes payment of
____________________________ dollars (at the rate of
$_________ per share) therefor, and requests that the
certificate for the Shares be issued in the name of the
undersigned and delivered to him at the following address:
__________
________________________________________________
______________________.

The undersigned represents that his
purchase of the Shares is made for his own account for
investment and not with a view to or for sale or distribution
thereof in a public offering, but subject to the disposition of
the Shares being at all times within his control and without
prejudice to his right at all times to sell or otherwise
dispose of all or any part of the Shares in accordance with
applicable law.


Dated:
                                 _________________________________________
                                 (Signature must conform in all respects to
                                  name of Holder as specified on face
                                  of the Stock Option Agreement)


                                 _________________________________________
                                 Address

                                 _________________________________________





                             EXHIBIT D

          TAG-ALONG AGREEMENT

               TAG-ALONG AGREEMENT (this
"Agreement"), dated as of __________, 2001, by and
between BRYANSTON GROUP, INC. ("Bryanston"), a
________ corporation, and Watertone Holdings, LP
("Watertone"), a Delaware limited partnership.

         W I T N E S S E T H :

               WHEREAS, Alpha Hospitality
Corporation (the "Corporation") has entered into an
Contribution Agreement (the "Contribution
Agreement"), dated as of August 9, 2001, with
Watertone, providing, inter alia, for the formation of
New York Gaming LLC (the "LLC"), a Georgia limited
liability company, and, in connection therewith,
issuance and contribution of certain shares of the
Corporation's common stock (such shares, the
"Acquired Shares") to the LLC; and

               WHEREAS, in conjunction with the
Contribution Agreement and the transactions
contemplated thereby, Watertone has requested that
Bryanston grant it and the LLC certain tag-along
rights, and Bryanston is willing to grant certain tag-
along rights as set forth herein;

               NOW THEREFORE, in consideration of
the foregoing premises and the mutual representations,
warranties, covenants and agreements contained herein,
and for other good and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the
parties hereto agree as follows:

               ARTICLE I

              DEFINITIONS

SECTION 1.01.                Definitions.  Capitalized
terms used herein and defined in the Contribution
Agreement are used herein with the respective
meanings ascribed thereto in the Contribution
Agreement unless otherwise defined herein or the
context otherwise requires.

              ARTICLE II

           TAG-ALONG RIGHTS

SECTION 2.01.                Grant of Tag-Along Rights.
Subject to the terms



and conditions provided herein,
Bryanston hereby agrees that, until the Outside Date (as
hereinafter defined), it shall not sell or otherwise
dispose of any of its shares of the common stock of the
Corporation (the "Common Stock") unless it shall have
given written notice (a "Proposed Sale Notice") to
Watertone setting forth (a) the terms and conditions of
the proposed sale or other disposition of shares of
Common Stock by Bryanston, (b) the number of shares
of Common Stock that Bryanston intends to sell or
otherwise dispose of in connection with such proposed
sale or other disposition and (c) the date, time and
location of the proposed closing of such sale or other
disposition.  Each Proposed Sale Notice shall be given to
Watertone at least ten (10) business days prior to the
date scheduled for the closing of the proposed sale or
other disposition referred to therein.  In addition,
Bryanston shall not consummate any sale or other
disposition of shares of Common Stock referred to in
any Proposed Sale Notice unless at the closing thereof
(on the date, and at the time and location, of such
closing as set forth in such Proposed Sale Notice)
Bryanston shall have arranged for Watertone and/or
the LLC to be provided with, or Watertone and/or the
LLC shall otherwise have, an opportunity to sell or
otherwise dispose of (whether such is accomplished by
Bryanston reducing the number of shares of Common
Stock it proposes to sell or otherwise dispose of at such
closing or the purchaser or other assignee of such
shares of Common Stock agrees to increase the number
of shares of Common Stock it is willing to purchase or
otherwise acquire at such closing) a number of Transfer
Shares equal to the lesser of (i) the product of the
Applicable Fraction (as hereinafter defined) times the
aggregate number of the Transfer Shares that are then
owned of record by Watertone and/or the LLC and that
have not been (or the offer and sale of which have not
been) registered under Securities Act, or (ii) the number
of Transfer Shares that Watertone, in a written notice
received by Bryanston at least two (2) business days
prior to the scheduled closing as set forth in such
Proposed Sale Notice, has indicated that it or the LLC
desires to sell or otherwise dispose of on the terms and
conditions set forth in such Proposed Sale Notice;
provided, however, that, if for any reason whatsoever,
Watertone or the LLC declines, refuses or otherwise
fails to sell or otherwise dispose of any of the shares of
Common Stock at such closing that it would have been
entitled to sell or otherwise dispose of at such closing,
Bryanston shall be entitled to sell or otherwise dispose
of at such closing such number of shares of Common
Stock, in addition to the number of shares of Common
Stock that it could have sold or otherwise disposed of at
such closing had Watertone and/or the LLC not
declined, refused or otherwise failed to sell or otherwise
dispose of any shares of Common Stock at such closing.
As used herein, the "Outside Date" means the earlier to
occur of (a) the third (3rd) anniversary of the date of this
Agreement or (b) the date as of which the offer and sale
of the Transfer Shares have been registered under the
Securities Act and the "Applicable Fraction" means, as
of any time, a fraction, the numerator of which is the
number of shares of Common Stock that Bryanston has
indicated that it proposes to sell or otherwise dispose of
as set forth in the relevant Proposed Sale Notice and the
denominator of which is the total



number of shares of
Common Stock then owned beneficially or of record by
Bryanston or any of its Affiliates (which, for these
purposes, shall be deemed to include all shares of
Common Stock issuable upon the conversion of any
securities convertible into or exchangeable for shares of
Common Stock).

 SECTION 2.02.               Exclusions from Tag-Along
Rights.  Notwithstanding anything contained herein to
the contrary, the requirements set forth in Section 2.01
above shall not extend or apply to any of the following:
(a) any sale or other disposition of any shares of
Common Stock to any officer, director, employee,
consultant, agent or other representative of Bryanston
or any Affiliate thereof (which, for purposes of this
Agreement, shall include Alpha and its Affiliates); (b)
any sale or other disposition of any shares of Common
Stock pursuant to, or as a consequence of, any pledge of
such shares (or any similar arrangement) to secure any
loan or other obligation, provided such loan or other
obligation was obtained from or owed to an un-
affiliated third party; (c) any transfer or assignment of
any shares of Common Stock in consideration for
services rendered to Bryanston or any of its Affiliates;
or (d) any sale or other disposition of any shares of
Common Stock unless the number of shares of
Common Stock being sold or otherwise disposed of,
when aggregated with the number of shares of Common
Stock that have been sold or otherwise disposed of by
Bryanston during the immediately preceding ninety
(90) days (exclusive of any sale or other disposition
referred to in any of the preceding clauses (i) through
(iii)) would exceed ___________ [number to be inserted
equal to 3.75% of the number of shares of Common
Stock, determined on a fully-converted basis, currently
owned by Bryanston], which number shall be subject to
appropriate adjustment on account of any stock split or
similar event.

              ARTICLE III

             MISCELLANEOUS

SECTION 3.01.                 Expenses.  Each
party to this Agreement will bear all of its own expenses
in connection with the preparation and negotiation of
this Agreement and the consummation and
performance of its obligations hereunder.

SECTION 3.02.                 Notices.  All notices,
demands, requests, consents, approvals or other
communications (collectively, "Notices") required to be
given hereunder shall be in writing and shall be
personally served or deposited in the mail, registered or
certified, return receipt requested, postage prepaid, or
delivered by reputable overnight air courier service
with charges prepaid, or transmitted by facsimile,
addressed as set forth below, or to such other address as
such party shall have specified most recently by written
notice given in accordance with this Section 3.02:



               (A) if to Bryanston, to:
                                   Bryanston Group, Inc.
                                   1886 Route 52
                                   Hopewell Junction, N.Y  [Zip]
                                   Attention: _____________
                                   Facsimile No.: ___________

               with a copy thereof (which shall not
constitute notice) simultaneously and similarly sent to:
                                   Parker Duryee Rosoff & Haft
                                   529 Fifth Avenue
                                   New York, New York 10017
                                   Attention: Herbert F. Kozlov, Esq.
                                   Facsimile No.: (212) 972-9487

               (B) if to Watertone, to:
                                   Watertone Holdings, LP
                                   Scott Kaniewski
                                   2412 Central Park Avenue
                                   Evanston, IL 60201
                                   Facsimile
                                   No.: (847)328-4032

                      with a copy thereof (which shall not
constitute notice) simultaneously and similarly sent to:
                                   Stites & Harbison
                                   Attn: William W. Hopson
                                   3350 Riverwood Pkwy, Suite 1700
                                   Atlanta, GA 30339
                                   Facsimile No.: (770)850-7070

Any Notice shall be deemed given on the date of service
or transmission if personally served or transmitted by
facsimile with receipt confirmed.  Any Notice otherwise
sent as provided herein shall be deemed given on the
third (3rd) Business Day following the date mailed or on
the next Business Day following delivery of such notice
to a reputable overnight air courier service.

SECTION 3.03.                Entire Agreement.  This
Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements,
representations, understandings, negotiations and
discussions between the parties, whether oral or
written, with respect to the subject matter hereof.



SECTION 3.04.                Amendment and
Waiver.  This Agreement may
not be amended, modified or waived except by a writing
executed by the party against which such amendment,
modification or waiver is sought to been enforced.
Waivers may be made in advance or after the right
waived has arisen or the breach or default waived has
occurred.  Any waiver may be conditional.  No waiver
of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or
succeeding breach thereof nor of any other agreement
or provision herein contained.  No waiver or extension
of time for performance of any obligation or act shall be
deemed a waiver or extension of the time for
performance of any other obligation or act.

SECTION 3.05.                Assignment; No Third
Party Beneficiaries.  This Agreement and the rights,
duties and obligations hereunder may not be assigned
or delegated by either Bryanston, on the one hand, or
Watertone, on the other hand, without the prior written
consent of the other party hereto.  Except as provided in
the preceding sentence, any purported assignment or
delegation of rights, duties or obligations hereunder
made without the prior written consent of the other
party hereto shall be void and of no effect.  This
Agreement and the provisions hereof shall be binding
upon and enforceable against the parties and their
respective successors and assigns and shall inure to the
benefit of and be enforceable by each of the parties and
their respective successors and permitted assigns.  This
Agreement is not intended to confer any rights or
benefits on any Persons other than as set forth above.

SECTION 3.06.                Severability.  The terms and
provisions of this Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or
provision hereof shall not affect the validity or
enforceability of this Agreement or of any other term or
provision hereof.  Furthermore, in lieu of any such
invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this
Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible
and be valid and enforceable.

SECTION 3.07.                Further Assurances.  Each
party hereto, upon the request of the other party hereto,
shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents
as may be necessary or desirable to carry out, effectuate
and/or evidence or memorialize the transactions
contemplated by this Agreement.

SECTION 3.08.                Titles and Headings;
Interpretation.  Titles, captions and headings of the
Articles and Sections of this Agreement are for
convenience of reference only and shall not affect the
construction of any provision of this Agreement.
Whenever the singular number is used in this
Agreement and when



required by the context, the same
shall include the plural and vice versa, and the neuter,
masculine and feminine gender of any pronoun or
possessive shall include all other genders.  Unless
otherwise provided herein, references herein to any
Section or Article are references to the corresponding
Section or Article of this Agreement.  Use of the terms
"herein," "hereof" or "hereunder" or similar terms
shall refer to this Agreement as a whole and not to any
particular Article, Section or other provision of this
Agreement.

SECTION 3.09.                GOVERNING LAW and
JURY WAIVER.  THIS AGREEMENT SHALL BE
GOVERNED BY, INTERPRETED UNDER, AND
CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED WHOLLY WITHIN SUCH STATE,
WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.  Each of the
parties hereto expressly waives its right to a
jury trial with respect to any suit, litigation or
other judicial proceeding REGARDING this
Agreement or any dispute hereunder or relating
hereto.  Each of the parties hereto agrees that any
dispute under or with respect to this Agreement shall be
determined before the state or federal courts situated in
the City, County and State of New York, which courts
shall have exclusive jurisdiction over and with respect
to any such dispute, and each of the parties hereto
hereby irrevocably submits to the jurisdiction of such
courts.  Each party hereby agrees not to raise any
defense or objection, under the theory of forum non
conviens or otherwise, with respect to the jurisdiction of
any such court.

SECTION 3.10.                Counterparts.  This
Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which
taken together shall constitute one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date
first set forth above.

BRYANSTON GROUP, INC.                    WATERTONE HOLDINGS, LP
                                         By: BKB, LLC,
                                         Its General Partner
By:
Name:
Title:                                  By:
                                        Name: Robert A. Berman
                                        Title: Managing Member




                                        Exhibit 10(b)

 AMENDMENT AND SUPPLEMENT TO
        CONTRIBUTION AGREEMENT

     This AMENDMENT AND SUPPLEMENT TO
CONTRIBUTION AGREEMENT ("Amendment") shall
amend and supplement that certain Contribution
Agreement (the "Contribution Agreement"), dated as of
August 10, 2001, by and between Alpha Hospitality
Corporation ("Alpha") and Watertone Holdings, LP
("Watertone").  Capitalized terms used herein and defined
in the Contribution Agreement are used herein with the
same respective meanings as ascribed thereto in the
Contribution Agreement unless otherwise defined herein.

     NOW, THEREFORE, in exchange for good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties do hereby amend and
supplement the Contribution Agreement as follows:

1.   Existing clause (ix) of Section 2.02(C) of
the Contribution Agreement is hereby deleted in its entirety
and the following shall be inserted in its place:

"(ix)   All of the issued and outstanding
shares of Alpha's Series B and C Preferred
Stock shall have been converted into shares of
Alpha's common stock, and all of the accrued
but unpaid dividends payable with respect to
Alpha's Series B and C Preferred Stock shall
have been converted into, or otherwise been
discharged or satisfied by the issuance of,
shares of Alpha's common stock; and"

2.   Notwithstanding anything contained in the
Contribution Agreement to the contrary, (A) the number of
shares of Alpha's common stock comprising or constituting
the Transfer Shares shall be adjusted to an amount that is
equal to twenty-three and one-tenth percent (23.1%) of the
Total Amount, which shall be defined as the number of
shares of Alpha's common stock currently outstanding plus
the aggregate number of shares of Alpha's common stock
issued after the date hereof and prior to the Closing as
contemplated by clause (ix) of Section 2.02(C) of the
Contribution Agreement; (B) the number of shares of
Alpha's common stock with respect to which each of the
Employees is to be issued an option as contemplated by


 Section 6 of his respective Employment Agreement
shall be adjusted to an amount that is equal to six and eight-
tenths percent (6.8%) of the Total Amount; and (C) the
exercise price per share of the Option Shares shall be
adjusted to an amount that is equal to ninety-one million,
six hundred thousand and no/100 dollars ($91,600,000.00)
divided by the Total Amount.

3.   Schedule 3.02 attached to the Contribution
Agreement shall be deemed amended to reflect that there is
currently outstanding $1,750,000 of Alpha's Series D
Preferred Stock, which (without taking into consideration
any accrued but unpaid dividends thereon) upon conversion
at an assumed Closing Price of $8.10 would result in the
issuance of 216,049 shares of Alpha's common stock.

4.   Except as amended or supplemented by this
Amendment, the Contribution Agreement shall remain in
full force and effect, and as amended and supplemented
hereby, the Contribution Agreement is hereby reaffirmed
by each of the undersigned.

IN WITNESS WHEREOF, each of the Parties
hereto has caused this Amendment to be executed on its
respective behalf by the undersigned, thereunto duly
authorized, as of the date set forth below.

Dated:  Effective as of August 10, 2001

ALPHA HOSPITALITY CORPORATION             WATERTONE HOLDINGS, LP
                                          By: BKB, LLC,
                                          Its General Partner
By:      /s/ Thomas W. Aro
Name:  Thomas W. Aro
Title:  Vice President and Secretary      By:  /s/ Scott A. Kaniewski
                                          Name:  Scott A. Kaniewski
                                          Title:  Member/Manager