10KSB

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

(Mark One)

|X|  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF 1934

                   For the fiscal year ended December 31, 2004

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE OF 1934

     For the transition period from __________________ to __________________

                         Commission file number: 1-12522

                              EMPIRE RESORTS, INC.
- --------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

         Delaware                                        13-4141279
- ----------------------------------------   -------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

        Route 17B, P.O. Box 5013,
         Monticello, New York                              12701
- ----------------------------------------   -------------------------------------
        (Address of principal                           (Zip Code)
          executive offices)

Issuer's telephone number: (845) 794-4100

Securities registered under Section 12(b) of the Exchange Act:

          Title of each class               Name of each exchange on which registered

Common Stock, $.01 par value per share           Nasdaq Small Cap Market
- ----------------------------------------   -------------------------------------

5-1/2% Secured Convertible Notes Due 2014             The PORTAL Market
- -----------------------------------------  -------------------------------------

Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, $.01 par value per share
- --------------------------------------------------------------------------------
                                (Title of class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.  Yes |X| No
|_|

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |_|

     The issuer had revenues of approximately $44,875,000 during the fiscal year
ended December 31, 2004.

     The  aggregate   market  value  of  the  issuer's  common  equity  held  by
non-affiliates, as of March 1, 2005 was $171,662,126.



     As of March 1, 2005,  there were  26,092,315  shares of the issuer's common
equity outstanding.

     Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|



                               TABLE OF CONTENTS
                               -----------------
                                                                        Page
                                                                      ---------

Part I
 Item 1.  Description of Business                                          1
 Item 2.  Description of Property                                         21
 Item 3.  Legal Proceedings                                               22
 Item 4.  Submission of Matters to a Vote of Security Holders             23

Part II
 Item 5.  Market for Common Equity and Related Stockholder Matters        24
 Item 6.  Management's Discussion and Analysis or Plan of Operation       26
 Item 7.  Financial Statements                                            54
 Item 8.  Changes In and Disagreements with Accountants
           on Accounting and Financial Disclosure                         81
 Item 8A. Controls and Procedures                                         81
 Item 8B. Other Information                                               81

Part III
 Item 9.  Directors, Executive Officers, Promoters and Control Persons;
           Compliance With Section 16(a) of the Exchange Act              82
 Item 10. Executive Compensation                                          85
 Item 11. Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                     87
 Item 12  Certain Relationships and Related Transactions                  89
 Item 13  Exhibits                                                        91
 Item 14  Principal Accountant Fees and Services                          97




                                     PART I

                           FORWARD-LOOKING STATEMENTS

            This  Annual   Report  on  Form  10-KSB   contains   forward-looking
statements  within the meaning of Section 21E of the Securities  Exchange Act of
1934,  as amended,  and Section 27A of the  Securities  Act of 1933, as amended,
reflecting  management's current expectations.  Examples of such forward-looking
statements  include our expectations  with respect to our strategy.  Although we
believe that our expectations are based upon reasonable  assumptions,  there can
be no assurances that our financial goals will be realized. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, performance or achievements,  or industry results,
to be materially different from any future results,  performance or achievements
expressed or implied by such  forward-looking  statements.  Numerous factors may
affect our actual results and may cause results to differ  materially from those
expressed  in  forward-looking  statements  made by or on behalf of us. For this
purpose,  any statements  contained herein that are not statements of historical
fact may be  deemed  to be  forward-looking  statements.  Without  limiting  the
foregoing, the words, "believes," "anticipates," "plans," "estimates," "expects"
and similar expressions are intended to identify forward-looking statements. The
important factors discussed in Item  6--Management's  Discussion and Analysis or
Plan of Operation, among others, would cause actual results to differ materially
from those  indicated by  forward-looking  statements  made herein and represent
management's  current expectations and are inherently  uncertain.  Investors are
warned that actual results may differ from management's expectations.  We assume
no  obligation  to update the  forward-looking  information  to  reflect  actual
results or changes in the factors affecting such forward-looking information.

ITEM 1.        DESCRIPTION OF BUSINESS.

GENERAL

            As used in this  Report,  the  terms  "we,"  "us,"  "our"  and  "the
Company"  refer to Empire  Resorts,  Inc.  which  was  organized  as a  Delaware
corporation  on March  19,  1993,  and since  that time has  served as a holding
company for  various  subsidiaries  engaged in the  ownership,  development  and
operation of racing and gaming facilities.  We incorporated under the name Alpha
Hospitality  Corporation  and  changed our name to Empire  Resorts,  Inc. in May
2003.  For much of our history,  we  concentrated  on  riverboat  casinos in the
southern United States,  with nominal  holdings in the mid-Atlantic  states.  In
2002 this focus shifted, as we commenced the liquidation of our holdings outside
the Catskills  region of the State of New York, and by the end of 2003 we had no
direct  operations  or  meaningful  assets  other  than a minority  interest  in
Catskill   Development,   L.L.C.   ("Catskill   Development"),   the   owner  of
approximately 232 acres of land in Monticello, New York, the sole stockholder of
Monticello Raceway Management,  Inc.  ("Monticello  Raceway Management") and the
controlling  member of Monticello  Casino  Management,  LLC ("Monticello  Casino
Management").

            In January  2004,  we  acquired  from the  members of both  Catskill
Development and Monticello Raceway Development Company, LLC ("Monticello Raceway
Development") all of the outstanding  membership  interests and capital stock of
Monticello Raceway Management,  Monticello Casino Management, Monticello Raceway
Development  and Mohawk  Management,  LLC in  exchange  for 80.25% of our common
stock,  calculated on a post-consolidation,  fully diluted basis (the "Merger").
Monticello Raceway Management,  Monticello Casino Management, Monticello Raceway
Development and Mohawk Management, LLC own all of the development and management
rights with respect to a Native  American  casino to be developed in conjunction
with the Cayuga Nation of New York on 29 of the 232 acres of land in Monticello,
New York.

            Although  we were the legal  survivor  in the  Merger and remain the
registrant  with  the  Securities  and  Exchange  Commission,  under  accounting
principles generally accepted in the United States, the Merger was accounted for
as a reverse  acquisition,  whereby  Catskill  Development  was  considered  the
"acquirer" for financial reporting purposes as we had no significant  operations
at that time and Catskill  Development's members controlled more than 50% of the
post  transaction  combined  company.   Among  other  matters,   reverse  merger
accounting  requires us to present in all financial  statements and other public
information  filings,   prior  historical  and  other  information  of  Catskill
Development,  and a retroactive restatement of Catskill Development's historical
stockholders  investment  for the  equivalent  number of shares of common  stock
received in the Merger.



            We have made, and may continue to make, investments in personnel and
resources  to further  our  efforts to grow our  business  within the gaming and
hospitality  industry which may involve  material  increases to our expenses and
expenditures of additional  capital.  We plan to grow and diversify our business
through  marketing  our  services  to gaming and  hospitality  clients,  seeking
consulting  relationships  with additional gaming clients and being receptive to
acquisitions, joint ventures or other growth opportunities

            Through  our  subsidiaries,  we intend to develop  multi-dimensional
gaming  resorts  in  Sullivan  County,  New  York  and  gaming  and  hospitality
operations  outside of the State of New York.  Our current plan  includes  horse
racing,  video  gaming  machines  ("VGM"),  Native  American  Class  III  gaming
facilities  and other  non-gaming  resort  development.  We  continue to explore
numerous other possible development projects.

            We currently  operate  Monticello  Raceway,  a harness  horse racing
facility  located in Monticello,  New York,  just 90 miles northwest of New York
City. On June 30, 2004, we began  operating  1,744 VGMs on 45,000 square feet of
floor space at Monticello Raceway after completing  approximately  $24.0 million
of renovations  to the facility.  We also have  agreements  with both the Cayuga
Nation of New York and the Seneca Cayuga Tribe of Oklahoma to develop and manage
two Native  American  casinos on land either  adjacent to Monticello  Raceway or
elsewhere  in the  Catskills  region  of the  State of New  York.  As  currently
contemplated,  each Native American gaming project will cost  approximately $500
million and will include a casino with 3,000 slot  machines and 200 table games,
all of which will be Class III games as defined in the Indian Gaming  Regulatory
Act of 1988.  Consistent with these pursuits,  on November 12, 2004, we, Concord
Associates Limited  Partnership and Sullivan Resorts,  LLC entered into a letter
agreement  pursuant  to which we agreed to,  among  other  things,  acquire  (i)
Grossinger's  Resort Hotel and Golf Course,  consisting of an approximately  600
acre  parcel  of  land,  various  hotel  buildings,   golf  course  and  related
facilities,  (ii) The Concord  Hotel,  consisting of an  approximately  166 acre
parcel  of land,  hotel  buildings,  the  Challenger  golf  course  and  related
facilities  and  (iii) The  Concord  Resort  and Golf  Club,  consisting  of the
International  golf course, the ground lease for the Monster golf course, a club
house,  and lodging and support  facilities  (collectively,  the "Concord Resort
Property"),  from Concord Associates  Limited  Partnership and Sullivan Resorts,
LLC in exchange for 18 million  shares of our common stock (or its equivalent on
a  fully-diluted   basis)  and  the  assumption  of  certain   indebtedness  and
liabilities  not to exceed $30 million.  Each of these  properties is located in
the Catskills region of the State of New York.

REVERSE STOCK SPLIT

            In June 2001,  we  consummated  a  one-for-ten  reverse split of our
outstanding common stock, such that each ten shares of common stock subsequently
represented one outstanding share of common stock. No scrip or fractional shares
were issued in connection with the reverse split.

THE EXISTING PROPERTY

     Monticello Raceway currently features:

     o 1,744 VGMs;

     o live harness horse racing;

     o year-round  simulcast  pari-mutuel  wagering on thoroughbred  and harness
       horse racing from across the country;

     o a  5,000-seat  grandstand  and  a  100-seat  clubhouse  with  retractable
       windows;

     o parking spaces for 2,000 cars and 10 buses;

     o a 350-seat buffet and food court with three outlets;

     o a large central bar and an additional clubhouse bar; and

     o an entertainment lounge with seating for 75 people.


                                       2



The  current  plans for the  Native  American  casino  resort at  Monticello  is
expected to feature:

     o 160,000  square  feet of gaming  space with 3,000 slot  machines  and 200
       table games,  with  sufficient  space to accommodate an additional  1,000
       slot machines;

     o separate bingo and poker areas;

     o nine restaurants, including a buffet;

     o several bars and a nightclub;

     o 5,000 parking spaces, including 4,200 covered spaces all located directly
       underneath or adjacent to the casino;

     o an enclosed retail corridor connected to Monticello Raceway;

     o a central entertainment lounge; and

     o a 40,000 square foot multi-function room.

The plans  are only in a  preliminary  stage  and are  subject  to  approval  by
relevant  government  authorities  and the Cayuga Nation of New York.  Our plans
with respect to our proposed  facility at the Concord  Resort  Property are less
well developed at this point.

COMPETITIVE ADVANTAGES

            We believe  that our  efforts to develop  new gaming  operations  at
Monticello  Raceway  and at the  two  Native  American  casino  resorts  will be
successful  because the sites are  approximately  90 miles northwest of New York
City, making it a shorter trip from the nation's most populous metropolitan area
than either  Atlantic City or any regional  Native  American  casino,  including
Foxwoods and Mohegan Sun in  Connecticut.  There are  approximately  1.3 million
adults living within 50 miles of Monticello Raceway.  In addition,  roughly 18.4
million  adults  live  within  100 miles of  Monticello  Raceway,  an area where
household income averages approximately $76,000.  Monticello Raceway is directly
adjacent to Highway 17, has highly visible signage and convenient access, and is
less than 1,000  feet from the  highway's  exit.  There is  currently  no direct
competition  for our VGM  operations  within  85  miles of  Monticello  Raceway.
However,  Yonkers Raceway and Aqueduct Raceway,  two racetracks in New York City
propose developing VGM operations, and the governor or New York has proposed the
development of three additional Native American casinos in the Catskills region,
in addition to the two casinos that we propose to develop.


                                       3


STRONG GAMING MARKET

            The table below illustrates the strength of the northeastern  United
States  gaming  market,  with the Atlantic City casinos in New Jersey and Native
American casinos in Connecticut generating slot win of nearly $5 billion.

                                                                  TOTAL GAMING WINS
                                                                 GAMING                       WIN PER
                   CASINO            SLOTS        TABLES         WIN(1)       SLOT WIN(1)  SLOT PER DAY
                   ------            -----        ------         ---          --------     ------------

      Foxwoods Casino                6,934          354(2)     $     NA       $  805.6      $  318
      Mohegan Sun                    6,248          290(3)      1,123.1(3)       832.8         365
      Atlantic City Casinos (12)    42,006        1,408         4,820.7        3,562.0         269



       -------------------------------------------------------------------------
       SOURCE:  ALL  INFORMATION  AS OF NOVEMBER  30, 2004 AND FROM THE STATE OF
       CONNECTICUT  DIVISION OF SPECIAL  REVENUE AND NEW JERSEY  CASINO  CONTROL
       COMMISSION, UNLESS OTHERWISE NOTED.
       (1) FIGURES IN MILLIONS.
       (2) MOST RECENT DATA FROM FOXWOODS CASINO'S WEBSITE.
       (3) FOR THE FISCAL YEAR ENDED SEPTEMBER 30 , 2004 FROM MOHEGAN
TRIBAL GAMING AUTHORITY'S PUBLIC FILINGS.


            The  table  below  illustrates  win per  gaming  device  per day for
racetrack  operations  with  VGM  operations,  also  known  as  racinos,  in the
northeastern United States for which data is publicly  available.  On average, a
typical  racino  generates  over $240 of win per gaming device per day on nearly
2,000 gaming devices.

                                 WIN PER GAMING      AVERAGE NUMBER OF
                   RACINO      DEVICES (1) PER DAY   GAMING DEVICES (1)   TOTAL WIN(2)
                   ------      -------------------   ------------------   ---------
          Lincoln, RI               $337                 2,543              $302.5
          Charles Town, WV           270                 3,616               355.8
          Wheeling Downs, WV         232                 2,248               190.2
          Delaware Park, DE          293                 2,453               261.6
          Dover Downs, DE            208                 2,449               185.9
          Mountaineer, WV            219                 3,158               252.1
          Newport, RI                218                 1,020                78.8
          Harrington, DE             202                 1,434               105.9
          Tri-State, WV              113                 1,574                65.1
          Average                   $240                 2,278              $199.8

          SOURCE:  FOR  THE  LATEST  TWELVE  MONTHS  ENDED  DECEMBER  2004  FROM
          INDIVIDUAL STATE GAMING COMMISSIONS.

          (1) THE TERM "GAMING  DEVICES" IS INCLUSIVE OF BOTH SLOT  MACHINES AND
              VIDEO GAMING MACHINES.

          (2) FIGURES IN MILLIONS.

CASINO DEVELOPMENT

            We have  agreements  with both the Cayuga Nation of New York and the
Seneca  Cayuga  Tribe of  Oklahoma  to develop  and  manage two Native  American
casinos.  One is proposed on land adjacent to  Monticello  Raceway and the other
will be  elsewhere  in the  Catskills  region of the  State of New York.  If our
transaction  for the  Concord  Resort  Property  is  consummated,  we propose to
develop some of the land at the Concord Resort Property into the other casino.

            On April 3, 2003, Monticello Casino Management, the Cayuga Nation of
New York and the Cayuga Catskill Gaming  Authority,  an  instrumentality  of the
Cayuga Nation of New York formed to develop and conduct gaming operations signed
an initial form of gaming  facility  management  agreement.  This  agreement was
subsequently  extended in January 2005 to June 30, 2005. Our agreements with the
Cayuga Nation of New York were entered into through our principal subsidiaries.

            Separately,  on August 19, 2004, we entered into a letter  agreement
with the Seneca Cayuga Tribe of Oklahoma, a federally recognized Native American
tribe,  which  provides  for the  development  of a  trust  land  casino  in the
Catskills region of the State of New York. The letter agreement  provides for us
to supply  technical  and  financial  assistance  to the Seneca  Cayuga Tribe of
Oklahoma and to serve as the Seneca Cayuga Tribe of Oklahoma's exclusive partner
in the  development,  construction,  financing,  operation and management of the
proposed casino. The letter agreement is for a term of one year.


                                       4


            Under the letter agreement with the Seneca Cayuga Tribe of Oklahoma,
we will provide  technical  assistance and support relating to the settlement of
the Seneca Cayuga Tribe of Oklahoma's  land claims against the State of New York
and, subject to certain limitations under an agreement between us and the Cayuga
Nation  of New  York,  will  assist  the  Seneca  Cayuga  Tribe of  Oklahoma  in
identifying  an  appropriate  site in the  southern  tier of New York State as a
location for the proposed Native  American  casino resort.  We will also provide
development  assistance  of  $35,000  per month to the  Seneca  Cayuga  Tribe of
Oklahoma in connection with the establishment and initial operations of a tribal
gaming authority for New York gaming operations.

            The letter  agreement  also calls for us and the Seneca Cayuga Tribe
of Oklahoma to  separately  enter into a management  agreement  and  development
agreement  for the project  through  good faith  negotiations  and to submit the
management  agreement for approval to the National Indian Gaming Commission.  We
have not yet negotiated the terms of our management and  development  agreements
with the Seneca  Cayuga Tribe of Oklahoma.  All of the  provisions  of the above
agreements  relating to the management of the Native  American casino resort are
subject to review and approval by the National Indian Gaming Commission prior to
becoming  effective.  Pending such approval and as a result of such review, such
provisions may be amended or supplemented by the parties.

OPERATIONS

            We operate through three principal subsidiaries:  Monticello Raceway
Management,  Monticello  Casino  Management and Monticello  Raceway  Development
Company. Currently, only Monticello Raceway Management generates revenue, as the
operations  of our other two  subsidiaries  are  contingent  upon the receipt of
certain federal and state regulatory approvals.

MONTICELLO RACEWAY MANAGEMENT

RACETRACK OPERATIONS

            Monticello  Raceway  Management  is  a  New  York  corporation  that
operates  Monticello  Raceway,  a  harness  horse  racing  facility  located  in
Monticello,  New York.  Monticello  Raceway  began  operation in 1958 and offers
pari-mutuel  wagering on live harness  racing  throughout  the year,  along with
year-round  simulcasting from various harness and thoroughbred racetracks across
the country. Monticello Raceway derives its revenue principally from:

            o    wagering at Monticello  Raceway on live races run at Monticello
                 Raceway;

            o    fees from  wagering at  out-of-state  locations on races run at
                 Monticello Raceway using export simulcasting;

            o    revenue  allocations,   as  prescribed  by  law,  from  betting
                 activity  at  off-track  betting  facilities  in New York City,
                 Nassau  County  and the  Catskills  region  of the State of New
                 York;

            o    wagering  at  Monticello   Raceway  on  races   broadcast  from
                 out-of-state racetracks using import simulcasting; and

            o    admission  fees,  program  and  racing  form  sales,  food  and
                 beverages sales and certain other ancillary activities.

            SIMULCASTING. Over the past several years, import and, particularly,
export  simulcasting  has become an  increasingly  important  part of Monticello
Raceway's business.  Simulcasting is the process by which a live horse race held
at one facility  (the "host  track") is  transmitted  to another  location  that
allows its patrons to wager on that race.  Amounts  wagered  are then  collected
from each off-track  betting location and combined into appropriate pools at the
host track where the final odds and payouts are  determined.  With the exception
of a few holidays,  Monticello Raceway offers year-round simulcast wagering from
racetracks across the country,  including Churchill Downs, Hollywood Park, Santa
Anita Racetrack,  Gulfstream Park,  Aqueduct Raceway,  Belmont Park and Saratoga
Racecourse. In addition, races of national interest, such as the Kentucky Derby,
Preakness  Stakes and Breeders' Cup supplement  regular  simulcast  programming.
Monticello  Raceway  also exports  live  broadcasts  of its races to casinos and
off-track betting facilities in Nevada, New York and Connecticut.


                                       5



            PARI-MUTUEL WAGERING. Monticello Raceway's racing revenue is derived
from  pari-mutuel   wagering  at  the  track  and  government  mandated  revenue
allocations  from  certain  New  York  State  off-track  betting  locations.  In
pari-mutuel  wagering,  patrons bet against  each other  rather than against the
operator of the facility or with pre-set odds.  The dollars  wagered form a pool
of funds from which  winnings are paid based on odds  determined by the wagering
activity.  The  racetrack  acts as a  stakeholder  for the wagering  patrons and
deducts from the amounts wagered a "take-out" or gross commission from which the
racetrack  pays state and county taxes and racing purses.  Monticello  Raceway's
pari-mutuel  commission  rates are fixed as a percentage  of the total handle or
amounts wagered.

            LICENSING REQUIREMENTS. As the owner and operator of a harness horse
racing facility in New York State,  Monticello  Raceway Management is subject to
various regulatory requirements. All horse racing and pari-mutuel wagering, both
on-track  and  off-track,  in the State of New York is  overseen by the New York
State  Racing  and  Wagering  Board and  subject  to the  rules and  regulations
provided  under the Racing,  Pari-mutuel  Wagering and Breeding Law of 1983,  as
amended.  This law requires that  Monticello  Raceway  Management be licensed to
operate Monticello Raceway. This license must be renewed annually.  The New York
State  Racing  and  Wagering  Board can deny a license  renewal  for  failure to
properly  maintain  Monticello  Raceway.  The New York State Racing and Wagering
Board can also deny Monticello  Raceway  Management's  license renewal if any of
its or our officers,  directors or stockholders,  or any party owning stock or a
share of the profits,  or participating in the management of Monticello  Raceway
Management:

            o    is convicted of a crime involving moral turpitude;

            o    engages in bookmaking or other forms of illegal gambling;

            o    is found guilty of any fraud or misrepresentation in connection
                 with racing or breeding;

            o    violates or attempts to violate any law,  rule or regulation of
                 any racing  jurisdiction for which suspension from racing might
                 be imposed in such jurisdiction;

            o    violates  any rule,  regulation  or order of the New York State
                 Racing and Wagering Board; or

            o    is found  to have  experience,  character  or  general  fitness
                 inconsistent with the best interests of racing generally.

            Our  directors and certain of our  employees  and  stockholders  and
certain of  Monticello  Raceway  Management's  employees are also required to be
licensed  by the New  York  State  Racing  and  Wagering  Board  based  on their
perceived  amount of  influence  over  Monticello  Raceway's  operations.  These
individuals  can be denied a license or have their licenses  revoked should they
commit any of the acts described above which would jeopardize Monticello Raceway
Management's annual license renewal.

            Since we are the sole stockholder of Monticello Raceway  Management,
whenever a stockholder of ours that holds 25% or more of our  outstanding  stock
transfers any shares of stock, the Racing, Pari-mutuel Wagering and Breeding Law
of 1983 requires that the person  receiving stock file an affidavit with the New
York State Racing and Wagering Board stating that the recipient will be the sole
beneficial owner of the transferred stock, and whether or not the recipient:

            o    has ever been convicted of a crime involving moral turpitude;

            o    has  ever  engaged  in  bookmaking  or other  forms of  illegal
                 gambling;

            o    has ever been found guilty of any fraud or misrepresentation in
                 connection with racing or breeding;

            o    has ever been  found  guilty of any  violation  or  attempt  to
                 violate any law, rule or regulation of any racing  jurisdiction
                 for which  suspension  from  racing  might be  imposed  in such
                 jurisdiction; or

            o    has ever violated any rule, regulation or order of the New York
                 State Racing and Wagering Board.

                                       6





            If the recipient is not, or will not be, the sole  beneficial  owner
of the transferred stock, then the New York State Racing and Wagering Board must
be supplied with the terms of the agreement or  understanding  pursuant to which
the stock will be held,  including  a detailed  statement  of any other  party's
interest  in such  stock.  If the New  York  State  Racing  and  Wagering  Board
determines  that it is  inconsistent  with the public  interest,  convenience or
necessity, or with the best interests of racing generally, for such recipient to
be a stockholder of record,  or the beneficial  owner of any interest in us or a
party that owns 25% or more of our stock, the New York State Racing and Wagering
Board may order such  recipient  to dispose  of our stock or  interest  within a
specified period of time. Furthermore,  any stock certificate denoting an equity
interest in us is required to bear a legend that states:  "This  certificate  of
stock is  transferable  only subject to the  provisions of section three hundred
three of the racing, pari-mutuel wagering and breeding law."

            In  addition,  any  stockholder  may be  required,  upon our written
demand,  to sell his,  her or its holdings in us, at a price to be fixed by law,
provided such demand is made  pursuant to the written  direction of the New York
State Racing and Wagering Board.

            RACING RIGHTS.  As a licensed  harness horse  racetrack,  Monticello
Raceway is entitled to hold one or more harness horse race meetings each year on
any day  except  December  25,  when  live  racing  in the  State of New York is
prohibited.  Of the  amounts  wagered on its live races,  Monticello  Raceway is
allowed to retain between  14%-20% of Regular Bets (a single bet or wager on one
horse),  between  16%-22% of Multiple  Bets (a single bet or wager on two horses
such as an "exacta"),  between  20%-30% of Exotic Bets (a single bet or wager on
three or more horses such as a "trifecta"), between 20%-36% of Super Exotic Bets
(a  single  bet or wager on six or more  horses  such as a "pick  six")  and the
breaks  (the  amount  wagered  at races  where no one  places  a  winning  bet).
Monticello  Raceway  normally  must pay a tax of 1/2 of 1% of the total pool and
must  dedicate  6%-15% of the pool to  purses,  depending  on the type of wager.
Additional  amounts may be required to be allocated to purses as provided in its
agreement with the track's representative horsemen's association.

            BOND POSTING.  Each year,  Monticello Raceway Management is required
to post a bond  with the New York  State  Comptroller's  office,  not to  exceed
$250,000, to ensure that all:

            o    books  and  records  are  maintained  and  reports  are made as
                 required by the Racing,  Pari-mutuel  Wagering and Breeding Law
                 of 1983;

            o    taxes imposed by the Racing,  Pari-mutuel Wagering and Breeding
                 Law of 1983 are paid;

            o    distributions  are made upon  presentation of winning  tickets;
                 and

            o    provisions of the Racing, Pari-mutuel Wagering and Breeding Law
                 of 1983 and the rules  and  regulations  prescribed  by the New
                 York  State  Racing  and  Wagering  Board  and  the  state  tax
                 commission are followed.

Should  Monticello  Raceway  Management  fail to post  such a bond,  it would be
subject to fines or the suspension of its racing license.

            BOOKS  AND  RECORDS.   Throughout  the  year,   Monticello   Raceway
Management  must  maintain  its books and  records  so as to  clearly  show by a
separate record the total amount of money  contributed to every pari-mutuel pool
including  daily double pools,  if any.  Furthermore,  the state tax  commission
must,  at all  reasonable  times,  be given  access  to the  Monticello  Raceway
Management's  books and records for the purpose of  examining  and  checking the
same and  ascertaining  whether or not the proper  amount or amounts  due to the
State of New York are being paid.

            LICENSES FOR SIMULCAST FACILITIES. A separate license is required in
order for  Monticello  Raceway to display and accept  pari-mutuel  wagers on the
simulcast of horse races from outside  racetracks.  To obtain such a license, an
applicant  is  required  to submit a "plan of  operation"  to the New York State
Racing and Wagering Board containing:

            o    a feasibility  study showing the revenue earnings expected from
                 the simulcast  facility and the expected  costs to operate such
                 facility;

                                       7





            o    the security measures to be used to protect the transmission of
                 wagering data; and

            o    a description  of the  management  groups  responsible  for the
                 operation of the simulcast facility.

            Even though an  applicant's  plan may be found  acceptable,  the New
York State  Racing and  Wagering  Board  still has the right to deny a simulcast
license if it determines that simulcast  wagering may cause any reduction of the
total  number  of racing  events  conducted  on an annual or daily  basis at the
receiving  track,  or if the receiving  track applying for such license fails to
enter into a written agreement with the sending track.

            IN-STATE SIMULCASTING  RESTRICTIONS.  Absent special permission from
the New York State  Racing  and  Wagering  Board,  Monticello  Raceway  may only
transmit  its signal to a receiving  track in New York so long as the  receiving
track is not also  conducting a harness horse race meeting  during the same time
and the signal from Monticello Raceway has been made available to all authorized
receiving  tracks in the State of New York.  The amount  retained by  Monticello
Raceway from the total  deposits in pools wagered on in-state  simulcast  racing
events must be equal to the  retained  percentages  applicable  to the  in-state
sending  track.  Of  this  retained  amount,  generally  50% is  required  to be
dedicated to increasing local purses.

            SIMULCASTING  OF   OUT-OF-STATE   THOROUGHBRED   RACES.   Monticello
Raceway's ability to simulcast thoroughbred races from racetracks outside of the
State of New York is subject to it reaching an agreement with its representative
horsemen's association. How much of these wagers that Monticello Raceway is able
to retain  depends on how it collects the bets.  If wagers from an  out-of-state
race are combined  with those placed in other states in order to create a single
uniform  pari-mutuel  pool,  the  percentage  of wagers  collected by Monticello
Raceway that it can retain is subject to the laws of the  jurisdiction  in which
the sending track is located.  If,  however,  pools are only being shared within
the State of New York,  Monticello  Raceway  is allowed to retain 18% of Regular
Bets, 21% of Multiple Bets, 26% of Exotic Bets, 27% of Super Exotic Bets and the
breaks. Of the amounts retained,  approximately  1%-3.25% must be paid to either
state taxing authorities or non-profit  organizations,  depending on the day the
race is held  and the  type of  wager  and 50%  normally  must be  dedicated  to
racetrack purses.

            SIMULCASTING OF RACES RUN BY OUT-OF-STATE HARNESS TRACKS. Subject to
a  written  agreement  with  Monticello  Raceway's   representative   horsemen's
association,  Monticello  Raceway may accept wagers and display the signal of up
to five out-of-state harness horse racetracks.  However,  Monticello Raceway may
not accept wagers or display the simulcast  signal from an out-of-state  harness
horse  racetrack  on more than four days in any week  unless in the  immediately
preceding  calendar  month an average of four or more live racing  programs  per
week were conducted,  nor may Monticello Raceway accept wagers on more than five
days in any week unless in the immediately  preceding  calendar month an average
of five or more  live  harness  racing  programs  per  week  were  conducted  at
Monticello  Raceway. If wagers from a race at an out-of-state track are combined
with  those  placed  in  other  states  in order  to  create  a  single  uniform
pari-mutuel pool, the percentage of wagers collected by Monticello  Raceway that
it can retain is subject to the laws of the  jurisdiction  in which the  sending
track is located.  If, however,  pools are only being shared within the State of
New York,  Monticello  Raceway is allowed to retain 19% of Regular Bets,  21% of
Multiple  Bets,  27% of Exotic  Bets,  36% of Super  Exotic Bets and the breaks.
Distribution  of the amounts  retained by Monticello  Raceway must be consistent
with how retained wagers are distributed from its live events.

MIGHTY M GAMING AT MONTICELLO RACEWAY

            Monticello  Raceway  Management  currently  operates a 45,000 square
foot VGM facility called Mighty M Gaming at Monticello Raceway. On July 7, 2004,
the Appellate  Division of the Supreme Court of the State of New York ruled that
the legislation  permitting  state sponsored VGM operations is  unconstitutional
(which  decision has been stayed  pending  appeal).  The basis for the appellate
court's  holding is the fact that the  legislation  requires that certain of the
net revenues from VGMs be dedicated to breeding funds and for enhancing  purses,
and that  requirement  violates a  constitutional  mandate  that such  moneys be
applied  exclusively to, or in aid or support of,  education in the State of New
York. On January 14, 2004,  under the existing  legislation,  the New York State
Lottery  issued  Monticello  Raceway a temporary  license to install up to 1,800

                                       8





VGMs  at  Monticello  Raceway,   which  license  will,  assuming  the  continued
effectiveness of the existing legislation, become permanent following completion
of a  thorough  background  check  of  Monticello  Raceway  Management  and  its
principals.  VGMs are  electronic  gaming  devices  that  allow  patrons to play
electronic  versions  of  various  lottery  games of chance  and are  similar in
appearance and feel to traditional  slot machines.  Each of the VGMs is owned by
the State of New York and, by statute, approximately 20% of the net revenue from
each machine is to be distributed to us through  Monticello  Raceway  Management
and 9% to its  horsemen  breeders'  associations,  including  funds  to  provide
gradually  increasing  purses for the  horsemen  and for a breeding  fund,  thus
improving  the quality of racing at the track.  However,  it should be noted the
allocations   to  purses  and  the   breeding   fund  were   determined   to  be
unconstitutional as described above.

            During the past decade,  the  operation  of video gaming  devices at
racetracks  in  several  states  outside  New York has  enhanced  state  lottery
revenues and  improved  the  racetrack's  economic  performance.  To finance the
improvements necessary for the introduction of these VGMs at Monticello Raceway,
in  February  2004,  we  completed  a $30 million  private  placement,  and have
incurred approximately $27 million of construction and start-up expenses. Mighty
M Gaming at Monticello Raceway began operations on June 30, 2004.

            BACKGROUND.  On October 31,  2001,  the State of New York  enacted a
bill  designating  seven  racetracks  across  the  state,  including  Monticello
Raceway,  as approved  locations  for the New York State  Lottery to install and
operate VGMs as agents for the New York State  Lottery.  However,  as originally
drafted,  none of the racetracks  authorized to participate in the program found
the terms  conducive to the level of investment  required.  On May 15, 2003, New
York State enacted further  legislation to enhance the incentives for racetracks
to  participate  in the program by extending  the initial term of the program to
10-years  from the date  that the  first  facility  is  placed  in  service  and
permitting year-round operations.

            In January 2005, as part of his 2005-2006 budget,  New York Governor
George Pataki proposed resubmitting  legislation to build eight gambling parlors
with VGMs,  five of which  would be  located  in New York City,  with the others
scattered around the state and determined by applications to state  authorities.
Under the proposal,  private  entities,  as well as OTB tele-theater  facilities
that are willing to pay a fee and keep no more than 20% of wagers  after  paying
lottery winners, would be allowed to competitively bid for a VGM franchise.  The
proposal also calls for a state gaming commission  oversee the operations of all
VGM facilities in New York State.

            VGM  activities in the State of New York are  presently  overseen by
the  Division  of the  Lottery of the State of New York and subject to the rules
and  regulations  governing  VGMs issued under and pursuant to the  authority of
Part C, Chapter 383,  Laws of New York 2001 as amended by Chapter 85 of the Laws
of New York  2002,  as  amended by Chapter 63 of the Laws of New York 2003 which
include the following requirements:

            VIDEO GAMING AGENT  LICENSE.  The law governing VGMs requires us and
Monticello Raceway  Management to apply for and obtain a VGM agent license.  The
Division has the right to deny a permanent  VGM agent license to an applicant on
the basis of any of the following:

            o    failure to prove by clear and  convincing  evidence  that it is
                 suitable to be licensed;

            o    failure to provide  information,  documentation and assurances,
                 or to reveal any fact  material to  suitability,  or  supplying
                 material information which is untrue or misleading;

            o    conviction of an applicant, or of any principal thereof, of any
                 felony offense or serious misdemeanor;

            o    a determination that an applicant's prior activities,  criminal
                 record,  if any, or reputation,  habits and associations pose a
                 threat to the effective regulation of VGMs or create or enhance
                 the  chances  of  unfair or  illegal  practices,  methods,  and
                 activities in the conduct of VGMs;

            o    current  prosecution or pending charges in any  jurisdiction of
                 the  applicant or of any person who is required to be qualified
                 under  these  regulations  as  a  condition  of a  VGM  agent's
                 licensure,  for any of the offenses enumerated above; provided,
                 however,  that at the  request of either the  applicant  or the
                 person charged, the Division of the Lottery of the State of New
                 York shall  defer  decision  upon such  application  during the
                 pendency of such charge;

                                       9





            o    pursuit of economic gain in an  occupational  manner or context
                 which is in violation of the criminal or civil public  policies
                 of New York State,  if such pursuit creates an appearance of or
                 a reasonable  belief that the  participation  of such person in
                 VGM  operations  would be inimical  to the  policies of the law
                 governing VGMs or to gaming in New York State; and

            o    commission  of any  act or  acts  which  would  constitute  any
                 offense above,  even if such conduct has not been or may not be
                 prosecuted  under the  criminal  laws of New York  State or any
                 other  jurisdiction or has been  prosecuted  under the criminal
                 laws of New  York  State  or any  other  jurisdiction  and such
                 prosecution  has been  terminated in a manner other than with a
                 conviction.

            Certain of our and  Monticello  Raceway  Management's  employees and
stockholders  are also subject to New York State licensing  requirements.  These
individuals  can be denied a license or have theirs  revoked  should they commit
any of the acts described above which would jeopardize our or Monticello Raceway
Management's license.

            BONDING OF VGM AGENTS.  The  Division of the Lottery of the State of
New York requires a bond or other surety  agreement to be obtained by Monticello
Raceway  Management  prior to conducting  VGM  operations.  It must cover,  at a
minimum,  71% of the total of our days of  estimated  average  daily  sales,  be
issued by a surety company or bank  authorized to transact  business in New York
and  approved  by the New York  State  Insurance  Department  or New York  State
Banking Department as to solvency and  responsibility,  and be in such amount as
the Division of the Lottery of the State of New York may determine,  based on an
established  formula,  so as to avoid monetary loss to New York State because of
Monticello  Raceway  Management's  activities  or  those of a third  party.  The
Division  of the Lottery of the State of New York and the State of New York must
be named as beneficiaries.

            FINANCIAL  STABILITY  OF  VGM  AGENTS.  We  and  Monticello  Raceway
Management  must  assure  the  financial  integrity  of  VGM  operations  by the
maintenance of VGM bankroll, or equivalent provisions, adequate to pay prizes to
VGM patrons when due.  Currently,  Monticello  Raceway Management is required to
maintain a daily VGM  bankroll of at least  $500.00 per machine  plus the single
highest available progressive or non-progressive jackpot at the facility.

            CONTINUING  ASSESSMENT  OF  FINANCIAL  CONDITION.   Neither  we  nor
Monticello  Raceway  Management  may  consummate  a material  debt  transaction,
guarantee,  co-sign or assume the debt of  another,  or encumber  facilities  to
secure the debts of another without,  the prior written approval of the Division
of the Lottery of the State of New York.  Such approval may not be  unreasonably
withheld.

            FAILURE TO  DEMONSTRATE  FINANCIAL  STABILITY.  If we or  Monticello
Raceway  Management  fail to  demonstrate  financial  stability at any time, the
Division  of the  Lottery  of the State of New York may take  such  action as is
necessary to fulfill the purposes of the law  governing  VGMs and to protect the
public interest, including, but not limited to:

            o    issuing conditional licenses, approvals or determinations;

            o    establishing an appropriate cure period;

            o    imposing  reporting  requirements  in excess of those otherwise
                 mandated by these regulations;

            o    placing  such  restrictions  on the  transfer  of  cash  or the
                 assumption  of  liabilities  as is necessary  to ensure  future
                 compliance with the financial stability standards;

            o    requiring  the  maintenance  of  reasonable   reserves  or  the
                 establishment  of dedicated or trust  accounts to ensure future
                 compliance with the financial stability standards;

            o    requiring a special audit, with a plan approved by the Division
                 of the  Lottery  of the State of New York and  conducted  by an
                 independent accounting firm at our expense;

                                       10





            o    charging  interest on any  outstanding  amount of sales due the
                 Division of the Lottery of the State of New York; or

            o    suspending, revoking or denying licensure.

            SUBMISSION AND REVIEW OF THE VGM SYSTEMS OF INTERNAL  CONTROL.  As a
licensed VGM agent, Monticello Raceway Management is required to create a system
of internal operating controls to ensure all of the following:

            o    that our assets and the assets of Monticello Raceway Management
                 and the  Division  of the  Lottery of the State of New York are
                 safeguarded;

            o    that  our  financial  records  and  the  financial  records  of
                 Monticello Raceway Management are accurate and reliable;

            o    that  our   transactions   and  those  of  Monticello   Raceway
                 Management's operations are performed only as authorized by the
                 law governing  VGMs and the rules and  regulations  promulgated
                 thereunder;

            o    that accountability for assets is maintained in accordance with
                 generally accepted accounting principles;

            o    that only authorized personnel have access to assets;

            o    that recorded accountability for assets is compared with actual
                 assets at reasonable  intervals and appropriate action is taken
                 with respect to any discrepancies;

            o    that  the   functions,   duties,   and   responsibilities   are
                 appropriately segregated and performed in accordance with sound
                 practices by competent,  qualified, licensed personnel and that
                 no employee of ours or  Monticello  Raceway  Management is in a
                 position to perpetuate and conceal errors or  irregularities in
                 the normal course of the employee's duties;

            o    that gaming is conducted with integrity and in accordance  with
                 the  law   governing   VGMs  and  the  rules  and   regulations
                 promulgated thereunder; and

            o    that we and  Monticello  Raceway  Management  comply  with  all
                 federal,  state,  and  local  tax laws,  codes,  and  reporting
                 requirements.

            Prior  to  commencing  operations,   Monticello  Raceway  Management
received  initial  approval from the Division of the Lottery of the State of New
York for proposed internal control processes for its video gaming operations.

            The Division of the Lottery of the State of New York may require, at
its option,  that we or Monticello  Raceway Management provide an annual report,
to be  included  in  our or  its  annual  financial  report,  of an  independent
certified  public  accountant  licensed  to  practice  in New  York,  that we or
Monticello  Raceway  Management  have,  in all  respects,  followed the approved
internal  control plan,  which report shall not, in case of a dispute between us
and Monticello  Raceway  Management and the Division of the Lottery of the State
of New York,  be binding  upon the  Division  of the Lottery of the State of New
York.

            CONDUCT OF BUSINESS WITH NON-GAMING VENDORS; AGENT RESPONSIBILITIES.
It is our responsibility and Monticello Raceway  Management's  responsibility to
ensure that all  qualifying  non-gaming  vendors with which  Monticello  Raceway
Management  seeks to conduct  business have first  obtained from the Division of
the Lottery of the State of New York a non-gaming vendor  identification  number
or, as necessary, a license.


                                       11


            NOTIFICATION OF ANTICIPATED OR ACTUAL CHANGES IN DIRECTORS, OFFICERS
OR EQUIVALENT  LICENSEES  VGM AGENTS AND HOLDING  COMPANIES.  We and  Monticello
Raceway  Management must  immediately  notify the Division of the Lottery of the
State of New York,  in  writing,  as soon as is  practicable,  of any changes or
proposed  changes in our or its board of  directors,  or of any officer or other
person  required to be licensed as a principal or key employee.  The Division of
the  Lottery of the State of New York will  undertake  any review of the license
necessitated by the change.

            NOTIFICATION  CONCERNING  CERTAIN NEW PRINCIPALS OF PUBLICLY  TRADED
HOLDING  COMPANIES.  We or Monticello Raceway Management must immediately notify
the  Division  of the  Lottery  of the  State of New York in  writing  if either
company becomes aware that, with regard to us, any person has acquired:

            o    5% or more of any class of equity securities;

            o    the ability to control us; or

            o    the ability to elect one or more directors.

            If we are served with any  Schedule  13D,  Schedule  13G or Form 13F
filing under the Securities Exchange Act of 1934, as amended, copies of any such
filing must be immediately submitted to the Division of the Lottery of the State
of New York by us.

MONTICELLO CASINO MANAGEMENT

            Monticello  Casino  Management  was formed for the stated purpose of
managing the  operations of a casino and related  gaming  activities on those 29
acres of land at the  Monticello  Raceway  site  that is the  subject  of a land
purchase option given to the Cayuga Nation of New York.

            GAMING FACILITY MANAGEMENT AGREEMENT.

            On April 3, 2003, Monticello Casino Management, the Cayuga Nation of
New York and the Cayuga Catskill Gaming  Authority,  an  instrumentality  of the
Cayuga Nation of New York formed to develop and conduct gaming operations signed
an initial form of gaming facility management  agreement.  Until approved by the
Chairman  of  the  National  Indian  Gaming  Commission,   the  Gaming  Facility
Management  Agreement is not in force.  In January,  we and the Cayuga Nation of
New York received a letter from the National Indian Gaming  Commission,  stating
that the Gaming Facility  Management  Agreement did not, in their view, meet all
federal   requirements,   and  setting  forth  particular  comments  on  various
provisions  in the  agreement  and other  matters.  In partial  response to this
letter,  in April we submitted a proposed  form of Amended and  Restated  Gaming
Facility Management  Agreement (the "Gaming Facility  Management  Agreement") to
the National Indian Gaming Commission for approval. Neither the Cayuga Nation of
New York nor the  Cayuga  Catskill  Gaming  Authority  has  approved  the Gaming
Facility Management  Agreement.  We intend to negotiate a form acceptable to the
National  Indian Gaming  Commission  before formal  re-submission  to the Cayuga
Nation of New York for its approval.  We expect, but cannot guarantee,  that the
Cayuga Nation of New York will approve the Gaming Facility Management Agreement.

            Under the currently proposed form of the Gaming Facility  Management
Agreement,  the Cayuga Catskill Gaming Authority will retain  Monticello  Casino
Management to manage all casino style gaming  activities,  other than  horserace
wagering and Class II gaming,  that may be conducted on the land for seven years
commencing  upon  the  National  Indian  Gaming  Commission's  approval  of  the
agreement.  Monticello  Casino  Management  would also be retained to manage all
lawful  commercial  activities  on the land  related to gaming such as automatic
teller machines, food service,  lodging and retail. At the same time, Monticello
Casino  Management  has agreed to assist the Cayuga  Catskill  Gaming  Authority
obtain  financing  for  the  gaming   enterprise  and  all  related   commercial
activities.  In exchange for these  services,  Monticello  Casino  Management is
entitled to receive a management  fee equal to 35% of the net  revenues  derived
from the operations it manages. However, under the Indian Gaming Regulatory Act,
any  management  fees in excess of 30% or terms  greater than five years require
justifications  acceptable to the National Indian Gaming  Commission.  We cannot
give any assurance that the National  Indian Gaming  Commission  will,  however,
approve this level of management fees or the length of the management  contract,
or that the National  Indian  Gaming  Commission  will not seek to combine other
compensation payable to us (for example under the development  agreement),  with
the stated management fee in evaluating our management compensation.

                                       12





            Under the Gaming Facility Management Agreement,  it is proposed that
Monticello  Casino Management would be entitled to pay itself its management fee
on or before the 25th day of each calendar  month.  However,  before  Monticello
Casino  Management  can pay  itself  its fee,  it must  first pay to the  Cayuga
Catskill Gaming Authority a minimum return of approximately  $517,000 per month.
These minimum  priority  payments are to be charged  against the Cayuga Catskill
Gaming Authority's  distribution of net revenues and, when there is insufficient
net  revenue  in a given  month to pay the  minimum  return,  Monticello  Casino
Management  is obligated to advance the funds  necessary to  compensate  for the
deficiency,  with the Cayuga Catskill Gaming  Authority  reimbursing  Monticello
Casino Management in the next succeeding month or months.  The minimum return is
required to be paid to the Cayuga Catskill  Gaming  Authority every month gaming
is  conducted,  including on a pro rata basis during those months when gaming is
conducted only for part of a month.

            While the terms of the proposed Gaming Facility Management Agreement
provide  Monticello  Casino Management with wide discretion as to the day-to-day
management of the gaming  facilities,  all major decisions or expenditures  must
first  be  approved  by a  management  business  board to be  comprised  of four
persons, two of whom are to be appointed by the Cayuga Catskill Gaming Authority
and the other two of whom are to be appointed by Monticello  Casino  Management.
In addition,  absent  approval from this management  business board,  Monticello
Casino  Management's  operational  expenses for any fiscal year must stay within
the budget that has been agreed to by the board for that fiscal  year.  Finally,
under the Gaming  Facility  Management  Agreement,  the Cayuga  Catskill  Gaming
Authority is entitled to select a  reasonable  number of  inspectors  that shall
have full  access,  without  notice,  to all  aspects of the gaming  enterprise,
including the daily  operations of the  enterprise,  and the right to verify the
daily gross revenues and all income of the gaming enterprise.  Monticello Casino
Management  is also required to have the gaming  enterprise's  books and records
audited  each  year by a  nationally  recognized  independent  certified  public
accounting firm with casino industry experience.

            In  carrying  out its  duties as  manager  of the  gaming  facility,
Monticello  Casino  Management  is required to provide the Cayuga  Nation of New
York and other recognized Native American tribes with certain  preferences.  For
instance,  under the Gaming Facility  Management  Agreement,  Monticello  Casino
Management must:

            o    give preference in recruiting, training and employment first to
                 qualified  members  of  the  Cayuga  Nation  of New  York,  and
                 secondly  to other  qualified  Native  Americans  and the local
                 community;

            o    provide  training  programs for members of the Cayuga Nation of
                 New York;

            o    use reasonable  commercial efforts to recruit and train members
                 of  the  Cayuga   Nation  of  New  York,   including,   without
                 limitation,  providing  job fairs  for  members  of the  Cayuga
                 Nation  of  New  York  and  clearly   specifying   in  all  job
                 advertisements  the preference for members of the Cayuga Nation
                 of New York; and

            o    in entering into contracts for the supply of goods and services
                 for the gaming  enterprise,  give preference first to qualified
                 members  of the  Cayuga  Nation  of  New  York,  and  qualified
                 business  entities  certified  by the  Cayuga  Catskill  Gaming
                 Authority or the Cayuga Nation of New York as being  controlled
                 by  members  of the  Cayuga  Nation of New York,  and second to
                 other  qualified  Native   Americans  and  qualified   business
                 entities  certified by the Cayuga Catskill Gaming  Authority to
                 be controlled by Native Americans and to the local community.


                                       13

            GOVERNMENT REGULATION

            INDIAN GAMING REGULATORY ACT. The terms and conditions of management
contracts for the operation of Native American-owned  casinos, and of all gaming
on Native  American land in the United States,  are subject to the Indian Gaming
Regulatory Act of 1988, as amended, which is administered by the National Indian
Gaming  Commission,  and also are subject to the provisions of statutes relating
to  contracts  with  Native  American  tribes,  which  are  administered  by the
Secretary of the Interior and the Bureau of Indian Affairs.  The regulations and
guidelines under which the National Indian Gaming Commission will administer the
Indian Gaming Regulatory Act are evolving.  The Indian Gaming Regulatory Act and
those  regulations and guidelines are subject to interpretation by the Secretary
of the Interior and the National Indian Gaming  Commission and may be subject to
judicial and legislative clarification or amendment.

            We or Monticello Casino Management may need to provide the Bureau of
Indian  Affairs  or  the  National  Indian  Gaming  Commission  with  background
information  on a variety of  people,  including  each  person  with  management
responsibility for the gaming facility management  agreement,  our directors and
the directors of Monticello Casino Management, and our ten largest shareholders.
Background investigations of others may also be required.

            The Indian  Gaming  Regulatory  Act of 1988,  as amended,  currently
requires the National Indian Gaming Commission to approve  management  contracts
and certain  collateral  agreements for Native  American  casinos.  The National
Indian Gaming  Commission  will review  Monticello  Casino  Management's  gaming
facility management  contract and collateral  agreements for compliance with the
Indian  Gaming  Regulatory  Act,  and  approve  or reject  the  gaming  facility
management  contract and any other of the collateral  agreements  constituting a
management contract.

            The  National  Indian  Gaming  Commission  has broad  discretion  to
approve or not approve a  management  contract and will not approve a management
contract if, among other things,  any person with a direct or indirect financial
interest in a management contract:

            o    is an elected member of the Native American  tribal  government
                 that is a party to the management contract;

            o    has been or is convicted of a felony or any misdemeanor  gaming
                 offense;

            o    has   knowingly  and  willfully   provided   materially   false
                 information  to the National  Indian  Gaming  Commission or the
                 tribe;

            o    has refused to respond to questions  from the  National  Indian
                 Gaming Commission; or

            o    is a person whose prior activities, criminal record, if any, or
                 reputation,  habits,  and  associations  pose a  threat  to the
                 public  interest or to the effective  regulation and control of
                 gaming, or create or enhance the dangers of unsuitable, unfair,
                 or illegal practices, methods, and activities in the conduct of
                 gaming or the  carrying on of related  business  and  financial
                 arrangements.

            In addition,  the National Indian Gaming Commission will not approve
a  management  contract  if the  management  company or any of its  agents  have
attempted  to unduly  influence  any  decision  or process of tribal  government
relating to gaming,  or if the management  company has  materially  breached the
terms of the management contract or the tribe's gaming ordinance,  or a trustee,
exercising due diligence, would not approve such management contract.

            A management contract can be approved only after the National Indian
Gaming  Commission  determines that the contract  provides,  among other things,
for:

            o    adequate   accounting   procedures  and  verifiable   financial
                 reports, which must be furnished to the tribe;

            o    tribal access to the daily operations of the gaming enterprise,
                 including the right to verify daily gross revenues and income;

            o    minimum  guaranteed  payments  to the  tribe,  which  must have
                 priority over the  retirement of development  and  construction
                 costs;

            o    a ceiling on the repayment of such development and construction
                 costs; and

                                       14



            o    a contract term not exceeding  five years and a management  fee
                 not exceeding 30% of profits; provided that the National Indian
                 Gaming  Commission  may  approve  up to a seven year term and a
                 management  fee not to exceed 40% of  profits  if the  National
                 Indian  Gaming   Commission  is  satisfied   that  the  capital
                 investment  required,   the  risk  exposure,   and  the  income
                 projections  for the  particular  gaming  activity  justify the
                 larger profit allocation and longer term.

            The Indian Gaming  Regulatory  Act of 1988, as amended,  established
three  separate  classes  of tribal  gaming -- Class I, Class II, and Class III.
Class I gaming  includes  all  traditional  or social games played by a tribe in
connection with celebrations or ceremonies.  Class II gaming includes games such
as bingo,  pull-tabs,  punch  boards,  instant bingo and card games that are not
played  against  the  house.  Class  III  gaming  includes  casino-style  gaming
including table games such as blackjack,  craps and roulette,  as well as gaming
machines such as slots, video poker, lotteries, and pari-mutuel wagering.

            Class I gaming on Native  American  lands is  within  the  exclusive
jurisdiction  of Native  American tribes and is not subject to the Indian Gaming
Regulatory  Act of 1988,  as  amended.  Class II gaming is  permitted  on Native
American lands if:

            o    the state in which the Native  American  lands lie permits such
                 gaming for any purpose by any person, organization or entity;

            o    the gaming is not otherwise  specifically  prohibited on Native
                 American lands by federal law;

            o    the gaming is conducted in accordance  with a tribal  ordinance
                 or resolution  which has been  approved by the National  Indian
                 Gaming Commission;

            o    a Native  American  tribe  has sole  proprietary  interest  and
                 responsibility for the conduct of gaming;

            o    the primary management officials and key employees are tribally
                 licensed; and

            o    several other requirements are met.

            Class  III  gaming is  permitted  on  Native  American  lands if the
conditions applicable to Class II gaming are met and, in addition, the gaming is
conducted in  conformance  with the terms of a  tribal-state  compact (a written
agreement  between the tribal  government and the government of the state within
whose boundaries the tribe's lands lie).

            TRIBAL-STATE  COMPACTS. The Indian Gaming Regulatory Act of 1988, as
amended,  requires states to negotiate in good faith with Native American tribes
that seek to enter  into  tribal-state  compacts  for the  conduct  of Class III
gaming. Such tribal-state  compacts may include provisions for the allocation of
criminal and civil jurisdiction  between the state and the Native American tribe
necessary  for the  enforcement  of such laws and  regulations,  taxation by the
Native  American  tribe of gaming  activities  in  amounts  comparable  to those
amounts assessed by the state for comparable activities,  remedies for breach of
compacts,  standards for the operation of gaming and  maintenance  of the gaming
facility,  including  licensing and any other subjects that are directly related
to the operation of gaming activities.  While the terms of tribal-state compacts
vary from state to state,  compacts  within  one state tend to be  substantially
similar.  Tribal-state  compacts  usually specify the types of permitted  games,
establish technical standards for gaming, set maximum and minimum machine payout
percentages,   entitle  the  state  to  inspect  casinos,   require   background
investigations  and  licensing of casino  employees and may require the tribe to
pay  a  portion  of  the  state's  expenses  for  establishing  and  maintaining
regulatory agencies.  Some tribal-state compacts are for set terms, while others
are for indefinite duration.

            Our jointly developed Native American casino resorts would therefore
be subject to the requirements  and  restrictions  contained in the compacts the
Cayuga  Nation of New York and the Seneca  Cayuga  Tribe of Oklahoma are able to
reach  with the  State of New York.  An  outline  of the  basic  terms for these
compacts is set forth in each of the  Agreement of  Compromise  and  Settlement,
dated as of November 17, 2004,  between the Cayuga Indian Nation of New York and
the State of New York and the  Agreement of  Compromise  and  Settlement,  dated
November 12, 2004,  between the Seneca Cayuga Tribe of Oklahoma and the State of
New York. Pursuant to each of these settlement agreements, the State of New York
agreed to separately  enter into a Class III gaming compact for the  development

                                       15





of a tribal  casino in the Town of Thompson in  Sullivan  County,  New York with
each of the Cayuga  Nation of New York and the Seneca  Cayuga  Tribe of Oklahoma
that will permit the  operation of slot  machines,  but not VGMs,  shall have an
initial term of 14 years, with an automatic seven year renewal and shall provide
each tribe, along with certain other Native American tribes, the exclusive right
to operate slot machines in the counties of Bronx, Delaware,  Greene, Kings, New
York,  Orange,  Queens,  Richmond,  Rockland,  Sullivan,  Ulster and Westchester
(which includes all of New York City). Under the proposed compacts,  each of the
Cayuga  Nation  of New York  and the  Seneca  Cayuga  Tribe  of  Oklahoma  shall
contribute  20% of its slot  machine net revenue to the State of New York during
the  first  four  years  of  operation,   with  such  contribution  subsequently
increasing  to 25% and each  tribe must  commence  gaming  operations  within 18
months of receiving all requisite  state and federal  approvals.  Finally,  each
tribe agreed to collect and remit to the State of New York,  all state and local
taxes in  connection  with all sales made by vendors  with respect to the gaming
facility of alcoholic beverages, cigarettes, tobacco products, gas and all other
personal  property  and  services  sold  to  non  members  of the  tribe.  These
settlement  agreements,  however, do not become effective until the enactment of
federal and state  legislation and tribal  resolutions  that formally  implement
their terms.

            With respect to the rest of the  provisions  of any Class III gaming
compact  between the State of New York and each of the Cayuga Nation of New York
and the Seneca  Cayuga  Tribe of  Oklahoma,  as State of New York is expected to
prefer that the terms of its  compacts  with Native  American  tribes  evolve on
substantially similar terms, we believe that such terms will be similar to those
in the compact that governs the  operation  of the Seneca  Niagara  Falls Casino
between the Seneca Nation of Indians and the State of New York. The following is
a summary of certain  terms of the compact  between the Seneca Nation of Indians
and the State of New York, dated April 12, 2002:

            o    The  Seneca  Nation of Indians is  specifically  authorized  to
                 conduct  baccarat,  bang,  beat the  dealer,  best poker  hand,
                 blackjack,  Caribbean stud poker,  chuck-a-luck,  craps, gaming
                 devices,   hazard,  joker  seven,  keno,  let  it  ride  poker,
                 minibaccarat,  pai gow poker, red dog, roulette,  sic bo, super
                 pan,  under and over seven,  wheel games,  casino war,  Spanish
                 blackjack, multiple action blackjack and three card poker.

            o    All gaming employees must obtain and maintain a gaming employee
                 license issued by the Seneca Nation of Indians.

            o    All non-gaming  employees must obtain and maintain a non-gaming
                 employee license issued by the Seneca Nation of Indians.

            o    Any  enterprise  or  individual  providing  gaming  services or
                 gaming equipment to the Seneca Nation of Indians is required to
                 hold a valid,  current gaming enterprise  license issued by the
                 Seneca Nation of Indians.

            o    Upon  request,  the Seneca  Nation of Indians  is  required  to
                 submit to the State of New York copies of all reports,  letters
                 and other documents relating to its Class III gaming activities
                 filed with the National Indian Gaming Commission.

            o    Each year,  the Seneca  Nation of Indians is required to submit
                 audited financial statements to the State of New York.

            o    The Seneca  Nation of Indians must  reimburse  the State of New
                 York for certain of its costs  associated with the oversight of
                 the compact.

            o    The Seneca  Nation of Indians  waives any defense  which it may
                 have by virtue of sovereign immunity with respect to any action
                 brought  in  United  States   District   Court  to  enforce  an
                 arbitration award under the compact.


                                       16



            In addition to the Indian Gaming Regulatory Act of 1988, as amended,
tribally-owned gaming facilities on Native American land are subject to a number
of other federal  statutes.  The operation of gaming on Native  American land is
dependent  upon  whether  the law of the  state in which the  casino is  located
permits gaming by non-Native American entities, which may change over time.

            Title 25,  Section  81 of the United  States  Code  states  that "no
agreement  or contract  with an Indian tribe that  encumbers  Indian lands for a
period of 7 or more years shall be valid unless that agreement or contract bears
the approval of the Secretary of the Interior or a designee of the Secretary."

MONTICELLO RACEWAY DEVELOPMENT

            Monticello  Raceway  Development  was  formed  for  the  purpose  of
developing and constructing a casino, a raceway, lodging facilities, and retail,
entertainment and amusement  facilities on 232 acres of land in Monticello,  New
York that are now owned by Monticello Raceway Management.

            GAMING FACILITY DEVELOPMENT AND CONSTRUCTION AGREEMENT.

            On April 3, 2003,  Monticello  Raceway  Development  entered  into a
gaming facility development and construction  agreement with the Cayuga Catskill
Gaming  Authority  and the  Cayuga  Nation  of New York  (the  "Gaming  Facility
Development and Construction Agreement"),  pursuant to which the Cayuga Catskill
Gaming Authority granted Monticello  Raceway  Development the exclusive right to
design, engineer, construct, furnish and develop the Cayuga Catskill Resort, and
Monticello Raceway  Development agreed to help arrange financing of the project.
In exchange for these services,  the Cayuga Catskill Gaming  Authority agreed to
pay Monticello  Raceway  Development a development  fee equal to 5% of the first
$505 million of the project's  costs,  payable  monthly as the project costs are
incurred.  However,  the Cayuga Catskill Gaming  Authority is entitled to retain
10% of such  development  fees until the  project is 50%  completed  and then 5%
until the project is completed.  On the  completion  date,  the Cayuga  Catskill
Gaming  Authority  is  required  to pay  Monticello  Raceway  Development  these
retained fees.

            Similar to the Gaming Facility Management Agreement among Monticello
Casino Management,  the Cayuga Nation of New York and the Cayuga Catskill Gaming
Authority,  in the execution of its duties under the Gaming Facility Development
and  Construction  Agreement,  Monticello  Raceway  Development  must first seek
approval  from a  development  business  board  before  any major  decisions  or
unapproved material  expenditures are made. The development business board shall
be  comprised  of four  persons,  two of whom are to be  appointed by the Cayuga
Catskill  Gaming  Authority  and the  other two of whom are to be  appointed  by
Monticello  Raceway  Development.  In addition,  absent prior  approval from the
development  business board,  Monticello Raceway Development must operate within
the objectives,  schedule  requirements,  design criteria,  space  requirements,
special  equipment,  design  requirements  and budget  that is  approved  by the
development  business board before the  commencement of development  activities.
Finally,  similar to the covenants of the Gaming Facility Management  Agreement,
the Gaming Facility  Development and  Construction  Agreement  provides that any
general  contractor  hired  by  Monticello  Raceway  Development  shall  use its
reasonable best efforts to give, and to cause  subcontractors  to give, a hiring
preference to qualified members of the Cayuga Nation of New York.

            In addition,  we,  Catskill  Development,  the Cayuga  Nation of New
York,  the  Cayuga  Catskill  Gaming  Authority,  Robert  A.  Berman,  our chief
executive  officer,  a member of our board of directors and our former chairman,
and Morad  Tahbaz,  Catskill  Development's  and our  president  and a member of
Catskill  Development's  and our board of  directors,  are  parties  to a letter
agreement, dated as of April 3, 2003, as amended, pursuant to which we agreed to
fund the Cayuga Catskill Gaming  Authority's  purchase of those 29 acres of land
subject to a land purchase  agreement between  Monticello Raceway Management and
the Cayuga Nation of New York and the development  costs of building a Class III
gaming enterprise on such land. We are to be reimbursed for up to $10 million of
these advances from any third party construction financing that is received and,
to the extent that such third party financing or $10 million cap is insufficient
to fully reimburse us, from  distributions  made to Monticello Casino Management
under the Gaming Facility Management Agreement.

            Under this letter  agreement,  we, Catskill  Development,  Robert A.
Berman and Morad Tahbaz,  together as a group,  on the one hand,  and the Cayuga
Nation of New York, on the other hand,  also agreed that for 10 years,  each may
participate in the development or operation by the other of:

o     one or more hotels, motels or other similar facilities providing overnight
      accommodations   including   ancillary  beverage,   food,   entertainment,
      commercial and or retail  services within a 15 mile radius of the 29 acres
      to be  acquired by the Cayuga  Nation of New York under the Land  Purchase
      Agreement; and
o     any other  entertainment,  sports and/or retail  facility  within a 5 mile
      radius of those 29 acres of land.

            In each  case,  the  non-developing  party  will  have the  right to
purchase up to 33.33% of the equity in the facility  being  developed,  with the
purchase  price  being a pro rata share of the costs of such  facility  less any
amount  advanced  by any lender for any  mortgage  or other loan  secured by the
facility's  property or cash flow. The purchase price for this acquired interest
must be paid in cash at the time the  interest is actually  purchased.  However,
with respect to any acquired interest purchased by the Cayuga Nation of New York
prior to the second anniversary of the primary gaming facility's public opening,
the Cayuga Nation of New York may pay for its acquired interest by delivery of a
non-recourse promissory note, payable over five years, with interest accruing on
the unpaid  principal amount at the then existing prime rate. These parties have
further agreed that the first hotel facility to be built that is governed by the
letter  agreement  will  be  deemed  to be  the  gaming  enterprise's  preferred
provider,  in that the  gaming  enterprise  shall  be  obligated  to  refer  its
customers to that hotel.

                                       17



            In  consideration   of  the  agreements   contained  in  the  letter
agreement,  each of the  parties  has  agreed  that for a period  ending  on the
earliest of:

o     approval by the Bureau of Indian  Affairs of the  application  to transfer
      the 29 acres of land to the  United  States  of  America  in trust for the
      Cayuga  Nation of New York and to use such land for Class II and Class III
      gaming and by the National Indian Gaming Commission of the Gaming Facility
      Management Agreement;
o     the termination of the Gaming  Facility  Management  Agreement  because of
      Monticello Casino Management's material breach of its obligations;
o     the  termination  of the  Gaming  Facility  Development  and  Construction
      Agreement because of Monticello Raceway  Development's  material breach of
      its obligations; and
o     June 30, 2005,

each party,  respectively,  will refrain from having  discussions  regarding the
development of another Class III gaming facility in Sullivan County, New York.


            GOVERNMENT REGULATION

            Under the Indian Gaming Regulatory Act of 1988,  regulated gaming by
a Native  American tribe is permitted only if the casino is located on an Indian
reservation  or land  held by the  United  States in trust  for the  nation  (or
subject to similar  restrictions on transfer),  and only if that tribe exercises
governmental  powers over the casino  site.  That same Act,  however,  generally
prohibits  Native American  casinos on land transferred into trust after October
17, 1988.  Two  exceptions  to this trust land  limitation  are available to the
Cayuga  Nation of New York and the Seneca  Cayuga Tribe of  Oklahoma.  The first
exception  permits  gaming on land taken into trust  after  October 17, 1998 if,
after  consultation with the tribe and applicable state,  local and other nearby
tribal  officials,  the  Secretary  of the  Interior  determines  that a  gaming
establishment on the land proposed for transfer would be in the best interest of
the tribe and its  members,  and would  not be  detrimental  to the  surrounding
community,  provided that the Governor of the  applicable  state must concur.  A
second  exception  to the trust land  restriction  on gaming is pursuant to land
taken into trust as part of a settlement of a land claim.

OTHER BUSINESS ACTIVITIES AND PAST DEVELOPMENTS

            THE JUBILATION CASINO VESSEL

            On July 8, 1999, we, through our subsidiary,  Jubilation  Lakeshore,
Inc.,  contributed our inactive gaming vessel,  Bayou Caddy's  Jubilation Casino
("Jubilation"),  to Casino Ventures, LLC, in exchange for $150,000 in cash and a
note of approximately $1.4 million,  plus a non-managing  membership interest in
Casino Ventures.

            Effective June 30, 2003, we and PDS Special Situations, LLC ("PDS"),
a  Nevada  limited  liability  company,  entered  into an  agreement  for PDS to
purchase our membership  interest in Casino Ventures,  LLC and all of our former
debt agreements.  We sold 75% of our issued and outstanding  equity interests in
Casino Ventures,  LLC in exchange for $10,000, with the remaining interest still
owned by us,  which is 18%.  The 18% will  then be sold and  transferred  for an
additional  $40,000 upon the procurement by PDS from the other interest holders'
membership  interests which  aggregates 7%. We recorded $10,000 of proceeds from
the sale of our interest and will record the  additional  $40,000  proceeds upon
the receipt of the final  payment since all assets and  liabilities  relating to
the project were wrote off or encumbered in a prior period. In December 2002, we
recognized  a $3 million  impairment  loss  reflecting  a  casualty  loss on the
Jubilation vessel. Final payment was still outstanding at December 31, 2004.

            LITIGATION CONCERNING RELATIONS WITH THE ST. REGIS MOHAWK TRIBE

            On January 12, 2004,  in order to better focus on the  operations at
Monticello Raceway and business  arrangements with the Cayuga Nation of New York
and as a condition to the consolidation  transaction with Catskill  Development,
all interests of the plaintiffs,  including ours, with respect to the litigation
against  Caesars  Entertainment,  Inc that alleged  tortuous  interference  with
contract  and  business   relationships,   were  transferred  to  a  liquidating
litigation  trust  (the  "Litigation  Trust").  Two  members  of  our  board  of
directors, Paul A. deBary, and Joseph E. Bernstein, serve as co-trustees for the
Litigation Trust. For these services,  Messrs. deBary and Bernstein each receive
$60,000 per year and are  entitled to 1% and 4%,  respectively,  of any proceeds
that the Litigation  Trust receives from the ongoing  litigation,  or any future
litigation  that may be brought by the Litigation  Trust. In connection with the
organization of the trust, our common  stockholders of record immediately before
the merger closing (but following the redemption of the common stock held by The
Bryanston  Group and Beatrice  Tollman)  were  granted a 19.75%  interest in the
trust as a liquidating  dividend and we issued an irrevocable line of credit for
$2.5  million to the trust.  Pursuant to the terms of the  Declaration  of Trust
establishing the trust, in the event of a recovery in the litigation,  we are to
receive payments to reimburse us for prior  litigation  expenses of $7.5 million
and to  repay  any  draws  on the  line  of  credit.  After  such  payments  and
reimbursements  and the  payment  of all fees and  expenses  of the  trust,  any
remaining  amount  recovered  is to be  distributed  pro rata to the  Litigation
Trust's  beneficiaries.  Except  for  these  arrangements,  we have  no  further
interest  in, or  control  over,  the  related  litigation.  For the year  ended
December 31, 2004,  we released  approximately  $500,000 in draws on the line of
credit.  Due to the  unpredictable  nature  of the  litigation  and the  pending
motions  currently  under  review,  we  provided  for  valuation   allowance  of
approximately  $500,000  against the receivable  from the  Litigation  Trust and
recorded an appropriate  expense of  approximately  $500,000 for the year ending
December 31, 2004.

                                       18



COMPETITION

            MONTICELLO RACEWAY

            Generally,  Monticello  Raceway does not compete directly with other
harness  racing  tracks in New York  State  for live  racing  patrons.  However,
Monticello  Raceway  does face intense  competition  for  off-track  wagering at
numerous gaming sites within the State of New York and the  surrounding  region.
The inability to provide larger purses for the races at Monticello  Raceway is a
significant  limitation  on  its  ability  to  compete  for  off-track  wagering
revenues.


            MIGHTY M GAMING AT MONTICELLO RACEWAY

            The primary competition for Mighty M Gaming at Monticello Raceway is
expected to be from two racetracks located within the New York City metropolitan
area, Yonkers Raceway and Aqueduct Raceway. Both racetracks have announced plans
to proceed with the program and limited construction of facilities has commenced
at Aqueduct Raceway.  However,  the development  program for Yonkers Raceway has
yet to be finalized and construction at Aqueduct  Raceway was suspended  pending
the  resolution of certain legal issues.  In addition,  proposals have been made
for the implementation of a similar program in New Jersey, which would include a
facility at the Meadowlands Racetrack.

            In July 2004, Pennsylvania enacted a law legalizing the operation of
up to 61,000 slot machines at 14 locations  throughout the state. The holders of
horse  racing  licenses  in  Pennsylvania  may apply for 7 of the 14 licenses to
operate slot machines at their  racetracks  while the other 7 locations have yet
to be identified.  On January 25, 2005, in  anticipation of receiving one of the
licenses to initially  operate 3,000 slot  machines,  the Mohegan  Tribal Gaming
Authority acquired Pocono Downs Racetrack and five off-track wagering operations
for a total of $280  million  and  anticipated  licensing  fees of $50  million.
Pocono Downs Racetrack is located in Wilkes-Barre,  Pennsylvania,  approximately
75 miles to the southwest of Monticello.

            COMPETING CASINOS

            In April 2000,  the St. Regis Mohawk Tribe  announced  that they and
Caesars  Entertainment,  Inc.  plan to build and  manage a $500  million  tribal
casino and resort in the Catskills region of the State of New York. In May 2000,
Caesars  Entertainment,  Inc.  obtained an option to purchase  Kutsher's  Resort
Hotel and Country Club in Monticello,  New York as the site for this casino.  As
currently announced, Caesars Entertainment, Inc. plans on turning this facility,
located  approximately  5 miles from Monticello  Raceway,  into a 750 room hotel
with a 130,000  square foot casino,  15,000 square foot meeting  hall,  numerous
restaurants  and a luxury spa. On February 1, 2005,  the St.  Regis Mohawk Tribe
entered into an Agreement of Settlement and  Compromise to resolve  certain land
claims against the State of New York. In return, the State of New York agreed to
negotiate and enter into a mutually  satisfactory gaming compact (subject to the
review and approval of the Secretary of Interior of the United States) that will
authorize  the St. Regis Mohawk Tribe to operate a Class III gaming  facility at
Kutsher's  and to fully  support  all  regulatory  approvals  required  for such
facility.

            The  Stockbridge  Munsee  Band of  Mohicans,  currently  located  in
Wisconsin,  asserting  aboriginal  roots in New York State, has also applied for
approval  to develop a Native  American  casino in the  Catskills  region of the
State of New York. Their partner,  Trading Cove Associates,  Inc., developers of
the successful Mohegan Sun casino in Connecticut, has purchased an option on 300
acres to build a $600 million casino hotel and casino on a site  approximately 5
miles east of Monticello Raceway.

            In November 2004, the  Stockbridge  Munsee Band of Mohegans  entered
into an Agreement of Settlement  and  Compromise to resolve  certain land claims
against  the  State of New York.  In  return,  the  State of New York  agreed to
negotiate and enter into a mutually  satisfactory gaming compact (subject to the
review and approval of the Secretary of Interior of the United States) that will
authorize the Stockbridge  Munsee Band of Mohegans to operate a Class III gaming
facility in the Catskill  Region and to fully support all  regulatory  approvals
required for such facility.  Such parcel of land will be Indian Country under 18
U.S.C. ss.1151.

            In November, 2004, the Wisconsin Oneida entered into an Agreement of
Settlement  and  Compromise to resolve  certain land claims against the State of
New York. In return,  the State of New York agreed to negotiate and enter into a
mutually  satisfactory gaming compact (subject to the review and approval of the
Secretary of Interior of the United  States) that will  authorize  the Wisconsin
Oneidas to operate a Class III gaming  facility  in the  Catskill  Region and to
fully support all regulatory approvals required for such facility.

            Other New York based federally  recognized Native American tribes or
tribes with  historical  ties to New York have  expressed  interest in operating
casinos in the Catskills region of the State of New York, but none has submitted
applications. Two of these, the Oneida Nation of New York and the Seneca Nation,
have already been active in the  development  of casinos in Western New York. In
July  1993,  the  Oneida  Nation of New York  opened  "Turning  Stone," a casino
featuring 24-hour table gaming and electronic gaming machines with approximately
90,000 square feet of gaming space,  near  Syracuse,  New York. In October 1997,
the facility  expanded to include a hotel,  expanded gaming  facilities,  a golf

                                       19





course and a  convention  center.  Turning  Stone is  completing  an  additional
expansion  consisting of 50,000 square feet of gaming  space,  additional  hotel
rooms, additional golf courses and a water park. The Seneca Nation completed its
negotiations  with New York  State and,  on January 1, 2003,  opened a casino in
Niagara  Falls,  New York.  The casino offers full Las Vegas style gambling with
slot machines and table games.  Although the Oneida Nation and the Seneca Nation
have  expressed  interest in operating a casino in the  Catskills  region of the
State of New York and have been  actively  engaged  in  preliminary  development
work, neither has publicly identified a site,  submitted federal applications or
entered into a settlement agreement with the State of New York.

            In February 1992,  the  Mashantucket  Pequot Nation opened  Foxwoods
Resorts Casino, a casino hotel facility in Ledyard,  Connecticut (located in the
far eastern portion of such state), an approximately two and one-half hour drive
from New York City and an approximately two and one-half hour drive from Boston,
Massachusetts,  which currently offers 24-hour gaming and contains approximately
6,412  slot  machines,  350 table  games and over  1,400  rooms and  suites,  24
restaurants,  17 retails  stores,  entertainment  and a year-round  golf course.
Also, a high-speed ferry operates  seasonally between New York City and Foxwoods
Resort and Casino. The Mashantucket Pequot Nation has also announced plans for a
high-speed  train linking  Foxwoods Resort and Casino to the interstate  highway
and an airport outside Providence, Rhode Island.

            In October 1996, the Mohegan Nation opened the Mohegan Sun casino in
Uncasville,  Connecticut,  located 10 miles from Foxwoods Resort and Casino. The
Mohegan Sun casino has  approximately  6,100 slot  machines and 282 table games,
off-track  betting,  bingo, 32 food and beverage outlets,  and retail stores and
completed the first phase of an expansion project that included a 115,000 square
foot  casino,  a 10,000  seat  arena,  40 retail  shops,  dining  venues and two
additional  parking garages,  accommodating up to 5,000 cars, in September 2001.
The  second  phase  included  a 1,200  hotel  guest  room 34  story  tower  with
convention facilities and a spa and opened in the summer of 2002.

            A number of groups are seeking to become federally-recognized Indian
tribes in order  operate  casinos near the New York  metropolitan  area. A state
designated Indian reservation exists for the Schaghticoke Tribe in the Berkshire
mountain  area in  Northwestern  Connecticut.  The  Schaghticokes  have recently
received Federal recognition; however, the State of Connecticut has appealed the
Bureau of Indian  Affairs'  decision.  There have been  periodic  proposals  for
locating a Native American casino in the City of Bridgeport, Connecticut. Should
a  federally-recognized  tribe be  successful  in  doing  so,  it would  have an
economic impact on any casinos in the Catskills  region of the State of New York
since Bridgeport is close to a large portion of the New York metropolitan  area.
In addition,  the Shinnecock Indian Nation, a  state-recognized  Native American
tribe,  is  attempting  to  construct  a casino in  Southampton,  New York.  The
Shinnecocks  take the position that because they are  state-recognized,  but not
federally  recognized,  they have the  right to  engage in gaming  free of state
regulation and without the restrictions  imposed by the Indian Gaming Regulatory
Act (including the need for a gaming compact).  The Shinnecocks  broke ground on
their  casino on June 30,  2003,  but the State of New York brought suit against
the  Shinnecocks,  and a federal  district court enjoined the  Shinnecocks  from
moving  ahead with their  casino  because  they are not a  federally  recognized
tribe.  The court initially  stayed the case for 18 months so that a decision on
the  Shinnecocks'  request  for  federal  recognition  could be made,  but later
determined that the request could take the federal  government  several years to
process,  and  agreed  to  move  toward  trial  on  the  issue  of  whether  the
Shinnecocks,  as a state-recognized  tribe, are immune from the state's lawsuit.
No  trial  date  has  been  scheduled,  but if the  court  determines  that  the
Shinnecocks  are  immune  from the suit,  the  injunction  may be lifted and the
Shinnecocks  may move  ahead  with  their  casino  in  Southampton.  Should  the
Shinnecocks  operate  a gaming  facility  in  Southampton,  New  York,  which is
approximately  90 miles from New York City, it is expected to have some level of
economic impact on any casino in the Catskills region of the State of New York.

            In Atlantic  City there are  currently 12 casino  hotels.  Moreover,
substantial new expansion and development  activity has recently been completed,
is under  construction,  or has been announced in Atlantic  City,  including the
summer of 2003  opening of the Borgata  Casino  developed by MGM Mirage and Boyd
Gaming and the expansions at Harrah's, Tropicana and Showboat.


                                       20



            NEW STATE LEGISLATION

            Legislation  permitting  other forms of casino  gaming is  proposed,
from time to time, in various states, including those bordering the State of New
York. Six states have legalized  riverboat gambling while others are considering
its approval. Several states are also considering, or have approved, large-scale
land-based VGM operations  based at their state's  racetracks.  The business and
operations   of  Monticello   Raceway  could  be  adversely   affected  by  such
competition,  particularly  if  casino  and/or  video  gaming  is  permitted  in
jurisdictions  close to New York  City.  Currently,  casino  gaming,  other than
Native American gaming,  is not allowed in New York,  Connecticut or in areas of
New Jersey  outside of Atlantic  City.  However,  proposals  were  introduced to
expand legalized gaming in each of those locations and in Pennsylvania.

            Specifically,  in July 2004,  Pennsylvania  enacted a law legalizing
the  operation  of up to 61,000 slot  machines at 14  locations  throughout  the
state.  The holders of horse racing licenses in Pennsylvania  may apply for 7 of
the 14 licenses to operate slot machines at their  racetracks  while the other 7
locations have yet to be identified,  although at least one is expected to be in
Philadelphia  and another in  Pittsburgh.  Two of the  locations  are limited to
resort  properties  with no more than 500  machines.  On January  25,  2005,  in
anticipation  of receiving  one of the licenses to initially  operate 3,000 slot
machines,  the Mohegan Tribal Gaming  Authority  acquired Pocono Downs Racetrack
and  five  off-track  wagering  operations  for a  total  of  $280  million  and
anticipated licensing fees of $50 million.  Pocono Downs Racetrack is located in
Wilkes-Barre,   Pennsylvania,   approximately  75  miles  to  the  southwest  of
Monticello.

            On February 3, 2005 New York State Governor George Pataki introduced
legislation for State approval of five Indian Land Claim Settlements authorizing
creation of five casinos in the Catskills  region of the State of New York. This
proposed bill would approve settlement  agreements between the State of New York
and the various Native American  tribes  including the Cayuga Nation of New York
and the  Seneca  Cayuga  Tribe of  Oklahoma.  In  addition  to  obtaining  State
legislative  approval,  these  settlements  require United States  Congressional
approval.

            On February 14, 2004,  a bill was  introduced  in the New York State
Senate to amend  the split of gross  gaming  revenues  to allow a  significantly
greater percentage to be retained by the racetracks for operating expenses.  The
bill has been  referred  to the New York  State  Senate's  committee  on Racing,
Gaming and Wagering. If this bill is approved, it could significantly change the
results of our VGM operations.

EMPLOYEES

            As  of  December  31,  2004,  we  and  our   subsidiaries   employed
approximately 380 people.

ITEM 2.     DESCRIPTION OF PROPERTY.

MONTICELLO LAND

            Our  primary  asset,  which  is  held in fee by  Monticello  Raceway
Management,  our  wholly  owned  subsidiary,  is a 232  acre  parcel  of land in
Monticello,  New York. Facilities at the site include Monticello Raceway,  which
includes an enclosed grandstand with a capacity of 4,500, a clubhouse restaurant
facility  with a capacity for 200  customers,  pari-mutuel  wagering  facilities
(including  simulcasting),  a paddock, exterior barns and related facilities for
the horses, drivers, and trainers. In addition,  Monticello Raceway Management's
video gaming  operation is conducted  in the  grandstand  portion of  Monticello
Raceway,  which  includes a gaming  floor with a central bar and  separate  high
stakes  gaming area, a 350 seat buffet,  a food court with a coffee bar, a pizza
station and deli,  kitchens,  employee  locker  rooms,  storage and  maintenance
facilities, surveillance and security facilities and systems, cashier's cage and
accounting and marketing  areas, as well as enhanced  parking areas for cars and
buses. Our principal  executive offices,  and the principal executive offices of
Monticello Raceway Management are also located within Monticello Raceway.

            Of these 232 acres of land, a 29 acre parcel is presently subject to
a land purchase agreement between Monticello Raceway Management (as successor to
Catskill Development) and the Cayuga Catskill Gaming Authority,  an affiliate of
the Cayuga  Nation of New York,  dated as of April 3, 2003 (the  "Land  Purchase
Agreement").  Pursuant to the terms of the Land Purchase  Agreement,  Monticello
Raceway  Management  agreed to convey  this 29 acre parcel of land to the United
States of  America to be held in trust for the  benefit of the Cayuga  Nation of
New York  following the Bureau of Indian  Affairs'  approval of the transfer and
its authorization to use such land for Class II and Class III gaming. Monticello
Raceway  Management and the Cayuga Catskill Gaming Authority are also parties to
a shared  facilities  agreement,  whereby the Cayuga Catskill  Gaming  Authority
agreed,  among other things,  not to use the property for any purpose other than
Class II or Class III gaming,  and  activities  incidental to gaming such as the
operation of entertainment,  parking, restaurant or retail facilities.  However,
if the required  approvals  for the land transfer are not received by Monticello
Raceway  Management and the Cayuga Nation of New York by June 30, 2005, the Land
Purchase Agreement shall terminate.

                                       21





            On January 11, 2005, we entered into a credit  facility with Bank of
Scotland,  pursuant  to which Bank of  Scotland  agreed to provide us with a two
year $10 million senior secured revolving loan (subject to certain reserves). To
secure the timely repayment of any borrowings under this credit facility,  among
other  things,  Monticello  Raceway  Management  executed a  Mortgage,  Security
Agreement,  Assignment of Leases and Rents,  and Fixture Filing in favor of Bank
of Scotland  pursuant to which  Monticello  Raceway  Management  granted Bank of
Scotland a security  interest and lien with respect to the above  described  232
acres  of land,  along  with  all  improvements,  fixtures,  leases,  rents  and
contracts related to the land and the proceeds therefrom. This security interest
shall terminate upon  satisfaction  of all of our  obligations  under the credit
facility,  and all related documents,  concurrently with the termination of Bank
of Scotland's obligations to provide us advances under the credit facility.

PROPOSED CONCORD AND GROSSINGER LAND

            On  November  12,  2004,  we entered  into a letter  agreement  with
Concord  Associates  Limited  Partnership and Sullivan Resorts,  LLC pursuant to
which we agreed to, among other things,  acquire (i)  Grossinger's  Resort Hotel
and Golf Course, consisting of an approximately 600 acre parcel of land, various
hotel  buildings,  golf course and related  facilities,  (ii) The Concord Hotel,
consisting of an approximately  163 acre parcel of land,  hotel  buildings,  the
Challenger  golf course and related  facilities and (iii) The Concord Resort and
Golf Club, consisting of the International golf course, the ground lease for the
Monster  golf course,  a club house,  and lodging and support  facilities,  from
Concord Associates Limited Partnership and Sullivan Resorts, LLC in exchange for
18 million shares of our common stock (or its  equivalent) and the assumption of
certain  indebtedness  and liabilities not to exceed $30 million.  Each of these
properties  is located in the  Catskills  region of the State of New York,  less
than ten miles  away  from  Monticello  Raceway,  and upon  consummation  of the
acquisition  would provide us with  approximately  an additional  1,200 acres of
land in the region.  This letter agreement is expected to be formalized in March
2005 in an  Agreement  and Plan of Merger and  Contribution  between us,  Empire
Resorts  Holdings,  Inc., one of our wholly owned  subsidiaries,  Empire Resorts
Sub, Inc., a wholly owned subsidiary of Empire Resorts Holdings,  Inc.,  Concord
Associates  Limited  Partnership  and  Sullivan  Resorts,  LLC.  We  expect  the
transactions  provided for in this  agreement to close  sometime  during  fiscal
2005.

OTHER PROPERTY

            We lease approximately 140 square feet of office space at 707 Skokie
Boulevard, Suite 600, Northbrook, Illinois, 60062 on a month-to-month basis. The
rent for this office space is approximately $2,000 per month.

            We also  lease a  warehouse  located at 222 South  Theobald  Street,
Greenville, Mississippi for $850 per month.

ITEM 3.     LEGAL PROCEEDINGS.

            Two pending lawsuits,  Dalton v. Pataki and Karr v. Pataki,  seek to
enjoin the State of New York from  proceeding  with VGM operations or permitting
the  construction  of any new Native  American  casinos  within the State of New
York. While the trial court initially dismissed both of these cases in May 2003,
the plaintiffs filed an appeal of the trial court's dismissal.  On July 7, 2004,
the Appellate  Division of the Supreme Court of the State of New York overturned
the trial court's  dismissal of certain of the plaintiffs'  claims in respect of
VGM  operations.  In overturning the trial court,  the Appellate  Division ruled
that  the   legislation   permitting   state   sponsored   VGM   operations   is
unconstitutional  under New York law because such  legislation  provides  that a
portion of the VGM vendor  fees be  dedicated  to breeding  funds and  enhancing
purses in  violation  of a  constitutional  mandate  that such moneys be applied
exclusively  to, or in aid or support  of,  education  in the State of New York.
Notwithstanding this ruling, the court separately held that VGMs are valid state
operated  lotteries  and thus fall within the  exemption of  lotteries  from the
general  ban on  gambling  in the State of New York.  However,  as the court was
unable to separate  its finding that a VGM is a  legitimate  "lottery"  from the
enacting  legislation  that it believes  unconstitutionally  directs vendor fees
toward  breeding  funds and  enhancing  purses,  the court  held the  entire VGM
legislation to be unconstitutional.


                                       22


            The office of the Attorney  General of the State of New York filed a
notice of appeal with respect to the Appellate  Division's  invalidation  of the
VGM legislation.  This notice of appeal stays the appellate court's ruling while
the State of New York  proceeds to formally  appeal the decision to the New York
Court of Appeals,  New York State's  highest  court,  a process that can take 18
months or longer. While the ruling is stayed, we can continue to operate our VGM
facility  at  Monticello  Raceway in a manner  consistent  with past  practices.
However,  no assurance  can be given that the Court of Appeals will overrule the
Appellate  Division and find the VGM  legislation to be  constitutional.  Absent
such a ruling,  to continue video gaming  operations at Monticello  Raceway,  we
would  need the New York state  legislature  to modify  the VGM  legislation  to
remove the  provision  that  directs  certain  vendor fees be  dedicated  toward
breeding funds and enhancing  purses.  Again,  no assurance can be given that if
the State of New York  loses  its  appeal  on the  constitutionality  of the VGM
legislation  that the  State of New York  will  enact  the  required  corrective
legislation or that the legislation currently under reveiw by the New York State
legislature  will be enacted in its current form or if enacted will be free from
constitutional  issues.  Should  the State of New York both lose its  appeal and
fail to enact corrective legislation,  our operations would be restricted to the
operation of Monticello  Raceway and our proposed  management and development of
Native American casinos.

            In addition to ruling on the  constitutionality  of VGMs, on July 7,
2004,  the  Appellate  Division  of the  Supreme  Court of the State of New York
upheld the trial court's validation of the legislation  authorizing the Governor
of the State of New York to enter into gaming compacts with federally recognized
Native  American  tribes to  provide  for Class III gaming on  reservation  land
within  the State of New York.  The  plaintiffs,  however,  have  appealed  this
ruling,  and no  assurances  can be given that the legality of this  legislation
will be upheld.

            The Monticello Harness  Horsemen's  Association,  Inc.  ("Horsemen",
"Horsemen's  Association")  has brought multiple actions against our subsidiary,
Monticello Raceway Management.

            Monticello  Harness  Horsemen's  Association v.  Monticello  Raceway
Management State of New York, Supreme Court, Sullivan County Index No.: 1750/03:
This is an action  brought by the Horsemen's  Association of Monticello  Raceway
against  Monticello  Raceway  Management.  The  claim is that  the barn  area at
Monticello  Raceway has been reduced in size and there are less available stalls
for Horsemen at the track in prior years.  An  additional  claim is that some of
the Horsemen who are no longer  eligible for stall use due to  consolidation  of
the barn area were  discriminated  against by reason of their  membership in the
Horsemen's  Association.  The  action  was  commenced  July  31,  2003,  and the
plaintiff  obtained  a  temporary  restraining  order upon  commencement  of the
action.  The temporary  restraining order was dismissed and an injunction denied
to the Horsemen  after a hearing which was held the following  week and the case
had not been pursued further by the plaintiff, although it is still pending. The
consolidation of the barn area at Monticello Raceway was completed.

            Monticello  Harness  Horsemen's  Association v.  Monticello  Raceway
Management Index Numbers:  1765/03 and 2624/03 Supreme Court, State of New York,
Sullivan  County.  These are  consolidated  actions  brought  by the  Horsemen's
Association  seeking  damages  for  alleged  underpayment  of purses  due to the
Horsemen from various  raceway  revenue  sources.  These actions were  commenced
respectively  on September  30, 2003 and  December  12,  2003.  The actions were
consolidated  by order of the Sullivan  County Supreme Court in November,  2004.
One case alleges that certain  monies  designated by contract for the Horsemen's
overnight purses were used to fund a special racing series at the raceway.  That
portion of the claim seeks a  recoupment  of  approximately  $60,000  dollars in
purse  monies.  That action also seeks control by the Horsemen of the setting of
purses  as  opposed  to  Monticello   Raceway.   The  second  action  which  was
consolidated  with the first action  involves a claim that the Horsemen's  purse
account has not been properly  credited with various  simulcasting  revenues and
that there were  deductions  from the  Horsemen's  purse  account for  simulcast
expenses  which  the  plaintiff  claims  were  not  authorized  by the  parties'
contract.   That  complaint   seeks   approximately   $2.0  million  dollars  in
compensatory damages and a similar amount in punitive damages. This consolidated
action is pending.  There has been certain paper  discovery  completed  (bill of
particulars) and there are outstanding requests for further  interrogatories and
discovery items. Depositions have not yet been held.

            We are a party from time to time to various other legal actions that
arise in the  normal  course of  business.  In the  opinion of  management,  the
resolution of these other matters will not have a material and adverse effect on
our consolidated financial position, results of operations or cash flows.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

            Not Applicable.


                                       23





                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

            Our common  stock is listed on the Nasdaq Small Cap Market under the
symbol  "NYNY".  The  following  table sets forth the high and low intraday sale
prices for the common stock for the periods indicated, as reported by the Nasdaq
Small Cap Market.

                                          HIGH              LOW
                                          ----              ---
Year ended December 31, 2003
           First Quarter                $  10.47         $   1.94
           Second Quarter                  11.48             7.83
           Third Quarter                   18.05             9.15
           Fourth Quarter                  14.78             8.21

Year ended December 31, 2004
           First Quarter                $  14.95         $   8.36
           Second Quarter                  15.55            11.20
           Third Quarter                   14.53             5.98
           Fourth Quarter                  11.91             4.21


HOLDERS

            According to Continental Stock Transfer & Trust Company,  there were
275 holders of record of our common stock at March 1, 2005.

DIVIDENDS

            During the past two fiscal years, we did not declare or pay any cash
dividends  with respect to our common stock and we do not  anticipate  declaring
any cash dividends on our common stock in the foreseeable  future.  We intend to
retain  all future  earnings  for use in the  development  of our  business.  In
addition,  the payment of cash dividends is restricted by financial covenants in
our credit agreement with Bank of Scotland.

                                       24





SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

            The following  table  provides  information  as of December 31, 2004
with  respect  to the shares of our  common  stock that may be issued  under our
existing equity compensation plans.

                                                                                                Number of
                                                                                               securities
                                                                                                remaining
                                                                                              available for
                                                 Number of                 Weighted-        future issuance
                                              securities to be              average           under equity
                                                issued upon             exercise price        compensation
                                                 exercise of            of outstanding        plans (excluding
                                                 outstanding               options,              securities
                                               options,warrants          warrants and           reflected in
                                                  and rights                rights               column (a))
                                                     (a)                      (b)                    (c)
                                             ---------------------     -----------------   -----------------------
Equity compensation plans approved by
      security holders ...................         822,928                  $   3.19                285,643
Equity compensation plans not approved by
      security holders ...................         455,000                      7.12                   --
                                                 =========                  ========                ========
      Total ..............................       1,277,928                  $   5.49                285,643

RECENT SALES OF UNREGISTERED SECURITIES

            On July 26, 2004, we sold $65 million principal amount of our 5-1/2%
Convertible Secured Notes in a private  transaction  pursuant to Rule 4(2) under
the  Securities  Act of 1933,  as  amended.  Jefferies & Company,  Inc.  was the
initial  purchaser  of the notes,  which were  immediately  resold to buyers who
represented  themselves  to be  qualified  institutional  investors.  If certain
events  shall have not  occurred  on or prior to July 31,  2005,  the notes will
accrue  interest  from and  after  July 31,  2005 at an annual  rate of 8%.  The
aggregate offering price was $65 million and the aggregate underwriting discount
was approximately $2.8 million.  The notes are convertible into shares of common
stock at any  time  before  their  maturity,  subject  to  certain  restrictions
contained in the notes,  at a conversion  rate of 72.727  shares per each $1,000
principal  amount  of notes (an  aggregate  of  4,727,255  shares),  subject  to
adjustment.  The net  cash  proceeds  from the sale of the  notes  were  used to
acquire 232 acres of land in Monticello,  New York, to repay  approximately $5.1
million of  indebtedness,  to complete  renovations  at our horse  racetrack  in
Monticello,   to  fund  certain   development   costs  in  connection  with  the
construction of a Native American casino and for general corporate purposes.  On
October 4, 2004, a shelf registration  statement filed by us with respect of the
resale of the notes and the common stock  issuable upon  conversion of the notes
was declared effective by the Securities and Exchange Commission.

            On  November  12,  2004  we  issued   Concord   Associates   Limited
Partnership  an  irrevocable  three year option  pursuant to Rule 4(2) under the
Securities Act of 1933, as amended, to purchase up to 5,188,913 shares of common
stock at $7.50  per  share  as  consideration  for  Concord  Associates  Limited
Partnership  entering  into a  binding  letter  agreement  pursuant  to  sell us
Grossinger's Resort Hotel and Golf Course, The Concord Hotel and Challenger Golf
Course and The Concord  Resort and Golf Club for 18 million shares of our common
stock and the  assumption  of up to $30  million of  indebtedness.  The  option,
however, is only exercisable,  upon termination of the binding letter agreement,
absent a material adverse change in the properties, assets, business, prospects,
financial  or other  condition  of the  parties  to the extent  relevant  to the
transaction,  or the failure to satisfy certain closing  conditions,  including,
without limitation, approval of the transaction by our stockholders, the holders
of a majority of the outstanding  principal of our convertible secured notes and
Bank of Scotland.  If the option does become exercisable,  we would be obligated
to file up to three registration statements at the demand of Catskill Associates
Limited Partnership,  one of which can be a shelf registration  statement,  with
respect to the shares of common stock issuable upon exercise of the option.

                                       25





ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.


            The following  discussion of our financial  condition and results of
operations  should  be read  in  conjunction  with  the  consolidated  Financial
Statements and Notes thereto appearing elsewhere in this document.

            Much of the  information  contained  in this  report is  historical.
However,  other matters discussed in this "Management's  Discussion and Analysis
or Plan of Operation" and elsewhere in this document as well as statements  made
in press releases and oral  statements that may have been made and could be made
by us or by officers,  directors or our employees  acting on our behalf that are
not  statements  of  historical  or  current  fact  constitute  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of  1995,  Section  27A of the  Securities  Act of 1933 and  Section  21E of the
Securities  Exchange Act of 1934.  We believe  that,  in making any such forward
looking statements,  our expectations have been based on reasonable assumptions,
but any  statement  about future  events may be influenced by factors that could
cause  actual  outcomes  and  results  to be  materially  different  from  those
projected.

            These forward-looking  statements include statements relating to our
anticipated  financial  performance  and business  prospects  and/or  statements
preceded  by,  followed by or that  include the words  "believe,"  "anticipate,"
"intend," "estimate," "expect," "project," "could," "plans," "seeks" and similar
expressions. These forward-looking statements speak only as of their date. We do
not  undertake  any  obligation  to  update  or  revise  publicly  any of  these
forward-looking  statements,  whether  as a result  of new  information,  future
events or otherwise,  even if experience or future events make it clear that any
expected results expressed or implied by these  forward-looking  statements will
not be realized.  Although we believe that the  expectations  reflected in these
forward-looking  statements are reasonable,  these expectations may not prove to
be correct or we may not achieve the anticipated  financial results,  savings or
other  benefits.  These  forward-looking  statements are  necessarily  estimates
reflecting  the best judgment of our senior  management  and involve a number of
risks and  uncertainties,  some of which may be beyond  our  control  that could
cause actual results to differ materially from those suggested.

OVERVIEW

            We were  organized as a Delaware  corporation on March 19, 1993, and
since  that time  have  served as a holding  company  for  various  subsidiaries
engaged in the  ownership,  development  and  operation of gaming and  amusement
industries.  We were incorporated  under the name Alpha Hospitality  Corporation
and  changed our name to Empire  Resorts,  Inc.  in May,  2003.  For much of our
history,  we  concentrated  on riverboat  casinos in the southern United States,
with nominal  holdings in the Mid-Atlantic  States.  In 2002 this focus shifted.
Specifically,  we commenced the  liquidation of all of our holdings  outside the
Catskills  region of the State of New York. By the end of 2003, we had no direct
operations  or  meaningful  assets  other than a minority  interest  in Catskill
Development;  the prior owner of approximately  232 acres of land in Monticello,
New  York,  the  sole  stockholder  of  Monticello  Raceway  Management  and the
controlling member of Monticello Casino Management.

            In January  2004,  we  acquired  from the  members of both  Catskill
Development and Monticello Raceway Development all of the outstanding membership
interests and capital stock of Monticello Raceway Management,  Monticello Casino
Management,  Monticello  Raceway  Development  and  Mohawk  Management,  LLC  in
exchange for 80.25% of our common  stock,  18,219,075  shares,  calculated  on a
post-consolidation,   fully  diluted  basis.   Monticello  Raceway   Management,
Monticello  Casino  Management,   Monticello  Raceway   Development  and  Mohawk
Management, LLC own all of the development and management rights with respect to
a Native  American  casino  to be  developed  on 29 of the 232  acres of land in
Monticello, New York owned by Monticello Raceway Management.  Monticello Raceway
Management,  which  previously  held  a  leasehold  interest  in  the  property,
purchased the property from  Catskill  Development,  a related party on July 26,
2004.

            Since  we had no  significant  operations  during  the  time of this
acquisition  and the  members of Catskill  Development  and  Monticello  Raceway
Development,  collectively,  received  a  controlling  interest  as part of this
acquisition,  the acquisition  was accounted for as a reverse merger.  Moreover,
our  ability to develop a  successful  business is now solely  dependent  on the
success or failure of our ability to develop our  interests in  Monticello,  New
York,  and our  financial  results  in the  future  will be based  on  different
activities than those from our prior fiscal years.

                                       26





            We now operate  Monticello  Raceway, a harness horse racing facility
located in  Monticello,  New York, 90 miles  Northwest of New York City. On June
30, 2004, we began operating 1,744 VGMs after  completing an  approximately  $24
million  renovation of our facility.  VGMs have aided other  similarly  situated
racetracks in generating new revenue  streams.  We also have agreements with the
Cayuga  Nation  of New York to  develop  and  manage a  Native  American  casino
entitled the Cayuga  Catskill  Resort  adjacent to  Monticello  Raceway,  and an
agreement  with the Seneca  Cayuga  Tribe of  Oklahoma,  a federally  recognized
Indian Tribe, to develop a gaming facility in the Catskills  region of the State
of New York.

            On April 3, 2003,  Monticello  Raceway  Development  entered  into a
gaming facility  development and  construction  agreement with the Cayuga Gaming
Authority  and the  Cayuga  Nation  of New  York,  which  has been  subsequently
extended to June 30, 2005. Pursuant to the agreement, the Cayuga Catskill Gaming
Authority granted Monticello Raceway  Development the exclusive right to design,
engineer,  construct,  furnish  and  develop  the Cayuga  Catskill  Resort,  and
Monticello Raceway Development agreed to help arrange financing of the project.

            On August 19, 2004, we entered into a one year letter agreement with
the Seneca  Cayuga Tribe of Oklahoma,  a federally  recognized  Native  American
tribe,  that provides for the development of a trust land Native American casino
in the Catskills region of New York.  Under this agreement,  we are obligated to
supply technical and financial assistance to the Seneca Cayuga Tribe of Oklahoma
in  exchange  for the right to serve as the  tribe's  exclusive  partner  in the
development,  construction,  financing,  operation  and  management  of a Native
American casino in the Catskills region of the State of New York.

            Consistent  with these  pursuits,  on November 12, 2004, we, Concord
Associates Limited  Partnership and Sullivan Resorts,  LLC entered into a letter
agreement  pursuant  to which we agreed to,  among  other  things,  acquire  (i)
Grossinger's  Resort Hotel and Golf Course,  consisting of an approximately  600
acre  parcel  of  land,  various  hotel  buildings,   golf  course  and  related
facilities,  (ii) The Concord  Hotel,  consisting of an  approximately  163 acre
parcel  of land,  hotel  buildings,  the  Challenger  golf  course  and  related
facilities  and  (iii) The  Concord  Resort  and Golf  Club,  consisting  of the
International  golf course, the ground lease for the Monster golf course, a club
house,  and lodging and support  facilities,  from  Concord  Associates  Limited
Partnership and Sullivan  Resorts,  LLC in exchange for 18 million shares of our
common stock (or its equivalent) and the assumption of certain  indebtedness and
liabilities  not to exceed $30 million.  Each of these  properties is located in
the Catskills region of the State of New York. Moreover, in connection with this
letter  agreement,  we entered into an option agreement with Concord  Associates
Limited  Partnership  pursuant to which we granted  Concord  Associates  Limited
Partnership an irrevocable  three year option to purchase up to 5,188,913 shares
of the our common  stock at a purchase  price of $7.50 per share.  The option is
exercisable,  however,  only if the letter agreement is terminated in accordance
with its terms,  absent a material  adverse  change in the  properties,  assets,
business,  prospects,  financial or other condition of the parties to the extent
relevant  to the  transaction  or by the  parties  to  satisfy  certain  closing
conditions.

            Thus,  our  ability to develop a  successful  business is now solely
dependent  on the success or failure of our ability to develop our  interests in
the Catskills.  Our current business plan requires our Native American  partners
to raise  significant  capital to fund the development  and  construction of the
casino  projects.  Further,  our  success is  dependent  on our ability to raise
additional  equity and debt to fund our  operations.  On January  11,  2005,  we
entered into a credit  facility  which provides for a $10 million senior secured
revolving  loan  (subject  to  certain  reserves).  In  addition,  in  2005,  we
anticipate  raising  additional  equity in order to fund our  business  plan and
operating  expenses.  Our  financial  results  in the  future  will be  based on
different activities than those from our prior fiscal years.

            We have spent  significant  amounts of money  generated  principally
through  the  issuance  of equity and debt in  connection  with our  development
activities, primarily for the design, development, financing and construction of
the  video  gaming  operation,  as  well  as  the  predevelopment,  design,  and
negotiations  of two  Native  American  casinos.  Predevelopment  costs  include
expenses  associated  with  legal  fees,  accounting  and  audit  fees and costs
relating  to  employees.   Some  of  these  costs  have  been  capitalized.   We
periodically review these capitalized costs for impairment. If such review shows
that the assets are impaired the carrying value will be reduced to fair value.

            New business  developments,  outside our  interests in the Catskills
region of the State of New York, or other unforeseen events may occur, resulting
in the need to raise additional  funds. We continue to explore  opportunities to
develop  additional  gaming or  related  businesses  in other  markets,  whether
through  acquisition or development.  Any such developments  would require us to
obtain additional financing.

                                       27






            We have  never  declared  or paid any cash  dividends  on our common
stock. We currently  intend to retain our earnings,  if any, and cash to finance
our growth and,  therefore,  do not anticipate  paying any cash dividends on our
common stock in the foreseeable  future.  Any  determination to pay dividends in
the future will be at the  discretion  of our board of directors and will depend
upon our financial condition, results of operations and capital requirements.

RACEWAY OPERATIONS

            Monticello Raceway Management,  a wholly owned subsidiary,  is a New
York  corporation  that  operates  Monticello  Raceway,  a harness  horse racing
facility located in Monticello,  New York.  Monticello Raceway Management held a
leasehold  interest in the property that Monticello Raceway is located on, which
it purchased  from  Catskill  Development,  a related  party on July 26, 2004 by
exercising a purchase option under the lease.

            During the year ended  December  31, 2004,  revenue  produced by the
racing operations  increased nominally compared to 2003. The increase appears to
be related to  simulcasting  operations  and dark day  proceeds.  The closing of
other raceways due to weather conditions while our track is operational enhances
our dark day proceeds.  Our racing facility was undergoing  improvements for the
VGM operation  during 2004, which impacted  negatively on our operating  results
for the pari-mutuel operations in Monticello.

MIGHTY M GAMING AT MONTICELLO RACEWAY

            A VGM is an  electronic  gaming  device that allows a patron to play
electronic  versions  of  various  lottery  games of chance  and is  similar  in
appearance to a traditional slot machine.  On October 31, 2001, the State of New
York enacted a bill designating seven racetracks,  including Monticello Raceway,
to install and operate VGMs. Under the program,  the New York State Lottery made
an in initial  allocation  of 1,800  VGMs to  Monticello  Raceway.  Construction
contracts  for  these   facilities   were  signed  and  work  on  the  necessary
improvements  began in  February  2004.  On June 30,  2004,  Monticello  Raceway
Management  began  operating  1,744 VGMs on 45,000 square feet of floor space at
Monticello Raceway after completing  approximately $24 million of renovations to
the facility.  The VGM operation  employs  approximately  280 employees.  Of the
revenue  generated by the VGMs,  Monticello  Raceway  Management  is entitled to
retain approximately 20%. The operating results of the VGM operation is reported
in our  consolidated  results.  Operating  results for the  pari-mutuel  and VGM
operations are evaluated by management separately.

            The primary competition for Mighty M Gaming at Monticello Raceway is
from Atlantic City and  Connecticut's  full service  casinos and two  racetracks
located within the New York City metropolitan area; Yonkers Raceway and Aqueduct
Raceway.  Both  racetracks  have announced plans to proceed with the VGM program
and limited  construction  of  facilities  had  commenced  at Aqueduct  Raceway.
However, the development program for Yonkers Raceway has yet to be finalized and
construction at both racetracks was suspended  pending the resolution of certain
legal issues. In addition,  proposals have been made for the implementation of a
similar program in New Jersey, which would include a facility at the Meadowlands
Racetrack.

            On July 4, 2004,  the State of  Pennsylvania  enacted a law allowing
for the operation of up to 61,000 slot machines at 14 gambling halls,  including
seven  racetracks,  two stand-alone  parlors,  and three at either racetracks or
stand-alone  parlors.  As a result of this law, slot machine facilities could be
developed  within 30 miles of Monticello  Raceway that compete directly with our
VGMs.

            The results of our VGM  operations  to date have been  significantly
below expectations.  Our ability to improve operations is limited, as 80% of our
VGM gross  revenues  are required to go to third  parties,  thus leaving us with
only 20% to operate and promote the business.  Moreover,  to date,  the New York
State Lottery has not implemented any marketing  efforts to support the program.
Thus, with the limited portion of gross revenue  currently made available to us,
we are not able at this time to offer incentives that compete favorably with the
Atlantic City and the Connecticut Native American casinos. On February 14, 2004,
a bill was  introduced  in the New York State Senate to amend the split of gross
gaming  revenues to allow a significantly  greater  percentage to be retained by
the  racetracks  for operating  expenses.  The bill has been referred to the New
York State Senate's  committee on Racing,  Gaming and Wagering.  If this bill is
approved,  it could  significantly  change the  results  of our VGM  operations.
Unless  this  proposed  bill,  or one with  similar  terms is  adopted,  our VGM
operations may never become profitable.


                                       28



CAYUGA CATSKILL RESORT DEVELOPMENT

            On April 3,  2003,  the  Cayuga  Nation  of New  York,  a  federally
recognized  Indian  Nation,   Catskill   Development  and  certain  of  Catskill
Development's  affiliates,  including  one of our  subsidiaries,  entered into a
series of agreements  which provide for the  development  of a trust land casino
adjacent to Monticello Raceway.  These agreements were extended on June 25, 2004
and  again  on  January  3,  2005 to June  30,  2005.  In  furtherance  of these
transactions, on April 10, 2003, these parties officially filed with the Eastern
Regional Office of the Bureau of Indian Affairs, an application  requesting that
the Secretary of the Interior acquire in trust on behalf of the Cayuga Nation of
New York a 29 acre parcel of land in Monticello,  New York to be used for gaming
purposes.  On April 27, 2004, the Eastern  Regional Office ("ERO") of the Bureau
of Indian Affairs ("BIA")  completed its review of the plan by the Cayuga Nation
of New  York  and us to  build  a $500  million  casino  on a site  adjacent  to
Monticello Raceway.  The ERO recommended that a finding be made that the project
was in the best  interests of the Cayuga Nation of New York and not  detrimental
to the  surrounding  community  and  recommended  that the site be taken into to
trust by the United States as a site for gaming activities.

            One of the April 3, 2003  agreements  also  provides  for the Cayuga
Nation of New York to participate with us in the ownership of a  to-be-developed
hotel within five miles of the proposed gaming facility.  This agreement further
provides for a reciprocal  ten-year  option to acquire up to a 33.33%  ownership
interest in our VGM  operations,  other  lodging,  entertainment,  sports and/or
retail facilities, which may be developed or operated within a 15 mile radius of
the proposed casino.  The option becomes  exercisable only upon the opening date
of the gaming facility.  In addition,  we agreed if sufficient  financing is not
available in connection  with the project,  we will advance an additional  $60.0
million  to pay  legal  fees  incurred  by the  Cayuga  Nation  of New  York  in
connection to their land claim,  $50 million of which would be reimbursed out of
operations,  to  the  extent  available,  and  the  remainder  of  which  may be
reimbursable  under other agreements.  We have further agreed to fund legal fees
of Sonnenschein Nath &  Rosenthal LLP, legal counsel to the Cayuga Nation of
New York,  legal  counsel to the Cayuga  Nation of New York,  and certain  other
expenses pursuant to the Cayuga Nation of New York's  settlement  agreement with
the State of New York.

            As currently  contemplated,  the Cayuga  Catskill  Resort will be an
approximately  $500 million Class III Native  American gaming project with a Las
Vegas style  casino that is expected to have 3,000 slot  machines  and 200 table
games.  Development of the project is pending various  government  approvals and
financing.

            On November 18, 2004, the State of New York and the Cayuga Nation of
New York  entered  into a definitive  settlement  agreement  with respect to the
Cayuga Nation of New York's land title and trespass  claims against the State of
New York. This settlement  agreement  provides for the State of New York and the
Cayuga  Nation of New York to enter  into a class  III  gaming  compact  for the
development  of a tribal  casino on the 29-acre  parcel at  Monticello  Raceway.
Under the settlement agreement,  the gaming compact will permit the operation of
slot machines,  but not VGM terminals,  and the operation of traditional  casino
table games.  The Cayuga  Nation of New York and certain  other Native  American
tribes were also granted the  exclusive  right to operate  slot  machines in the
counties of Bronx, Delaware,  Greene, Kings, New York, Orange, Queens, Richmond,
Rockland,  Sullivan,  Ulster and Westchester.  The Cayuga Nation of New York has
agreed to  contribute  20% of its slot  machine  net revenue to the State of New
York  during  the  first  four  years  of  operation,   with  such  contribution
subsequently  increasing to 25%. The settlement  agreement also provides for the
gaming compact to have an initial term of 14 years, with an automatic seven year
renewal,  requires  the Cayuga  Nation of New York to commence  class III gaming
operations  within  18 months  of  receiving  all  requisite  state and  federal
approvals  and provides  for the Cayuga  Nation of New York and the State of New
York  to  negotiate  a tax  parity  compact  concerning  the  sale  of  alcohol,
cigarettes, gasoline and other retail products and services by the Cayuga Nation
of New York to  non-Native  Americans  on the gaming  facility's  property.  The
settlement agreement,  however, does not become effective until the enactment of
federal and state legislation and tribal resolutions that formally implement its
terms.


                                       29




            In connection with the settlement agreement between the State of New
York  and the  Cayuga  Nation  of New  York we have  elected  to set  aside,  or
otherwise  make provision for, the possible use by the Cayuga Nation of New York
of certain funds for the acquisition of land. Through segregation of funds under
our  credit  facility  with  Bank of  Scotland  and  certain  carve-outs  on the
incurrence  of  additional  debt  under  the  documents   governing  our  senior
convertible notes, we believe we are in a position to fulfill these obligations,
although we are not certain of the requirements due to continuing negotiations.

            There are  significant  preconditions  that must be met  before  the
Cayuga  Nation of New York can  operate  gaming at the Cayuga  Catskill  Resort.
First,  legislation  must be passed by the New York State  legislature.  Second,
similar  legislation must be passed by the United States Congress.  Third, title
to the  proposed  29-acre  site must be  transferred  to the  United  States and
accepted  into trust for the benefit of the Cayuga  Nation of New York.  Fourth,
the Cayuga  Nation of New York must enter into a Class III gaming  compact  with
the State of New York.

SENECA CAYUGA TRIBE OF OKLAHOMA RESORT DEVELOPMENT

            On August 19,  2004,  we entered  into a letter  agreement  with the
Seneca Cayuga Tribe of Oklahoma,  to develop a gaming  facility in the Catskills
region  of the  State of New  York.  The  agreement  provides  for us to  supply
technical and financial assistance to the Seneca Cayuga Tribe of Oklahoma and to
serve  as  the  tribe's  exclusive  partner  in the  development,  construction,
financing, operation and management of the proposed casino. Financial assistance
includes the payment of  professional  consultants of the Seneca Cayuga Tribe of
Oklahoma on a monthly basis.  The agreement is for a term of one year and became
effective  immediately.  We will also provide  technical  assistance and support
relating to the  settlement  of the tribe's land claim  against the State of New
York. We will provide development  assistance of $35,000 per month to the Seneca
Cayuga  Tribe of  Oklahoma  in  connection  with the  establishment  and initial
operations of a tribal gaming authority for New York gaming operations.

            The  agreement  calls for us and the Seneca Cayuga Tribe of Oklahoma
to separately  enter into a management  agreement and development  agreement for
the project through good faith negotiations and submit the management  agreement
for approval to the National Indian Gaming Commission.  All of the provisions of
the above  agreements  relating to the  management  of the casino are subject to
review and approval by the National Indian Gaming  Commission  prior to becoming
effective. Pending such approval and as a result of such review, such provisions
may be amended or supplemented by the parties.

            On November  12, 2004,  the State of New York and the Seneca  Cayuga
Tribe of Oklahoma announced execution of a settlement  agreement relating to the
Seneca  Cayuga  Tribe of  Oklahoma's  land  claims and  development  of a Native
American  casino to be located in the Town of  Thompson,  Sullivan  County.  The
agreement  provides  that the State of New York and the Seneca  Cayuga  Tribe of
Oklahoma  to enter into a  mutually  satisfactory  Class III  gaming  compact to
operate a casino in the  Catskills,  subject to  approval  of the  Secretary  of
Interior.

            There are significant preconditions,  similar to the requirements of
the Cayuga  Nation of New York,  that must be met before the Seneca Cayuga Tribe
of Oklahoma  can operate a Class III gaming  facility  in Sullivan  County,  New
York.

CONCORD ASSOCIATES RESORT DEVELOPMENT

            On November  12,  2004,  we entered  into a binding  agreement  with
Concord Associates  Limited  Partnership and an affiliate for acquisition of the
Concord and  Grossinger's  Resort Hotels and Golf Courses in Sullivan County New
York. The acquisition  includes casino and hotel development sites, and 72 holes
of golf, including the Monster, International,  Challenger and Grossinger's Golf
Courses.

            As  consideration  for the  acquisition,  we will  issue 18  million
shares of common stock to Concord Associates Limited  Partnership,  representing
approximately  40% of the total number of issued and  outstanding  common shares
after the closing,  on a fully diluted basis and the assumption of related debt.
The  closing is subject to certain  approvals,  including a vote in favor of the
transaction by a majority of our  stockholders,  and  regulatory  approval of at
least one land to trust  transfer  for a gaming  facility  at any of the  casino
development sites owned by us or Concord Associates Limited Partnership.

            Pursuant to the binding  agreement with Concord  Associates  Limited
Partnership,  we granted Concord Associates  Limited  Partnership an irrevocable
option (the "Option") to purchase up to 5,188,913  shares of our Common Stock at
a price per share equal to $7.50. The Option is exercisable at any time and from
time to time  following the  occurrence of an Exercise  Event (as defined below)
and shall remain in full force and effect until the earliest to occur of (i) the
transfer of the Properties as provided in the Agreement,  (ii) the date which is
180 days after the receipt by Concord Associates Limited  Partnership of written
notice from us of the  occurrence  of an Exercise  Event and (iii)  November 12,

                                       30





2007; provided that with respect to clauses (ii) and (iii), if the Option cannot
be exercised before the expiration of the applicable  period described in clause
(ii) or (iii) as a result of any injunction,  order or similar  restraint issued
by  a  court  of  competent  jurisdiction,  or  if  prior  notification  to,  or
authorization of, any governmental or tribal authority is required in connection
with such exercise, such period shall be extended so that it shall expire on the
10th  business day after such  injunction,  order or  restraint  shall have been
dissolved  or when  such  injunction,  order  or  restraint  shall  have  become
permanent and no longer subject to appeal, or after such prior  notification to,
or authorization  of, any governmental or tribal authority is given or obtained,
as the case may be. For purposes of the Option Agreement, "Exercise Event" means
the  termination  of the Letter  Agreement,  the  Agreement  and the  Additional
Agreements for any reason in accordance with their respective terms,  except for
any termination  described in the second sentence of Section 13(b) of the Letter
Agreement or in Section 8(c),  13(h) or 13(i) of the Letter  Agreement.  For the
avoidance of doubt,  references to Sections 8(c), 13(b),  13(h) and 13(i) of the
Letter Agreement shall be deemed to refer to the corresponding sections, if any,
of the Agreement and the Additional Agreements.

            On  February 3, 2005,  legislation  was  introduced  in the New York
Legislature to approve five Indian land claim settlements  authorizing  creation
of five casinos in the Catskills  region of the State of New York. This proposed
bill would approve  settlement  agreements between the State of New York and the
various Native American  tribes  including the Cayuga Nation of New York and the
Seneca  Cayuga Tribe of Oklahoma.  In addition to  obtaining  State  legislative
approval,  these settlements require United States  Congressional  approval.  On
February 10, 2005, this legislative proposal was approved by the Sullivan County
Legislature  and is currently  pending  before the New York Assembly and the New
York Senate.

MONTICELLO RACEWAY DEVELOPMENT

            Monticello  Raceway  Development  is a New  York  limited  liability
company with the exclusive right to design,  engineer,  develop,  construct, and
furnish a Class III  Gaming  facility  that will be  developed  on 29 of the 232
acres of land at Monticello Raceway in Monticello,  New York. Monticello Raceway
Development  also has the exclusive  right to develop the remaining 203 acres of
land to provide for  activities  supportive  of gaming,  such as  lodging,  food
service and  retail.  Monticello  Raceway  Development's  operating  results are
reported in our consolidated results.

            On April 3, 2003,  Monticello  Raceway  Development  entered  into a
gaming facility  development and  construction  agreement with the Cayuga Gaming
Authority  and the  Cayuga  Nation of New  York,  pursuant  to which the  Cayuga
Catskill Gaming Authority granted Monticello  Raceway  Development the exclusive
right to design,  engineer,  construct,  furnish and develop the Cayuga Catskill
Resort, and Monticello  Raceway  Development agreed to help arrange financing of
the  project.  In  exchange  for these  services,  the  Cayuga  Catskill  Gaming
Authority has agreed to pay  Monticello  Raceway  Development a development  fee
equal to 5% of the first $505 million of the project's costs, payable monthly as
the project costs are incurred. However, the Cayuga Catskill Gaming Authority is
entitled  to  retain  10% of such  development  fees  until the  project  is 50%
completed and then 5% until the project is completed.  On the  completion  date,
the Cayuga  Catskill  Gaming  Authority  is required to pay  Monticello  Raceway
Development these retained fees. Additionally, Monticello Raceway Development is
authorized $10 million for reimbursement of all pre-development and construction
costs  incurred in connection  with those 29 acres from the Cayuga Nation of New
York.

            Monticello  Raceway  Development,  in connection with its gaming and
development activities,  capitalizes certain legal,  architectural,  engineering
and  environmental  study fees, as well as other costs  directly  related to the
gaming  license  and  development  of the real  estate.  During the year  ending
December 31, 2004, Monticello Raceway Development capitalized approximately $4.7
million of additional  costs  associated with the casino  development  projects.
Capitalized costs that are specifically related to either of the Native American
projects    are    refundable    under    certain    circumstances    and    are
non-interest-bearing.  When the financing of the relevant operation is completed
the gaming  license and  development  costs will be evaluated for refund ability
and when the  operations  of a proposed  casino  commence the  balance,  if any,
systematically  recognized over a determinable  period.  These capitalized costs
are periodically  reviewed for impairment.  Should the Cayuga Nation of New York
fail to  negotiate a Compact  with the State of New York by June 30, 2005 or the
parties  fail to agree to  extend  the  agreements  we will  write off the costs
specifically  related to the Cayuga  Catskill  Resort.  At  December  31,  2004,
Monticello Raceway Development  employed four full-time employees whose salaries
and benefits are currently capitalized as development costs.

                                       31





            We believe that either of the  management  contracts with the Cayuga
Nation of New York trust land casino or the  agreements  with the Seneca  Cayuga
Tribe of Oklahoma, with all appropriate approvals, will generate more revenue in
the first year of the  contract  than the gaming  related  capitalized  costs at
December 31, 2004.  Most of the costs that are  capitalized at December 31, 2004
will  be  reimbursed  through  provisions  of the  contracts.  We are  currently
evaluating the available deferred tax asset to utilize when this revenue becomes
realizable.

MONTICELLO CASINO MANAGEMENT

            Monticello  Casino Management was formed for the purpose of managing
the  operations  of a casino and related  gaming  activities  on the 29 acres of
trust land.

            On April 3, 2003, Monticello Casino Management entered into a gaming
facility management  agreement with the Cayuga Nation of New York and the Cayuga
Catskill Gaming Authority,  an  instrumentality of the Cayuga Nation of New York
which was formed to develop and  conduct  gaming  operations  on the 29 acres of
trust land. The deadline for the effectiveness of such agreement was extended on
January 3, 2005 to June 30, 2005.  This  agreement,  the Cayuga  Catskill Gaming
Authority  retained  Monticello  Casino  Management  to manage all casino  style
gaming activities,  other than horserace wagering,  that may be conducted on the
land for seven years  commencing  upon the National  Indian Gaming  Commission's
approval of the agreement.  Monticello  Casino Management has also been retained
to manage all lawful commercial activities on the land related to gaming such as
automatic teller machines,  food service,  lodging and retail. At the same time,
Monticello  Casino  Management has agreed to assist the Cayuga  Catskill  Gaming
Authority obtain financing for the gaming enterprise and all related  commercial
activities.  In exchange for these  services,  Monticello  Casino  Management is
entitled to receive a management  fee equal to 35% of the net  revenues  derived
from the operations it manages.  Monticello Casino Management is entitled to pay
itself  its  management  fee on or before the 25th day of each  calendar  month.
However,  before  Monticello  Casino  Management can pay itself its fee, it must
first  pay  to  the  Cayuga  Catskill  Gaming  Authority  a  minimum  return  of
approximately $516,000 per month.

            The Cayuga Catskill Resort is expected to feature:

            o    160,000  square feet of gaming  space with 3,000 slot  machines
                 and 200 table games,  with  sufficient  space to accommodate an
                 additional 1,000 slot machines;

            o    separate bingo and poker areas;

            o    nine restaurants, including a buffet;

            o    several bars and a nightclub;

            o    5,000  parking  spaces,  including  4,200  covered  spaces  all
                 located directly underneath or adjacent to the casino;

            o    an enclosed retail corridor connected to Monticello Raceway;

            o    a central entertainment lounge; and

            o    a 40,000 square foot multi-function room.

            Monticello Casino  Management's  financial results will be reflected
in our consolidated  results. At December 31, 2004, Monticello Casino Management
did not have any full-time employees or operations.


                                       32



STOCK REDEMPTION

            On December 10, 2002, we entered into a  recapitalization  agreement
with Stanley Tollman,  Beatrice Tollman (Stanley Tollman's wife), Monty Hundley,
Bryanston Group and Alpha Monticello,  Inc., our wholly owned subsidiary.  Under
this agreement,  each of Bryanston Group and Beatrice Tollman granted us a three
year option to redeem from them up to 2,326,857  and 66,000 shares of our common
stock,  respectively,  at a redemption price of $2.12 per share, payable in cash
or by promissory note.

            On January 9, 2004, prior to the closing of the  consolidation  with
Catskill  Development,  we redeemed  all of the shares of our common  stock that
were subject to the  recapitalization  agreement and that were held by Bryanston
Group and Beatrice  Tollman.  In order to consummate this redemption,  we issued
promissory notes in the aggregate sum of approximately $5.1 million to Bryanston
Group and  Beatrice  Tollman in  exchange  for their  shares.  These  notes were
subsequently  paid in full on July 26,  2004 from of the  proceeds of our senior
secured convertible note offering.

CAPITAL RAISING ACTIVITIES

            PRIVATE PLACEMENT

            On January  30,  2004,  with  Jefferies & Co.,  Inc.  serving as our
exclusive placement agent, we closed the private sale of 4,050,000 shares of our
common  stock at $7.50  per  share.  This sale  resulted  in gross  proceeds  of
approximately  $30  million,  of which  $24  million  was used to  renovate  the
grandstand  at  Monticello  Raceway to install and operate up to 1,800 VGMs.  As
part of its  compensation as placement agent in this offering,  we also issued a
five year  warrant at  closing to  Jefferies  & Company,  Inc.  to acquire up to
250,000  shares of our  common  stock at $7.50 per  share  resulting  in a stock
issuance cost of approximately $2.1 million. This cost, as well as other related
stock issuance costs of approximately $4.4 million, were recorded as a reduction
of the net capital raised in this transaction.

            SENIOR SECURED NOTE OFFERING

            On July 26,  2004,  we sold $65 million  principal  amount of senior
secured  convertible  notes due in 2014 in a private  transaction to Jefferies &
Company,  Inc.,  who,  in turn,  immediately  resold  the  notes to  buyers  who
represented themselves to be qualified institutional  investors.  The notes were
issued  pursuant to an  indenture  and The Bank of New York was  selected as the
trustee for the Noteholders  under the indenture.  From the sale of these notes,
we received  net  proceeds of  approximately  $61 million  that were used to all
allow  Monticello  Raceway  Management  to  acquire  the  232  acres  of land in
Monticello,  New York it previously leased from Catskill  Development,  to repay
approximately  $5.1  million  of  indebtedness,   to  complete   renovations  at
Monticello  Raceway,  to fund certain  development  costs in connection with the
construction of a Native American casino and for general corporate purposes.

            The notes  currently  accrue  interest  at an annual rate of 5 1/2%.
However, in the event that each of:

            o    publication  in  the  Federal   Register  of  approval  by  the
                 Secretary of the Interior of a Class III gaming compact for the
                 Cayuga Nation of New York;

            o    written approval of a gaming facility  management  agreement on
                 behalf  of  the   chairman  of  the  National   Indian   Gaming
                 Commission; and

            o    the land in Monticello, New York to be used for the development
                 of  the  Cayuga   Nation  of  New  York's  casino  having  been
                 transferred  to the United  States in trust for such tribe (the
                 occurrence of all of the foregoing events is herein referred to
                 as the "Trigger Event")

fail to occur on or prior to July 31, 2005, the notes will accrue  interest from
and after July 31, 2005 at an annual rate of 8%. The  interest  rate will return
to 5 1/2% upon the  occurrence  of the  Trigger  Event.  We will  make  interest
payments  semi-annually  in cash on each  January  31 and July 31 of each  year,
beginning on January 31, 2005.


                                       33



            The notes are  convertible  into  shares of our common  stock at any
time before their  maturity,  subject to certain  restrictions  contained in the
notes, at a conversion rate of 72.727 shares per each $1,000 principal amount of
notes or $13.75 per share (equal to an aggregate  of 4,727,255  shares).  If the
Trigger  Event  has not  occurred  on or  prior to July 31,  2005,  the  initial
conversion rate per each $1,000  principal  amount of notes shall be reset based
on a 15%  premium to the average  closing bid price of our common  stock for the
prior 10 trading days; provided,  however,  that the new initial conversion rate
shall not reflect an initial  conversion  price per share in excess of $13.75 or
less than $12.56.

            Repayment  of the  notes  is  guaranteed  by  each  of our  material
subsidiaries and a security  interest in all of our personal  property,  whether
owned at the time we sold the notes or subsequently  acquired.  In addition,  if
the  Trigger  Event has not  occurred  on or prior to April 22,  2005,  we will,
subject to regulatory approval, grant the noteholders a security interest in all
of our real property,  including the 232 acres of land in Monticello,  New York,
by placing a mortgage on such property in favor of the noteholders.

OFF-BALANCE SHEET ARRANGEMENTS

            On October 29, 2003, we entered into a surety  agreement in favor of
The Berkshire  Bank to guarantee a $3.5 million loan made to Monticello  Raceway
Management,  then a wholly owned subsidiary of Catskill  Development.  This loan
was subsequently repaid in February 2004.

            On January 12, 2004 in order to better  focus on the  implementation
of the New York State  Lottery's VGM program and the development of other gaming
operations  at  Monticello  Raceway  and as a  condition  to the  closing of the
consolidation  with  Catskill  Development,   all  claims  relating  to  certain
litigation   against   parties   alleged  to  have   interfered   with  Catskill
Development's  relations with the St. Regis Mohawk Tribe,  along with the rights
to any  proceeds  from any  judgment  or  settlement  that may  arise  from such
litigation, were transferred to a grantor trust in which our common stockholders
of record immediately before the consolidation's  closing were provided a 19.75%
interest,  with the  members of  Catskill  Development  and  Monticello  Raceway
Development  immediately before the consolidation's closing owning the remaining
80.25%. We separately  entered into an agreement with the grantor trust pursuant
to which we agreed to provide  the trust with a $2.5  million  line of credit to
finance the litigation.

            For the year  ended  December  31,  2004 we  released  approximately
$500,000 in draws on the line of credit. Due to the unpredictable  nature of the
litigation  and the pending  motions  currently  under  review we provided for a
valuation  allowance of  approximately  $500,000 against the receivable from the
Litigation  Trust for the year ending  December 31, 2004.  This agreement is not
expected to have a material current or future effect on our financial condition,
or cause  changes in  financial  condition,  revenues  or  expenses,  results of
operations,  liquidity,  capital expenditures or capital resources.  Pursuant to
the terms of the Declaration of Trust  establishing the trust, in the event of a
recovery in the litigation, we are to receive payments to reimburse us for prior
litigation  expenses  of $7.5  million  and to  repay  any  draws on the line of
credit.

            We agreed to provide development  assistance of $35,000 per month to
the Seneca Cayuga Tribe of Oklahoma in  connection  with the  establishment  and
initial  operations of a tribal gaming authority for New York gaming operations.
We will also provide  technical  assistance,  payment of professional  and legal
consultants,  and expertise  relating to the  settlement of the Cayuga Nation of
New York and the Seneca Cayuga Tribe of Oklahoma's land claims against the State
of New York.

            In connection with the settlement agreement between the State of New
York and the Cayuga Nation of New York, on November 18, 2004, we have elected to
set aside,  or  otherwise  make  provision  for,  the possible use by the Cayuga
Nation  of New York of  certain  funds  for the  acquisition  of  land.  Through
segregation of funds under our credit facility with Bank of Scotland and certain
carve-outs on the  incurrence of additional  debt under the documents  governing
our senior  convertible  notes, we believe we are in a position to fulfill these
obligations,  although we are not certain of the  requirements due to continuing
negotiations.

            On November  14,  2004,  we agreed if  sufficient  financing  is not
available in connection  with the project,  we will advance an additional  $60.0
million  to pay  legal  fees  incurred  by the  Cayuga  Nation  of New  York  in
connection to their land claim,  $50 million of which would be reimbursed out of
operations,  to  the  extent  available,  and  the  remainder  of  which  may be
reimbursable under other agreements.

                                       34






CRITICAL ACCOUNTING POLICIES AND ESTIMATES

            The   preparation  of  financial   statements  in  conformity   with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and assumptions  that affect the reported
amounts  of assets and  liabilities  and  disclosure  of  contingent  assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  Actual results could differ
from those estimates.

            Management periodically reviews the carrying value of its investment
and advancement and deferred development cost in relation to historical results,
as well as  management's  best  estimate  of future  trends,  events and overall
business  climate.  If such reviews  indicate  that the  carrying  value of such
assets may not be  recoverable,  we would then  estimate  the future  cash flows
(undiscounted  and  without  interest  charges).  If such  future cash flows are
insufficient  to recover the carrying  amount of the assets,  then impairment is
triggered and the carrying value of any impaired assets would then be reduced to
fair value.

RESULTS OF OPERATIONS

           YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

            Our operations during the year ended December 31, 2004 and 2003 were
not similar due to the merger with Catskill Development and its subsidiaries and
the commencement of the new VGM operations on June 30, 2004.

            REVENUES.  Revenues  increased  approximately  $35.1 million for the
year ended December 31, 2004 due to the VGM operations.

            OPERATING  COSTS.  Operating  costs  increased  approximately  $35.8
million for the year ended  December 31, 2004 due to the start up and  operating
costs associated with the VGM operations.

            SELLING,   GENERAL   AND   ADMINISTRATIVE.   Selling,   General  and
Administrative  expenses increased approximately $8.7 million for the year ended
December 31, 2004 from stock-based  compensation of  approximately  $3.0 million
and costs associated with the VGM operations.

            DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
was approximately $507,000 and $703,000 respectively for the year ended December
31, 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES

            Net cash used in operating activities during the year ended December
31, 2004 totaled $8.7 million,  which is primarily  attributable to the start-up
costs  associated  with  the  VGM  operations  and  increased  payroll  for  new
employees.

            Net cash  used in  investing  activities  in during  the year  ended
December 31, 2004 totaled $36.2 million,  consisting  primarily of approximately
$31.1  million in purchases of property and  equipment  and  approximately  $4.1
million in costs associated with the casino development project.

            Net cash  provided  by  financing  activities  during the year ended
December 31, 2004 totaled  $50.7  million,  which is primarily  attributable  to
approximately  $30.4  million from the  proceeds of the sale of stock  through a
private  placement  and  approximately  $62.2  million  from the sale of  senior
convertible notes, offset by the excess of market value over carrying value that
was  recorded as a reduction  to equity for the  related  party  purchase of the
property  and  equipment  of $30.8  million,  stock  issuance  expenses  of $2.3
million,  $5.1 million for the repayment of promissory  notes, and the repayment
of the $3.5 million note issued to The Berkshire Bank.

            To  prepare  the  property  at   Monticello   Raceway  for  the  VGM
operations,  we had contractual  obligations relating to construction of the VGM
renovations of  approximately  $24 million.  On November 9, 2004 the balance was
paid in full.

                                       35





            In October 2004, we began  construction  to replace the paddock that
was previously  converted into VGM operation  floor space.  The new building was
under  construction at December 31, 2004 and we have contractual  obligations of
approximately $1.7 million due on this project.

            Monticello Raceway  Management  recorded a $5.7 million loss for the
year  ending  December  31,  2004.  The net  loss  was  mainly  attributable  to
non-recurring  costs  associated with the start-up of the VGM operations,  lease
expense  for  the  raceway  property  and  interest  due to  Empire  Resorts  of
approximately  $2.3 million.  The pari-mutuel  operation in the past has usually
generated a nominal  yearly  profit.  A dispute in regards to off track  betting
parlor Dark day money was settled and we recognized  approximately $1 million of
revenue with the  resolution in the quarter ending  December 31, 2004.  Dark day
money is revenue  received from OTBs when racing is held at  Monticello  Raceway
and thoroughbred racing facilities are closed.

            Any revenue  projections  would be based on information  without any
historical  data due to the start-up of the new VGM  operations,  which produces
the majority of Monticello  Raceway  Management's  revenue.  It could be assumed
that the revenue flow from the VGM operations would follow a seasonal trend line
with the winter months producing fewer guests.  Therefore, we do not believe the
revenue  results for the year ended  December 31, 2004 will be indicative of the
yearly total revenue in 2005.

            On January 30, 2004, we, with the assistance of Jefferies & Company,
Inc.,  closed a private  sale of  4,050,000  shares of common  stock to multiple
investors  at a price of $7.50 per  share.  This sale of the  registered  shares
increased by approximately $30 million, less expenses, our funds for development
and  operations.  On February 13, 2004, a  registration  statement  covering the
resale of the  shares  privately  placed  by  Jefferies  &  Company,  Inc.  went
effective.  As part of its compensation as placement agent in this offering,  we
also  issued a five year  warrant at closing to  Jefferies  & Company,  Inc.  to
acquire up to 250,000 shares of our common stock at $7.50 per share resulting in
a stock issuance cost of approximately $2.1 million.

            We entered into a special letter agreement with the Cayuga Nation of
New York to work  exclusively  with each other to  develop a casino in  Sullivan
County,  New York. As an inducement  to enter into the  transaction,  the Cayuga
Nation of New York  received  300,000  shares of our common stock vesting over a
twelve  month  period.  On April 9 and October 9, 2003,  an aggregate of 200,000
shares of common  stock vested at a market value of $10.56 and $13.84 per share,
respectively.  On April  9,  2004,  an  additional  100,000  shares  vested  and
approximately  $1.5  million  of  additional  cost  was  capitalized.  When  the
operations of the proposed casino commence,  the deferred development costs will
be systematically recognized over a determinable period. These capitalized costs
are periodically reviewed for impairment.

            On April 29, 2004, in settlement  of all unpaid  dividends  from the
first quarter of 2004, due April 1, 2004 on our Series B Preferred  Stock,  paid
$30,000 in cash,  and on June 11, 2004 issued  16,074  shares of common stock in
settlement of all outstanding  dividends from the year ending December 31, 2003.
The 16,074  shares were valued at  approximately  $210,000  and  recorded in the
period ended June 30, 2004.

            On July 16,  2004,  we sold $65 million of 5.5%  senior  convertible
notes,  guaranteed by our material subsidiaries,  that presently are convertible
into  approximately  4.7 million shares of common stock at a conversion price of
$13.75 subject to adjustment  upon the occurrence or  non-occurrence  of certain
events.  The notes were issued on July 26, 2004 with a maturity date of July 31,
2014. We will make interest payments semi-annually. We used part of the offering
proceeds to acquire 232 acres of land and  buildings  at  Monticello  Raceway in
Monticello,  New York,  from Catskill  Development,  a related  party,  to repay
certain  indebtedness,  to complete  renovations at Monticello  Raceway, to fund
certain  development costs in connection with the Cayuga Catskill Resort and for
general corporate purposes.

            The notes were sold by the initial  purchaser in a Rule 144A private
offering to qualified  institutional  buyers and were not  registered  under the
Securities  Act of 1933.  In  September of 2004 a shelf  registration  statement
covering the resale of the notes and common stock  issuable  upon  conversion of
the notes was filed with the Securities and Exchange Commission and subsequently
declared effective October 4, 2004.

            On July 26, 2004,  approximately  $5.3 million of proceeds  from the
senior  convertible  notes was  expended  to pay in full the  obligation  of the
promissory  notes payable and accrued  interest due to the  Bryanston  Group and
Beatrice Tollman.

            On July 26,  2004,  approximately  $38 million of proceeds  from the
senior  convertible  notes was expended to terminate a ground lease covering 232
acres in Monticello,  New York, and the improvements thereon,  owned by Catskill
Development,  a related party, by purchasing such leased  property.  Purchase of
the land will allow us to benefit from certain real estate tax credits resulting
from our recent investment in improvements on the land.


                                       36



            On August 19,  2004,  we and the  Seneca  Cayuga  Tribe of  Oklahoma
entered into a one year agreement  where we agreed to provide  $35,000 per month
to pay the  expenses of  establishing  the tribal  gaming  authority  or similar
organization  for the Seneca  Cayuga  Tribe of  Oklahoma  to oversee  its gaming
activities and other gaming related costs. These advances will be refunded to us
when the development project is financed.

            On November  12,  2004,  we entered  into a binding  agreement  with
Concord Associates  Limited  Partnership and an affiliate for acquisition of the
Concord  and  Grossinger's  Resort  Hotels  and Golf  Courses.  The  acquisition
includes casino and hotel development sites, and a 72 hole golf course.  Concord
Associates Limited Partnership is a joint venture owned 46% by Reckson Strategic
Venture Partners, a real estate venture capital fund.

            As  consideration  for the  acquisition,  we will  issue 18  million
shares of common stock to Concord Associates Limited  Partnership,  representing
approximately  40% of our total  issued and  outstanding  shares of common stock
after the closing, on a fully diluted basis, and the assumption of related debt.
The  closing is subject to certain  approvals,  including a vote in favor of the
transaction by a majority of our  stockholders,  and  regulatory  approval of at
least one land to trust  transfer  for a gaming  facility  at any of the  casino
development sites owned by us or Concord Associates Limited Partnership.

            On November 12, 2004,  the Company  granted  Concord  Associates  an
irrevocable  three year option to purchase up to 5,188,913  shares of its Common
Stock at a price of $7.50 per share. The option is exercisable in the event that
the Letter  Agreement is  terminated  in  accordance  with its terms for reasons
other than (a) failure of the due diligence  condition to be satisfied by either
party as of the  completion  of due  diligence on December  14, 2004,  which was
extended and satisfied by January 14, 2005, (b) a material adverse change (i) in
the properties,  assets, business, prospects, or financial or other condition of
(1) the Resort  Properties (or Concord  Associates to the extent relevant to the
transactions  contemplated by the Letter Agreement) or (2) the Company,  in each
case to the extent relevant to the transactions  contemplated by, or the ability
to consummate, the transactions, (c) an election by the Company to terminate due
to a default by Concord  Associates in the  performance of the Letter  Agreement
that has a material  adverse effect,  (d) failure to close due to the failure to
satisfy  certain  specified  conditions  to  the  closing  of  the  transactions
contemplated by the Letter Agreement,  or (d) an election by Concord  Associates
to terminate  due to failure to receive  necessary  approvals of the  Bankruptcy
Court having  jurisdiction over the bankruptcy  proceeding  involving  Frontline
Capital Corp.

            Specifically,  our  responsibilities  in  relation  to  keeping  the
options from being  exercisable  is to have a favorable  vote of both the common
stock  shareholders  and the  holders of the senior  convertible  notes,  and in
addition,  if we have a change of  ownership  prior to the  consummation  of the
acquisition of the Concord and  Grossinger's  Resort Hotels and Golf Courses Our
Board of Directors  has voted in favor of the  acquisition.  We are hopeful that
there will be a favorable  vote by both the common  stock  shareholders  and the
holders  of the  senior  convertible  notes,  and that the  transaction  will be
completed in the last quarter of 2005.

            On November  14,  2004,  we agreed if  sufficient  financing  is not
available in connection  with the project,  we will advance an additional  $60.0
million  to pay  legal  fees  incurred  by the  Cayuga  Nation  of New  York  in
connection to their land claim,  $50 million of which would be reimbursed out of
operations,  to  the  extent  available,  and  the  remainder  of  which  may be
reimbursable under other agreements.

            At December  31, 2004 we had  undeclared  dividends  on our Series E
Preferred Stock of approximately  $2.9 million and the remaining 2004 undeclared
dividends of  approximately  $125,000 on our Series B Preferred  Stock.  We have
historically  paid the Series B Preferred  Stock  dividends in common stock with
few  exceptions.  We are in compliance with our  Certificates  of  Designations,
Preferences and Rights of the issued and outstanding preferred shares.

            On July 30, 2002,  President Bush signed into law the Sarbanes-Oxley
Act of 2002 (the  "Sarbanes-Oxley  Act"). The  Sarbanes-Oxley Act imposes a wide
variety of new  regulatory  requirements  on  publicly-held  companies and their
insiders.  Many of these  requirements  will affect us. For  example,  our chief
executive  officer and chief financial  officer must now certify the accuracy of
all periodic  reports that contain  financial  statements,  our periodic reports
must disclose conclusions about the effectiveness of our disclosure controls and
procedures, and we may not make any loan to any director or executive officer.

                                       37





            The  Sarbanes-Oxley  Act  has  required  us to  review  our  current
procedures and policies to determine whether they comply with the Sarbanes-Oxley
Act and  the  new  regulations  promulgated  there  under.  We  have  engaged  a
professional  service  corporation  to assist  management in its  evaluation and
compliance with the new  requirements.  The Company will continue to monitor the
compliance with all future regulations that are adopted under the Sarbanes-Oxley
Act and will take whatever  actions are necessary to ensure  compliance.  We are
anticipating substantial costs to attain the level of compliance required by the
Sarbanes-Oxley Act.

FORMER DIRECTOR CONVICTIONS FEBRUARY 4, 2004

            On  February  4, 2004,  four former  officers  or  directors  of the
Company were convicted of tax and bank fraud.  These four individuals were Monty
Hundley,  Howard Zuckerman,  Sanford Freedman and James Cutler. None of the acts
that led to the  conviction  of these  individuals  for tax and bank  fraud were
related to their  roles or  activities  with the Company and the Company has not
been, nor will be, charged with any wrongdoing.

RECENT ACCOUNTING PRONOUNCEMENTS

            In November 2004, the FASB issued SFAS No. 151, Inventory Costs - an
amendment of ARB No. 43,  Chapter 4. SFAS No. 151 amends the guidance in ARB No.
43, Chapter 4 Inventory Pricing,  to clarify the accounting for abnormal amounts
of idle facility expense,  freight, handling costs and wasted material. SFAS No.
151 is effective  for inventory  costs  incurred  during fiscal years  beginning
after June 15, 2005. We believe that the impact that this statement will have on
our financial position or results of operations will not be significant.

            In December  2004,  FASB issued SFAS No. 123  (revised  2004) "Share
Based Payment" (SFAS No. 123R), a revision to Statement No. 123,  Accounting for
Stock-Based  Compensation  which  supersedes APB Opinion No. 25,  Accounting for
Stock Issued to Employees.  The revised SFAS 123 eliminates  the  alternative to
use Opinion 25's  intrinsic  value method of  accounting  and instead,  requires
entities to  recognize  the cost of employee  services  received in exchange for
awards of equity instruments based on the grant-date fair value of those awards.
Furthermore,  public  entities are required to measure  liabilities  incurred to
employees in share-based payment  transactions at fair value as well as estimate
the number of  instruments  for which the  requisite  service is  expected to be
rendered.  Any incremental  compensation cost for a modification of the terms or
conditions of an award is measured by comparing the fair values before and after
the modification.

            For  public  entities  that  file as  small  business  issuers,  the
effective  date of the revised  Statement  is as of the  beginning  of the first
interim or annual  reporting  period that begins after  December  15,  2005.  We
adopted the fair-value method to account for our stock-based compensation awards
granted under our stock option plans and awards granted to  non-employees  as of
January 1, 2003.

RISK FACTORS

            RISKS RELATED TO OUR BUSINESS

            THERE IS  CURRENTLY  A SPLIT  BETWEEN  TRIBAL  LEADERS OF THE CAYUGA
NATION OF NEW YORK,  THE OUTCOME OF WHICH COULD LEAD TO THE  TERMINATION  OF OUR
PROPOSED  PROJECT TO DEVELOP A NATIVE  AMERICAN  CASINO IN MONTICELLO,  NEW YORK
WITH THE CAYUGA NATION OF NEW YORK.

            On January 3, 2005, Clint Halftown,  a representative  of the Cayuga
Nation of New York,  sent a letter to Governor Pataki and issued a press release
stating that the Cayuga Nation of New York was abandoning its casino development
project with us, along with a settlement agreement between the State of New York
and the Cayuga  Nation of New York that would have allowed us to move forward in
jointly developing a Native American casino.  This statement was then refuted by
Gary  Wheeler,  another  representative  of the Cayuga  Nation of New York, in a
letter  to the  Governor  of New  York  State in which  he  claimed  that  Clint
Halftown's actions were unauthorized, that the tribe had overwhelmingly approved
the  settlement  agreement  with the State of New York back in November and that
all gaming and  development  agreements  between  us and the tribe  remained  in
effect.  Mr. Wheeler and Timothy Twoguns,  a third  representative of the Cayuga
Nation of New York,  then sent a second letter to the Governor of New York State
on January 13, 2004 affirming these positions,  and attaching the minutes from a
meeting of the Cayuga Nation Council of Chiefs, Representatives and Clan Mothers
from November 14, 2004 in which the  settlement  agreement with the State of New
York was duly approved.


                                       38


            On February 4, 2005,  we received a letter from the National  Indian
Gaming  Commission  informing us that the NIGC  received a letter on January 27,
2005 from Clint Halftown  stating that all agreements  between us and the Cayuga
Nation  expired on December 31, 2004. As a result of this fact,  the NIGC stated
that it ceased reviewing the Class III gaming management agreement,  dated April
3, 2003,  by and among the Nation,  the Cayuga  Catskill  Gaming  Authority  and
Monticello Casino Management,  LLC, our wholly owned subsidiary, and deemed such
contract to be withdrawn.  Upon receipt of this letter, the Cayuga Nation of New
York told the National Indian Gaming Commission that the January 27, 2005 letter
was not  authorized  and that in December  2004 we and the Cayuga  Nation of New
York entered  into a letter  agreement  extending  the  expiration  date for all
agreements between us, including the management agreement.  On February 9, 2005,
the Cayuga  Nation of New York  further  informed  the  National  Indian  Gaming
Commission that while Clint H. Halftown was previously given signature authority
with respect to government-to-government  relations with the United States, such
authorization  was  revoked on February  7, 2005.  The Bureau of Indian  Affairs
subsequently  notified the tribe that federal agents were being sent to New York
to investigate the leadership issue.

            Given  the  complex  nature  of the  Cayuga  Nation  of  New  York's
government,  as discussed  below, we cannot assure you that Mr. Halftown was not
authorized to terminate the New York State settlement agreement,  along with our
agreements,  regardless  of the letters  sent to the  Governor  and the National
Indian Gaming Commission by Mr. Wheeler and/or Mr. Twoguns.  If Mr. Halftown did
have proper  authority to take such actions,  our Native American casino project
with the Cayuga Nation of New York would effectively be terminated.

            IF OUR VGMS AT  MONTICELLO  RACEWAY DO NOT INCREASE OUR REVENUES AND
OPERATING  INCOME,  IF LEGISLATION  AUTHORIZING OUR VIDEO GAMING  OPERATIONS AND
DICTATING  THE AMOUNT OF VGM REVENUE WE RETAIN IS NOT MODIFIED OR IS  ULTIMATELY
HELD TO BE  UNCONSTITUTIONAL  OR IF A NATIVE AMERICAN CASINO IS NOT SUCCESSFULLY
DEVELOPED  BY  US,  IT  COULD  ADVERSELY  AFFECT  OUR  ABILITY  TO  SERVICE  OUR
OUTSTANDING DEBT.

            Our ability to make  payments on our senior  secured  notes or loans
under  the Bank of  Scotland  credit  facility  will  depend on our  ability  to
generate  cash flow from our  current  and  future  operations.  Our  ability to
generate  sufficient  cash flow will largely  depend on the success of the 1,744
VGMs that were  installed  by the New York  Lottery  this  Summer as part of our
renovation  of  Monticello  Raceway's  grandstand  building  and our  ability to
successfully  develop and manage a Native  American Casino for the Cayuga Nation
of New  York  and  the  Seneca  Cayuga  Tribe  of  Oklahoma.  Currently  our VGM
operations are losing money, as Monticello  Raceway Management is only permitted
to retain  20% of its VGM gross  revenue.  In  addition,  on July 7,  2004,  the
Appellate  Division of the Supreme Court of the State of New York ruled that the
legislation  permitting state sponsored VGM operations is unconstitutional under
New York law because such legislation  provides that a portion of the VGM vendor
fees be  dedicated  to breeding  funds and  enhancing  purses in  violation of a
constitutional  mandate that such moneys be applied exclusively to, or in aid or
support  of,  education  in the State of New  York.  While the State of New York
filed a notice of appeal with  respect to this  ruling,  which  notice of appeal
stays the decision  and allows us to continue  operating  VGMs,  there can be no
assurance that the State of New York will ultimately prevail or,  alternatively,
that  the  authorizing  legislation  will  be  amended  in  order  for  it to be
constitutional.  If the appellate court's findings are ultimately upheld and the
state legislature fails to enact corrective  legislation,  we would be forced to
shutter  our  VGMs  and our  operations  would  be  limited  to the  pari-mutuel
operations of Monticello Raceway and the proposed  development and management of
Native  American  casinos  with the Cayuga  Nation of New York and/or the Seneca
Cayuga Tribe of Oklahoma.

            In addition to ruling on the permitted use of net lottery  revenues,
the court  separately  held that VGMs are valid,  state operated  lotteries and,
thus, fall within the exemption of lotteries from the general ban on gambling in
the  State of New  York.  The  plaintiffs  have  appealed  this  portion  of the
Appellate  Division's  ruling,  and no  assurances  can be given that it will be
upheld by the New York Court of Appeals.


                                       39


            Even assuming that the ultimate  outcome of these court  proceedings
permits  us to  continue  operating  VGMs at  Monticello  Raceway  as  presently
conducted,  there can be no  assurance  that VGMs will draw  sufficiently  large
crowds to  Monticello  Raceway to increase  local  wagering to the point that we
will  realize  a profit.  The  operations  and  placement  of our  video  gaming
machines,  including the layout and distribution,  are under the jurisdiction of
the New York State Lottery and the program contemplates that a significant share
of the  responsibility  for  marketing the program will be borne by the New York
State  Lottery.  The New York State Lottery may make  decisions that we feel are
not in our best interest and, as a consequence,  the  profitability of our video
gaming  machine   operations  may  not  reach  the  levels  that  we  originally
anticipated or may be slower than expected in reaching those levels.  Currently,
Monticello  Raceway's   pari-mutuel   activities  lose  money.   Moreover,   the
legislation authorizing the implementation of VGMs at Monticello Raceway expires
in 2013,  prior to maturity of our senior secured notes, and no assurance can be
given that the  authorizing  legislation  will be extended  beyond this  period.
Similarly, the development of our proposed Native American casinos is subject to
many  regulatory,  competitive,  economic and business risks beyond our control,
and there can be no assurance  that either will be developed in a timely manner,
or at all.  Any failure in this regard could have a material  adverse  impact on
our operations and our ability to service our current debt. This problem will be
magnified if we acquire the Concord Resort Property, as this acquisition entails
our assumption of up to $30 million of new  indebtedness.  This  property,  like
Monticello  Raceway and our VGM  operations,  presently  loses money and is only
able to generate revenue from its golf courses.

            AS A HOLDING  COMPANY,  WE ARE  DEPENDENT ON THE  OPERATIONS  OF OUR
SUBSIDIARIES  TO PAY  DIVIDENDS  OR MAKE  DISTRIBUTIONS  IN  ORDER  TO  GENERATE
INTERNAL CASH FLOW.

            We are a holding  company  with no  revenue  generating  operations,
owning all the capital  stock or  membership  interests,  as the case may be, of
Monticello  Raceway  Management,  Monticello  Casino  Management  and Monticello
Raceway Development.  Consequently,  our ability to service our outstanding debt
is  dependent  on  the  earnings  and  the  distribution  of  funds  from  these
subsidiaries.  There can be no assurance that these  subsidiaries  will generate
enough  revenue  to make cash  distributions  in an amount  necessary  for us to
satisfy our  obligations  under the senior secured notes or the Bank of Scotland
credit facility.

            CHANGES IN THE LAWS,  REGULATIONS,  AND ORDINANCES (INCLUDING TRIBAL
AND/OR LOCAL LAWS) TO WHICH THE GAMING INDUSTRY IS SUBJECT,  AND THE APPLICATION
OF EXISTING LAWS AND  REGULATIONS,  OR OUR INABILITY OR THE INABILITY OF OUR KEY
PERSONNEL,  SIGNIFICANT  STOCKHOLDERS,  OR JOINT  VENTURE  PARTNERS TO OBTAIN OR
RETAIN REQUIRED GAMING REGULATORY LICENSES,  COULD PREVENT THE COMPLETION OF OUR
CURRENT CASINO DEVELOPMENT PROJECTS, PREVENT US FROM PURSUING FUTURE DEVELOPMENT
PROJECTS OR OTHERWISE ADVERSELY IMPACT OUR RESULTS OF OPERATION.

            The  ownership,  management  and operation of gaming  facilities are
subject to  extensive  federal,  state,  provincial,  tribal  and/or local laws,
regulations  and ordinances  that are  administered  by the relevant  regulatory
agency or agencies in each jurisdiction.  These laws, regulations and ordinances
vary  from   jurisdiction   to   jurisdiction,   but   generally   concern   the
responsibilities,  financial  stability and character of the owners and managers
of gaming  operations as well as persons  financially  interested or involved in
gaming  operations,  and often require such parties to obtain certain  licenses,
permits and approvals.  These laws,  regulations  and ordinances may also affect
the operations of our gaming facilities.

            The rapidly-changing  political and regulatory environment governing
the gaming industry  (including  gaming operations which are conducted on Native
American land) makes it impossible for us to accurately predict the effects that
an adoption of, changes in or application  of the gaming laws,  regulations  and
ordinances will have on us. However,  our failure,  or the failure of any of our
key personnel,  significant stockholders or joint venture partners, to obtain or
retain required gaming  regulatory  licenses could prevent us from operating our
existing  gaming  enterprises  like  Monticello  Raceway or  expanding  into new
markets,  prohibit us from  generating  revenues in certain  jurisdictions,  and
subject us to sanctions and fines.


                                       40



            SHOULD  WE OR ANY OF OUR  STOCKHOLDERS  BE FOUND  UNSUITABLE  BY ANY
FEDERAL,  STATE,  REGIONAL OR TRIBAL  GOVERNMENTAL  BODY TO OWN AN INTEREST IN A
GAMING OPERATOR,  WE OR SUCH STOCKHOLDER  COULD BE FORCED TO DIVEST OUR HOLDINGS
IN SUCH GAMING OPERATOR IN A SHORT PERIOD OF TIME AT BELOW MARKET PRICES.

            As discussed above, we and certain of our principal stockholders are
required to be licensed or otherwise  approved in each  jurisdiction in which we
own,  directly  or  indirectly,  a  significant  ownership  interest in a gaming
operator.  These licenses  generally  expire after a relatively  short period of
time and thus require  frequent  renewals  and  reevaluations.  Obtaining  these
licenses in the first place,  and for purposes of  renewals,  normally  involves
receiving  a   subjective   determination   of   "suitability."   A  finding  of
unsuitability  could lead to a material  loss of  investment by either us or our
stockholders,  as it would  require  divestiture  of one's  direct  or  indirect
interest  in  a  gaming  operator  that  conducts   business  in  the  licensing
jurisdiction.  Consequently,  should we or any  stockholder  ever be found to be
unsuitable by the federal  government,  the State of New York, the Cayuga Nation
of New York or the Seneca  Cayuga  Tribe of Oklahoma to own a direct or indirect
interest in a company with gaming  operations,  we or such  stockholder,  as the
case may be, could be forced to liquidate all  interests in that entity.  Should
either of us be forced to liquidate  these interests  within a relatively  short
period  of time,  we or such  stockholder  would  likely  be forced to sell at a
discount, causing a material loss of investment value.

            SEVERAL OF OUR FORMER  OFFICERS AND DIRECTORS  HAVE BEEN INDICTED OR
CONVICTED ON FRAUD CHARGES, AND OUR SUITABILITY  DETERMINATION TO PARTICIPATE IN
GAMING ACTIVITIES COULD ACCORDINGLY BE ADVERSELY AFFECTED.

            During 2002, certain affiliates of Bryanston Group, Inc. ("Bryanston
Group"),  our former  largest  stockholder,  and six of our former  officers and
directors were indicted for various  counts of tax and bank fraud.  On September
5, 2003, one of these former  directors  pleaded guilty to felony tax fraud, and
on  February  4, 2004,  four  additional  former  officers  and  directors  were
convicted of tax and bank fraud.  In December 2002, we entered into an agreement
with  Bryanston  Group and  certain of these  individuals  pursuant  to which we
acquired a three year option to  repurchase  their  shares of our common  stock.
This option was  exercised  on January 9, 2004 by issuing a  promissory  note to
Bryanston Group in exchange for our common stock, which note was paid in full by
us on July 26, 2004. While none of the acts these  individuals were charged with
or convicted of relate to their former positions with or ownership  interests in
us, there can be no  assurance  that none of the various  governmental  agencies
that now,  or in the  future  may,  regulate  and  license  our  gaming  related
activities  will factor in these  indictments or criminal acts in evaluating our
suitability.   Should  a  regulatory  agency  fail  to  acknowledge  that  these
indictments and  convictions do not relate to our operations,  we could lose our
gaming  licenses  or be  forced  to  liquidate  certain  or all  of  our  gaming
interests.

            OUR  ACQUISITION  OF THE  PROPERTIES  CONTEMPLATED  BY THAT  CERTAIN
NOVEMBER  12,  2004 LETTER  AGREEMENT  BETWEEN US,  CONCORD  ASSOCIATES  LIMITED
PARTNERSHIP  AND SULLIVAN  RESORTS,  LLC, WE WILL LIKELY  REQUIRE  AMENDMENTS OR
WAIVERS UNDER BOTH OUR SENIOR  CONVERTIBLE  NOTE  INDENTURE AND BANK OF SCOTLAND
CREDIT FACILITY.

            The land acquisitions contemplated by that certain letter agreement,
dated November 12, 2004 between us, Concord Associates  Limited  Partnership and
Sullivan  Resorts,  LLC,  will likely  require an  amendment or waiver under the
senior  convertible  note  indenture  and  Bank  of  Scotland  credit  facility.
Specifically,  each of the senior  secured note  indenture  and Bank of Scotland
credit facility contains numerous restrictive covenants that limit, for example,
the  amount  of new  indebtedness  we  may  occur,  the  amount  of  capitalized
expenditures  we may make,  the type of  investments we may make and the type of
acquisitions  we may  consummate.  The land  purchases,  as  contemplated in the
November 12, 2004 letter  agreement,  will likely  require  consents under these
restrictive covenants.  No assurance can be given that either the noteholders or
Bank of Scotland will agree to either of these  proposals,  and that if they do,
they will not force us to pay  severe  penalties,  causing  a  material  adverse
effect on our financial condition, thus making it harder to remain in compliance
with the  indenture  and credit  facility  going  forward,  or to secure  casino
development  financing.  Moreover,  if we are unable to secure  these  necessary
waivers and/or  consents on reasonable  terms, or at all, we intend to terminate
the  November  12,  2004  letter   agreement  and  the  land   acquisitions   it
contemplates.  Termination of the November 12, 2004 letter agreement in order to
avoid a default under our senior  secured note indenture or the Bank of Scotland
credit facility,  however,  will allow Concord Associates Limited Partnership to
exercise its option to acquire up to 5,188,913 shares of our common stock at the
exercise price of $7.50 per share.


                                       41



            IN THE EVENT THE TRIGGER EVENT HAS NOT OCCURRED ON OR PRIOR TO APRIL
22, 2005, WE ARE OBLIGATED TO USE OUR BEST EFFORTS TO PLACE A SECOND MORTGAGE ON
OUR 232 ACRES OF LAND IN MONTICELLO, NEW YORK.

            According to the terms of the senior secured note indenture,  if the
Trigger  Event has not occurred on or before April 22, 2005,  we are required to
use our best  efforts  to  obtain  all  regulatory  approvals  to place a second
mortgage  on our 232 acres of land in  Monticello,  New York and the grant  such
mortgage to The Bank of New York,  as  collateral  agent for the senior  secured
noteholders.  Thus,  should  there be a default  under the senior  secured  note
indenture following April 22, 2005, The Bank of New York, in addition to Bank of
Scotland,  will be able to  realize  on our  land  to  secure  repayment  of our
outstanding indebtedness. Moreover, as we do not have positive cash flow and our
land is our principal  asset,  should there be an event of default,  The Bank of
New York and Bank of Scotland  would  likely be forced to seize and sell all 232
acres to  assure  at  least  some  repayment  of our more  than $65  million  of
outstanding indebtedness.

            THE GAMING  INDUSTRY  IN THE  NORTHEASTERN  UNITED  STATES IS HIGHLY
COMPETITIVE,  WITH MANY OF OUR COMPETITORS BETTER KNOWN AND BETTER FINANCED THAN
US.

            The gaming  industry  in the  northeastern  United  States is highly
competitive  and  increasingly  run by  multinational  corporations  that  enjoy
widespread  name  recognition,  established  brand  loyalty,  decades  of casino
operation  experience and a diverse  portfolio of gaming assets.  Atlantic City,
the second most popular gaming destination in the United States,  with more than
10 full service hotel casinos,  is  approximately a two hour drive from New York
City, the highly popular  Foxwoods  Resort and Casino and the Mohegan Sun casino
are  each  only  two  and a  half  hour  drives  from  New  York  City.  Caesars
Entertainment,  Inc., a large gaming company, Trading Cove Associates, Inc., the
developers  of the  Mohegan  Sun  casino,  and the  Wisconsin  Oneidas  are each
planning  to  develop  Native  American  casinos  on  properties  that  are near
Monticello  Raceway.  Additionally,  on July 4, 2004, the State of  Pennsylvania
enacted a law  allowing for the  operation  of up to 61,000 slot  machines at 14
locations.  Pursuant to this new law, slot machine facilities could be developed
within 30 miles of  Monticello  Raceway  that  compete  directly  with our VGMs.
Moreover,   a  number  of  well  financed  Native  American  tribes  and  gaming
entrepreneurs  are  presently  seeking  to  develop  casinos  in  New  York  and
Connecticut  in areas that are 90 miles  from New York City such as  Bridgeport,
Connecticut and Southampton,  New York. In contrast,  we have limited  financial
resources and are  presently  limited to the operation of a harness horse racing
facility and VGMs in  Monticello,  New York and we are  approximately  one and a
half hour drive from New York City.  No  assurance  can be given that we will be
able to  compete  successfully  with  the  established  Atlantic  City  casinos,
existing and proposed regional Native American casinos,  slot machine facilities
in   Pennsylvania   or  the  casinos   proposed  to  be   developed  by  Caesars
Entertainment,  Inc., Trading Cove Associates, Inc. and the Wisconsin Oneidas in
the Catskills region of the State of New York for local gaming customers.

            BECAUSE OF THE UNIQUE STATUS OF NATIVE AMERICAN  TRIBES,  GENERALLY,
OUR ABILITY TO  SUCCESSFULLY  DEVELOP AND MANAGE OUR  PROPOSED  NATIVE  AMERICAN
CASINOS WILL BE SUBJECT TO UNIQUE RISKS.

            We have no  experience  in managing or  developing  Native  American
casinos, which present unique challenges. Native American tribes are governments
and possess the inherent  power to adopt laws and regulate  matters within their
jurisdiction. For example, tribes are generally immune from suit and other legal
processes unless they waive such immunity.  Gaming at casinos developed with the
Cayuga  Nation  of New  York or the  Seneca  Cayuga  Tribe of  Oklahoma  will be
operated on behalf of each respective tribe's government, and that government is
subject to changes in leadership or  governmental  policies,  varying  political
interests,  and pressures from the tribe's individual members,  any of which may
conflict with our interests.  Thus,  disputes  between  ourselves and either the
Cayuga Nation of New York or the Seneca Cayuga Tribe of Oklahoma may arise. With
respect to disputes concerning our existing gaming facility management agreement
and  development  agreement  with the Cayuga  Nation of New York and our planned
such agreements  with the Seneca Cayuga Tribe of Oklahoma,  the Cayuga Nation of
New York has waived,  and the Seneca  Cayuga  Tribe of  Oklahoma  will waive its
sovereign   immunity,   although  if  for  any  reason  that  waiver  should  be
ineffective,  we might be unable to enforce our rights  under those  agreements.
Also, it is possible that we might be required to seek enforcement of our rights
in a court or other dispute resolution forum of the Cayuga Nation of New York or
the Seneca  Cayuga  Tribe of Oklahoma,  as the case may be,  instead of state or
federal courts or arbitration.  As discussed below, until either gaming facility
management  agreement has been approved by the National Indian Gaming Commission
and by the Cayuga Nation of New York or the Seneca Cayuga Tribe of Oklahoma,  as
the case may be, that  agreement  will not be valid or binding on the applicable
tribe, and under relevant federal court precedent, it is likely that some or all
of our other  agreements  with such  tribe  will also be  inoperative  until the
gaming  facility  management  agreement has been approved by the National Indian
Gaming Commission.

                                       42





            Native American gaming is also governed by unique laws,  regulations
and  requirements  arising from the Indian  Gaming  Regulatory  Act of 1988,  as
amended,  the  applicable  Class III  gaming  compact,  and  gaming  laws of the
applicable  Native  American  tribe,  and certain federal Indian law statutes or
judicial  principles.  A number of examples exist where Native  American  tribes
have  successfully  voided  development  or  management-related  contracts  with
non-native  parties because of these unique Native American aspects.  For all of
the foregoing and other reasons,  we may encounter  difficulties in successfully
developing and managing a Native  American  casino with either the Cayuga Nation
of New York or the Seneca  Cayuga  Tribe of  Oklahoma.  Several  companies  with
gaming  experience that have tried to become  involved in the management  and/or
development  of  Native  American  casinos  have been  unsuccessful.  Due to our
limited Native  American  gaming  experience,  no assurance can be given that we
will be able to avoid the pitfalls that have befallen  other  companies in order
to develop successful Native American gaming operations.

            GAMING IS A HIGHLY  REGULATED  INDUSTRY AND CHANGES IN THE LAW COULD
HAVE A MATERIAL ADVERSE EFFECT ON US AND OUR ABILITY TO CONDUCT GAMING, AND THUS
ON OUR ABILITY TO MEET OUR DEBT SERVICE OBLIGATIONS.

            Native  American  casinos in New York are regulated  extensively  by
federal,  state and tribal  regulatory  bodies,  including  the National  Indian
Gaming Commission and agencies of the State of New York. As is the case with any
casino,  changes in applicable  laws and  regulations  could limit or materially
affect the types of gaming that may be conducted,  or services provided,  by our
planned casinos and the revenues realized from them.

            Currently, the operation of all gaming on Indian lands is subject to
the Indian Gaming  Regulatory Act. Over the past several years,  legislation has
been  introduced  in the United  States  Congress with the intent of modifying a
variety of perceived  problems with Indian Gaming Regulatory Act.  Specifically,
legislation  has been proposed  which would have the effect of repealing many of
the key  provisions  of the Indian Gaming  Regulatory  Act and  prohibiting  the
continued  operation of particular  classes of gaming on Indian  reservations in
states where such gaming is not otherwise allowed on a commercial  basis.  While
none of the substantive proposed amendments to Indian Gaming Regulatory Act have
been enacted, we cannot predict the ramifications of future legislative acts. In
the event that Congress passes prohibitory legislation,  and if such legislation
is sustained in the courts  against tribal  challenge,  we may be unable to move
forward in developing  our planned  Native  American  casinos and our ability to
meet our debt service obligations would be materially and adversely affected. In
addition,  under  federal  law,  gaming  on  Indian  land  is  dependent  on the
permissibility   under  state  law  of  specific  forms  of  gaming  or  similar
activities.  If the  State  of New York  were to make  various  forms of  gaming
illegal or against public policy,  such action may have an adverse effect on our
ability to develop Native American gaming operations in the Catskills.

            THE UNIQUE  GOVERNANCE  STRUCTURE  OF THE CAYUGA  NATION OF NEW YORK
MAKES CREATES A CERTAIN LEVEL OF  UNCERTAINTY AS TO WHETHER OR NOT WE OUR ALWAYS
WORKING  WITH  THE  APPROPRIATE  PERSONS  OF THE  CAYUGA  NATION  OF NEW YORK IN
IMPLEMENTING OUR GAMING FACILITY AND MANAGEMENT AGREEMENTS.

            The Cayuga Nation of New York has about 500 members,  each belonging
to one of four remaining clans,  with clan membership  determined by matrilineal
succession. The Cayuga Nation of New York has not enjoyed a reservation or other
land base for more than two hundred years,  and has no written  constitution  or
other governing  documents.  Instead, the Cayuga Nation of New York follows oral
traditions, customs and practices, including a centuries old "Great Law," and is
governed  by  a  Council  of  Chiefs,  Representatives  and  Clan  Mothers  (the
"Council").  As a result,  there may be  uncertainty  at any point in time as to
which  individuals  have  authority to act on behalf of the Cayuga Nation of New
York  and  what  limitations,  if any,  exist  on that  authority.  Our  current
understanding  is that  only two of the  four  clans  in  existence  have a Clan
Mother,  one clan is currently  in the process of  selecting a Clan Mother,  and
another  clan  can no  longer  designate  a Clan  Mother  because  there  are no
full-blooded  women members of that clan.  Each Clan Mother is  responsible  for
selecting  (and in  certain  cases  removing)  two full blood men from among her
Clan's members to serve a life-long term as Representatives on the Council.  The
Council may act only by  consensus  at a meeting,  with  unanimous  consent from
those  Representatives  in  attendance.  The  Council  presently  does  not have
regularly  scheduled  meetings,  and has no prior  experience with gaming or any
other substantial business undertaking.  Accordingly,  we could encounter delays
or other  difficulties in dealing with matters that require action by the Cayuga
Nation of New York's  government,  including  approvals of desirable  courses of
action,  contracts  or  contract  modifications,  which in turn could  adversely
affect our successful  development  and management of our jointly planned Native
American casino.

                                       43





            A TRANSFER  OF A PROPOSED  CASINO SITE TO THE UNITED  STATES,  TO BE
HELD IN TRUST FOR THE  BENEFIT  OF THE  CAYUGA  NATION OF NEW YORK OR THE SENECA
CAYUGA  TRIBE OF OKLAHOMA  MIGHT NOT OCCUR OR MAY BE DELAYED  FOR A  SUBSTANTIAL
PERIOD OF TIME;  AND UNTIL SUCH A TRANSFER  OCCURS,  IT WILL NOT BE POSSIBLE FOR
EITHER  TRIBE TO  OPERATE A CASINO IN THE  CATSKILLS  REGION OF THE STATE OF NEW
YORK FOR US TO MANAGE.

            Under the Indian Gaming Regulatory Act of 1988, the Cayuga Nation of
New York or the Seneca Cayuga Tribe of Oklahoma will be able to operate a casino
in the  Catskills  region of the State of New York only if the casino is located
on land held by the United  States in trust for the tribe (or subject to similar
restrictions on transfer),  and only if such tribe exercises governmental powers
over the  casino  site.  That  same Act,  however,  generally  prohibits  Native
American  casinos on land  transferred  into trust after  October 17,  1988.  An
exception  to this trust  land  limitation  is being  pursued by both the Cayuga
Nation  of New  York  and the  Seneca  Cayuga  Tribe of  Oklahoma,  without  any
assurance that it will be obtained.

            One exception available for land transferred after October 17, 1988,
is that if, after  consultation with the tribe and applicable  state,  local and
other nearby tribal  officials,  the Secretary of the Interior (who acts through
the Bureau of Indian Affairs) determines that a gaming establishment on the land
proposed  for  transfer  would  be in the best  interest  of the  tribe  and its
members,  and would not be detrimental to the  surrounding  community,  provided
that the Governor of the applicable State must concur. To date the instances are
very limited where this exception has been successful for off-reservation  land.
Furthermore,  historically  the Bureau of Indian  Affairs has been  reluctant to
support  accepting  land into trust that is located a substantial  distance from
the reservation of a tribe, and in the case of the Cayuga Nation of New York and
the Seneca Cayuga Tribe of Oklahoma,  the  Catskills  region of the State of New
York is a  substantial  distance  from  land  recognized  to be a part of either
tribe's  original  reservation.  Nevertheless,  on April 27,  2004,  the Eastern
Regional  Office of the Bureau of Indian  Affairs  recommended  approval  of the
Cayuga  Nation of New York's  request that the United States accept its proposed
casino  site in  Monticello,  New York into trust for the  benefit of the Cayuga
Nation of New York.  Final  approval from the Secretary of the Interior is still
required, and the Secretary of the Interior is not required to give deference to
the  Eastern  Regional  Office  of  the  Bureau  of  Indian  Affairs'  decision.
Additionally,  the  Governor of New York State must  concur  with any  favorable
determination  by the Secretary of the  Interior,  and no assurance can be given
that the Governor's office will provide such consent.

            IF OUR GAMING FACILITY MANAGEMENT AGREEMENTS ARE NOT APPROVED BY THE
NATIONAL  INDIAN GAMING  COMMISSION,  WE WILL NOT BE ABLE TO EXECUTE OUR CURRENT
BUSINESS PLAN OF DEVELOPING AND MANAGING NATIVE AMERICAN CASINOS.

            Our current gaming  facility  management  agreement and  development
agreement with the Cayuga Nation of New York such proposed  agreements  with the
Seneca  Cayuga Tribe of Oklahoma  will not become  valid or effective  until the
respective  gaming  facility  management  agreement  is  first  approved  by the
National  Indian Gaming  Commission,  and that approval might not be obtained or
might be obtained  only after we agree to modify  terms that have  already  been
agreed to by the relevant tribe that reduce our revenues under the agreements or
otherwise adversely affect us.


                                       44



            No management  contract for tribally  operated Class II or Class III
gaming is valid until  approved by the National  Indian Gaming  Commission,  and
under  current  case law in New York,  an agreement  collateral  to a management
contract,  such as our  development  agreement,  is likewise  not valid until so
approved.  The National Indian Gaming Commission has broad discretion to approve
or reject proposed management  contracts,  and by law the National Indian Gaming
Commission  can  approve  management  fees  exceeding  30% of related net gaming
revenues only if the if the Chairman of the National Indian Gaming Commission is
satisfied that the capital investment required, and income projections,  require
the  additional  fee.  The Cayuga  Nation of New York has agreed to pay us a 35%
management fee, as well as other compensation  under the development  agreement.
Our gaming facility management  agreement with the Cayuga Nation of New York has
been under review by the National Indian Gaming Commission for over one year. On
January  21,  2004,  the  National  Indian  Gaming  Commission  issued its first
objection  letter,  and in April 2004, we submitted  partial  responses to these
objections,  including a revised gaming facility  management  agreement that has
not yet been executed or otherwise formally approved by the Cayuga Nation of New
York,  but which we expect will be acceptable to the tribe.  No assurance can be
given  that the  National  Indian  Gaming  Commission  will  approve  the gaming
facility management agreement, as amended, or that further modifications to such
agreement  will not be required prior to the National  Indian Gaming  Commission
granting approval.  Such modifications could include a material reduction in the
management fee or other  compensation  we have negotiated with the Cayuga Nation
of New York. As amended,  and approved by the National Indian Gaming Commission,
the gaming  facility  management  agreement will require formal  approval by the
Cayuga Nation of New York before it becomes effective.  We cannot guarantee that
the  Cayuga  Nation  of New  York  will  approve  the  amended  gaming  facility
management agreement in order to obtain approval from the National Indian Gaming
Commission.

            COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS COULD SUBSTANTIALLY DELAY
OR, IN THE EXTREME, PREVENT OUR DEVELOPMENT OF A NATIVE AMERICAN CASINO.

            The National  Environmental  Policy Act requires federal agencies to
consider the environmental impacts of activities they perform,  fund, or permit,
as well as alternatives to those activities and ways to mitigate or lessen those
impacts.  Under the National  Environmental  Policy Act,  federal  agencies must
prepare an  environmental  assessment to determine  whether the proposed  action
will have a significant effect on the quality of the environment.  If the agency
determines  that  the  action  will  not  have  a  significant   effect  on  the
environment,  it issues a finding of no significant  impact, and the project can
move  forward;  if the agency  finds to the  contrary,  it must then  prepare an
environmental   impact   statement,   detailing   the   environmental   impacts,
alternatives, and mitigation measures.

            For either of our proposed Native American  casinos to be developed,
there are at least two major federal  actions that will require  compliance with
the  National  Environmental  Policy Act: (1) the  Secretary  of the  Interior's
decision  to take land into trust for the  benefit  of the Cayuga  Nation of New
York and/or the Seneca  Cayuga  Tribe of Oklahoma,  and (2) the National  Indian
Gaming   Commission's   approval  of  our  related  gaming  facility  management
agreement.  After reviewing the environmental assessment prepared for the Cayuga
Nation of New York project,  the Eastern Regional Office of the Bureau of Indian
Affairs  recommended,  in April,  2004,  that the Secretary of the Interior find
that taking a 29-acre  site into trust for the  benefit of the Cayuga  Nation of
New York would not have a significant effect on the environment,  and therefore,
a finding of no significant impact should be issued.  This recommendation is not
binding  on  the  Secretary  of  the  Interior  or the  National  Indian  Gaming
Commission.  The  Secretary  of the  Interior  and the  National  Indian  Gaming
Commission may accept or reject such  recommendation,  and a risk exists that in
light of recent positions taken by the Department of Justice,  preparation of an
environmental  impact statement may be required,  which could delay the project.
In any event,  even if a finding  of no  significant  impact is  issued,  a risk
exists that parties opposed to project will commence litigation  challenging the
issuance of the finding of no significant impact, thereby delaying or preventing
the project.  With respect to the Seneca  Cayuga Tribe of Oklahoma  project,  no
assurance can be given that a finding of no significant  impact will be granted,
as the land for the  casino has yet to be  determined  and  applications  to the
appropriate  governmental  authorities  for  such  evaluation  have  yet  to  be
submitted.


                                       45



            A CLASS III  GAMING  COMPACT  BETWEEN  THE STATE OF NEW YORK AND THE
CAYUGA  NATION OF NEW YORK OR THE SENECA  CAYUGA TRIBE OF OKLAHOMA,  AS THE CASE
MAY BE, MUST BE NEGOTIATED AND BECOME  EFFECTIVE BEFORE SUCH TRIBE CAN OPERATE A
CASINO FOR US TO MANAGE.

            Neither the Cayuga Nation of New York nor the Seneca Cayuga Tribe of
Oklahoma  can  lawfully  engage in Class III  gaming  unless  such tribe and the
Governor  for the State of New York  execute a Class III gaming  compact that is
approved or deemed  approved by the Secretary of the Interior.  Although  courts
have invalidated two other Class III gaming compacts between New York tribes and
the State of New York due to lack of  legislative  authority,  the  Governor has
received  requisite  legislative  authorization to enter into a Class III gaming
compact  with the  Cayuga  Nation  of New York and the  Seneca  Cayuga  Tribe of
Oklahoma  in the  Catskills  region of the State of New York.  Under each of the
land claim  settlement  agreements  between the State of New York and the Cayuga
Nation of New York,  and the State of New York and the  Seneca  Cayuga  Tribe of
Oklahoma,  the State of New York  State  agreed to  negotiate  and enter  into a
gaming compact that will authorize  Class III gaming in the Catskills  region of
the State of New York for each  tribe once the  appropriate  land has been taken
into trust by the United States for the benefit of such tribe. The terms of this
gaming  compact are not specified in the settlement  agreements,  and a draft of
the proposed  compact has not been  submitted by either the State of New York or
the  tribes to the other for  consideration.  We expect the State of New York to
propose  terms for a compact  similar to those found in the compact  between the
State of New York and the  Seneca  Nation.  That  compact  obligates  the Seneca
Nation to make payments to the State of New York in amounts of up to 25% of that
tribe's net slot revenues. There is no assurance that the State of New York will
reach an agreement upon the terms of any revenue sharing arrangement with either
the Cayuga Nation of New York or Seneca  Cayuga Tribe of Oklahoma,  or any other
terms that will result in a compact for Class III gaming.

            If the State of New York and either  the  Cayuga  Nation of New York
nor the Seneca  Cayuga Tribe of Oklahoma  reach  agreement and execute a compact
for Class III  gaming,  under the Indian  Gaming  Regulatory  Act of 1988,  that
compact  does not  become  effective  until an  approval  of the  compact by the
Secretary  of  the  Interior  has  been  published  in  the  Federal   Register.
Additionally,  the compact could become effective,  but only to the extent it is
consistent with the Indian Gaming  Regulatory Act of 1988, upon publication of a
notice in the Federal  Register  that  forty-five  days have  elapsed  after the
compact was  submitted  for  approval to the  Secretary  of the Interior and the
Secretary  of the Interior  neither  approved nor  disapproved  the compact.  No
assurance can be given that the Secretary of the Interior will approve the terms
of any compact  agreed to by the Cayuga  Nation of New York and the State of New
York or the  Seneca  Cayuga  Tribe of  Oklahoma  and the State of New  York.  In
particular,  the existence of revenue sharing provisions in a compact by which a
state  receives a share of tribal  gaming  revenues has provided a basis for the
Secretary of the Interior to disapprove a compact.  The Indian Gaming Regulatory
Act of 1988  generally  prohibits a state from  imposing a tax on tribes for the
privilege of conducting gaming in the state. The Seneca Nation-State of New York
gaming compact was neither  approved nor disapproved  within the required 45-day
period,  and therefore  became  effective  upon  publication  of a notice in the
Federal  Register.  In the letter to the Seneca  Nation and the  Governor of New
York, the Secretary of the Interior stated that the State of New York's right to
receive up to 25% of gross gaming  revenues was primarily  based on the State of
New York's  grant of an  extensive  area in which the Seneca  Nation  would have
broad  exclusive  gaming rights.  Because the precise terms of a compact between
either the Cayuga Nation of New York or the Seneca Cayuga Tribe of Oklahoma have
not been  formally  proposed,  let alone agreed upon,  there can be no assurance
that the  Secretary  of the  Interior  will  approve the future  terms of such a
compact.  If the Secretary of the Interior  disapproves any agreed upon compact,
the compact will not become effective and such tribe will not be able to conduct
gaming under its terms.  Since 2003,  a bill has been  pending in Congress  that
would limit a State's  right to share in a tribe's  gaming  revenues  unless the
State provided the tribe a "substantial  economic benefit." We cannot predict if
this or other legislation will be enacted or, if enacted, would prevent a gaming
compact  between either the Cayuga Nation of New York or the Seneca Cayuga Tribe
of Oklahoma and the State of New York.

            THERE IS A RISK THAT OUR  CO-DEVELOPMENT  LETTER  AGREEMENT AND LAND
PURCHASE AGREEMENT WITH THE CAYUGA NATION OF NEW YORK MAY HAVE EXPIRED.

            In April 2003, we entered a letter  agreement with the Cayuga Nation
of New York that allowed each of us to share in the  development by the other of
projects  ancillary to our proposed  Native  American  casino to be developed in
Monticello,  New York.  In  addition,  at the same  time,  Catskill  Development
entered into a land purchase  agreement  with the Cayuga Nation of New York that
allowed the Cayuga Nation of New York to acquire 10 of the 232 acres  previously
owned  by  Catskill  Development  upon  receiving  approvals  from  the  federal
government  to transfer  the land to the United  States of America to be held in
trust for the tribe. Upon Monticello Raceway  Management's  acquisition of those
232 acres on July 26, 2004,  Monticello  Raceway  Management  replaced  Catskill
Development as a party to the land purchase agreement.  While each of the letter
agreement and land purchase  agreement  were scheduled to expire on December 31,
2004,  on  such  date we and the  Cayuga  Nation  of New  York  entered  into an
agreement which extended the expiration of these agreements until June 30, 2005.
As this  extension  agreement  did not fully comply with the required  amendment
terms of the  letter  agreement,  because  a  number  of  other  parties  to the
agreement  did  not  execute  the  extension  contract,  or  the  land  purchase
agreement,  because we executed it instead of Monticello Raceway Management,  we
cannot assure  investors that either of these  agreements  remain in effect.  If
these  agreements are  determined not to be in effect,  the Cayuga Nation of New
York would be able to abandon the Native American casino project,  or pursue the
project with a different  developer.  While we and the Cayuga Nation of New York
are in the  process of  drafting  a more  definitive  letter  and land  purchase
agreement  that  would  eliminate  any  uncertainty  as  to  enforceability  and
commitment,  until such  agreement  is executed,  there  remains a risk that the
Cayuga  Nation of New York could  change its mind and try to abandon  the Native
American  casino  project  with us by claiming  the  governing  agreements  have
expired.


                                       46


            WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS AND EXECUTE
OUR BUSINESS STRATEGY.

            Because we are not currently generating  sufficient cash to fund our
operations,  we may be  forced  to rely on  external  financing  to meet  future
capital and operating  requirements.  Any  projections  of future cash needs and
cash flows are subject to  substantial  uncertainty.  Our  capital  requirements
depend  upon  several  factors,  including  the rate of market  acceptance,  our
ability  to  expand  our  customer  base and  increase  revenues,  our  level of
expenditures for marketing and sales, purchases of equipment, revenues and other
factors.  If our  capital  requirements  vary  materially  from those  currently
planned,  we may require  additional  financing sooner than anticipated.  We can
make no  assurance  that  financing  will be  available  in  amounts or on terms
acceptable  to  us,  if  at  all.  Further,   if  we  issue  equity  securities,
stockholders may experience additional dilution or the new equity securities may
have rights,  preferences or privileges  senior to those of existing  holders of
common  stock,  and  debt  financing,  if  available,  may  involve  restrictive
covenants  which could restrict our  operations or finances.  If we cannot raise
funds,  if needed,  on  acceptable  terms,  we may not be able to  continue  our
operations, grow market share, take advantage of future opportunities or respond
to competitive  pressures or unanticipated  requirements  which could negatively
impact our business, operating results and financial condition.

            WE WILL  NEED TO OBTAIN  ADDITIONAL  FINANCING  IN ORDER TO  DEVELOP
EITHER OF OUR PROPOSED NATIVE AMERICAN CASINOS.

            Additional  financing  will  be  required  to meet  our  obligations
related to the Native  American  casino  projects  with the Cayuga Nation of New
York and the Seneca Cayuga Tribe of Oklahoma as soon as regulatory approvals are
received and substantive  construction commences with respect to either project.
It is likely  that we will seek or require  additional  capital at some point in
2005 through  either public or private  financings.  Such  financings may not be
available  when  needed  on  terms  acceptable  to us or at all.  Moreover,  any
additional equity  financings may be dilutive to our stockholders,  and any debt
financing may involve  restrictive  covenants.  An inability to raise such funds
when  needed  might  require us to delay,  scale back or  eliminate  some of our
expansion and development goals related to the casino projects, or might require
us to cease operations entirely.

            In addition, the construction of the Native American casino projects
may depend upon the ability of the respective tribes to obtain financing for the
project.  In order to assist the Cayuga  Nation of New York or the Seneca Cayuga
Tribe of Oklahoma, as the case may be, to obtain any such financing,  we, or one
of our subsidiaries, may be required to guarantee such tribe's debt obligations.
Any guarantees by us or one of our  subsidiaries  or similar  off-balance  sheet
liabilities,  if any,  will  increase our  potential  exposure in the event of a
default by such tribe.

            OUR MANAGEMENT  REVENUES FROM OUR PROPOSED NATIVE  AMERICAN  CASINOS
MAY BE ADVERSELY AFFECTED BY MATTERS ADVERSE TO THE CAYUGA NATION OF NEW YORK OR
THE SENECA CAYUGA TRIBE OF OKLAHOMA THAT ARE UNRELATED TO US.

            When constructed,  our proposed Native American casino sites will be
either owned by a tribal partner,  or held by the United States in trust for the
benefit of such tribe.  We and our  subsidiaries  will derive  revenues from the
site based on our management and development contracts. If the proprietary tribe
does not adequately  shield its gaming  operations at the site from  obligations
arising from its other non-gaming operations,  and such tribe suffers a material
adverse  event such as  insolvency,  a default  or civil  damages in a matter in
which it did not have sovereign immunity,  creditors could attempt to seize some
or all of the personal property or profits from the tribe's gaming operations or
move to have a receiver or trustee  appointed.  Such a result  could lead to the
voidance or indirect modification by a court of our subsidiaries' management and
development  contracts with such tribe,  leading to a material adverse affect on
our  operations.  We may be  required  by  lenders  who  finance  the  casino to
subordinate  all or part of our management  fees to the prior payment in full of
their  financing.  In addition,  if  creditors  were to seize any or all of such
tribe's  gaming  operations,   our  subsidiaries'   management  and  development
agreements  with that  tribe  would be  rendered  worthless,  as the  ability to
conduct casino style gambling on that property may no longer be permissible.

            PENDING LAWSUITS COULD THREATEN THE VIABILITY OF OUR BUSINESS PLAN.

            Our  ability to  participate  in New  York's VGM  program or to help
develop  and manage a Native  American  casino in New York  could be  materially
adversely affected by the outcome of two pending lawsuits,  Dalton v. Pataki and
Karr v. Pataki,  that seek to enjoin the State of New York from  proceeding with
VGM operations or permitting the construction of any new Native American casinos
within the State of New York. While the trial court initially  dismissed both of
these cases in May of 2003, the plaintiffs  filed an appeal of the trial court's
dismissal.  On July 7, 2004, the Appellate  Division of the Supreme Court of the
State of New York  overturned  the trial  court's  dismissal  of  certain of the
plaintiffs' claims in respect of VGM operations. In overturning the trial court,
the Appellate Division ruled that the legislation permitting state sponsored VGM
operations  is  unconstitutional  under New York law  because  such  legislation
provides  that a portion of the VGM vendor fees be dedicated  to breeding  funds
and enhancing purses in violation of a  constitutional  mandate that such moneys
be applied  exclusively  to, or in aid or support of,  education in the State of
New York.  Notwithstanding  this ruling, the court separately held that VGMs are
valid,  state  operated  lotteries  and,  thus,  fall  within the  exemption  of
lotteries from the general ban on gambling in the State of New York. However, as
the  court  was  unable  to  separate  its  finding  that a VGM is a  legitimate
"lottery"  from the  enacting  legislation  that it believes  unconstitutionally
directs vendor fees toward breeding funds and enhancing  purses,  the court held
the entire VGM legislation to be unconstitutional.


                                       47



            The  office  of the  Attorney  General  of the State of New York has
filed a notice of appeal with respect to the Appellate  Division's  invalidation
of the VGM legislation. This notice of appeal stays the appellate court's ruling
while the State of New York proceeds to formally  appeal the decision to the New
York  Court of  Appeals,  New York  State's  highest  court,  a process  that we
understand  could take 18 months or longer.  While the ruling is stayed,  we can
continue  to  operate  our  VGM  facility  at  Monticello  Raceway  in a  manner
consistent  with past  practices.  However,  no assurance  can be given that the
Court  of  Appeals  will  overrule  the  Appellate  Division  and  find  the VGM
legislation to be constitutional. Absent such a ruling, to continue video gaming
operations at Monticello  Raceway,  we would need the New York state legislature
to modify the VGM  legislation  to remove the  provision  that  directs  certain
vendor fees be dedicated toward breeding funds and enhancing  purses.  Again, no
assurance  can be given  that if the State of New York  loses its  appeal on the
constitutionality  of the VGM  legislation  that  the  State  of New  York  will
subsequently enact the required corrective legislation.  Should the State of New
York  both  lose  its  appeal  and  fail to enact  corrective  legislation,  our
operations  would be restricted  to the operation of Monticello  Raceway and our
proposed management and development of Native American casinos. No assurance can
be given  that these  operations,  alone,  will be  sufficient  to  satisfy  our
existing debt obligations.

            In addition to ruling on the  constitutionality  of VGMs, on July 7,
2004,  the  Appellate  Division  of the  Supreme  Court of the State of New York
upheld the trial court's validation of the legislation  authorizing the Governor
of the State of New York to enter into gaming compacts with federally recognized
Native  American  tribes to  provide  for Class III gaming on  reservation  land
within the State of New York. The  plaintiffs  have appealed this portion of the
Appellate Division's ruling, and we cannot assure you that the New York Court of
Appeals will uphold the Appellate  Division's  validation  of this  legislation.
Should  the  plaintiffs  prevail,  we  may  be  materially  adversely  affected.
Additionally,  this  appeal,  even prior to a  definitive  ruling on its merits,
could  adversely  affect  financing  efforts  for our  planned  Native  American
casinos,  as potential  investors  might be reluctant to make such an investment
given the uncertainty that the appeal creates.

            THE  CONTINUING  DECLINE  IN THE  POPULARITY  OF  HORSE  RACING  AND
INCREASING  COMPETITION IN SIMULCASTING  COULD ADVERSELY  IMPACT THE BUSINESS OF
MONTICELLO RACEWAY.

            Since the mid 1980s,  there has been a general decline in the number
of  people  attending  and  wagering  at live  horse  races  at  North  American
racetracks  due to a number of factors,  including  increased  competition  from
other  forms of  gaming,  unwillingness  of  customers  to travel a  significant
distance to racetracks and the increasing  availability  of off-track  wagering.
The declining  attendance at live horse racing events has prompted racetracks to
rely increasingly on revenues from  inter-track,  off-track and account wagering
markets. The industry-wide focus on inter-track,  off-track and account wagering
markets has  increased  competition  among  racetracks  for outlets to simulcast
their live races.  A  continued  decrease  in  attendance  at live events and in
on-track  wagering,  as  well  as  increased  competition  in  the  inter-track,
off-track and account wagering  markets,  could lead to a decrease in the amount
wagered at Monticello Raceway.  Our business plan anticipates the possibility of
Monticello Raceway attracting new customers to its racetrack wagering operations
through VGM operations and potential  casino  development in order to offset the
general  decline  in  raceway   attendance.   However,   even  if  the  numerous
arrangements, approvals and legislative changes necessary for casino development
occur,  Monticello  Raceway may not be able to maintain  profitable  operations.
Public tastes are unpredictable  and subject to change.  Any decline in interest
in horse racing or any change in public tastes may adversely  affect  Monticello
Raceway's  revenues  and,  therefore,  limit  its  ability  to  make a  positive
contribution to our results.

            WE DEPEND ON OUR KEY PERSONNEL AND THE LOSS OF THEIR  SERVICES WOULD
ADVERSELY AFFECT OUR OPERATIONS.

            If we are unable to  maintain  our key  personnel  and  attract  new
employees  with  high  levels of  expertise  in those  gaming  areas in which we
propose  to  engage,  without  unreasonably  increasing  our  labor  costs,  the
execution of our business  strategy may be hindered and our growth  limited.  We
believe that our success is largely dependent on the continued employment of our
senior management and the hiring of strategic key personnel at reasonable costs.
If any of our current  senior  managers  were unable or unwilling to continue in
his or her present position, or we were unable to attract a sufficient number of
qualified employees at reasonable rates, our business, results of operations and
financial condition will be materially adversely affected.


                                       48



            SUBSTANTIAL  LEVERAGE AND DEBT  SERVICE  OBLIGATIONS  MAY  ADVERSELY
AFFECT OUR CASH FLOW, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

            As a result of the issuance of our senior  secured  notes,  our debt
service obligations  increased  substantially.  There is the possibility that we
may be unable to generate  cash  sufficient  to pay the principal or interest on
and other amounts due in respect of our  indebtedness  when due. If we close the
acquisition of the Concord Resort Property,  we will substantially  increase our
indebtedness by up to an additional $30 million. In addition, the Concord Resort
Property  currently does not generate revenues other than from its golf courses.
Currently,  the operating  expenses of the Concord  Resort  Property  exceed the
revenue it generates.  We may also incur substantial additional  indebtedness in
the future. Our level of indebtedness will have several important effects on our
future operations, including, without limitation:

            o    a portion of our cash flow from operations will be dedicated to
                 the  payment of any  interest  or  amortization  required  with
                 respect to outstanding indebtedness;

            o    increases in our  outstanding  indebtedness  and leverage  will
                 increase  our  vulnerability  to  adverse  changes  in  general
                 economic and  industry  conditions,  as well as to  competitive
                 pressure; and

            o    depending on the levels of our  outstanding  indebtedness,  our
                 ability to obtain  additional  financing  for working  capital,
                 general corporate and other purposes may be limited.

            Our  ability to make  payments  of  principal  and  interest  on our
indebtedness  depends upon our future  performance,  which is subject to general
economic conditions,  industry cycles and financial,  business and other factors
affecting  our  operations,  many of which are beyond our control.  Our business
might not continue to generate cash flow at or above current  levels.  If we are
unable to generate sufficient cash flow from operations in the future to service
our debt, we may be required, among other things:

            o    to seek additional financing in the debt or equity markets;

            o    to   refinance  or   restructure   all  or  a  portion  of  our
                 indebtedness, including the notes; or

            o    to sell selected assets.

            Such  measures  might not be  sufficient to enable us to service our
indebtedness. In addition, any such financing, refinancing or sale of assets may
not be available on commercially reasonable terms, or at all.

            WE MAY NOT HAVE THE ABILITY TO REPURCHASE THE NOTES.

            Upon the  occurrence  of a change  in  control  (as  defined  in the
indenture  governing  the  notes),  we  would  be  required  to  repurchase  all
outstanding  notes tendered to us by the holders of such notes. In addition,  we
may be required to repurchase  notes on July 31, 2009. We cannot assure you that
we will  have  sufficient  financial  resources,  or  will  be  able to  arrange
financing,  to pay the  purchase  price  for all of the  notes  tendered  by the
holders in connection  with any such  repurchase.  Any failure to repurchase the
notes when required will result in an event of default under the indenture.

            In addition,  the events that  constitute a change of control  under
the indenture may also be events of default under any credit  agreement or other
agreement  governing future debt. These events may permit the lenders under such
credit   agreement  or  other  agreement  to  accelerate  the  debt  outstanding
thereunder and, if such debt is not paid, to enforce  security  interests in the
collateral  securing  such debt,  thereby  limiting our ability to raise cash to
purchase the notes, and reducing the practical  benefit of the offer to purchase
provisions to the holders of the notes.

            CONVERSION  OF THE NOTES  WILL  DILUTE  THE  OWNERSHIP  INTEREST  OF
EXISTING STOCKHOLDERS.

            The  conversion of notes into shares of our common stock will dilute
the ownership interests of existing stockholders. Any sales in the public market
of the shares of our common stock  issuable  upon  conversion of the notes could
adversely affect prevailing market prices of our common stock. In addition,  the
existence of the notes may encourage short selling by market participants due to
this  dilution or  facilitate  trading  strategies  involving  the notes and our
common stock.


                                       49



            FUTURE  SALES OF SHARES OF OUR  COMMON  STOCK IN THE  PUBLIC  MARKET
COULD  ADVERSELY  AFFECT THE TRADING  PRICE OF SHARES OF OUR COMMON  STOCK,  THE
VALUE OF THE NOTES AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS.

            Future sales of substantial amounts of shares of our common stock in
the public market, or the perception that such sales are likely to occur,  could
affect prevailing trading prices of our common stock and, as a result, the value
of the notes. As of December 31, 2004, we had 26,079,655  shares of common stock
outstanding.  Because the notes generally are initially  convertible into shares
of our common stock only at a conversion  price in excess of the recent  trading
price,  a decline in our common  stock price may cause the value of the notes to
decline.

            On January  12,  2004,  18,219,075  shares of our common  stock were
issued pursuant to our acquisition of Monticello Raceway Management,  Monticello
Casino Management,  Monticello Raceway  Development and Mohawk Management,  LLC,
all of which may be sold to the  public  pursuant  to a  registration  statement
under the Securities Act. We also issued 4,050,000 shares of our common stock to
multiple  investors  in February  2004 in a private  placement.  At December 31,
2004,  we also had  outstanding  options to purchase an  aggregate  of 1,027,928
shares of common stock at an average exercise price of $5.00 per share,  250,000
warrants at $7.50 per warrant, an agreement to issue 18 million shares of common
stock and a contingent  option to purchase  5,188,913 at $7.50 per share. If the
holders  of  these  shares,  options  or  warrants  were  to  attempt  to sell a
substantial  amount of their  holdings at once,  the market  price of our common
stock would likely  decline.  Moreover,  the  perceived  risk of this  potential
dilution could cause  stockholders to attempt to sell their shares and investors
to "short" the stock,  a practice in which an investor  sells  shares that he or
she does not own at prevailing market prices, hoping to purchase shares later at
a lower price to cover the sale.  As each of these events would cause the number
of shares of our common  stock being  offered for sale to  increase,  the common
stock's  market price would likely  further  decline.  All of these events could
combine  to make it very  difficult  for us to  sell  equity  or  equity-related
securities in the future at a time and price that we deem appropriate.

            OUR  OPERATIONS  COULD  BE  CURTAILED  IF WE ARE  UNABLE  TO  OBTAIN
REQUIRED ADDITIONAL FINANCING.

            Since December 2002, our investments  and operations  primarily have
been  financed  through  sales  of our  common  stock or the  issuance  of debt.
Moreover,  we will require  substantial new financing in order to consummate our
business plan of developing two Native  American  casinos.  Sources of financing
may  include  public  or  private  debt  or  equity   financing  by  us  or  our
subsidiaries,  sales of assets or other financing arrangements.  There can be no
assurance  that  such  additional  financing  will  be  available  to us or,  if
available, that it can be obtained on acceptable terms or within the limitations
contained  in our credit  facility  with the Bank of Scotland  or the  indenture
governing our senior  secured  convertible  notes.  In addition,  any private or
public debt or equity  financing  could  result in dilution to our  stockholders
Failure  to  obtain  such  financing,  however,  could  result  in the  delay or
abandonment  of  some  or  all  of  our  development  and  expansion  plans  and
expenditures  and could have a material  adverse  effect on our  business.  Such
failure  could also limit the our ability of the Company to make  principal  and
interest  payments  on our  outstanding  indebtedness.  Except  for the  Bank of
Scotland credit  facility,  we have no material  working capital or other credit
facility  under  which we may  borrow  for  working  capital  and other  general
corporate purposes. There can be no assurance that such additional facility will
be available to us in the future or that if such a facility is  available,  that
it would be available on terms and conditions acceptable to us.

            CERTAIN  PROVISIONS OF OUR CERTIFICATE OF  INCORPORATION  AND BYLAWS
DISCOURAGE UNSOLICITED TAKEOVER PROPOSALS AND COULD PREVENT YOU FROM REALIZING A
PREMIUM RETURN ON YOUR INVESTMENT IN OUR COMMON STOCK.

            Our board of  directors  is divided  into three  classes,  with each
class constituting one-third of the total number of directors and the members of
each class serving staggered  three-year terms. This classification of the board
of  directors  makes  it more  difficult  for our  stockholders  to  change  the
composition  of the board of directors  because only a minority of the directors
can be elected at once. The  classification  provisions  could also discourage a
third party from  accumulating  our stock or attempting to obtain control of us,
even though this attempt might be  beneficial to us and some, or a majority,  of
our  stockholders.  Accordingly,  under certain  circumstances  our stockholders
could be deprived of  opportunities  to sell their  shares of common  stock at a
higher price than might  otherwise be  available.  In addition,  pursuant to our
certificate of incorporation,  our board of directors has the authority, without
further action by the stockholders, to issue up to 3,225,045 shares of preferred
stock  on such  terms  and  with  such  rights,  preferences  and  designations,
including,  without  limitation,  restricting  dividends  on our  common  stock,
dilution of our common stock's voting power and impairing the liquidation rights
of the holders of our common  stock,  as the board of directors  may  determine.
Issuance of such preferred  stock,  depending upon its rights,  preferences  and
designations,  may also have the effect of delaying,  deterring or  preventing a
change in control.

                                       50





            YOUR ABILITY TO INFLUENCE CORPORATE DECISIONS MAY BE LIMITED BECAUSE
OUR MAJOR STOCKHOLDERS OWN A LARGE PERCENTAGE OF OUR COMMON STOCK.

            Our  significant  stockholders  own a  substantial  portion  of  our
outstanding  stock. As a result of their stock ownership,  if these stockholders
were to  choose to act  together,  they  would be able to  control  all  matters
submitted to our stockholders for approval,  including the election of directors
and approval of any merger, consolidation or sale of all or substantially all of
our  assets.  This  concentration  of voting  power  could  delay or  prevent an
acquisition  of our  company on terms that other  stockholders  may  desire.  In
addition,  as the  interests of our majority and minority  stockholders  may not
always  be the  same,  this  large  concentration  of  voting  power may lead to
stockholder  votes that are  inconsistent  with your best  interests or the best
interest of us as a whole.

            THE MARKET  PRICE OF OUR COMMON  STOCK IS  VOLATILE,  LEADING TO THE
POSSIBILITY  OF ITS VALUE BEING  DEPRESSED  AT A TIME WHEN YOU WANT TO SELL YOUR
HOLDINGS.

            The market price of our common  stock has in the past been,  and may
in the future continue to be,  volatile.  For instance,  between January 1, 2002
and March 1, 2005,  the closing bid price of our common stock has ranged between
$1.39 and $16.74.  A variety of events may cause the market  price of our common
stock to fluctuate significantly, including but not necessarily limited to:

            o    quarter to quarter variations in operating results;

            o    adverse news announcements; and

            o    market conditions for the gaming industry.

            In  addition,  the  stock  market in  recent  years has  experienced
significant  price and volume  fluctuations  for reasons  unrelated to operating
performance.  These market  fluctuations  may adversely  affect the price of our
common stock at a time when you want to sell your interest in us.

GENERAL BUSINESS RISKS

            TERRORISM AND THE UNCERTAINTY OF WAR MAY HARM OUR OPERATING RESULTS.

            The terrorist  attacks of September  11, 2001 and the  after-effects
(including  the  prospects  for more  terror  attacks in the  United  States and
abroad),  combined with recent economic trends and the U.S.-led  military action
in Iraq have had a negative  impact on various  regions of the United States and
on a wide  range  of  industries,  including,  in  particular,  the  hospitality
industry. In particular, the terrorist attacks, as well as the United States war
on terrorism,  may have an unpredictable  effect on general economic  conditions
and may harm our future results of operations as they may engender  apprehension
in people who would otherwise be inclined to travel to destination  resort areas
like the  Catskills  region of the State of New York.  Moreover,  in the future,
fears of recession,  war and additional acts of terrorism may continue to impact
the U.S. economy and could negatively impact our business.

            WE ARE  SUBJECT  TO  GREATER  RISKS  THAN A  GEOGRAPHICALLY  DIVERSE
COMPANY.

            Our proposed  operations are limited to the Catskills  region of the
State of New York.  As a result,  in addition to our  susceptibility  to adverse
global and domestic economic,  political and business  conditions,  any economic
downturn in the region could have a material  adverse effect on our  operations.
An economic  downturn would likely cause a decline in the  disposable  income of
consumers  in the  region,  which  could  result in a decrease  in the number of
patrons  at our  proposed  facilities,  the  frequency  of their  visits and the
average amount that they would each be willing to spend at the proposed casinos.
We are subject to greater risks than more  geographically  diversified gaming or
resort  operations and may continue to be subject to these risks upon completion
of our expansion projects, including:

            o    a downturn in national, regional or local economic conditions;

                                       51





            o    an   increase  in   competition   in  New  York  State  or  the
                 Northeastern   United  States  and  Canada,   particularly  for
                 day-trip  patrons  residing in New York State,  including  as a
                 result of recent legislation  permitting new Indian casinos and
                 video  gaming  machines  at  certain  racetracks  in New  York,
                 Connecticut and Pennsylvania;

            o    impeded access due to road  construction or closures of primary
                 access routes; and

            o    adverse   weather  and  natural  and  other  disasters  in  the
                 Northeastern United States and Canada.

            The occurrence of any one of the events  described above could cause
a material  disruption in our business and make us unable to generate sufficient
cash flow to make payments on our obligations.

            OUR  BUSINESS  COULD BE  AFFECTED  BY  WEATHER-RELATED  FACTORS  AND
SEASONALITY.

            Our   results  of   operations   may  be   adversely   affected   by
weather-related and seasonal factors. Severe winter weather conditions may deter
or prevent patrons from reaching our gaming facilities or undertaking day trips.
In  addition,  some  recreational  activities  are  curtailed  during the winter
months.  Although  our budget  assumes  these  seasonal  fluctuations  in gaming
revenues for our proposed Native  American  casinos to ensure adequate cash flow
during  expected   periods  of  lower  revenues,   we  cannot  assure  you  that
weather-related  and seasonal factors will not have a material adverse effect on
our operations.  Our limited operating history makes it difficult to predict the
future effects of seasonality on our business, if any.

            WE ARE VULNERABLE TO NATURAL  DISASTERS AND OTHER DISRUPTIVE  EVENTS
THAT COULD SEVERELY DISRUPT THE NORMAL  OPERATIONS OF OUR BUSINESS AND ADVERSELY
AFFECT OUR EARNINGS.

            Currently,  the majority of our operations are located at a facility
in Monticello, New York and both of our proposed Native American casinos will be
located in the same general geographic area.  Although this area is not prone to
earthquakes,  floods, tornados, fires or other natural disasters, the occurrence
of any of  these  events  or any  other  cause  of  material  disruption  in our
operation  could  have a  material  adverse  effect on our  business,  financial
condition and operating  results.  Moreover,  although we do maintain  insurance
customary  for  our  industry  including  a  policy  with a ten  million  dollar
($10,000,000.00)  limit of coverage for the perils of flood and  earthquake,  we
can not assure that this  coverage will be sufficient in the event of one of the
disasters mentioned above.

            WE MAY BE SUBJECT TO MATERIAL ENVIRONMENTAL LIABILITY AS A RESULT OF
UNKNOWN ENVIRONMENTAL HAZARDS.

            We currently  own 232 acres of land that we acquired  from  Catskill
Development  in July 2004. In addition,  in November 2004, we signed a letter of
intent to acquire an  additional  1,200  acres of land from  Concord  Associates
Limited Partnership and Sullivan Resorts,  LLC. As a significant land holder, we
are   subject  to  numerous   environmental   laws.   Specifically,   under  the
Comprehensive Environmental Response,  Compensation and Liability Act, a current
or previous owner or operator of real estate may be required to investigate  and
clean up hazardous or toxic  substances  or chemical  releases on or relating to
its property and may be held liable to a governmental entity or to third parties
for property  damage,  personal injury and for  investigation  and cleanup costs
incurred  by such  parties  in  connection  with the  contamination.  Such  laws
typically impose cleanup  responsibility and liability without regard to whether
the  owner  knew of or  caused  the  presence  of  contaminants.  The  costs  of
investigation, remediation or removal of such substances may be substantial.


                                       52



            POTENTIAL  CHANGES  IN THE  REGULATORY  ENVIRONMENT  COULD  HARM OUR
BUSINESS.

            From time to time,  legislators  and  special  interest  groups have
proposed legislation that would expand, restrict or prevent gaming operations in
the jurisdictions in which we operate or intend to operate. For example, Senator
John McCain of Arizona, the new chairman of the Senate Indian Affairs Committee,
has recently  announced that he is calling for hearings on all aspects of Native
American gaming. In particular,  the Senate Indian Affairs Committee is expected
to discuss  legislation that would ban out-of-state  tribes from gaining land in
another state for gambling  operations.  The outcome of those hearing may impede
or prevent the Seneca Cayuga Tribe of Oklahoma from obtaining a Class III gaming
license from the State of New York.  Also, in recent  months,  the Oneida Indian
Nation has  undertaken  significant  lobbying  efforts to try to prevent  Native
American Indian tribes without current land holdings in New York State,  such as
the Seneca Cayuga Tribe of Oklahoma,  from  obtaining a Class III gaming license
in New York. In addition,  from time to time, certain anti-gaming groups propose
referenda  that,  if  adopted,  could force us to curtail  operations  and incur
significant losses.

            WE ARE DEPENDENT ON THE STATE OF NEW YORK, SULLIVAN COUNTY, THE TOWN
OF THOMPSON AND THE VILLAGE OF  MONTICELLO  TO PROVIDE OUR  PROPOSED  FACILITIES
WITH CERTAIN NECESSARY SERVICES.

            New York State Governor George Pataki has proposed  legislation that
would result in five Native American casinos being developed in Sullivan County.
It is uncertain  whether the local  governments have the ability to support this
level of economic  development.  The demands place upon the local governments by
these expansion efforts may be beyond the infrastructure capabilities that these
entities  are able to provide.  The  failure of the State of New York,  Sullivan
County,  the Town of Thompson or the Village of  Monticello  to provide  certain
necessary  services  such  as  water,  sanitation,   law  enforcement  and  fire
protection,  or to be able to support increased traffic demands for our proposed
facilities, would have a material adverse effect on our business.

SUBSEQUENT EVENTS

            2005 REVOLVING CREDIT FACILITY

            On January 11, 2005, we entered into a credit  facility with Bank of
Scotland,  pursuant  to which Bank of  Scotland  agreed to provide us with a $10
million senior secured revolving loan (subject to certain reserves) that matures
in two years. To secure the timely  repayment of any borrowings by us under this
credit facility, among other things, we agreed to:

            o    cause Monticello Raceway Management to grant Bank of Scotland a
                 mortgage  over  the 232  acres  of  land  and  improvements  in
                 Monticello, New York owned by Monticello Raceway Management;

            o    cause our material  subsidiaries  to guarantee our  obligations
                 under the credit facility;

            o    pledge our equity  interests  in each of our current and future
                 subsidiaries; and

            o    grant Bank of Scotland a first priority secured interest in all
                 of its assets, now owned or later acquired.

            Interest  on any loans made  pursuant  to the credit  facility  bear
interest,  at our  option,  at the rate of prime  plus 2% or Libor  plus 4%.  In
connection  with this credit  facility,  the Bank of New York, the  noteholders'
trustee  under  the  indenture,  and  Bank of New  York,  also  entered  into an
Intercreditor Agreement so that the Bank of New York will enjoy a first priority
position,  notwithstanding  the indenture and security  documents we executed on
July  26,  2004 in  connection  with  our  issuance  of $65  million  of  senior
convertible notes due 2014. We anticipate fully utilizing the available funds to
meet our development and administrative costs.

                                       53





ITEM 7.      FINANCIAL STATEMENTS.

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE STOCKHOLDERS OF EMPIRE RESORTS, INC.
      AND SUBSIDIARIES

            We have  audited  the  accompanying  consolidated  balance  sheet of
Empire Resorts,  Inc. and  Subsidiaries as of December 31, 2004, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years  ended  December  31,  2004 and  2003.  These  consolidated  financial
statements   are  the   responsibility   of  the   company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

            We  conducted  our audits in  accordance  with the  standards of the
Public Company  Accounting  Oversight  Board (United  States).  Those  standards
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

            In our opinion,  the financial  statements referred to above present
fairly, in all material respects, the financial position of Empire Resorts, Inc.
and  Subsidiaries as of December 31, 2004, and the results of its operations and
its cash flows for the years ended December 31, 2004 and 2003 in conformity with
accounting principles generally accepted in the United States of America.

/s/ Friedman LLP
- ----------------
New York, New York
February 14, 2005

                                       54





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004
                    (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Assets

Current assets:
      Cash and cash equivalents                                                      $  7,164
      Restricted cash                                                                     159
      Accounts receivable                                                               2,680
      Prepaid expenses and other current assets                                           874
                                                                                     --------
           Total current assets                                                        10,877

Property and equipment, net                                                            33,147
Advances- Tribal Gaming Authorities                                                       925
Deferred financing costs, net of accumulated
      amortization of $134                                                              3,009
Deferred development costs                                                              3,890
Gaming license and development costs                                                    8,905
                                                                                     --------

Total assets                                                                         $ 60,753
                                                                                     ========

Liabilities and Stockholders' Deficit

Current liabilities:
          Accounts payable                                                              3,805
          Construction costs payable                                                    1,447
          Accrued expenses and other current liabilities                                5,493
                                                                                     --------
                 Total current liabilities                                             10,745

Senior convertible notes                                                               65,000
                                                                                     --------
Total liabilities                                                                      75,745
                                                                                     --------

Stockholders' deficit:
      Preferred stock, 5,000 shares authorized $.01
           par value;
      Series B, 44 issued and outstanding                                                --
      Series E, $10.00 redemption value, 1,731 issued
           and outstanding                                                              6,855
      Common stock, $.01 par value, 75,000 shares
           authorized, 26,080 issued and outstanding                                      261
      Additional paid in capital                                                       15,284
      Accumulated deficit                                                             (37,392)
                                                                                     --------
           Total stockholders' deficit                                                (14,992)
                                                                                     --------
Total liabilities and stockholders' deficit                                          $ 60,753
                                                                                     ========

          See accompanying notes to consolidated financial statements.

                                       55





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
                    (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)


                                                                             2004          2003
                                                                          ---------     -----------

Revenues                                                                  $ 44,875      $  9,735
                                                                          --------      --------

Expenses:
          Operating costs                                                   44,297         8,542
          Selling, general and administrative                               10,710         2,018
          Depreciation and amortization                                        507           703
          Amortization of deferred
                 financing costs                                               378            22
          Interest expense, net                                              1,728           731
                                                                          --------      --------
                 Total expenses                                             57,620        12,016
                                                                          --------      --------

Loss from operations                                                       (12,745)       (2,281)

          Development costs                                                   --          (4,243)
                                                                          --------      --------

Net loss                                                                   (12,745)       (6,524)

Dividends paid on preferred stock                                              (30)         --

Cumulative undeclared dividends on
          preferred stock                                                   (1,510)         --
                                                                          --------      --------

Net loss applicable to common shares                                      $(14,285)     $ (6,524)
                                                                          ========      ========

Weighted average common shares
          outstanding, basic and diluted                                    25,199        18,219
                                                                          --------      --------

Loss per common share, basic and
          diluted                                                         $  (0.57)     $  (0.36)
                                                                          ========      ========

          See accompanying notes to consolidated financial statements

                                       56





                                                EMPIRE RESORTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                               YEARS ENDED DECEMBER 31, 2004 AND 2003
                                                           (IN THOUSANDS)

                                    Preferred Stock       Preferred Stock    Common Stock
                                        Series B            Series E                             Capital in   Members'
                                                                                                 Excess of     equity    Accumulated
                                   Shares      Amount   Shares    Amount    Shares    AmounT     Par Value  (deficiency)  Deficit
                                   ------      ------   ------    ------    ------    ------     ---------  ------------  ----------
Balances, January 1, 2003            --       $   --     --      $   --        --      $   --     $   --       $  4,572        --

Capital contributions                --           --     --          --        --          --         --            735        --
Capital acquisition costs            --           --     --          --        --          --         --           (445)       --
Net loss                             --           --     --          --        --          --         --         (6,524)       --
                               ----------------------------------------------------------------------------------------------------
Balances, December 31, 2003          --       $   --     --      $   --        --      $   --     $   --       $ (1,662)       --
Recapitalization effect of
   reverse acquisition               44           --    1,731      6,855    24,206        242      18,372         1,662    (24,407)
Declared and paid preferred
   dividends                         --           --     --          --         16         --         210           --        (240)
Stock based compensation             --           --     --          --         40         --       2,959           --         --
Common stock issued
   through private placement
   sales                             --           --     --          --      4,050         41      30,335           --         --
Warrants issued through private
   placement                         --           --     --          --         --         --       2,103           --         --
Stock issuance expenses              --           --     --          --         --         --      (4,420)          --         --
Common stock issued from
   exercise of stock options         --           --     --          --         61          1         150           --         --
Common stock converted to
   long term debt                    --           --     --          --     (2,393)       (24)     (5,049)          --         --
Excess of market over
   carrying value of property
   and equipment purchased
   from a related party              --           --     --          --         --         --     (30,825)          --         --
Common stock issued for
   development costs                 --           --     --          --        100          1       1,449           --         --
Net loss                             --           --     --          --         --         --         --            --     (12,745)
                               ----------------------------------------------------------------------------------------------------
Balances, December 31, 2004          44       $   --    1,731    $ 6,855    26,080     $  261     $15,284      $    --    $(37,392)
                               ====================================================================================================

                                    See accompanying notes to consolidated financial statements.

                                                                 57





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                                2004            2003
                                                                                ----            ----
Cash Flows From Operating Activities
Net loss                                                                      $(12,745)     $ (6,524)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
        Depreciation and amortization                                              507           703
        Development costs                                                         --           4,243
        Amortization of deferred financing costs                                   378            22
        Allowance for doubtful accounts -advances litigation trust                 505          --
        Accrued interest                                                          --             682
        Interest paid with proceeds of notes payable, bank                        --               3
        Stock-based compensation                                                 2,959          --
        Changes in operating assets and liabilities:
        Restricted cash                                                            (37)          (80)
        Accounts receivable, net                                                (1,921)          275
        Prepaid expenses and other current assets                                 (620)           98
        Accounts payable                                                        (2,208)        1,575
Accrued expenses and other current liabilities                                   4,504          (180)
                                                                              --------      --------

Net cash provided by (used in) operating activities                             (8,678)          817
                                                                              --------      --------

Cash Flows From Investing Activities
        Purchases of property and equipment                                    (31,079)       (1,382)
        Cash acquired from acquisition                                              18          --
        Advances - litigation trust                                               (505)         --
        Advances -  tribal gaming authorities                                     (540)         (385)
        Gaming license and development costs                                    (4,074)       (2,001)
                                                                              --------      --------
Net cash used in investing activities                                          (36,180)       (3,768)
                                                                              --------      --------

Cash flows from financing activities
        Proceeds from issuance of common stock                                  30,375          --
        Proceeds from exercise of stock options and warrants                       151          --
        Stock issuance expenses                                                 (2,317)         --
        Proceeds from issuance of senior convertible notes                      62,218          --
        Excess of market over carrying value of property and
            equipment purchased from related party                             (30,825)         --
        Repayment of promissory notes                                           (5,073)         --
        Proceeds from note payable, bank                                          --           3,379
        Repayment of note payable, bank                                         (3,470)          (30)
        Deferred financing costs                                                  (361)          (53)
        Preferred stock dividends paid                                             (30)         --
        Capital acquisition costs                                                 --             (90)
        Members' capital contributions                                            --             455
                                                                              --------      --------
Net cash provided by financing activities                                       50,668         3,661
                                                                              --------      --------
Net increase in cash  and cash equivalents                                       5,810           710
Cash and cash equivalents, beginning of year                                     1,354           644
                                                                              --------      --------
Cash and cash equivalents, end of year                                           7,164         1,354
                                                                              ========      ========
(continued)

          See accompanying notes to consolidated financial statements.

                                       58





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                                        2004      2003
                                                                                        ----      ----

Supplemental disclosure of cash flow information:
       Cash paid for interest during the year                                        $  319     $   29

Supplemental schedule of noncash investing and financing activities:
       Issuance of promissory note and redemption of common stock                     5,073       --
       Accrued construction costs                                                     1,447         23
       Common stock issued in settlement of preferred stock dividend                    210       --
       Warrants issued in settlement of stock issuance expenses                       2,103       --
       Common stock issued for development costs                                      1,450       --
       Deferred financing costs paid with proceeds from senior convertible notes      2,782       --
       Noncash additions to gaming license and development costs                        665        340
       Common stock issued in settlement of accounts payable                           --          281
       Deferred financing costs paid with proceeds from loan                           --          118
       Accrued deferred loan costs                                                     --           95
       Accrued capital acquisition costs                                               --          355

           See accompanying notes to consolidated financial statements

                                       59





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BASIS FOR PRESENTATION

            The  consolidated  balance  sheet  as  of  December  31,  2004,  the
consolidated  statement of operations  for the year ended  December 31, 2004 and
the consolidated  statement of cash flows for the year December 31, 2004 include
the accounts of Empire  Resorts,  Inc ("Empire" or "the Company") and certain of
the assets and liabilities of Catskill Development,  L.L.C. ("CDL"),  which were
merged into the Company  effective  January 12, 2004.  The operations of CDL for
the period January 1, 2004 through January 11, 2004, which were not significant,
have been  included in the  consolidated  statement of  operations  for the year
ended December 31, 2004 and cash flows for the year ended December 31, 2004. For
accounting  purposes,  CDL is deemed to have been the  acquirer  in the  merger.
Accordingly,  the comparative  consolidated statement of operations for the year
ended  December  31,  2003 and cash flows for the year ended  December  31, 2003
represent the accounts of CDL only. The assets that were not transferred through
the merger were leased to the Company  and  subsequently  purchased  on July 26,
2004 from CDL, a related party and recorded at CDL's carrying value.

            Although Empire was the legal survivor in the merger and remains the
registrant  with  the  Securities  and  Exchange  Commission,  under  accounting
principles generally accepted in the United States, the merger was accounted for
as a reverse  acquisition,  whereby CDL was  considered the "acquirer" of Empire
for financial  reporting purposes as CDL had all significant  operations and its
members controlled more than 50% of the post transaction combined company. Among
other  matters,  reverse  merger  accounting  requires  Empire to present in all
financial statements and other public information filings,  prior historical and
other  information  of CDL,  and a  retroactive  restatement  of CDL  historical
shareholders  investment  for the  equivalent  number of shares of common  stock
received in the merger.  Accordingly,  the accompanying  consolidated  financial
statements  present the results of operations of CDL for the year ended December
31, 2003 and reflect the  acquisition  of Empire as of January 1, 2004 under the
purchase method of accounting.  Subsequent to January 1, 2004, the operations of
the Company reflect the combined operations of the former Empire and CDL.

            The Company is deemed to be a Small Business Issuer.  The integrated
disclosure  system for small  business  issuers  adopted by the  Securities  and
Exchange Commission in Release No. 34-30968 and effective as of August 13, 1992,
substantially  modified the information  and financial  requirements of a "Small
Business  Issuer,"  defined to be an issuer  that has  revenues of less than $25
million;  is a U.S. or Canadian issuer; is not an investment  company;  and if a
majority-owned subsidiary, the parent is also a small business issuer; provided,
however,  an entity is not a small business issuer if it has a public float (the
aggregate  market  value  of  the  issuer's   outstanding   securities  held  by
non-affiliates) of $25 million or more.  Pursuant to Item 10(a)(2) of Regulation
S-B, as of the end of the fiscal year ended December 31, 2004, the Company is no
longer  considered a small business  issuer.  Accordingly,  going  forward,  the
Company will no longer report  pursuant to Regulation S-B, but will instead need
to meet the disclosure requirements of Regulation S-K.

            The Securities and Exchange Commission, state securities commissions
and the North American  Securities  Administrators  Association,  Inc. ("NASAA")
have  expressed  an interest  in  adopting  policies  that will  streamline  the
registration  process  and make it easier  for a small  business  issuer to have
access to the public capital markets.

NOTE A. NATURE OF BUSINESS

            Empire was  organized as a Delaware  corporation  on March 19, 1993,
and since that time has served as a holding  company  for  various  subsidiaries
engaged in the ownership,  development and operation of gaming  facilities.  The
Company  incorporated  under the name Alpha Hospitality  Corporation and changed
its name to Empire Resorts, Inc. in May, 2003.

            During  the past  three  years,  the  Company  has  concentrated  on
developing  gaming  operations  in New York State.  As part of this effort,  the
Company  has  divested  itself of various  ancillary  interests  and  terminated
certain unprofitable operations in other areas of the country.

                                       60





            Through  its   subsidiaries,   the  Company  intends  to  develop  a
multi-dimensional  gaming resort in  Monticello,  New York that  includes  horse
racing,  VGMs and a $500  million  Native  American  casino  entitled the Cayuga
Catskill Resort and other gaming and non-gaming resort  development,  to include
the development of Class III gaming facilities both within and outside the State
of New York, and Sullivan County. The Company also continues to explore numerous
other possible development projects.

            The  Company   operates   through  three   principal   subsidiaries,
Monticello  Raceway  Management,   Inc.   ("Monticello   Raceway   Management"),
Monticello  Casino  Management,   LLC  ("Monticello   Casino   Management")  and
Monticello Raceway Development Company, LLC ("Monticello Raceway  Development").
Currently,   only  Monticello  Raceway  Management  generates  revenue,  as  the
operations  of the other two  subsidiaries  are  contingent  upon the receipt of
certain federal and state regulatory approvals.

RACEWAY OPERATIONS

            Monticello Raceway Management,  a wholly owned subsidiary,  is a New
York corporation  that operates  Monticello  Raceway (the "Raceway"),  a harness
horse racing  facility  located in  Monticello,  New York,  and held a leasehold
interest in the surrounding property that it subsequently  purchased on July 26,
2004 from CDL, a related party, and recorded at CDL's carrying value.

            The Raceway began operation in 1958 and offers pari-mutuel  wagering
and live harness racing throughout the year, along with year round  simulcasting
from various harness and thoroughbred racetracks across the country. The Raceway
derives its revenue  principally  from (i) wagering at the Raceway on live races
run at the Raceway;  (ii) fees from wagering at out-of-state  locations on races
simulcast from the Raceway using export simulcasting; (iii) revenue allocations,
as  prescribed  by law,  from  betting  activity  at New York  City,  Nassau and
Catskill Off Track Betting facilities  (certain of such revenues are shared with
Yonkers Raceway based on a pro rata market share  calculation  updated monthly);
(iv) wagering at the Raceway on races  broadcast  from  out-of-state  racetracks
using  import  simulcasting;  and (v)  admission  fees,  program and racing form
sales, the sale of food and beverages and certain other ancillary activities.

MIGHTY M GAMING AT MONTICELLO RACEWAY

            A video gaming machine ("VGM") is an electronic  gaming device which
allows a patron to play  electronic  versions of various lottery games of chance
and is similar in appearance to a traditional slot machine. On October 31, 2001,
the State of New York enacted a bill designating seven racetracks, including the
Raceway,  to install and operate  VGMs.  Under the  program,  the New York State
Lottery made an initial  allocation  of 1,800 VGMs to the  Raceway.  On June 30,
2004,  Monticello Raceway Management began operating 1,744 VGMs on 45,000 square
feet  of  floor  space  at  the  Raceway  after  approximately  $27  million  of
renovations to the facility and start-up expenses.

CASINO DEVELOPMENT

            On April 3,  2003,  the  Cayuga  Nation  of New York,  (the  "Cayuga
Nation"),  a  federally  recognized  Indian  Nation,  CDL and  certain  of CDL's
affiliates,  including a  subsidiary  of the  Company,  entered into a series of
agreements  which provide for the development of a trust land casino adjacent to
the Raceway and certain other projects.  These  agreements were extended on June
25, 2004 and again on January 3, 2005 to June 30, 2005. In  furtherance of these
transactions,  on April 10, 2003,  these parties filed with the Eastern Regional
Office of the  Bureau of  Indian  Affairs  an  application  requesting  that the
Secretary of the Interior  acquire in trust on behalf of the Cayuga  Nation a 29
acre parcel of land in Monticello,  New York to be used for gaming purposes.  On
April 27,  2004,  the Eastern  Regional  Office  ("ERO") of the Bureau of Indian
Affairs  ("BIA")  completed  its review of the plan by the Cayuga Nation and the
Company to build a $500 million  casino on these 29 acres.  The ERO  recommended
that a finding be made that the project was in the best  interests of the Cayuga
Nation and not detrimental to the surrounding community and recommended that the
29 acre site be taken  into  trust by the  United  States  as a site for  gaming
activities.


                                       61



            On November  18, 2004,  the State of New York and the Cayuga  Nation
entered  into a  definitive  settlement  agreement  with  respect  to the Cayuga
Nation's  land title and  trespass  claims  against the State of New York.  This
settlement agreement provides for the State of New York and the Cayuga Nation to
enter into a class III gaming compact for the  development of a tribal casino on
the 29-acre parcel at Monticello Raceway.  Under the settlement  agreement,  the
gaming  compact  will  permit  the  operation  of  slot  machines,  but  not VGM
terminals.  The Cayuga Nation and certain other Native American tribes were also
granted the  exclusive  right to operate slot machines in the counties of Bronx,
Delaware, Greene, Kings, New York, Orange, Queens, Richmond, Rockland, Sullivan,
Ulster and  Westchester.  The Cayuga Nation has agreed to contribute  20% of its
slot machine net revenue to the State of New York during the first four years of
operation, with such contribution subsequently increasing to 25%. The settlement
agreement  also  provides  for the gaming  compact to have an initial term of 14
years,  with an automatic  seven year  renewal,  requires  the Cayuga  Nation to
commence gaming operations within 18 months of receiving all requisite state and
federal  approvals  and provides for the Cayuga Nation and the State of New York
to negotiate a tax parity compact  concerning  the sale of alcohol,  cigarettes,
gasoline  and  other  retail  products  and  services  by the  Cayuga  Nation to
non-Native  Americans  on  the  gaming  facility's   property.   The  settlement
agreement, however, does not become effective until the enactment of federal and
state legislation and tribal resolutions that formally implement its terms

            There are  significant  preconditions  that must be met  before  the
Cayuga  Nation  can  operate  gaming  at  the  Cayuga  Catskill  Resort.  First,
legislation must be passed by the New York State  legislature.  Second,  similar
legislation  must be passed by the United States Congress.  Third,  title to the
proposed 29-acre site must be transferred to the United States and accepted into
trust for the benefit of the Cayuga Nation. Fourth, the Cayuga Nation must enter
into a Class III gaming compact with the State of New York.

            On July 7, 2004, the Appellate  Division of the Supreme Court of the
State of New  York  upheld  the  trial  court's  validation  of the  legislation
authorizing  the Governor of the State of New York to enter into gaming compacts
with federally recognized Native American tribes to provide for Class III gaming
on reservation land within the State of New York. The decision has been appealed
to the highest court of New York,  the Court of Appeals,  which may reverse this
ruling.  In the event of a reversal by the Court of Appeals,  we may not be able
to proceed with the development of the Cayuga Catskill Resort.

            On August 19, 2004, the Company entered into a letter agreement with
the  Seneca-Cayuga  Tribe of Oklahoma,  a federally  recognized Indian Tribe, to
develop a gaming  facility in the  Catskills  region of New York.  The agreement
provides for the Company to supply  technical  and  financial  assistance to the
Seneca-Cayuga  Tribe of Oklahoma  and to serve as its  exclusive  partner in the
development,  construction,  financing, operation and management of the proposed
casino.  The  agreement  is  for  a  term  of  one  year  and  became  effective
immediately.  The Company will also  provide  technical  assistance  and support
relating to the  settlement of its land claim against the State of New York. The
Company  will  provide  development  assistance  of  $35,000  per  month  to the
Seneca-Cayuga Tribe of Oklahoma in connection with the establishment and initial
operations of a tribal gaming authority for New York gaming operations.

            On November  12, 2004,  the State of New York and the  Seneca-Cayuga
Tribe of Oklahoma announced execution of a settlement  agreement relating to the
Seneca-Cayuga  Tribe of  Oklahoma's  land  claims  and  development  of a Native
American  casino to be located in the Town of  Thompson,  Sullivan  County.  The
agreement provides that the State and the Seneca-Cayuga  Tribe of Oklahoma shall
enter into a mutually  satisfactory Class III gaming compact to operate a casino
in the Catskills, subject to approval of the Secretary of Interior.

            There are significant preconditions,  similar to the requirements of
the Cayuga  Nation,  that must be met  before the Tribe can  operate a Class III
gaming facility in Sullivan County, New York.

            The agreement calls for the Company and the  Seneca-Cayuga  Tribe of
Oklahoma  to  separately  enter  into a  management  agreement  and  development
agreement  for the  project  through  good  faith  negotiations  and  submit the
management agreement for approval to the National Indian Gaming Commission.  All
of the  provisions  of the above  agreements  relating to the  management of the
casino  are  subject  to review  and  approval  by the  National  Indian  Gaming
Commission prior to becoming effective. Pending such approval and as a result of
such review, such provisions may be amended or supplemented by the parties.

            Monticello  Raceway  Development  is a New  York  limited  liability
company with the exclusive right to design,  engineer,  develop,  construct, and
furnish a Class III  Gaming  facility  that will be  developed  on 29 of the 232
acres  of land at the  Raceway.  Monticello  Raceway  Development  also  has the
exclusive  right to  develop  the  remaining  203 acres of land to  provide  for
activities supportive of gaming, such as lodging, food service and retail.


                                       62



            Monticello  Raceway  Development,  in connection with its gaming and
development activities,  capitalizes certain legal,  architectural,  engineering
and  environmental  study fees, as well as other costs  directly  related to the
gaming  license  and  development  of the real  estate.  During  the year  ended
December 31, 2004, Monticello Raceway Development capitalized approximately $4.7
million of costs associated with the casino development project. When operations
of the  casino  commence,  the  remaining  costs  after  reimbursements  will be
systematically recognized over a determinable period.

NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            REVENUE AND EXPENSE  RECOGNITION.  Revenues  represent  (i) revenues
from  pari-mutual  wagering,  (ii) the net win  from  VGMs  and  (iii)  food and
beverage sales, net of promotional  allowances and other  miscellaneous  income.
The Company  recognizes  revenues  from  pari-mutual  wagering  earned from live
harness racing and simulcast signals from other tracks at the end of each racing
day and are reflected at gross,  before  deductions of such related  expenses as
purses,  stakes and awards.  Revenues from the VGM  operations is the difference
between the amount  wagered by bettors and the amount paid out to bettors and is
referred  to as the net  win.  The  Company  recognizes  revenues  from  the VGM
operations  at the end of each day and are reflected at gross.  Operating  costs
include (i) the amounts paid to the New York State Lottery for the State's share
of the net win,  (ii) amounts due to the Horsemen and  Breeder's for their share
of the net win and (iii) for harness  racing  purses,  stakes and  awards.  Also
included  in  operating  costs are the costs  associated  with the sale of food,
beverage and other miscellaneous items.

            The Company currently has a point loyalty program  ("Player's Club")
for its VGM  customers,  which allows them to earn points based on the volume of
their VGM  activity.  The  points  can be  redeemed  for  various  services  and
merchandise throughout the gaming facility. The Company records the points as an
expense  when  they are  redeemed  by the  customers.  The  value of all  points
outstanding as of December 31, 2004 was approximately $187,000.

            PRINCIPLES OF CONSOLIDATION.  The consolidated  financial statements
include  the  accounts of the Company  and its  wholly-owned  subsidiaries.  All
significant  inter-company  balances and  transactions  have been  eliminated in
consolidation.

            CASH AND CASH EQUIVALENTS. Cash and cash equivalents include cash on
account, demand deposits and certificates of deposit with original maturities of
three months or less at  acquisition.  The Company  maintains  significant  cash
balances  with  financial  institutions,  which are not  covered by the  Federal
Deposit Insurance  Corporation.  The Company has not incurred any losses in such
accounts and believes it is not exposed to any significant  credit risk on cash.
Approximately  $1.1 million of cash is held in reserve according to the New York
State Lottery Rules and Regulations.

            RESTRICTED CASH. Under New York State Racing,  Pari-Mutuel  Wagering
and Breeding Law, Monticello Raceway Management is obliged to withhold a certain
percentage of certain  types of wagers  towards the  establishment  of a pool of
money,  the use of  which is  restricted  to the  funding  of  approved  capital
improvements.  Periodically  during  the  year,  Monticello  Raceway  Management
petitions the Racing and Wagering  Board to certify that the noted  expenditures
are eligible for reimbursement from the capital improvement fund. The unexpended
balance is shown as restricted cash on the balance sheet.

            ACCOUNTS RECEIVABLE.  Accounts receivable are reported at the amount
outstanding.  Management expects to collect the entire amount and,  accordingly,
determined  that no allowance is required at December 31, 2004. The Company,  in
the  normal  course of  business,  settled  wagers for other  racetracks  and is
potentially  exposed to credit  risk.  These  wagers are  included  in  accounts
receivable.

                                       63





            PROPERTY AND  EQUIPMENT.  Property  and  equipment is stated at cost
less accumulated depreciation. The Company provided for depreciation on property
and  equipment  used by applying  the  straight-line  method over the  following
estimated useful lives:

                                                       ESTIMATED
                                                         USEFUL
            ASSETS                                       LIVES
            ------                                       -----
            Vehicles                                   5-10 years
            Furniture, fixtures and equipment          5-10 years
            Land improvements                            20 years
            Building improvements                        40 years
            Buildings                                    40 years

            DEFERRED FINANCING COSTS.  Deferred financing costs are amortized on
the  straight-line  method over the term of the senior  convertible  notes. (see
note H)

            DEFERRED DEVELOPMENT COSTS. Deferred development costs are stated at
cost.  The Company  capitalizes  certain costs  directly  related to obtaining a
gaming license under a management  agreement with a federally  recognized Native
American  Tribe.   These  capitalized   costs  are  periodically   reviewed  for
impairment.

            GAMING LICENSE AND DEVELOPMENT  COSTS. In connection with its gaming
and   development   activities,   the   Company   capitalizes   certain   legal,
architectural,  engineering and environmental study fees, as well as other costs
directly related to the gaming license and development of the real estate. These
capitalized costs are periodically reviewed for impairment.

            IMPAIRMENT OF LONG-LIVED  ASSETS. The Company  periodically  reviews
the carrying value of its long-lived  assets in relation to historical  results,
as well as  management's  best  estimate  of future  trends,  events and overall
business  climate.  If such reviews  indicate  that the  carrying  value of such
assets may not be  recoverable,  the Company would then estimate the future cash
flows (undiscounted and without interest charges). If such future cash flows are
insufficient  to recover the carrying  amount of the assets,  then impairment is
triggered and the carrying value of any impaired assets would then be reduced to
fair value.

            LOSS PER COMMON SHARE. The Company computes basic earnings per share
by dividing  income  available to common  stockholders  by the  weighted-average
common shares  outstanding for the year. Diluted earnings per share reflects the
potential dilution of earnings that could occur if securities or other contracts
to issue common stock were  exercised or converted into common stock or resulted
in the  issuance of common stock that then shared in the earnings of the entity.
Since the effect of  outstanding  options  and  warrants is  anti-dilutive  with
respect to losses,  they have been excluded from the  Company's  computation  of
loss per common share. Therefore,  basic and diluted losses per common share for
the year ending  December 31, 2004 were the same.  The weighted  average  shares
used in the loss per common share  calculation for year ending December 31, 2003
reflects the number of shares issued in the merger.

            ADVERTISING.  The Company expenses the costs of general advertising,
promotion and marketing programs at the time the costs are incurred. Advertising
expense was approximately  $142,000 and $49,000 respectively for the years ended
December 31, 2004 and 2003.

            INCOME TAXES.  The Company applies the asset and liability  approach
to financial  accounting  and reporting for income  taxes.  Deferred  income tax
assets and  liabilities  are  computed  for  differences  between the  financial
statement  and tax bases of assets and  liabilities  that will  result in future
taxable  or  deductible  amounts,  based on  enacted  tax laws and rates for the
periods  in which  the  differences  are  expected  to  affect  taxable  income.
Valuation  allowances are  established,  when necessary,  to reduce deferred tax
assets to the amount expected to be realized.


                                       64



            USE  OF  ESTIMATES.  The  preparation  of  financial  statements  in
conformity with accounting principles generally accepted in the United States of
America  requires  management to make estimates and assumptions  that affect the
reported  amounts of assets and liabilities and disclosure of contingent  assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses  during the  reporting  period.  Actual  results  could
differ from those estimates.

            STOCK-BASED COMPENSATION. In December 2004, FASB issued SFAS No. 123
(revised 2004) "Share Based Payment" (SFAS No. 123R) a revision to Statement No.
123,  Accounting for Stock-Based  Compensation  which supersedes APB Opinion No.
25,  Accounting  for Stock Issued to Employees.  The revised SFAS 123 eliminates
the  alternative  to use Opinion 25's  intrinsic  value method of accounting and
instead,  requires  entities to recognize the cost of employee services received
in exchange for awards of equity  instruments based on the grant-date fair value
of  those  awards.   Furthermore,   public  entities  are  required  to  measure
liabilities  incurred to employees in share-based  payment  transactions at fair
value as well as  estimate  the number of  instruments  for which the  requisite
service is expected to be  rendered.  Any  incremental  compensation  cost for a
modification of the terms or conditions of an award is measured by comparing the
fair values before and after the modification.

            For  public  entities  that  file as  small  business  issuers,  the
effective  date of the revised  Statement  is as of the  beginning  of the first
interim or annual  reporting  period that begins after  December  15, 2005.  The
Company   adopted  the  fair-value   method  to  account  for  its   stock-based
compensation  awards  granted under the Company's  stock option plans and awards
granted to non-employees as of January 1, 2003.

            RECENT ACCOUNTING PRONOUNCEMENTS.  In November 2004, the FASB issued
SFAS No. 151,  Inventory Costs - an amendment of ARB No. 43, Chapter 4. SFAS No.
151 amends the guidance in ARB No. 43, Chapter 4 Inventory  Pricing,  to clarify
the accounting for abnormal amounts of idle facility expense,  freight, handling
costs and  wasted  material.  SFAS No.  151 is  effective  for  inventory  costs
incurred  during fiscal years beginning after June 15, 2005. We believe that the
impact that this  statement  will have on our  financial  position or results of
operations will not be significant.

            RECLASSIFICATIONS. Certain prior year amounts have been reclassified
to conform to the current year presentation.

NOTE C. PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

            The following  unaudited  pro-forma statement of operations presents
information  as if the merger,  purchase of the property and  equipment  and the
issuance  of the senior  convertible  notes  took place at January 1, 2003.  The
pro-forma  amounts  include  certain  adjustments  primarily to present  certain
expenses which resulted from the  transaction  and do not reflect the economics,
if any,  which  might be  achieved  from  combining  the  Company's  results  of
operations.   The  merger  was  between   companies  under  common  control  and
accordingly assets and liabilities acquired were recorded at book value.

                                       65





The unaudited pro forma  financial  statements  should be read together with the
financial  statements  and notes of the Company and the  consolidated  financial
statements of CDL for the year ended December 31, 2003.

                                                                                 Pro Forma Results
                                                                                     (Unaudited)
                                                                                 (in thousands except
                                                                                   per share data)
                                                                                    Year Ended
                                                                                 December 31, 2003


Revenues                                                                             $  9,735
                                                                                     --------

Expenses:
             Operating costs                                                            8,542
             Selling, general and administrative                                        8,883
             Depreciation                                                                 703
             Amortization of deferred financing costs                                      22
                                                                                     --------
             Interest expense, net                                                      4,179
                                                                                     --------
             Total expenses                                                            22,329
                                                                                     --------

Other income (loss)
             Gain on sale of investment and related management contract                   135
             Recovery of insurance proceeds                                               500
             Gain on extinguishment of debt                                               389
             Development cost                                                          (4,243)
                                                                                     --------
             Total other loss                                                          (3,219)
                                                                                     --------

Net loss                                                                              (15,813)

Cumulative undeclared dividends on preferred stock                                     (1,551)
                                                                                     --------

Net loss applicable to common shares                                                 $(17,364)
                                                                                     ========

Weighted average common shares outstanding, basic and diluted                          23,720
                                                                                     ========

Loss per common share, basic and diluted                                             $  (0.73)
                                                                                     ========

NOTE D. PROPERTY AND EQUIPMENT

                                                                                  December 31, 2004
                                                                                    (in thousands)

              Land                                                                  $     770
              Land improvements                                                         1,481
              Buildings                                                                 4,564
              Buildings improvements                                                   23,966
              Vehicles                                                                    130
              Furniture, fixtures and equipment                                         2,743
                                                                                    ---------

                                                                                       33,654

              Less - Accumulated depreciation and amortization                           (507)
                                                                                    ----------

                                                                                     $ 33,147
                                                                                    ==========

                                       66





            Depreciation and amortization expense was approximately $507,000 and
$703,000, respectively for the years ending December 31, 2004 and 2003.

NOTE E.  ADVANCES TO TRIBAL GAMING AUTHORITIES

            The  Company  has made  payments  to both the Cayuga  Nation and the
Seneca-Cayuga Tribe of Oklahoma to help cover development costs for the proposed
gaming  facilities  and  other  development   projects.  We  agreed  to  provide
development  assistance  of  $35,000  per  month to the  Seneca-Cayuga  Tribe of
Oklahoma  and  support  additional  professional  fees in  connection  with  the
establishment and initial  operations of tribal gaming  authorities for both the
Cayuga Nation and the  Seneca-Cayuga  Tribe of Oklahoma for gaming operations in
the State of New York. These advances are refundable under certain circumstances
and are non-interest-bearing.  These capitalized costs are periodically reviewed
for  impairment.  As of December 31, 2004,  approximately  $925,000 in total was
advanced to both Tribal Gaming Authorities.

NOTE F.  DEFERRED DEVELOPMENT COSTS

            Under a special letter agreement  between the Company and the Cayuga
Nation,  the parties are to work exclusively with each other to develop a casino
in  Sullivan  County,  New  York  and,  as  an  inducement  to  enter  into  the
transaction,  the Cayuga Nation received  300,000 shares of the Company's common
stock  vesting over a twelve month  period.  On April 9 and October 9, 2003,  an
aggregate  of 200,000  shares of common stock vested at a market value of $10.56
and $13.84 per share,  respectively.  On April 9, 2004,  an  additional  100,000
shares vested and approximately $1.5 million of additional cost was capitalized.
When the operations of the proposed casino  commence,  the deferred  development
costs  will be  systematically  recognized  over a  determinable  period.  These
capitalized costs are periodically reviewed for impairment.

NOTE G.  GAMING LICENSE AND DEVELOPMENT COSTS

            In connection  with the  development  of real estate for  additional
gaming  activities,  we have incurred  various costs including  salaries for key
personnel.  We agreed to provide technical  assistance,  payment of professional
and legal  consultants,  and expertise  relating to the settlement of out Native
American  partners' land claims against the State of New York and assist them in
acquiring a mutually acceptable gaming compact.

            As of December 31, 2003,  Monticello  Raceway  Development,  through
CDL, had  capitalized  approximately  $4.2 million of costs  associated with the
development  of gaming  activities.  During the year ended  December  31,  2004,
Monticello  Raceway  Development  capitalized   approximately  $4.7  million  of
additional costs.  Capitalized costs that are specifically  related to either of
the Native American projects are refundable under certain  circumstances and are
non-interest-bearing. When the financing of the relevant operation is completed,
the gaming license and  development  costs will be evaluated for refund ability,
and when the  operations of the proposed  casino  commence the balance,  if any,
will be systematically  recognized over a determinable period. These capitalized
costs are periodically reviewed for impairment.

NOTE H. SENIOR CONVERTIBLE NOTES

            On July 26,  2004,  the  Company  issued $65  million of 5.5% senior
convertible notes presently convertible into approximately 4.7 million shares of
common stock,  subject to adjustment  upon the occurrence or  non-occurrence  of
certain  events.  The notes were issued with a maturity  date of July 31,  2014.
Interest is payable  semi-annually  on January 31 and July 31 to the persons who
are  registered  holders at the close of business on each January 15 and July 15
immediately preceding the applicable interest payment date.

            The senior  convertible notes are the Company's senior  obligations,
ranking  senior in right of payment to all of the Company's  existing and future
subordinated  indebtedness and ranking equally in right of payment with existing
and future senior  indebtedness.  The notes are  guaranteed on a senior basis by
all of the  Company's  material  subsidiaries.  The  guarantee of each  material
subsidiary guarantor is a senior obligation of the guarantor,  ranking senior in
right of payment to all existing  and future  subordinated  indebtedness  of the
Company's  guarantors and ranking  equally in right of payment with any existing
and future senior indebtedness of such guarantor.

                                       67





            The notes are  secured  by the  Company's  tangible  and  intangible
assets and by a pledge of the equity interests of each of the Company's material
subsidiaries.

            The notes  initially  accrue  interest at an annual rate of 5.5%. If
one of the following  events (the  "Trigger  Event") does not occur on or before
July 31, 2005:  publication in the Federal Register of approval by the Secretary
of the Interior of a Class III gaming  compact for the Cayuga  Catskill  Resort;
written  approval of a gaming  facility  management  agreement  on behalf of the
chairman of the National  Indian Gaming  Commission;  or the land in Monticello,
New York to be used for the  development  of the Cayuga  Catskill  Resort having
been transferred to the United States in trust for the Cayuga Nation,  the notes
will accrue  interest  from and after July 31, 2005 at an annual rate of 8%. The
interest rate will return to 5.5% upon the occurrence of the Trigger Event.

            The notes can be converted into shares of the Company's common stock
at any time prior to maturity,  redemption  or  repurchase  by the Company.  The
initial  conversion  rate is 72.727 shares per each $1,000  principal  amount of
notes,  subject to adjustment.  This conversion rate is equivalent to an initial
conversion  price of $13.75 per share. In the event that the notes convert prior
to July 31, 2007, the Company will be required to make an additional  make-whole
payment  equal to the  present  value of all  remaining  scheduled  payments  of
interest on the notes to be  converted  through  and  including  July 31,  2007,
assuming for such purpose that the interest rate in effect as of the  conversion
date shall apply for all subsequent  interest periods through July 31, 2007. Any
make-whole  payment  will be payable  in cash or, at the  Company's  option,  in
shares of the Company's common stock at a 5% discount to the average closing bid
price  of the  Company's  common  stock  for the 10  trading  days  prior to the
conversion date.

            If the Trigger  Event has not occurred on or prior to July 31, 2005,
the initial  conversion rate per each $1,000  principal amount of notes shall be
reset  based on a 15%  premium to the  average  closing  bid price of our common
stock for the prior 10 trading  days,  provided,  however,  that the new initial
conversion  rate  shall not  reflect an  initial  conversion  price in excess of
$13.75 or less than $12.56 per share.

            The Company will use its best efforts to cause, on or prior to April
22, 2005, if the Trigger  Event shall have not yet  occurred,  the notes and the
guarantees  to  become  secured  by a  mortgage  on our  232  acres  of  land in
Monticello, New York (with such mortgage being released with respect to the site
of the Cayuga  Catskill  Resort being released as required to transfer such site
into trust with the United States).

            Upon the  occurrence of the Trigger Event,  the indenture  governing
the notes will permit the Company to incur up to an additional $150.0 million of
additional  indebtedness  or any  amount  of  additional  indebtedness  that the
Company's  consolidated fixed charge coverage ratio will be, after giving effect
to the incurrence thereof, greater than 2 to 1.

            If the Company  experiences  a  significant  change of control,  the
holder will have the right to either require the Company to repurchase the notes
at a price  equal to 101% of the  principal  amount  thereof,  plus  accrued and
unpaid  interest and  liquidated  damages,  if any,  thereon or, in the event at
least 90% of the  consideration  received  in  connection  with  such  change of
control is comprised of cash or cash equivalents,  elect to receive a make-whole
payment  of up to 16.5% of the  outstanding  principal  amount of such  holder's
untendered notes (depending when the change of control occurs).

            Holders may  require  the  Company to purchase  all or part of their
notes at a  purchase  price of 100% of the  principal  amount of the notes  plus
accrued and unpaid interest and liquidated damages, if any, on July 1, 2009.

            The notes were sold by the initial  purchaser in a Rule 144A private
offering to qualified  institutional  buyers and were not  registered  under the
Securities  Act of 1933.  In September of 2004, a shelf  registration  statement
covering  the resale of the notes and the shares of common stock  issuable  upon
conversion  of the  notes  was  filed  with  the SEC and  subsequently  declared
effective on October 4, 2004.

            There is no public  market  for the notes and the  Company  does not
intend  to apply for  listing  of the notes on any  securities  exchange  or for
quotation of the notes through any automated quotation system.

                                       68





            The  Company,  in  association  with  the  issuance  of  the  senior
convertible  notes,  incurred  approximately $3.1 million in costs. The deferred
financing  costs will be capitalized  and  systematically  amortized over the 10
year life of the notes.  For the year  ended  December  31,  2004,  the  Company
recognized approximately $134,000 in amortization expense.

            For the year  ending  December  31,  2004,  the  Company  recognized
approximately  $1.5  million  in  interest  expense  associated  with the senior
convertible notes.

            On January 31, 2005, the interest  payment paid in association  with
the senior convertible notes was approximately $1.8 million.

NOTE I. NOTES PAYABLE

BRYANSTON GROUP AND BEATRICE TOLLMAN

            On January 9, 2004, the Company redeemed  2,392,857 shares of common
stock at a  redemption  price of $2.12 per share.  In order to  consummate  this
redemption, the Company issued promissory notes in the sum of approximately $5.1
million.  On July 26,  2004,  approximately  $5.3  million of proceeds  from the
senior  convertible notes was expended to pay in full the principal of the notes
and accrued interest to Bryanston Group and Beatrice Tollman.

            Under the terms of the notes,  interest  accrued on the  outstanding
principal  amount at the rate of 7% per annum.  For the year ended  December 31,
2004  the  Company  recognized   approximately   $195,000  in  interest  expense
associated with the promissory notes.

BERKSHIRE BANK

            On October 29, 2003,  Monticello  Raceway  Management  issued a $3.5
million note to The Berkshire Bank. The Company entered into a surety  agreement
with The  Berkshire  Bank to  guarantee  the  note.  The  note was  subsequently
satisfied in February 2004.

                                       69





NOTE J. SUPPLEMENTAL GUARANTOR INFORMATION

            As discussed in Note H, the Company  obligations  to pay  principal,
premium,  if any, and interest  under certain debt are guaranteed on a joint and
several basis by substantially all of its operating subsidiaries. The guarantees
are full and unconditional and the guarantor  subsidiaries are 100% owned by the
Company. The Company has determined that separate,  full financial statements of
the   guarantors,   Monticello   Raceway   Management  and  Monticello   Raceway
Development,  would not be material to investors and, accordingly,  supplemental
financial information for the guarantors is presented.

                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                           CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2004
                                   (UNAUDITED)
                                 (IN THOUSANDS)
                                                                                     Non-
                                                    Empire        Guarantor      Guarantor      Eliminating   Consolidated
Assets                                              Resorts      Subsidiaries   Subsidiaries     Entries         Empire
                                                    -------      ------------   ------------     -------         ------

Cash and cash equivalents                          $   1,903         5,261      $    --        $    --        $   7,164
Restricted cash                                         --             159           --             --              159
Accounts receivable                                     --           2,680           --             --            2,680
Prepaid expenses and other assets                         83           791           --             --              874
Investments in subsidiaries                            5,060          --             --           (5,060)          --
Inter-Company                                        147,299          --             --         (147,299)          --
Property and equipment, net                             --          33,147           --             --           33,147
Advances- Tribal Gaming Authorities                     --             925           --             --              925
Deferred financing costs, net                          3,009          --             --             --            3,009
Deferred development costs                              --           3,890           --             --            3,890
Gaming license and development costs                    --           8,905           --             --            8,905
                                                   ---------     ---------      ---------      ---------      ---------

Total assets                                       $ 157,354     $  55,758      $    --        $(152,359)     $  60,753
                                                   =========     =========      =========      =========      =========

Liabilities and stockholders' equity (deficit)

Accounts payable                                   $   1,392     $   2,413      $    --        $    --        $   3,805
Construction costs payable                              --           1,447           --             --            1,447
Accrued expenses and other liabilities                 1,660         3,833           --             --            5,493
Inter-Company                                           --          53,717         93,582       (147,299)          --
Senior convertible notes                              65,000          --             --             --           65,000
                                                   ---------     ---------      ---------      ---------      ---------
    Total liabilities                                 68,052        61,410         93,582       (147,299)        75,745

Stockholders' equity (deficit):                       89,302        (5,652)       (93,582)        (5,060)       (14,992)
                                                   ---------     ---------      ---------      ---------      ---------

Total liabilities and stockholders'
Equity (deficit)                                   $ 157,354     $  55,758      $    --        $(152,359)     $  60,753
                                                   =========     =========      =========      =========      =========

                                       70





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATING STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2004
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                               Empire      Guarantor     Non-Guarantor     Eliminating      Consolidated
                                              Resorts    Subsidiaries     Subsidiaries       Entries           Empire
                                              -------    ------------     ------------       -------           ------

Revenue                                    $   --        $ 44,875         $       --          $      --       $ 44,875
                                           --------      --------         ------------        -----------     --------

Expenses:
Operating costs                                --          44,297                 --                 --         44,297
Selling general and administrative            7,593         3,117                 --                 --         10,710
Depreciation and amortization                  --             507                 --                 --            507
Amortization of deferred
        financing costs                         134           244                 --                 --            378
Intercompany interest (income) expense       (2,251)        2,251                 --                 --           --
Interest expense, net                         1,617           111                 --                 --          1,728
                                           --------      --------         ------------        -----------     --------

Total expenses                                7,093        50,527                 --                 --         57,620
                                           --------      --------         ------------        -----------     --------

Net loss                                   $ (7,093)     $ (5,652)        $       --          $      --       $(12,745)
                                           ========      ========         ============        ===========     ========


                      CONSOLIDATING STATEMENT OF OPERATIONS
                          YEAR ENDED DECEMBER 31, 2003
                                   (UNAUDITED)
                                 (IN THOUSANDS)


                                             Empire      Guarantor         Non-Guarantor     Eliminating    Consolidated
                                             Resorts     Subsidiaries      Subsidiaries        Entries        Empire
                                             -------     ------------      ------------        -------        ------

Revenue                                    $    --       $  9,735         $      --           $     --       $  9,735
                                          ---------     --------        ------------         ----------     ---------

Expenses:
  Operating costs                               --          8,542                --                 --          8,542
  Selling general and administrative            --          2,018                --                 --          2,018
  Depreciation and amortization                 --            703                --                 --            703
  Amortization of deferred
     financing costs                            --             22                --                 --             22
  Interest expense, net                         --            731                --                 --            731
                                          ---------     --------        ------------         ----------     ---------

    Total expenses                              --         12,016                --                 --         12,016
                                          ---------     --------        ------------         ----------     ---------

Development costs                               --          4,243                --                 --          4,243
                                          ---------     --------        ------------         ----------     ---------

Net loss                                 $      --       $ (6,524)     $         --       $         --       $ (6,524)
                                         ===========     ========      ==============     ==============     ========

                                       71





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 2004
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                            Empire     Guarantor       Non-Guarantor  Eliminating  Consolidated
                                                            Resorts   Subsidiaries     Subsidiaries     Entries       Empire
                                                           ---------  ------------     -------------  ----------- -------------

Net cash used in operating activities                      $ (2,033)     $ (6,645)     $   --       $   --        $ (8,678)
                                                           --------      --------      --------     --------      --------

Cash flows from investing activities:
  Purchases of property and
      equipment                                                --         (31,079)         --           --         (31,079)
  Cash acquired from acquisition                                 18          --            --           --              18
  Advances - litigation trust                                  (505)         --            --           --            (505)
  Advances - tribal gaming authorities                         --            (540)         --           --            (540)
  Gaming license and development
      costs                                                    --          (4,074)         --           --          (4,074)
  Advances to subsidiaries                                  (49,715)         --            --         49,715          --
                                                           --------      --------      --------     --------      --------

Net cash used in investing activities                       (50,202)      (35,693)         --         49,715       (36,180)
                                                           --------      --------      --------     --------      --------

Cash flows from financing activities:
  Proceeds from issuance of common stock                     30,375          --            --           --          30,375
  Proceeds from exercise of stock
      options and warrants                                      151          --            --           --             151
  Stock issuance expenses                                    (2,317)         --            --           --          (2,317)
  Proceeds from issuance of senior
      convertible notes                                      62,218          --            --           --          62,218
  Excess of market over carrying value of property and
      equipment purchased from a related party              (30,825)         --            --           --         (30,825)
  Advances from Empire Resorts                                 --          49,715          --        (49,715)         --
  Repayment of promissory notes                              (5,073)         --            --           --          (5,073)
  Repayment of note payable, bank                              --          (3,470)         --           --          (3,470)
  Deferred financing costs                                     (361)         --            --           --            (361)
  Preferred stock dividends paid                                (30)         --            --           --             (30)
                                                           --------      --------      --------     --------      --------

Net cash provided by financing
      activities                                             54,138        46,245          --        (49,715)       50,668
                                                           --------      --------      --------     --------      --------

Net increase in cash and cash
      equivalents                                             1,903         3,907          --           --           5,810

Cash and cash equivalents,  beginning
      of year                                                  --           1,354          --           --           1,354
                                                           --------      --------      --------     --------      --------

Cash and cash equivalents, end of
      year                                                 $  1,903      $  5,261      $   --       $   --        $  7,164
                                                           ========      ========      ========     ========      ========

                                       72





                      EMPIRE RESORTS, INC. AND SUBSIDIARIES
                      CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 2003
                                   (UNAUDITED)
                                 (IN THOUSANDS)

                                                  Empire      Guarantor    Non-Guarantor      Eliminating       Consolidated
                                                  Resorts   Subsidiaries   Subsidiaries         Entries            Empire
                                                  -------   ------------   ------------         -------            ------

Net cash provided by operating activities     $      --       $   817      $         --       $        --       $   817

Cash flows from investing activities:
  Purchases of property and                          --        (1,382)               --                --        (1,382)
       equipment
  Advances - tribal gaming authorities               --          (385)               --                --          (385)
  Gaming license and development                     --        (2,001)               --                --        (2,001)
       costs
                                              -----------     -------      --------------     -------------     -------

Net cash used in investing activities                --        (3,768)               --                --        (3,768)
                                              -----------     -------      --------------     -------------     -------

Cash flows from financing activities:
  Proceeds from note payable, bank                   --         3,379                --                --         3,379
  Repayment of note payable, bank                    --           (30)               --                --           (30)
  Deferred financing costs                           --           (53)               --                --           (53)
  Capital acquisition costs                          --           (90)               --                --           (90)
  Members' capital contributions                     --           455                --                --           455
Net cash provided by financing
   activities                                        --         3,661                --                --         3,661
                                              -----------     -------      --------------     -------------     -------

Net increase in cash and cash                        --           710                --                --           710
  equivalents
                                              -----------     -------      --------------     -------------     -------

Cash and cash equivalents, beginning
   of year                                           --           644                --                --           644
                                              -----------     -------      --------------     -------------     -------

Cash and cash equivalents, end of
   year                                       $      --       $ 1,354      $         --       $        --       $ 1,354
                                              ===========     =======     ==============     =============     ========


                                       73





NOTE K.  STOCKHOLDERS' EQUITY

COMMON STOCK

            In accordance with the merger  agreement,  18,219,075  shares of our
common  stock were issued  pursuant to our  acquisition  of  Monticello  Raceway
Management,  Monticello Casino Management,  Monticello  Raceway  Development and
Mohawk  Management,  LLC,  all of which may be sold to the public  pursuant to a
registration  statement  under the  Securities  Act.  On January 30,  2004,  the
Company also issued 4,050,000  shares of our common stock to multiple  investors
in a private placement.

            On January 30, 2004,  David  Matheson,  the Chairman of the Board of
Directors of the Company,  was granted  20,000  shares of the  Company's  common
stock  for  his  service  on a  special  committee  of the  Board  of  Directors
established to represent the Company with the regulatory matters in front of the
Bureau of Indian Affairs, the National Indian Gaming Commission and the State of
New  York  with  respect  to the  Cayuga  Nation  gaming  project.  The  expense
associated with this grant was approximately  $260,000 and was recognized in the
period  ending March 31,  2004.  On June 30, 2004,  another  20,000  shares were
issued to Mr.  Matheson  for these  services  and were  recorded  in the  second
quarter,  and the expense associated with this grant was $281,000.  Mr. Matheson
abstained  from all votes of the Board of  Directors  related to the creation of
this special committee and the establishment of his compensation.

PREFERRED STOCK AND DIVIDENDS

            The Company's Series B Preferred Stock,  44,258 shares  outstanding,
has voting rights of .8 votes per preferred  share,  is convertible to .8 shares
of common  stock for each share of  preferred  stock and  carries a  liquidation
value of $29 per  share,  a  cumulative  dividend  of $2.90 per  share,  payable
quarterly,  which  increases to $3.77 per share if the cash dividend is not paid
within 30 days of the end of each quarter. In the event the dividend is not paid
by January  30  following  the year for which such  dividend  has  accrued,  the
dividend will be payable in common stock.

            On April 29, 2004, the Company in settlement of all unpaid dividends
from the first  quarter  of 2004,  due April 1, 2004 on the  Series B  Preferred
shares, paid $30,000 in cash. On June 11, 2004, the Company issued 16,074 shares
of common stock in settlement of all outstanding  dividends from the year ending
December 31, 2003. The 16,074 shares were valued at  approximately  $210,000 and
recorded in the quarter ended June 30, 2004.

            The Company had undeclared  dividends on Series B Preferred Stock of
approximately  $125,000 at December  31,  2004.  In January  2005,  the Board of
Directors  declared a dividend on the series B to be paid in common  stock after
January 31, 2005.

            In December of 2002, the Company issued 1,730,696 shares of Series E
Preferred  Stock to  Bryanston  Group with an option in favor of the  Company to
reacquire,  at any time, or from time to time,  and without prior notice,  up to
that number of shares of Preferred  Stock adjusted for any  subsequent  dividend
for the purchase price of $10.00 per share.

            This special  class of preferred  stock is  non-convertible,  has no
fixed date of redemption or liquidation,  and provides for cumulative  dividends
at 8% per annum  based upon the  liquidation  value.  The  series E holders  has
voting rights of 1 vote per 4 preferred shares held. Dividends to holders of the
Company's common stock and other uses of the Company's net cash flow are subject
to priorities for the benefit of this preferred stock.

            The Company has undeclared  dividends on Series E Preferred Stock of
approximately  $2.9  million at December  31,  2004 which will be recorded  when
declared.

                                       74





NOTE L. STOCK OPTIONS AND WARRANTS

2004, 2002 AND 1998 STOCK OPTION PLANS

            In May 1998, the Company's Board of Directors adopted the 1998 Stock
Option Plans  providing for incentive  stock options  ("ISO") and  non-qualified
stock options ("NQSO").  The Company has reserved 400,000 shares of common stock
for  issuance  upon the  exercise of options to be granted  under the 1998 Stock
Option  Plans,  respectively.  The exercise  price of an ISO or NQSO will not be
less than 100% of the fair market  value of the  Company's  common  stock at the
date of the grant.  The maximum term of each option  granted  under each plan is
ten years;  however,  options  granted to an employee owning greater than 10% of
the Company's common stock will have a maximum term of five years.

            On January 9, 2003, the Company's Board of Directors granted 200,673
stock  options,  subject to stockholder  approval,  to each of Robert A. Berman,
then the Company's Chairman of the Board and Chief Executive Officer,  and Scott
A. Kaniewski,  then the Company's  Chief  Financial  Officer and a member of the
Company's Board of Directors.  Pursuant to the adopting board resolution, all of
these stock  options were to become  exercisable  immediately  upon  stockholder
approval at an exercise  price of $2.12 per share.  On March 25, 2003, the stock
option grant under the 2002 stock option plan was duly approved by the Company's
stockholders and immediately became effective.

            On  January  9,  2003,  the  Company  cancelled  all of its  options
outstanding  except  for  5,500.  On that day the  Company  awarded  options  to
purchase  approximately  854,000  shares of its common stock at $2.12 per share.
Included in the award were approximately 829,000 options, which were exercisable
immediately  and  approximately   25,000  options  to  employees  of  affiliated
companies, which vested on July 9, 2003.

            On January 30, 2004 as part of its  compensation  as placement agent
in the Company's  private  placement  offering,  the Company  issued a five year
warrant at closing to Jefferies & Company,  Inc. to acquire up to 250,000 shares
of  common  stock at $7.50  per  share  resulting  in a stock  issuance  cost of
approximately  $2.1 million.  This cost, as well as other related stock issuance
costs of  approximately  $4.4  million,  were  recorded as  reduction of the net
capital raised in this transaction.

            On  March  24,  2004,  10,000  options  were  granted  to all  seven
non-employee  board members to purchase common stock at $11.97 per share.  These
options were immediately vested and expire in ten years.  Compensation  expenses
relating to these grants  totaling  approximately  $838,000 were included in the
results of operations for the year ended December 31, 2004.

            On May 12, 2004, the Company's  Shareholders approved the 2004 stock
option plan. The Company has reserved  250,000 shares of common stock for future
issuance.

            On May 20, 2004, the Company issued 109,500  incentive stock options
with a strike price of $14.25 to various employees. The option issuance provided
a  variety  of  vesting  schedules,  including  half  immediately  and  half the
following  year,  33.3%  each  year over  three  years  starting  at the date of
issuance  and,  33.3% each year over three years  starting  after one year.  All
options expire ten years from the date of grant.  On the date of issuance 33,333
options were vested and the expense recognized. The expense associated with this
grant was approximately $990,000 for the year ending December 31, 2004.

            On August 13,  2004,  the  Company  issued  20,000  incentive  stock
options with a strike price of $8.63 to various  employees.  The option issuance
provided for the following vesting schedules, (i) 33.3% vested immediately, (ii)
33.3%  vested  over a year,  and (iii) the balance  vested  over two years.  All
options  expire ten years from the date of grant.  On the date of issuance 6,667
options were vested and the expense was recognized.  The expense associated with
this grant was approximately $80,000 for the year ending December 31, 2004.


                                       75



            On November 12, 2004,  the Company  granted  Concord  Associates  an
irrevocable  three year option to purchase up to 5,188,913  shares of its Common
Stock at a price of $7.50 per share. The option is exercisable in the event that
the Letter  Agreement is  terminated  in  accordance  with its terms for reasons
other than (a) failure of the due diligence  condition to be satisfied by either
party as of the  completion  of due  diligence on December  14, 2004,  which was
extended and satisfied by January 14, 2005, (b) a material adverse change (i) in
the properties,  assets, business, prospects, or financial or other condition of
(1) the Resort  Properties (or Concord  Associates to the extent relevant to the
transactions  contemplated by the Letter Agreement) or (2) the Company,  in each
case to the extent relevant to the transactions  contemplated by, or the ability
to consummate, the transactions, (c) an election by the Company to terminate due
to a default by Concord  Associates in the  performance of the Letter  Agreement
that has a material  adverse effect,  (d) failure to close due to the failure to
satisfy  certain  specified  conditions  to  the  closing  of  the  transactions
contemplated by the Letter Agreement,  or (d) an election by Concord  Associates
to terminate  due to failure to receive  necessary  approvals of the  Bankruptcy
Court having  jurisdiction over the bankruptcy  proceeding  involving  Frontline
Capital Corp.

            The  Companies  responsibilities  in relation to keeping the options
from being  exercisable  is to have a  favorable  vote of both the common  stock
shareholders and the holders of the senior convertible notes, and in addition if
we have a change of ownership  prior to the  consummation  of the acquisition of
the Concord and Grossinger's  Resort Hotels and Golf Courses,  the new ownership
must complete the acquisition  transaction.  Our Board of Directors has voted in
favor of the  acquisition.  We feel there will be a  favorable  vote by both the
common stock  shareholders and the holders of the senior  convertible notes, and
the transaction will be completed in the last quarter of 2005.

            On November 12, 2004,  the Company  granted  50,000  options to both
John Sharpe and David Hanlon,  members of the Company's Board of Directors,  for
services  related to exploration of new business  possibilities in areas outside
of New York State. The recognized expense of approximately $511,000 was recorded
for the year ended December 31, 2004

            During  the year ended  December  31,  2004,  the  Company  received
approximately $151,000 of proceeds from the exercising of stock options.

            The  following  table  sets forth each grant on the day of the grant
using the Black Scholes option pricing model weighted  average  assumptions used
for such grants:

                                            2004                     2003
                                            ----                     ----
Weighted Average Fair Value of
Options Granted                           $11.29                 $   2.59
Dividend Yield                                 0%                       0%
Expected Volatility                      97.9 to 99.7%              271.8%
Risk-free Interest Rate                  3.10 to 4.22%               3.05%
Expected Life                            3 to 10 years             5 to 10 years


                                       76






            The following table summarizes  approximate stock option activity in
2004 and 2003.

                                                                                Weighted
                                                                                Average
                                   Number of            Range of             Exercise Price
                                     Shares         Exercise Price             Per Share
                                   ---------      ----------------------     ---------------
Options outstanding at
January 1, 2003                     667,000      $     4.40 to 17.49          $   16.01
Granted in 2003                     943,000      $     2.12 to 7.00           $    2.59
Exercised or expired in 2003       (127,000)     $         2.12               $    2.12
Cancelled in 2003                  (662,000)     $     4.40 to 17.49          $   16.09
                                  ---------
Options outstanding
December 31, 2003                   821,000                                        2.67

Granted in 2004                     300,000      $     8.11 to 14.25          $    6.79
Exercised in 2004                   (61,000)     $     2.12 to 8.63           $    2.48
Cancelled in 2004                   (32,000)     $     2.12 to 11.97          $    8.83
                                  ---------

Options outstanding at
December 31, 2004                 1,028,000                                   $    5.00
                                  =========

            The following table summarizes  information  regarding stock options
outstanding at December 31, 2004:


                                               Weighted
                 Number of Options              Average                   Weighted
    Range of        Outstanding                Remaining                  Average                    Exercisable
    Exercise           at                    Contractual                 Exercise                       at
     Prices      December 31, 2004            Life in Years                 Price                  December 31, 2004
- -------------    -----------------    --------------------------    ---------------------       ----------------------

$  2.12                581,378                    3.0                     2.12                   $     581,378
$  2.12                 86,550                    7.8                     2.12                   $      86,550
$  4.40                  5,500                    5.5                     4.40                   $       5,500
$  7.00                 75,000                    8.5                     7.00                   $      75,000
$ 11.97                 60,000                    4.3                    11.97                   $      60,000
$ 14.25                109,500                    9.4                    14.25                   $      33,333
$  8.63                 10,000                    9.7                     8.63                   $       3,333
$  8.11                100,000                    2.9                     8.11                   $     100,000
  --------     -------------------     ------------------------    ---------------------       ----------------------
$                    1,027,928                    4.6                     5.00                   $     945,094
  ========     ===================     ========================    =====================       ======================


NOTE M. INCOME TAXES

            The Company and all of its subsidiaries file a consolidated  federal
income tax return. At December 31, 2004, the estimated Company's deferred income
tax asset was comprised of the tax benefit  associated  with the following items
based on the statutory tax rates currently in effect:

                                                   (in thousands)
           Net operating loss carry forwards        $   78,000
           Deferred income tax asset                $   31,000
               Valuation allowance                  $  (31,000)
                                                    -----------
           Deferred income tax asset, net           $      --
                                                    ===========

                                       77






            The Company's  merger with CDL will limit the  Company's  ability to
use its current net operating loss carry forwards, potentially increasing future
tax liability. As of December 31, 2004, the Company had net operating loss carry
forwards of  approximately  $78 million that expire  between 2008 and 2024.  The
Internal  Revenue  Code  allows  the  offset of these net  operating  loss carry
forwards against income earned in future years,  thus reducing the tax liability
in future years. The merger of the Company's operations with CDL, however,  will
not permit the Company to use the entire amount of the net operating  losses due
to the change in control of the Company.  A limited  amount of the net operating
loss  carry-forward  may be  applied  in future  years  based upon the change of
control and existing income tax laws.

NOTE N. RELATED PARTY TRANSACTIONS

            On October 29, 2003,  CDL, a related party,  and Monticello  Raceway
Management  entered into a 48-year Ground Lease ("Ground Lease") with respect to
232 acres of land and the improvements  located on such land. Under the terms of
the Ground Lease,  Monticello  Raceway Management agreed to pay CDL $1.8 million
per year, with the first payment deferrable until January 11, 2005, but accruing
interest  at the rate of 4.5% per annum.  On July 26,  2004,  approximately  $38
million of proceeds from the senior  convertible notes was expended to terminate
the Ground  Lease and  acquire  the fee  interest in these 232 acres from CDL, a
related party.  The property and equipment was recorded at CDL's carrying value.
The  purchase  provides  for  additional  security  to the holders of the senior
convertible notes and will allow the Company to benefit from certain real estate
tax credits resulting from its recent investment in improvements on the land.

NOTE O. COMMITMENTS AND CONTINGENCIES

            CASINO  DEVELOPMENT.  On August 19, 2004, the Seneca-Cayuga Tribe of
Oklahoma and the Company  entered into a one year agreement in which the Company
agreed to provide  $35,000  per month to pay the  expenses of  establishing  the
tribal gaming authority or similar organization to oversee its gaming activities
and other related purposes.

            On November  14,  2004,  we agreed if  sufficient  financing  is not
available in connection  with the project,  we will advance an additional  $60.0
million  to pay  legal  fees  incurred  by the  Cayuga  Nation  of New  York  in
connection to their land claim,  $50 million of which would be reimbursed out of
operations,  to  the  extent  available,  and  the  remainder  of  which  may be
reimbursable under other agreements.

            In connection with the settlement agreement between the State of New
York and the Cayuga  Nation of New York,  on November 18, 2004,  the Company has
elected to set aside,  or otherwise  make provision for, the possible use by the
Cayuga Nation of New York of certain funds for the acquisition of land.  Through
segregation of funds under the Company's  credit  facility with Bank of Scotland
and certain  carve-outs on the incurrence of additional debt under the documents
governing the Company's senior  convertible notes, the Company believes it is in
a position  to fulfill  these  obligations.  The  Company is not  certain of the
requirements  due  to  continuing  negotiations  of  the  Cayuga  Nation  casino
development  project,  and there is currently a split between  tribal leaders of
the Cayuga Nation of New York,  the outcome of which could  possibly lead to the
termination of our proposed  project to develop a Native American casino for the
Cayuga Nation.


            CONSTRUCTION OBLIGATION.  To prepare the property at the Raceway for
the  VGM  operation,   the  Company  had  contractual  obligations  relating  to
construction of the VGM renovations of approximately $24 million. On November 9,
2004 this obligation was paid in full.

            In October  2004,  the Company,  began  construction  to replace the
paddock that was previously  converted into VGM operation  floor space.  The new
building  was under  construction  at  December  31,  2004 and the  Company  has
contractual obligations of approximately $1.7 million.


                                       78



            LITIGATION  TRUST.  On January 12, 2004, in order to better focus on
the  development  of  a  VGM  program  at  the  Raceway  and  current   business
arrangements  with the Cayuga  Nation and as a  condition  to the  consolidation
transaction with CDL, all interests of the plaintiffs, including any interest of
the Company, with respect to litigation against Caesars Entertainment, Inc which
alleged tortuous interference with contractual and business relationships,  were
transferred to a liquidating Litigation Trust. The Company agreed to provide the
Litigation Trust with a $2.5 million line of credit. For the year ended December
31, 2004, the Company  advanced  approximately  $500,000 in draws on the line of
credit.  Due to the  unpredictable  nature  of the  litigation  and the  pending
motions currently under review,  the Company provided for a valuation  allowance
of approximately $500,000 against the receivable from the Litigation Trust.

            LEGAL PROCEEDINGS.  There are two actions pending against Monticello
Raceway   Management,   Inc.  brought  by  the  Monticello   Harness  Horsemen's
Association (the "Horsemen").  One action,  known as the "Barn Area" action, has
lain basically  dormant since the Horsemen were denied a preliminary  injunction
after a hearing in which the Horsemen  sought an injunction  against  Monticello
Raceway  Management,  Inc.  from  moving the  Horsemen  to  different  barns and
removing  approximately  half of the  barn and  backstretch  area.  The  court's
written decision on the injunction motion upheld the right of Monticello Raceway
Management, Inc. to consolidate the barn area and to determine to whom to assign
stall space.

            The  second  action  against  Monticello  Raceway  Management,  Inc.
centers  around the amount of purses  paid to the  Horsemen's  purse  account by
Monticello Raceway Management,  Inc. The Horsemen allege that there has not been
a proper  crediting  over the years of racing  revenues  by  Monticello  Raceway
Management,  Inc. to the Horsemen's purse account from various  simulcasting and
OTB sources, and that a portion of the Horsemen's purse account has been used by
a special series racing in violation of contract  provisions  which call for the
monies to be used for "overnight"  purses.  This action seeks approximately $2.0
million  in  compensatory  damages  and a similar  amount in  punitive  damages.
Monticello Raceway Management, Inc. has responded vigorously to this litigation.
However, settlement negotiations are ongoing.

            The Company's ability to participate in New York's VGM program or to
help develop and manage a Native American casino in conjunction  with the Cayuga
Nation of New York could be hampered  by the  outcome of two  pending  lawsuits,
Dalton v. Pataki and Karr v.  Pataki,  that seek to enjoin the State of New York
from proceeding  with the VGM program or permitting the  construction of any new
Native American casinos within the State of New York's borders.  While the trial
court  dismissed both of these cases in May 2003,  the plaintiffs  have filed an
appeal.  On July 7, 2004,  the Appellate  Division of the New York State Supreme
Court  affirmed the decision of lower court to uphold the  constitutionality  of
the provisions of the law that authorized expanded Native American casino gaming
in New York State and found  that it was  consistent  with New York and  federal
laws. The Appellate  Division also ruled that the legislation  permitting  state
sponsored  VGM  operations is  unconstitutional  under New York law because such
legislation  provides  that a portion of the VGM  vendor  fees be  dedicated  to
breeding  funds and enhancing  purses in violation of a  constitutional  mandate
that such moneys be applied  exclusively to, or in aid or support of,  education
in the State of New York. The Attorney  General of the State of New York filed a
notice of appeal  with  respect  to this  ruling  that  automatically  stays the
decision of the  appellate  court and allows the  Company to continue  operating
VGMs at the Raceway.  However,  there can be no assurance  that the State of New
York will ultimately prevail or, alternatively, that the authorizing legislation
will be amended in order for it to be  constitutional.  If the appellate court's
findings  are  ultimately  upheld  and the  state  legislature  fails  to  enact
corrective legislation, the Company would be forced to close its VGM operations.

            The  Company  is also a party  to  various  non-environmental  legal
proceedings and administrative  actions, all arising from the ordinary course of
business.  Although  it is  impossible  to  predict  the  outcome  of any  legal
proceeding,  the Company  believes any liability  that may finally be determined
with respect to such legal proceedings  should not have a material effect on the
Company's consolidated financial position, results of operations or cash flows.

NOTE P. SUBSEQUENT EVENTS

            On January 7, 2005,  the Board of Directors  authorized the issuance
of 12,640 shares of common stock in settlement of the remaining dividends on the
Series B preferred  stock for 2004. On February 16, 2005, the shares were issued
to the Series B preferred shareholder.

            On January 7, 2005 the Board of  Directors  authorized  their yearly
stipend  of 60,000  options to  purchase  common  stock at $8.51 per share.  The
expense  associated with this grant was  approximately  $380,000,  which will be
recorded in the quarter ending March 31, 2005.

                                       79





            Pursuant to Item  10(a)(2) of  Regulation  S-B, as of the end of the
fiscal year ended December 31, 2004, the Company is no longer considered a small
business issuer.  Accordingly,  going forward, the Company will no longer report
pursuant  to  Regulation  S-B,  but will  instead  need to meet  the  disclosure
requirements of Regulation S-K.

Line Of Credit

            On January 11, 2005, the Company entered into a credit facility (the
"Credit  Facility")  with Bank of Scotland (the  "Lender").  The Credit Facility
provides for a $10 million  senior  secured  revolving  loan (subject to certain
reserves)  that matures in two years.  To secure timely  repayment,  the Company
agreed to have its wholly owned subsidiary, Monticello Raceway Management, Inc.,
grant  a  mortgage  over  the  Monticello  Raceway  property  and  its  material
subsidiaries  guarantee its obligations  under the Credit Facility.  The Company
also  agreed to pledge its equity  interests  in all of its  current  and future
subsidiaries,  maintain  certain  reserves,  and grant a first priority  secured
interest in all of its assets, now owned or later acquired.

            At the option of the Company,  loans under the Credit  Facility bear
interest  at the rate of prime  plus 2% or Libor  plus 4%.  The  Lender has also
entered into an  Intercreditor  Agreement  with The Bank of New York so that the
Lender will enjoy a first priority  position  notwithstanding  the Indenture and
security  documents  entered  into  on July  26,  2004 in  connection  with  the
Company's issuance of $65 million of senior convertible notes.

                                       80





NOTE Q. UNAUDITED QUARTERLY DATA (IN THOUSANDS)

                                            First        Second         Third          Fourth
                                           Quarter       Quarter       Quarter        Quarter
                                         ----------    ----------    ----------    -----------
2004
Total revenue                            $  2,511      $  2,654      $ 21,914      $ 17,796
Net loss                                   (3,653)       (4,626)       (1,533)       (2,933)
Net loss applicable to common shares       (4,029)       (5,104)       (1,921)       (3,321)
Net loss per common share, basic and
diluted                                     (0.18)        (0.19)        (0.07)        (0.13)

2003
Total revenue                               2,282         2,550         2,641         2,262
Net loss                                     (531)         (845)         (147)       (5,001)
Net loss applicable to common shares         (531)         (845)         (147)       (5,001)
Net loss per common share, basic and
diluted                                  $   (.03)     $   (.05)     $   (.01)     $   (.27)

ITEM 8.     CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
            FINANCIAL DISCLOSURE.

            Not Applicable.

ITEM 8A.    CONTROLS AND PROCEDURES.

            We maintain  disclosure controls and procedures that are designed to
ensure that  information  required to be disclosed in our reports filed pursuant
to the  Securities  Exchange Act of 1934,  as amended,  is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's rules and forms, and that such information is accumulated
and  communicated to our management,  including our chief executive  officer and
chief financial  officer,  as appropriate,  to allow timely decisions  regarding
required  disclosure.  In designing and evaluating  the disclosure  controls and
procedures,  management  recognizes that any controls and procedures,  no matter
how well  designed  and  operated,  can provide  only  reasonable  assurance  of
achieving the desired  control  objectives,  and management is required to apply
its judgment in evaluating the  cost-benefit  relationship of possible  controls
and procedures.

            We carry out a variety of on-going procedures, under the supervision
and with the participation of management,  including our chief executive officer
and chief financial  officer,  to evaluate the  effectiveness  of the design and
operation of our disclosure controls and procedures. Based on the foregoing, our
chief  executive   officer  and  chief  financial  officer  concluded  that  our
disclosure  controls and procedures  were effective at the reasonable  assurance
level as of December 31, 2004.

            There have been no significant changes in our internal controls over
financial  reporting  during our most recent fiscal  quarter that has materially
affected,  or is reasonably likely to materially  affect,  our internal controls
over financial reporting.

ITEM 8B.    OTHER INFORMATION.

            Not Applicable.


                                       81





                                    PART III

ITEM 9.     DIRECTORS,   EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
            COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

            Our directors and executive officers are as follows:

NAME                     AGE       POSITION
- ----                     ---       --------
David Matheson           52        Chairman of the Board(3)
David P. Hanlon          59        Vice Chairman of the Board(2)
Robert A. Berman         44        Chief Executive Officer and Director(3)
Morad Tahbaz             48        President and Director(2)
Scott A. Kaniewski       41        Chief Financial Officer and Treasurer
Thomas W. Aro            61        Chief Operating Officer
Joseph E. Bernstein      55        Director(3)
Ralph J. Bernstein       46        Director(1)
John Sharpe              62        Director(1)
Paul A. deBary           58        Director(1)
- -------------

(1)  Class I Director
(2)  Class II Director
(3)  Class III Director

            In January 2004, we amended our  certificate  of  incorporation  and
bylaws to create a staggered board of directors.  The amendment provided for the
creation of three  classes of  directors,  as nearly  equal in size as possible.
Upon their initial  election,  Class I directors  were to hold office for a term
expiring  in one year,  at the 2004  annual  meeting of  stockholders;  Class II
directors  were to hold  office for a term  expiring  in two years,  at the 2005
annual meeting of stockholders;  and Class III directors were to hold office for
a term  expiring in three  years,  at the 2006 annual  meeting of  stockholders.
Commencing at the 2004 annual meeting of stockholders,  the  stockholders  would
elect only one class of directors  each year,  beginning with Class I directors,
with each  director so elected  holding  office for a term of three  years.  The
initial Class I, Class II and Class III directors were selected in January 2004,
concurrently with the adoption of this amendment, and the Class I directors were
all reelected at the 2004 annual stockholders meeting in May 2004.

            The  business  experience  of each or our  directors  and  executive
officers is as follows:

            DAVID MATHESON is currently our chairman of the board, a position he
has held since August 2003. Over the years,  David Matheson,  who is a member of
the Coeur d'Alene Tribe of Coeur  d'Alene,  Idaho,  has served as Tribal Council
leader, Tribal Chairman, and manager of various tribal operations.  Mr. Matheson
is the chief  executive  officer of the Coeur  d'Alene  Casino & Resort Hotel in
Worley,  Idaho,  which was voted #1 casino in the  Spokesman  Reader  Review for
three  consecutive  years.  Mr. Matheson was appointed by President  George H.W.
Bush as Deputy Commissioner for Indian Affairs, U.S. Department of the Interior,
a  position  he held for four  years  and  during  the  time the  Indian  Gaming
Regulatory  Act of 1988 was  being  implemented.  Mr.  Matheson  was  awarded  a
Commendation  from the Secretary of the Interior for Outstanding  Service.  More
recently,  Mr. Matheson was appointed by President  George W. Bush as an advisor
to the President's Commission on Reservation Economies.  Mr. Matheson previously
served as a delegate to the People's  Republic of China's Native  American Trade
Mission,   and  as  chief  executive   officer  of  Coeur  d'Alene   Development
Enterprises.  He holds an M.A. in business administration from the University of
Washington.  Over the past twenty years, he has held many esteemed positions and
has received many honors for his work in  preserving  cultural  traditions,  the
native language and ceremonial practices of the Coeur d'Alene Tribe. He recently
published his first novel,  Red Thunder,  which  depicts the faith,  courage and
dedication of the Schi'tsu'umsh Indians, now called the Coeur d'Alene Tribe.

                                       82





            DAVID P.  HANLON is  currently  our vice  chairman  of the board,  a
position  he has held  since  August  2003.  David P.  Hanlon  is a U.S.  gaming
industry   consultant,   including  Native  American  and  international  gaming
ventures.  He most recently served as president and chief  operating  officer of
Rio Suites  Hotel  Casino,  from 1996 to 1999,  where he guided the  corporation
through a major expansion and successful return to  profitability.  From 1994 to
1995, he served as president and chief executive  officer of International  Game
Technology,  the world's leading manufacturer of microprocessor gaming machines.
From 1988 to 1993,  he served as president and chief  executive  officer of Merv
Griffin's Resorts  International,  where he completed two complex billion dollar
restructurings,  while successfully selling off international  properties in the
Bahamas.  From 1984 to 1988, Mr. Hanlon served as president of Harrah's Atlantic
City (Harrah's Marina and Trump Plaza),  where he was responsible for casino and
hotel operations and 9,000 employees. During his four-year leadership,  Harrah's
became the most profitable operation in Atlantic City. Between 1978 to 1983, Mr.
Hanlon  served as chief  financial  officer  and  executive  vice  president  of
Caesar's World, Inc., where he was in charge of all East Coast operations. Prior
to starting his career in the gaming industry,  Mr. Hanlon served as director of
corporate  finance  for  Fluor  Corporation,  from  1975 to 1978.  Mr.  Hanlon's
education includes a B.S. in hotel  administration from Cornell  University,  an
M.S. in accounting and an M.B.A. in finance from the Wharton School,  University
of  Pennsylvania,  and an Advanced  Management  Program at the Harvard  Business
School.   Mr.   Hanlon  served  as   executive-in-residence,   School  of  Hotel
Administration, Cornell University, and is a member of various boards.

            ROBERT A.  BERMAN is  currently  our chief  executive  officer and a
member of our board of directors,  and has held such  positions  since  February
2002. Mr. Berman also served as chairman of our board of directors from February
2002  through  July 2003.  As the  managing  director of  Watermark  Investments
Limited from 1994 to 2000, Mr. Berman  oversaw a number of private  partnerships
investing in real estate,  technology and basic  industries.  From 1998 to 1999,
Mr. Berman was vice chairman and a director of Executone  Information Systems, a
telecommunications  company. From 1995 to 1999, Mr. Berman served as chairman of
the board and chief executive officer of Hospitality Worldwide Services, Inc., a
hotel services company with average annual sales above $150 million.

            MORAD TAHBAZ is currently our president and a member of our board of
directors. Mr. Tahbaz has been a member of our board of directors since February
2003 and our  President  since  June  2003.  Mr.  Tahbaz  serves on the board of
directors of Air Methods  Corporation,  a publicly  traded company that provides
air medical  emergency  transport  services  and systems  throughout  the United
States of America.  In 1983 Mr. Tahbaz joined Americas  Partners,  an investment
and venture  capital firm,  at which time he became  primarily  responsible  for
acquisitions.  Subsequently,  Mr.  Tahbaz  took on the added  responsibility  of
developing  Americas  Tower,  a one million  square foot office  building in New
York. Mr. Tahbaz remains a partner in Americas Partners. Mr. Tahbaz holds a B.A.
in philosophy  and fine arts from Colgate  University and attended the Institute
for  Architecture  and Urban  Studies in New York.  He also  holds an M.B.A.  in
finance from Columbia University Graduate School of Business.

            THOMAS W. ARO is currently our chief operating  officer,  a position
he has held since November 2003. Mr. Aro also served as a member of our board of
directors  from 1994 through July 2003 and was our executive vice president from
formation  in May 1993  through  November  2003.  Mr.  Aro also  serves as chief
operating officer of our gaming subsidiaries and has over 30 years experience in
the  hospitality  and gaming  industries.  Mr. Aro  received  his B.S.  from the
University of Arizona and is a certified public accountant.

            SCOTT A. KANIEWSKI is currently our chief financial officer, and has
held such position since February 2002. Mr. Kaniewski also served as a member of
our board of directors from February 2002 through July 2003.  From 1995 to 2000,
Mr. Kaniewski was a director of Watermark  Investments  Limited and from 1995 to
1999, Mr. Kaniewski also served as a director of Hospitality Worldwide Services,
Inc. and  president of its real estate  advisory  group from 1998 to 1999.  From
1989 to 1995, Mr. Kaniewski held several  positions with VMS Realty Partners,  a
real estate  investment  and  development  company,  including vice president of
hotel  investments.  Mr. Kaniewski received his B.S. from Indiana University and
is a certified public accountant.


                                       83



            RALPH J.  BERNSTEIN is currently a director,  a position he has held
since August 2003.  Mr.  Bernstein is also a co-founder  and general  partner of
Americas  Partners,  an investment and venture capital firm, and, since 1981 has
been responsible for the acquisition,  renovation,  development and financing of
several  million  square feet of commercial  space.  Mr.  Bernstein  started his
career in  agribusiness  with a large European  multi-national  trading and real
estate  development  company,  where he was later responsible for that company's
U.S. real estate  activities.  Mr.  Bernstein  also serves as a director for Air
Methods  Corporation,  a publicly  traded  company  that  provides  air  medical
emergency  transport  services  and  systems  throughout  the  United  States of
America.  He holds a Bachelor of Arts degree in economics from the University of
California at Davis.

            JOSEPH E. BERNSTEIN is currently a director,  a position he has held
since August 2003.  Joseph E.  Bernstein  started his career as a corporate  tax
attorney at Cahill  Gordon & Reindel  and as an  international  tax  attorney at
Rosenman & Colin. He later started his own international tax practice. Since the
early 1980's,  Mr.  Bernstein  (along with his brother Ralph, and their partner,
Morad Tahbaz,  through their jointly-owned entity,  Americas Tower Partners) has
been  involved in the  development  of three  million  square feet of commercial
property in Manhattan,  including  Americas Tower, a 50-story office building on
Avenue of the Americas and 46th Street,  serving as US  headquarters to Israel's
largest bank, Bank Hapoalim.

            PAUL A. DEBARY is currently a director, a position he has held since
April 2002. Paul A. deBary is also a managing  director at Marquette deBary Co.,
Inc., a New York based broker-dealer, where he serves as a financial advisor for
state and  local  government  agencies,  public  and  private  corporations  and
non-profits.  Prior to  assuming  his  current  position,  he served as managing
director in the Public Finance Department of Prudential  Securities from 1994 to
1997. He was a partner in the law firm of Hawkins,  Delafield  & Wood in New
York from 1975 to 1994. Mr. deBary  received an A.B. in 1968, and an M.B.A.  and
J.D.  in 1971  from  Columbia  University.  He is a member of the  American  Bar
Association,  the New York State Bar Association,  the Association of the Bar of
the City of New York and the National Association of Bond Lawyers, and serves as
a Director of the Society of Columbia  Graduates,  New  Neighborhoods,  Inc.,  a
non-profit  based in  Stamford,  Connecticut,  and the Old Blue  Rugby  Football
Foundation.

            JOHN SHARPE is  currently  a director,  a position he has held since
August 2003.  John Sharpe most recently  served as president and chief operating
officer of Four Seasons Hotels & Resorts,  from which he retired in 1999,  after
23 years of service.  During his tenure at Four  Seasons,  the  world's  largest
operator of luxury  hotels,  Mr. Sharpe  directed  worldwide  hotel  operations,
marketing  and human  resources,  and took great  pride in helping  create  Four
Seasons'  renowned  reputation for the highest level of service in the worldwide
hospitality  industry.  In 1999,  Mr.  Sharpe was bestowed  with the  "Corporate
Hotelier of the World" award by Hotels  Magazine,  Inc. Mr. Sharpe also received
the "Silver Plate" award of the International  Food  Manufacturers  Association,
and the "Gold Award" of the Ontario  Hostelry  Institute.  Mr. Sharpe  graduated
with a B.S. in hotel  administration  from Cornell University and is currently a
trustee of the Culinary Institute of America, and chair of the Industry Advisory
Council at the Cornell  Hotel  School.  He serves on the board of  directors  of
Fairmont  Hotels & Resorts,  Toronto,  Canada and on the  advisory  board to the
Singapore   Department   of   Tourism.   Mr.   Sharpe   previously   served   as
executive-in-residence,  School  of Hotel  Administration,  Cornell  University;
chair, board of governors, Ryerson Polytechnic University, Toronto, Canada; and,
co-chair, American Hotel Foundation, Washington, D.C.

            Ralph J. Bernstein and Joseph E. Bernstein are brothers.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

            We maintain a separately  designated audit committee  established in
accordance with Section  3(a)(58)(A) of the Securities  Exchange Act of 1934, as
amended.  The members of our audit committee are Paul A. deBary, David P. Hanlon
and John Sharpe. Mr. deBary is its chairman.  Each member of the audit committee
is  independent,  within the meaning of the National  Association  of Securities
Dealers' listing standards.  In addition,  each audit committee member satisfies
the audit committee  independence standards under the Securities Exchange Act of
1934, as amended.

            Our board of directors  believes that Mr. Paul A. deBary is an audit
committee financial expert, as such term is defined in Item 401(e)(2)(i)-(iv) of
Regulation S-B.


                                       84



CODE OF ETHICS

            We  adopted  a code of  ethics  that is  available  on our  internet
website  (www.empireresorts.com) and will be provided in print without charge to
any  stockholder  who  submits a request  in  writing  to Empire  Resorts,  Inc.
Investor Relations,  Route 17B, P.O. Box 5013,  Monticello,  New York 12701. The
code of ethics  applies to each of our  directors  and  officers,  including the
chief  financial  officer  and  chief  executive  officer,  and all of our other
employees and the  employees of our  subsidiaries.  The code of ethics  provides
that  any  waiver  of the  code of  ethics  may be made  only  by our  board  of
directors.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

            Section  16(a) of the  Securities  Exchange Act of 1934, as amended,
requires our executive officers and directors,  and persons who beneficially own
more than ten percent of our common stock,  to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than ten percent beneficial owners are
required by Securities  and Exchange  Commission  regulations to furnish us with
copies of all Section  16(a) forms they file.  Based upon a review of the copies
of such forms  furnished to us and written  representations  from our  executive
officers and directors,  we believe that during the year ended December 31, 2004
there were no  delinquent  filers except as follows:  David J. Matheson  filed a
late  Form  4  for  a  transaction  that  occurred  on  January  30,  2004  (one
transaction);  Joseph E.  Bernstein  filed a late Form 4 for a transaction  that
occurred on March 23, 2004 (one  transaction);  Ralph E. Bernstein  filed a late
Form 4 for a transaction that occurred on March 23, 2004 (one transaction); Paul
A. deBary filed a late Form 4 for a transaction  that occurred on March 23, 2004
(one  transaction);  John  Sharpe  filed a late  Form 4 for a  transaction  that
occurred on March 23, 2004 (one transaction); Arthur I. Sonnenblick filed a late
Form 4 for a  transaction  that  occurred on March 23,  2004 (one  transaction);
David P. Hanlon filed a late Form 4 for a transaction that occurred on March 23,
2004 (one transaction); and Thomas W. Aro filed a Form 5 on February 11, 2005 in
which he  reported  an option  grant to him on May 21,  2004 that was not timely
reported on a Form 4 (one transaction).

ITEM 10.    EXECUTIVE COMPENSATION.

SUMMARY COMPENSATION TABLE

            The  following  table  sets  forth all  information  concerning  the
compensation  received,  for each of the last three years, for services rendered
to us by Robert A. Berman who served as our chief executive  officer during 2004
and each of our other most highly compensated executive officers during the year
ended December 31, 2004 whose total compensation in 2004 exceeded $100,000.
                                                                                        Securities
                                                                     Other Annual       Underlying        All Other
Name and Principal Position      Year       Salary        Bonus      Compensation         Options       Compensation
- ---------------------------      ----      ---------     -------     ------------     --------------    ------------

Robert A. Berman                 2004      $ 282,000       --            (1)                 --              --
   Chief Executive Officer       2003        300,000       --            (1)              298,189            --
                                 2002        263,150       --            (1)               95,016(2)         --

Morad Tahbaz                     2004      $ 286,000       --            (1)                 --              --
   President                     2003        173,000       --            (1)               17,500            --
                                 2002             --       --            (1)                 --              --

Scott A. Kaniewski               2004        188,000       --            (1)                 --              --
   Chief Financial Officer       2003        200,000       --            (1)              299,689            --
   and Treasurer                 2002        175,433       --            (1)               95,016(2)         --

Thomas W. Aro                    2004        229,000       --            (1)               50,000            --
   Chief Operating Officer       2003        210,000       --            (1)               50,000            --
                                 2002        192,000       --            (1)                5,500            --
- -------------

(1)   We concluded that the aggregate  amount of perquisites  and other personal
      benefits,  if any,  paid did not exceed the lesser of 10% of the officer's
      total  annual  salary and bonus for this fiscal  year or $50,000;  so that
      amount is not included in the table.
(2)   In 2003,  these stock  options were  cancelled  at the  exercise  price of
      $17.49 and reissued at an exercise price of $2.12.


                                       85



OPTION GRANTS TABLE FOR FISCAL 2004

            The following table contains information concerning the grant of
stock options to our executive officers during the fiscal year. No stock
appreciation rights were granted during the year.

                         Number of
                        Securities        Percent of Total
                        Underlying         Options/SARs            Exercise Or
                        Options/SARs     Granted to Employees      Base Price
Name                    Granted (#)         in Fiscal Year           ($/Sh)        Expiration Date
- ---------------        -------------     --------------------     -------------    ----------------

Thomas W. Aro             50,000                 39%                 $14.25          May 20, 2014

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

            The following table sets forth information regarding the exercise of
stock options  during the last fiscal year by the named  officers in the Summary
Compensation Table above and the fiscal year-end value of unexercised options.

                                                      Number of Securities
                              Shares                      Underlying
                             Acquired                    Unexercised           Value Of Unexercised In-
                                on         Value       Options/SARs At FY-       The-Money Options/SARs
                             Exercise     Realized    End (#) Exercisable/          At FY-End ($) (1)
Name                           (#)          ($)           Unexercisable        Exercisable/Unexercisable
- -------------------        -----------    ------      --------------------     -------------------------

Robert A. Berman               --           --            281,689/--                   2,544,000/--
Morad Tahbaz                   --           --             17,500/--                     158,000/--
Scott A. Kaniewski             --           --            299,698/--                   2,706,000/--
Thomas W. Aro                  --           --           68,500/25,000                   393,000/--

- -------------
(1)   Assumes a fair market  value for our common  stock of $11.15,  the closing
      market price per share of our common stock as reported by the Nasdaq Small
      Cap Market on December 31, 2004.

EMPLOYMENT AGREEMENTS

            In January 2004, we entered into an amended and restated  employment
agreement with Robert A. Berman,  providing for a base salary of $300,000, which
was voluntarily reduced by 20% in October 2004. This agreement may be terminated
by either party upon 30 days prior written notice. Upon termination,  Mr. Berman
is entitled to his full salary during the  termination  notice  period,  expense
reimbursement  and to retain all  options  previously  granted to him by us. Mr.
Berman  has  also  agreed  to  certain   confidentiality,   non-competition  and
non-solicitation provisions.

            In January 2004, we entered into an amended and restated  employment
agreement  with Scott A.  Kaniewski,  providing  for a base salary of  $200,000,
which was  voluntarily  reduced by 20% in October  2004.  This  agreement may be
terminated by either party upon 30 days prior written notice.  Upon termination,
Mr.  Kaniewski  is  entitled to his full salary  during the  termination  notice
period,  expense  reimbursement and to retain all options  previously granted to
him  by  us.  Mr.   Kaniewski  has  also  agreed  to  certain   confidentiality,
non-competition and non-solicitation provisions.

                                       86





COMPENSATION OF DIRECTORS

            CASH COMPENSATION

            Each member of our board of directors  receives $20,000 per year and
$1,000 per  meeting.  Directors  that also serve on  committees  of the board of
directors,  other than the audit  committee,  receive an  additional  $1,000 per
committee  meeting for  non-employee  members,  with the  chairperson  receiving
$2,500 per  meeting.  With  respect  to the audit  committee,  its  non-employee
chairperson  receives an additional  annual  payment of $10,000,  and each audit
committee member (including the chairperson) receives $2,500 per audit committee
meeting.

            STOCK COMPENSATION

            Each member of our board of  directors  receives an annual  grant of
10,000 stock options at the common  stock's then current fair market value.  All
stock options granted to the members of our board of directors vest immediately.
In addition,  in recognition of special and  extraordinary  services provided by
David  Hanlon and John  Sharpe to us, on November  11,  2004,  the  compensation
committee  hereby  granted  to each of  Messrs.  Sharpe  and  Hanlon  options to
purchase 50,000 shares of our common stock, having a term of three (3) years and
an exercise price of $8.11.  Messrs.  Hanlon and Sharpe abstained from all votes
of the board of directors related to the granting of these stock options.

            SPECIAL COMMITTEE

            On  November  11,  2003,  our board of  directors  created a special
committee,  comprised  solely of David  Matheson,  to assist us in obtaining all
federal and state regulatory  approvals  necessary to develop a tribal casino in
conjunction with the Cayuga Nation of New York. As consideration for his work on
this special committee,  we agreed to issue Mr. Matheson 20,000 shares of common
stock on each of January 30, 2004 and June 30, 2004. Mr. Matheson abstained from
all votes of the board of  directors  related to the  creation  of this  special
committee and the establishment of his compensation.

ITEM 11.    SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT AND
            RELATED STOCKHOLDER MATTERS.

            The following table sets forth certain  information known to us with
respect to the beneficial  ownership of our common stock as of March 1, 2005, by
(1) all persons who are beneficial owners of 5% or more of our voting securities
stock,  (2) each director,  (3) the named  officers in the Summary  Compensation
Table above, and (4) all directors and executive officers as a group.

            The information  regarding  beneficial ownership of our common stock
has been  presented in accordance  with the rules of the Securities and Exchange
Commission.  Under these rules, a person may be deemed to  beneficially  own any
shares of capital stock as to which such person, directly or indirectly,  has or
shares voting power or investment  power,  and to beneficially own any shares of
our  capital  stock as to which such  person has the right to acquire  voting or
investment  power  within 60 days  through the  exercise of any stock  option or
other right.  The  percentage of  beneficial  ownership as to any person as of a
particular  date  is  calculated  by  dividing  (a)  (i) the  number  of  shares
beneficially  owned by such  person  plus (ii) the  number of shares as to which
such person has the right to acquire  voting or investment  power within 60 days
by (b) the total number of shares  outstanding as of such date,  plus any shares
that such  person  has the right to  acquire  from us within 60 days.  Including
those shares in the tables does not,  however,  constitute an admission that the
named  shareholder  is a direct or indirect  beneficial  owner of those  shares.
Unless  otherwise  indicated,  each person or entity named in the table has sole
voting  power and  investment  power (or shares  that  power with that  person's
spouse)  with  respect to all shares of  capital  stock  listed as owned by that
person or entity.


                                       87


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Name and Address of Beneficial         Common Stock Beneficially    Series B Preferred Stock    Series E Preferred Stock
Owner(1)                                         Owned                 Beneficially Owned        Beneficially Owned
- ------------------------------         -------------------------    ------------------------    ------------------------
                                        Shares      Percentage       Shares      Percentage      Shares      Percentage
                                        ------      ----------       ------      ----------      ------      ----------
Robert A. Berman                      4,589,671(2)     17.40%          --            --            --            --

Scott A. Kaniewski                    1,005,785(3)      3.81%          --            --            --            --

Thomas W. Aro                            72,700(4)       *             --            --            --            --

Paul A. deBary                          210,913(5)       *             --            --            --            --

Morad Tahbaz                          1,301,354(6)      4.98%          --            --            --            --

David Matheson                           75,000(7)       *             --            --            --            --

John Sharpe                              87,000(8)       *             --            --            --            --

David P. Hanlon                          72,500(9)       *             --            --            --            --

Joseph E. Bernstein                    2,326,143(10)    8.90%          --            --            --            --

Ralph J. Bernstein                     2,256,243(11)    8.64%          --            --            --            --

Directors and Officers as a Group     11,999,309       44.37%          --            --            --            --

Patricia Cohen                              --           --          44,258         100%           --            --
8306 Tibet Butler Drive
Windmere, FL

Bryanston Group, Inc.                       --           --            --            --       1,551,213          89.6%
2424 Route 52Hopewell Junction, NY 12533

Stanley Tollman                             --           --            --            --         152,817           8.8%
Bryanston Group, Inc.
2424 Route 52
Hopewell Junction, NY 12533

- -------------
* less than 1%

(1)   Unless otherwise indicated, the address of each stockholder, director, and
      executive  officer listed below is c/o Empire  Resorts,  Inc.,  Route 17B,
      P.O. Box 5013, Monticello, New York, 12701.

(2)   Includes  3,209,108  shares of common  stock  owned  directly by Robert A.
      Berman,  options that are  currently  exercisable  into 281,689  shares of
      common stock,  1,061,602 shares of common stock held directly by Avon Road
      Partners,  LP, with  respect to which Mr.  Berman is its general  partner,
      12,272  shares of common stock held by the Berman  Family Trust and 25,000
      shares of common stock held  directly by Watertone  Holdings,  L.P.,  with
      respect to which BKB,  LLC is its general  partner.  Robert A. Berman owns
      82% of BKB,  LLC and is its  managing  member.  The  beneficiaries  of the
      Berman  Family Trust are Robert A.  Berman's  children.  Debbie N. Berman,
      Robert A. Berman's wife, and Philip B. Berman, Robert A. Berman's brother,
      are  co-trustees  of the Berman  Family  Trust and have  joint  voting and
      dispositive power with respect to its holdings. Robert A. Berman disclaims
      beneficial  ownership  of all  shares of common  stock  held by the Berman
      Family Trust.

(3)   Includes  151,118  shares  of  common  stock  owned  directly  by Scott A.
      Kaniewski,  options that are currently  exercisable into 299,689 shares of
      common  stock,  2,776  shares of common  stock held  directly by Watertone
      Holdings, 253,119 shares of common stock held directly by Kaniewski Family
      Limited  Partnership  and 299,083  shares of common stock held directly by
      KFP  Trust.  Through  BKB,  LLC,  15.3%  of  which  is  owned  by Scott A.
      Kaniewski,  Scott A.  Kaniewski  indirectly  holds a  general  partnership
      interest  of  .153%  of  Watertone  Holdings,   representing  an  indirect
      beneficial  ownership  interest in an  additional  38 shares of such 2,776
      shares of common  stock held  directly by  Watertone  Holdings.  Kaniewski
      Family Limited  Partnership,  with respect to which Mr.  Kaniewski is a 1%
      limited  partner and the general  partner with sole voting and dispositive
      power, holds a 4.95% limited  partnership  interest in Watertone Holdings,
      representing an indirect beneficial  ownership interest in 1,238 shares of
      such 2,776 shares of common stock held directly by Watertone Holdings, and
      through  BKB,  LLC,  0.05% of which is owned by Kaniewski  Family  Limited
      Partnership,  Kaniewski  Family  Limited  Partnership  indirectly  holds a

                                       88





      general partnership interest of .0005% of Watertone Holdings, representing
      an  indirect  beneficial  ownership  interest in less than 1 share of such
      2,776 shares of common stock held directly by Watertone Holdings. Scott A.
      Kaniewski disclaims beneficial ownership of all the shares of common stock
      owned by Kaniewski  Family Limited  Partnership for any purpose other than
      voting and dispositive  powers. KFP Trust, whose sole trustee is Stacey B.
      Kaniewski,  Scott A. Kaniewski's  wife, and whose sole  beneficiaries  are
      Scott A. Kaniewski's children,  holds a 6.00% limited partnership interest
      in  Watertone  Holdings,  representing  an indirect  beneficial  ownership
      interest  in 1,500  shares  of such  2,776  shares of  common  stock  held
      directly by Watertone  Holdings,  and through BKB, LLC,  0.05% of which is
      owned by KFP  Trust,  KFP Trust  indirectly  holds a  general  partnership
      interest  of  .0005%  of  Watertone  Holdings,  representing  an  indirect
      beneficial ownership interest in less than 1 share of such 2,776 shares of
      common  stock held  directly by  Watertone  Holdings.  Scott A.  Kaniewski
      disclaims  beneficial  ownership of all shares of common stock held by KFP
      Trust.

(4)   Represents  options that are currently  exercisable  into 68,500 shares of
      common stock and 4,200  shares of common stock held  directly by Thomas W.
      Aro.

(5)   Includes  178,318  shares of common  stock owned  directly by Paul deBary,
      12,595 shares of common stock held in an individual retirement account for
      Mr.  deBary's  benefit and options  that are  currently  exercisable  into
      20,000 shares of common stock.

(6)   Includes  1,283,854  shares of common stock owned directly by Morad Tahbaz
      and options that are  currently  exercisable  into 17,500 shares of common
      stock.

(7)   Represents  options that are currently  exercisable  into 35,000 shares of
      common  stock and 40,000  shares of common  stock held  directly  by David
      Matheson.

(8)   Represents  options that are currently  exercisable  into 85,000 shares of
      common  stock and  2,000  shares of common  stock  held  directly  by John
      Sharpe.

(9)   Represents  options that are currently  exercisable  into 72,500 shares of
      common stock.

(10)  Includes  2,192,643  shares of common  stock  owned  directly by Joseph E.
      Bernstein,  options that are currently  exercisable  into 35,000 shares of
      common stock and 98,500  shares of common stock held in the name Joseph E.
      Bernstein  on  behalf of the JB Trust,  in which Mr.  Bernstein's  mother,
      Helen Bernstein, is sole trustee and Mr. Bernstein's children are ultimate
      beneficiaries.

(11)  Includes  2,221,243  shares of common  stock  owned  directly  by Ralph J.
      Bernstein and options that are currently exercisable into 35,000 shares of
      common stock.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

            On January 12, 2004,  we acquired  from the members of both Catskill
Development and Monticello Raceway Development all of the outstanding membership
interests and capital stock of Monticello Raceway Management,  Monticello Casino
Management,  Monticello  Raceway  Development  and  Mohawk  Management,  LLC  in
exchange for 80.25% of our common  stock,  calculated  on a  post-consolidation,
fully  diluted  basis.   Monticello   Raceway   Management,   Monticello  Casino
Management, Monticello Raceway Development and Mohawk Management, LLC own all of
the development  and management  rights with respect to a Native American casino
to be developed on 29 of the 232 acres of land in Monticello, New York now owned
by Monticello Raceway Management. The principal members of Catskill Development,
at the time, were (i) Americas Tower Partners,  which is controlled by Joseph E.
Bernstein,  a member of our board of directors,  Ralph J. Bernstein, a member of
our board of directors and Morad Tahbaz, our president and a member of our board
of directors  (ii)  Watertone  Holdings,  LP, an entity  controlled by Robert A.

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Berman, our chief executive officer and a member of our board of directors,  and
Scott A. Kaniewski,  our chief financial  officer and (iii)  Monticello  Realty,
LLC, which is controlled by Maurice Dabbah,  who formerly had board  observation
rights with respect to us. In addition,  the two members of  Monticello  Raceway
Development  were Americas Tower Partners and BKB, LLC, an entity  controlled by
Robert A. Berman,  Scott A.  Kaniewski  and Philip  Berman,  Robert A.  Berman's
brother  and one of our  vice  presidents.  As a  result  of  this  transaction,
Americas Tower Partners received 6,599,294 shares of our common stock, Watertone
Holdings,  LP  received  4,565,010  shares of our  common  stock and  Monticello
Realty, LLC received 5,732,261 shares of our common stock. In addition,  each of
Joseph E. Bernstein,  Ralph J. Bernstein,  Morad Tahbaz, Robert A. Berman, Scott
A. Kaniewski and Philip Berman held his respective  board and officer  positions
both before and after the above described transaction.

            We, Catskill Development,  the Cayuga Nation of New York, the Cayuga
Catskill Gaming  Authority,  Robert A. Berman,  our chief executive  officer,  a
member of our board of  directors  and our former  chairman,  and Morad  Tahbaz,
Catskill  Development's and our president and a member of Catskill Development's
and our board of directors, are parties to a letter agreement, dated as of April
3, 2003,  as amended,  pursuant  to which we agreed to fund the Cayuga  Catskill
Gaming  Authority's  purchase  of those 29  acres  of land  subject  to the Land
Purchase  Agreement between  Monticello Raceway Management and the Cayuga Nation
of New York and the development  costs of building a Class III gaming enterprise
on such land.  We are to be reimbursed  for up to $10 million of these  advances
from any third party construction  financing that is received and, to the extent
that such third party  financing  or $10 million  cap is  insufficient  to fully
reimburse us, from  distributions made to Monticello Casino Management under the
Gaming Facility Management Agreement.

            Under this letter  agreement,  we, Catskill  Development,  Robert A.
Berman and Morad Tahbaz,  together as a group,  on the one hand,  and the Cayuga
Nation of New York, on the other hand,  also agreed that for 10 years,  each may
participate in the development or operation by the other of:

            o    one  or  more  hotels,   motels  or  other  similar  facilities
                 providing   overnight    accommodations   including   ancillary
                 beverage,  food,   entertainment,   commercial  and  or  retail
                 services within a 15 mile radius of the 29 acres to be acquired
                 by the  Cayuga  Nation  of New York  under  the  Land  Purchase
                 Agreement; and

            o    any other entertainment, sports and/or retail facility within a
                 5 mile radius of those 29 acres of land.

            In each  case,  the  non-developing  party  will  have the  right to
purchase up to 33.33% of the equity in the facility  being  developed,  with the
purchase  price  being a pro rata share of the costs of such  facility  less any
amount  advanced  by any lender for any  mortgage  or other loan  secured by the
facility's  property or cash flow. The purchase price for this acquired interest
must be paid in cash at the time the  interest is actually  purchased.  However,
with respect to any acquired interest purchased by the Cayuga Nation of New York
prior to the second anniversary of the primary gaming facility's public opening,
the Cayuga Nation of New York may pay for its acquired interest by delivery of a
non-recourse promissory note, payable over five years, with interest accruing on
the unpaid  principal amount at the then existing prime rate. These parties have
further agreed that the first hotel facility to be built that is governed by the
letter  agreement  will  be  deemed  to be  the  gaming  enterprise's  preferred
provider,  in that the  gaming  enterprise  shall  be  obligated  to  refer  its
customers to that hotel.

            In  consideration   of  the  agreements   contained  in  the  letter
agreement,  each of the  parties  has  agreed  that for a period  ending  on the
earliest of:

            o    approval by the Bureau of Indian Affairs of the  application to
                 transfer  the 29 acres of land to the United  States of America
                 in trust for the Cayuga Nation of New York and to use such land
                 for Class II and Class III  gaming and by the  National  Indian
                 Gaming Commission of the Gaming Facility Management Agreement;

            o    the  termination of the Gaming  Facility  Management  Agreement
                 because of Monticello  Casino  Management's  material breach of
                 its obligations;

            o    the  termination  of  the  Gaming   Facility   Development  and
                 Construction    Agreement   because   of   Monticello   Raceway
                 Development's material breach of its obligations; and

            o    June 30, 2005,

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each party,  respectively,  will refrain from having  discussions  regarding the
development of another Class III gaming facility in Sullivan County, New York.

            Finally, under the letter agreement, we awarded the Cayuga Nation of
New York 300,000 shares of restricted  common stock,  100,000 of which vested on
April 11,  2003,  100,000 of which  vested on October 11,  2003,  and 100,000 of
which vested on April 11, 2004.

            Robert A. Berman  executed a guarantee,  dated  October 29, 2003, in
favor of The Berkshire Bank,  guarantying the performance of Monticello  Raceway
Management's  performance under a $3.5 million loan agreement with The Berkshire
Bank.  All  obligations  under this loan  agreement  were  satisfied  in full on
February 4, 2004.

            On  December 1, 1995,  Monticello  Raceway  Development,  our wholly
owned subsidiary,  and Catskill  Development,  an entity controlled by Joseph E.
Bernstein,  Ralph J.  Bernstein,  Morad  Tahbaz,  Robert A.  Berman and Scott A.
Kaniewski, entered into a development leasing and property management agreement,
pursuant to which Catskill  Development  granted Monticello Raceway  Development
the  exclusive  right  for 25  years  to  develop,  lease  and  manage  Catskill
Development's former 232 acres of land in Monticello, New York.

            On  October  29,  2003,  Catskill  Development  and  our  subsidiary
Monticello  Raceway  Management entered into a 48 year ground lease with respect
to those  232  acres of land in  Monticello,  New York  then  owned by  Catskill
Development and all buildings and  improvements  located on such land. Under the
terms of the ground lease,  Monticello Raceway Management agreed to pay Catskill
Development $1.8 million per year, subject to annual adjustments consistent with
the consumer price index, payable in equal monthly installments,  and Monticello
Raceway  Management  was given a limited  option to purchase  these 232 acres of
property,  subject to the Land Purchase Agreement, for approximately $38 million
in immediately  available funds. On July 26, 2004, Monticello Raceway Management
exercised  this  option  and  acquired  all  232  acres  of land  from  Catskill
Development.  The purchase of these 232 acres resulted in the termination of the
ground  lease and  rendered  the 1995  development  agreement  between  Catskill
Development and Monticello Raceway Development moot.

ITEM 13.    EXHIBITS

2.1         Letter  Agreement,  dated  November  12,  2004,  by and among Empire
            Resorts,  Inc., Concord Associates Limited  Partnership and Sullivan
            Resorts, LLC. (12)

3.1         Certificate of Incorporation, dated March 19, 1993. (7)

3.2         Certificate  of Amendment of  Certificate  of  Incorporation,  dated
            August 15, 1993. (7)

3.3         Certificate  of Amendment of  Certificate  of  Incorporation,  dated
            December 18, 1996. (7)

3.4         Certificate  of Amendment of  Certificate  of  Incorporation,  dated
            September 22, 1999. (7)

3.5         Certificate of Amendment of the Certificate of Incorporation,  dated
            June 13, 2001. (7)

3.6         Certificate of Amendment to the Certificate of Incorporation,  dated
            May 15, 2003. (7)

3.7         Certificate  of  Amendment  to  the  Certificate  of  Incorporation,
            January 12, 2004. (7)

3.8         Second Amended and Restated By-Laws, as of Feb. 12, 2002. (7)

3.9         Amendment No. 1 to the Second  Amended and Restated  By-Laws,  dated
            November 11, 2003. (7)

4.1         Form of Common Stock Certificate. (2)

4.2         Certificate  of  Designations,  Preferences  and  Rights of Series B
            Preferred Stock dated July 31, 1996. (7)

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4.3         Certificate of Designation setting forth the Preferences, Rights and
            Limitations  of  Series B  Preferred  Stock and  Series C  Preferred
            Stock, dated May 29, 1998. (7)

4.4         Certificate of Amendment to the  Certificate of Designation  setting
            forth the Preferences,  Rights and Limitations of Series B Preferred
            Stock and Series C Preferred Stock, dated June 13, 2001. (7)

4.5         Certificate of Designations  setting forth the  Preferences,  Rights
            and Limitations of Series D Preferred Stock, dated February 7, 2000.
            (1)

4.6         Certificate of the Designations,  Powers,  Preferences and Rights of
            the Series E Preferred Stock, dated December 10, 2002. (7)

4.7         Certificate of Amendment of Certificate of the Designations, Powers,
            Preferences  and Other  Rights  and  Qualifications  of the Series E
            Preferred Stock, dated January 12, 2004. (7)

4.8         Indenture dated as of July 26, 2004 among Empire Resorts,  Inc., The
            Bank of New York and the Guarantors named therein. (11)

10.1        1998 Stock Option Plan. (3)

10.2        2004 Stock Option Plan. (8)

10.3        Recapitalization  Agreement, dated December 10, 2002, by and between
            Alpha Hospitality  Corporation,  Alpha Monticello,  Inc.,  Bryanston
            Group, Inc., Stanly Tollman, Beatrice Tollman and Monty Hundley. (4)

10.4        Promissory Note issued by Empire Resorts,  Inc. on December 10, 2002
            to Societe Generale for the Principal Sum of $1,600,000. (4)

10.5        Amendment No. 1, dated as of February 28, 2003,  to promissory  note
            issued by Empire  Resorts,  Inc.  on  December  10,  2002 to Societe
            Generale for the principal sum of $1,600,000. (1)

10.6        Amendment  No. 2, dated as of April 14,  2003,  to  promissory  note
            issued by Empire  Resorts,  Inc.  on  December  10,  2002 to Societe
            Generale for the principal sum of $1,600,000. (1)

10.7        Amendment  No. 3,  dated as of June 12,  2003,  to  promissory  note
            issued by Empire  Resorts,  Inc.  on  December  10,  2002 to Societe
            Generale for the principal sum of $1,600,000. (1)

10.8        Land  Purchase  Agreement,  dated April 3, 2003,  between the Cayuga
            Catskill Gaming Authority and Catskill Development, L.L.C. (5)

10.9        First  Amendment to Land Purchase  Agreement,  dated April 30, 2004,
            between  the  Cayuga   Catskill   Gaming   Authority   and  Catskill
            Development, L.L.C. (1)

10.10       Shared Facilities Agreement, dated April 3, 2003, between the Cayuga
            Catskill Gaming Authority and Catskill  Development,  L.L.C.  (filed
            without  exhibits  or  schedules,  all of which are  available  upon
            request, without cost). (1)

10.11       Gaming  Facility  Management  Agreement,  dated as of April 3, 2003,
            among the  Cayuga  Nation of New York,  the Cayuga  Catskill  Gaming
            Authority and Monticello Casino Management, LLC. (5)

10.12       Gaming Facility Development and Construction Agreement,  dated as of
            April 3,  2003,  among the  Cayuga  Nation of New York,  the  Cayuga
            Catskill  Gaming  Authority  and  Monticello   Raceway   Development
            Company, LLC. (5)

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10.13       Letter  Agreement,  dated as of April 3, 2003, among Empire Resorts,
            Inc., Catskill  Development,  L.L.C., the Cayuga Nation of New York,
            the Cayuga  Catskill  Gaming  Authority  and certain  principals  of
            Empire Resorts, Inc. and Catskill Development, L.L.C. (5)

10.14       First  Amendment  of Letter  Agreement,  dated as of April 30, 2004,
            between Empire Resorts,  Inc.,  Catskill  Development,  L.L.C.,  the
            Cayuga Nation of New York and the Cayuga Catskill Gaming  Authority.
            (1)

10.15       Surety  Agreement,  dated October 29, 2003,  made by Empire Resorts,
            Inc. in favor of The Berkshire Bank. (6)

10.16       Term Note,  dated  October 29, 2003,  issued by  Monticello  Raceway
            Management, Inc. to The Berkshire Bank. (6)

10.17       Leasehold  Mortgage,  Security  Agreement,  Assignment of Leases and
            Rents  and  Fixture  Filing,  dated  as  of  October  29,  2003,  by
            Monticello Raceway Management,  Inc., as mortgagor, to The Berkshire
            Bank. (6)

10.18       Loan and Security  Agreement,  dated  October 29, 2003, by and among
            Monticello Raceway Management, Inc. and The Berkshire Bank. (6)

10.19       Security  Agreement,  dated as of October 29,  2003,  by and between
            Catskill Development, L.L.C. and The Berkshire Bank. (6)

10.20       Guaranty  Agreement made and executed  October 29, 2003 by Robert A.
            Berman in favor of The Berkshire Bank. (6)

10.21       Nondisturbance and Attornment Agreement, made and entered into as of
            October 29, 2003, by and between Americas Tower Partners, Monticello
            Realty,  L.L.C.,  Monticello  Raceway  Management,   Inc.,  Catskill
            Development, L.L.C. and The Berkshire Bank. (6)

10.22       Agreement of Lease made as of the 29th day of October, 2003, between
            Catskill Development, L.L.C. and Monticello Raceway Management, Inc.
            (6)

10.23       Amendment  No. 1 dated as of January 12, 2004 to  Agreement of Lease
            made  as  of  the  29th  day  of  October,  2003,  between  Catskill
            Development, L.L.C. and Monticello Raceway Management, Inc. (1)

10.24       Amendment No. 2 dated as of July 26, 2004 to Agreement of Lease made
            as of the 29th day of October,  2003, between Catskill  Development,
            L.L.C. and Monticello Raceway Management, Inc. (1)

10.25       Termination of Agreement of Lease. (1)

10.26       Amended  and  Restated  Securities  Contribution  Agreement,   dated
            December  12,  2003,  by and among Empire  Resorts,  Inc.,  Catskill
            Development,  L.L.C.,  and  members  of both  Catskill  Development,
            L.L.C. and Monticello Raceway Development Company, LLC. (6)

10.27       Promissory Note issued by Empire Resorts, Inc. on January 9, 2004 to
            Bryanston Group, Inc. for the Principal Sum of $4,932,936.84. (1)

10.28       Promissory Note issued by Empire Resorts, Inc. on January 9, 2004 to
            Beatrice Tollman for the Principal Sum of $139,920. (1)

10.29       Assignment and Assumption Agreement, made as of January 12, 2004, by
            and  between  Catskill   Development,   L.L.C.,   Monticello  Casino
            Management, LLC, Monticello Raceway Development Company, LLC, Mohawk
            Management, LLC and Empire Resorts, Inc. (1)


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10.30       Assignment and Assumption Agreement, made as of January 12, 2004, by
            and between New York Gaming, LLC and Alpha Monticello, Inc. (1)

10.31       Redemption  Agreement,  entered into as of January 12, 2004, between
            Catskill Development, L.L.C. and Alpha Monticello, Inc. (1)

10.32       Assignment and Assumption Agreement, made as of January 12, 2004, by
            and between  Catskill  Development,  L.L.C.  and  Monticello  Casino
            Management, LLC (1)

10.33       Assignment  of Limited  Liability  Company  Membership  Interests in
            Monticello Raceway Development Company, LLC, dated as of January 12,
            2004, by Americas Tower Partners to Empire Resorts, Inc. (1)

10.34       Assignment  of Limited  Liability  Company  Membership  Interests in
            Monticello Raceway Development Company, LLC, dated as of January 12,
            2004, by BKB, LLC to Empire Resorts, Inc. (1)

10.35       Assignment  of Limited  Liability  Company  Membership  Interests in
            Monticello Casino Management, LLC and Mohawk Management,  LLC, dated
            as of January 12,  2004,  by  Americas  Tower  Partners,  Monticello
            Realty,  L.L.C.,  Watertone  Holdings,  LP,  Fox-Hollow  Lane,  LLC,
            Shamrock Strategies, Inc. and Clifford A. Ehrlich to Empire Resorts,
            Inc. (1)

10.36       Guaranty of Lease made by Empire  Resorts,  Inc.  for the benefit of
            Catskill Development, L.L.C. dated January 12, 2004. (1)

10.37       Mortgage  Modification and Spreader  Agreement,  dated as of January
            12,  2004  between  Monticello  Raceway  Management,  Inc.  and  The
            Berkshire Bank. (1)

10.38       Amended and  Restated  Employment  Agreement  by and between  Empire
            Resorts,  Inc. and Robert A.  Berman,  dated as of January 12, 2004.
            (7)

10.39       Amended and  Restated  Employment  Agreement  by and between  Empire
            Resorts, Inc. and Scott A. Kaniewski,  dated as of January 12, 2004.
            (7)

10.40       Closing  Memorandum,  entered  into as of January 12,  2004,  by and
            among  Empire  Resorts,  Inc.,  Catskill  Development,  L.L.C.,  and
            members of both Catskill Development,  L.L.C. and Monticello Raceway
            Development Company, LLC. (1)

10.41       Letter   Agreement,   dated  January  12,  2004,   between  Catskill
            Development,  L.L.C. and Empire Resorts,  Inc. with respect to April
            3, 2003 Letter Agreement. (1)

10.42       Letter   Agreement,   dated  January  12,  2004,   between  Catskill
            Development,  L.L.C. and Monticello  Raceway  Management,  Inc. with
            respect to Shared Facilities Agreement. (1)

10.43       Declaration of Trust of the Catskill  Litigation Trust,  dated as of
            January 12,  2004,  made by  Catskill  Development,  L.L.C.,  Mohawk
            Management, LLC, Monticello Raceway Development Company, LLC, Empire
            Resorts, Inc., the trustees and Christiana Bank & Trust Company. (1)

10.44       Line of credit dated January 12, 2004 between  Empire  Resorts,  Inc
            and Catskill Litigation Trust. (11)

10.45       Promissory Note issued by Catskill  Litigation  Trust on January 12,
            2004 to Empire  Resorts,  Inc. for the Principal Sum of $10,000,000.
            (11)

10.46       Securities Purchase  Agreement,  dated as of January 26, 2004, among
            Empire Resorts,  Inc. and the purchasers identified on the signature
            pages thereto. (7)

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10.47       Registration Rights Agreement,  dated as of January 26, 2004, by and
            among Empire Resorts, Inc. and the investors signatory thereto. (7)

10.48       Five Year Warrant issued to Jefferies & Company, Inc., dated January
            30, 2004, to purchase  250,000 shares of Common Stock at an exercise
            price of $7.50 per share. (7)

10.49       Registration Rights Agreement,  dated as of January 30, 2004, by and
            among Empire Resorts, Inc. and Jefferies & Company, Inc. (7)

10.50       Contractor Agreement dated as of January 30, 2004 between Monticello
            Raceway Management, Inc. and Fluor Enterprises, Inc. (1)

10.51       Security Agreement dated as of July 26, 2004 between Empire Resorts,
            Inc., The Bank of New York and the Guarantors named therein. (9)

10.52       Pledge Agreement dated as of July 26, 2004 Empire Resorts, Inc., The
            Bank of New York and the Guarantors named therein. (9)

10.53       Registration  Rights  Agreement  dated  as of July 26,  2004  Empire
            Resorts, Inc., the Guarantors named therein and Jefferies & Company,
            Inc. (9)

10.54       Agreement  between Empire Resorts,  Inc. and the Seneca Cayuga Tribe
            of Oklahoma, dated as of August 19, 2004. (10)

10.55       Contract for  construction of new paddock by and between  Monticello
            Raceway Management,  Inc. and Armistead Mechanical, Inc. dated as of
            November 11, 2004 (filed without exhibits or schedules, all of which
            are available upon request, without cost). (1)

10.56       Contract for  construction of new paddock by and between  Monticello
            Raceway  Management,  Inc.  and  Darlind  Construction  dated  as of
            November 11, 2004 (filed without exhibits or schedules, all of which
            are available upon request, without cost). (1)

10.57       Option  Agreement,  dated  November  12,  2004,  by and among Empire
            Resorts, Inc. and Concord Associates Limited Partnership. (12)

10.58       Form of Voting Agreement by and between Concord  Associates  Limited
            Partnership and Stockholder. (12)

10.59       Letter  Agreement,  effective  December  31,  2004,  between  Empire
            Resorts, Inc. and the Cayuga Nation of New York. (13)

10.60       Loan  Agreement,  dated as of January 11, 2005,  by and among Empire
            Resorts,   Inc.,   Monticello   Raceway   Management,   Inc.,  Alpha
            Monticello,  Inc., Alpha Casino Management Inc., Mohawk  Management,
            LLC,  Monticello  Raceway  Development  Company,  LLC and Monticello
            Casino Management, LLC and Bank of Scotland, as lender and as agent.
            (14)

10.61       Security Agreement, dated as of January 11, 2005, by Empire Resorts,
            Inc., Monticello Raceway Management,  Inc., Alpha Monticello,  Inc.,
            Alpha Casino Management Inc.,  Mohawk  Management,  LLC,  Monticello
            Raceway Development  Company,  LLC and Monticello Casino Management,
            LLC, in favor of Bank of Scotland. (14)

10.62       Pledge  Agreement,  dated as of January 11, 2005, by Empire Resorts,
            Inc.,  Alpha  Monticello,  Inc. and Alpha Casino  Management Inc. in
            favor of Bank of Scotland. (14)

10.63       Mortgage,  Security  Agreement,  Assignment of Leases and Rents, and
            Fixture Filing,  dated as of January 11, 2005, by Monticello Raceway
            Management, Inc., a New York corporation to Bank of Scotland. (14)

                                       95





10.64       Promissory Note issued by Empire  Resorts,  Inc. on January 11, 2005
            to Bank of Scotland for the Principal Sum of $10,000,000. (14)

10.65       Intercreditor Agreement,  dated as of January 11, 2005, by and among
            Bank of  Scotland,  The  Bank of New  York,  Empire  Resorts,  Inc.,
            Monticello Raceway Management,  Inc., Alpha Monticello,  Inc., Alpha
            Casino Management Inc., Mohawk Management,  LLC,  Monticello Raceway
            Development Company, LLC and Monticello Casino Management, LLC. (14)

10.66       Memorandum  of  Understanding  dated  November  14, 2004 between the
            Cayuga Nation of New York and Empire Resorts, Inc.

14.1        Code of Ethics. (7)

21.1        List of Subsidiaries. (1)

23.1        Consent of Independent Certified Public Accountants. (1)

31.1        Section 302 Certification of Principal Executive Officer. (1)

31.2        Section 302 Certification of Principal Financial Officer. (1)

32.1        Section 906 Certification of Principal Executive Officer. (1)

32.2        Section 906 Certification of Principal Financial Officer. (1)

- -----------------

(1)   Filed herewith.

(2)   Incorporated by reference to Empire Resorts, Inc.'s Registration Statement
      on Form SB-2 (File No.  33-64236),  filed with the Securities and Exchange
      Commission on June 10, 1993 and as amended on September 30, 1993,  October
      25,  1993,  November  2, 1993 and  November  4, 1993,  which  Registration
      Statement became effective  November 5, 1993. Such Registration  Statement
      was further amended by Post Effective Amendment filed on August 20, 1999.

(3)   Incorporated  by  reference to Empire  Resorts,  Inc.'s  Definitive  Proxy
      Statement  on  Schedule  14A,  filed  with  the  Securities  and  Exchange
      Commission on August 25, 1999.

(4)   Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K/A,  filed with the Securities and Exchange  Commission on February 10,
      2003.

(5)   Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K/A,  filed with the Securities  and Exchange  Commission on November 3,
      2003.

(6)   Incorporated by reference to Empire Resorts, Inc.'s Registration Statement
      on Form  S-4/A,  filed with the  Securities  and  Exchange  Commission  on
      December 12, 2003.

(7)   Incorporated  by reference to Empire  Resorts,  Inc.'s Form 10-KSB for the
      year ended December 31, 2003.

(8)   Incorporated  by  reference to Empire  Resorts,  Inc.'s  Definitive  Proxy
      Statement  on  Schedule  14A,  filed  with  the  Securities  and  Exchange
      Commission on April 28, 2004.

(9)   Incorporated by reference to Empire Resorts,  Inc.'s  Quarterly  Report on
      Form 10-QSB for the quarter ended June 30, 2004.

                                       96





(10)  Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K, filed with the Securities and Exchange Commission on August 20, 2004.

(11)  Incorporated by reference to Empire Resorts,  Inc.'s  Quarterly  Report on
      Form 10-QSB for the quarter ended September 30, 2004.

(12)  Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K,  filed with the  Securities  and Exchange  Commission on November 18,
      2004.

(13)  Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K, filed with the Securities and Exchange Commission on January 3, 2005.

(14)  Incorporated by reference to Empire Resorts, Inc.'s Current Report on Form
      8-K,  filed with the  Securities  and Exchange  Commission  on January 14,
      2005.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

            Our principal accountant for the audit and review of our annual and
quarterly financial statements, respectively, during each of the past two fiscal
years was Friedman LLP. Moreover, the following table shows the fees paid or
accrued by us to Friedman LLP during this period.

TYPE OF SERVICE                 2004            2003
- ---------------                 ----            ----
Audit Fees (1)                $248,100         $176,050
Audit-Related Fees (2)         159,051          100,059
Tax Fees (3)                    43,013           34,009
All Other Fees (4)              20,153             --
                              --------        ---------
   TOTAL                      $470,317         $310,118

(1)   Comprised of the audit of our annual  financial  statements and reviews of
      our quarterly financial statements.

(2)   Comprised  of services  rendered in  connection  with our capital  raising
      efforts,  registration  statements,  and consultations regarding financial
      accounting and reporting.

(3)   Comprised  of services for tax  compliance,  tax return  preparation,  tax
      advice, and tax planning.

(4)   Fees related to other filings with the Securities and Exchange Commission,
      including consents.

            In  accordance  with  the  Sarbanes-Oxley  Act of  2002,  the  Audit
Committee  established  policies  and  procedures  under  which  all  audit  and
non-audit  services  performed by our principal  accountants must be approved in
advance by the Audit Committee.  As provided in the  Sarbanes-Oxley Act of 2002,
all  audit  and  non-audit  services  to be  provided  after May 6, 2003 must be
pre-approved  by the Audit  Committee  in  accordance  with these  policies  and
procedures. Based in part on consideration of the non-audit services provided by
Friedman LLP during fiscal year 2003, the Audit  Committee  determined that such
non-audit services were compatible with maintaining the independence of Friedman
LLP.

                                       97





                                   SIGNATURES

            In  accordance  with  Section 13 or 15(d) of the  Exchange  Act, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                        EMPIRES RESORTS, INC.


                                        By: /s/ Robert A. Berman
                                            ------------------------------------
                                            Name:  Robert A. Berman
                                            Title: Chief Executive Officer
                                            Date:  March 3, 2005

                                POWER OF ATTORNEY

            Know all men by these  presents,  that each person  whose  signature
appears  below hereby  constitutes  and  appoints  Robert A. Berman and Scott A.
Kaniewski  his true and lawful  attorney-in-fact  and agent,  with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments to this Annual Report on Form
10-KSB and to file the same,  with  exhibits  thereto,  and other  documents  in
connection therewith, with the Securities and Exchange Commission, granting unto
said  attorney-in-fact and agent full power and authority to do and perform each
and every act and thing  requisite  and  necessary  to be done,  as fully to all
intents and  purposes as he might or could do in person,  hereby  ratifying  and
confirming all that said  attorney-in-fact and agent or either of them, or their
or his substitute or substitutes,  may lawfully do or cause to be done by virtue
hereof.

            In  accordance  with the Exchange  Act,  this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.


SIGNATURE                       TITLE                                 DATE
- ---------                       -----                                 ----

/s/ Robert A. Berman      Chief Executive Officer and Director    March 3, 2005
- ----------------------    (Principal Executive Officer)
Robert A. Berman

                          Chief Financial Officer                 March 3, 2005
/s/ Scott A. Kaniewski    (Principal Accounting and
- -----------------------   Financial Officer)
Scott A. Kaniewski

/s/ David Matheson
- -----------------------   Chairman of the Board and Director      March 3, 2005
David Matheson

/s/ David P. Hanlon       Vice Chairman of the Board              March 3, 2005
- ----------------------    and Director
David P. Hanlon


/s/ Morad Tahbaz
- ----------------------    President and Director                  March 3, 2005
Morad Tahbaz

/s/ Paul A. deBary
- -----------------------   Director                                March 3, 2005
Paul A. deBary

/s/ John Sharpe
- -----------------------   Director                                March 3, 2005
John Sharpe


/s/ Ralph J. Bernstein
- -----------------------   Director                                March 3, 2005
Ralph J. Bernstein

/s/ Joseph Bernstein
- -----------------------   Director                                March 3, 2005
Joseph Bernstein

                                       98

EX-4.5

                                                                     Exhibit 4.5


                                                           STATE OF DELAWARE
                                                           SECRETARY OF STATE
                                                        DIVISION OF CORPORATIONS
                                                       FILED 09:00 AM 02/08/2000
                                                          001063665 - 2329793


                           CERTIFICATE OF DESIGNATIONS
                     SETTING FORTH THE PREFERENCES, RIGHTS
                   AND LIMITATIONS OF SERIES D PREFERRED STOCK
                        OF ALPHA HOSPITALITY CORPORATION


     The undersigned officers of ALPHA HOSPITALITY CORPORATION (the
"Corporation"), a Delaware corporation, DO HEREBY CERTIFY that, pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware:

     1. The name of the Corporation is Alpha Hospitality Corporation and the
Corporation is validly existing and incorporated.

     2. On February 7, 2000, pursuant to authority vested in the Board of
Directors by Article FOURTH of the Corporation's Certificate of Incorporation,
the Board of Directors established a series of up to 4,000 shares of Series D
Preferred Stock of the Corporation, par value $ .01 per share, and adopted the
following preambles and resolutions with respect to the Certificate of
Designations of the Series D Preferred Stock:

     WHEREAS, the Corporation desires to create a new series of its Preferred
     Stock to be designated as "Series D) Preferred Stock";

     NOW THEREFORE. it is hereby

     RESOLVED, that a new series of the class of authorized preferred stock of
     the Corporation, designated "Series D Preferred Stock," be hereby created,
     and that the designation and amount thereof and the voting powers,
     preferences and relative, participating, optional and other special rights
     of the shares of such series, and the qualifications, limitations and
     restrictions thereof shall be as set forth below:

     Section 1. Designation and Amount; Par Value.

     The shares of such series shall be designated as "Series D Preferred Stock"
     and the number of shares constituting such series shall be 4,000, The par
     value of each share of the series shall be $.01. Each share of the Series
     D Preferred Stock shall have a stated value of $1,000.

     Section 2. Dividends on Series D Preferred Stock.

     The Corporation shall pay dividends on the stated value of each share of
     the Series D Preferred Stock at the rate of 7 % per annum, computed based
     an a 360-day year consisting of twelve 30-day months; provided that the
     applicable dividend rate will permanently increase to 15% per annum upon
     the occurrence of the events described in the second paragraph of Section
     4(a) below. Dividends shall be cumulative with respect to each share of the
     Series D Preferred Stock while such share is outstanding. Dividends shall
     be payable in arrears on the earlier to occur of (1) the date of conversion
     of a share of the Series D Preferred Stock into Common Stock (as defined





     in Section 4 below) as provided herein and (ii) the Redemption Date (as
     defined below). At the opiion of the Corporation, dividends may be payable
     to the holder of shares of the Series D Preferred Stock registered on the
     books of the Corporation (the "Holder") in the form of either (i) such coin
     or currency of the United States of America as at the time of payment is
     legal tender for payment of public and private debts or (ii) provided, and
     to the extent, that the Maximum Share Issuance (as defined in Section 4(a)
     below) shall not have occurred in respect of the shares of Series D
     Preferred Stock held by such Holder, the number of full shares of Common
     Stock that the amount of accrued dividends payable would entitle such
     Holder to acquire based upon a price per share equal to the Conversion
     Price (as defined in Section 4(a) below) determined as if the Conversion
     Date were the date on which such dividends became payable. The Corporation
     shall notify the Holder in writing within two (2) business days of the date
     Notice of Conversion by the Holder is received by the Corporation or five
     (5) business days prior to the Redemption Date, as applicable, of the form
     in which the Corporation elects to pay accumulated dividends. In the event
     the Corporation fails to timely provide such notice, payments of dividends
     shall be in Common Stock.

     Section 3. Redemption.

            (a) REDEMPTION DATE; MANDATORY REDEMPTION DATE.

                    (1) The "Redemption Date" shall mean, (i) in the case of a
mandatory redemption, the Mandatory Redemption Date, (ii) in the case of
redemption upon a Redemption Event (as defined below), the date a demand for
redemption is made following such Redemption Event, or (iii) in the case of an
elective redemption in the event of a Change of Control (as defined below), the
time immediately prior to the consummation of the Change of Control Transaction
(as defined below).

                    (2) The "Mandatory Redemption Date" shall mean February 8,
2005.

                    (3) The "Default Redemption Date" shall mean the date a
demand for redemption is made or deemed to be made following a Redemption Event.

            (b) MANDATORY REDEMPTION. On the Mandatory Redemption Date, upon
surrender to the Corporation of the Holder's stock certificate representing then
outstanding shares of the Series D Preferred Stock (the "Series D Stock
Certificates"), the Corporation shall deliver to the Holder, subject to, and
only to the extent such conversion is within the limits of, the Maximum Share
Issuance and the 9.9% Limitation (as defined in Section 4(a) below), the number
of shares of Common Stock determined pursuant to Section 4(a) as if such
Mandatory Redemption Date were the Date of Conversion. In the event the Maximum
Share Issuance prevents any shares of Series D Preferred Stock from being
converted in full, the dividend rate payable on any such remaining outstanding
Shares of Series D of Preferred Stock shall permanently increase to 15% per
annum, payable in cash in arrears, semi-annually on June 30 and December 31 of
each year to the extent such payments in cash are lawful.

                                       2




            (c) OTHER REDEMPTION PROVISIONS. The Series D Preferred Stock may
also be redeemed prior to a Change of Control Transaction or following a
Redemption Event, as provided elsewhere herein.

     Section 4. Conversion.

            (a) CONVERSION PRICE; AMOUNT; MAXIMUM SHARE ISSUANCE. Subject to
this Section 4, a Holder has the right to convert shares of the Series D
Preferred Stock, in whole or from time to time in part, into shares of common
stock, par value $.01 per share, of the Corporation (the "Common Stock"), The
price at which the Holder may convert shares of the Series D Preferred Stock (or
any portion thereof) into shares of Common Stock (the "Conversion Price") shall
be the lesser of (i) $6.00 (the "Maximum Conversion Price") and (ii) the
average of the two lowest Closing Prices (as defined below) of the Common Stock
during the 30 consecutive trading days immediately preceding (but excluding) the
Date of Conversion (as defined below) (the "Variable Conversion Price"). The
"Closing Price" with respect to the per share price of Common Stock on any day
means the last reported bid price regular way on NASDAQ Small Cap Market (or the
NASDAQ National Market, the New York Stock Exchange or American Stock Exchange
in the event any such market or exchange constitutes the principal market on
which the Common Stock is quoted or listed or admitted to trading) (such four
markets and exchanges, the "Approved Markets") or, if not quoted or listed or
admitted to trading on any such Approved Market, the closing bid price in the
over-the-counter market as furnished by any New York Stock Exchange member firm
that is selected from time to time by the Corporation for that purpose. In lieu
of any fractional share of Common Stock to which the Holder would otherwise be
entitled upon conversion of shares of the Series D Preferred Stock, the number
of shares of Common Stock issuable upon conversion thereof shall be rounded up
to the nearest whole number. In the case of a dispute as to the calculation of
the Conversion Price, the Holder's calculation shall be deemed conclusive absent
manifest error.

     The maximum number of shares of Common Stock (the "Maximum Share Issuance")
issuable upon conversion of all or any shares of the Series D Preferred Stock
(including shares of Common Stock that (x) the Corporation elects to issue in
payment of dividends as provided in Section 2 hereof and (y) the Holder elects
to receive in the form of Common Stock, if any, pursuant to the Registration
Rights Agreement (as from time to time amended, supplemented, restated or
otherwise modified, the "Registration Rights Agreement"), dated as of the
Initial Issuance Date, between the Corporation and the original purchaser of the
Series D Preferred Stock) is 3,300,000 (subject to adjustment for stock splits,
stock dividends, reclassification or other similar events). In the event there
is more than one Holder of Series D Preferred Stock, the unused portion of the
Maximum Share Issuance shall be allocated on a pro rata basis among the Holders
based upon the aggregate outstanding shares of Series D Preferred Stock. As of
the date on which the Maximum Share Issuance has occurred in respect of a
Holder's entire position of shares of the Series D Preferred Stock (and
accordingly, such Holder is unable to convert its remaining Series D Preferred
Stock into shares of Common Stock), the dividend rate payable on the remaining
shares of the Series D Preferred Stock held by such Holder shall permanently
increase to 15% per annum and shall be payable in arrears in cash on June 30 and
December 31 of each year, to the extent payment in cash shall be lawful
(regardless of whether the allocable Maximum Share Issuance applicable to such


                                       3




Holder's shares of the Series D Preferred Stock subsequently increases as a
result of conversions by other Holdcrs or otherwise).

     Except as otherwise provided herein, the Holder shall be entitled to
convert shares of the Series D Preferred Stock into Common Stock as follows: (i)
during calendar days 1 through 75 following the Initial Issuance Date, up to 25%
of the Holder's original position in shares of the Series D Preferred Stock;
(ii) during calendar days 76 through 150 following the Initial Issuance Date, an
amount that, when added to that previously converted, does not exceed 50% of the
Holder's original position in shares of the Series D Preferred Stock; (iii)
during calendar days 151 through 225 following the Initial Issuance Date, an
amount that, when added to that previously converted, does not exceed 75% of the
Holder's original position in shares of the Series D Preferred Stock; and (iv)
at any time on or after the 226th calendar day following the Initial Issuance
Date, all the remaining outstanding shares of the Series D Preferred Stock. In
the event of any transfer of the Series D Preferred Stock prior to the 226th day
following the Initial Issuance Date, the transferring Holder and the transferee
shall agree (and notify the Corporation in writing) as to the limitation on
their respective ability to convert shares of Series D Preferred Stock (giving
effect to conversion which have already accrued) in order to effectuate the
purpose of the foregoing sentence. The last date on which shares of the Series D
Preferred Stock may be converted is three (3) business days prior to the
Redemption Date. The foregoing limitation on conversion shall not apply to any
conversion to the extent the Closing Price on the trading day immediately
preceding the Date of Conversion is at least $10.00 per share (the "Minimum
Release Price").

     Notwithstanding any other provision of this Section 4, as of any date prior
to the Redemption Date, (i) the aggregate number of shares of Common Stock into
which all shares of the Series D Preferred Stock (inclusive of shares of Common
Stock issuable in payment of accrued dividends) and all other securities
convertible into Common Stock held by a Holder and its affiliates shall be
convertible, together with the shares of Common Stock then beneficially owned
(as defined in the Securities Exchange Act of 1934, at amended (the "Exchange
Act")) by such Holder and its affiliates (excluding shares of Common Stock
otherwise deemed beneficially owned as a result of the convertibility of the
shares of the Series D Preferred Stock held by the Holder or its affiliates),
shall not exceed 4.9% of the total outstanding shares of Common Stock as of such
date. In addition, notwithstanding any other provision of this Section 4, during
any consecutive 61-day period no Holder (together with its affiliates) may (x)
convert its Series D Preferred Stock into a number of shares of Common Stock
exceeding 9.9% of the Corporation's issued and outstanding shares of Common
Stock as of the first day of such 61-day period or sell shares of Common Stock
(whether acquired upon conversion of the Series D Preferred Stock or otherwise
in excess of 9.9% of the Corporation's issued and outstanding shares of Common
stock as of the first day of such 61-day period) (the "9.9% Limitation").
Notwithstanding any other provision of this Certificate of Designations, the
foregoing limitations on conversion may not be waived, amended or modified. The
Corporation shall have no obligation to monitor compliance with the foregoing
limitations on conversion.

          (b) MECHANICS OF CONVERSION. To convert shares of the Series D
Preferred Stock, the Holder must (i) complete and sign a Notice of Conversion in
form acceptable to the Corporation (the "Notice of Conversion") and deliver the
Notice of Conversion to the Corporation as herein provided and (ii) prior to the
date on which delivery of Common Stock is required to be made hereunder, (x)
duly endorse and deliver to the Corporation the Series D Stock Certificate(s)
representing the shares of the Series D Preferred Stock being converted and


                                        4



(y) pay any transfer or similar tax with respect to the delivery of such Series
D Stock Certificate(s) if required. The Holder shall surrender such Series D
Stock Certificate(s) and the Notice of Conversion to the Corporation (with an
advance copy by facsimile of the Notice of Conversion). The date on which
Notice of Conversion is given (the "Date of Conversion") shall be deemed to be
the date of receipt by the Corporation of the facsimile of the Notice of
Conversion, provided that such Series D Stock Certificate(s) are received by the
Corporation within five (5) business days thereafter. The Corporation shall not
be obligated to cause the transfer agent for the Common Stock (the "Transfer
Agent") to issue certificates evidencing the shares of Common Stock issuable
upon such conversion unless either such Series D Stock Certificate has been
received by the Corporation or, if such Series D Stock Certificates) have been
lost, stolen or destroyed, the Holder has executed and delivered to the
Corporation an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with the shares of the
Series D Preferred Stock represented by such Series D Stock Certificate(s).

     If the Transfer Agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program, the Corporation
shall cause the Transfer Agent to transmit electronically the shares of Common
Stock issuable to the Holder upon conversion of shares of the Series D Preferred
Stock by crediting the account of the Holder's prime broker with DTC through
DTC's Deposit Withdrawal Agent Commission ("DWAC") system, within three (3)
business days after delivery to the Corporation of the Holder's Series D Stock
Certificate(s). In the event the Holder otherwise elects in writing, however,
the Corporation shall cause the Transfer Agent to issue and deliver (within such
three (3) business day period) to the address of the Holder on the books of the
Corporation, as contemplated by the purchase agreement pursuant to which the
shares of the Series D Preferred Stock being converted were issued (the
"Securities Purchase Agreement"), or as otherwise directed pursuant to the
Notice of Conversion, a certificate or certificaies for the number of shares of
Common Stock to which such Holder shall be entitled as aforesaid. In the event
the Corporation fails to complete such delivery as aforesaid, it shall be
responsible for actual damages incurred by the Holder as a result thereof. The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. Notwithstanding that the
Holder is required to deliver the Series D Stock Certificate(s), duty endorsed,
within five (5) business days after the Date of Conversion, if such Series D
Certificate(s) are not received by the Corporation within ten (10) business days
after the Date of Conversion, the Corporation may at its option elect, by
written notice given to the Holder within fifteen (15) business days after the
Date of Conversion, elect (A) to treat Notice of Conversion as null and void or
(B) to treat the Notice of Conversion as binding and require the Holder to
deliver the applicable Series D Stock Certificate(s). In the event the
Corporation elects to treat the Notice of Conversion as binding, the shares of
Series D Preferred Stock with respect to which such Notice of Conversion was
given shall thereafter no longer be deemed outstanding and the Holder thereof
shall not be entitled to any voting or other rights attendant thereto, excepting
only the right to receive, upon the delivery to the Corporation of the
applicable Series D Stock Ccrtificate(s), the share of Common Stock upon the
conversion thereof as contemplated above.

     Following conversion of a share of the Series D Preferred Stock, such share
will no longer be outstanding and may not be reissued. In the event of the
conversion of less than all of the shares of the Series D Preferred Stock
represented by a Series D Stock Certificate, the Corporation or its Transfer
Agent will issue to the Holder a new stock certificate representing the


                                       5




number of shares of the Series D Preferred Stock not converted or shall endorse
the Series D Stock Certificate to reflect such conversion.

          (c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock or shares of Common Stock held in treasury, or
both, solely for the purpose of effecting the conversion of the Series D
Preferred Stock, such number of shares of Common Stock as shall from time to
time be sufficient to effect the conversion of the Series D Preferred Stock and
all other securities of the Corporation convertible or exchangeable into Common
Stock.

          (d) ADJUSTMENT TO FIXED CONVERSION PRICE, VARIABLE CONVERSION PRICE,
MAXIMUM SHARE ISSUANCE, MINIMUM TRIGGER PRICE AND MINIMUM RELEASE PRICE.

               (i) If, prior to the conversion of all shares of the Series D
Preferred Stock, the number of outstanding shares of Common Stock is increased
by a stock split, stock dividend of shares of Common Stock or other shares of
capital stock, reclassification or other similar event, the Maximum Conversion
Price, if applicable, and the Variable Conversion Price (together, the
"Conversion Prices") shall be proportionately reduced, or if the number of
outstanding shares of Common Stock is decreased by a combination or
reclassification of shares or other similar event, the Conversion Prices shall
be proportionately increased, in each case, such that a Holder will have the
right to receive upon conversion of shares of the Series D Preferred Stock the
number of shares of Common Stock (or other shares of capital stock) of the
Corporation (notwithstanding the limitation set forth in the fourth paragraph of
Section 4(a)) that such Holder would have been entitled to receive had the
Holder converted such shares of the Series D Preferred Stock immediately prior
to such action. The Maximum Share Issuance, the Minimum Trigger Price (as
defined in clause (iv) below) and the Minimum Release price shall likewise be
proportionately adjusted upon any increase in the number of outstanding shares
of Common Stock on account of any stock split, stock dividend of shares of
Common Stock or other shares of capital stock, reclassification or other similar
event or upon any decrease in number of outstanding shares of Common Stock on
account of any combination or reclassification of shares or other similar event.

               (ii) If, prior to the conversion of all shares of the Series D
Preferred Stock, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event (a "Conversion
Reclassification Event"), as a result of which shares of Common Stock shall be
changed into the same or a different number of shares of the Corporation or the
same or another class or classes of stock or securities of the Corporation or
another entity, then the Holder shall thereafter have the right to receive upon
conversion of shares of the Series D Preferred Stock, upon the basis and the
terms and conditions specified herein, such shares of stock and/or securities as
may be issued or payable with respect to or in exchange for the number of shares
of Common Stock immediately theretofore receivable upon the conversion of such
shares of the Series D Preferred Stock (irrespective of the limitations set
forth in Section 4(a)) had such Conversion Reclassification Event not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder such that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of shares of the
Series D Preferred Stock) shall thereafter be applicable, as nearly as may be
practicable in relation to any shares of stock or securities thereafter
deliverable upon the conversion of shares of the Series D Preferred Stock. The
Corporation shall not effect any Conversion Reclassification  Event unless the


                                       6




resulting successor or acquiring entity (if not the Corporation) assumes by
written instrument the obligation to deliver to the Holder such shares of stock
and/or securities as the Holder is entitled to receive upon conversion in
accordance with the foregoing.

               (iii) In addition to the adjustments set forth above, if the
Corporation distributes to all holders of its Common Stock any of its assets or
debt securities or any rights or warrants to purchase securities other than
Common Stock, then the Conversion Prices shall be adjusted in such a manner as
shall be agreed to by the Corporation and the Holders of a majority of the
outstanding shares of Series D Preferred Stock as shall fairly preserve the
economic rights and benefits of each Holder as contemplated by this Certificate
of Designations. In the event that within 15 days of any such event, the
Corporation and such Holders do not reach an agreement as to the appropriate
adjustment, the Corporation shall retain, and pay for, a nationally recognized
investment bank or accounting firm to determine the appropriate adjustment as
soon as possible, but in any event not later than 45 days, after the date of
such event.

               No adjustment to the Conversion Prices pursuant to any of the
events or circumstances set forth herein shall be made unless such adjustment
shall be in an amount of at least five cents ($0.05); provided, however, that
any adjustment that would otherwise be required to be made hereunder but for the
fact that it is less than five cents ($0.05) shall be carried forward and made
part of any subsequent adjustment that (a) when aggregated with prior
adjustment(s) that have not been made because it was (or each of them was) less
than five cents ($0.05) or (b) is in excess of five cents ($0.05).

               (iv) In the event that, after the Initial Issuance Date, the
     Corporation shall (other than upon the exercise, exchange or conversion of
     any securities of, the Corporation that are exercisable or exchangeable
     for, or convertible into, shares of Common Stock and that are outstanding
     as of the Initial Issuance Date (including, without limitation, the right
     granted to Stanley Tollman to convert deferred compensation into shares of
     Common Stock), upon the exercise of stock options granted under or pursuant
     to any stock option plan approved by shareholders of the Corporation, upon
     the conversion of any shares of Series D Preferred Stock or Parallel
     Preferred Stock (as defined in Section 11 below) or any shares of preferred
     stock issued by the Corporation prior to the Initial Issuance Date or upon
     the issuance of shares of Common Stock in lieu of cash dividends on any
     shares of preferred stock of the Corporation) at any time while any shares
     of the Series D Preferred Stock are outstanding (A) issue shares of Common
     Stock without consideration (other than in the form of a dividend) or at a
     price per share less than the Closing Price on the Initial Issuance Date
     (such Closing Price, the "Minimum Trigger Price") (B) issue options, rights
     or warrants to subscribe for or purchase Common Stock that provide for
     (upon the exercise thereof) the issuance of shares of Common Stock without
     consideration or at a price per share, which when added to the price or
     other consideration received for such options, rights or warrants, is less
     than the Minimum Trigger Price or (C) issue securities convertible into
     Common Stock having a conversion price less than the Minimum Trigger Price,
     the Conversion Prices to be in effect after the date of such issuance shall
     be adjusted by multiplying the Conversion Prices in effect immediately
     prior to the date of any such issuances referenced above by a fraction, of
     which the numerator shall be the number of shares of Common Stock
     outstanding on the date of such issuance plus the number of shares of
     Common Stock that the aggregate offering price of the total number of
     shares of Common Stock so to be issued (or the aggregate issue price of the
     convertible securities so to be issued) would purchase at the Minimum


                                       7




     Trigger Price and of which the denominator shall be the number of shares of
     Common Stock outstanding on the date of such issuance plus the number of
     additional shares of Common Stock to be issued (or into which the
     convertible securities so to be issued are initially convertible). In case
     the price for such securities may be paid in a consideration part or all of
     which shall be in a form other than cash, the value of such consideration
     shall be as determined in good faith by the Board of Directors of the
     Corporation, whose determination shall be conclusive. Such adjustment shall
     be made successively whenever the date of such issuance is fixed and, in
     the event that such options, rights, warrants or convertible securities
     (or portions thereof) expire or are otherwise discharged or redeemed
     without being exercised or converted, any adjustment in the Conversion
     Prices on account of the issuance of the same shall be reversed.

               (v) Adjustments to the Maximum Conversion Price pursuant to this
     Section 4, subject to subsection (i) above and the last sentence of
     subsection (ii) above, shall be permanent. Adjustment to the Variable
     Conversion Price pursuant to this Section 4 shall be made only to the
     extent an event requiring adjustment occurs during the period that the
     Variable Conversion Price is required to be calculated to determine the
     Conversion Price by making adjustments to the applicable Closing Prices
     within such period.

               (vi) If any adjustment under this Section 4(d) would create a
     fractional share of Common Stock or a right to acquire a fractional share
     of Common Stock, such fractional share shall be disregarded and the number
     of shares of Common Stock issuable upon conversion shall be the next higher
     number of shares.

          (e) ADJUSTMENTS OR ADDITIONS TO RIGHTS ATTENDANT TO SERIES D
PREFERRED STOCK. If at any time after the Initial Issuance Date, the
Corporation shall issue a class or series of preferred stock that is convertible
into Common Stock at varying prices based upon the market price of the Common
Stock at the time of conversion ("New Preferred Stock"), which new class or
series contains terms which the Holder determines are more favorable than the
terms of the Series D Preferred Stock, each Holder may elect to have all, but
not less than all, of such terms replace the applicable provisions set forth
herein. In the event such election is not made, the antidilution provisions of
Section 4(d) shall apply. The Corporation shall advise each Holder of the terms
of any New Preferred Stock within five (5) business days of the issuance
thereof, and each Holder shall have thirty (30) business days after receipt of
such notice to make such election; such election to be effective immediately
upon notice by such Holder to the Corporation.

          Section 5. Redemption Events.

          (a) A "Redemption Event" occurs if:

          (1) the Corporation defaults in effecting a conversion of shares of
     the Series D Preferred Stock in accordance with the provisions hereof
     (provided such default was (i) voluntarily caused or permitted by the
     Corporation, (ii) not due to some legal inability and (iii) otherwise
     within the Corporation's reasonable control) and such default continues for
     a period of 10 days; or


                                       8




          (2) the Corporation defaults in the payment of the stated value of or
     dividends on the Series D Preferred Stock when due (provided such default
     was (i) voluntarily caused or permitted by the Corporation, (ii) not due to
     some legal inability and (iii) otherwise within the Corporation's
     reasonable control) and any such default continues for a period of 10 days.

          (b) If a Redemption Event occurs and is continuing, the Holder of
shares of the Series D Preferred Stock may demand that the Corporation redeem
its shares in cash at a price equal to 125% of (i) the stated value plus (ii)
dividends accumulated thereon until such date of redemption.

          Section 6. Change of Control.

          A "Change of Control Transaction" shall mean, (i) the sale, conveyance
or disposition of all or substantially all of the assets of the Corporation,
(ii) a consolidation or merger of the Corporation with or into any other
"Person" (as defined in the Exchange Act) (whether or not the Corporation is the
surviving Person, but other than a merger or consolidation whereby the
stockholders of the Corporation. immediately preceding the merger or
consolidation continue to own greater than 50% of the voting power attributable
to the capital stock of the surviving Person in such merger or consolidation
that is normally entitled to vote in the election of directors, managers or
trustees, as applicable) or, (iii) any Person or any "group" (as such term is
used in Section 13(d) of the Exchange Act), becomes the beneficial owner or is
deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act
without regard to the 60-day exercise period) in excess of 50% of the
Corporation's voting power of the capital stock of the Corporation normally
entitled to vote in the election of directors of the Corporation (other than (A)
any Person or any such group that held such voting power as of the Initial
Issuance Date or (B) any group that holds such voting power subsequent to the
Initial Issuance Date, provided that the Persons that constitute such group
include the Person or a majority of the members of, and at least 50% of the
voting power held by, a group referenced in the foregoing clause (A)).

          Upon the notice or occurrence of, or announcement of the Corporation's
intent (or a third party's or parties' intent in the case of Change of Control
Transaction of the type set forth in clause (iii) of the definition of a Change
of Control Transaction) to engage in, a Change of Control Transaction, then, the
Series D Preferred Stock shall thereupon be convertible in full, notwithstanding
any limitations set forth in Section 4 hereof other than the 9.9% Limitation;
provided that the Holder's ability to convert the Series D Preferred Stock shall
cease three (3) trading days prior to the consummation of a Change of Control
Transaction of the type set forth in clauses (i) and (ii) of the definition
thereof. In addition, upon either the notice of, or the announcement of the
Corporation's intent to engage in, a Change of Control Transaction (of the type
set forth in clauses (i) and (ii) of the definition thereof), the Holder shall
have the right, up to and including the third trading day prior to the date of
effectiveness of such Change of Control Transaction, to elect to convert the
Series D Preferred Stock (subject to the 9.9% Limitation) into a number of
shares equal to 125% of the amount into which such Series D Preferred Stock
would otherwise be convertible, which conversion, in the case of such Change of
Control Transaction, shall be conditioned upon and shall be effective
immediately prior to consummation of such Change of Control Transaction. If the
Holder does not make such an election, the outstanding shares of Series D
Preferred Stock shall be deemed automatically converted into shares of Common
Stock immediately prior to the consummation of such Change of Control
Transaction, and the Holder shall receive the same consideration that a holder
of Common Stock is entitled to receive in connection with such Change of Control

                                       9



Transaction as if it held shares of Common Stock as of such date.

          The Corporation shall promptly mail written notice to the Holder of
either the occurrence of, or the announcement of the Corporation's intent to
engage in, a Change of Control Transaction (with a copy sent by facsimile), but
in any event such notice (other than, if applicable, in the case of a Change of
Control Transaction of the type set forth in clause (iii) of the definition of a
Change of Control Transaction) shall not be given less than twenty (20) days
prior to the effective date of such Change of Control Transaction.

          Section 7. Reacquired Shares.

          Any shares of the Series D Preferred Stock redeemed, purchased,
converted or otherwise acquired by the Corporation in any manner whatsoever
shall not be reissued as part of the Series D Preferred Stock and shall be
retired promptly after the acquisition thereof.  All such shares of the Series D
Preferred Stock upon their retirement and the filing of any certificate required
in connection therewith pursuant to the Delaware General Corporation Law shall
become authorized but unissued shares of Preferred Stock.

          Section 8. Equality.

          All Holders of Series D Preferred Stock shall be subject to the same
terms and conditions as set forth herein. No Holders of Series D Preferred Stock
shall be entitled to or receive terms that are more favorable than those given
to any other Holder of Series D Preferred Stock. In the event a Holder of Series
D Preferred Stock is given by the Corporation or receives from the Corporation
terms more favorable than those given by the Corporation or received from the
Corporation by any other Holder of Series D Preferred Stock, then in such event
all Holders of Series D Preferred Stock shall be given and entitled to those
more favorable terms.

          Section 9. Registered Holder.

          The Corporation may for all purposes treat the holder of shares of the
Series D Preferred Stock registered on the books of the Corporation as the
Holder, notwithstanding any notice or claim by any other Person with respect to
any interest in such shares.

          Section 10. Voting Rights.

          (a) Prior to conversion thereof, Holders of the Series D Preferred
Stock shall not be entitled to any of the rights of a holder of Common Stock,
including without limitation, the right to vote or to attend any meetings of
common stockholders or any other proceedings of the Corporation and shall only
be entitled to such voting rights as are provided by Delaware law and as set
forth in clause (b) below.

          (b) So long as any shares of Series D Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the Holders
of majority of the outstanding shares of Series D Preferred Stock; (A) alter or
change the rights, preferences or privileges of the Series D Preferred Stock;
(B) alter or change the rights, preferences or privileges of any capital stock
of the Corporation so as to affect adversely the Series D Preferred Stock; (C)
create or issue any Senior Securities (except as provided in Section 11 below);
(D) create or issue any Pari Passu Securities (as defined in Section 11 below)
other than any additional series of preferred stock that has terms (other than


                                       10




the amount of the maximum conversion price) identical or substantially identical
to the terms of the Series D Preferred Stock and the outstanding shares of which
shall not have an aggregate stated value in excess of three million dollars
($3,000,000) and a maximum conversion price which is not set at a discount to
the Closing Price of the Common Stock as the trading date immediately preceding
the date of issuance thereof above the discount that the Maximum Conversion
Price bears to the Closing Price on the trading day immediately preceding the
Initial Issuance Date (such additional series of preferred stock, the "Parallel
Preferred Stock"); (E) increase the authorized number of shares of Series D
Preferred Stock; (F) do any act or thing not authorized or contemplated by this
Certificate of Designation that would result in any taxation with respect to the
Series D Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended, or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended, (or otherwise suffer to exist any such
taxation as a result thereof). Notwithstanding the foregoing, any Holder (and
all of its, his or her successors and assigns) shall be bound by any waiver or
other amendment, modification or other agreement set forth in writing and signed
by such Holder or otherwise obtained in accordance with the immediately
preceding sentence.

          Section 11. Rank.

          All shares of the Series D Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the
Corporation hereafter created other than the Senior Preferred Stock, the
Parallel Preferred Stock and any other series or class of capital stock of the
Corporation (A) that has been consented to by the Holders of a majority of the
outstanding shares of Series D Preferred Stock, and (B) that specially, by its
terms, ranks senior to or pari passu with the Series D Preferred Stock) (the
Common Stock and any other class or series of capital stock of the Corporation
hereafter created (other than the Senior Preferred Stock and the Parallel
Preferred Stock) that does not specifically, by its terms, rank senior to or
pari passu with the Series D Preferred Stock being hereinafter referred to
collectively as "Junior Securities"); (iii) pari passu with the Parallel
Preferred Stock and any other class or series of capital stock of the
Corporation hereafter created (A) that has been consented to by the Holders of a
majority of the outstanding shares of Series D Preferred Stock and (B) that,
specifically by its terms, ranks on parity with the Series D Preferred Stock
(the "Pan Passu Securities"); and (iv) junior to the Corporation's Series B and
Series C Preferred Stock, the Senior Preferred Stock and any other class or
series of capital stock of the Corporation hereafter created, (A) that has been
consented to by the Holders of a majority of the outstanding shares of Series D
Preferred Stock and (B) that specifically, by its terms, ranks senior to the
Series D Preferred Stock (all of the foregoing, collectively, the "Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
In the event the Board of Directors of the Corporation, in order to raise
funding or financing all or substantially all of the net proceeds of which are
to be applied or used in the development of the proposed casino and related
projects of the Corporation and/or its subsidiaries and other affiliates in the
Monticello, New York region deems it in the best interests of the Corporation
and its shareholders that the Corporation issue one or more series of preferred
stock (which shall not be convertible into Common Stock based on a variable
market price) ranking senior to the Series D Preferred Stock, the Corporation
shall be entitled to do so and the Holders of the Series D Preferred Stock,
shall be deemed to have consented to the issuance of each such series and that
such series shall rank senior to the Series D Preferred Stock (any such series
of preferred stock, "Senior Preferred Stock").


                                       11



Section 12. Liquidation Preference.

          A. LIQUIDATION OF THE CORPORATION. If the Corporation shall commence
a voluntary case under the U.S. Federal bankruptcy laws or any other applicable
bankruptcy, insolvency or similar law, or consent to the entry of an order for
relief in an involuntary case under any law or to the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or other similar
official) of the Corporation or of any substantial part of its property, or make
an assignment for the benefit of its creditors, or admit in writing its
inability to pay its debts generally as they become due, or if a decree or order
for relief in respect of the Corporation shall be entered by a court having
jurisdiction in the premises in an involuntary case under the U.S Federal
bankruptcy laws or any other applicable bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of sixty (60) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (a "Liquidation Event"), no
distribution shall be made to the holders of any shares of capital stock of the
Corporation (other than Senior Securities and, together with the Holders of
Series D Preferred Stock, the Pari Passu Securities) upon liquidation,
dissolution or winding up unless prior thereto the Holders shall have received
the Liquidation Preference (as hereinafter defined) with respect to each share
of Series D Preferred Stock. If, upon the occurrence of a Liquidation Event, the
assets and funds available for distribution among the Holders and holders of
Pari Passu Securities shall be insufficient to permit the payment to such
Holders of the preferential amounts payable thereon, then the entire assets and
funds of the Corporation legally available for distribution to the Series D
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable
on each such share bears to the aggregate Liquidation Preference payable on all
such shares.

          B. CERTAIN ACTS NOT A LIQUIDATION. The purchase or redemption by the
Corporation of stock of any class or series, in any manner permitted by law,
shall not, for the purposes hereof, be regarded as a liquidation, dissolution or
winding up of the Corporation. Neither the consolidation or merger of the
Corporation with or into any other entity nor the sale or transfer by the
Corporation of less than substantially all of its assets shall, for the purposes
hereof, be deemed to be a liquidation, dissolution or winding up of the
Corporation.

          C. DEFINITION OF LIQUIDATION PREFERENCE, The "Liquidation Preference
with respect to a share of Series D Preferred Stock means an amount equal to the
stated value thereof plus any other amounts that may be due from the Corporation
with respect thereto pursuant to this Certificate of Designation, the Securities
Purchase Agreement or the Registration Rights Agreement. The Liquidation
Preference with respect to any Pari Passu Securities shall be as set forth in
the Certificate of Designation filed in respect thereof and, as applicable, any
other agreements related thereto.

          Section 13. Lost or Destroyed Certificates.

          If a Series D Stock Certificate shall be mutilated, lost, stolen or
destroyed, the Corporation shall execute and deliver, in exchange and
substitution for and upon cancellation of such mutilated Series D Stock
Certificate, or in lieu of or in substitution for a lost, stolen or destroyed


                                       12




Series D Stock Certificate, a new Series D Stock Certificate for the Series D
Stock Certificate so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of such loss, theft or destruction of such Series D Stock
Certificate, and of the ownership thereof, and indemnity, if requested, all
reasonably satisfactory to the Corporation,

          Section 14. Certain Definitions.

          (a) BUSINESS DAY. For purposes hereof, the term "business day" shall
mean any day on which banks are generally open for business in the City of New
York.

          (b) TRADING DAY. For purposes hereof, the term "trading day" shall
mean any day on which the principal market on which the Common Stock is traded
is open for business.

          (c) PERSON. For purposes hereof, the term "Person" means an individual
or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, governmental authority or other
entity of any kind.

          Section 15. Waiver.

          Any waiver by the Corporation or a Holder of a breach of any provision
of this Certificate of Designations shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of the Series D Preferred Stock. The failure of the Corporation or the
Holder to insist upon strict adherence to any term of this Certificate of
Designations on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Certificate of Designations of the Series D
Preferred Stock Any waiver must be in writing.

          Section 16. Unenforceable Provisions.

          If any provision of this Certificate of Designations is invalid,
illegal or unenforceable, the remaining provisions of thereof shall remain in
effect, and if any provision is inapplicable to any Person or circumstance, it
shall nevertheless remain applicable to all other Persons and circumstances,

          Section 17. Copies of Agreements, Instruments, Documents.

          Copies of any of the agreements, instruments or other documents
referred to in this Certificate of Designations shall be furnished to any Holder
of Series D Preferred Stock upon written request to the Corporation at its
principal place of business.

          Section 18. Notices.

          All notices, demands, requests, consents, approvals or other
communications required or permitted to be given hereunder or that are given
with respect to the Series D Preferred Stock 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 air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below: (i) if to the Corporation, to: Alpha
Hospitality Corporation, 12 East 49th Street, New York, New York 10017,
Attention: Thomas Aro, Secretary, Facsimile No.: (212) 750-5171 (or to such


                                       13




other address of which notice has been given as herein provided, with copies
(which shall not constitute notice) to: Parker Duryee Rosoff& Haft, 529 Fifth
Avenue, New York, New York 10017, Attention: Herbert F. Kozlov, Esq., Facsimile
No.: (212) 972-9487; and (ii) if to the Holder, to the address of the registered
holder according to the books and records of the Corporation or its transfer
agent. Notice shall be deemed given on the date so served, deposited for
mailing, transmitted by hand delivery, telegram, telex or facsimile or delivered
to a reputable air courier for delivery as contemplated above and shall be
deemed received on the date so served, if served or transmitted by hand
delivery, telegram, telex or facsimile, one business day after being so
delivered to a reputable air courier for delivery as contemplated above or three
business days after being so mailed as contemplated above.

          IN WITNESS WHEREOF, ALPHA HOSPITALITY CORPORATION has caused this
Certificate of Designations to be executed by its Chairman and President and
attested to by its Secretary this 7th dayof February, 2000,


                                     ALPHA HOSPITALITY CORPORATION



                                      /s/ Stanley S. Tollman
                                     -------------------------------------------
                                     Stanley S. Tollman, Chairman and President


ATTEST:



/s/ Thomas W. Aro
- ------------------------
Thomas W. Aro, Secretary

                                       14

EX-10.5

                                                                    Exhibit 10.5

                               AMENDMENT NO. 1 TO
                      16% SENIOR UNSECURED PROMISSORY NOTE

     Reference is hereby made to that certain Promissory Note dated December 10,
2002  (the  "NOTE"),  issued  by  Alpha  Hospitality  Corporation,   a  Delaware
corporation (the "COMPANY"), to the order of Societe Generale (the "HOLDER"), in
the principal amount of $1,600,000.

     WHEREAS,  on July 31,  2000,  the  Company  issued  the Holder a warrant to
purchase 12,500 shares of the Company's  common stock,  $.01 par value per share
(the "COMMON STOCK"), at an exercise price of $24.00 (as adjusted to reflect the
Company's 1-10 reverse stock split effected June 27, 2001) (the "WARRANT");

     WHEREAS,  as  consideration  for the Company reducing the exercise price of
the  Warrant  from  $24.00 to $.01,  the  Holder has agreed to amend the Note as
provided below; and

     WHEREAS, the parties hereto are in discussions with respect to the exchange
by the Holder of the Note for certain shares of the Company's Common Stock.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:

     1.  AMENDMENT.  Section 3(A) of the Note is hereby amended by deleting such
subsection in its entirety and inserting in its stead the following:

          "(A) The payment of the  principal on this Note shall be due
          in such amounts and on such payment dates (each,  a "Payment
          Date") as follows:  (i) $800,000 shall be due and payable on
          April 15, 2003 and (ii) $800,000 shall be due and payable on
          June 30, 2003. Accrued interest on the outstanding principal
          amount of this Note  shall  also be due and  payable on each
          Payment Date.  Interest  will accrue on overdue  payments of
          principal and interest at the rate of 16% per annum."

     2. GOVERNING LAW. This Amendment  shall be governed by,  enforced under and
construed in accordance  with the laws of the State of New York,  without giving
effect to the principles of conflicts of laws thereof.

     3.  MISCELLANEOUS.  This  Amendment  shall be binding upon and inure to the
benefit of and be enforceable  by the  respective  successors and assigns of the
parties  hereto.  This Amendment may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one  instrument.  Except as amended hereby,  the Note remains  unmodified and in
full force and effect.

                            [Signature Page Follows]






     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
executed by the undersigned, thereunto duly authorized, as of February 28, 2003.

                                   ALPHA HOSPITALITY CORPORATION


                                   By: /s/ Scott A. Kaniewski
                                      -------------------------------------
                                      Name:  Scott A. Kaniewski
                                      Title: CFO

                                   SOCIETE GENERALE


                                   By: /s/ Francois Barthelemy
                                      ------------------------------------
                                      Name:  Francois Barthelemy
                                      Title: Managing Director

EX-10.6

                                                          Exhibit 10.6

                          AMENDMENT NO. 2 TO
                 16% SENIOR UNSECURED PROMISSORY NOTE

     Reference is hereby made to that certain Promissory Note dated December 10,
2002, as amended to date (the "NOTE"), issued by Alpha Hospitality  Corporation,
a Delaware  corporation (the  "COMPANY"),  to the order of Societe Generale (the
"HOLDER"), in the principal amount of $1,600,000.

     WHEREAS, an $800,000 payment is due and payable under the Note on April 15,
2003;

     WHEREAS,  the Holder has agreed to restructure the terms of this payment as
provided in the Amendment below as consideration for (i) the Company's  issuance
to the Holder of 10,000 shares of the Company's common stock, $.01 par value per
share ("COMMON STOCK"),  (ii) the Company's payment to the Holder of $250,000 to
be credited  against the outstanding  principal amount of the Note and (iii) the
Company's  payment to the Holder of all outstanding  accrued but unpaid interest
on the Note (together, the "RESTRUCTURING TERMS");

     WHEREAS,  the  Holder has agreed to accept  shares of Common  Stock,  to be
valued at $8.00  per  share,  for any  payments  due to the  Holder in excess of
$150,000 under the Restructuring Terms; and

     WHEREAS, the parties hereto are in discussions with respect to the exchange
by the Holder of the Note for certain shares of the Company's common stock.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:

     1.  AMENDMENT.  Section 3(A) of the Note is hereby amended by deleting such
subsection in its entirety and inserting in its stead the following:


          "(A) The payment of the  principal on this Note shall be due
          in such amounts and on such payment dates (each,  a "Payment
          Date") as follows:  (i) $250,000 shall be due and payable on
          April 15, 2003, and (ii) $1,350,000 shall be due and payable
          on  June  15,  2003.  Accrued  interest  on the  outstanding
          principal  amount of this Note shall also be due and payable
          on each  Payment  Date.  Interest  will  accrue  on  overdue
          payments of  principal  and  interest at the rate of 16% per
          annum."

     2.  REGISTRATION  OF  SHARES.  The  Company  shall (a)  prepare  and file a
registration  statement (the "REGISTRATION  STATEMENT") under the Securities Act
of 1933, as amended,  relating to the resale of the shares of Common Stock to be
issued to the Holder under the  Restructuring  Terms (the "SHARES"),  (b)use its
best  efforts to cause such  Registration  Statement  to become  effective on or
before April 30, 2003 (the "FIRST TARGET DATE"),  but in all events on or before
June 15, 2003 (the "SECOND  TARGET  DATE") and (c) use its best efforts to cause
such  Registration  Statement  to  remain  effective  for a period  of two years
commencing on the date such  Registration  Statement  becomes  effective or such
shorter period as will terminate when all of the Shares have been disposed of by
the Holder or are otherwise  available for resale pursuant to Rule 144 under the
Securities Act of 1933, as amended.  If the Registration  Statement has not been




declared effective by the Securities and Exchange  Commission ( the "SEC") on or
before the First Target Date, then on the first business day following the First
Target Date the Company shall pay to the Holder the sum of $60,000 as liquidated
damages for such delay. Moreover, if such Registration Statement is not declared
effective  by the SEC on or before the  Second  Target  Date,  then on the first
business  day  following  the Second  Target Date the  Company  shall pay to the
Holder an  additional  sum of $90,000 as  liquidated  damages  for such  further
delay.

     3. GOVERNING LAW. This Amendment  shall be governed by,  enforced under and
construed in accordance  with the laws of the State of New York,  without giving
effect to the principles of conflicts of laws thereof.

     4.  MISCELLANEOUS.  This  Amendment  shall be binding upon and inure to the
benefit of and be enforceable  by the  respective  successors and assigns of the
parties  hereto.  This Amendment may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one  instrument.  Except as amended hereby,  the Note remains  unmodified and in
full force and effect.

                            [Signature Page Follows]







             [SIGANTURE PAGE TO AMENDMENT NO. 2 TO PROMISSORY NOTE]

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
executed by the undersigned, thereunto duly authorized, as of April 14, 2003.

                                     ALPHA HOSPITALITY CORPORATION


                                     By: /s/ Scott A. Kaniewski
                                        ------------------------------------
                                        Name:  Scott A. Kaniewski
                                        Title: Chief Financial Officer

                                     SOCIETE GENERALE


                                     By: /s/ Francois Barthelemy
                                        ------------------------------------
                                        Name:  Francois Barthelemy
                                        Title: Managing Director

EX-10.7

                                                          Exhibit 10.7

                          AMENDMENT NO. 3 TO
                 16% SENIOR UNSECURED PROMISSORY NOTE

     Reference is hereby made to that certain Promissory Note dated December 10,
2002, as amended to date (the "NOTE"),  issued by Empire Resorts, Inc. (formerly
Alpha Hospitality  Corporation),  a Delaware corporation (the "COMPANY"), to the
order of Societe Generale (the "HOLDER"), in the principal amount of $1,600,000.

     WHEREAS,  the remaining unpaid  principal amount of the Note  ($1,350,000),
and all unpaid accrued  interest  thereon,  is due and payable on June 15, 2003;
and

     WHEREAS,  the Holder has agreed to extend this  payment due date until June
20, 2003.

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:

     1.  AMENDMENT.  Section 3(A) of the Note is hereby amended by deleting such
subsection in its entirety and inserting in its stead the following:

          "(A) The payment of the  principal on this Note shall be due
          in such amounts and on such payment dates (each,  a "Payment
          Date") as follows:  (i) $250,000 shall be due and payable on
          April 15, 2003, and (ii) $1,350,000 shall be due and payable
          on  June  20,  2003.  Accrued  interest  on the  outstanding
          principal  amount of this Note shall also be due and payable
          on each  Payment  Date.  Interest  will  accrue  on  overdue
          payments of  principal  and  interest at the rate of 16% per
          annum."

     2. GOVERNING LAW. This Amendment  shall be governed by,  enforced under and
construed in accordance  with the laws of the State of New York,  without giving
effect to the principles of conflicts of laws thereof.

     3.  MISCELLANEOUS.  This  Amendment  shall be binding upon and inure to the
benefit of and be enforceable  by the  respective  successors and assigns of the
parties  hereto.  This Amendment may be executed in any number of  counterparts,
each of which shall be an original,  but all of which together shall  constitute
one instrument.  Except as amended  hereby,  and by amendments 1 and 2 (all such
previous amendments being valid and applicable), the Note remains unmodified and
in full force and effect.

                       [Signature Page Follows]




        [SIGANTURE PAGE TO AMENDMENT NO. 3 TO PROMISSORY NOTE]

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Amendment to be
executed by the undersigned, thereunto duly authorized, as of June 12, 2003.

                                     EMPIRE RESORTS, INC.
                                     (FORMERLY ALPHA HOSPITALITY CORPORATION)


                                     By: /s/ Scott A. Kaniewski
                                        ----------------------------------------
                                        Name:  Scott A. Kaniewski
                                        Title: Chief Financial Officer

                                     SOCIETE GENERALE


                                     By: /s/ Francois Barthelemy
                                        ----------------------------------------
                                        Name:  Francois Barthelemy
                                        Title: Managing Director

EX-10.9

                                                                    Exhibit 10.9

              FIRST AMENDMENT OF LAND PURCHASE AGREEMENT

     THIS FIRST AMENDMENT OF LAND PURCHASE  AGREEMENT (this "AMENDMENT") is made
and entered  into as of April 30, 2004 (the  "EFFECTIVE  DATE"),  by and between
Catskill  Development,  L.L.C., a New York limited liability company,  having an
address at Monticello  Raceway,  P.O. Box 5013,  Route 17B Monticello,  New York
12701 ("SELLER"),  and Cayuga Catskill Gaming Authority,  an  instrumentality of
the Cayuga Nation of New York, whose address is Post Office Box 11,  Versailles,
NY 14168  ("PURCHASER").  This  Amendment is entered into with  reference to the
following facts:

     A. Seller is the seller and  Purchaser  is the  purchaser  pursuant to that
certain  Land  Purchase  Agreement,  dated  April 30,  2003 (the "LAND  PURCHASE
AGREEMENT"),  affecting  certain premises  located at Monticello,  New York (the
"PREMISES"),  Which  Premises  contain  approximately  29  acres,  all  as  more
particularly described in the Land-Purchase Agreement.

     B. The Premises are more particularly described in Exhibit A attached.

     D. Seller and Purchaser desire to amend certain of the teens and provisions
of the Sale Purchase Agreement,  upon the terms and conditions set forth in this
Amendment.

     NOW,  THEREFORE,  for  Ten  Dollars  ($10)  and  other  good  and  valuable
consideration   the   receipt  and  legal   sufficiency   of  which  are  hereby
acknowledged,  Seller and  Purchaser  agree as follows  (all  capitalized  terms
defined in the Land  Purchase  Agreement  shall have the same  meanings  in this
Amendment  except to the  extent  that this  Amendment  sets  forth  some  other
definition for a particular term):

1.   Closing Date.

     In Section 9.01 of the Land Purchase  Agreement,  the date "May 1, 2004" is
deleted and replaced by the following date: "December 31, 2004."

2.   No Other Changes.

     Except  for the  foregoing  changes  in the  Land Purchase  Agreement,  the
parties ratify and confirm the Land Purchase  Agreement,  as previously amended.
Seller and Purchaser acknowledge and agree that the Land Purchase Agreement,  as
hereby amended,  is in full force and effect in accordance  with its terms.  Any
inconsistency  between this  Amendment  and the Land  Purchase  Agreement (as it
existed  before this  Amendment)  shall be resolved in favor of this  Amendment,
whether or not this Amendment specifically modifies the particular  provision(s)
in the Land Purchase  Agreement  inconsistent with this Amendment.  Wherever the
Land Purchase  Agreement refers to the Land Purchase  Agreement,  such reference
shall be deemed to refer to the Land  Purchase  Agreement  as  modified  by this
Amendment.   Sections   14.10   and  14.11  of  the  Land   Purchase   Agreement
("Nonrecourse")  shall apply to this  Amendment  as if set forth in full in this
Amendment.

3.   Certain Confirmations.

     Each of Seller and Purchaser confirms and acknowledges on its own behalf:



     3.1. Full Force and Effect.  The Land  Purchase  Agreement is in full force
and effect and has not been  supplemented,  modified or  otherwise  amended,  or
canceled,  terminated,  or surrendered,  except pursuant to this Amendment.  The
Land  Purchase  Agreement  is binding  and  enforceable  as  against  Seller and
Purchaser in accordance with its terms. The Land Purchase  Agreement as modified
by this Amendment  represents  the entire  agreement and  understanding  between
Purchaser and Seller with respect to sale/purchase of the Premises.

     3.2. No Defenses.  Neither Seller nor Purchaser has any defenses, claims or
counterclaims  with respect to the Land Purchase  Agreement  nor does  Purchaser
have any  offsets,  setoffs or other  basis for  reduction  with  respect to any
payments required under the terms of the Land Purchase Agreement.

     3.3. No Default.  To each party's best knowledge,  as of the Effective Date
neither  Seller nor  Purchaser  is in default in the  performance  of any of its
covenants, agreements or conditions contained in the Land Purchase Agreement nor
has any event  occurred  that,  with the  passage of time or giving of notice or
both,  would  constitute a default  under the Land Purchase  Agreement.  Neither
Seller nor  Purchaser  has given any notice of any uncured  default to the other
party.

4.   Miscellaneous.

     4.1.  Representations  and Warranties.  Each party  represents and warrants
that it has the legal power and authority to enter into this  Amendment  without
consent or  approval by any third  party,  and that this  Amendment  is a valid,
legal, and binding  obligation of such party  enforceable in accordance with its
terms.

     4.2.  Further  Assurances.  Each party shall take such  further  actions as
shall be reasonably  necessary from time to time to implement and effectuate the
intentions of the parties expressed in this Amendment.

     4.3.  Amendments.  The Land Purchase  Agreement may not be further amended,
discharged or terminated except by a written instrument executed by the parties.

     4.4. Counterparts.  This Amendment may be executed in counterparts, each of
which  shall  be an  original,  but  all of  which  shall  constitute  a  single
agreement.


                                       2


     IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as of
the Effective Date.

CAYUGA CATSKILL GAMING AUTHORITY             CATSKILL DEVELOPMENT, L.L.C.

/s/ Timothy W. Twoguns                       /s/ Morad Tahbaz
- --------------------------------             ---------------------------------
By:  Timothy W. Twoguns                      By: Morad Tahbaz
Its: Director                                Its:  President

Attachments:
Exhibit A = Legal Description

                                       3



                                   EXHIBIT A

                               LEGAL DESCRIPTION

     All that certain plot, piece or parcel of land situate,  lying and being in
the Village of Monticello, Town of Thompson, County of Sullivan and State of New
York  being  more  particularly  described  as Parcel  No. 1 on  "Final  Revised
Subdivision of Plat of Lands of Catskill Development, L.L.C." dated May 25, 1999
and filed in the Office of the Sullivan  County Clerk on February 4, 2002 as Map
No.  8-271,  together  with  and  subject  to  the  easements  shown  thereon.

                                      A-1

EX-10.14

                                                                  Exhibit 10.14


                      FIRST AMENDMENT OF LETTER AGREEMENT

          THIS FIRST AMENDMENT OF LETTER  AGREEMENT  (this  "Amendment") is made
and entered  into as of April 30, 2004 (the  "Effective  Date"),  by and between
EMPIRE  RESORTS,  INC.  and  CATSKILL  DEVELOPMENT,  L.L.C.,  having  address at
Monticello  Raceway,  P.O.  Box  5013,  Route  17B,  Monticello  New York  12701
(collectively, "Monticello"),   and  CAYUGA   NATION  OF  NEW  YORK  and  CAYUGA
CATSKILL GAMING  AUTHORITY,  having an address at 24 East Main Street,  Gowanda,
New York  (collectively,  "Cayuga"  ).  This  Amendment  is  entered  into  with
reference to the following facts:

          A.  Catskill  Development,   L.L.C.,  Alpha  Hospitality   Corporation
(predecessor  to  Empire  Resorts,  Inc.)  and  Cayuga  entered  into  a  Letter
Agreement,  dated as of April 3,  2003 (a copy of which is  attached  hereto  as
Exhibit "A", the "Letter Agreement").

          B. Monticello and Cayuga on behalf of themselves and their  respective
successors and assignees  desire to amend certain of the terms and provisions of
the Letter Agreement, upon the terms and conditions set forth in this Amendment.

          NOW,  THEREFORE,  for Ten  Dollars  ($10) and other good and  valuable
consideration   the   receipt  and  legal   sufficiency   of  which  are  hereby
acknowledged,  Monticello  and Cayuga  agree as follows (all  capitalized  turns
defined in the Letter Agreement shall,  have the same meanings in this Amendment
except to the extent that this Amendment sets forth some other  definition for a
particular term):

1.   Dates.

          In Paragraphs 11 and 12 of the Letter Agreement, in each instance, (A)
the date "April 30, 2004" is deleted and replaced  with the date  "December  31,
2004";  and (B) the date "May 1, 2004" is  deleted  and  replaced  with the date
"December 31, 2004."

2.   No Other Changes.

          Except for the foregoing changes to the Letter Agreement,  the parties
ratify and confirm the Letter Agreement.  Monticello and Cayuga  acknowledge and
agree that the Letter Agreement,  as hereby amended, is in full force and effect
in accordance with its terms. Any  inconsistency  between this Amendment and the
Letter  Agreement  (as it existed  before this  Amendment)  shall be resolved in
favor of this  Amendment.  Wherever  the Letter  Agreement  refers to the Letter
Agreement,  such reference  shall be deemed to refer to the Letter  Agreement as
modified by this Amendment.

3.   Certain Confirmations.

     Each of Monticello and Cayuga confirms and acknowledges on its own behalf:

          3.1. Full Force and Effect.  The Letter Agreement is in full force and
effect  and has  not  been  supplemented,  modified  or  otherwise  amended,  or
canceled, terminated,  or surrendered,  except  pursuant to this Amendment.  The
Letter Agreement is binding and enforceable as against  Monticello and Cayuga in



accordance  with its terms.  The Letter  Agreement as modified by this Amendment
represents the entire agreement and understanding  between Cayuga and Monticello
with respect to the subject matter thereof.

     3.2. No Default.  To each party's best knowledge,  as of the Effective Date
neither  Cayuga nor  Monticello is in default in the  performance  of any of its
covenants,  agreements or conditions  contained in the Letter  Agreement nor has
any event occurred  that,  with the passage of time or giving of notice or both,
would constitute a default under the Letter Agreement.   Neither  Monticello nor
Cayuga has given any notice of any uncured default to the other party.

4.   Miscellaneous.

     4.1 Representations and Warranties. Each party represents and warrants that
it has the legal  power and  authority  to enter  into  this  Amendment  without
consent or  approval by any third  party,  and that this  Amendment  is a valid,
legal, and binding  obligation of such party  enforceable in accordance with its
terms.

     4.2.  Further  Assurances.  Each party shall take such  further  actions as
shall be reasonably  necessary from time to time to implement and effectuate the
intentions of the parties expressed in this Amendment.

     4.3.  Amendments.   The  Letter  Agreement  may  not  be  further  amended,
discharged or terminated except by a written instrument executed by the parties.

     4.4. Counterparts.  This Amendment may be executed in counterparts, each of
which  shall  be an  original,  but  all of  which  shall  constitute  a  single
agreement.


                                       2


     IN WITNESS  WHEREOF,  Monticello and Cayuga have executed this Amendment as
of the Effective Date.

EMPIRE RESORTS, INC.                         CAYUGA NATION OF NEW YORK


/s/ Robert Berman                            /s/ Timothy H. Twoguns
- -------------------------------              ----------------------------------
By: Robert Berman                            By:  Timothy H. Twoguns
Its: CEO                                     Its: Representative


                                             CAYUGA CATSKILL
CATSKILL DEVELOPMENT, L.L.C.                 GAMING AUTHORITY


/s/ Morad Tahbaz                             /s/ Irene B. Jimewon
- --------------------------------             -----------------------------------
By: Morad Tahbaz                             By:  Irene B. Jimewon
its:  President                              Its  Director



/s/ Robert A. Berman
- --------------------------------
Robert A. Berman, individually



/s/ Morad Tahbaz
- --------------------------------
Morad Tahbaz, individually


          Attachments:

          Exhibit A = Letter Agreement


                                       3



                                   EXHIBIT A

                         ALPHA HOSPITALITY CORPORATION

                          CATSIILL DEVELOPMENT L.L.C.

                                                             As of April 3, 2003

Cayuga Nation of New York
Cayuga Catskill Gaming Authority
24 East Main Street
Gowanda, New York
Attention: Clint Halftown

Ladies and Gentlemen:

     This letter sets forth the agreements and  understandings  among the Cayuga
Nation of New York (the  "Nation"),  the Cayuga Catskill  Gaming  Authority,  an
instrumentality of the Nation (the "Authority"),  Catskill  Development,  L.L.C.
("Catskill"),  Alpha Hospitality Corporation (individually and collectively with
its  subsidiaries,   "Alpha"),   Robert  A.  Berman  ("Berman"),   Morad  Tahbaz
("Tahbaz"),  the other  principals  and affiliates of Catskill or  Alpha who are
listed on Schedule 1 annexed hereto and made a part hereof and who individually,
directly or indirectly, own ten (10%) percent or more of the equity interests in
Catskill  (such  principals  and  affiliates  are referred to  individually  and
collectively  as the  "Principals"),  Monticello  Raceway  Development  Company,
L.L.C. ("Developer") and Monticello Casino Management,  L.L.C. ("Manager").  For
purposes of this letter,  Catskill and Alpha are  referred to  individually  and
collectively  as  "Monticello",  and  Catskill,  Alpha,  Berman,  Tahbaz and the
Principals are referred to individually and collectively as "CAP".

     The Nation intends to apply for approval of conveyance of an  approximately
30 acre parcel of land (the "Property")  currently forming a portion of the site
of the Monticello  Raceway located in Sullivan  County,  New York to the  United
States  Government in trust for the Nation's  benefit in order to facilitate the
development  of a Class III gaming  facility  (the "Gaming  Enterprise")  on the
Property.  The Gaming  Enterprise  is to be developed on behalf of the Nation by
Developer and its affiliates.  In connection therewith,  among other things, the
Nation, the Authority and Manager are entering into a gaming facility management
agreement  (the  "Management  Agreement")  with respect to the  development  and
operation of the Gaming Enterprise.

     As an outgrowth of the  foregoing  transactions  and in order to induce the
Nation,  the  Authority,  and  Catskill  and its  affiliates  to enter into such
transactions,  the Nation  and the  individuals  and  entities  included  in the
definition of CAP have  discussed and agreed to certain  aspects  thereof and to
the structure of certain future joint business activities, as follows:



Cayuga Nation of New York
As of April 3, 2003
Page 2

     1. In order to fund the costs and expenses of the Nation in connection with
acquiring  the Property and  developing  the Gaming  Enterprise,  the Nation and
Catskill agree  to formulate a mutually  acceptable written budget within thirty
(30) days  after the date  hereof  encompassing  the costs and  expenses  of the
Nation  (including  services  to be  performed  by  members  of the  Nation)  in
connection with such acquisition and development, and the fees and disbursements
to  be  paid  to  legal  counsel,  accountants  and  such  other  professionals,
consultants  and  specialists  engaged  by or on  behalf  of the  Nation  or the
Authority in connection therewith. The parties further agree that Catskill shall
fund all amounts  contemplated by such budget as required thereby,  but not less
frequently  than  monthly,  until  ninety (90) days after the  Opening  Date (as
hereinafter  defined) with the  understanding  that Catskill would be reimbursed
for such amounts  solely out of (x) the third party  construction  financing and
(y) to the extent  such  financing  is  insufficient,  distributions  to Manager
pursuant to Section 6.4 Third of the Management  Agreement.  The parties further
agree that neither the Nation nor the  Authority  shall have any  obligation  to
fund any of the costs and expenses of acquiring the Property or  developing  the
Gaming Enterprise, except as expressly contemplated by the Management Agreement,
as amended from time to time.

     2. Catskill  further  agrees on behalf of itself and Developer that (i) the
maximum amount they (and their  affiliates on their  behalf),  in the aggregate,
will be reimbursed for pre-development  costs and  expenses shall be $10,000,000
(exclusive of the purchase price for the Property) and such reimbursement  shall
be funded  solely (x) out of the third party  construction  financing and (y) to
the extent such financing is insufficient,  distributions to Manager pursuant to
Section  6.4 Third of the  Management  Agreement,  and (ii)  such  reimbursement
shall,  in no event  include  any costs and  expenses  incurred by them or their
affiliates in connection with the litigation with Park Place Entertainment Corp.
or amounts  paid by them  or their affiliates to the St. Regis Mohawk Tribe, its
members, affiliates and/or their respective legal counsel, accountants and their
other professionals, consultants and specialists.

     3.  Subject to paragraph 4 and the other terms and  conditions  hereinafter
set forth,  from,  the date hereof  through and  including  the date that is the
tenth (10th)  anniversary of the date of the opening to the public of the Gaming
Enterprise (the "Opening Date"), the Nation and CAP have agreed that CAP and the
Nation,  respectively,  will  have the  right  to  participate  in the  proposed
development   and  operation   directly  or   indirectly  by  the  Nation,   its
instrumentalities  and agencies and/or its and their respective  affiliates (the
Nation  and  such  instrumentalities,  agencies  and  its and  their  respective
affiliates are referred to individually and collectively as "Nation Group"),  or
by CAP  and/or  its or their  respective  affiliates  (CAP  and/or  its or their
respective  affiliates are referred to individually and collectively as the "CAP
Group"):

          (a)  of one  or  more  hotels,  motels  or  other  similar  facilities
               providing overnight accommodations  including ancillary beverage,
               food,  entertainment,  commercial  and/or retail services (each a
               "Hotel  Facility")  within a  fifteen  (15)  mile  radius  of the
               Property; and




Cayuga Nation of New York
As of April 3, 2003
Page 3


          (b)  any  other   entertainment,   sports   and/or   retail   facility
               (including,  but not limited to the  placement  of video  lottery
               terminals and/or slot machines on the real estate currently owned
               by Catskill  upon which  Monticello  Raceway is located)  (each a
               "Non-Hotel  Facility")  within  a  five-mile  (5)  radius  of the
               Property.

For  purposes of this  letter,  a Hotel  Facility  and/or a  Non-Hotel  Facility
are/is referred  to individually  and  collectively as a "Facility".  The Nation
acknowledges  and understands that the CAP Group has no current plans to develop
and/or operate a Hotel  Facility.  CAP  acknowledges  and  understands  that the
Nation Group has no current plans to develop  and/or  operate a Hotel  Facility.
Notwithstanding the foregoing provisions of this paragraph 3 to the contrary,

          (x)  the term Hotel  Facility  shall not include  any hotel,  motel or
               other  similar  facilities  providing  overnight   accommodations
               including ancillary  beverage,  food,  entertainment,  commercial
               and/or retail  services  developed by the Nation Group or the CAP
               Group in conjunction or their respective development of any Class
               III or Class II gaming facility other than the Gaming Enterprise;

          (y)  the term  Facility  shall  not  include  the  Gaming  Enterprise,
               residential housing  developments such as single-family homes, or
               condominium,  cooperative  or  rental  apartments,  or  office or
               professional buildings and

          (z)  the term  Facility  shall not  include  the   Exempt  Transaction
               (hereinafter defined).

     4.  Notwithstanding  any other provision of this Agreement to the contrary,
the rights  afforded to the Nation and CAP under paragraph 3 shall vest when the
Property  has been  acquired  by the  United  States in trust  for the  Nation's
benefit but shall not become  exercisable  until the Opening Date.  Accordingly,
while the parties shall be obligated to provide each other with the  information
contemplated  by paragraph 9, no party can compel or obligate any other party to
make a decision  under  paragraph  9 until the  Opening  Date,  and the right to
commence  the  running of all time  periods  set forth in  paragraph 9 is tolled
until the Opening Date and the  requirements of paragraph 9 have been satisfied.
Upon the occurrence of the Opening Date, the rights  afforded under  paragraph 3
shall become  exercisable as to any Facility  developed between the date of this
letter and the Opening Date.

     5. Subject to paragraph 4, the Nation and CAP hereby agree that

          (a)  the Nation or its designee, provided that such designee is a 100%
               owned agency, authority or  instrumentality of, or otherwise 100%
               controlled by, the Nation, or



Cayuga Nation of New York
As of April 3, 2003
Page 4



          (b)  the entities and  individuals  included in the definition of CAP,
               or their  designees,  provided  such  designees are 100% owned or
               controlled by one or more of such entities and individuals,

in each case, in the aggregate, will have the right to purchase, in each case at
its or their option and sole discretion,  an interest (the "Acquired  Interest")
of up to one-third  (33.33%) of the equity in each Facility developed by the CAP
Group,  or the Nation Group,  respectively.  The purchase price for the Acquired
Interest  shall be a pro rata share of the costs,  as  calculated  in accordance
with  paragraph 6, of such Facility  less the amount  advanced by any lender for
any mortgage or other loan secured by such Facility's  property or cash flow. If
the Nation,  or CAP, as the case may be, does not exercise  such right as to any
Facility,  it or they shall  nevertheless  retain the right with  respect to any
other Facility  developed by the CAP Group, or the Nation Group, as the case may
be, in accordance with the terms of this Agreement.

     6. The costs may include (i) land costs  (acquisition,  lease,  etc.,  site
development and other costs and expenses  incurred in connection  therewith) and
(ii) so-called "hard" and "soft" costs and expenses  incurred in connection with
the  planning,  development,  construction,  equipping  and  furnishing  of such
Facility,  including,  reasonable financing,  development and carrying costs, as
agreed to by the  parties,  but shall in no event be less than  $1.00  provided,
however,  that such  costs  shall in no event  include  any  costs and  expenses
incurred in connection with the operation of the Nation's or the Authority's, or
CRP's,  businesses,  including,  without limitation,  salaries, rent, insurance,
utility  charges  and any other  type of  general,  administrative  or  overhead
expense.

     7. Except as permitted by the following sentence, the purchase price for an
Acquired  Interest  shall be paid in cash at the time the  Acquired  Interest is
purchased. With respect to any Acquired Interest purchased by the Nation (or its
permitted  designee) prior to  the second (2nd) anniversary of the Opening Date,
in lieu of paying cash, the  obligations of the Nation (or such designee) to pay
for such Acquired  Interest,  may, at the option of the Nation,  be satisfied in
whole or in, part by the  execution  and delivery of a  non-recourse  promissory
note having an interest rate equal to the composite prime interest rate publicly
announced  from time to time by The Wall Street  Journal  until such time as the
financing to construct such Facility is obtained at which time the interest rate
then and thereafter  will be changed  to the interest rate charged by the lender
providing such  financing,  (ii)  providing for (A) monthly  payments based on a
thirty (30) year amortization  schedule, (B) no monthly payments until the first
(1st) anniversary  of the date the Note is issued,  with monthly  payments to be
made over the ensuing  five (5) years and (C) the  payment of the entire  unpaid
principal balance, together with accrued and unpaid interest thereon, at the end
of such five (5) year period;  (iii)  providing for the prepayment of the unpaid
principal amount in whole or in part, at any time and from time to time, without
premium or  penalty,  but with  accrued  interest on the amount  being  prepaid,


Cayuga Nation of New York
As of April 3, 2003
Page 5

(iv)providing  for the  payment  obligations  under the Note are to be a general
obligation of or  guaranteed by the  Authority,  and (v)  containing  such other
reasonable terms and conditions as are agreed to by the parties.

     8. In consideration for the option to obtain the Acquired  Interests as set
forth  above,  the Nation  agrees  that the first  Hotel  Facility  shall be the
so-called  "preferred provider" Hotel Facility for the Gaming Enterprise for the
period  commencing on the  completion of such Hotel  Facility and  ending on the
retirement of the initial first mortgage indebtedness with respect to such Hotel
Facility.  For purposess of this Agreement,  the term "preferred provider" means
that the Nation will cause the Gaming Enterprise to refer and recommend rooms in
such Hotel  Facility to the guests and clients of the Gaming Enterprise to the
extent such  accommodations  are available in the Hotel Facility;  provided that
such Hotel Facility agrees to use commercially reasonable efforts to accommodate
such guests and clients at the most favorable corporate discount rates.

     9. Whenever the Nation Group or CAP Group,  as the case may be,  identifies
and  determines  to proceed  with a specific  Facility  (the party  making  such
identification and determination is referred to as the Facility  "Developer" and
the other party is referred to as the "Prospective  Participant"),  the Facility
Developer  shall provide the  Prospective  Participant  with a written  analysis
containing in reasonable  detail the material  terms of the proposed.  Facility,
including,  but not limited to copies of the  contract or option to purchase the
property  upon  which  such  Facility  will  be   constructed,   and  copies  of
applications fled for requisite  building and other permits,  and business plans
and marketing studies, if any (collectively, the "Analysis"), together with such
other  information  as  the  Prospective  Participant  then  or  thereafter  may
reasonably  request,  to the extent in the possession of the Facility Developer.
The Prospective  Participant may thereafter notify the Facility Developer of the
Prospective  Participant's  decision to  purchase  an Acquired  Interest in such
Facility. In such event, the Prospective  Participant and the Facility Developer
shall enter into a definitive  purchase and sale  agreement (a  "Contract"),  in
form  and  substance  reasonably  and  mutually  satisfactory  to  the  parties,
providing  for  the  purchase  by the  Prospective  Participant  of an  Acquired
Interest in such  Facility.  The  Contract  is to be  prepared  by  Monticello's
attorneys  who, will be instructed to begin the  preparation of the form thereof
(which shall include customary provisions regarding  governance,  management and
disposition of an equity interest by an owner, and a form of the Note, customary
closing  conditions,  including  opinions  of counsel  as to the  authorization,
binding effect and availability of commercially reasonable judicial remedies for
the  enforceability  thereof) upon the execution and delivery hereof,  and which
form shall be negotiated in good faith and fair dealing by the parties,  subject
to such  changes in the form once a Facility  is  identified  as are  reasonably
required and are otherwise  acceptable to the parties. If the parties through no
fault of the  Facility  Developer  have not  entered  into a  Contract  within a
reasonable time, not to be less than ninety (90) days from the date the Facility
Developer  delivers the Analysis to the  Prospective  Participant,  the Facility
Developer may thereafter submit a written request to the Prospective Participant
for  confirmation   from  the  Prospective   Participant  that  the  Prospective
Participant intends to purchase an Acquired


Cayuga Nation of New York.
As of April 3, 2003
Page 6

Interest  in such  Facility  (the  "Confirmation").  If the  Developer  does not
receive the Confirmation  within thirty (30) days after the Developer  submits a
request therefor, the Prospective  Participant will be deemed to have elected to
forgo his, her or its right to purchase an Acquired  Interest in such  Facility.
If the Prospective  Participant  confirms that he, she or it intends to purchase
an Acquired Interest in such Facility, such Confirmation shall be accompanied by
a fully executed Contract (together with such documentation  as is then provided
for therein)  within thirty (30) days after the Facility  Developer  submits the
demand for the Confirmation.

     10. If there is any  material  change in the  proposed  development  of any
Facility,  the Facility  Developer thereof shall promptly notify the Prospective
Participant of all such changes. Further, if the Prospective Participant has not
previously  exercised his, her or its right to purchase an Acquired  Interest in
such Facility,  the Facility Developer shall again offer, in accordance with the
procedures set forth in paragraph 9, the Prospective Participant the opportunity
to purchase an Acquired Interest in such Facility.

     11. In  consideration  of the  agreements and  undertakings  of the parties
hereto set forth herein, the Nation Group and the CAP Group severally agree that
for a period  ending on the earliest of (i) approval (A) by the Secretary of the
Interior  of the  United  States  of the  Application  and (B)  approval  by the
National  Indian  Gaming  Commission  of  the  Management  Agreement,  (ii)  the
termination of the Management  Agreement by reason of Manager's (as such term is
defined  in  the  Management  Agreement)  material  breach  of  its  obligations
thereunder,  (iii) the termination of the Development and Construction Agreement
(as  such  term  is  defined  in the  Management  Agreement)  by  reason  of the
Developer's  material breach of its obligations  thereunder,  and (iv) April 30,
2004, the Nation Group and the CAP Group, respectively, will refrain from having
discussions  regarding the  development of another Class III gaming  facility in
Sullivan  County,  New York.  If the approvals set forth in clause (i) above are
not obtained by April 30, 2004 or the  Management  Agreement or the  Development
and  Construction  Agreement  (or both) is (are) so  terminated  prior to May 1,
2004,  this Agreement and the  transactions  contemplated  or referenced  herein
shall terminate and the partiess hereto shall have no obligation to proceed with
any of such  transactions,  or to each other,  except that Catskill shall remain
liable for, and  reimburse  the Nation for,  any amounts  expended by the Nation
prior to May 1, 2004 in  accordance  with the  budget  established  pursuant  to
paragraph 1.

     12. In  consideration  of the agreements and undertakings of the Nation set
forth herein, and notwithstanding  any provision of the Management  Agreement to
the contrary,  Monticello  and Manager shall use their  commercially  reasonable
efforts to (i) identify  and enter into a joint  venture,  partnership  or other
similar  arrangement  (which  may  include a direct or  indirect  investment  in
Monticello or Manager) with one or more  individuals or entities,  (ii) identify
and employ or  otherwise  retain the  services  of one or more  individuals,  or
entities,  or (iii) enter into a contractual  arrangement with one or more third
parties, in each case in Monticello's and Manager's sole discretion, and in each
case by no later than April 30, 2004; provided that such individuals, entities


Cayuga Nation of New York
As of April 3, 2003
Page 7

or third  parties as the case may be,  (x) have the  expertise,  experience  and
ability to (1) obtain financing to construct,  and, (2) develop manage,  operate
and maintain,  the Gaming  Enterprise,  as well as to instruct the Authority and
others in the operation of a first-class  gaming  facility and (y), are approved
in advance by the Authority,  in its sole and absolute discretion.  In addition,
promptly  after  the  approval  of  the  Authority  has  been   obtained,   such
individuals, entities or third parties, as the case may be, acting through or on
behalf of Monticello and Manager,  as the case may be, shall (i) have the day to
day  responsibility for and, in consultation with the other persons and entities
comprising the Manager, the overall performance of, all of Manager's obligations
under the  Management  Agreement,  and (ii) join with  Monticello and Manager in
furnishing  a  a  written   certificate   to  the  Authority   confirming   such
responsibility.  If  the  Authority  does  not  approve  of and  consent  to the
performance of such obligations by such individuals,  entities or third parties,
as  the  case  may  be,   Monticello  and  Manager  shall  forthwith  use  their
commercially reasonable efforts to identify and accept such other individuals or
entities,  as the case may be, who satisfy the  conditions  set forth in clauses
(x) and (y) above of this paragraph 12.

     13.  Alpha is hereby  added as a party to the  Letter of Intent  previously
entered into between  Catskill and the Nation,  dated  October 22, 2002,  and in
consideration  thereof and of the Nation's agreement that a Hotel Facility shall
become the  "preferred  provider"  to the Gaming  Enterprise,  Alpha has made an
award to the Nation of 300,000 shares of its Common Stock (the  "Stock"),  to be
valued at the  closing  price of Alpha's  Common  Stock on the  Nasdaq  SmallCap
Market on such  grant  date,  which is to become  vested in the  Nation in three
installments,  in each case  assuming  that the  Nation  has not  withdrawn  the
Application  from the Bureau of Indian Affairs and/or the National Indian Gaming
Commission:

     (a)  the first  installment  will consist of 100,000 shares and will become
          vested on the date of the filing (the "Filing  Date") by the Nation of
          an Application  for the Acquisition of Land to be Placed in Trust (the
          "Application")  for the Property with the United States  Department of
          the Interior

     (b)  the second  installment will consist of 100,000  additional shares and
          become vested on the six month anniversary of the Filing Date; and

     (c)  the third  installment will consist of 100,000  additional  shares and
          become vested on the one-year anniversary of the Filing Date.

     14.  The  Stock  is to  be  held  in  escrow  by  the  Nation's  attorneys,
Sonnenschein  Nath  &  Rosenthal  (the  "Escrow  Agent").  Compliance  with  all
conditions  for release  thereof as of the date of each release may be evidenced
by  the  filing  with  such  escrow  agent  of a  certificate  of an  authorized
representative  of the Nation stating that the Nation has complied with all such
conditions.  The escrow agent and the transfer  agent for Alpha's  common shares
will be fully  protected in relying on such  certification.  The transfer  agent


Cayuga  Nation of
New York As of April 3, 2003
Page 8


shall be entitled to assume that any such certificate presented with the related
shares is valid and genuine.

     15. On or immediately  following each vesting date  prescribed by paragraph
13, Alpha will file a registration  statement on Form S-3 (or, if Alpha does not
meet the  conditions  to use Form  S-3,  on Form S-1)  with the  Securities  and
Exchange  Commission  with  respect to the  100,000  shares of Stock  first then
vested and shall take any and all other  steps  necessary  for all the shares of
Stock theretofore and then vested to be immediately, and remain, registered (and
the registration  statement and prospectus  current) under the Securities Act of
1933 and qualified  under state  securities  laws,  all of the above at Alpha's.
expense (including the fees of counsel to the Nation).  Alpha will indemnify the
Nation  against any  liabilities  with respect to or in connection  with actions
taken or omitted to be  taken, or  statements  made or omitted to be made, by or
on behalf of Alpha with respect to such registration to which the Nation and its
affiliates or associates  may become  subject as a result of such  registration,
and will remain current in Alpha's filings under the Securities  Exchange Act of
1934.

     16.  The Nation  will be a  stockholder  of Alpha  only to the extent  that
shares have vested in the Nation as provided herein and, in the event the Nation
withdraws the  Application,  any portion of the Stock which has not vested as of
the date the  Application  is  withdrawn  will cease to be vestable  and will be
cancelled by Alpha (the  certificates of which shall be returned to Alpha by the
Escrow Agent),  but no such cancellation will have any effect on the validity or
ownership of any shares which have already vested.

     17.  Monticello  represents and warrants that no individual or entity other
than Berman and the other  individuals or entities listed on Schedule 1 directly
or  indirectly  owns or currently  has the right to acquire ten (10%) percent or
more of the equity interests in Catskill,  Alpha,  Developer or Manager,  except
that Alpha  presently  has the right to acquire all direct and  indirect  equity
interests  in Catskill,  Developer  and Manager as described in Exhibit J to the
Management Agreement (the "Exempt Transaction").

     18.  Any notice(s),  consent(s) or other communications  required hereunder
shall be sent to the parties hereto at the addresses for such parties prescribed
by,  and  become  effective  as  provided  in,  Section  7.1 of  the  Management
Agreement,  and in the case of the Nation,  notice  shall be sent to the address
set forth at the  beginning  of this  Agreement  and in the case of  Monticello,
notices and other communications shall be sent to the address of the Manager set
forth in the Management Agreement. In addition, CAP agrees that a notice sent to
Monticello  shall be deemed a notice to each  individual and entity  encompassed
within the definition of CAP.

     19.(a) Subject to the provisions of this paragraph 19, the Nation expressly
waives sovereign immunity for the sole purpose of consenting to the jurisdiction
of any federal court located in the State of New York (or any federal  appellate
court  having  jurisdiction  thereover)  or any  State of New York  court of any
level, in each case, of competent jurisdiction only for the purpose of enforcing


Cayuga Nation of New
York As of April 3, 2003
Page 9

remedies  permitted  hereunder arising out of its obligations under paragraphs 3
through 11  (inclusive),  13, 14, 16, and 20 and this Paragraph 19 and then only
to the extent that the judicial remedy being sought in such judicial  proceeding
is injunctive relief, specific performance,  or any other similar remedy that is
equitable  in nature and that does not  involve the payment by the Nation of any
monetary damages,  it being understood and agreed by the parties hereto that the
Nation in no event shall be liable or otherwise  responsible  for the payment of
any award of monetary  damages.  In the event that any court or  Arbitrator  (as
hereinafter defined), as applicable,  determines that a breach of the provisions
of paragraphs 3 through 11  (inclusive),  13,14,  16 and 20 by the Nation caused
CAP economic  harm for which an award of monetary  damages from the Nation,  but
for the  foregoing  provisions of this  paragraph  19, would be the  appropriate
judicial  remedy,  the Authority (but in no event the Nation) shall,  subject to
the applicable terms and provisions of this paragraph 19, pay the amount of such
award to CAP.

          (b) Subject to the  provisions  of this  paragraph  19, the  Authority
waives  sovereign  immunity for the sole  purpose of  permitting  or  compelling
arbitration as provided in this paragraph 19 and consenting to the  jurisdiction
of any federal court located in the State of New York (or any federal  appellate
court  having  jurisdiction  thereover)  or any  State of New York  court of any
level, in each case, of competent jurisdiction for the purpose of any mediation,
arbitration or lawsuit (including enforcing awards and other remedies on account
thereof),  as applicable,  pursuant to the  provisions  hereof or arising out of
this Agreement. Without in any way limiting the generality of the foregoing, the
Authority expressly  authorizes any governmental  authorities who have the right
and duty under  applicable  law to take any action  authorized or ordered by any
court,  to take such action.  In no instance  shall any  enforcement of any kind
whatsoever be allowed  against any assets of the Nation or the  Authority  other
than the limited assets of the Authority specified in paragraph 19(g).

          (c) The  following  disputes  between  the  parties  hereto  shall  be
resolved by the United States  District  Court for the Southern  District of New
York (or any federal appellate court having jurisdiction  thereover) or, if such
United States District Court cannot hear or refuses to hear such dispute, by the
New York State Supreme Court, sitting in New York County (or any state appellate
court having jurisdiction thereover):  (a) any material monetary dispute and (b)
any dispute in which injunctive relief,  specific performance or another similar
equitable remedy is one of the remedies being sought by any party (such disputes
being  referred to as "Judicially  Resolved  Matters").  The following  disputes
between the parties  hereto shall be determined by mediation or  arbitration  as
set forth in  paragraph  19(d):  (a) any dispute as to whether any party  hereto
acted reasonably (if and only if that is the standard by which such action is to
be judged),  or used commercially  reasonable  efforts,  when required to so act
under  the terms  and  provisions  of this  Agreement  and (b) any  non-material
monetary  dispute (such disputes being referred to as "JAMS Resolved  Matters").
In the event that any dispute,  controversy or claim arising between the parties
hereto is  notoencompassed  within the  foregoing  definitions  of a  Judicially
Resolved Matter or a JAMS Resolved Matter,  such dispute shall be deemed to be a
Judicially Resolved Matter, notwithstanding the definition of such term.


Cayuga Nation of New York
As of April 3, 2003
Page 10


Anything to the contrary  contained  herein  notwithstanding,  in the event that
both the United States District Court for the Southern  District of New York (or
any federal  appellate  court having  jurisdiction  thereover)  and the New York
State Supreme Court,  sitting in New York County (or any state  appellate  court
having jurisdiction thereover), cannot or refuse to hear any Judicially Resolved
Matter,  such  dispute  shall be brought in the New York  State  Supreme  Court,
sitting in Sullivan  County (or any state  appellate  court having  jurisdiction
thereover)  (or if such  court  cannot or  refuses  to hear such  dispute,  such
dispute shall be resolved as if it were a JAMS Resolved Matter).

          (d) All JAMS  Resolved  Matters  shall be  resolved  by  mediation  or
arbitration, to be held in the County, City and State of New York, or such other
location as the parties may agree, before a single  mediator/arbitrator  who has
at least  five  years of  knowledge  and  experience  in the  casino,  hotel and
real estate  industries   ("Arbitrator"),  the  identity of whom shall be agreed
upon by the  parties   from the panel  of  mediators  and  arbitrators  of JAMS.
Failing agreement between the parties concerning the identity of the Arbitrator,
JAMS shall  appoint  such  person.  The  Arbitrator  shall  immediately  conduct
mediation  between the parties to attempt to resolve the  dispute.  Failing such
mediation,  the Arbitrator shall determine the dispute through arbitration.  The
parties  recognize  that  disputes  could arise which will  require  expeditious
determination.  In such  cases,  the  Arbitrator  shall  render a  determination
expeditiously,  and in the exercise of discretion, on a summary basis. Except in
such exigent circumstances,  arbitration are to be conducted in  accordance with
the rules of JAMS.

          (e) In determining any matter the court or Arbitrator,  as applicable,
shall  apply  the terms of this  Agreement,  without  adding  to,  modifying  or
changing the terms in any respect,  and shall apply New York law and  applicable
federal  and  Nation  law.  New York law shall  govern  the  interpretation  and
construction of this Agreement.

          (f) The  parties  (and,  in the case of a JAMS  Resolved  Matter,  the
Arbitrator) shall maintain strict  confidentiality  with respect to the judicial
proceeding or arbitration,  as  applicable,   subject  to  the  requirements  of
applicable law, including the federal securities laws.

          (g) The  waiver  of  immunity  from suit in this  paragraph  19 by the
Authority  shall  be  specifically   limited  to  injunctive  relief,   specific
performance and  other similar  equitable  relief,  and to the enforcement of an
award of money damages by judicial proceeding or arbitration;  provided that the
Arbitrator  and/or the court shall have no  authority or  jurisdiction  to order
execution  against any assets or revenues of the Nation and may execute  only as
to the Authority  against (i) undistributed or future Net Revenues (as such term
is defined in the Management Agreement) of the Gaming Enterprise;  or (ii) if it
has been  specifically  found by an  Arbitrator  that, by exercise of regulatory
authority  pursuant to the Nation Gaming  Ordinance (as such  term is defined in
the Management  Agreement) or otherwise,  or any rules, actions, or decisions of
the Authority pursuant thereto,  the Authority has prejudiced CAP Group's rights
under this  Agreement,  the  future Net Revenues of any other gaming  operations
conducted  by the  Authority,  or any  other  entity  of the  Authority,  on the


Cayuga Nation of New York
As of April 3, 2003
Page 11


Property.  Notwithstanding  any  other  provision  of this  paragraph  19 to the
contrary, in no instance shall any enforcement of any kind whatsoever be allowed
against any assets of the Nation or the Authority  other than the limited assets
of the Authority specified in this paragraph 19(g).

          (h)  Neither  the Nation  nor any  officer,  office-holder,  employee,
agent,  representative  or member of the  Nation or of the  Authority,  as such,
shall have any personal  liability for  obligations of the Authority  under this
Agreement  or for any claim  based  on, in  respect  of, or by reason  of,  such
obligations  or their  creation.  Further,  no member,  nor any officer,  office
holder,  employee,  agent,  representative,  or member of any  member of the Cap
Group shall have any personal liability, for the obligations of Monticello under
this  Agreement  or for any claim based on, in respect of, or by reason of, such
obligations or their creation.

     20. Each party  represents  and  warrants  that it has engaged no broker or
finder in connection with any of the transactions contemplated by this Agreement
nor to its knowledge is  any broker or finder in  any way connected  with any of
such transactions and will indemnify the other against any claim based thereon.

     21. This  Agreement  and the matters set forth  herein  shall not be deemed
merged into or  superceded  by any other  agreement  or contract by or among the
Nation, the Authority or CAP, whether such agreement or contract was previously,
is  now,  or is  hereafter  executed  in  connection  with  the  Application  or
otherwise,  notwithstanding  the fact that such other  agreement or contract may
contain a merger or similar clause unless this  Agreement is expressly  referred
to in such  clause and such  clause  expressly  states  that this  Agreement  is
superceded or terminated by such agreement, or contract.

     22. This Agreement may be executed in counterparts, each of which shall for
all purposes be deemed to be an original and all of  which shall constitute  the
same  instrument.  Any  such  counterpart  may  be  executed  and  delivered  by
telecopier or other facsimile  transmission,  all with the same force and effect
as if the same was a  manually executed and delivered original counterpart.  Any
such counterpart  signature page may be attached to the body of one copy of this
Agreement to form a complete integrated whole.

     23. New York law shall govern the  interpretation  and construction of this
Agreement.

     24. The  Nation  acknowledges  and  agrees  that  Berman  and  Tahbaz  have
executed this  Agreement to  acknowledge  their  agreements  with respect to the
provisions of paragraphs 3-11 (inclusive) and paragraph 18.

      [balance of page intentionally left blank; signature pages follow]





Cayuga nation of New York
April 3 2003

     If these terms are  acceptable,  please sign in the space  provided  below.

                                             Very truly yours,

ALPHA HOSPITALITY CORPORATION                CATSKILL DEVELOPMENT, L. L. C.


By: /s/ Robert A. Berman                     By: /s/ Morad Tahbaz
   ----------------------------------           --------------------------------
   Name:  Robert A. Berman                      Name:  Morad Tahbaz
   Title: Chairman                              Title: Chairman


/s/ Robert A. Berman                         /s/ Morad Tahbaz
- -------------------------------------        -----------------------------------
Robert A. Berman, individually               individually



Cayuga Nation of New York
As of April 3, 2003
Page 13


ACCEPTED AND AGREED:

CAYUGA NATION OF NEW YORK


By: /s/ Clint Halftown
    -----------------------------------
Name: Clint Halftown
Title: Authorized Representative




CATSKILL GAMING AUTHORITY


By: /s/ Clint Halftown
   --------------------------------------
Name:  Clint Halftown
Title:




                               PRELTMINARY BUDGET

                Pursuant to April 3, 2003 Letter Agreement among
          Alpha Hospitality Corporation, Catslall Development, L.L,C.,
        Cayuga Nation of new York and Cayuga Catskil1 Gamining Authority

As contemplated by paragraph I of the above  identified  letter  agreement,  the
parties  thereto,  by  having  their  authorized  representatives  initial  this
preliminary budget in the spaces provided below, agree to the following payments
with  the  understanding  that the  amount  set  forth  in Item I below  will be
reviewed and revised  periodically  to reflect  actual  experience and increased
activity as the development of the Gaming Enterprise on the Property progresses.

I.   Monthly payments on the first day                 $35,000 per month
     of each month on account of the
     expenses of the Nation and its
     instrumentalities and agencies,
     including salaries to be paid to
     individuals involved in rendering
     services to the Nation, or its
     instrumentalities or agencies, and
     the costs of equipment supplies,
     etc.

II.  Payment of travel, lodging, meals                 To be reimbursed upon
     and related expenses incurred by                  submission to Catskill of
     individuals rendering services to                 documents evidencing
     instrumentalities or agencies of the              such expenses
     Nation in furtherance of this
     project; provided that the
     incurrence of any material expense
     has been approved by Catskill, such
     approval not to be unrrasonably
     withheld

III. Expenses of legal counsel,                        To be billed directly to
     accountants, and other                            Catskill and paid by it
     professionals, consultants and
     specialists engaged to render
     advice or assistance to the Nation
     and its instrumentalities and
     agencies, provided that the
     incurrence of any material expense
     has been approved by Catskill, such
     approval not to be unreasonably
     withheld

The parties agree that the $35,000 monthly payment provided for in Item I above
will be made by wire transfer from Catskill's bank to the Authotity's account at
HSBC Bank USA,  and other payments shall be either, wired to such account or
otherwise paid as directed by the Nation or the Authority from time to time.

Initialed by authorized reprosentatives of:


Alpha                Catskill            Cayuga                Cayuga
Hospitality          Development         Nation                Catskill
Corporation          L.L.C.              of New York           Gaming
                                                               Authority


/s/ Robert Berman    /s/ Morad Tahbaz   /s/ Clint Halftown     /s/ Clint Halftown
- -----------------    ----------------   ------------------     ------------------

EX-10.10

                                                                   EXHIBIT 10.10

================================================================================



                           SHARED FACILITIES AGREEMENT

                                 by and between

                        CAYUGA CATSKILL GAMING AUTHORITY

                                       and

                          CATSKILL DEVELOPMENT, L.L.C.







                            Dated as of April 3, 2003

================================================================================







                                TABLE OF CONTENTS

ARTICLE 1  DEFINITIONS; UNDEFINED TERMS........................................2
    Section 1.1  Definitions...................................................2

ARTICLE 2  TERM................................................................5

ARTICLE 3  COVENANTS OF THE AUTHORITY..........................................5

    Section 3.1  Operating Covenants of the Authority..........................5
    Section 3.2  Construction Covenant of Authority............................5

ARTICLE 4  OPERATING COVENANTS OF CATSKILL.....................................5

ARTICLE 5  SHARED FACILITIES BUSINESS BOARD....................................6

ARTICLE 6  MAINTENANCE, OPERATION, AND MANAGEMENT OF COMMON AREAS;
           ALLOCATION OF COSTS.................................................7

    Section 6.1  Maintenance of Common Areas...................................7
    Section 6.2  Lighting......................................................8
    Section 6.3  Maintenance of Gaming Facility................................8
    Section 6.4  Maintenance of Track Facility.................................9
    Section 6.5  Use/Maintenance Easement Area E (Pedestrian Sky Bridge).......9
    Section 6.6  Security......................................................9
    Section 6.7  Employment of Contractors or Personnel........................9
    Section 6.8  Parking.......................................................9
    Section 6.9  Allocation of Costs..........................................10
    Section 6.10  Rights of Authority to Common Areas.........................10

ARTICLE 7  JOINT MARKETING AND ADVERTISING....................................10

    Section 7.1  Joint Marketing..............................................10
    Section 7.2  Promotion Fund...............................................10

ARTICLE 8  CONDEMNATION.......................................................11

    Section 8.1  Notice of Condemnation.......................................11
    Section 8.2  Condemnation of Casino Property..............................11
    Section 8.3  Condemnation of Track Property...............................11
    Section 8.4  Restoration or Replacement Obligation of Catskill............11
    Section 8.5  Condemnation Award...........................................11
    Section 8.6  Condemnation Disputes........................................12

                                       (i)





ARTICLE 9  INSURANCE..........................................................12

    Section 9.1  Casualty Insurance...........................................12
    Section 9.2  Liability Insurance..........................................12
    Section 9.3  Insurance Carriers: Form of Insurance Policies...............12
    Section 9.4  Responsible for Respective Lots..............................13
    Section 9.5  Waiver of Subrogation........................................13
    Section 9.6  Blanket Policy...............................................13

ARTICLE 10  CASUALTY..........................................................14

    Section 10.1  Notice and Restoration Obligations..........................14
    Section 10.2  Insurance Proceeds..........................................14
    Section 10.3  Razing of Damaged Property..................................14

ARTICLE 11  TRADE AND SERVICE MARKS...........................................15

    Section 11.1  The Authority's Trade and Service Marks.....................15
    Section 11.2  Catskill's Trade and Service Marks..........................15
    Section 11.3  Confidentiality; Exclusivity................................16

ARTICLE 12  DEFAULT, TERMINATION, DISPUTES AND ARBITRATION....................16

    Section 12.1  Default.....................................................16
    Section 12.2  Mutual Termination..........................................17
    Section 12.3  Waiver of Sovereign Immunity; Disputes; Arbitration.........17
    Section 12.4  Indemnity...................................................18
    Section 12.5  No Personal Liability.......................................19

ARTICLE 13  MECHANIC'S LIENS..................................................19

ARTICLE 14  INTENTIONALLY DELETED ARTICLE.....................................19

ARTICLE 15  MISCELLANEOUS PROVISIONS..........................................19

    Section 15.1  Government Savings Clause...................................19
    Section 15.2  Third Party Beneficiary.....................................19
    Section 15.3  Authorization...............................................20
    Section 15.4  Relationship................................................20
    Section 15.5  Notices.....................................................20
    Section 15.6  No Waiver...................................................20
    Section 15.7  Successors and Assigns......................................21
    Section 15.8  Article and Section Headings................................21
    Section 15.9  Choice of Law...............................................21
    Section 15.10  Termination and Amendment..................................21
    Section 15.11  Excusable Delays...........................................21
    Section 15.12  Severability...............................................22
    Section 15.13  Counterparts...............................................22
    Section 15.14  Effective Date.............................................23

                                    EXHIBITS

Exhibit A   Track Property
Exhibit B   Casino Property
Exhibit C   Site Plan

                                      (ii)





                             INDEX OF DEFINED TERMS

Arbitrator......................17      IGRA..................................3
Authority .....................1,2      Improvements..........................3
Authority's Marks...............15      Insurance Proceeds...................14
Award...........................11      Insured Casualty.....................14
Casino Property..................1      Landscape Improvements................3
Catskill.........................1      Lot...................................3
Catskill's Marks................15      Management Agreement..................4
Common Areas.....................2      Manager...............................4
Common Utility Facilities........2      Marketing Program....................10
Compact..........................2      Nation................................1
Condemn .........................2      Obligation ...........................4
Condemnation ....................2      Occupant..............................4
Condemnee ......................11      Parking Areas ........................4
Condemnor.......................11      Permitees ............................4
Declaration of Covenants.........2      Person................................4
Development Agreement ...........2      Plans and Specifications .............4
Easement Areas...................2      Promotion Fund ......................10
Enterprise ......................3      Property..............................4
Exclusive Use Area...............2      Restrictions..........................4
Gaming...........................2      Shared Costs.........................10
Gaming Authority.................2      Shared Facilities Business Board......4
Gaming Enterprise ...............3      Site Plan ............................4
Gaming Facility................1,3      Track Facility .....................1,4
Government Regulations...........3      Track Property........................1

                                     (iii)





                           SHARED FACILITIES AGREEMENT

THIS SHARED FACILITIES  AGREEMENT (this "AGREEMENT") has been entered into as of
April 3, 2003, by and between CAYUGA  CATSKILL GAMING  AUTHORITY,  together with
its permitted successors and assigns, having an address c/o Cayuga Nation of New
York, Post Office Box 11,  Versailles,  NY 14168, (the "AUTHORITY") and CATSKILL
DEVELOPMENT,  L.L.C., together with its permitted successors and assigns, having
an  address  at Route  17B,  P.O.  Box  5013,  Monticello,  New  York  12701-553
("CATSKILL").

                                    RECITALS

WHEREAS,  Catskill  is  the  owner  of  certain  land  located  in the  city  of
Monticello, County of Sullivan, State of New York as shown by shading on EXHIBIT
A attached hereto and made a part hereof (the "TRACK PROPERTY");

WHEREAS,  contemporaneously  with the effectiveness of this Agreement,  Catskill
shall  convey  land  adjacent  to the  Track  Property  located  in the  city of
Monticello, County of Sullivan, State of New York as shown by shading on EXHIBIT
B attached  hereto and made a part hereof (the "CASINO  PROPERTY") to the United
States of  America to be held in trust for the  benefit of The Cayuga  Nation of
New York(the "NATION");

WHEREAS,  the Nation has established the Authority,  an  instrumentality  of the
Nation,  to which it has assigned its authority over the development and conduct
of Gaming (hereafter defined) on the Casino Property;

WHEREAS,  the Nation and the Authority  contemplate  entering into a Land Lease,
pursuant to which the Nation shall lease its interest in the Casino  Property to
the Authority;

WHEREAS, it is intended by the Nation and the Authority that the Authority shall
construct  and develop or cause to be  constructed  and  developed on the Casino
Property certain  buildings,  improvements and fixtures (the "GAMING  FACILITY")
for the purposes of  operating a Gaming  Enterprise  (hereafter  defined) on the
Casino Property;

WHEREAS,  Catskill  intends to operate and improve,  or cause the  operation and
improvement  of, the  existing  horse  racing  track and  incidental  facilities
located upon the Track Property (the "TRACK FACILITY");

WHEREAS, prior to the execution and delivery of this Agreement,  Catskill as the
owner of the  Property  (hereinafter  defined)  has  recorded a  Declaration  of
Covenants; and

WHEREAS,  the  parties  intend  that if there is a conflict  between  the terms,
conditions  and  provisions  of this  Agreement  and the terms,  conditions  and
provisions of the  Declaration,  the terms,  conditions,  and provisions of this
Agreement shall govern.

NOW,  THEREFORE,  in  consideration  of the  payment of Ten ($10) and the mutual
covenants,  conditions and promises herein contained and other good and valuable
consideration,  the receipt and sufficiency of which are expressly acknowledged,
the Authority and Catskill hereby agree as follows:







ARTICLE 1.  DEFINITIONS; UNDEFINED TERMS

Section 1.1  DEFINITIONS.  For purposes of this  Agreement,  the following terms
shall have the following  meanings.  All capitalized terms used herein,  but not
otherwise defined in this Agreement, shall have the respective meanings ascribed
to them in the Management Agreement.

            A. "COMPACT" shall mean the nation-state compact, and any amendments
or modifications thereto, to be entered into between the Nation and the State of
New York pursuant to IGRA, or such other Compact as may be substituted therefor.

            B. "COMMON AREAS" shall mean those  portions of the Casino  Property
and Track  Property  that are  available  for the common  use,  convenience  and
benefit of the parties hereto including, without limitation, the Easement Areas,
the Parking  Areas,  Common  Utility  Facilities,  and any walkways,  connecting
passageways,  lobbies,  public conveniences or sidewalks  incidental thereto and
all other Improvements thereon, all as shown on the Site Plan.

            C.  "COMMON  UTILITY  FACILITIES"  shall  mean  all  storm  drainage
facilities,  sanitary sewer systems, gas systems, water systems, fire protection
installations,  electrical  power  cables and  telephone  lines  situated on the
Property used for the joint service of the Lots.

            D.  "CONDEMNATION"  or "CONDEMN"  shall mean a taking of property or
possession thereof pursuant to the power of eminent domain, or any conveyance in
lieu of eminent domain made by a party under the threat of condemnation.

            E. "DECLARATION OF COVENANTS" shall mean that certain Declaration of
Covenants,  Conditions and  Restrictions,  dated as of the date as of which this
Agreement is made, executed by Catskill Development, L.L.C.

            F.   "DEVELOPMENT   AGREEMENT"   shall  mean  the  Gaming   Facility
Development and  Construction  Agreement,  dated as of the date as of which this
Agreement is made,  among the  Authority,  the Nation,  and  Monticello  Raceway
Development Company, L.L.C., as the same may be amended from time to time.

            G.  "EASEMENT  AREAS"  shall mean,  collectively,  Easement  Area A,
Easement  Area B,  Easement Area C, Easement Area D, Easement Area E (Pedestrian
Sky  Bridge),  Easement  Area F,  Easement  Area G (the Bus Staging Area and Bus
Drop-off Area), all as shown on the Site Plan.

            H.  "EXCLUSIVE  USE AREA" shall mean those  portions of the Property
which are or may  become for the  exclusive  use of the  Occupant  of the Lot on
which they are located, as shown on the Site Plan.

            I. "GAMING" shall mean any and all activities defined as Class II or
Class III Gaming under the IGRA or authorized under the Compact.

            J. "GAMING  AUTHORITY"  or  "AUTHORITY"  shall mean Cayuga  Catskill
Gaming Authority.

                                       2




            K. "GAMING  ENTERPRISE"  or  "ENTERPRISE"  shall mean any commercial
enterprise of the  Authority  authorized by IGRA and/or the Compact and operated
on the Casino  Property;  and any other lawful  commercial  activity  related to
Gaming allowed in the Gaming Facility  including,  but not limited to, automatic
teller  machines  and  subject to any  applicable  governmental  or  contractual
limitations,  the sale for individual  consumption of food, beverages,  tobacco,
gifts and souvenirs but excluding any  franchised or licensed  vendors  paying a
fee to the Gaming  Enterprise.  It is  acknowledged  by the parties  hereto that
"Gaming Enterprise" shall exclude any wagering activities related to the outcome
of any  horse  racetrack  or  horse  racing  contest  conducted  off the  Casino
Property;  PROVIDED,  however, that if a horse racetrack or horse racing contest
has not been  conducted on the racetrack  that  comprises a portion of the Track
Property at any time during a  consecutive  twenty-four  (24) month period or if
such racetrack has been abandoned and not reoccupied within seven (7) days after
notice  from the  Authority  to the  record  owner of the  Track  Property,  the
foregoing  prohibition  against  racetrack  wagering  activities  on the  Casino
Property shall (subject to applicable Legal Requirements) be of no further force
or effect. The Gaming Enterprise includes any building or accommodation used for
Gaming on the Casino  Property and related  on-site retail sales and services on
the Casino Property.  The Authority shall have the sole proprietary  interest in
and  responsibility  for the  conduct  of all  Gaming  conducted  by the  Gaming
Enterprise subject to the rights and  responsibilities  of the Manager under the
Management Agreement.

            L. "GAMING  FACILITY"  shall mean the buildings,  improvements,  and
fixtures,  now or  hereafter  located on the Casino  Property  within  which the
Gaming Enterprise will be housed.

            M.  "GOVERNMENT  REGULATIONS"  shall  mean all  present  and  future
governmental laws, statutes, codes, ordinances, rules, regulations, limitations,
restrictions,  orders, judgments and other governmental  requirements applicable
to the Property.

            N. "IGRA" shall mean the Indian  Gaming  Regulatory  Act of 1988, PL
100-497,  25 U.S.C. ss. 2701 et seq. as same may, from time to time, be amended.

            O.  "IMPROVEMENTS"  shall  mean  all  structures  and  appurtenances
thereto  of every  type and kind,  including,  but not  limited  to,  buildings,
outbuildings,  huts, horse racing tracks, kiosks, garages, tunnels,  underground
installations,  irrigation and drainage devices or systems,  fountains,  fences,
screening  walls,   retaining  walls,  gateways,   porte  cocheres,   skybridges
(including  the skybridge  anticipated to be located in Easement Area D shown on
the Site Plan),  Parking Areas, Bus Staging Areas,  Bus Drop-off Areas,  loading
areas,  poles,  stairs,  escalators,  decks,  light standards,  signs,  benches,
walkways and Landscape Improvements.

            P. "LANDSCAPE IMPROVEMENTS" shall mean any plantings,  ground cover,
trees and  shrubbery  now or hereafter  existing in Easement Area A and Easement
Area B shown on the Site Plan, all foundation planting areas and the Bus Staging
Area and the Bus Drop-off  Area  together  with any  alterations,  systems,  and
equipment  installed  in order to enable  reasonable  irrigation,  lighting  and
maintenance of the plantings, ground cover, trees and shrubbery.

            Q. "LOT" shall mean either the Casino Property or the Track Property
as the context requires,  but shall not include streets or alleys that have been
dedicated to and accepted by any governmental  agency having jurisdiction in the
matter.

                                       3





            R. "MANAGER" shall mean Monticello Casino Management, L.L.C., or any
successor thereto pursuant to the Management Agreement.

            S. "MANAGEMENT  AGREEMENT" shall mean the Gaming Facility Management
Agreement,  dated as of the date as of which this  Agreement is made,  among the
Authority, Manager and the Nation, as the same may be amended from time to time.

            T.  "OBLIGATION"  shall  have  the  meaning  ascribed  to it in  the
Declaration of Covenants.

            U. "OCCUPANT" shall mean,  collectively,  the record owner of either
Lot and any Person from time to time  entitled to the use and  occupancy  of any
portion of the Property  under any lease,  license or concession  agreement,  or
other similar instrument or arrangement.

            V.  "PARKING  AREAS"  shall mean those  portions of the Property set
forth on the Site Plan used for parking of motor  vehicles,  including,  without
limitation,  incidental and interior roadways and driveways, walkways, curbs and
landscaping  within  the  areas  used  for  such  parking,   together  with  all
improvements  which at any time are erected thereon (as the same may be expanded
or diminished).

            W.  "PERMITEES"  shall  mean  all  Persons  which  may  utilize  the
Property,   including,  without  limitation,   Occupants  and  their  respective
employees, agents, contractors, service people, customers and invitees.

            X. "PERSON"  shall mean any  individual,  corporation,  partnership,
limited liability  company,  joint venture,  association,  joint-stock  company,
trust,  unincorporated  organization,  government  or any  agency  or  political
subdivision thereof or any other entity.

            Y. "PLANS AND SPECIFICATIONS" shall have the meaning assigned in the
Development Agreement.

            Z. "PROPERTY" shall mean, collectively,  the Casino Property and the
Track Property.

            AA. "RESTRICTIONS" shall mean the easements, covenants,  conditions,
restrictions,  liens  and  charges  and  other  encumbrances,  now or  hereafter
established or imposed by or pursuant to the Declaration of Covenants.

            BB.  "SHARED  FACILITIES  BUSINESS  BOARD" shall mean the  committee
established pursuant to Article 5 hereof.

            CC. "SITE PLAN" shall mean that certain plan for the  development of
the  Property  attached  hereto and made a part hereof as EXHIBIT C, as the same
may be changed from time to time.

            DD. "TRACK  FACILITY"  shall have the meaning  ascribed to it in the
Recitals.

                                       4




ARTICLE 2   TERM

The term of this Agreement shall commence on the  Commencement  Date (as defined
in the Management  Agreement) and, unless otherwise  terminated  pursuant to the
terms  of  this  Agreement,  shall  terminate  on  the  original  expiration  or
termination of the Management Agreement.

ARTICLE 3   COVENANTS OF THE AUTHORITY

Section 3.1 OPERATING  COVENANTS OF THE AUTHORITY.  Subject to the provisions of
Articles 8 and 10 hereof and to interruptions reasonably incident to the conduct
of Gaming on the Casino Property, the Authority shall:

            A.  continually  operate  or  cause  the  Gaming  Enterprise  to  be
continually  operated  on a  year-round  basis,  seven  (7)  days a  week  or as
otherwise operated pursuant to the terms of the Management Agreement;

            B. operate or cause the Gaming  Enterprise to be operated in a first
class manner  (including,  without  limitation,  the  maintenance  of sufficient
parking facilities);

            C.  manage  and  operate  the  Gaming  Facility  under  a name to be
determined  by the  Shared  Facilities  Business  Board and under no other  name
without the prior  written  approval of Catskill,  which  approval  shall not be
unreasonably withheld; and

            D. not use the Casino  Property for any other purpose other than the
conduct of Gaming  and any  incidental  entertainment,  parking,  restaurant  or
retail facilities in connection therewith.

Section 3.2 CONSTRUCTION COVENANT OF AUTHORITY.  The Authority covenants that it
shall develop and construct  the Gaming  Facility and make certain  renovations,
improvements  or  alterations  to the Track  Facility  free of defects  and in a
workerlike manner in accordance with the terms and provisions of the Development
Agreement.  Catskill agrees that it shall look solely to the General  Contractor
to insure  that such work shall be free of defects and shall be  performed  in a
workerlike manner.

ARTICLE 4   OPERATING COVENANTS OF CATSKILL

Subject to the  provisions  of Articles 8 and 10 hereof and provided that Gaming
is being continuously  conducted on the Casino Property as provided in Article 3
hereof, Catskill shall:

            A. from and after the date the Authority  completes the construction
contemplated  by the provisions of SECTION 3.2 hereof,  continually  operate the
Track Facility in a first-class  manner  consistent with operators of similar or
comparable racetrack facilities with a reasonable number of racing days per year
and for other lawful purposes such as hotel,  entertainment,  retail, restaurant
and other similar uses other than Gaming as conducted on the Casino Property and
industrial uses; provided that Catskill may conduct or operate any lottery games
permitted  under  state law (e.g.  Quick Draw,  Pick 6, etc.) and slot  machines

                                       5





permitted by state law provided the same is  incidental  to the use of the Track
Facility  as a racing  venue and such uses are  housed and  operated  within the
existing improvements; and

            B. manage and operate the Track Facility under the name  "Monticello
Racetrack" or any  derivative  thereof and under no other name without the prior
written  approval of the Authority,  which  approval  shall not be  unreasonably
withheld.

Notwithstanding the above, Authority acknowledges that if at any time during the
term hereof it is no longer commercially practical to operate the Track Facility
as a racing  venue,  Catskill  may use the Track  Property  for any other lawful
purpose such as hotel, entertainment,  retail, restaurant and other similar uses
other than Gaming as  conducted  on the Casino  Property  and  industrial  uses,
provided  the same  does not  materially  adversely  interfere  with the use and
operation of the Casino Property and the Common Areas.

ARTICLE 5   SHARED FACILITIES BUSINESS BOARD

On or prior to the Issuance Date (as defined in the Development Agreement),  the
Authority and Catskill shall establish the Shared Facilities Business Board. The
Shared  Facilities  Business  Board  shall  be a  committee  consisting  of four
representatives,  two of whom are  appointed  by the  Authority,  one of whom is
appointed by Catskill  and one of whom is appointed by the Manager.  The members
of the Shared  Facilities  Business  Board  appointed by (a) the  Authority  and
Manager  shall (i) with  respect to the  Authority,  consist of the same members
appointed by it to the  Management  Business Board (as defined in the Management
Agreement)  and (ii) with  respect to Manager,  the member  appointed by Manager
shall be one of the same  members  appointed  by it to the  Management  Business
Board, and (b) Catskill shall be one of the same members  appointed by it to the
Development Business Board (as defined in the Development Agreement). The Shared
Facilities  Business  Board  shall have the rights,  obligations  and powers set
forth  in  this  Agreement.  Except  as  otherwise  expressly  provided  in this
Agreement,  actions of the Shared  Facilities  Business  Board shall require the
affirmative vote of three members of the Shared  Facilities  Business Board. The
attendance  of three  members of the  Shared  Facilities  Business  Board at any
meeting  shall  constitute a quorum.  The Nation,  Catskill and Manager may each
change its respective  representatives to such board at any time,  provided this
Article 5 is complied with and notice is given in  accordance  with SECTION 15.5
hereof. Members of the Shared Facilities Business Board may designate a proxy to
act on behalf of a named representative in the absence of such representative to
the Shared  Facilities  Business  Board,  provided that such  designation  be in
writing by (x) in the case of the Authority,  the chairman of the Authority, (y)
in the  case  of  Catskill,  its  managing  director  or (z) in the  case of the
Manager, its managing director,  and that notice of such designation be provided
pursuant  to SECTION  15.5 of this  Agreement.  Such  proxy  shall have the full
authority to act,  vote or consent on behalf of such  representative.  Except as
otherwise  expressly provided in this Agreement,  in order to be effective,  any
action of the Shared  Facilities  Business Board must be the result of agreement
by at least  three  (3)  members  of the  Shared  Facilities  Business  Board or
designees.  The Shared Facilities  Business Board shall remain active during the
entire term of this  Agreement.  The parties  hereby  agree to ensure that their
respective  representatives  to  the  Shared  Facilities  Business  Board  shall
cooperate  fully and to reach  agreement or compromise on all matters before the
Shared Facilities Business Board. In the event such agreement cannot be reached,
the appropriate  action shall be determined in the manner provided in Article 12

                                       6





hereof.  The parties shall cooperate in setting meeting schedules for the Shared
Facilities   Business   Board   during  the  term   hereof.   Any  two  or  more
representatives of the Shared Facilities  Business Board shall have authority to
call a special  meeting of the  Shared  Facilities  Business  Board on three (3)
days' written notice (by facsimile or otherwise) to other  representatives  that
comprise the Shared Facilities Business Board on such date.

ARTICLE 6   MAINTENANCE, OPERATION, AND MANAGEMENT OF COMMON
            AREAS; ALLOCATION OF COSTS

Section 6.1 MAINTENANCE OF COMMON AREAS.

            A. The  Authority  shall,  or shall  cause the  Manager to, keep and
maintain the Common Areas on the entire Property including,  without limitation,
the Landscape Improvements between the Lots (and the Authority shall have access
to the Track Facility for such purpose,  pursuant to and otherwise in accordance
with this  Agreement and the  Declaration of Covenants) in a good and safe state
of repair and in a clean and  orderly  condition  in keeping  with  commercially
prudent  standards  which  shall  include  (but  shall  not be  limited  to) the
following:

                (i) All hard  surfaced  portions  of the Common  Areas  shall be
            swept at  intervals  sufficient  to maintain the same in a clean and
            safe  condition  and shall be kept  reasonably  clear of ice,  snow,
            surface water, and debris before the Gaming  Enterprise or the Track
            Facility   shall  open  for  business  to  the  general  public  and
            thereafter during such operation.

                (ii) All sidewalks in the Common Areas shall be swept and washed
            at  intervals  sufficient  to maintain  the same in a clean and safe
            condition.

                (iii) All trash and  rubbish  containers  located  in the Common
            Areas  for the use of  Occupants  or  Permitees,  shall be washed at
            intervals sufficient to maintain the same in a clean condition.

                (iv) All  landscaping  in the  Common  Areas  shall be  properly
            maintained,  including  removal of dead plants,  weeds,  and foreign
            matter and such  replanting  and  replacement  as the  occasion  may
            require.

                (v) All hard surfaced markings  (including all parking striping)
            in the Common  Areas shall be  inspected  at regular  intervals  and
            promptly  repainted as the same shall become unsightly or indistinct
            from wear and tear or other cause.

                (vi) All sewer catch basins in the Common Areas shall be cleaned
            on a  schedule  sufficient  to  maintain  all sewer  lines in a free
            flowing condition.  All mechanical  equipment and storm and sanitary
            sewer  facilities  shall be regularly  inspected  and kept in proper
            working order.

                (vii) All asphalt  paving in the Common Areas shall be inspected
            at regular  intervals and  maintained  in a  first-class  condition,
            which  maintenance  shall include patching and repair of chuckholes,

                                       7





            potholes  and  cracks  as they  appear  from  time to time and shall
            include repaving if necessary.

                (viii)  All  Common  Utility  Facilities  (including  all Common
            Utility  Facilities in the Common Areas) shall be kept in good order
            and repair.

                (ix) All  directional  signs and  pavement  signs in the  Common
            Areas shall be kept distinct and legible.

                (x) All  lighting  and light poles in the Common  Areas shall be
            kept in good order and repair (including repainting), and all tubes,
            ballasts, and bulbs shall be replaced as necessary.

                (xi) All Common Area  stairways,  paths and  entrances,  if any,
            shall be (a) swept and washed at  intervals  sufficient  to maintain
            the same in a clean and safe  condition,  (b)  inspected  at regular
            intervals,  and (c) promptly  repaired  upon the  occurrence  of any
            irregularities or worn portions thereof.

The plan  pursuant to which the Authority  shall  perform the above  obligations
(e.g.  commencement,  frequency)  shall  be  adopted  by the  Shared  Facilities
Business  Board from the plan  proposed  by the  Management  Business  Board (as
defined in the Management Agreement) for the Gaming Facility.

            B. All  Improvements on and to the Common Areas shall be repaired or
replaced by the Manager with materials,  apparatus, and facilities of quality at
least equal to the quality of the materials,  apparatus, and facilities repaired
or replaced.

            C. The parties hereto agree that the  maintenance  and repair of all
other  portions of the  Property  not covered by this Article 6 shall remain the
sole cost and  responsibility  of, with respect to the Casino Property only, the
Authority,  and with  respect  to the Track  Property  only,  Catskill  or their
designees;  PROVIDED HOWEVER, Catskill and the Authority shall maintain and keep
the Track Property and Casino Property,  respectively,  in a good and safe state
of repair and in a clean and orderly  condition in accordance with  commercially
prudent business standards.

Section 6.2 LIGHTING.  During any period when the Gaming  Enterprise is open for
business  and for  commercially  reasonable  periods  of time  when  the  Gaming
Enterprise  is  closed,  if any,  Catskill  shall  keep or  cause to be kept the
Parking  Areas on the Track  Facility  well lighted  during the period from dusk
until dawn,  with a minimum  maintained  intensity of not less than one (1) foot
candle measured at ground level.

Section 6.3 MAINTENANCE OF GAMING FACILITY.  The Authority shall (or shall cause
the same to be performed) (a) keep and maintain the interior and exterior of the
Gaming  Facility  in a good and safe state of repair and in a clean and  orderly
condition,  and (b) during any hours when (i) the Track  Facility  shall be open
for business or when Occupants occupying  seventy-five  percent (75%) or more of
the  floor  area of any  building  located  on the Track  Property  are open for
business  and  (ii)  the  Gaming  Enterprise  is open  for  business,  and for a
reasonable  period of time before and after such hours,  provide adequate light,
heat, ventilation and air conditioning to the Gaming Facility in accordance with
commercially prudent standards.

                                       8





Section 6.4 MAINTENANCE OF TRACK FACILITY.  Catskill shall keep and maintain the
interior and  exterior of the Track  Facility in a good and safe state of repair
and in a clean and orderly  condition,  subject to the other  provision  of this
Agreement.  During any hours when the Track Facility shall be open for business,
and for a reasonable period of time before and after such hours,  Catskill shall
provide  adequate light,  heat,  ventilation  and air  conditioning to the Track
Facility in accordance with commercially prudent standards.

Section 6.5 USE/MAINTENANCE EASEMENT AREA E (PEDESTRIAN SKY BRIDGE). The parties
hereto have agreed that Easement Area E shown on the Site Plan  constitutes part
of the Common Areas and,  accordingly,  the Manager shall be responsible to keep
and  maintain the  Improvements  located in Easement  Area E including,  without
limitation,  the connection to, the building  materials  surrounding the opening
and the structural support features of, that portion of the Track Facility shown
on Easement Area E as shown on the Site Plan.  Notwithstanding  such  obligation
however,  and otherwise  supplementing the provisions of PARAGRAPH 6.1.C hereof,
each party hereto shall have the exclusive  right to use the portion of Easement
Area E allocated to it,  respectively,  for retail and other attendant  purposes
(as shown on the Site Plan,  which will be based upon a fraction  expressed as a
percentage, (x) the numerator of which will be the length thereof that begins at
a party's  property  line and ends at such party's  building  line,  and (y) the
denominator of which will be the total length of the pedestrian skybridge,  e.g.
to the extent the pedestrian  skybridge  spans and otherwise  encroaches  upon a
party's Lot,  such party will have the  exclusive use of a portion of the bridge
for retail  purposes  designated as such. The exclusive areas will be maintained
at the sole cost and  responsibility  of the party enjoying and otherwise  using
such area for retail  purposes.  The area within the  pedestrian  bridge  (size)
which may be utilized  for retail  purposes  shall be  determined  by the Shared
Facilities Business Board.

Section 6.6 SECURITY.  The Authority shall provide security for the Common Areas
pursuant to a plan to be adopted by the Shared  Facilities  Business  Board from
the plan proposed by the Manager.  Each of the parties  hereto shall provide for
security  services  based  on  commercially   reasonable   standards  for  their
respective facilities. Each of the parties hereto shall cooperate with the other
to assure that reasonably adequate and coordinated  security is provided for the
Property and the uses thereon, including traffic control and night patrols.

Section 6.7 EMPLOYMENT OF CONTRACTORS OR PERSONNEL. The Authority or the Manager
may engage  outside  contractors or hire  personnel,  in adequate  numbers,  and
during  business  hours and such  other  hours as are  prudent  for the safe and
orderly operation of the Common Areas and on commercially reasonable and prudent
terms in order to carry out its  obligations  under this  Article 6. The parties
hereto  shall share in the expenses of the  Authority or the Manager  under this
SECTION  6.7 hereof in the manner and to the extent  provided  in SECTION 6.9 of
this Agreement.

Section 6.8 PARKING.  The parties hereto agree that no charge shall be collected
from and/or time limit imposed upon any Occupant or Permitee for parking  unless
the parties hereto have otherwise mutually agreed in writing. The parties hereto
also  agree  that they may  jointly  promulgate  mutually  acceptable  rules and
regulations with respect to the use of the Common Areas.

Section  6.9  ALLOCATION  OF  COSTS.  During  the  term of this  Agreement,  the
Authority  agrees that it shall pay for  ninety-five  percent (95%) of all costs
and  expenses  incurred by or on behalf of the  Authority  in  carrying  out its

                                       9





obligations  under this Article 6 (the "SHARED COSTS").  During the term of this
Agreement, but only during those periods when Catskill is open to the public for
business,  Catskill agrees that it shall pay for five percent (5%) of all Shared
Costs;  provided however,  if either party desires to recalculate its percentage
of Shared Costs  because such party  believes  that the then current  allocation
percentage  is no longer  equitable  based on each party's then current use, the
parties  hereto  shall  in good  faith  negotiate  to  mutually  agree  on a new
percentage  and if the parties  hereto  shall fail to reach an agreement on such
percentage,  then either  party  shall have the right to submit such  dispute to
arbitration in accordance  with the terms of Article 12 hereof.  Notwithstanding
the above,  with respect to Easement Area E shown on the Site Plan,  the parties
hereto shall share the maintenance  costs and expenses (as opposed to the repair
costs and expenses which will be the  Authority's  obligation as provided above)
as  provided  in SECTION  6.5.  In  addition,  the  foregoing  is subject to the
applicable provisions of ARTICLE 10 and SECTION 12.4.

Section 6.10 RIGHTS OF AUTHORITY TO COMMON  AREAS.  During the term hereof,  the
rights and  benefits  accruing to each owner of a Lot under the  Declaration  of
Covenants  shall inure to the benefit of the Authority.  (In no event shall this
Agreement  restrict  the  rights  of the  Authority  under  the  Declaration  of
Covenants).

ARTICLE 7   JOINT MARKETING AND ADVERTISING

Section 7.1 JOINT MARKETING.  In addition to the rights,  obligations and powers
of the  Shared  Facilities  Business  Board set forth in  Article 5 hereof,  the
Shared  Facilities  Business Board shall be  responsible  for  establishing  and
maintaining a joint marketing and advertising program (the "MARKETING  PROGRAM")
that will  maximize  the joint  promotion  of the Gaming  Facility and the Track
Facility which program may include,  without limitation,  special events, shows,
displays, institutional advertising, promotional literature, special promotional
programs  including,  players clubs,  VIP services,  monthly  newsletters,  tour
packages and other direct and media  marketing  programs and the  engagement  of
outside  consultants or companies to assist in carrying out the  foregoing.  The
Shared  Facilities  Business  Board  shall  have  exclusive  responsibility  for
determining  the  content,  format and length of all joint  promotion  print and
electronic  media  advertising  and the  location and size of all signage in the
Common Areas.  The Marketing  Program shall be adopted by the Shared  Facilities
Business  Board  from  the  marketing  and  advertising  plan  proposed  by  the
Management Business Board.  Notwithstanding the above,  nothing contained herein
shall or shall  be  deemed  to  restrict  either  party  from  establishing  and
maintaining its own separate  advertising and marketing  program with respect to
the activities conducted on its Lot.

Section 7.2 PROMOTION FUND. During the term of this Agreement, the Authority and
Catskill may (but neither party shall be under any  obligation to) contribute in
accordance  with the  percentages  set forth in SECTION 6.9  hereof,  funds (the
"PROMOTION  FUND") to be utilized to pay for all costs and  expenses  associated
with the formulation and carrying out the Marketing Program  administered by the
Shared Facilities  Business Board.  Upon the reasonable  request of either party
hereto, the Shared Facilities  Business Board shall provide an accounting of all
expenditures  made out of the Promotion Fund for the preceding  calendar year in
which such request is made.

                                       10





ARTICLE 8   CONDEMNATION

Section 8.1 NOTICE OF CONDEMNATION.  If any party hereto (the "CONDEMNEE") shall
receive  notice from a condemning  authority (the  "CONDEMNOR")  of the proposed
Condemnation  of any of the  Condemnee's  Property,  such party  shall  promptly
inform the other party by written  notice of such fact,  together with copies of
all papers  served in connection  with such  Condemnation,  and when known,  the
portion or portions of its Property so to be  condemned  and the date upon which
it is anticipated  that the Condemnee  will be required to surrender  possession
thereof to the Condemnor.

Section 8.2 CONDEMNATION OF CASINO PROPERTY.  Subject to the terms of the Senior
Secured  Note  Indenture,  if  any  portion  of the  Casino  Property  shall  be
Condemned,  the Authority shall promptly restore, replace or rebuild the same to
the  extent  economically  feasible  to  be of  at  least  equal  value  and  of
substantially the same character as prior to such Condemnation.

Section 8.3  CONDEMNATION OF TRACK PROPERTY.  If all or any portion of the Track
Property  shall  be  Condemned  and in  the  good  faith  judgment  of  Catskill
reasonably  exercised in accordance with commercially prudent business standards
it shall not be  economically  feasible  to  restore  or  replace  the same to a
complete  architectural  unit capable of being operated as previously used prior
to such  Condemnation,  then Catskill shall have the right and option to exclude
such  portion  of the  Track  Property  from the  operation  and  effect of this
Agreement by specifying in a written notice  delivered to the Authority at least
forty-five  (45) days prior to the date that it must  surrender  such  condemned
property to the  Condemnor  that it has elected to so exclude such property from
this  Agreement,  provided that any future use of such property shall be for any
lawful  purpose  such as  hotel,  entertainment,  retail,  restaurant  and other
similar  uses  other  than  Gaming  as  conducted  on the  Casino  Property  and
industrial uses, provided that Catskill may conduct or operate any lottery games
permitted  under  state law (e.g.  Quick Draw,  Pick 6, etc.) and slot  machines
permitted by state law provided the same is  incidental  to the use of the Track
Facility  as a racing  venue and such uses are  housed and  operated  within the
existing improvements.

Section 8.4 RESTORATION OR REPLACEMENT OBLIGATION OF CATSKILL. If as a result of
a Condemnation, Catskill either (a) is not entitled to exclude its property from
the  operation and effect of this  Agreement,  or (b) being so entitled does not
elect to do so or fails to do so in accordance  with the terms and provisions of
SECTION 8.3 hereof,  regardless  of whether any award or payment is collected or
made in connection with such  Condemnation,  Catskill shall promptly  proceed to
restore,  repair,  replace  or rebuild  such  Condemned  property  to the extent
possible to be of at least equal value and of  substantially  the same character
as prior to such Condemnation.

Section 8.5 CONDEMNATION  AWARD.  Subject to the terms of this Agreement and any
Financing  Agreements,  the entire award or payment (the  "AWARD")  made for any
Condemnation of any land,  building(s) or other improvements shall belong to the
party upon whose Lot such land,  building(s) or other improvements were located.
Notwithstanding  anything to the contrary  contained in the preceding  sentence,
with respect to any Award made in connection  with a Condemnation  of all or any
portion of the Casino Property, such Award shall be deposited with a bank, trust
company or other similar  entity to be held and disbursed in a manner similar to
the procedures set forth in the Disbursement and Escrow Agreement (as defined in

                                       11





the Senior Secured Note Indenture) and any balance remaining thereafter shall be
paid to the Authority.  The Occupant of each Lot shall have the right at its own
cost and expense to make any  compromises and settlements in connection with any
Condemnation  of any property on its  respective  Lots  provided  that any party
hereto may participate and join in any such Condemnation proceedings but only to
the extent necessary to maintain its own claim.  Notwithstanding anything to the
contrary  contained in the  preceding  sentence,  subject to the approval of the
Shared Facilities  Business Board, the Manager shall have the right to negotiate
and make any compromises and settlements in connection with any  Condemnation of
any Easement Areas and the costs of making any such settlements shall be paid by
Catskill and the Authority in accordance  with the  respective  percentages  set
forth in Section 6.9 hereof

Section 8.6  CONDEMNATION  DISPUTES.  Any disputes  under this Article 8 between
Catskill and the Authority shall be determined by arbitration in accordance with
the provisions of Article 12 hereof.

ARTICLE 9   INSURANCE

Section  9.1  CASUALTY  INSURANCE.   Subject  to  the  terms  of  the  Financing
Agreements,  each  party  hereto  shall  keep at its own cost and  expense,  the
buildings  and  other  structures  on its  respective  Lot,  including,  without
limitation,  Common Areas on its respective Lot,  insured against loss or damage
by fire and other perils commonly covered under an extended coverage endorsement
in an amount  equal to the full  replacement  cost of such  buildings  and other
structures,  such insurance to be written on a full  replacement cost basis. The
cost of such  insurance  reasonably  allocable  to the  Common  Areas  shall  be
allocated in accordance with the terms of SECTION 6.9 hereof.

Section 9.2 LIABILITY INSURANCE. The Authority shall, or shall cause the Manager
to, at all times  during the term of this  Agreement,  maintain,  or cause to be
maintained, in full force and effect,  comprehensive general liability insurance
covering the Casino  Property and the Common Areas,  including  coverage for any
accident   resulting  in  personal   injury  to  or  death  of  any  person  and
consequential  damages  arising  therefrom,  in an amount  not less  than  Fifty
Million  Dollars  ($50,000,000)  per occurrence and One Hundred  Million Dollars
($100,000,000) in the aggregate.  All costs of any general  liability  insurance
for the Common Areas shall be allocated in accordance  with the terms of SECTION
6.9  hereof.  The Track  Manager  shall,  at all times  during  the term of this
Agreement,  maintain  or cause  to be  maintained,  in full  force  and  effect,
comprehensive  general  liability  insurance  covering  the  Track  Property  in
coverage and amounts equal to those maintained by owners of comparable racetrack
properties  in the  exercise of its good faith  judgment  based on  commercially
prudent standards. [BEING DISCUSSED WITH CONSULTANT.]

Section 9.3 INSURANCE  CARRIERS:  FORM OF INSURANCE  POLICIES.  On or before the
effective  date of any insurance  policy  required to be maintained  pursuant to
this  Article 9, the parties  hereto shall  furnish  evidence to the other party
that such  insurance  coverage is in full force and effect and that the premiums
therefor  have been  paid.  Subject  to the  terms of the  Senior  Secured  Note
Indenture,  all insurance  policies  required to be maintained  pursuant to this
Article 9 shall (a) name the other party hereto, as applicable, as named insured
thereunder,  (b) provide that such insurance policy may not be canceled, reduced
or amended without at least thirty (30) days prior written notice being given by

                                       12





the insurer to all the parties  hereto,  (c) contain  severability  of interests
endorsements,  (d) be issued by responsible  insurance  companies licensed to do
business in the State of New York with a claims  paying  ability  rating of A or
higher and a financial size category of not less than X as listed in the current
Best's Insurance Reports or if such carrier is not rated by A.M. Best & Company,
Inc., having the financial stability and size deemed appropriate as certified by
a reputable  insurance  broker and (e) include a provision  which  prohibits any
insurance carrier from invoking the Authority's  sovereign immunity as a defense
to any action within the limits of such policy.  Any insurance policies required
to be  maintained  pursuant  to this  Article 9 may also be made  payable to the
holder of any first  mortgage  which is a lien  upon all or any  portion  of the
property  of any  insured  under a  standard  mortgagee  clause,  provided  such
mortgagee is a bank,  trust  company,  insurance  company,  or a pension fund or
retirement  fund having a bank or trust  company as trustee,  and agrees that it
will, in the event of loss,  apply the proceeds  toward the costs of restoration
in accordance with the terms of this Agreement.  All insurance policies required
to be  maintained  under this  Article 9 which  affect any  Common  Areas  shall
contain a provision which prohibits any cancellation,  amendment or modification
thereto  without the prior written  consent of Catskill,  which consent  (except
with respect to  cancellation)  shall not be unreasonably  withheld.  Each party
hereto shall, upon request, deliver to the other party certificates of insurance
and other  evidence of renewal of all policies  required to be maintained  under
this Article 9.

Section 9.4  RESPONSIBLE  FOR RESPECTIVE  LOTS.  Each party hereto  covenants to
defend, and does hereby, indemnify and hold harmless each other from and against
all  claims  and all  costs,  expenses  and  liabilities  (including  reasonable
attorneys' fees) incurred in connection with all claims, including any action or
proceedings brought thereon, arising from or as a result of the death of, or any
accident, injury, loss or damage whatsoever caused, to any natural Person, or to
the property of any Person,  as shall occur on its  respective  Lot,  except for
claims  caused by the active  negligence  or willful act or willful  omission of
such indemnified Person, or its Permitees.

Section 9.5 WAIVER OF  SUBROGATION.  Each of the parties  hereto  shall,  to the
extent such insurance  endorsement  is available,  obtain for the benefit of the
other, a waiver of any right of subrogation which the fire and extended coverage
insurer or any other  insurance  carrier may acquire against the other by virtue
of the payment of any loss covered by such insurance. The foregoing waiver shall
be  operative  only so long as the same shall not  preclude the other party from
obtaining insurance,  and shall have no effect to the extent that it diminishes,
reduces,  or impairs the liability of any insurer to provide coverage to a party
hereunder  or  the  scope  of any  coverage  under  any  policy  required  to be
maintained pursuant to this Article 9 (collectively, an "IMPAIRMENT"); PROVIDED,
however, that in such event, the party otherwise obligated to obtain such waiver
shall notify the other party of such Impairment prior to such Impairment  taking
effect and such other party shall have the option to procure  such waiver at its
sole cost and expense.

Section 9.6 BLANKET POLICY. Any party hereto may carry any insurance required to
be  maintained  under this  Article 9 under a "blanket  policy"  covering  other
properties of such party and/or Person  provided  that, the other party shall be
furnished evidence  reasonably  satisfactory to it that the protection  afforded
under such blanket  insurance policy is not less than that which would have been
obtained  and  available  under  separate  policies  and that such  coverage  is
consistent with prudent commercial business practices.

                                       13





ARTICLE 10  CASUALTY

Section 10.1     NOTICE AND RESTORATION OBLIGATIONS.

            A. If all or any portion of the Casino  Property shall be damaged or
destroyed,  in  whole  or in  part,  by  fire or  other  casualty  (an  "INSURED
CASUALTY"),  the  Authority  shall  give  prompt  notice  thereof  to  Catskill.
Following the occurrence of an Insured Casualty,  the Authority shall,  provided
that  insurance  proceeds are available,  at its own cost and expense,  promptly
proceed to restore,  repair, replace or rebuild (if commercially  practical) the
same to be of at least equal value and of  substantially  the same  character as
prior to such damage or destruction.

            B. If all or any portion of the Track  Property  shall be damaged or
destroyed in whole or in part, by fire or other  casualty,  Catskill  shall give
prompt notice  thereof to the  Authority.  Following the  occurrence of any such
casualty,  Catskill  shall,  at its own cost and  expense,  promptly  proceed to
restore,  repair,  replace or rebuild (if  possible)  the same to be of at least
equal value and of  substantially  the same character as prior to such damage or
destruction   provided  that  in  the  good  faith  judgment  of  Catskill  such
restoration,  repair,  replacement or rebuilding is economically  practicable or
otherwise  such repair and  restoration  shall be performed to render the same a
complete  architectural  unit.  Notwithstanding  anything to the contrary in the
preceding sentence,  Catskill shall not be required to restore,  repair, replace
or rebuild any property damaged by fire or other casualty if the failure to make
such restoration,  repair,  replacement or rebuilding will not have a materially
adverse economic effect on the operation of the Gaming Enterprise in which event
the provisions of Article 4 shall control.

Section 10.2 INSURANCE PROCEEDS.  Any insurance proceeds or other settlements in
lieu  thereof  ("INSURANCE  PROCEEDS")  made  with  respect  to  the  damage  or
destruction of any land,  building(s) or other  improvements shall belong to the
party  upon  whose Lot such  building(s)  or other  improvements  were  located,
subject to the provisions of any Financing Agreement.  Notwithstanding  anything
to the  contrary  contained  in the  preceding  sentence,  with  respect  to any
Insurance  Proceeds paid in connection  with a casualty of all or any portion of
the Casino Property, such Award shall be deposited with a bank, trust company or
other  similar  entity  to be held  and  disbursed  in a manner  similar  to the
procedures set forth in the  Disbursement  and Escrow  Agreement and any balance
remaining  thereafter  shall be paid to the Authority.  The Occupant of each Lot
shall  have the right at its own cost and  expense to make any  compromises  and
settlements  in connection  with any casualties or losses of any property on its
respective Lots (subject to the provisions of any Financing  Agreement) provided
that,  any  party  hereto  may  participate  and  join  in any  such  settlement
proceedings  but  only to the  extent  necessary  to  maintain  its  own  claim.
Notwithstanding  anything to the contrary  contained in the preceding  sentence,
subject to the approval of the Shared  Facilities  Business  Board,  the Manager
shall have the right to negotiate and make any  compromises  and  settlements in
connection  with any  casualties  or losses of property  located on any Easement
Areas and the costs of making any such settlements shall be paid by Catskill and
the Authority in accordance with the respective percentages set forth in SECTION
6.9 hereof.

Section  10.3  RAZING OF DAMAGED  PROPERTY.  To the  extent  that a party is not
required  to,  and does not  elect to,  restore,  replace  or repair  all or any
portion of a building or other  improvement  which has been damaged or destroyed

                                       14





by any  casualty or taken by  Condemnation,  such party shall raze the  portions
thereof which are not to be restored,  replaced, repaired or rebuilt, clear away
all  debris  and leave  said area in a clean,  orderly  and  sightly  condition;
provided,  however,  that nothing contained herein shall prevent said party from
subsequently  constructing  a building on said area subject to the terms of this
Agreement.

ARTICLE 11     TRADE AND SERVICE MARKS

Section 11.1   THE AUTHORITY'S TRADE AND SERVICE MARKS.

            A. Catskill  agrees to recognize the exclusive right of ownership of
the Authority to all the  Authority's  service  marks,  trademarks,  copyrights,
trade names,  designs,  logos,  company name,  fictitious  business name,  trade
styles  and/or  other  sources  and/or  business  identifiers  and  applications
pertaining thereto, including,  without limitation, the use of all marks and the
Nation's logo (collectively, the "AUTHORITY'S MARKS"). Catskill hereby disclaims
any right or  interest  therein,  regardless  of any legal  protection  afforded
thereto.  Catskill  acknowledges  that all of the Authority's Marks might not be
used in connection with the Gaming Enterprise, and the Authority shall have sole
discretion  to  determine  which  of the  Authority's  Marks  shall  be so used.
Catskill shall not use the Authority's name, or any variation thereof,  directly
or  indirectly,  in  connection  with (a) a private  placement or public sale of
securities  or other  comparable  means of financing  or (b) press  releases and
other  public  communications,   without  the  prior  written  approval  of  the
Authority.

            B. In the event the Authority  and/or  Catskill is (are) the subject
of any  litigation  or action  brought by any party seeking to restrain the use,
for or with respect to the Gaming  Enterprise,  by the Authority and/or Catskill
of any of the  Authority's  Marks used by Catskill for or in connection with the
Gaming  Enterprise,  any such litigation or action shall be defended entirely at
the expense of Authority,  notwithstanding  that Authority may not be named as a
party thereto.  In the event Catskill  desires to bring suit against any user of
any of the  Authority's  Marks,  seeking to restrain such user from using any of
the Authority's  Marks, then such suit shall be brought only with the consent of
Authority and at the expense of Catskill,  notwithstanding that such user may be
a prior or subsequent user. In all cases the conduct of any suit whether brought
by the  Authority  and/or  Catskill or instituted  against the Authority  and/or
Catskill shall be under the absolute  control of the Authority,  notwithstanding
that the Authority may not be a party to such suit. Catskill,  at its sole cost,
shall have the right to engage its own legal counsel and  Catskill's own counsel
shall have the right to  non-controlling  participation  in any such litigation.
Catskill  shall have the right at any time during the course of such  litigation
to withdraw from participation therein.

Section 11.2     CATSKILL'S TRADE AND SERVICE MARKS.

            A.  The  Authority  agrees  to  recognize  the  exclusive  right  of
ownership of Catskill to all Catskill's service marks,  trademarks,  copyrights,
trade names,  designs,  logos,  company name,  fictitious  business name,  trade
styles  and/or  other  sources  and/or  business  identifiers  and  applications
pertaining  thereto,  including,  without  limitation,  the  use  of  the  marks
"Monticello  Race  Track" now or  hereafter  held or applied  for in  connection
therewith (collectively, the "CATSKILL'S MARKS"). The Authority hereby disclaims

                                       15





any right or interest in Catskill's  Marks,  regardless of any legal  protection
afforded thereto. The Authority  acknowledges that all of Catskill's Marks might
not be used in  connection  with the race track,  and  Catskill  shall have sole
discretion to determine which  Catskill's  Marks shall be so used. The Authority
agrees that Catskill or its  representative  may, at any reasonable time after a
termination of this Agreement, enter the Gaming Facility for the sole purpose of
removing all signs,  furnishings,  printed material,  emblems,  slogans or other
distinguishing  characteristics  which are now or hereafter  may be connected or
identified with Catskill's  Marks or which carry any of Catskill's  Marks.  Such
removal  shall be  accomplished  in a  manner  that  leaves  the  premises  in a
condition  suitable for appropriate  commercial use. The Authority shall not use
Catskill's name, or any variation thereof, directly or indirectly, in connection
with (a) a private  placement or public sale of securities  or other  comparable
means of  financing  or (b)  press  releases  and other  public  communications,
without the prior written approval of Catskill.

            B. In the event the Authority  and/or  Catskill is (are) the subject
of any  litigation or action brought by a party seeking to restrain the use, for
or with respect to the Gaming  Enterprise,  by the Authority  and/or Catskill of
any of  Catskill's  Marks used by Catskill for or in  connection  with the Track
Property,  any such  litigation  or action  shall be  defended  entirely  at the
expense of Catskill,  notwithstanding  that Catskill may not be named as a party
thereto.  In the event the  Authority  desires to bring suit against any user of
any  Catskill's  Mark,  seeking to restrain such user from using any  Catskill's
Mark,  then such suit shall be brought  only with the consent of Catskill and at
the expense of the Authority,  notwithstanding  that such user may be a prior or
subsequent  user.  In all cases the conduct of any suit  whether  brought by the
Authority  and/or Catskill or instituted  against the Authority  and/or Catskill
shall be under the absolute control of Catskill,  notwithstanding  that Catskill
may not be a party to such suit. The Authority, at its sole cost, shall have the
right to engage its own legal counsel and the Authority's own counsel shall have
the right to non-controlling participation in any such litigation. The Authority
shall  have the  right at any time  during  the  course  of such  litigation  to
withdraw from participation therein.

Section  11.3  CONFIDENTIALITY;  EXCLUSIVITY.  Subject  to  the  terms  of  this
Agreement and any disclosure requirements of applicable law, including,  federal
securities  laws, the Authority and Catskill  covenant to keep  confidential and
exclusive the trademarks and other  proprietary  information that it may possess
during the term hereof of the other party hereto.

ARTICLE 12     DEFAULT, TERMINATION, DISPUTES AND ARBITRATION

Section 12.1   DEFAULT.

            A. Catskill may terminate this Agreement for any material  breach or
the failure to perform any material duty or  obligation by the Authority  within
sixty (60) days after the  Authority's  receipt of any notice  from  Catskill of
Authority's  material  breach and default  PROVIDED  THAT,  if the Authority has
commenced  to cure such  default  within  such  sixty  (60) day  period and such
default is not reasonably  susceptible of cure within such sixty (60) day period
then the Authority  shall have an additional  reasonable  period of time to cure
such default so long as the Authority is diligently  and  continuously  pursuing
such cure.

                                       16





            B. The  Authority  may  terminate  this  Agreement  for any material
breach or the failure to perform any  material  duty or  obligation  by Catskill
within sixty (60) days after Catskill's receipt of any notice from the Authority
of  Catskill's  material  breach and default  PROVIDED  THAT,  if  Catskill  has
commenced  to cure such  default  within  such  sixty  (60) day  period and such
default is not reasonably  susceptible of cure within such sixty (60) day period
then Catskill  shall have an additional  reasonable  period of time to cure such
default so long as Catskill is diligently and  continuously  pursuing such cure.
The Authority may also terminate this Agreement in the event that the Management
Agreement  has  terminated  on account of a material  breach  thereof by Manager
pursuant thereto or if the Development  Agreement has terminated on account of a
material breach thereof by Developer (as defined therein) pursuant thereto.

Section  12.2  MUTUAL  TERMINATION.  Notwithstanding  anything  to the  contrary
contained in this Agreement, this Agreement may be terminated at any time during
the term hereof by mutual  consent  between the Authority  and  Catskill,  which
consent may be granted or withheld in either party's sole discretion.

Section 12.3   WAIVER OF SOVEREIGN IMMUNITY; DISPUTES; ARBITRATION.

            A. Subject to the terms of this Article 12, the Authority  expressly
waives   sovereign   immunity  for  the  purpose  of  permitting  or  compelling
arbitration as provided in subparagraph (B) below, and to be sued in any federal
or state  court  of  competent  jurisdiction  by  Catskill  for the  purpose  of
compelling  arbitration or enforcing any arbitration  award or judgment  arising
out of this Agreement or the termination or purported termination thereof or any
rules,  actions or decisions of the  Authority  which have a materially  adverse
effect on the rights of  Catskill  hereunder.  Without in any way  limiting  the
generality of the foregoing, the Authority expressly authorizes any governmental
authorities who have the right and duty under  applicable law to take any action
authorized  or ordered by any court,  to take such  action,  including,  without
limitation,  entering the Casino  Property and  repossessing  any  furniture and
equipment  subject to a security interest or otherwise giving effect to any such
judgment entered. In no instance shall any enforcement of any kind whatsoever be
allowed against any assets of the Authority other than the limited assets of the
Authority specified herein.

            B. All disputes,  controversies or claims arising out of or relating
to this  Agreement,  shall be settled by binding  arbitration in accordance with
the Expedited Procedures provisions (Rules 53 through 57 in the current edition)
of the commercial  arbitration  rules of the American  Arbitration  Association.
Arbitration  shall occur before a single  arbitrator,  or any greater  number of
arbitrators   if  mutually   agreed  to  by  the  Authority  and  Catskill  (the
"ARBITRATOR").  The Arbitrator(s)  shall possess relevant expertise and shall be
selected  jointly by Catskill and the  Authority.  If the owners of each Lot are
unable to agree on the selection of the Arbitrator(s),  the Arbitrator(s)  shall
be selected by the American  Arbitration  Association.  The Arbitrator(s)  shall
render a decision  promptly  after the submission of the dispute and shall apply
the standards of a reasonable,  prudent businessperson.  The Arbitrator(s) shall
have no  authority  to award  punitive  damages.  Unless  the owners of each Lot
mutually agree otherwise, binding arbitration shall be the sole remedy as to all
disputes arising out of this Agreement, except for disputes requiring injunctive
or declaratory  relief. In determining any matter, the Arbitrator(s) shall apply
the terms of this Agreement,  without adding to, modifying or changing the terms
in any respect,  and shall apply New York law and applicable  federal and Nation
law.  All  arbitration  hearings  shall  be held at a  place  designated  by the

                                       17





Arbitrator(s)  in New York  County,  New York.  The parties  hereto  covenant to
maintain strict confidentiality with respect to any arbitration,  subject to any
requirements of any applicable law, including, federal securities law.

            C. The  Authority's  waiver of immunity from suit granted under this
Article 12 shall be specifically  limited to the following  actions and judicial
remedies:

                (i) The enforcement of an award of money damages by arbitration;
            PROVIDED  THAT,  the  Arbitrator(s)  and/or the court  shall have no
            authority or jurisdiction  to order execution  against any assets or
            revenues of the  Authority  except (A)  undistributed  or future Net
            Revenues  (as  defined in the  Management  Agreement)  of the Gaming
            Enterprise;  or  (B)  if it  has  been  specifically  found  by  the
            Arbitrator(s) that, by the exercise of regulatory authority pursuant
            to the  Gaming  Authority  Ordinance  or  otherwise,  or any  rules,
            actions,  or decisions of the Authority pursuant thereto or by other
            action,  the  Authority  has  knowingly  and  purposely   prejudiced
            Catskill's  rights under this Agreement,  such award may be enforced
            against  the  future Net  Revenues  of any other  gaming  operations
            conducted by the  Authority or any other entity of the  Authority on
            the Casino  Property.  In no instance  shall any  enforcement of any
            kind whatsoever be allowed against any assets of the Authority other
            than the limited assets of the Authority specified herein.

                (ii) The  enforcement of a  determination  by the  Arbitrator(s)
            that the  Authority's  consent  or  approval  has been  unreasonably
            withheld contrary to the terms of this Agreement.

                (iii) The  enforcement of a determination  by the  Arbitrator(s)
            that (A) prohibits  the Authority  from taking any action that would
            adversely  impair  or  affect  any  rights of  Catskill  under  this
            Agreement, or (B) requires the Authority to specifically perform any
            of its obligations under this Agreement.

                (iv) An action to compel  arbitration  as  required  pursuant to
            this Article 12.

Section 12.4  INDEMNITY.  A.  Catskill  shall  indemnify  and save the Authority
harmless from and against all loss, cost, liability and expense,  including, but
not limited to, reasonable counsel fees and disbursements that may be occasioned
by any acts constituting theft, fraud, willful misconduct or gross negligence on
the part of  Catskill in the  performance  of its duties  under this  Agreement.
Except for the Authority's theft, fraud, willful misconduct or gross negligence,
Catskill shall indemnify,  defend and hold harmless the Authority from any loss,
cost, liability and expense,  including,  but not limited to, reasonable counsel
fees and  disbursements,  relating to the Track  Property  that results from the
Authority's performance of its obligations under this Agreement.

            B. The Authority shall indemnify and save Catskill harmless from and
against all loss, cost,  liability and expense,  including,  but not limited to,
reasonable  counsel fees and  disbursements  that may be  occasioned by any acts
constituting theft, fraud, willful misconduct or gross negligence on the part of
the Authority in the performance of its duties under this Agreement.  Except for
Catskill's theft, fraud,  willful misconduct or gross negligence,  the Authority


                                       18




shall  indemnify,  defend  and  hold  harmless  Catskill  from any  loss,  cost,
liability and expense,  including,  but not limited to, reasonable  counsel fees
and  disbursements,  relating to the Gaming  Enterprise or Gaming  Facility that
results from Catskill's performance of its obligations under this Agreement.

            C. The  indemnifications  and terms set forth in this section  shall
survive the expiration or earlier  termination of this Agreement.  The foregoing
provisions of this SECTION 12.4 are in addition to and not in  substitution  for
the indemnification provisions set forth in the Declaration of Covenants.

Section  12.5 NO  PERSONAL  LIABILITY.  Neither  the  Nation  nor  any  officer,
officeholder,  employee,  agent,  representative  or member of the Nation or the
Authority shall have any personal liability for the obligations of the Authority
under this  Agreement or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Further, no member, officer,  office-holder,
employee,  agent,  representative,  manager or member of Catskill shall have any
personal  liability for the  obligations of Catskill under this Agreement or for
any claim based on, in respect of, or by reason of,  such  obligations  or their
creation.

ARTICLE 13  MECHANIC'S LIENS

Neither Catskill nor the Authority shall permit any mechanic's, materialman's or
similar lien to stand against any portion of the other's  property for any labor
performed or material  furnished in connection with any work performed or caused
to be performed  pursuant to this Agreement.  Any party which is responsible for
the filing of such lien may bond and contest the  validity or amount of any such
lien but upon final  determination  as to the validity  and amount  thereof such
party shall promptly discharge said lien.

ARTICLE 14  INTENTIONALLY DELETED ARTICLE

ARTICLE 15  MISCELLANEOUS PROVISIONS

Section 15.1 GOVERNMENT  SAVINGS CLAUSE.  Each of the parties agrees to execute,
deliver  and,  if  necessary,   record  any  and  all  additional   instruments,
certifications,   amendments,  modifications  and  other  documents  as  may  be
reasonably  required by the United States Department of the Interior,  Bureau of
Indian Affairs,  the office of the Field  Solicitor,  the National Indian Gaming
Commission,  or any other  applicable  statute,  rule or  regulation in order to
effectuate,  complete,  perfect,  continue or preserve  the  respective  rights,
obligations and interests of the parties hereto to the fullest extent  permitted
by law; provided, that any such additional instrument, certification, amendment,
modification  or other  document  shall not  materially  change  the  respective
rights,  remedies  or  obligations  of the  Authority  or  Catskill  under  this
Agreement or any other agreement or document related hereto.

Section 15.2 THIRD PARTY  BENEFICIARY.  This  Agreement is  exclusively  for the
benefit of the parties hereto and it may not be enforced by any party other than
the parties to this  Agreement and shall not give rise to liability to any third
party other than the authorized successors and assigns of the parties hereto.

                                       19





Section 15.3  AUTHORIZATION.  The  Authority and Catskill  hereby  represent and
warrant to each other that each has the full power and authority to execute this
Agreement  and to be bound by and  perform  the terms  hereof.  Each party shall
furnish  evidence of such  authority  to the other upon the  reasonable  request
thereof.

Section 15.4 RELATIONSHIP.  Catskill and the Authority shall not be construed as
joint  venturers  or  partners  of each  other by reason of this  Agreement  and
neither  shall have the power to bind or obligate  the other except as set forth
in this Agreement.

Section 15.5  NOTICES.  Any notice  required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been duly given to the
applicable  party (a) on the date of hand delivery with signed  receipt,  (b) on
the business day immediately  following  transmittal to Federal Express or other
nationally  recognized overnight commercial courier,  with signed receipt or (c)
five (5) days after deposit in the United States mail,  certified  mail,  return
receipt  requested,  postage  and fees  prepaid,  in any case  addressed  to the
address of the applicable  party set forth below,  or such other address as such
party may hereafter specify by notice to the other in accordance with the notice
procedures described in this paragraph. The parties also designate the following
persons as agents for receipt of service of process:

            If to the Authority:    Cayuga Catskill Gaming Authority
                                    c/o The Cayuga Nation of New York
                                    Post Office Box 11
                                    Versailles, NY 14168
                                    Attn: Chairman

           with a copy to:          Sonnenschein Nath & Rosenthal
                                    1221 Avenue of Americas
                                    New York, NY 10020
                                    Attn: Martin Gold, Esq.

           If to Catskill:          Catskill Development, L.L.C.
                                    Monticello Raceway, Route 17B
                                    P.O. Box 5013
                                    Monticello, New York 12701-5193
                                    Attn: Morad Tahbaz

           with a copy to:          Latham & Watkins LLP
                                    885 Third Avenue
                                    New York, New York 10022
                                    Attn: James I. Hisiger, Esq.

Section 15.6 NO WAIVER. No consent or waiver express or implied, by either party
to any  breach or default by the other  party in the  performance  of any of the
obligations  or conditions of this Agreement or any related  agreement  shall be
construed  to be a consent  to or waiver of any other  breach or default by such
party.  Failure on the part of a party to  complain of any act or failure to act

                                       20





by the  other  party,  or  failure  to  declare  the  other  party  in  default,
irrespective of how long such failure  continues,  shall not constitute a waiver
of the rights of such party.

Section 15.7  SUCCESSORS  AND ASSIGNS.  The  benefits  and  obligations  of this
Agreement  shall  inure to and be  binding  upon the  parties  hereto  and their
respective  permitted  successors  and  assigns.  Subject  to the  terms of this
Section 15.7, the  Authority's  prior written  consent shall not be required for
Catskill to assign all or any of its rights,  interests or obligations hereunder
to a third  party  acquiring  an  interest,  estate or other  right in or to the
Property or any portion thereof.  All proposed  assignees shall by acceptance of
such  assignment  be deemed to agree to be bound by the terms and  conditions of
this Agreement including, without limitation, Section 12.4 hereof and each party
that may from time to time be a party  hereto  shall  endeavor  in  confirmation
thereof to obtain a written  assumption of this  Agreement  from any  subsequent
purchaser  of any  portion  of the Lot owned by such  party.  In  addition,  the
assignment of a  controlling  interest in Catskill may be made without the prior
written  consent of the  Authority.  Notwithstanding  anything  to the  contrary
contained  in this  Agreement,  the  acquisition  of  Catskill  or any member of
Catskill by a third party shall not  constitute an assignment of this  Agreement
by Catskill and this Agreement shall remain in full force and effect between the
Authority and Catskill.  Subject to the terms of this  paragraph,  the Authority
shall,  without the prior written consent of Catskill,  have the right to assign
this Agreement and the assets of the Gaming Enterprise to an  instrumentality of
the  Authority or Nation or to a  corporation  or other  business  entity wholly
owned by the Authority or Nation organized to conduct the business of the Gaming
Enterprise  for the  Nation  provided  that  such  assignee  assumes  all of the
Authority's  obligations herein. Any assignment by the Authority or Nation shall
not  adversely  prejudice  the  rights of  Catskill  under  this  Agreement.  No
assignment  authorized hereunder shall be effective until all Legal Requirements
are met.

Section 15.8 ARTICLE AND SECTION HEADINGS.  Article and Section headings,  where
used herein, are inserted for convenience only and are not intended to be a part
of this  Agreement  or in any way to  define,  limit or  describe  the scope and
intent of the particular sections or paragraphs to which they refer.

Section 15.9 CHOICE OF LAW.  This  Agreement  shall be construed and enforced in
accordance with the laws of the State of New York.

Section  15.10  TERMINATION  AND  AMENDMENT.  This  Agreement  may be  canceled,
changed,  modified,  or amended in whole or in part only by written and recorded
instrument executed by each of the record owners of the Lots.

Section 15.11 EXCUSABLE  DELAYS.  Whenever  performance is required of any party
hereto, that party shall use all due diligence to perform and take all necessary
measures in good faith to perform;  provided,  however,  that if  completion  of
performance  shall be delayed at any time by reason of acts of God,  war,  civil
commotion,  terrorist acts, riots, strikes,  picketing, or other labor disputes,
or damage to work in  progress  by  reason of fire or other  casualty  or causes
beyond the  reasonable  control of such party then the time for  performance  as
herein  specified  shall be  appropriately  extended  by the amount of the delay
actually  so caused;  provided,  however,  that the  maximum  length of any such
extension shall in no event exceed twelve (12) months for any one cause. Failure

                                       21





by any party hereto to perform any obligation  under this Agreement shall not be
deemed to be a cause beyond the control of such party.

Section 15.12 SEVERABILITY.  Invalidation of any of the provisions  contained in
this  Agreement,  or of the  application  thereof to any person,  by judgment or
court  order  shall in no way affect any of the other  provisions  hereof or the
application  thereof to any other person and the same shall remain in full force
and effect.

Section 15.13 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts.  Each counterpart shall be deemed to be an original, and
all such counterparts shall constitute one and the same instrument.

Section 15.14 EFFECTIVE DATE.  This Agreement  shall become  effective,  of full
force and effect and the parties hereto shall be bound hereby,  on the Effective
Date (as such term is defined in the Management Agreement).

                        SIGNATURE PAGES FOLLOW HEREAFTER.


                                       22





IN WITNESS  WHEREOF,  the Parties hereto have executed this Agreement on the day
and year first above written.

CATSKILL DEVELOPMENT, L.L.C




By: /s/
    ______________________________
    Name:
    Title: Authorized Signatory

                    SIGNATURE(S) CONTINUE ON FOLLOWING PAGE.

                                       23





CAYUGA CATSKILL GAMING
AUTHORITY




By: /s/
    __________________________
    Name:
    Title:

CERTIFICATION:  This is to hereby certify that the above was duly executed by an
officer of Cayuga Catskill  Gaming  Authority  pursuant to the authority  vested
therein.

By: /s/
    ________________________________

EX-10.23

                                                                   EXHIBIT 10.23

                      AMENDMENT NO. 1 TO AGREEMENT OF LEASE

            This Amendment No. 1 to the Agreement of Lease,  dated as of January
12,  2004  (this   "AMENDMENT"),   is  entered  into  by  and  between  Catskill
Development,  L.L.C.,  a New York limited  liability  company  ("CATSKILL")  and
Monticello Raceway Management, Inc., a New York corporation ("MONTICELLO").

                                    RECITALS:

            WHEREAS,  Catskill and  Monticello  are parties to the  Agreement of
Lease the "Lease") dated as of October 29, 2003;

            WHEREAS, on December 12, 2003, Catskill, Empire Resorts, Inc., Alpha
Monticello,  Inc., Americas Tower Partners,  Monticello Realty L.L.C., Watertone
Holdings,  LP, New York Gaming, LLC, Fox-Hollow Lane, LLC, Shamrock  Strategies,
Inc., Clifford A. Ehrlich,  BKB, LLC, Robert A. Berman,  Philip B. Berman, Scott
A. Kaniewski, Kaniewski Family Limited Partnership and KFP Trust Manager entered
into that certain Amended and Restated  Securities  Contribution  Agreement (the
"CONTRIBUTION AGREEMENT");

            WHEREAS,  pursuant  to  the  Contribution  Agreement,  Catskill  and
Monticello  are to enter into an  amendment  to the Lease  pursuant to which the
amount of land subject to the purchase option under the Lease shall be increased
from 200 acres of land to 229 acres of land (the  "CASINO  LAND"),  without  any
consequential  increase in the purchase  option price,  and the purchase  option
price for the  purchase  option  under the Lease  shall be reduced by any amount
received by Catskill (or its  successor)  if the Casino Land is sold pursuant to
that certain Land Purchase Agreement,  dated as of April 3, 2003, by and between
Catskill and the Cayuga Catskill Gaming Authority.

            WHEREAS,  the  parties to the Lease would like to amend the Lease in
connection with the transactions  contemplated in the Contribution  Agreement as
herein provided.

                                   AGREEMENT:

            NOW,  THEREFORE,  for Ten Dollars  ($10) and other good and valuable
consideration  and the  covenants  and  conditions  herein set forth the parties
hereto agree as follows:

            1. AMENDMENT. The Lease shall be, and hereby is, amended as follows:

            (a) The following  definitions  are added in  alphabetical  order to
Section 2.1:

            "CASINO LAND" shall have the meaning provided in SECTION 37.1."

            "CASINO LAND PURCHASE PRICE CREDIT" shall have the meaning  provided
in SECTION 10.9.






            "LAND PURCHASE AGREEMENT" shall have the meaning provided in SECTION
37.1."

            (b) Section  2.1.27 is deleted in its entirety and replaced with the
following:

            "2.1.27  "PURCHASED LAND" shall mean the Land and, to the extent the
Land Purchase Agreement has not been consummated, the Casino Land."

            (c) Section 10.9 is deleted in its  entirety  and replaced  with the
following:

            "Section 10.9 TENANT'S OPTION TO ACQUIRE THE PREMISES.  In the event
that  Landlord  withholds  its  consent to the  assignment  of this Lease or the
sublet of all or part of the  Premises,  Tenant shall have the option to acquire
the Purchased Land for a purchase price (the "Non-Consent Purchase Price") equal
to the sum of (x) an amount  equal to the Fixed Net Rent payable for the year in
which Tenant shall consummate such purchase option divided by five percent (5%),
plus (y) an amount equal to all  transfer  taxes and closing  costs  (including,
without limitation, reasonable attorneys' fees) incurred by Landlord, as seller,
less (z) the Casino Land Purchase Price Credit (as defmed below), if any. In the
event that Tenant exercises its rights  hereunder,  the provisions of Article 37
hereof shall control the exercise of the purchase  option  herein  contained and
the consummation of the acquisition of the Purchased Land by Tenant."

            (d) Section  28.2.3 is deleted in its entirety and replaced with the
following:

            "28.2.3  To  Landlord  in an amount  equal to the  greater of (i) an
amount  equal  to the  Fixed  Net  Rent  payable  for  the  year  in  which  the
condemnation  occurs divided by five percent (5%) (less the Casino Land Purchase
Price  Credit,  if any) or (ii) the Fair  Market  Property  Value (as defined in
SECTION  24.6),  such Fair Market  Property Value to be determined in accordance
with the terms of Article 24 hereof, except that such valuation shall be made as
of the Date of Taking (as hereinafter defined); and"

            (e) Section 37.1 is deleted in its  entirety  and replaced  with the
following:

            "Section  37.1  LANDLORD  SALE OF  CASINO  PROPERTY.  Tenant  hereby
acknowledges  that there exists a certain Land Purchase  Agreement,  dated as of
April 3, 2003, by and between Catskill and Cayuga Catskill Gaming Authority (the
"LAND PURCHASE AGREEMENT"), entered into in connection with the sale-purchase of
that  certain  parcel of land  designated  as Parcel No. 1 on the Final  Revised
Subdivision Plat of Lands of Catskill  Development,  L.L.C., dated May 25, 1999,
and filed in the Office of the Sullivan  County Clerk on February 4, 2000 as Map
No. 8-271  (consisting of  approximately  29 acres of land) (the "CASINO LAND").
Tenant hereby agrees that this Lease is made expressly  subject to the terms and
provisions  of the Land  Purchase  Agreement  and the rights and benefits of the
purchaser  thereunder  and the  rights,  benefits  and  obligations  of Landlord
thereunder.  In  addition,  Tenant  acknowledges  and agrees  that Tenant has no
rights or obligations in connection  therewith,  including,  without limitation,
any sums paid or payable to  Landlord  on account  thereof,  including,  without
limitation,  the purchase price payable  thereunder.  In the event that the Land
Purchase  Agreement is consummated in accordance with the provisions thereof and
Landlord  receives  the  purchase  price  payable  thereunder,  there will be no
adjustment to the Fixed Base Rent."







            (f) Section 37.2 is amended by  inserting  the  following  after the
second  sentence  that ends in the ninth line of Section  37.2 with  "("TENANT'S
OPTION PRICE").":

            "In the event  that the  Casino  Land is sold  pursuant  to the Land
Purchase  Agreement  prior to Tenant's  exercise  and  consummation  of Tenant's
Purchase  Option,  Tenant's  Option  Price shall be reduced by the amount of the
purchase price that Landlord receives from the purchaser  thereunder  (exclusive
of transfer taxes and closing costs including,  without  limitation,  reasonable
attorneys'  fees) in  connection  with the sale of the Casino Land (the  "Casino
Land Purchase Price Credit")."

            (g) Exhibit 2 is amended by inserting  the  following to the list of
Permitted Exception:

            "10. The Shared Facilities  Agreement by and between Cayuga Catskill
Gaming Authority and Catskill Development, L.L.C., dated as of April 3, 2003, as
such may be amended, assigned or transferred from time to time."

            2. GENERAL. (a) This Amendment shall be governed by, and enforced in
accordance  with, the laws of the State of New York (excluding the choice of law
principles thereof).  The provisions of Articles 24, 27, 28, 33, 35 and Sections
42.1,  42.3,  42.4,  42.5 and 42.6 of the Lease  shall apply with like effect to
this Amendment, as fully as if set forth herein.

            (b) As  amended  by this  Amendment,  the Lease is in full force and
effect.

            (c) This Amendment may be executed in two or more counterparts,  and
by different parties on separate counterparts.  Each set of counterparts showing
execution by all parties shall be deemed an original,  and shall  constitute one
and the same instrument.

                            [Signature page follows]







            IN WITNESS  WHEREOF,  the parties  have caused this  Amendment to be
executed and delivered by their duly authorized  officers or agents as set forth
below.

                                    CATSKILL DEVELOPMENT, L.L.C.,
                                    Landlord


                                    By: /s/ Morad Tahbaz
                                        -------------------------------------
                                        Name:  Morad Tahbaz
                                        Title: President


                                    MONTICELLO RACEWAY MANAGEMENT, INC., Tenant


                                    By: /s/ Clifford A. Ehrlich
                                        ------------------------------------
                                        Name:   Clifford A. Ehrlich
                                        Title:  President






                          AMENDMENT TO LEASE AGREEMENT

EX-10.24

                                                                   EXHIBIT 10.24

                      AMENDMENT NO. 2 TO AGREEMENT OF LEASE

            This Amendment No. 2 to the Agreement of Lease, dated as of July 26,
2004 (this  "AMENDMENT"),  is entered into by and between Catskill  Development,
L.L.C., a New York limited liability company ("CATSKILL") and Monticello Raceway
Management, Inc., a New York corporation ("MONTICELLO").

                                    RECITALS:

            WHEREAS,  Catskill and  Monticello  are parties to the  Agreement of
Lease,  dated as of October 29, 2003, as amended by that certain Amendment No. 1
to the  Agreement  of Lease,  dated as of  January  12,  2004 (as  amended,  the
"LEASE");

            WHEREAS,  the parties have discovered that the legal  description of
the Land (as  defined in the Lease) and the  acreage  with  respect  thereto are
incorrect;

            WHEREAS,  the  parties to the Lease would like to amend the Lease to
correct such description as herein provided.

                                   AGREEMENT:

            NOW,  THEREFORE,  for Ten Dollars  ($10) and other good and valuable
consideration  and the  covenants  and  conditions  herein set forth the parties
hereto agree as follows:

            1. AMENDMENT.  Exhibit 1 of the Lease is deleted in its entirety and
replaced with EXHIBIT 1 attached hereto.

            2. GENERAL. (a) This Amendment shall be governed by, and enforced in
accordance  with, the laws of the State of New York (excluding the choice of law
principles thereof).  The provisions of Articles 24, 27, 28, 33, 35 and Sections
42.1,  42.3,  42.4,  42.5 and 42.6 of the Lease  shall apply with like effect to
this Amendment, as fully as if set forth herein.

            (b) As  amended  by this  Amendment,  the Lease is in full force and
effect.

            (c) This Amendment may be executed in two or more counterparts,  and
by different parties on separate counterparts.  Each set of counterparts showing
execution by all parties shall be deemed an original,  and shall  constitute one
and the same instrument.

                            [Signature page follows]







            IN WITNESS  WHEREOF,  the parties  have caused this  Amendment to be
executed and delivered by their duly authorized  officers or agents as set forth
below.

                                    CATSKILL DEVELOPMENT, L.L.C.,
                                    Landlord


                                    By: /s/ Morad Tahbaz
                                        --------------------------------------
                                        Name:  Morad Tahbaz
                                        Title: President


                                    MONTICELLO RACEWAY MANAGEMENT, INC., Tenant


                                    By: /s/ Clifford A. Ehrlich
                                        --------------------------------------
                                         CLIFFORD A. EHRLICH








                                    EXHIBIT 1
                                    ---------

                                      LAND

All that certain plot, piece of parcel of land lying and being in the Village of
Monticello,  Town of  Thompson,  County of Sullivan  and State of New York being
more  particularly  bounded and described and  designated as Parcel No. 2 on the
Final Revised Subdivision Plat of Lands of Catskill  Development,  L.L.C., dated
May 25, 1999, made by T.M. Depuy, Engineering & Land Surveying,  P.C., and filed
in the Office of the Sullivan County Clerk on February 4, 2000 as Map No. 8-271,
together with and subject to easements as shown thereon.

TOGETHER WITH, that certain 3.62 acre parcel in the Village of Monticello,  Town
of  Thompson,  County  of  Sullivan  and  State  of New York  more  particularly
described as:

BEGINNING at a concrete  highway  monument  found on the east bounds of New York
State Route  17-Quickway,  said point of beginning  being the southwest comer of
lands of Loflcowitz as described in Liber 724 of Deeds at Page 1121,  said point
of beginning being on the northerly tine of the premises originally described in
Liber 552 of Deeds at Page 314; and

RUNNING  THENCE from said place of  beginning  South 66 degrees 14 minutes  East
174.92 feet leaving said  highway  bounds and passing  along the South bounds of
lands of said  Lefkowitz  to a point on the west  bounds of County  Road No. 174
(formerly N.Y.S. Route 17);

THENCE the  following  courses and distances  along the westerly  bounds of said
County Road:

South 18 degrees 07 minutes East 350.00 feet;

South 29 degrees 25 minutes East 200.00 feet;

South 44 degrees 22 minutes East 610.00 feet;

South 33 degrees 08 minutes East 231.79 feet; and

South 18 degrees 46 minutes 125.00 feet to a point on the easterly bounds of New
York State Route 17-Quickway;

THENCE the following courses and distances along said Quickway bounds:

North 46 degrees 41 minutes  West  531.00  feet to a concrete  highway  monument
found;

North 40 degrees 20 minutes  West  363.11  feet to a concrete  highway  monument
found;

North 32 degrees 00 minutes  West  403.67  feet to a concrete  highway  monument
found;

North 21 degrees 46 minutes  West  289.81  feet to a concrete  highway  monument
found; and

North 13 degrees 46 minutes West 75.43 feet to the point or place of BEGINNING.

Containing  3.62 acres of land,  as surveyed by George H. Fulton,  Licensed Land
Surveyor, in February, 1995.

EX-10.25

                                                                   EXHIBIT 10.25

              ----------------------------------------------------

              ----------------------------------------------------

                          CATSKILL DEVELOPMENT, L.L.C.
                                       and
                       MONTICELLO RACEWAY MANAGEMENT, INC.

                      -------------------------------------

                        TERMINATION OF AGREEMENT OF LEASE

                      -------------------------------------

This instrument affects real and personal property situated,  lying and being in
the Village of Monticello,  Town of Thompson,  County of Sullivan,  State of New
York, known as follows:

Section 101,  Block 1, Lot 1.1
Section 101,  Block 1, Lot 1.3
Section 102, Block 4, Lot 1
Section 12, Block 1, Lot 37.6
Section 12, Block 1, Lot 46.2
Section 12, Block 1, Lot 48
Section 12, Block 1, Lot 64

RECORD AND RETURN TO:

Latham & Watkins LLP
885 Third Avenue, Suite 1000
New York, New York 10022-4802

Attn: Mark Leskiw

Latham & Watkins File No.: 038294-0001






                        TERMINATION OF AGREEMENT OF LEASE

            THIS TERMINATION OF AGREEMENT OF LEASE (the  "TERMINATION")  is made
and entered  into as of July 26,  2004 (the  "EFFECTIVE  DATE"),  by and between
CATSKILL  DEVELOPMENT,  L.L.C.,  a New York  limited  liability  company,  whose
address  is c/o  Monticello  Raceway,  Route  17B,  Monticello,  New York  12701
("CATSKILL"),  and MONTICELLO RACEWAY MANAGEMENT,  INC., a New York corporation,
whose address is c/o Monticello Raceway,  Route 17B, Monticello,  New York 12701
("MRMI").  This  Termination  is entered into with  reference  to the  following
facts:

            A. On October 29, 2003,  Catskill and MRMI entered into that certain
Agreement of Lease,  as amended by Amendment No. 1 to Agreement of Lease,  dated
as of January 12, 2004 and further  amended by  Amendment  No. 2 to Agreement of
Lease,  dated as of July 26, 2004 (as amended,  the "AGREEMENT"),  affecting the
real property described on EXHIBIT A (the "Premises").

            B. A memorandum of this Agreement was recorded on  ______________ in
the  Official  Records  of  Sullivan  County,  at Book  _________________,  Page
________________.

            C.  Catskill is selling  the  premises to MRMI as of the date hereof
and the parties desire to terminate the Agreement.

            NOW THEREFORE the parties agree and give notice as follows.

            1.  TERMINATION.  The parties hereby  terminate the  Agreement.  The
Agreement is hereby declared to be of absolutely no force or effect.  Each party
hereby releases,  cancels, annuls, rescinds,  discharges,  disclaims, waives and
releases  any and all rights and benefits it may have under the  Agreement,  and
unconditionally  releases each of the other party(ies) to the Agreement from any
and all obligations  under the Agreement except to the extent such  obligations,
if  any,  survive  termination  of the  Agreement  by  the  terms  thereof.  All
obligations  of all parties under the Agreement  have been  performed in full or
waived except to the extent such obligations, if any, survive termination of the
Agreement by the terms thereof.

            2.  NO   CONSTRUCTIVE   NOTICE.   Neither  the  Agreement  nor  this
Termination shall be deemed to give any person  constructive notice of any facts
or circumstances whatsoever.

            3.  FURTHER  ASSURANCES.  Each party  agrees to execute  any further
documentation that any title insurance company shall require in order to further
evidence  the  termination  of the  Agreement  or to enable any title  insurance
company to issue policy(ies) of title insurance without any reference whatsoever
to the Agreement or the rights of any party thereunder.

            4. NO CONDITIONS. This Termination is absolutely unconditional.

            5. PARTIES.  This Termination shall bind and benefit the parties and
their  successors  and  assigns,  and may be relied upon by any title  insurance
company and any prospective  purchaser,  lessee, or mortgagee of the Premises or
any interest therein.







            IN WITNESS WHEREOF, Catskill and MRMI have executed this Termination
as of the Effective Date.

            CATSKILL DEVELOPMENT, L.L.C.            MONTICELLO RACEWAY
                                                    MANAGEMENT, INC.


            By: /s/ Morad Tahbaz                    By: /s/ Cliff Ehrlich
            ---------------------------                 ------------------------
            Its:  President                             Its: Sr. Vice President


Attachments:

                        Acknowledgments
                        Exhibit A = Legal Description






                                 ACKNOWLEDGMENTS

STATE OF NEW YORK       )
                        ) SS.:
COUNTY OF NEW YORK      )

            On the 22nd day of July in the year 2004 before me, the undersigned,
personally appeared Morad Tahbaz,  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 the same in his
capacity, and that by his signature on the instrument,  such individual, and the
entity upon behalf of which t individual acted, executed the instrument.


                                                       Corrie Peach
                                                       -----------------------
                                                       NOTARY PUBLIC


STATE OF NEW YORK       )
                        ) SS.:
COUNTY OF ________      )

            On the ________ day of  __________________________  in the year 2004
before       me,       the        undersigned,        personally        appeared
__________________________________,  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 the same in his
capacity, and that by his signature on the instrument,  such individual, and the
entity upon behalf of which t individual acted, executed the instrument.



                                                       -----------------------
                                                       NOTARY PUBLIC







                                 ACKNOWLEDGMENTS

STATE OF NEW YORK       )
                        ) SS.:
COUNTY OF SULLIVAN      )

            On July 22, 2004 before me, the undersigned,  a notary public in and
for said state,  personally  appeared CLIFF EHRLICH,  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 the same in his capaccity, and that by his signature on the instrument,
the  individual,  or the  person  upon  behalf  of which the  individual  acted,
executed the instrument.

                                               Donna J. Bradbury
                                               ----------------------------
                                               Notary Public






                                    EXHIBIT A

                                LEGAL DESCRIPTION

All that certain plot, piece of parcel of land lying and being in the Village of
Monticello,  Town of  Thompson,  County of Sullivan  and State of New York being
more particularly bounded and described and designated as Parcels No. 1 and 2 on
the Final Revised  Subdivision  Plat of Lands of Catskill  Development,  L.L.C.,
dated May 25, 1999, made by T.M. Depuy, Engineering & Land Surveying,  P.C., and
filed in the Office of the Sullivan  County Clerk on February 4, 2000 as Map No.
8-271, together with and subject to easements as shown thereon.

TOGETHER WITH, that certain 3.62 acre parcel in the Village of Monticello,  Town
of  Thompson,  County  of  Sullivan  and  State  of New York  more  particularly
described as:

BEGINNING at a concrete  highway  monument  found on the east bounds of New York
State Route  17-Quickway,  said point of beginning  being the southwest comer of
lands of Lofkowitz  as described in Liber 724 of Deeds at Page 1121,  said point
of beginning being on the northerly line of the premises originally described in
Liber 552 of Deeds at Page 314; and

RUNNING  THENCE from said place of  beginning  South 66 degrees 14 minutes  East
174.92 feet leaving said  highway  bounds and passing  along the South bounds of
lands of said  Leikowitz  to a point on the west  bounds of County  Road No. 174
(formerly N.Y.S. Route 17);

THENCE the  following  courses and distances  along the westerly  bounds of said
County Road:

South 18 degrees 07 minutes East 350.00 feet;

South 29 degrees 25 minutes East 200.00  feet;

South 44 degrees 22 minutes East 610.00  feet;

South 33 degrees 08 minutes East 231.79 feet; and

South 18 degrees 46 minutes 125.00 feet to a point on the easterly bounds of New
York State Route 17-Quickway;

THENCE  the  following   courses  and  distances  along  said  Quickway  bounds:

North 46 degrees 41 minutes  West  531.00  feet to a concrete  highway  monument
found;

North 40 degrees 20 minutes  West  363.11  feet to a concrete  highway  monument
found;

North 32 degrees 00 minutes  West  403.67  feet to a concrete  highway  monument
found;

North 21 degrees 46 minutes  West  289.81  feet to a concrete  highway  monument
found; and

North 13 degrees 46 minutes West 75.43 feet to the point or place of BEGINNING.

Containing  3.62 acres of land,  as surveyed by George H. Fulton,  Licensed Land
Surveyor, in February, 1995.

EX-10.27

                                                                   Exhibit 10.27

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"),  OR UNDER ANY STATE  SECURITIES  LAW AND MAY NOT BE PLEDGED,  SOLD,
ASSIGNED OR  TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE  STATE  SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,  SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.

                              EMPIRE RESORTS, INC.

                          Subordinated Promissory Note

January 9, 2004                                                    $4,932,936.84


     Empire Resorts,  Inc., a Delaware corporation (together with its successors
and assigns,  the "Issuer"),  for value received,  hereby promises to pay to the
order of The Bryanston  Group  (together with its  successors,  transferees  and
assigns,  the  "Noteholder")  the  principal  sum of  $4,932,936.80  (the  "Note
Amount"),  in the amounts and on the dates ("Note  Amount  Repayment  Date") set
forth below:

                  DATE                                 AMOUNT
                  ----                                 ------
      (1 Year Anniversary of Note)           (13.33% of the Note Amount)
      (18 Month Anniversary of Note)         (17.78% of the Note Amount)
      (2 Year Anniversary of Note)           (22.22% of the Note Amount)
      (30 Month Anniversary of Note)         (26.67% of the Note Amount)
      (3 Year Anniversary of Note)           (20.00% of the Note Amount)

     1. INTEREST. The Issuer further promises to pay interest on the unpaid Note
Amount from the date hereof until the Note is paid in full  (whether at maturity
or  prepayment),  payable  on each Note  Amount  Repayment  Date,  at the simple
interest rate of seven percent (7%) per annum.

     2.  PREPAYMENT.  The Issuer may at its option,  at any time or from time to
time,  prepay this Note (and  accrued  interest),  in whole or in part,  without
premium or penalty.  Any such optional prepayment shall be applied to reduce the
unpaid Note Amount installments, in direct order of maturity (such that the Note
Amount next due shall be repaid first).

     3. ISSUER REGISTER. The Issuer shall keep a register at its principal place
of business (the "Register") in which it shall enter the  Noteholder's  name and
address as set forth above. For the purpose of paying principal and any interest
on this Note,  the Issuer  shall be  entitled to rely on the name and address in
the Register.

     4.  TRANSFER.  This Note is  neither  assignable  nor  transferable  by the
Noteholder without the Issuer's prior written consent.


                                      -1-


     5. NO WAIVER.  No failure by the  Noteholder  to exercise,  and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder  preclude any other or further
exercise  thereof or the  exercise of any other  right.  The  remedies  provided
herein are cumulative and not exclusive of any remedies provided by law.

     6.  ACCELERATION.  In case one or more of the following  events ("Events of
Default") (whatever the reason for such Event of Default and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:

          (a)  failure by the  Issuer to pay all or any part of the Note  Amount
within ten (10) business days after the same shall become due and payable; or

          (b)  failure by the Issuer to pay all or any part of the  interest  on
the Note  within ten (10)  business  days  after the same  shall  become due and
payable; or

          (c) the  Issuer  becomes  the  subject  of any  voluntary  bankruptcy,
insolvency or similar proceeding,  or any involuntary bankruptcy,  insolvency or
similar proceeding not stayed or dismissed within sixty (60) days of filing,

then:  (i) except in the case of an Event of Default  specified  in Section 6(c)
hereof,  the  Noteholder,  by notice in writing to the  Issuer,  may declare the
aggregate  Note  Amount  to be due and  payable  immediately,  and upon any such
declaration  the same shall  become  immediately  due and payable and (ii) if an
Event of Default specified in Section 6(c) occurs,  the Note Amount shall become
and be immediately  due and payable  without any declaration or other act on the
part of the Noteholder.

     7. NO  ACTION.  The  Issuer  shall not by any  action,  including,  without
limitation,    amending   its   certificate   of   incorporation   through   any
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  winding up, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the  terms of this  Note,  but will at all  times in good  faith  assist  in the
carrying  out of all such terms and in the taking of all such  actions as may be
reasonably  necessary  or  appropriate  to protect the rights of the  Noteholder
against impairment.

     8. COSTS; EXPENSES. Should the Noteholder initiate an action to enforce the
provisions of this Note, then the prevailing party in such action, as determined
by the court, agency,  tribunal or other body with jurisdiction over the action,
shall be reimbursed its reasonable fees and out-of-pocket expenses of counsel in
connection with such action.

     9.  AMENDMENT.  This Note may only be  amended by a written  instrument  or
instruments executed by both the Issuer and the Noteholder.

     10.  SENIOR  DEBT.  This Note  shall be senior to all  existing  and future
indebtedness  of the Issuer  other than  indebtedness  created  pursuant to that
certain  promissory note issued by the Issuer to Societe Generale on December 9,
2002 for the principal sum of $1,600,000.


                                      -2-


     11.  WAIVERS.   The  Issuer  hereby  waives  any  requirements  of  demand,
presentment for payment, notice of dishonor, notice of protest and protest.

     12.  GOVERNING  LAW;  FORUM.  This  agreement  shall be  governed  by,  and
construed and interpreted in accordance  with, the laws of the state of New York
without reference to the choice of laws provisions thereof.  Any action, suit or
proceeding initiated by any party hereto against any other party hereto under or
in  connection  with this Note shall be brought in any state or federal court in
the  State of New York.  Each  party  hereto  submits  itself  to the  exclusive
jurisdiction  of any such court,  waives any claims of forum non  conveniens and
agrees  that  service of  process  may be  effected  on it by the means by which
notices are to be given pursuant to this Note.

     13.  NOTICES.  All  notices  (including  other  communications  required or
permitted)  under  this Note must be in  writing  and must be  delivered  (a) in
person,  (b) by registered or certified mail,  postage  prepaid,  return receipt
requested,  (c) by a generally  recognized  courier or  messenger  service  that
provides written  acknowledgment of receipt by the addressee or (d) by facsimile
or other generally accepted means of electronic transmission with a verification
of delivery. Notices are deemed delivered when actually delivered to the address
for notices.  Notices to the Noteholder  must be given to its last known address
appearing  on the  Register  and  notices  to the  Issuer  must be  given at its
principal  place of business.  Any party may furnish,  from time to time,  other
addresses for notices to it.

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

                                  EMPIRE RESORTS, INC.



                                  By:/s/ Thomas W. Aro
                                     -----------------------------------
                                     Name:
                                     Title:



                                      -3-

EX-10.28

                                                                   Exhibit 10.28

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"),  OR UNDER ANY STATE  SECURITIES  LAW AND MAY NOT BE PLEDGED,  SOLD,
ASSIGNED OR  TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE  STATE  SECURITIES LAW, OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,  SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED.

                              EMPIRE RESORTS, INC.

                          Subordinated Promissory Note

January 9, 2004                                                         $139,920


     Empire Resorts,  Inc., a Delaware corporation (together with its successors
and assigns,  the "Issuer"),  for value received,  hereby promises to pay to the
order of  Beatrice  Tollman  (together  with  its  successors,  transferees  and
assigns, the "Noteholder") the principal sum of $139,920 (the "Note Amount"), in
the amounts and on the dates ("Note Amount Repayment Date") set forth below:

                 DATE                                   AMOUNT
                 ----                                   ------
      (1 Year Anniversary of Note)             (13.33% of the Note Amount)
      (18 Month Anniversary of Note)           (17.78% of the Note Amount)
      (2 Year Anniversary of Note)             (22.22% of the Note Amount)
      (30 Month Anniversary of Note)           (26.67% of the Note Amount)
      (3 Year Anniversary of Note)             (20.00% of the Note Amount)

     1. INTEREST. The Issuer further promises to pay interest on the unpaid Note
Amount from the date hereof until the Note is paid in full  (whether at maturity
or  prepayment),  payable  on each Note  Amount  Repayment  Date,  at the simple
interest rate of seven percent (7%) per annum.

     2.  PREPAYMENT.  The Issuer may at its option,  at any time or from time to
time,  prepay this Note (and  accrued  interest),  in whole or in part,  without
premium or penalty.  Any such optional prepayment shall be applied to reduce the
unpaid Note Amount installments, in direct order of maturity (such that the Note
Amount next due shall be repaid first).

     3. ISSUER REGISTER. The Issuer shall keep a register at its principal place
of business (the "Register") in which it shall enter the  Noteholder's  name and
address as set forth above. For the purpose of paying principal and any interest
on this Note,  the Issuer  shall be  entitled to rely on the name and address in
the Register.

     4.  TRANSFER.  This Note is  neither  assignable  nor  transferable  by the
Noteholder without the Issuer's prior written consent.


                                      -1-



     5. NO WAIVER.  No failure by the  Noteholder  to exercise,  and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder  preclude any other or further
exercise  thereof or the  exercise of any other  right.  The  remedies  provided
herein are cumulative and not exclusive of any remedies provided by law.

     6.  ACCELERATION.  In case one or more of the following  events ("Events of
Default") (whatever the reason for such Event of Default and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative or governmental body) shall have occurred and be continuing:

          (a)  failure by the  Issuer to pay all or any part of the Note  Amount
within ten (10) business days after the same shall become due and payable; or

          (b)  failure by the Issuer to pay all or any part of the  interest  on
the Note  within ten (10)  business  days  after the same  shall  become due and
payable; or

          (c) the  Issuer  becomes  the  subject  of any  voluntary  bankruptcy,
insolvency or similar proceeding,  or any involuntary bankruptcy,  insolvency or
similar proceeding not stayed or dismissed within sixty (60) days of filing,

then:  (i) except in the case of an Event of Default  specified  in Section 6(c)
hereof,  the  Noteholder,  by notice in writing to the  Issuer,  may declare the
aggregate  Note  Amount  to be due and  payable  immediately,  and upon any such
declaration  the same shall  become  immediately  due and payable and (ii) if an
Event of Default specified in Section 6(c) occurs,  the Note Amount shall become
and be immediately  due and payable  without any declaration or other act on the
part of the Noteholder.

     7. NO  ACTION.  The  Issuer  shall not by any  action,  including,  without
limitation,    amending   its   certificate   of   incorporation   through   any
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  winding up, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the  terms of this  Note,  but will at all  times in good  faith  assist  in the
carrying  out of all such terms and in the taking of all such  actions as may be
reasonably  necessary  or  appropriate  to protect the rights of the  Noteholder
against impairment.

     8. COSTS; EXPENSES. Should the Noteholder initiate an action to enforce the
provisions of this Note, then the prevailing party in such action, as determined
by the court, agency,  tribunal or other body with jurisdiction over the action,
shall be reimbursed its reasonable fees and out-of-pocket expenses of counsel in
connection with such action.

     9.  AMENDMENT.  This Note may only be  amended by a written  instrument  or
instruments executed by both the Issuer and the Noteholder.

     10.  SENIOR  DEBT.  This Note  shall be senior to all  existing  and future
indebtedness  of the Issuer  other than  indebtedness  created  pursuant to that
certain  promissory note issued by the Issuer to Societe Generale on December 9,
2002 for the principal sum of $1,600,000.


                                      -2-


     11.  WAIVERS.   The  Issuer  hereby  waives  any  requirements  of  demand,
presentment for payment, notice of dishonor, notice of protest and protest.

     12.  GOVERNING  LAW;  FORUM.  This  agreement  shall be  governed  by,  and
construed and interpreted in accordance  with, the laws of the state of New York
without reference to the choice of laws provisions thereof.  Any action, suit or
proceeding initiated by any party hereto against any other party hereto under or
in  connection  with this Note shall be brought in any state or federal court in
the  State of New York.  Each  party  hereto  submits  itself  to the  exclusive
jurisdiction  of any such court,  waives any claims of forum non  conveniens and
agrees  that  service of  process  may be  effected  on it by the means by which
notices are to be given pursuant to this Note.

     13.  NOTICES.  All  notices  (including  other  communications  required or
permitted)  under  this Note must be in  writing  and must be  delivered  (a) in
person,  (b) by registered or certified mail,  postage  prepaid,  return receipt
requested,  (c) by a generally  recognized  courier or  messenger  service  that
provides written  acknowledgment of receipt by the addressee or (d) by facsimile
or other generally accepted means of electronic transmission with a verification
of delivery. Notices are deemed delivered when actually delivered to the address
for notices.  Notices to the Noteholder  must be given to its last known address
appearing  on the  Register  and  notices  to the  Issuer  must be  given at its
principal  place of business.  Any party may furnish,  from time to time,  other
addresses for notices to it.

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

                                    EMPIRE RESORTS, INC.



                                    By: /s/ Thomas W. Aro
                                       ---------------------------------------
                                       Name:
                                       Title:



                                      -3-

EX-10.29

                                                                   Exhibit 10.29
                                                                  EXECUTION COPY

                      ASSIGNMENT AND ASSUMPTION AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION  AGREEMENT (this  "AGREEMENT") is made as of
January  12,  2004,  by and between  Catskill  Development,  L.L.C.,  a New York
limited liability company ("CATSKILL"),  Monticello Raceway Management,  Inc., a
New York corporation  ("MRMI"),  Monticello Casino  Management,  LLC, a New York
limited liability company ("MCM"),  Monticello Raceway Development Company, LLC,
a New York limited liability company ("MRD") and Mohawk  Management,  LLC, a New
York limited liability company ("MM" and, collectively with Catskill,  MRMI, MCM
and MRD, the "ASSIGNORS") and Empire Resorts, Inc. ("EMPIRE"),  pursuant to that
certain Amended and Restated Securities Contribution  Agreement,  dated December
12, 2003, by and between Empire,  Alpha  Monticello,  Inc.,  Catskill,  Americas
Tower  Partners,  Monticello  Realty L.L.C.,  Watertone  Holdings,  LP, New York
Gaming,  LLC,  Fox-Hollow  Lane, LLC,  Shamrock  Strategies,  Inc.,  Clifford A.
Ehrlich,  BKB,  LLC,  Robert A. Berman,  Philip B. Berman,  Scott A.  Kaniewski,
Kaniewski Family Limited Partnership and KFP Trust (the "SECURITIES CONTRIBUTION
AGREEMENT").  Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Securities Contribution Agreement.

     ASSIGNMENT OF LIABILITIES. For good and valuable consideration, the receipt
and  sufficiency  of which are hereby  acknowledged,  Assignors do hereby grant,
sell,  assign,  transfer,  convey and set over to  Empire,  its  successors  and
assigns, the Liabilities (accrued solely through the date hereof) other than the
mortgage   currently   encumbering  those  certain  200+/-  acres  of  land  and
improvements  thereon,  located in Monticello,  New York. and currently owned by
Catskill,  to have and to hold the same unto Empire, its successors and assigns,
forever.

     ASSUMPTION OF LIABILITIES. For good and valuable consideration, the receipt
and  sufficiency  of which are hereby  acknowledged,  Empire hereby  assumes and
agrees to be bound by and to pay and  otherwise  to perform  and  discharge  the
Liabilities  (accrued  solely  through the date hereof)  other than the mortgage
currently  encumbering  those  certain  200+/-  acres of land  and  improvements
thereon, located in Monticello, New York and currently owned by Catskill.

     ADDITIONAL DOCUMENTS.  Each party hereby agrees to perform,  execute and/or
deliver  or  cause  to be  performed,  executed  and/or  delivered  any  and all
such-further  agreements  and  assurances  (including,  but not  limited to, all
necessary  waivers,  consents,  approvals from third parties and permits) as the
other  party  hereto  may   reasonably   request  to  more  fully  complete  the
transactions contemplated hereby.

     SUCCESSORS.  This Agreement shall be binding on and inure to the benefit of
the successors and assigns of the parties hereto.

     INTERPRETATIONS.  The headings of the sections  contained in this Agreement
are solely for  convenience  of  reference  and shall not affect the  meaning or
interpretation of this Agreement.



     COUNTERPARTS.  This Agreement may be executed  simultaneously in any number
of  counterparts,  each of which need not contain the signature of more than one
party and each of which shall be deemed an original,  and all of which  together
shall constitute one and the same instrument, binding upon the other party. This
Agreement may be executed by  facsimile,  with such  facsimile  copy to serve as
conclusive  evidence of the consent and  ramification  of the matters  contained
herein by the parties hereto.

     GOVERNING LAW. This Agreement and the legal  relations  between the parties
will be governed by and  construed in  accordance  with the laws of the State of
New York  applicable  to contracts  made and performed in such State and without
regard to conflicts of law  doctrines  unless  certain  matters are preempted by
federal law.

                            [Signature page follows]





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

                              CATSKILL DEVELOPMENT, L.L.C.


                              By: /s/ Morad Tahbaz
                              ---------------------------------------
                              Name:   /s/ Morad Tahbaz
                              Title:



                              MONTICELLO RACEWAY MANAGEMENT, INC.


                              By: /s/ Cliff Ehrlich
                              ---------------------------------------
                              Name:  /s/ Cliff Ehrlich
                              Title:



                              MONTICELLO CASINO MANAGEMENT, LLC


                              By: /s/ Thomas W. Aro
                              ---------------------------------------
                              Name:   /s/ Thomas W. Aro
                              Title:



                              MONTICELLO RACEWAY DEVELOPMENT COMPANY, LLC


                              By: /s/ Ralph Bernstein
                              ---------------------------------------
                              Name:   /s/ Ralph Bernstein
                              Title:



                              MOHAWK MANAGEMENT, LLC


                              By: /s/ Thomas W. Aro
                              ---------------------------------------
                              Name:   /s/ Thomas W. Aro
                              Title:



                              EMPIRE RESORTS, INC.


                              By: /s/ Robert Berman
                              ---------------------------------------
                              Name:   /s/ Robert Berman
                              Title:

EX-10.30

                                                                   Exhibit 10.30


                       ASSIGNMENT AND ASSUMPTION AGREEMENT

     This  Assignment and Assumption  Agreement  (the  "AGREEMENT")  is made and
entered into as of January 12, 2004, by and between (i) New York Gaming,  LLC, a
Georgia limited liability  company (the "ASSIGNOR"),  and (ii) Alpha Monticello,
Inc., a Delaware corporation ( the "ASSIGNEE").

                              W I T N E S S E T H:

     WHEREAS,  the  Assignor  was formed by each of  Watertone  Holdings,  LP, a
Delaware limited  partnership  ("WATERTONE"),  and the Assignee pursuant to that
certain  Amended and Restated  Contribution  Agreement,  dated as of February 8,
2002,  by  and  between  Empire  Resorts,   Inc.   (formerly  Alpha  Hospitality
Corporation),  a Delaware  corporation  ("EMPIRE"),  and Watertone,  whereby the
Assignee,  a wholly owned  subsidiary of Empire,  contributed  575,874 shares of
Empire's  common  stock (the  "EMPIRE  SHARES") to the  Assignor  and  Watertone
contributed  47.5% of Watertone's  29.167%  economic  ownership  interest in the
gaming and  wagering  operations  of Catskill  Development,  L.L.C.,  a New York
limited  liability  company  ("CATSKILL")  and 47.5% of Watertone's 25% economic
ownership  interest  in  Catskill's   horseracing   operations  (together,   the
"WATERTONE INTERESTS") to the Assignor;

     WHEREAS,  pursuant  to the  Assignor's  Operating  Agreement,  dated  as of
February  12,  2002,  the  Assignee has the sole right to direct the Assignee to
take any action with  respect to the  Watertone  Interests,  including,  without
limitation,  the right to direct the transfer and  assignment  of the  Watertone
Interests;

     WHEREAS,  on January 12, 2004, the Assignee directed the Assignor to assign
all of the  Watertone  Interests to the  Assignee,  and the Assignee  desires to
accept such assignment,  together with all the duties and obligations related to
the Watertone Interests (the "ASSIGNMENT"); and

     WHEREAS,  the  transfer of the  Watertone  Interests  contemplated  in this
Agreement  is deemed to have been  approved by a Majority  Vote (as such term is
defined in the First Amended and Restated Operating Agreement of Catskill, dated
as of January 1, 1999 (the "CATSKILL  OPERATING  AGREEMENT",  as the Assignee is
also  a  Voting  Member  of  Catskill  (as  defined  in the  Catskill  Operating
Agreement)  and an  "accredited  investor," as defined in the  Securities Act of
1933, as amended, and exempt from registration.

     NOW  THEREFORE,  for good  and  valuable  consideration,  the  receipt  and
sufficiency  of  which  are  hereby  acknowledged,  the  parties  agree  to  the
following:

     1.  RECITALS.  The  foregoing  recitals are hereby  incorporated  herein by
reference and acknowledged as true and correct by the parties hereto.

     2. TRANSFER OF INTEREST.  The Assignor hereby  transfers and assigns all of
its right, title and interest in and to the Watertone Interests to the Assignee,
free and clear of all preemptive  rights,  liens,  claims and encumbrances,  and
consents to the admission of the Assignee as a member of Catskill (in accordance



with the terms of the Catskill Operating  Agreement) in respect of the Watertone
Interests.

     3.  ASSUMPTION.  The Assignee hereby accepts the transfer and assignment of
the  Watertone  Interests  by  the  Assignor,  and  hereby  assumes  all  of the
Assignor's  duties and obligations  under the Catskill  Operating  Agreement and
agrees to be bound by and subject to the terms and conditions thereof.

     4.  WITHDRAWAL.  Immediately  following the transfer and  assignment of the
Watertone Interests to the Assignee, the Assignor shall and does hereby withdraw
from Catskill as a Member (as defined in the Catskill Operating Agreement),  and
shall  thereupon  cease to be a Member  of  Catskill.  From and  after  the date
hereof, the Assignor shall have no further interest in the Watertone  Interests,
including,  without limitation,  the profits,  gains and income allocable to the
Watertone  Interests,  and  shall  not  be  liable  for  any  of  the  expenses,
obligations or liabilities  allocable to the Watertone  Interests or relating to
Catskill accruing from and after the date hereof.

     5. BOOKS AND RECORDS.  The Assignor shall take all actions  necessary under
the New York Limited Liability Company Act and the Catskill Operating Agreement,
including,  if  necessary,  causing  an  amendment  of  the  Catskill  Operating
Agreement,  to evidence the Assignor's  withdrawal from Catskill as a Member and
the  transfer  of the  Watertone  Interests  to  the  Assignee  pursuant  to the
Assignment.

     6. AUTHORITY. Each of the Assignor and the Assignee represents and warrants
to the  other  that (a) it has  full and  absolute  power  to  enter  into  this
Agreement and to assume and perform all of its  obligations  hereunder;  (b) the
execution and delivery of this  Agreement and the  performance  by such party of
its obligations hereunder have been duly authorized by all requisite action, and
no further action or approval is required in order to constitute  this Agreement
as a binding and enforceable obligation of such party; (c) the Agreement is duly
and validly  executed and delivered by or on behalf of such party and is binding
on such party; and (d) no consent or authorization,  including,  but not limited
to, any  consent or  authorization  by any  governmental  or  quasi-governmental
agency,  commission,  board, bureau, or instrumentality is necessary or required
in order to  constitute  this  Agreement  as a valid,  binding  and  enforceable
obligation in accordance with its terms.

     7.  VALIDITY OF  INTEREST.  The  Assignor  represents  and  warrants to the
Assignee that (a) the Assignor owns the  Watertone  Interests  free and clear of
all  liens,  claims,  charges  and  encumbrances;  (b) there are no  outstanding
warrants,  options, rights, agreements,  calls or other commitments to which the
Assignor is a party relating to or providing for the sale, conveyance, transfer,
gift,  pledge,  mortgage or other  disposition,  encumbrance  or granting of, or
permitting  any person or other entity to acquire any interest in the  Watertone
Interest;  and (c) the Assignor has, and upon  consummation  of the  transaction
contemplated hereby, the Assignee will acquire, good and marketable title to the
Watertone  Interests,   free  and  clear  of  all  liens,  claims,  charges  and
encumbrances.


                                      -2-


     8. INDEMNIFICATION.  Each of the Assignor and the Assignee hereby agrees to
indemnify  Catskill and its Members  (other than the Assignor and the  Assignee)
against,  and agrees to hold  Catskill and its Members  (other than the Assignor
and the Assignee) harmless from and against any liabilities, obligations, losses
or expenses including,  without limitation,  reasonable attorney's fees, arising
under or by virtue of the Assignment.

     9. COUNTERPARTS.  This Agreement may be executed in multiple  counterparts,
each of which  shall  be  deemed  an  original,  but all of  which,  when  taken
together, shall constitute but one document.

     10. FURTHER ASSURANCES.  The parties shall execute and deliver such further
instruments and do such further acts and things as may be reasonably required to
carry out the intent and purposes of this Agreement.

     11.  GOVERNING LAW. This Agreement shall be governed by and be construed in
accordance with the laws of the State of New York (excluding the laws applicable
to conflicts or choice of law).

     12.  SURVIVAL.  The  provisions  of  Sections  7 and 8  shall  survive  the
consummation of the transactions contemplated by this Agreement.

     13. ENTIRE  AGREEMENT.  This  Agreement  constitutes  the entire  agreement
between the parties hereto with respect to the transactions contemplated herein,
and supersedes all negotiations, representations,  warranties, offers, contracts
and communications relating thereto prior to the date hereof.

                            [SIGNATURES PAGE FOLLOWS]



             [SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]

     IN WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Agreement
effective the day and year first above written.


                                   ASSIGNOR

                                   NEW YORK GAMING, LLC


                                   By:/s/ Scott A. Kaniewski
                                      ---------------------------------------
                                      Name:  Scott A. Kaniewski
                                      Title: Manager

                                   ASSIGNEE

                                   ALPHA MONTICELLO, INC.


                                   By: /s/ Thomas W. Aro
                                      ---------------------------------------
                                      Name:  Thomas W. Aro
                                      Title:

EX-10.31

                                                                   EXHIBIT 10.31
                              REDEMPTION AGREEMENT

     THIS REDEMPTION  AGREEMENT  ("AGREEMENT") is entered into as of January 12,
2004, between Catskill Development, L.L.C., a New York limited liability company
(the "COMPANY"), and Alpha Monticello, Inc., a Delaware corporation ("ALPHA").

                                    RECITALS

     WHEREAS,  Alpha is a Member of the Company and owns a  Membership  Interest
and a Capital Account in the Company;

     WHEREAS,  the Company owns all of the issued and outstanding  capital stock
of Monticello Raceway Management, Inc., a New York Corporation ("MRMI");

     WHEREAS,  the Company  desires to redeem,  and Alpha desires to transfer to
the Company, Alpha's right, title and interest in all of its Membership Interest
and Capital Account in the Company (the "REDEEMED INTEREST"), in exchange for 40
shares  of  common  stock of MRMI,  no par  value  per  share  (the  "REDEMPTION
CONSIDERATION"); and

     WHEREAS,  capitalized terms that are used in this Agreement but not defined
herein shall have the respective meanings given to them in the First Amended and
Restated Operating Agreement of the Company dated as of January 1, 1999.

     NOW,  THEREFORE,  in consideration of the premises and the mutual terms and
conditions  set forth  herein,  and intending to be legally  bound,  the parties
agree as follows:

     1. THE REDEMPTION TRANSACTION.

          (a) The Company hereby redeems and Alpha hereby assigns, transfers and
conveys all of its right,  title and  interest in the  Redeemed  Interest to the
Company. Simultaneously with the execution and delivery of this Agreement, Alpha
shall  deliver to the Company  such  instruments  as the Company may  reasonably
request in order to effect the transfer of the Redeemed Interest by Alpha to the
Company.

          (b) In  consideration  for the  transfer of the  Redeemed  Interest by
Alpha,  the Company  hereby  assigns and  transfers  to Alpha,  clear,  full and
complete  right,  title and  interest  in and to the  Redemption  Consideration.
Simultaneously  with the execution and delivery of this  Agreement,  the Company
shall  deliver  or  cause  to be  delivered  to  Alpha  the  stock  certificates
representing the Redemption Consideration,  either duly endorsed for transfer or
accompanied by the appropriate stock transfer.

     2. REPRESENTATIONS AND WARRANTIES.

          (a) Alpha represents and warrants to the Company as of the date hereof
as follows:

               (i) Alpha is the sole record and direct  beneficial  owner of the
Redeemed  Interest,  and Alpha owns the Redeemed  Interest free and clear of all



liens, security interests,  encumbrances and restrictions whatsoever,  except as
provided in the Operating Agreement of the Company.

               (ii) The execution, delivery and performance of this Agreement by
Alpha  will not (A)  violate  or  conflict  with any  term or  provision  of the
certificate  of  incorporation,  by laws or other  organizational  documents  of
Alpha,  (B)  violate  any  provision  of any  judgment,  writ,  order or  decree
(collectively, "JUDGMENT"), or any law, rule or regulation (collectively, "LAW")
that is applicable to Alpha or any of its  Affiliates,  (C) require any consent,
approval,  waiver or other action by any natural  person,  organization or legal
entity ("PERSON")  under,  constitute a default under, or give rise to any right
of termination, cancellation or acceleration of any right or obligation of Alpha
or any of its  Affiliates,  or to a loss of any benefit to which Alpha or any of
its Affiliates is entitled  under,  any material  agreement or other  instrument
binding  upon  Alpha  or any of its  Affiliates,  or (D)  require  any  consent,
approval,  waiver or other action by, or notice to, any court or  administrative
or governmental agency or body.

               (iii)  There is no action,  suit,  investigation  or  proceeding,
governmental  or otherwise  ("PROCEEDING"),  pending (or, to Alpha's  knowledge,
threatened)  against Alpha or any of its  Affiliates or any of their  respective
directors,  officers, employees or agents relating to the Redeemed Interest, nor
is  there  any  basis  for  such a  Proceeding  known  to  Alpha.  Alpha  has no
obligation,  absolute or  contingent,  to any other  Person to sell the Redeemed
Interest except as provided in the Operating Agreement of the Company.

               (iv) Alpha understands that the Redemption  Consideration has not
been registered under the Securities Act of 1933, as amended ("ACT"), and may be
resold  only  if  registered  pursuant  to the  provisions  of the  Act or if an
exemption from registration is available,  except under the circumstances  where
neither such registration nor such exemption is required by law.

          (b) The Company represents and warrants to Alpha as of the date hereof
as follows:

               (i) The Company is the sole record and direct beneficial owner of
the Redemption Consideration,  and the Company owns the Redemption Consideration
free and clear of all liens,  security interests,  encumbrances and restrictions
whatsoever.

               (ii) The execution, delivery and performance of this Agreement by
the  Company  will not (A)  violate  any  provision  of  Judgment or Law that is
applicable  to the Company or any of its  Affiliates,  (B) require any  consent,
approval,  waiver or other  action by any  Person  under,  constitute  a default
under, or give rise to any right of termination, cancellation or acceleration of
any right or obligation of the Company or any of its Affiliates, or to a loss of
any benefit to which the Company or any of its Affiliates is entitled under, any
material  agreement or other  instrument  binding upon the Company or any of its
Affiliates, or (C) require any consent,  approval, waiver or other action by, or
notice to, any court or administrative or governmental agency or body.

                                       2


               (iii)  There  is no  Proceeding  pending  (or,  to the  Company's
knowledge,  threatened)  against the Company or any of its  Affiliates or any of
their  respective  officers,  employees or agents  relating to the  transactions
contemplated  by this  Agreement,  nor is there any basis for such a  Proceeding
known to the Company. The Company has no obligation,  absolute or contingent, to
any other Person to sell any of the Redemption  Consideration except as provided
in this Agreement.

     3. MISCELLANEOUS.

          (a) All the  provisions  of this  Agreement  shall be binding upon and
inure to the benefit of and be  enforceable  by the  respective  successors  and
assigns of Alpha and the Company.

          (b) This  Agreement  shall be governed by the laws of the State of New
York (without regard to any conflict of laws principles).

          (c)  Alpha and the  Company  shall  from  time to time  after the date
hereof, at the request of any other party, execute and deliver to the requesting
party  such  other  instruments  and  documents  as  the  requesting  party  may
reasonably  require  in order  to  carry  out and  consummate  the  transactions
contemplated by this Agreement.

          (d) Any provision of this Agreement which is invalid or  unenforceable
in any  jurisdiction  shall be ineffective  to the extent of such  invalidity or
unenforceability  without invalidating or rendering  unenforceable the remaining
provisions hereof, and such invalidity or  unenforceability  in any jurisdiction
shall  not  invalidate  or render  unenforceable  such  provisions  in any other
jurisdiction.

          (e) The provisions of Section 2 shall survive the  consummation of the
transactions contemplated by this Agreement.

          (f) This Agreement may be executed in any number of counterparts, each
of which when executed and  delivered  shall be deemed to be an original and all
of which  counterparts  taken  together  shall  constitute  but one and the same
instrument.

                            [SIGNATURE PAGE FOLLOWS]


                                       3



                    [SIGNATURE PAGE TO REDEMPTION AGREEMENT]

     IN WITNESS  WHEREOF,  the parties  hereto have duly  executed and delivered
this Agreement as of the date first written above.



                                  CATSKILL DEVELOPMENT, L.L.C.


                                  By: /s/ Morad Tahbaz
                                     -----------------------------------------
                                     Name:  Morad Tahbaz
                                     Title:


                                  ALPHA MONTICELLO, INC.


                                  By: /s/ Thomas W. Aro
                                     -----------------------------------------
                                     Name:  Thomas W. Aro
                                     Title:

EX-10.32

                                                                   EXHIBIT 10.32

                                                                  EXECUTION COPY

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

            THIS ASSIGNMENT AND ASSUMPTION  AGREEMENT (this "AGREEMENT") is made
as of January 12, 2004, by and between Catskill Development,  L.L.C., a New York
limited liability company (the  "ASSIGNOR"),  and Monticello Casino  Management,
LLC, a New York  limited  liability  company  ("MONTICELLO"),  pursuant  to that
certain Amended and Restated Securities Contribution  Agreement,  dated December
12, 2003, by and between  Empire  Resorts,  Inc.;  Alpha  Monticello,  Inc., the
Assignor, Americas Tower Partners, Monticello Realty L.L.C., Watertone Holdings,
LP, New York Gaming,  LLC,  Fox-Hollow  Lane, LLC,  Shamrock  Strategies,  Inc.,
Clifford A. Ehrlich,  BKB,  LLC,  Robert A. Berman,  Philip B. Berman,  Scott A.
Kaniewski,  Kaniewski Family Limited  Partnership and KFP Trust (the "SECURITIES
CONTRIBUTION  AGREEMENT").  Capitalized  terms  used  herein  and not  otherwise
defined shall have the meanings assigned to them in the Securities  Contribution
Agreement.

            ASSIGNMENT  OF  ASSETS.  For good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  Assignor does hereby
grant, sell, assign, transfer, convey and set over to Monticello, its successors
and  assigns,  all of its  assets and  liabilities  relating  to the  Assignor's
harness, horse racing and other pari-mutuel and gaming operations except for (i)
its  ownership  interests  in any of its  subsidiaries,  (ii) its real  property
interest  in 229 acres of land in  Monticello,  New York and  (iii)  its  claims
related to the Litigation (collectively,  the "Assigned Assets"), to have and to
hold the same unto Monticello, its successors and assigns, forever.

            ASSUMPTION OF LIABILITIES. For good and valuable consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  Monticello  hereby
assumes  and  agrees  to be bound by and to pay and  otherwise  to  perform  and
discharge all  liabilities  and  obligations of any kind and nature relating to,
arising from or in connection  with the Assigned  Assets.  Without  limiting the
foregoing,  solely with respect to Assignor's  rights and  obligations  that are
assigned to Monticello and not otherwise retained by Assignor or its affiliates,
Monticello  hereby assumes and agrees to be bound by and to discharge  according
to their terms all of Assignor's  liabilities  and  obligations  under contracts
that are included in the Assigned Assets.

            ADDITIONAL DOCUMENTS.  Each party hereby agrees to perform,  execute
and/or deliver or cause to be performed,  executed and/or  delivered any and all
such  further  agreements  and  assurances  (including,  but not limited to, all
necessary  waivers,  consents,  approvals from third parties and permits) as the
other  party  hereto  may   reasonably   request  to  more  fully  complete  the
transactions contemplated hereby.

            SUCCESSORS.  This  Agreement  shall be  binding  on and inure to the
benefit of the successors and assigns of the parties hereto.

            INTERPRETATIONS.  The  headings of the  sections  contained  in this
Agreement  are  solely for  convenience  of  reference  and shall not affect the
meaning or interpretation of this Agreement.







            COUNTERPARTS.  This Agreement may be executed  simultaneously in any
number of  counterparts,  each of which need not contain the  signature  of more
than one party and each of which shall be deemed an  original,  and all of which
together shall  constitute one and the same  instrument,  binding upon the other
party. This Agreement may be executed by facsimile,  with such facsimile copy to
serve as  conclusive  evidence of the consent  and  ramification  of the matters
contained herein by the parties hereto.

            GOVERNING  LAW. This Agreement and the legal  relations  between the
parties  will be governed by and  construed in  accordance  with the laws of the
State of New York  applicable to contracts  made and performed in such State and
without  regard  to  conflicts  of law  doctrines  unless  certain  matters  are
preempted by federal law.

                            [SIGNATURE PAGE FOLLOWS]

                                       2





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

                                 CATSKILL DEVELOPMENT, L.L.C.


                                 By:  /s/ Morad Tahbaz
                                      -----------------------------------
                                      Name:  Morad Tahbaz
                                      Title:


                                 MONTICELLO CASINO MANAGEMENT, LLC



                                 By:  /s/ Thomas W. Aro
                                      ----------------------------------
                                      Name: Thomas W. Aro
                                      Title:




                      ASSIGNMENT AND ASSUMPTION AGREEMENT

EX-10.33

                                                                   EXHIBIT 10.33

                                                                  EXECUTION COPY

                                  ASSIGNMENT OF
                 LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS

                                       TO

                              EMPIRE RESORTS, INC.

            The  undersigned,  pursuant to that  certain  Amended  and  Restated
Securities  Contribution Agreement dated as of December 12, 2003, by and between
Empire Resorts,  Inc., Alpha  Monticello,  Inc.,  Catskill  Development,  L.L.C,
Americas Tower Partners ("ATP"),  Monticello Realty L.L.C.,  Watertone Holdings,
LP, New York Gaming,  LLC,  Fox-Hollow  Lane, LLC,  Shamrock  Strategies,  Inc.,
Clifford A. Ehrlich,  BKB,  LLC,  Robert A. Berman,  Philip B. Berman,  Scott A.
Kaniewski,  Kaniewski Family Limited  Partnership and KFP Trust (the "SECURITIES
CONTRIBUTION  AGREEMENT"),  and the  unanimous  written  consent of the  general
partners of ATP,  effective  as of the  Closing  (as  defined in the  Securities
Contribution Agreement),  hereby (i) assigns,  transfers and conveys all of the.
right,  title and interest in ATP's  membership  interest in Monticello  Raceway
Development  Company,  LLC ("MRD") to Empire Resorts,  Inc. and (ii) consents to
the admission of Empire Resorts, Inc. as a member of MRDD in accordance with the
terms of the Limited Liability Company Agreement for MRD, dated as of January 1,
1999.

                            [SIGNATURE PAGE FOLLOWS]







            IT WITNESS WHEREOF,  the undersigned has executed this Assignment to
be effective as of January 12, 2004.

                                             AMERICAS TOWER PARTNERS


                                             By: /s/ Joseph E. Bernstein
                                                 ---------------------------
                                             Name:   Joseph E. Bernstein
                                             Title:  Managing Director













                 ASSIGNMENT BY ATP OF INTERESTS IN MRD TO EMPIRE







                                   SCHEDULE A

                 Limited Liability Company Membership Interests

ASSIGNEE                   ASSIGNED PERCENTAGE MEMBERSHIP INTEREST IN MONTICELLO
                           RACEWAY DEVELOPMENT COMPANY, LLC


Americas Tower Partners                         50.00%

EX-10.34

                                                                   EXHIBIT 10.34

                                                                  EXECUTION COPY

                                  ASSIGNMENT OF
                 LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS

                                       TO

                              EMPIRE RESORTS, INC.

            The  undersigned,  being all of the  Members  of BKB,  LLC  ("BKB"),
pursuant to that certain Amended and Restated Securities  Contribution Agreement
dated as of December  12,  2003,  by and between  Empire  Resorts,  Inc.,  Alpha
Monticello,   Inc.,  Catskill  Development,   L.L.C,  Americas  Tower  Partners,
Monticello  Realty  L.L.C.,  Watertone  Holdings,  LP,  New  York  Gaming,  LLC,
Fox-Hollow  Lane, LLC,  Shamrock  Strategies,  Inc.,  Clifford A. Ehrlich,  BKB,
Robert A. Berman, Philip B. Berman, Scott A. Kaniewski, Kaniewski Family Limited
Partnership and KFP Trust (the  "SECURITIES  CONTRIBUTION  AGREEMENT"),  and the
unanimous . written  consent of the members of BKB,  effective as of the Closing
(as  defined in the  Securities  Contribution  Agreement),  hereby  (i)  assign,
transfer  and convey all of their  right,  title and  interest in their  limited
liability company membership interest in Monticello Raceway Development Company,
LLC ("MRD") to Empire  Resorts,  Inc. in the percentages set forth on Schedule A
hereto and (ii) consent to the admission of Empire Resorts,  Inc. as a member of
MRD in accordance with the terms of the Limited  Liability Company Agreement for
MRD, dated as of January 1, 1999.

                            [SIGNATURE PAGE FOLLOWS]







            IT WITNESS WHEREOF, the undersigned have executed this Assignment to
be effective as of January 12, 2004.

                                      /s/ Robert A. Berman
                                      -----------------------------
                                      ROBERT A. BERMAN


                                      /s/ Phillip B. Berman
                                      -----------------------------
                                      PHILIP B. BERMAN


                                      /s/ Scott A. Kaniewski
                                      -----------------------------
                                      SCOTT A. KANIEWSKI


                                      KANIEWSKI FAMILY LIMITED PARTNERSHIP


                                      By /s/ Scott A. Kaniewski
                                         -------------------------
                                      Name:   Scott A. Kaniewski
                                      Title:  General Partner


                                      KFP TRUST


                                      By /s/ Stacey Kaniewski
                                         -----------------------
                                      Name:   Stacey Kaniewski
                                      Title:  Trustee






                         BKB ASSIGNMENT OF MRD INTERESTS







                                   SCHEDULE A

                 Limited Liability Company Membership Interests

ASSIGNEE                   ASSIGNED PERCENTAGE MEMBERSHIP INTEREST IN MONTICELLO
                           RACEWAY DEVELOPMENT COMPANY, LLC

Robert A. Berman                          41.000%

Philip B. Berman                           1.300%

Scott A. Kaniewski                         7.650%

Kaniewski Family                           0.025%
Limited Partnership

KFP Trust                                  0.025%

EX-10.35

                                                                   EXHIBIT 10.35

                                                                  EXECUTION COPY

                                  ASSIGNMENT OF
                 LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS

                                       TO

                              EMPIRE RESORTS, INC.

            The  undersigned,  pursuant to that  certain  Amended  and  Restated
Securities  Contribution Agreement dated as of December 12, 2003, by and between
Empire Resorts,  Inc.,  Alpha  Monticello,  Inc.,  Catskill  Development,  L.L.C
("CATSKILL"),  Americas Tower  Partners,  Monticello  Realty  L.L.C.,  Watertone
Holdings,  LP, New York Gaming, LLC, Fox-Hollow Lane, LLC, Shamrock  Strategies,
Inc., Clifford A. Ehrlich,  BKB, LLC, Robert A. Berman,  Philip B. Berman, Scott
A.  Kaniewski,   Kaniewski  Family  Limited   Partnership  and  KFP  Trust  (the
"SECURITIES CONTRIBUTION AGREEMENT"), effective as of the Closing (as defined in
the Securities Contribution  Agreement),  hereby (i) assign, transfer and convey
all of their right,  title and interest in all of their  membership  interest in
Monticello Casino Management,  LLC and Mohawk Management, LLC to Empire Resorts,
Inc.  in the  percentages  set forth in  Schedule  A attached  hereto,  and (ii)
consent  to the  admission  of  Empire  Resorts,  Inc.  as a  member  of each of
Monticello Casino Management,  LLC and Mohawk Management, LLC in accordance with
the terms of the Monticello Casino Management, LLC Operating Agreement, dated as
of July 10, 2000 and the Mohawk Management, LLC Operating Agreement, dated as of
January 1, 1999, respectively.

            IT WITNESS WHEREOF,  the undersigned has executed this Assignment to
be effective as of January 12, 2004.

                            [SIGNATURE PAGE FOLLOWS]







            IT WITNESS WHEREOF,  the undersigned has executed this Assignment to
be effective as of January _, 2004.

                                         AMERICAS TOWER PARTNERS


                                         By: /s/ Joseph E. Bernstein
                                             ---------------------------
                                         Name:  Joseph E. Bernstein
                                         Title: Managing Director


                                         MONTICELLO REALTY L.L.C.

                                         By:  MANHATTAN DEVELOPMENT
                                              CORPORATION, its Manager


                                         By: /s/ Maurice Dabbah
                                             ----------------------
                                             Name:  Maurice Dabbah
                                             Title: President


                                         WATERTONE HOLDINGS, LP


                                         By:  BKB, LLC, its general partner


                                         By: /s/ Scott A. Kaniewski
                                             --------------------------
                                             Name:  Scott A. Kaniewski
                                             Title: Member


                                         FOX-HOLLOW LANE, LLC


                                         By: /s/ Charles Degliomini
                                             --------------------------
                                             Name:  Charles Degliomini
                                             Title: Managing Member


                                         SHAMROCK STRATEGIES, INC.


                                         By: /s/ Christopher T. Cushing
                                             ------------------------------
                                             Name:  Christopher T. Cushing
                                             Title: Authorized Representative

               CATSKILL MEMBERS ASSIGNMENT OF MM AND MCM TO EMPIRE




                                         CLIFFORD A. EHRLICH


                                         /s/ Clifford A. Ehrlich
                                         -----------------------------------
                                         CLIFFORD A. EHRLICH







               CATSKILL MEMBERS ASSIGNMENT OF MM AND MCM TO EMPIRE




                                   SCHEDULE A

                 Limited Liability Company Membership Interests

Assignor                     Assigned Percentage Interest in       Assigned Percentage Interest in
                             Monticello Casino Management, LLC     Mohawk Management, LLC

Americas Tower Partners                  38.694%                          38.694%

Monticello Realty L.L.C.                 38.694%                          38.694%

Watertone Holdings, LP                   17.776%                          17.776%

Fox-Hollow Lane, LLC                      1.935%                           1.935%

Shamrock Strategies, Inc                  0.241%                           0.241%

Clifford A. Ehrlich                       2.660%                           2.660%

EX-10.36

                                                                   EXHIBIT 10.36

                                GUARANTY OF LEASE

            This GUARANTY OF LEASE (the  "GUARANTY") is made by Empire  Resorts,
Inc., a Delaware  corporation,  having an office at 707 Skokie Boulevard,  Suite
600,  Northbrook,  Illinois  60062  ("GUARANTOR"),  for the  benefit of Catskill
Development,  L.L.C., a New York limited liability company,  having an office at
Monticello  Raceway,  Route 17B - P.O.  Box  5013,  Monticello,  New York  12701
("LANDLORD"). This Guaranty is made with reference to the following facts:

            A.  Landlord  has entered into a Lease dated as of October 29, 2003,
as amended from time to time (the "LEASE"),  demising premises commonly known as
the  Monticello  Raceway  Site at  Monticello,  New York (the  "PREMISES")  with
Monticello Raceway Management, Inc. ("TENANT").

            B. Guarantor owns and controls Tenant.

            C. The Lease benefits Guarantor as the owner of Tenant.

            NOW,  THEREFORE,   in  exchange  for  good,  adequate  and  valuable
consideration, the receipt of which Guarantor acknowledges,  Guarantor agrees as
follows:

            1. DEFINITIONS.  For purposes of this Guaranty,  the following terms
shall be defined as follows.  In addition,  any terms defined in the Lease shall
have the same meanings in this Guaranty, except to the extent that this Guaranty
provides some other meaning(s) for such terms.

               1.1. "LEASE" means the Lease, dated on or about October 29, 2003,
between  Landlord  and Tenant,  as amended  from time to time.  The term "LEASE"
shall  also  refer to:  (a) any  renewal,  modification,  option,  extension  or
assignment of the Lease; and (b) Tenant's  obligations  relating to the Premises
during any period when Tenant is occupying  the Premises or any portion  thereof
either (i) as a "holdover  tenant" or (ii) as a "statutory  tenant" or under any
other rent regulation,  rent control, rent stabilization,  mandatory arbitration
or other  statutory  scheme  regulating the  landlord-tenant  relationship  (the
parties  recognizing,  however,  that none of the  schemes  referred  to in this
clause "ii" would presently apply to the Lease).  If Landlord has terminated the
Lease, then at Landlord's option,  notwithstanding  such termination (and in the
event of any subsequent  reinstatement of the Lease), all Obligations under this
Guaranty  shall be  calculated  and  determined  as if the Lease  were  still in
effect.  Any request by Landlord  that Tenant  vacate the Premises and surrender
the Lease shall not affect the  definition  of "LEASE" for all  purposes of this
Guaranty.

               1.2. "LEGAL COSTS" means Landlord's actual reasonable  attorneys'
fees incurred by Landlord in litigation  (including any  bankruptcy  proceeding)
with  Guarantor  or with  Tenant on account of  Tenant's  breach of the Lease or
Guarantor's breach of this Guaranty, provided that Landlord prevails.

               1.3.  "OBLIGATIONS"  means all  obligations  of Tenant  under the
Lease,  including:  (a) the  obligation to pay fixed rent; (b) the obligation to
make all  payments  required  under the  Lease on  account  of taxes,  operating
expenses, indemnification made by Tenant under the Lease, and all other matters;
and (c) all other  payment and  performance  required of Tenant under the Lease.
The  Obligations  shall be  determined  without  regard to any  modification  or
reduction  of the  Obligations  that  may  occur  pursuant  to  any  bankruptcy,







insolvency,  or  similar  proceeding  affecting  Tenant.  Without  limiting  the
generality of the  preceding  sentence,  the  Obligations  shall be  determined,
measured and calculated  without taking into account any reduction or limitation
thereof that may occur under Section  502(b)(6) of the United States  Bankruptcy
Code,  or any  similar  or  successor  statute.  Guarantor's  liability  for the
Obligations  shall be  determined  as if no such  reduction  or  limitation  had
occurred. Therefore, Guarantor's liability may exceed Tenant's.

               1.4.  "PROCEEDING"  means any  legal  action,  suit,  arbitration
hearing or  proceeding  arising  out of, or relating  to the  interpretation  or
enforcement  of, this  Guaranty or the Lease,  including a bankruptcy or similar
proceeding affecting Tenant or Guarantor.

               1.5. "STATE" means the State of New York.

               1.6.  "TENANT" means: (a) Tenant as defined above,  acting on its
own  behalf;  (b) any estate  created by the  commencement  of a  bankruptcy  or
similar proceeding affecting Tenant; (c) any trustee,  liquidator,  sequestrator
or receiver of Tenant or Tenant's  property;  (d) any similar person or officer,
appointed pursuant to any law governing any bankruptcy or insolvency  proceeding
or otherwise;  and (e) any direct or indirect  assignee of the original Tenant's
estate under the Lease.

            2.   GUARANTY  OF   OBLIGATIONS.   Guarantor   unconditionally   and
irrevocably guarantees Tenant's payment of the Obligations.  Guarantor covenants
to Landlord that Tenant will pay and perform the Obligations when due,  strictly
in  compliance  with the Lease.  If Tenant  does not pay or  perform  any of the
Obligation(s)  when due,  strictly in compliance with the Lease,  then Guarantor
shall pay or perform such  Obligation(s).  At Landlord's  option (whether or not
Landlord has previously  requested  payment or performance of the  Obligation(s)
from Tenant) Landlord may demand that Guarantor pay or perform any Obligation(s)
without demanding that Tenant pay or perform same.  Guarantor's  liability under
this Guaranty shall be primary and not secondary.  Guarantor's  liability  under
this  Guaranty  shall be in the full  amount  owed to Landlord on account of the
Obligations, including any interest, default interest, costs and fees (including
Legal Costs) with respect to the  Obligations,  including  any of the  foregoing
that  would  have  accrued  but for  the  commencement  of,  or any  rulings  or
determinations made pursuant to, a bankruptcy,  insolvency or similar proceeding
affecting Tenant.

            3. NO OFFSET.  Except to the extent,  if any, that  Landlord  agrees
otherwise in writing,  Guarantor's  obligations under this Guaranty shall not be
subject to offset, deduction,  reduction,  counterclaim, or defense of any kind,
including  on account of any  offset,  deduction,  reduction,  counterclaim,  or
defense   arising  or   purportedly   arising   under  the  Lease  or  from  the
landlord-tenant  relationship thereunder.  Landlord shall at no time be required
to apply any  security  deposit to  reduction  of the  Obligations  and shall be
entitled to continue to hold any such security deposit in its entirety.

            4. CHANGES IN LEASE.  Without  notice to, or consent by,  Guarantor,
and in Landlord's sole and absolute discretion and without prejudice to Landlord
or in any way limiting or reducing  Guarantor's  liability  under this Guaranty,
Landlord may: (a) grant  extensions of time,  renewals or other  indulgences  or
modifications to Tenant;  (b) change,  amend or modify the Lease; and (c) accept
or make  compositions  or other  arrangements  or file or refrain  from filing a
claim in any  bankruptcy or similar  proceeding,  and otherwise deal with Tenant

                                      -2-





and any other party  related to the Lease as Landlord may  determine in its sole
and absolute  discretion.  Without  limiting the  generality  of the  foregoing,
Guarantor's liability under this Guaranty shall continue even if Landlord alters
any  obligations  under the Lease in any  respect or if  Landlord's  remedies or
rights  against  Tenant are in any way  impaired  or  suspended  with or without
Guarantor's  consent.  If Landlord performs any of the actions described in this
paragraph,  then Guarantor's  liability shall continue in full force and effect.
Guarantor acknowledges that Guarantor is and will be in a position to know about
and control any of the actions described in this paragraph.

            5. NATURE OF GUARANTY.  Guarantor's liability under this Guaranty is
a guaranty of payment of money only. This Guaranty is a guaranty of payment, not
of collection.  Guarantor's  liability under this Guaranty is not conditioned or
contingent upon the genuineness,  validity,  regularity or enforceability of the
Lease.  Guarantor  acknowledges  that  Guarantor is fully  obligated  under this
Guaranty (with respect to the Obligations  only) even if Tenant had no liability
at the time of  execution  of the Lease or later  ceases to be liable  under the
Lease, whether by bankruptcy or otherwise.  Guarantor waives any right to compel
Landlord to proceed first against Tenant or under the Lease,  before  proceeding
against Guarantor. Guarantor agrees that if any of the Obligations are or become
void or  unenforceable,  then  Guarantor's  liability  under this Guaranty shall
continue  in full force  with  respect  to all  Obligations  as if they were and
continued to be legally enforceable.  Guarantor's  liability under this Guaranty
shall continue until all Obligations  have been paid in full,  whether by Tenant
or by Guarantor,  and all other  conditions to the  termination of this Guaranty
have been satisfied.

            6. EXTENSION, RENEWAL, ETC. OF LEASE. This Guaranty shall remain and
continue in full force and effect  notwithstanding  any  renewal,  modification,
option,  extension  or  assignment  of the  Lease,  whether  or  not  separately
consented to, acknowledged or confirmed by Guarantor.  The definition of "Lease"
shall include any such renewal, modification, option, extension or assignment of
the Lease.

            7.  WAIVERS OF RIGHTS AND  DEFENSES.  Guarantor  waives any right to
require  Landlord to proceed  against Tenant or pursue any other right or remedy
for  Guarantor's  benefit.  Guarantor  agrees that Landlord may proceed  against
Guarantor  with respect to the  Obligations  without  taking any action  against
Tenant.  Guarantor agrees that Landlord may  unqualifiedly  exercise in its sole
discretion any or all rights and remedies available to it against Tenant without
impairing Landlord's rights and remedies in enforcing this Guaranty, under which
Guarantor's liabilities shall remain independent and unconditional.

            8. ADDITIONAL  WAIVERS.  Guarantor waives diligence and all demands,
protests, presentments and notices of every kind or nature, including notices of
protest,  dishonor,  nonpayment,  acceptance  of this Guaranty and the creation,
renewal, extension, modification or accrual of any of the Obligations. Guarantor
further  waives  any right to plead any and all  statutes  of  limitations  as a
defense to Guarantor's  liability under this Guaranty or the enforcement of this
Guaranty.  No failure or delay on Landlord's part in exercising any power, right
or privilege under this Guaranty shall impair or waive any such power,  right or
privilege.  GUARANTOR  IRREVOCABLY  WAIVES  ANY  RIGHT  TO  TRIAL BY JURY IN ANY
ACTION, PROCEEDING,  COUNTERCLAIM OR OTHER LITIGATION ARISING OUT OF OR RELATING
TO THIS GUARANTY,  THE ENFORCEMENT OF THIS GUARANTY,  OR ANY ACTIONS OF LANDLORD

                                      -3-





IN CONNECTION  WITH OR RELATING TO THE  ENFORCEMENT OF THIS GUARANTY.  Guarantor
waives any  defense  arising  from  Landlord's  failure to obtain or perfect any
security interest.

            9.  LANDLORD'S  EXERCISE  OF LEASE  REMEDIES.  The  validity of this
Guaranty  and  the  obligations  of  Guarantor  shall  in no way be  terminated,
limited,  affected or impaired by reason of Landlord's  assertion against Tenant
of any rights or remedies reserved to Landlord under the Lease or available with
respect to the Lease under  applicable  law.  Landlord may enforce this Guaranty
against Guarantor either before, after, in conjunction with, or independently of
Landlord's assertion against Tenant of any remedies available under the Lease or
with  respect to the Lease under  applicable  law.  Landlord  may  enforce  this
Guaranty  whether or not  Landlord  has first  exhausted or applied any security
deposit provided for under the Lease. Guarantor's primary personal liability for
the Obligations shall not be limited, restricted,  diminished, or reduced in any
manner by the  occurrence of any of the following:  (a) Tenant's  departure from
the Premises after such Obligations accrued; (b) Landlord's obtaining a judgment
against  Tenant for rent' or use and  occupancy  payments,  except to the extent
that such  judgment  has  actually  been paid and such  payment(s)  are credited
against the Obligations pursuant to this Guaranty;  (c) any actions or inactions
by Landlord in any Proceeding  affecting  Tenant or the Lease; or (d) Landlord's
termination of the Lease or exercise of any other remedies under the Lease.

            10.  TENANT'S  FINANCIAL   CONDITION.   Guarantor   represents  that
Guarantor  is fully  aware  of the  financial  condition  of  Tenant.  Guarantor
delivers  this  Guaranty   based  solely  upon   Guarantor's   own   independent
investigation  and  based in no part upon any  representation  or  statement  by
Landlord.  Guarantor is not relying  upon,  nor  expecting,  Landlord to furnish
Guarantor with any information concerning the financial condition of Tenant.

            11. MERGER;  NO CONDITIONS;  AMENDMENTS.  This Guaranty contains the
entire agreement among the parties with respect to the matters set forth in this
Guaranty.  This Guaranty  supersedes all prior agreements among the parties with
respect to the matters set forth in this  Guaranty.  No course of prior dealings
among the parties,  no usage of trade, and no parol or extrinsic evidence of any
nature shall be used to  supplement,  modify or vary any terms of this Guaranty.
This Guaranty is unconditional.  There are no unsatisfied conditions to the full
effectiveness  of this Guaranty.  No terms or provisions of this Guaranty may be
changed, waived, revoked or amended without Landlord's prior written consent. If
any  court of  competent  jurisdiction  determines  that any  provision  of this
Guaranty is  unenforceable,  then all other  provisions of this  Guaranty  shall
remain fully effective.

            12. INTERPRETATION. This Guaranty shall be governed under the law of
the State of New York.  The words  "INCLUDE" or  "INCLUDING"  are intended to be
interpreted  as if  followed  in each  case by the words  "without  limitation."
Guarantor  represents  and warrants  that the recitals of this Guaranty are true
and correct.

            13. LEGAL COSTS.  In the event of any Proceeding  between  Guarantor
and Landlord, including any Proceeding in which Landlord enforces or attempts to
enforce this Guaranty, Guarantor shall reimburse Landlord for all Legal Costs of
such Proceeding.

            14. COMMERCIAL  TRANSACTION.  Guarantor  acknowledges that the Lease
and this Guaranty are a commercial  transaction,  and that neither this Guaranty
nor the Lease is entered into for personal,  family,  household or  agricultural
purposes.

                                      -4-





            15. NO  THIRD-PARTY  BENEFICIARIES.  This  Guaranty is executed  and
delivered for the benefit of Landlord and its successors and assigns, and is not
intended to benefit any third party.

            16. NOTICES. All notices, requests and demands to be made under this
Guaranty shall be given in writing at the address referred to in the preamble in
accordance with the notice provisions of the Lease.

            17. PRESERVED DEFENSES.  Notwithstanding anything to the contrary in
this Guaranty,  Guarantor does not waive, and Guarantor  reserves and may assert
against Landlord, any claim or defense that Tenant could assert against Landlord
provided that such claim or defense  arises from either (i)  Landlord's  acts or
omissions  in  connection  with or  relating  to the Lease or (ii)  Tenant's  or
Guarantor's actual payment and performance of the Obligations.







            IN WITNESS WHEREOF,  Guarantor has duly executed this Guaranty as of
the date indicated below.

                                    GUARANTOR

                                    EMPIRE RESORTS, INC.


                                    By: /s/ Robert Berman
                                        ---------------------
                                    Name:  Robert Berman
                                    Title:
                                    Date: January 12, 2004





                                GUARANTY OF LEASE

EX-10.37

                                                                   EXHIBIT 10.37


          -------------------------------------------------------------


                  MORTGAGE MODIFICATION AND SPREADER AGREEMENT

                          Dated as of January 12, 2004

                                     between

                       MONTICELLO RACEWAY MANAGEMENT, INC.

                                  ("Mortgagor")

                                       and

                               THE BERKSHIRE BANK
                                  ("Mortgagee")

                              LOCATION OF PROPERTY:
                      Monticello, Sullivan County,New York

                               EXISTING PREMISES:

                          Section 101, Block 1, Lot 1.1
                     Section 101, Block 1, Lot 1.3 (portion)
                           Section 102, Block 4, Lot 1
                          Section 12, Block 1, Lot 46.2
                           Section 12, Block 1, Lot 48
                           Section 12, Block 1, Lot 64

                              ADDITIONAL PREMISES:

                          Section 101, Block 1, Lot 1.3


          -------------------------------------------------------------
                        After recording, please return to

                                 Blank Rome LLP
                              405 Lexington Avenue
                            New York, New York 10174
                       Attention: Michael J. Feinman, Esq.

            This instrument was prepared by the above-named attorney.







                  MORTGAGE MODIFICATION AND SPREADER AGREEMENT
                  --------------------------------------------

            MORTGAGE MODIFICATION AND SPREADER AGREEMENT (this "AGREEMENT") made
as of  the  12th  day  of  January,  2004,  by and  between  MONTICELLO  RACEWAY
MANAGEMENT,  INC.  a New York  corporation  ("MORTGAGOR"),  having an address at
Monticello Raceway, Route 17B, Monticello, New York 12701 and THE BERKSHIRE BANK
("MORTGAGEE"),  having an  address  at 4 East 39th  Street,  New York,  New York
10016.

                              W I T N E S S E T H:
                              --------------------

            A. Mortgagor,  pursuant to the terms of a certain Agreement of Lease
dated as of October 29, 2003 (the "LEASE"), is the owner of a leasehold interest
in certain real  property  described  on SCHEDULE A-1 annexed  hereto and made a
part hereof (the "EXISTING PREMISES");

            B. Pursuant to a certain  Amendment of Lease dated as of January 12,
2004, the premises demised by the Lease has been expanded to include a leasehold
interest in certain  additional real property,  more  particularly  described on
SCHEDULE A-2 annexed hereto and made a part hereof (the "ADDITIONAL PREMISES");

            C.  Mortgagee  is now the  lawful  owner  and  holder  of a  certain
leasehold  mortgage,  security  agreement,  assignment  of leases  and rents and
fixture filing dated as of October 29, 2003 recorded in the Office of the County
Clerk, Sullivan County, New York (the "MORTGAGE"),  which encumbers the Existing
Premises; and

            D. Mortgagee and Mortgagor have agreed to modify the Mortgage in the
manner  hereinafter set forth and to spread the lien of the Mortgage to encumber
the Additional Premises.

            NOW,  THEREFORE,  in consideration  of the foregoing,  of the mutual
agreements  hereinafter set forth and of other good and valuable  consideration,
the receipt and sufficiency of which is hereby acknowledged,  the parties hereto
hereby agree as follows:

            1. REPRESENTATIONS AND WARRANTIES. Mortgagor represents and warrants
to Mortgagee that:

               (a) As of the date hereof,  the  Mortgage is not in default,  nor
has any event occurred which would be a default  thereunder  with the passage of
time, the giving of notice, or both.

               (b) Mortgagor is the holder of insurable  leasehold  title in and
to the Existing  Premises and the Additional  Premises and has full power,  good
right and lawful  authority to encumber its  leasehold  interest in the Existing
Premises  and the  Additional  Premises in the manner and form set forth in this
Agreement and to execute, deliver and perform this Agreement.

               (c) The execution,  delivery and performance of this Agreement by
Mortgagor  does not and will  not  violate  the  terms of any  other  agreement,
mortgage,  indenture or instrument affecting Mortgagor, the Existing Premises or





the  Additional  Premises or any law, rule,  order,  ordinance or statute of any
governmental  authority,  purporting to have  jurisdiction  over Mortgagor,  the
Existing Premises.

               (d) As of the date' hereof,  the principal  amount secured by the
Mortgage is  $3,439,082.94,  and such amount is secured without any right on the
part of Mortgagor of offset,  counterclaim  or defense,  all of which rights are
hereby expressly waived.

            2 SPREADING OF MORTGAGE LIEN. The lien of the Mortgage shall be, and
the same is, hereby spread to encumber the Existing  Premises and the Additional
Premises  (collectively,  the "OVERALL  PREMISES") in the same manner and to the
same effect as though the  descriptions  of each parcel of the Overall  Premises
had been included with the description of the Existing  Premises in the property
description  contained in the Mortgage and as though the Mortgage had originally
constituted,  and so that the Mortgage  shall and now does  constitute,  a valid
mortgage lien on the Overall Premises.

            3. NO NEW INDEBTEDNESS; MAXIMUM PRINCIPAL AMOUNT.

               (a) The  parties  hereto  hereby  certify  that the  Mortgage  as
modified,  and the lien  thereof as spread to the  Additional  Premises  by this
Agreement  secures'  the  same  indebtedness  and  obligations  secured  by  the
Mortgage,  and  evidences  and  secures  no  further  or other  indebtedness  or
obligation.

               (b)  Notwithstanding  anything to the contrary  contained herein,
the  maximum  principal  sum which is  secured  by the  Mortgage  as of the date
hereof,  or which under any  contingency  may be secured by the  Mortgage at any
time in the future,  shall not exceed the  principal  sum of THREE  MILLION FOUR
HUNDRED THIRTY NINE THOUSAND EIGHTY-TWO AND 94/100 DOLLARS ($3,439,082.94).

            4.  NO ORAL  MODIFICATION.  The  terms  hereof  may  not be  waived,
changed, modified,  terminated or discharged orally, but only by an agreement in
writing signed by the party against whom enforcement of any such waiver, change,
modification, termination or discharge is sought.

            5. WAIVERS BY MORTGAGOR.  To the extent permitted by law,  Mortgagor
hereby  waives and agrees not to assert or take  advantage  of: (a) any right to
require Mortgagee to proceed against Mortgagor or any other person or to proceed
against or exhaust any  security  held by Mortgagee at any time or to pursue any
other remedy in Mortgagee's power or under any other agreement before proceeding
against  Mortgagor  hereunder;  (b) demand,  presentment for payment,  notice of
nonpayment, intent to accelerate,  acceleration,  protest, notice of protest and
all other  notices of any kind, or the lack of any thereof,  including,  without
limiting the generality of the foregoing,  notice of the existence,  creation or
incurring of any new or additional  indebtedness  or obligation or of any action
or non-action on the part of Mortgagor,  Mortgagee,  any endorser or creditor of
Mortgagor or of Mortgagor  or on the part of any other person  whomsoever  under
this or any other  instrument in connection  with any  obligation or evidence of
indebtedness  held by  Mortgagee;  (c) any  defense  based upon an  election  of
remedies by Mortgagee; (d) any right or claim or right to cause a marshalling of

                                       2





the assets of Mortgagor;  and (e) any lack of notice of disposition or of manner
of disposition of any collateral for the obligations secure by the Mortgage,  as
modified hereby.

            6.  RATIFICATION.  Mortgagor  hereby (i)  ratifies  and confirms the
lien,  conveyance  and grant  contained  in and created by the Mortgage and (ii)
agrees that nothing  contained in this  Agreement is intended to or shall impair
the  validity  of the  Indebtedness  or the  lien,  conveyance  and grant of the
Mortgage.  Unless specifically  modified by the terms hereof, the parties hereto
ratify and confirm each and every term of the Mortgage,  which shall continue in
full force and effect.

            7. FURTHER  ASSURANCES.  Mortgagor  shall  execute and  deliver,  at
Mortgagor's  sole  cost  and  expense,  such  additional  documents  as shall be
requested by Mortgagee  from time to time to effectuate the terms and conditions
of  this  Agreement  and  the  Mortgage,  including,  without  limitation,  such
affidavits as shall be necessary to permit this  Agreement to be recorded in the
appropriate   public   records.   Mortgagor   hereby   appoints   Mortgagee  its
attorney-in-fact  to  execute,  acknowledge  and  deliver for and in the name of
Mortgagor any and all of the  instruments  mentioned in this  section,  and this
power, being coupled with an interest, shall be, irrevocable as long as any part
of the obligations secured by the Mortgage remain unsatisfied.

            8. SUCCESSORS AND ASSIGNS; GOVERNING LAW.

               (a) This  Agreement  shall bind, and inure to the benefit of, the
parties hereto, their respective successors and permitted assigns.

               (b)  This  Agreement  shall  be  governed  by  and  construed  in
accordance with the laws of the State of New York.

            9.  COUNTERPARTS.  This  Agreement may be executed in  counterparts,
each of which shall be deemed to be an original at such time as all parties have
executed and delivered at least one counterpart.

                                       3





            IN WITNESS WHEREOF,  this Agreement has been executed by the parties
as of the day and year first written above.

                                            Mortgagor:

                                            MONTICELLO RACEWAY MANAGEMENT, INC.


                                            By: /s/ Cliff Ehrlich
                                                -------------------------------
                                            Name:  Cliff Ehrlich
                                            Title: President


                                            Mortgagee:

                                            THE BERKSHIRE BANK


                                            By: /s/ Peter H. Kim
                                                --------------------
                                            Name:  Peter H. Kim
                                            Title: Vice President







                       MORTGAGE MODIFICATION AND SPREADER








STATE of NEW YORK   )
                    ) ss.:
COUNTY OF SULLIVAN  )

            On the 13 day of January,  2004, before me, the undersigned a Notary
Public in and for said State,  personally  appeared  Cliff  Ehrlich,  personally
known 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 the same in his capacity,  and that by his signature on the instrument,
the  individual,  or the  person  upon  behalf  of which the  individual  acted,
executed the instrument.


                                             Kim Willison
                                             ------------------------------
                                             Notary Public

                                             KIM WILLISON
                                             NOTARY PUBLIC, STATE OF NEW YORK
                                             NO. 01W16093630
                                             QUALIFIED IN QUEENS COUNTY
                                             MY COMMISSION EXPIRES JUNE 2, 2007







                       MORTGAGE MODIFICATION AND SPREADER







STATE OF NEW YORK       )
                        ) ss.:
COUNTY OF NEW YORK      )

            On the _____ day of January,  2004,  before me, the  undersigned,  a
Notary  Public in  and for said  State,  personally  appeared  ________________,
personally  known  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 the same in his  capacity,  and that by his signature on the
instrument,  the  individual,  or the person upon behalf of which the individual
acted, executed the instrument.

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



STATE OF NEW YORK       )
                        ) ss.
COUNTY OF NEW YORK      )

            On the 9th day of January, 2004, be re me, the undersigned, a Notary
Public in and for said State, personally appeared Peter H. Kim, personally known
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 the
same  in his  capacity,  and  that  by his  signature  on  the  instrument,  the
individual,  or the person upon behall of which the individual  acted,  executed
the instrument.


                                     /s/ Jeanette Kahan
                                     ---------------------------------
                                         Notary Public






                                  SCHEDULE A-1

ALL that tract or parcel of, land, situate,  in the Town of Thompson,  County of
Sullivan  and State of New York,  a portion  of said  parcel  being  within  the
Village of Monticello, being' bounded and described as follows:

BEGINNING  at a point in the center of a traveled  way,  of Kaufman  Road County
Road No 59, at the  northwest  corner of lands of New York State  Electric & Gas
Corporation,  as  described  in Liber  562 of Deeds at Page 464 and Liber 572 of
Deeds at Page 27;

and  running.  thence from said place of  beginning  the  following  courses and
distances along the center of traveled way of said Kaufman Road

north 17 degrees 41 minutes east, 228.60 feet;

north 16 degrees 13 minutes east, 155.04 feet;

north 13 degrees 59 minutes east,  85.94 feet;

north 11 degrees 26 minutes east, 98.34 feet;

north 9 degrees 16 minutes east, 82.10 feet;

north 8 degrees 06 minutes  east,  99.05 feet;

north 5 degrees 50 minutes east,  107.45 feet;

north 3 degrees 55 minutes east, 172.79 feet;

north 3 degrees 25 minutes east, 105.26 feet;

north 3  degrees  11  minutes  east,  163.50  feet to a point in the  center  of
traveled way of said road at the  northwest  corner of the  premises  originally
described in Liber 552 pg 114;

thence  leaving said road and running.  south 66 degrees 14 minutes east,  47.85
feet passing along the north line of the premises described in said Liber 552 of
Deeds at Page 114 to a point on the bounds of, said Kaufman Road as described in
Liber 596 of Deeds at Page 21

thence the  following  courses and distances  along the easterly  bounds of said
Kaufman Road:

north 3 degrees 02 minutes east,  331.18 feet;

north 2 degrees 11 minutes east, 548.26 feet;

north 4 degrees  37 minutes  east,  302.01  feet to an iron  stake  found at the
southwest  corner of lands of Kaufman and others as  described  in Liber 1045 of
Deeds at Page 229;

                                     Page 1







                                  SCHEDULE A-1
                                   (continued)

thence  leaving said road and running south 66 degrees 30 minutes  east,  891.08
feet,  passing along the south line of.  Kaufman and others parcel to a concrete
highway monument found-on the west bounds of New York State Route 17-Quickway;

thence  south  17  degrees  27  minutes  east,   434.76  feet   passing;   along
sail westerly highway bounds to a concrete highway monument found;

thence continuing along said bounds-south 9 degrees 37 minutes east, 175.95 feet
to a concrete highway monument found;

thence continuing along said highway bounds the following courses and distances:

south 19 degrees 45 minutes west, 125.32 feet to a concrete highway monument

south 17 degrees 38 minutes east, 199.80 feet to a concrete highway monument;

south 26 degrees 15 minutes east, 717.73 feet to a point;

south 29 degrees 50 minutes east, 419.41 feet to a point;

south 20 degrees 30 minutes east, 201.21 feet to a point;

south 37-degrees 07 minutes east, 530.90 feet to a concrete highway monument;

south 42 degrees 08 minutes east, 364.70 feet to a concrete highway monument

south 44 degrees 01 minutes east, 400.66 feet to a concrete highway monument;

south 50 degrees 14 minutes east, 124.99 feet to a point;

and  thence  south 35 degrees 40  minutes  east,  474.10  feet to a point on the
westerly  bounds of said highway at the most northerly  corner of Lands of Mapes
and Lane as  described  in Liber  798 pg  Deeds at Page 951 (it  being  the most
northerly corner of those lands lying west of N.Y.S. Route 17);

thence  leaving  said  highway  bounds  and running  south 43 degrees 08 seconds
west,  491.83 feet  passing to and along a stone wall  evidencing  the bounds of
said Mapes & Lane parcel to a stone wall evidencing the bounds of said Mapes and
Lane Parcel to a stone wall corner;

                                     Page 2







                                  SCHEDULE A-1
                                   (continued)

thence south 62 degrees 45 minutes east,  432.36 feet passing  generally along a
stone wall evidencing the bounds of said Mapes and Lane parcel to a point;

thence south 24 degrees 57 minutes east,  603.60 feet continuing  along lands of
said Mapes and Lane to a stone wall corner;

thence  still  along said lands  south 68 degrees 25 minutes  east,  458.75 feet
passing  along a stone  wall to a point on the  westerly  bounds  of said  State
Highway;

thence south 0 degrees 22 minutes east,  25.17 feet passing along,  said highway
bounds to a point;

thence  continuing along the northerly bounds of said highway,  south 58 degrees
35 minutes west, 602.89 feet to a point;

thence still along said bounds and continuing  along the northerly bounds of New
York State Route 17B the following courses and distances:

south 84 degrees 03 minutes west, 163.86 feet;

north 78 degrees 41 minutes  west,  305.31 feet to a concrete  highway  monument
found;

north 68 degrees 43 minutes  west,  215.81 feet to a concrete  highway  monument
found;

north 65 degrees 13 minutes west, 93.42 feet to a point;

north 68 degrees  21 minutes  west,  90.03 feet to a concrete  highway  monument
found;

north 65 degrees 53 minutes  west,  231.10 feet to a concrete  highway  monument
found;

north 65 degrees 36 minutes west, 352.52 feet to a point;

north 62 degrees 45 minutes  west,  612.98 feet to a concrete  highway  monument
found;

north 58 degrees  02 minutes  west,  89.52 feet to a concrete  highway  monument
found;

north 70 degrees 48 minutes  west,  151.35 feet to a concrete  highway  monument
found;

north 65 degrees 36 minutes west, 352.52 feet to a point;

north 62 degrees 45 minutes  west,  612.98 feet to a concrete  highway  monument
found;

north 58 degrees  02 minutes  west,  89.52 feet to a concrete  highway  monument
found;

                                     Page 3







                                  SCHEDULE A-1
                                   (continued)

north 62 degrees 46 minutes  west,  552.06 feet to a concrete  highway  monument
found;

north 64 degrees  57 minutes  west,  57.95 feet to a concrete  highway  monument
found;

north 60 degrees 34 minutes  west,  317.75 feet to a concrete  highway  monument
found;

north 62 degrees 30 minutes  west,  669.85 feet to a concrete  highway  monument
found;

and north 65 degrees 15 minutes  west,  35.70 feet to, a point on the  northerly
bounds of said N.Y.S.  Route 17B at the southeast corner of lands of the Village
of Monticello as described in Liber 616 of Deeds, at Page 480;

thence leaving said highway bounds and running north 15 degrees 53 minutes east,
41.69 feet passing along the east bounds of said Village parcel to a point;

thence north 68 degrees 45 minutes west,  40.00 feet passing along the northerly
bounds of said  Village  parcel to a point on the east bounds of lands of Jodana
Realty,  Inc.,  as  described in Land Record Liber 1748 page 193 and Land Record
Liber 1636 at page 203;

thence north 15 degrees 53 minutes  east,  251.56 feet  passing  along said east
bounds to an iron pin found;

thence continuing along the north line of said Jodana Realty, Inc. parcel, north
61 degrees 51 minutes west, 194.93 feet to a point in the center or traveled way
of Kaufman Road;

thence north 17 degrees 39 minutes east, 946.54 feet passing along the center of
traveled way of said Kaufman Road to a point at the southwest corner of said New
York State Electric & Gas Corporation parcel;

thence  leaving said road and running south 72 degrees 46 minutes  east,  184.25
feet passing along the south bounds of said Electric & Gas parcel to an iron pin
set;

thence  north 17 degrees 14 minutes  east,  225.00 feet  passing  along the east
bounds of said Electric & Gas parcel to an iron-pin set;

thence north 72 degrees 46 minutes  west,  182.07 feet  passing  along the north
bounds of said Electric & Gas parcel to the point or place of BEGINNING.

            Said Parcel containing approximately 228.84 acres of land.

                                     Page 4




                                  SCHEDULE A-1
                                   (continued)

Subject to easements of record to public utilities and highway use dedication of
record.

The above parcel being subject to certain permanent  drainage  easements for New
York State Route 17-Quickway and New York State Route 17B State Highway No. 890,
said  easements  being shown on a survey map of Monticello  Raceway  prepared by
George H. Fulton,  L. S., in February 1995. Said easements  being  identified by
the following parcel numbers on New York State Highway Maps: No. 78, No. 77, No.
81, No: 76, No. 75, No. 74, No. 73, No. 72, No. 125" and No. 103.

Subject to easements of record to public utilities.

Subject to a temporary highway easement for state Highway No. 5035-N.Y.S.  Route
17-Quickway as set forth on highway Map No. 31 as Parcel No. 109

EXCEPTING  therefrom  ALL that certain  plot,  piece of parcel of land lying and
being in the Village of  Monticello,  Town of  Thompson,  County of Sullivan and
State of New York being more  particularly  bounded and described and designated
as Parcel No 1 (St Regis Mohawk Trust Parcel) on the Final  Revised  Subdivision
Plat of Lands of Catskill Development,  L.L.C.", dated. May 25, 1999, made by T.
M. Depuy, Engineering &Land Surveying,  P.C., and filed in the Office of the
Sullivan  County Clerk on February 4, 2000 as Map No.  8-271,  together with and
subject to easements as shown thereon.  (Said parcel consisting of approximately
29.31 acres of land)

FOR CONVEYANCE ONLY     Being the same premises as described in a Lease made to
not for policy          MONTICELLO  RACEWAY  MANAGEMENT,  INC., a Memorandum  of
                        which is to be recorded in the Sullivan  County  Clerk's
                        Office.

FOR INFORMATION ONLY
County:   Sullivan    A)    Section 101     Block 1     Lot         1.1
County:   Sullivan    B)    Section 101     Block 1     Lot         1.3
County:   Sullivan    C)    Section 102     Block 4     Lot         1
County:   Sullivan    D)    Section 12      Block 1     Lot         46.2
County:   Sullivan    E)    Section 12      Block 1     Lot         48
County:   Sullivan    F)    Section 12      Block l     Lot         64

            (SECTION BLOCK AND LOT INFORMATION FOR INFORMATION ONLY),
            ---------------------------------------------------------



                                     Page 5







                                  SCHEDULE A-2
                                  ------------

                              PROPERTY DESCRIPTION
                               Additional Premises

ALL that certain plot, piece or parcel of land lying and being in the Village of
Monticello,  Town of  Thompson,  County of Sullivan  and State of New York being
more  particularly  bounded and  described  and  designated as Parcel No. 1 (St.
Regis Mohawk Trust  Parcel) on the Final  Revised  Subdivision  Plat of Lands of
Catskill  Development,  L.L.C.",  dated  May 25,  1999,  made  by T.  M.  Depuy,
Engineering  & Land  Surveying,  P.C.,  and filed in the Office of the  Sullivan
County Clerk on February 4, 2000 as Map No. 8-271,  together with and subject to
easements as shown thereon. (Said parcel consisting of approximately 29.31 acres
of land).

EX-10.40

                                                                   EXHIBIT 10.40

                               CLOSING MEMORANDUM

            This Closing  Memorandum (this "MEMO  AGREEMENT") is entered into as
of  January  12,  2004 by and among  Catskill  Development,  L.L.C.,  a New York
limited  liability  company  ("CATSKILL"),  Alpha  Monticello,  Inc., a Delaware
corporation  ("ALPHA"),  Americas Tower Partners, a New York general partnership
("ATP"),  Monticello Realty L.L.C., a Delaware limited liability company ("MR"),
Watertone Holdings, LP, a Delaware limited partnership ("WATERTONE"); Fox-Hollow
Lane, L.L.C., a New York limited liability company ("FOX"), Shamrock Strategies,
Inc., a Delaware  corporation  ("SHAMROCK"),  Clifford A. Ehrlich ("CE"),  BY-B,
LLC, a New York limited  liability  company  ("BKB"),  Robert A. Berman  ("RB"),
Philip B. Berman ("PB"),  Scott A. Kaniewski  ("SK"),  Kaniewski  Family Limited
Partnership ("KFLP"), KFP Trust ("KFP"), New York Gaming, LLC, a Georgia limited
liability  company  ("NYG") and Empire  Resorts,  Inc.,  a Delaware  corporation
("EMPIRE").  Each of the  signatories  hereto  is  individually  a  "PARTY"  and
collectively the "PARTIES".  Capitalized terms not otherwise defined herein will
have  the  meanings  assigned  to  such  terms  in the  Securities  Contribution
Agreement (as such term is defined below).

                                    RECITALS

A.          The  Parties   entered  into  that  certain   Amended  and  Restated
            Securities Contribution Agreement, dated as of December 12, 2003, by
            and between the Parties (the "SECURITIES  CONTRIBUTION  AGREEMENT"),
            pursuant  to  which:   (i)  the  Transferors  are  contributing  the
            Interests to Empire;  and (ii) Empire is issuing  Exchange Shares to
            the Transferors in exchange for the Interests.

B.          Contemporaneously  with  the  execution  and  delivery  hereof,  the
            Transaction is being consummated.

C.          The Parties  desire to set forth their  understanding  in connection
            therewith  and have a memorandum  of the actions and  agreements  on
            account thereof.

                                    AGREEMENT

            In consideration  of the foregoing  recitals and the mutual promises
and covenants contained herein, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:

                                    ARTICLE I
                    CLOSING ACTIONS AND DELIVERY OF DOCUMENTS

The following  steps and actions of the Parties were taken at the closing of the
Transaction,  which took place on January  12,  2004 at the  offices of Latham &
Watkins LLP, 885 Third Avenue, New York, New York, 10022:

            1)   delivery of an Opinion from Olshan Grundman Frome  Rosenzweig &
                 Wolosky LLP that neither Empire nor the Transferors  (including
                 any direct or indirect  owner of any of the  Transferors)  will
                 recognize any income,  gain or loss for U.S. federal income tax
                 purposes as a direct result of the Transaction and that Maurice






                 Dabbah  will not  recognize  any gain or loss for U.S.  federal
                 income tax purposes upon any subsequent  resale of the Exchange
                 Shares,  assuming no change in the law and that Empire is not a
                 U.S. Real Property Holding Company at the time of such resale;

            2)   the bylaws of Empire  shall be  amended,  substantially  in the
                 form of Exhibit C to the Securities Contribution Agreement;

            3)   the  certificate of  incorporation  of Empire shall be amended,
                 substantially  in the  form  of  Exhibit  D to  the  Securities
                 Contribution Agreement;

            4)   delivery  of a Letter  Agreement  regarding  the Cayuga  Letter
                 Agreement  providing  for  Empire's  assumption  of  Catskill's
                 obligations under such letter agreement;

            5)   termination of the Service Compensation Agreements;.

            6)   the Notice Letter,  dated as of January 12, 2004, from Catskill
                 to the Cayuga Nation and the Cayuga Catskill  Gaming  Authority
                 regarding  the  assignment  of  agreements,   shall  have  been
                 acknowledged  by the  Cayuga  Nation  and the  Cayuga  Catskill
                 Gaming Authority;

            7)   Empire  shall have  received  certificates  with respect to the
                 representations   and   warranties   made  in  the   Securities
                 Contribution Agreement, dated the Closing Date, and executed by
                 an  executive  officer  of  Catskill  and  each of the  Current
                 Catskill   Members   (other   than  CE,  who  shall  sign  such
                 certificate individually);

            8)   Empire shall have  received a  certificate  with respect to the
                 representations  and warranties  made by the MRD Members in the
                 Securities Contribution Agreement, dated the Closing Date,. and
                 executed by each of the MRD Members;

            9)   Each of the Affiliates  shall have  executed.  and delivered to
                 Empire an Affiliate Agreement;

            10)  Empire   shall  have   received  an  opinion  from  Kane  Reece
                 Associates,  Inc. to the effect that the Transaction is fair to
                 Empire and its stockholders  from a financial point of view and
                 the Special Committee shall have approved the Transaction;

            11)  the Lease shall have been amended, substantially in the form of
                 Exhibit E to the Securities Contribution Agreement;

            12)  the Shared Facilities Agreement shall have been amended whereby
                 MRM shall become a co-party to the Shared Facilities Agreement;

            13)  Empire  shall have  received  an opinion  from each of Latham &
                 Watkins LLP, Patterson,  Belknap, Webb & Tyler LLP and Stites &
                 Harbison,  PLLC, substantially in the form of Exhibits F-A, F-B
                 and  F-C,   respectively,   to  the   Securities   Contribution
                 Agreement;

                                       2





            14)  Catskill and the Transferors  shall have received a certificate
                 with  respect to the  representations  and  warranties  made by
                 Empire  in the  Securities  Contribution  Agreement,  dated the
                 Closing Date, and executed by an executive officer of Empire;

            15)  Catskill  and the  Transferors  shall have  received an opinion
                 from  Olshan  Grundman  Frome  Rosenzweig  &  Wolosky  LLP,
                 counsel  to Empire,  substantially  in the form of Exhibit G to
                 the Securities Contribution Agreement;

            16)  Catskill and the Transferors  shall have received a certificate
                 from  Empire's  transfer  agent  verifying,   in  all  material
                 respects,  the  accuracy of the  outstanding  shares of capital
                 stock  of  Empire  as  set  forth  in  Section  5.8(a)  of  the
                 Securities Contribution Agreement,  subject to modifications as
                 may  be  contemplated  by  Section  6.3(b)  of  the  Securities
                 Contribution Agreement;

            17)  the Transferors shall have received the Exchange Shares;

            18)  delivery of an assignment and assumption agreement, in form and
                 substance  reasonably  satisfactory to it, as to the assumption
                 by Empire of the Liabilities;

            19)  the Employment  Agreements  shall have been amended as provided
                 in Section 6.17 of the Securities Contribution Agreement,  with
                 such amendments to be effective as of the Closing Date; and

            20)  Empire shall have  executed a guarantee  of lease  guaranteeing
                 MRM's obligations under the Lease, substantially in the form of
                 Exhibit H to the Securities Contribution Agreement.

                                   ARTICLE II
                 POST-CLOSING ACTIONS AND DELIVERY OF DOCUMENTS

            As of the Closing Date,  certain  conditions to the Closing have not
been satisfied and certain documents that were to be executed in connection with
the  Closing  have not been  executed.  The  parties  have  agreed  to close the
Transaction  notwithstanding  the failure to satisfy  such  requirements  on the
condition that the delinquent  party agrees to satisfy the obligations set forth
on Exhibit A attached  hereto within ten (30)  calendar days  following the date
hereof. Each of the parties hereby agrees that it shall satisfy the requirements
set forth on Exhibit A attached  hereto  within such thirty  (30)  calendar  day
period.

                                   ARTICLE III
                              POST-CLOSING PAYMENTS

            Empire agrees to, and shall, pay all of the. fees, including,  legal
fees, costs and expenses,  incurred by Catskill,  the Remaining Catskill Members
and the Transferred Companies incident to or in connection with the negotiation,
preparation,  execution, delivery and performance of the Securities Contribution
Agreement and the Catskill Related  Agreements,  including  without  limitation,
legal fees,  and  expenses,  and  payments  made in  connection  with  obtaining
consents,  waivers,  agreements and permits,  any stock transfer,  real property
transfer, documentary transfer or other similar taxes and sales, use or

                                       3



other  taxes  imposed,by  reason of or on account  of, or  arising  out of or in
connection  with the  sale of the  Interests  and any  deficiency,  interest  or
penalty  asserted  with respect  thereto.  The legal fees and expenses  shall be
payable  on  the  date  of  closing  of the  private  placement  transaction  as
contemplated  in that  certain  engagement  letter by and  between  Jefferies  &
Company,  Inc. and Empire,  dated as of October 30, 2003,  but in no event later
than February 29, 2004.

                                   ARTICLE IV
                                  MISCELLANEOUS

1.   FURTHER  ASSURANCES.  Each Party will take such other  actions as any other
     Party may  reasonably  request or as may be  necessary  or  appropriate  to
     consummate  or  implement  the  transactions   contemplated  by  this  Memo
     Agreement or to evidence such events or matters.

2.   GOVERNING  LAWS.  This Memo Agreement and the legal  relations  between the
     Parties will be governed by and  construed in  accordance  with the laws of
     the State of New York  applicable  to contracts  made and performed in such
     State and  without  regard to  conflicts  of law  doctrines,  except to the
     extent that state law as to certain matters is preempted by federal law.

3.   AMENDMENTS;  WAIVERS.  Except  as  expressly  provided  herein,  this  Memo
     Agreement  may be amended only by  agreement in writing of all Parties.  No
     waiver of any  provision  nor consent to any exception to the terms of this
     Memo  Agreement  or any  agreement  contemplated  hereby will be  effective
     unless in writing and signed by all  Parties and then only to the  specific
     purpose,  extent and  instance so  provided.  No failure on the part of any
     Party to exercise or delay in exercising any right hereunder will be deemed
     a waiver  thereof,  nor will any single or partial  exercise  preclude  any
     further or other exercise of such or any other right.

4.   NO  ASSIGNMENT.  Neither this Memo  Agreement nor any rights or obligations
     under it are  assignable by one Party without the prior written  consent of
     the other Parties. Any such assignment without the prior written consent of
     the other Parties will be void ab initio.

5.   NOTICES.  All  notices,  demands  and other  communications  to be given or
     delivered  under or by reason of the provisions of this Memo Agreement will
     be in writing and will be deemed to have been given:  (i) immediately  when
     personally  delivered;  (ii) when  received  by first  class  mail,  return
     receipt requested; (iii) one day after being sent for overnight delivery by
     Federal Express or other overnight  delivery service;  or (iv) when receipt
     is acknowledged,  either electronically or otherwise, if sent by facsimile,
     telecopy or other  electronic  transmission  device.  Notices,  demands and
     communications to the Parties will, unless, another address is specified by
     the Parties hereafter in writing, be sent to the address indicated below:

                                       4



            If to Catskill, addressed to:

            Catskill Development, L.L.C.
            c/o Monticello Raceway
            Route 17B
            Monticello, New York 12701
            Attention: Morad Tahbaz, President
            Fax: (845) 791-1402

            With a copy to (which will not constitute notice):

            Latham & Watkins LLP
            885 Third Avenue, Suite 1000
            New York, New York 10022
            Attention: James I. Hisiger, Esq.
            Fax: (212) 751-4864

            If to ATP or MR, addressed to:

            c/o Americas Tower Partners
            77 East 77th Street
            New York, New York 10021
            Attention: Ralph Bernstein, Managing Director
            Fax: (212) 593-0469

            With a copy. to (which will not constitute notice):

            Latham & Watkins LLP
            885 Third Avenue, Suite 1000
            New York, New York 10022
            Attention: James I. Hisiger, Esq.
            Fax: (212) 751-4864

            and,  with  respect  to MR, a copy to  (which  will  not  constitute
            notice):

            Patterson, Belknap, Webb & Tyler LLP
            1133 Avenue of the Americas
            New York, NY 10036
            Attention: Maureen W. McCarthy, Esq.
            Facsimile:: (212) 336-2222

                                       5





            If to Empire or Alpha, addressed to:

            Empire Resorts, Inc.
            707 Skokie Boulevard, Suite 600
            Northbrook, Illinois 60062
            Attention: Scott A. Kaniewski
            Fax: (847) 418-3805

            With a copy to (which will not constitute notice):

            Olshan Grundman Frome Rosenzweig & Wolosky LLP Park Avenue Tower
            65 East 55th Street
            New York, New York 10022
            Attention: Robert H. Friedman, Esq.
            Fax: (212) 451-2222

            If to SK, KFLP, KFP, NYG, Watertone or BKB, addressed to:

            c/o Scott A. Kaniewski
            2412 Central Park Avenue
            Evanston, Illinois.60201
            Fax: (847) 328-4032

            If to CE, addressed to:

            Clifford A. Ehrlich
            c/o Monticello Raceway
            Route 17B
            Monticello, New York 12701
            Fax:. (845) 791-1402

            If to Fox, addressed to:

            Fox-Hollow Lane, LLC
            c/o Charles Degliomini
            12 Fox Hollow Lane
            Old Westbury, New York 11568
            Fax: (509) 461-7755

            If to Shamrock, addressed to:

            Shamrock Strategies, Inc.
            c/o Christopher Cushing, President
            1401 New York Avenue, NW
            Suite 810
            Washington, DC 20005
            Fax: (202) 789-4242

            If to RB, addressed to:

            735 Starlight Road
            Monticello, New York 12701
            Fax: (845) 791-1547

            If to PB, addressed to:

            c/o Monticello Raceway
            Route 17B
            Monticello, New. York 12701
            Attention: Philip B. Berman
            Fax: (845) 791-1402


                                       6




6.   HEADINGS.   The  descriptive   headings  of  the  Articles,   Sections  and
     subsections  of this Memo  Agreement  are for  convenience  only and do not
     constitute a part of this Memo Agreement.

7.   COUNTERPARTS.  This Memo  Agreement and any  amendment  hereto or any other
     agreement  delivered  pursuant  hereto  may be  executed  in  one  or  more
     counterparts  and  by  different  Parties  in  separate  counterparts.  All
     counterparts  will  constitute  one and the same  agreement and will become
     effective when one or more  counterparts have been signed by each Party and
     delivered to the other Parties.

8.   SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES.   This Memo Agreement
     is  binding  upon and will  inure to the  benefit  of each  Party and their
     respective  successors  or  assigns,  and  nothing in this Memo  Agreement,
     express or implied,  is intended to confer upon any other Person any rights
     or  remedies  of any  nature  whatsoever  under or by  reason  of this Memo
     Agreement.

9.   INTERPRETATION.  Each Party  acknowledges  that it has been  represented by
     counsel in connection  with this Memo Agreement.  Accordingly,  any rule of
     law or any legal decision that would require  interpretation of any claimed
     ambiguities in this Memo Agreement against the Party that drafted it has no
     application and is expressly waived.  The provisions of this Memo Agreement
     will be  interpreted  in a  reasonable  manner to effect  the intent of the
     Parties.

10.  GENERAL RULES OF CONSTRUCTION. For all purposes of this Memo Agreement: (i)
     the terms defined in this Memo Agreement  include the plural as well as the
     singular;  (ii)  all  references  in  this  Memo  Agreement  to  designated
     "Articles,"  "Sections"  and  other  subdivisions  are to  the  designated
     Articles,  Sections  and  other  subdivisions  of the  body  of  this  Memo
     Agreement;   (iii)  pronouns  of  either  -gender  or  neuter  include,  as
     appropriate, the other pronoun forms; (iv) the words "herein," "hereof" and
     "hereunder"  and other words of similar import refer to this Memo Agreement
     as a whole and not to any particular Article, Section or other subdivision;
     (v) "or" is not exclusive;  (vi)  "including" and "includes" will be deemed
     to be  followed  by "but  not  limited  to" and  "but is not  limited  to,"
     respectively;  (vii) any definition of or reference to any law,  agreement,
     instrument or other document  herein will be construed as referring to such
     law, agreement,  instrument or other document as from time to time amended,
     supplemented  or  otherwise  modified;  and  (viii)  any  definition  of or
     reference to any statute  will be construed as referring  also to any rules
     and regulations promulgated thereunder.

                            [SIGNATURE PAGES FOLLOW]

                                       7





            IN WITNESS WHEREOF,  each of the Parties hereto has caused this Memo
Agreement to be executed by its duly authorized  officers as of the day and year
first above written.

                                      CATSKILL DEVELOPMENT, L.L.C.


                                      By:  /s/ Morad Tahbaz
                                           --------------------
                                           Name: Morad Tahbaz
                                           Title: President


                                      ALPHA MONTICELLO, INC.


                                      By:  /s/ Thomas W. Aro
                                           ---------------------
                                           Name:  Thomas W. Aro
                                           Title: President


                                      AMERICAS TOWER PARTNERS


                                      By:  /s/ Joseph E. Bernstein
                                           ---------------------------
                                           Name: Joseph E. Bernstein
                                           Title: Managing Director


                                      MONTICELLO REALTY L.L.C.



                                      By:  By: MANHATTAN DEVELOPMENT
                                           CORPORATION, its Manager


                                      By:  /s/ Maurice Dabbah
                                           -------------------------
                                           Name: Maurice Dabbah
                                           Title: President


                                      WATERTONE HOLDINGS, LP

                                      By:  By: BKB, LLC, its general partner


                                      By:  /s/ Scott A. Kaniewski
                                           ----------------------
                                           Name: Scott A. Kaniewski
                                           Title: Member







                                      FOX-HOLLOW LANE, L.L.C.


                                      By:  /s/ Charles Degliomini
                                           ----------------------
                                           Name: Charles Degliomini
                                           Title: Managing Member


                                      SHAMROCK STRATEGIES, INC.


                                      By:  /s/ Christopher T. Cushing
                                           --------------------------
                                           Name: Christopher T. Cushing
                                           Title: Authorized Representative


                                      /s/ Clifford A. Ehrlich
                                      -----------------------------
                                           Clifford A. Ehrlich


                                      /s/ Robert A. Berman
                                      -----------------------------
                                      Robert A. Berman


                                      /s/ Philip B. Berman
                                      -----------------------------
                                      Philip B. Berman


                                      /s/ Scott A. Kaniewski
                                      ----------------------------
                                      Scott A. Kaniewski


                                      KANIEWSKI FAMILY LIMITED PARTNERSHIP


                                      By: /s/ Scott A. Kaniewski
                                          --------------------------
                                         Name:  Scott A. Kaniewski
                                         Title: General Partner




                                      KFP TRUST


                                      By: /s/ Stacey Kaniewski
                                          ------------------------
                                          Name: Stacey Kaniewski
                                          Title: Trustee


                                      NEW YORK GAMING, LLC


                                      By: /s/ Scott A. Kaniewski
                                          --------------------------
                                          Name:  Scott A. Kaniewski
                                          Title: Manager


                                      EMPIRE RESORTS, INC.


                                      By: /s/ Thomas W. Aro
                                          --------------------------
                                          Name:  Thomas W. Aro
                                          Title:


                                      BKB, LLC


                                      By: /s/ Scott A. Kaniewski
                                          --------------------------
                                          Name:  Scott A. Kaniewski
                                          Title: Member








                                    EXHIBIT A

                      POST-CLOSING ACTIONS AND DELIVERABLES

1.   The  Transferors   shall  have  delivered  to  Empire  executed   Affiliate
     Agreements from ATP and NYL.

2.   Patterson  shall have  delivered  to Empire the executed  legal  opinion of
     Patterson.

3.   Empire shall have  delivered an execution  copy of the  Certificate  of the
     Transfer Agent regarding Empire's Capitalization.

4.   Empire shall have delivered to the Transferors the execution  copies of and
     signature of the Berkshire Bank to the Berkshire Bank Waivers.

5.   The Executed Mortgage  Modification and Spreader  Agreement shall have been
     delivered.

6.   The 255  Affidavit  pursuant  to the  Mortgage  Modification  and  Spreader
     Agreement shall have been delivered.

7.   BKB, LLC shall have delivered the executed  written  consent of the members
     of BKB, LLC.

8.   Scott  A.  Kaniewski  shall  have  delivered  the  signatures  of  Scott A.
     Kaniewski and.  Kaniewski  Family Limited  Partnership to the Assignment by
     Scott A. Kaniewski of some of his interest in BKB, LLCC to KFP Trust.

9.   Scott  A.  Kaniewski  shall  have  delivered  the  signatures  of  Scott A.
     Kaniewski and Kaniewski  Family Limited  Partnership to the Assignment,  by
     Scott A. Kaniewski of some of his interest in BKB, LLC to Kaniewski  Family
     Limited Partnership.

10.  Scott A. Kaniewski shall have delivered the signature of Scott A. Kaniewski
     to the Assignment by Scott A. Kaniewski of some of his interest in BKB, LLC
     to Robert A. Berman.

11.  Scott A. Kaniewski shall have delivered the signature of Scott A. Kaniewski
     to the  Assignment  by Philip Berman of some of his interest in BKB, LLC to
     Robert A. Berman.

12.  BKB,  LLC shall have  delivered  the BKB  signature to the  Assignment  and
     Assumption Agreement between BKB, LLC and Americas Tower Partners regarding
     the transfer of 25% interest in  Monticello  Raceway  Development  Company,
     LLC.

13.  MR and Watertone,  respectively  shall have delivered the execution copy of
     and  notarized  signature  of  Monticello  Realty  L.L.C.  to the  Note and
     Mortgage  Modification  Agreement  regarding the  assignment of interest by







     Watertone  Holdings,  LP to  Scott  A.  Kaniewski,  Robert  A.  Berman  and
     Kaniewski Family Limited Partnership.

14.  ATP,  Watertone and MR shall have  delivered the execution copy of Catskill
     Members' Agreement.

15.  Executed Mortgage Assumption  Agreement of Scott A. Kaniewski,  pursuant to
     the Mortgage Note and Modification Agreement.

16.  Executed Mortgage Assumption Agreement of Robert A. Berman, pursuant to the
     Mortgage Note and Modification Agreement.

17.  Executed  Mortgage   Assumption   Agreement  of  Kaniewski  Family  Limited
     Partnership, pursuant to the Mortgage Note and Modification Agreement.

EX-10.41

                                                                   EXHIBIT 10.41

                          CATSKILL DEVELOPMENT, L.L.C.
                             c/o Monticello Raceway
                                    Route 17B
                           Monticello, New York 12701


                                January 12, 2004


Empire Resorts, Inc.
707 Skokie Boulevard, Suite 600
Northbrook, Illinois 60062

Ladies and Gentlemen:

            Reference  is hereby  made to the Amended  and  Restated  Securities
Contribution Agreement, dated as of December 12, 2003 (as amended,  supplemented
or otherwise modified, the "SECURITIES CONTRIBUTION AGREEMENT"),  by and between
Catskill  Development,  L.L.C.,  Empire Resorts,  Inc., Alpha Monticello,  Inc.,
Americas Tower Partners,  Monticello Realty L.L.C.,  Watertone Holdings, LP, New
York Gaming, LLC, Fox-Hollow Lane, LLC, Shamrock  Strategies,  Inc., Clifford A.
Ehrlich,  BKB,  LLC,  Robert A. Berman,  Philip B. Berman,  Scott A.  Kaniewski,
Kaniewski Family Limited  Partnership and KFP Trust.  Unless  otherwise  defined
herein,  capitalized  terms used herein shall have the meanings assigned to such
terms in the Securities Contribution Agreement.

            Pursuant to Section 8.1(o) of the Securities  Contribution Agreement
the parties agree to amend that certain letter  agreement,  dated as of April 3,
2003 (the  "CAYUGA  LETTER  AGREEMENT"),  by and among the Cayuga  Nation of New
York, the Cayuga Catskill Gaming Authority,  an  instrumentality  of the Nation,
Catskill  Development,  L.L.C.  ("CATSKILL"),  Empire Resorts, Inc. (f/k/a Alpha
Hospitality  Corporation)  (individually and collectively with its subsidiaries,
"EMPIRE" and together with Catskill,  the  "PARTIES"),  Robert A. Berman,  Morad
Tahbaz, the other principals and affiliates of Catskill or Empire who are listed
on  Schedule 1 annexed  thereto and made a part  thereof  and who  individually,
directly or indirectly, own ten (10%) percent or more of the equity interests in
Catskill,  Monticello Raceway Development Company,  L.L.C. and Monticello Casino
Management,  L.L.C.,  pursuant  to which Alpha is to assume  responsibility  for
Catskill's obligations under the Cayuga Letter Agreement.

            The Parties hereby agree as follows:

            1.  Notwithstanding any of Empire's rights and obligations under the
Cayuga Letter Agreement,  Empire hereby assumes and agrees to be bound by and to
pay and otherwise to perform and discharge all of  Catsklill's  liabilities  and
obligations  of any kind and nature.  relating to, arising from or in connection
with the Cayuga Letter  Agreement (the "CATSKILL  OBLIGATIONS").  As between the







Parties, Empire shall be primarily responsible under the Cayuga Letter Agreement
for the Catskill Obligations.

            2. Empire shall indemnify and hold Catskill harmless from,  against,
for and in respect of, and shall pay any and all Losses (as such term is defined
in the  Securities  Contribution  Agreement)  suffered,  sustained,  incurred or
required to be paid by Catskill by reason of the  non-performance  of any of the
Catskill  Obligations  or any covenant or  obligation  to be performed by Empire
under this Agreement.

            This Letter  Agreement may be executed in one or more  counterparts,
each of which shall be deemed an original and all of which  together  constitute
one and the same document.

            The  terms  of  this  Letter  Agreement  may be  modified  only by a
subsequent letter signed by each Party hereto.

            THIS  LETTER  AGREEMENT  SHALL  BE  GOVERNED  BY  AND  CONSTRUED  IN
ACCORDANCE  WITH  THE LAWS OF THE  STATE  OF NEW  YORK,  WITHOUT  REGARD  TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

                            [SIGNATURE PAGE FOLLOWS]

                                       2





            If you are in agreement with the  foregoing,  kindly sign and return
to us the enclosed copy of this Letter Agreement.

                                           Very truly yours,

                                           CATSKILL DEVELOPMENT, L.L.C.


                                           By: /s/ Morad Tahbaz
                                               --------------------
                                               Name:  Morad Tahbaz
                                               Title: President

Agreed and Accepted:

EMPIRE RESORTS, INC.

By: /s/ Robert A. Berman
    -----------------------
    Name: Robert A. Berman
    Title: Chairman




               LETTER AGREEMENT REGARDING CAYUGA LETTER AGREEMENT

EX-10.42

                                                                   EXHIBIT 10.42

                          CATSKILL DEVELOPMENT, L.L.C.
                             c/o Monticello Raceway
                                    Route 17B
                           Monticello, New York 12701


                                January 12, 2004


Monticello Raceway Management, Inc.
Monticello Raceway
Route 17B
Monticello, New York 12701

Ladies and Gentlemen:

            Reference  is hereby  made to the Amended  and  Restated  Securities
Contribution Agreement, dated as of December 12, 2003 (as amended,  supplemented
or otherwise modified, the "SECURITIES CONTRIBUTION AGREEMENT"),  by and between
Catskill  Development,  L.L.C.,  Empire Resorts,  Inc., Alpha Monticello,  Inc.,
Americas Tower Partners,  Monticello Realty L.L.C.,  Watertone Holdings, LP, New
York Gaming, LLC, Fox-Hollow Lane, LLC, Shamrock  Strategies,  Inc., Clifford A.
Ehrlich,  BKB,  LLC,  Robert A. Berman,  Philip B. Berman,  Scott A.  Kaniewski,
Kaniewski Family Limited  Partnership and KFP Trust.  Unless  otherwise  defined
herein,  capitalized  terms used herein shall have the meanings assigned to such
terms in the Securities Contribution Agreement.

            Pursuant to Section 8.2(g) of the Securities  Contribution Agreement
the parties agreed to amend that certain Shared Facilities  Agreement,  dated as
of April 3, 2003 (the  "SHARED  FACILITIES  AGREEMENT"),  by and between  Cayuga
Catskill Gaming  Authority (the  "AUTHORITY") and Catskill  Development,  L.L.C.
("CATSKILL")  (with such amendment to be in a form  reasonably  satisfactory  to
Empire),  pursuant  to which  Monticello  Raceway  Management,  Inc.  ("MRM  and
together  with  Catskill,  the  "PARTIES") is to become a co-party to the Shared
Facilities Agreement.

            The Parties hereby agree as follows:

            1. Catskill herewith assigns to MRM Catskill's rights, interests and
obligations  to the Shared  Facilities  Agreement on a joint basis with Catskill
and MRM herewith  accepts  such  assignment  on a joint basis with  Catskill and
agrees to be bound by the terms and conditions  thereof  applicable to Catskill,
including,  without  limitation,  Section 12.4 thereof (the "Assignment") for so
long as MRM is the tenant under the Lease. As between the Parties,  MRM shall be
primarily responsible for the enforcement of and compliance with the obligations
of the parties under the Shared Facilities Agreement.







            2.  Pursuant  to Section  15.7 of the Shared  Facilities  Agreement,
Catskill may assign any or all of its rights, interests or obligations under the
Shared  Facilities  Agreement to a third party acquiring an interest,  estate or
other  right  in or to the  Property  (as such  term is  defined  in the  Shared
Facilities  Agreement) or any portion  thereof  without the prior consent of the
Authority.  As MRM has acquired  rights in the Property (as such term is defined
in the Shared Facilities Agreement) as the tenant thereof pursuant to the terms,
conditions  and  provisions  of that  certain  Agreement  of Lease,  dated as of
October 29,  2003,  by and between the Parties,  as  subsequently  amended,  the
Authority's prior written consent is not required for the Assignment.

            This Letter  Agreement may be executed in one or more  counterparts,
each of which shall be deemed an original and all of which  together  constitute
one and the same document.

            The  terms  of  this  Letter  Agreement  may be  modified  only by a
subsequent letter signed by each Party hereto.

            THIS  LETTER  AGREEMENT  SHALL  BE  GOVERNED  BY  AND  CONSTRUED  IN
ACCORDANCE  WITH  THE LAWS OF THE  STATE  OF NEW  YORK,  WITHOUT  REGARD  TO THE
CONFLICTS OF LAWS PRINCIPLES THEREOF.

                            [SIGNATURE PAGE FOLLOWS]







            If you are in agreement with the  foregoing,  kindly sign and return
to us the enclosed copy of this Letter Agreement.

                                          Very truly yours,

                                          CATSKILL DEVELOPMENT, L.L.C.


                                          By: /s/ Morad Tahbaz
                                              --------------------
                                              Name:   Morad Tahbaz
                                              Title:  President

                                          Agreed and Accepted:


                                          MONTICELLO RACEWAY MANAGEMENT, INC.


                                          By: /s/ Clifford A. Ehrlich
                                              ---------------------------
                                              Name:   Clifford A. Ehrlich
                                              Title:  President





                        SHARED FACILITY LETTER AGREEMENT

EX-10.43

                                                                   Exhibit 10.43

================================================================================


                              DECLARATION OF TRUST
                                       OF
                            CATSKILL LITIGATION TRUST


================================================================================




                                January 12, 2004




                                Table of Contents
                                -----------------


                                                                                                                  Page
                                                                                                                  ----

DECLARATION OF TRUST OF CATSKILL LITIGATION TRUST..................................................................1

ARTICLE I  DEFINITIONS AND INTERPRETATIONS.........................................................................1
                Section 1.1.  Definitions..........................................................................1
                Section 1.2.  Interpretations......................................................................3

ARTICLE II  THE TRUST ESTATE.......................................................................................3
                Section 2.1.  Assets of the Trust Estate...........................................................3
                Section 2.2.  The Fund, Recovery Account and Expense Account.......................................4
                Section 2.3.  Payment of Expenses and Other Withdrawals
                              from the Expense Account.............................................................4
                Section 2.4.  Deposits to and Distributions from the Recovery Account..............................4

ARTICLE III  THE TRUSTEES .........................................................................................5
                Section 3.1.  Responsibilities and Powers of the Litigation Trustees...............................5
                Section 3.2.  Administrative Trustee...............................................................5
                Section 3.3.  Reports to the Administrative Trustee................................................6
                Section 3.4.  Reports to the Beneficiaries.........................................................6
                Section 3.5.  Death or Resignation of a Litigation Trustee.........................................6
                Section 3.6.  Expenses and Fees of Litigation Trustees.............................................6
                Section 3.7.  Fees of the Administrative Trustee...................................................7
                Section 3.8.  Interests of Trustees................................................................7
                Section 3.9.  Default and Notice...................................................................7
                Section 3.10. Retention of Attorneys, Accountants and Other Professionals
                              and Power to Direct Litigants ...................................................... 8

ARTICLE IV  ADMINISTRATION ........................................................................................9
                Section 4.1.  Appointment, Resignation and Removal of Administrative Trustee.......................9
                Section 4.2.  Responsibilities of the Administrative Trustee.......................................9

ARTICLE V  UNITS .................................................................................................10
                Section 5.1.  Units ..............................................................................10
                Section 5.2.  Provisions Regarding Units Not Registered under Securities Act......................10

                                       i




                                Table of Contents
                                -----------------

                                   (continued)


                                                                                                                  Page
                                                                                                                  ----


                Section 5.3.  Provisions Regarding Units Registered under Securities Act..........................11

ARTICLE VI  LIMITATION OF RIGHTS OF, AND SUITS BY, BENEFICIARIES..................................................12
                Section 6.1.  Limitations on Rights of Beneficiaries..............................................12
                Section 6.2.  Limitations on Suits by Beneficiaries...............................................12

ARTICLE VII  LIMITATION OF LIABILITY OF BENEFICIARIES, TRUSTEES AND
             OTHERS...............................................................................................14
                Section 7.1.  Liability...........................................................................14
                Section 7.2.  Exculpation.........................................................................14
                Section 7.3.  Fiduciary Duty......................................................................15
                Section 7.4.  Indemnification.....................................................................15

ARTICLE VIII  DISSOLUTION AND TERMINATION.........................................................................16
                Section 8.1.  Termination.........................................................................16

ARTICLE IX  MISCELLANEOUS ........................................................................................17
                Section 9.1.  Notices ............................................................................17
                Section 9.2.  Governing Law.......................................................................18
                Section 9.3.  Amendments..........................................................................19
                Section 9.4.  Intention of Parties................................................................19
                Section 9.5.  Headings 19
                Section 9.6.  Successors and Assigns..............................................................19
                Section 9.7.  Partial Enforceability..............................................................19
                Section 9.8.  Specific Performance................................................................19
                Section 9.9.  Counterparts........................................................................20

                                       ii




                              DECLARATION OF TRUST
                          OF CATSKILL LITIGATION TRUST

     A GRANTOR TRUST UNDER SECTION 671 ET. SEQ. OF THE INTERNAL REVENUE CODE

THIS  DECLARATION OF TRUST,  dated and effective as of January 12, 2004, made by
CATSKILL  DEVELOPMENT,  L.L.C.,  MOHAWK MANAGEMENT,  L.L.C.,  MONTICELLO RACEWAY
DEVELOPMENT  COMPANY,  L.L.C.,  each a New York limited liability  company,  and
Empire Resorts, Inc., a Delaware Corporation, as creators (the "Settlors"),  and
Joseph Bernstein, residing at 6663 Casa Grande Way, Delray Beach, Florida 33446,
Paul deBary,  residing at One White Birch Lane, Cos Cob,  Connecticut 06807, and
Christiana  Bank & Trust Company with a principal place of business at 1314 King
Street,  Wilmington,  Delaware 19801 and the Beneficiaries (as defined below) to
create the "Catskill Litigation Trust."

                                WITNESSETH THAT:

          WHEREAS,   the  Settlors,   Catskill   Development,   L.L.C.,   Mohawk
Management,  L.L.C. and Monticello Raceway  Development  Company,  L.L.C.,  (the
"Litigants")  are the  plaintiffs  in a lawsuit  brought  in the  United  States
District Court for the Southern District of New York; and

          WHEREAS,  Settlor,  Empire Resorts,  Inc. ("Empire"),  has significant
ownership  interests in each of the Litigants and is engaged in a  consolidation
of its business interests with Catskill Development, L.L.C.; and

          WHEREAS,  the result of such  consolidation  will be that the  various
owners of the Litigants will become shareholders in Empire; and

          WHEREAS,  the Settlors believe that their interests in the Litigations
(as  defined  below) may one day be of  significant  value and are  desirous  of
maintaining  and ensuring the  continuation  of the Litigations and their proper
administration for the benefit of the Beneficiaries (as defined below); and

          WHEREAS,  the Settlors also believe that the nature of the Litigations
and  the  supervision  requirements  and  other  needs  of the  Litigations  are
significantly different from the Settlors' operating business ventures; and

          WHEREAS, for such purposes,  the Settlors have determined to establish
an irrevocable trust in which the Settlors will have no interest whatsoever,  on
the terms and conditions  contained herein and have asked Paul deBary and Joseph
Bernstein to serve as Trustees  therefor and to  participate in the drafting and
preparation of this Declaration of Trust; and

          NOW THEREFORE,  the Settlors hereby irrevocably  assign,  transfer and
convey to the Trustees the Trust Estate described in Article II below, which the
Trustees  agree to hold in Trust and  administer  on the  terms  and  conditions
described below.

                                   ARTICLE I

                         DEFINITIONS AND INTERPRETATIONS


          Section 1.1  DEFINITIONS.  For purposes of this  Declaration of Trust,
the  following  words and terms shall have the meanings set forth below,  unless
the context clearly requires otherwise:

          "Administrative  Trustee" means the Christiana Bank & Trust Company or
any  successor  administrative  trustee of the  Litigation  Trust  appointed  or
serving in accordance with Article IV and Section 3.2 hereof.





          "Affiliate" has the same meaning as given that term in Rule 405 of the
Securities Act of 1933, as amended.

          "Beneficiary" means a Person having a beneficial ownership interest in
the  Claims,  consisting  of one or more Units,  or any  successor  thereto,  as
provided in Article V hereof.

          "Budget"  means  the  written  estimate  of  future  Expenses  of  the
Litigation Trust approved in writing by both Litigation Trustees and provided to
the Administrative Trustee as set forth in Section 3.3 hereunder.

          "Claims"  means all of the rights of the  Litigation  Trust to receive
damages or other compensation for actions  complained of in the Litigations,  as
initially filed or as they may be or have been  subsequently  amended,  refined,
modified or expanded, including compensatory or punitive damages or the proceeds
of any settlements of the causes of action based thereon.

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

          "Commission" means the Securities and Exchange Commission.

          "Damages" shall have the meaning set forth in Section 7.4 hereof.

          "Expense  Account"  means the Expense  Account  established  and to be
maintained pursuant to Article II hereof.

          "Expenses"  shall  include  any  fees,  costs  or  expenses  for or in
connection  with  attorneys,  stenography,   recording,  experts,  research  and
analysis,  document  retention,  production and  management,  public  relations,
investigations,  budgeting, accounting, financing, insurance, administration and
general  management  and any similar  charges  incurred for the purposes of this
Litigation  Trust,  including  interest and other charges in connection with any
borrowing  by or on  behalf  of  this  Litigation  Trust,  costs  of  Litigation
Trustees' and  Administrative  Trustee's  liability  insurance and any filing or
other court charges in connection with the Litigations.

          "Fund" means the fund  established  and to be  maintained  pursuant to
Article II hereof.

          "Indemnified Person" means (a) the Litigation Trustees,  any Affiliate
of the Litigation Trustees and any officers, directors,  stockholders,  members,
partners,  employees,  representatives,  custodians,  nominees  or agents of the
Litigation  Trustees;  (b) the  Settlors,  any Affiliate of the Settlors and any
partners,  employees,  representatives  or  agents  of  the  Settlors;  (c)  the
Administrative  Trustee,  any  Affiliate of the  Administrative  Trustee and any
officers, employees, representatives or agents of the Administrative Trustee and
(d) any officer, employee or agent of the Litigation Trust or its Affiliates.

          "Line of Credit" means the irrevocable,  direct payment Line of Credit
from Empire to the Litigation Trust, dated as of the date hereof and in the form
of Exhibit A attached hereto.

          "Litigation Trust" means the Catskill Litigation Trust created by this
Declaration of Trust.

            "Litigation Trustees" mean Joseph Bernstein and Paul deBary or any
of their respective successors hereunder acting as Trustees pursuant to Article
III hereof.

          "Litigations"  means (1) the lawsuit  entitled  CATSKILL  DEVELOPMENT,
L.L.C.,  MOHAWK MANAGEMENT,  L.L.C., AND MONTICELLO RACEWAY DEVELOPMENT COMPANY,
L.L.C., PLAINTIFFS, VS. PARK PLACE ENTERTAINMENT CORPORATION,  DEFENDANT. (Civil
Action  No. 00 CIV 8660 in the United  States  District  Court for the  Southern
District of New York),  which is presently on appeal,  (2) the lawsuit  entitled
CATSKILL DEVELOPMENT,  L.L.C.,  PLAINTIFF. VS. GARY MELIUS, IVAN KAUFMAN, WALTER
HORN,  PRESIDENT R.C. - ST. REGIS MANAGEMENT COMPANY, ET AL, DEFENDANTS.  (Index
No. 891/03  Supreme Court of the State of New York,  County of Sullivan),  which
was filed in April 2003, and (3) any similar actions or proceedings arising from
the acts and circumstances related to these lawsuits, including potential claims
against the St. Regis Mohawk Tribe, if any.

                                       2




          "Person" means a legal person, including any individual,  corporation,
estate, partnership,  joint venture,  association,  joint stock company, limited
liability  company,  trust,  unincorporated  association,  or  government or any
agency or political subdivision thereof, or any other entity of whatever nature.

          "Purposes  of the  Litigation  Trust"  means  the  prosecution  of the
Litigations  now  pending  or  hereafter  filed  through  the  recovery  of  any
settlements or final judgments thereof and the distribution of the net amount of
any such recoveries to the Beneficiaries as provided herein.

          "Recovery  Account" means the Recovery  Account  established and to be
maintained pursuant to Article II hereof.

          "Statutory  Trust  Act" means  Chapter 38 of Title 12 of the  Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.

          "Transfer Agent" means a registrar and/or transfer agent acceptable to
the Litigation Trustees.

          "Trustee" means any of the Litigation  Trustees or the  Administrative
Trustee.

          "Unit" means a fractional interest in the Claims.

          Section 1.2 INTERPRETATIONS.  Unless  the  context of this Declaration
of Trust otherwise  clearly  requires,  (i) references to the plural include the
singular, the singular includes the plural and the part includes the whole, (ii)
"or" has the inclusive  meaning  represented by the phrase  "and/or",  (iii) the
words  "hereof,"   "herein,"   "hereunder"  and  similar  terms  refer  to  this
Declaration  of Trust as a whole  and not to any  particular  provision  of this
Declaration of Trust, and (iv) the word "including" has the meaning  "including,
but not limited to." In this Declaration of Trust, in determining of a period of
time from a specified  date to a later  specified  date,  the word "from"  means
"from  and  including"  and  the  words  "to"  and  "until"  each  mean  "to but
excluding".  The article headings contained in this Declaration of Trust are for
reference  purposes only and do not control or affect the  construction  of this
Declaration of Trust or its  interpretation in any respect.  Article and section
references are to this Declaration of Trust unless otherwise  specified.  Unless
otherwise  specified,  all  accounting  terms  shall  be  interpreted,  and  all
accounting  determinations hereunder are to be made in accordance with generally
accepted accounting  principles,  but financial  statements  delivered hereunder
need not be prepared in  accordance  with such  principles  unless  specifically
required by the Litigation Trustees.


                                   ARTICLE II

                                THE TRUST ESTATE


          Section 2.1 ASSETS OF THE TRUST  ESTATE.  It is the  intention  of the
parties hereto to form a statutory trust pursuant to the Statutory Trust Act and
that this Declaration of Trust shall constitute the governing  instrument of the
statutory trust. Upon the execution of this Declaration of Trust, and the filing
of a Certificate of Trust (in compliance with the  requirements of the Statutory
Trust Act) with the Secretary of State of the State of Delaware, there is hereby
created the Litigation Trust to be known as the "Catskill  Litigation Trust" and
the Litigants hereby irrevocably  assign,  transfer and convey to the Litigation
Trust, for the benefit of the  Beneficiaries,  (i) all of their right, title and
interest  in and  to the  Litigations,  including  any  and  all  claims  of the
Litigants against Park Place Entertainment  Corporation,  or any co-conspirator,
including,  without  limitation,  for any wrong done to the  Litigants as of any
date prior to the date of this  Declaration  of Trust or otherwise in connection
with the  Litigations,  together  with the  right to  personally  represent  the
plaintiffs  therein,  appear in any such proceeding in the name of the Litigants
and to conduct,  pursue collection of, settle,  release or otherwise dispose of,
and receive the proceeds or other  benefits of the  Litigations  and (ii) to any
and all other  property which may hereafter be conveyed,  mortgaged,  pledged or
assigned to the Litigation  Trust by the Litigants.  In addition,  Empire hereby
delivers to the  Litigation  Trust its  unconditional  and  irrevocable  Line of


                                       3




Credit in the form attached as Exhibit A to this Declaration of Trust. On behalf
of the  Litigation  Trust,  the  Litigation  Trustees  hereby agree to reimburse
Empire  for any  drawings  on the Line of  Credit  according  to the  terms  and
conditions provided therein.

          Section 2.2 THE FUND,  RECOVERY ACCOUNT AND EXPENSE ACCOUNT.  There is
hereby created a Fund to be maintained by the Administrative  Trustee.  The Fund
shall consist of two accounts, the Expense Account and the Recovery Account. For
the Fund, the  Administrative  Trustee may establish on behalf of the Litigation
Trust one or more accounts with banks or brokerage firms in which all or part of
the moneys or investments  of the  Litigation  Trust to be deposited in the Fund
may be held,  invested and  reinvested  by the  Administrative  Trustee  pending
disbursement  or  distribution  as provided in this  Declaration  of Trust.  Any
amount on deposit in the Fund that is not required to be held for present use or
distributions  shall be  accumulated  and  retained  in the  Fund  and  shall be
invested and  reinvested by the  Administrative  Trustee as directed in the sole
discretion  of the  Litigation  Trustees so as to obtain a reasonable  return on
investment with proper regard for the preservation of the principal and so as to
be reasonably available at the times estimated to be necessary for distributions
in accordance with the Purposes of the Litigation Trust.

          Section 2.3 PAYMENT OF EXPENSES AND OTHER WITHDRAWALS FROM THE EXPENSE
ACCOUNT.


          (a) Amounts drawn on the Line of Credit,  amounts transferred from the
Recovery  Account to the Expense  Account as provided in Section  2.4(a) and any
other amounts received by the Litigation Trust, other than amounts received as a
recovery of any  settlement  or award of the Claims,  shall be  deposited in the
Expense  Account.  Amounts  in the  Expense  Account  shall  be  used to pay any
Expenses determined to be necessary or useful for the Purposes of the Litigation
Trust in the sole and absolute discretion of the Litigation Trustees.

          (b) The Administrative  Trustee shall make payments out of the Expense
Account upon (i) the written  direction of one of the Litigation  Trustees as of
the first business day of each calendar quarter to pay the quarterly fees of the
Litigation  Trustees and the Administrative  Trustee as set forth in Section 3.6
(a) and Section 3.7,  respectively,  and (ii) written direction signed by one of
the  Litigation  Trustees  with  respect  to  expenses  set forth in the  Budget
(provided that the Litigation Trustee shall specify in the written direction the
line item of the Budget  that  includes  such  expense)  and by both  Litigation
Trustees with respect to all other expenses.  The  Administrative  Trustee shall
have no  obligation to verify that the amounts so  requisitioned  are to be used
for the  Purposes  of the  Litigation  Trust.  Anything to the  contrary  herein
notwithstanding, the Litigation Trustees may, at any time and from time to time,
direct the Administrative Trustee to pay any Expense of the Litigations or apply
to or for the benefit of  Beneficiaries  so much or the entire  principal of the
Expense Account, as the Litigation Trustees, in their sole discretion,  may deem
advisable,  which payments and applications  shall be absolute and free from the
Litigation  Trust and the application and advisability of such payments shall be
final and  conclusive  upon all  Persons  who may be  interested  or may  become
interested  in  the  Litigation   Trust,   and  upon  making  such  payments  or
applications,  the Administrative  Trustee and all Litigation  Trustees shall be
fully  released and  discharged  from all further  liability  or  accountability
therefor.

          Section 2.4. DEPOSITS TO AND DISTRIBUTIONS FROM THE RECOVERY ACCOUNT.

          (a) The amount of proceeds  received on account of any  settlement  or
award in connection with the Claims shall be deposited in the Recovery  Account.
In the event that the  Litigation  Trust receives any proceeds on account of any
settlement or award in connection  with the Claims,  an amount  necessary to pay
any current debts or other  obligations of the  Litigation  Trust and to provide
for future  Expenses of the  Litigation  Trust,  each as shown in the  statement
delivered to the Administrative  Trustee by the Litigation  Trustees as provided
in Article III hereof,  shall be  transferred  to the Expense  Account  from the
Recovery  Account or applied  directly to the  retirement of such debts or other
obligations at the direction of the Litigation  Trustees.  Not later than thirty
days after the close of each  calendar  year, if there have been deposits in the
Recovery  Account  during  such year,  or within  thirty  days of receipt by the
Administrative  Trustee  of a notice  of  termination  of the  Litigation  Trust
pursuant to Article VIII hereof, the Administrative  Trustee shall calculate the

                                       4



balance  in the  Recovery  Account  at the end of such year or as of the date of
such notice and the amount so  calculated  shall be withdrawn  from the Recovery
Account and shall be applied and used to make  distributions for the Purposes of
the Litigation Trust as follows:

          FIRST: An amount necessary to pay the Litigation Trustees the fees for
their services as Litigation Trustees as set forth in Section 3.6(b).

          SECOND:  If any amount remains after the above  requirements have been
met,  $7,500,000  shall be paid to Empire  to  reimburse  it for prior  expenses
incurred in connection with the Litigation and any amounts outstanding under the
Line of Credit shall be repaid to Empire.

          THIRD:  If any amount remains after the above  requirements  have been
met,  such  amount  remaining  shall  be  divided  among  the  Beneficiaries  in
proportion to their ownership of Units as shown on the registration books of the
Administrative  Trustee or Transfer  Agent,  as applicable,  as of the date that
such distribution is made.

          (b) All  distributions  of the Litigation  Trust are to be made in the
sole   discretion  of  the  Litigation   Trustees.   In  making  and  scheduling
distributions  from the Litigation  Trust, no Litigation  Trustee shall have any
liability to the Beneficiaries,  or to potential beneficiaries of the Litigation
Trust, or to any other Person, for any failure or alleged failure to follow such
direction nor shall any Litigation Trustee be subject to suit by any Person that
contests the validity of any action taken hereunder or seeks to compel or direct
the use, investment or application of amounts in the Litigation Trust other than
as determined in the discretion of the Litigation Trustees.


                                  ARTICLE III

                                  THE TRUSTEES


          Section  3.1. RESPONSIBILITIES AND POWERS OF THE LITIGATION  TRUSTEES.

          (a) Except as  specifically  provided  in this  Declaration  of Trust,
Joseph Bernstein and Paul deBary, the Litigation Trustees,  and their successors
shall have  exclusive  and  complete  authority to carry out the Purposes of the
Litigation Trust. All matters to be decided by the Litigation  Trustees shall be
decided by the unanimous vote of the Litigation Trustees.  In the event that the
Litigation  Trustees  cannot  unanimously  agree on a matter,  they shall advise
their  designated  successors  hereunder who will then choose a third person and
the  majority  vote of the  Litigation  Trustees  and the third person so chosen
voting  together shall decide such matter.  Meetings of the Litigation  Trustees
may be held in person or by telephone  conference call. The Litigation  Trustees
may hold  such  meetings  from  time to time  without  notice  and  shall not be
required to keep any record of such meetings.  The Litigation  Trustees shall be
responsible  for the compliance of the  Litigation  Trust with the provisions of
the Code, but shall have no duty  hereunder to render any particular  accounting
for the Litigation  Trust to the  Beneficiaries.  The Litigation  Trustees shall
have all the powers  necessary and  appropriate to prosecute the Litigations and
administer the Litigation  Trust,  including the power to make draws on the Line
of Credit and to enter  into other  arrangements  to borrow or  otherwise  raise
funds  to pay the  Expenses  of the  Litigation  Trust,  the  power  to bind the
Litigation  Trust,  enter into any and all manner of contracts as the Litigation
Trustees,  in  their  sole  and  absolute  discretion,   shall  deem  necessary,
appropriate or convenient for the Purposes of the Litigation Trust.

          (b) The  Litigation  Trustees may provide the  Administrative  Trustee
with specific  direction  and advice as to the use and  investment of the income
and assets of the  Litigation  Trust.  Upon the unanimous vote of the Litigation
Trustees,  the Litigation Trustees may establish specific directions or policies
for implementation by the Administrative Trustee.

          Section 3.2.  ADMINISTRATIVE TRUSTEE. (a) As required by the Statutory
Trust Act, one trustee (which shall be the administrative Trustee), shall be:

                    (i)  a  natural  person  who is a  resident  of the State of
                         Delaware; or

                                       5




                    (ii) if not a  natural  person,  an  entity  which  has  its
                         principal  place of business in the State of  Delaware,
                         and otherwise meets the requirements of applicable law,
                         including Section 3807 of the Statutory Trust Act.

          (b)  The   Administrative   Trustee   shall  perform  the  duties  and
obligations  specifically  assigned to it, as set forth in this  Declaration  of
Trust and shall not have any of the  duties and  responsibilities  of any of the
Litigation Trustees described in this Declaration of Trust.

          (c) Except as otherwise set forth in this  Declaration  of Trust,  the
Administrative  Trustee  shall be a Trustee for the sole and limited  purpose of
fulfilling the requirements of Section 3807 of the Statutory Trust Act.

          (d) The Administrative Trustee shall be either a natural person who is
at least 21 years of age or a legal  entity  that shall act  through one or more
authorized officers.

          Section 3.3. REPORTS TO THE ADMINISTRATIVE TRUSTEE. Within thirty days
of the end of each calendar  year,  prior to a deposit of funds into the Expense
Account  pursuant  to Section  2.3(c),  prior to any  distribution  pursuant  to
Section 2.4 and upon the  determination by the Litigation  Trustees to terminate
the Litigation  Trust, the Litigation  Trustees shall prepare and deliver to the
Administrative  Trustee a statement  showing (1) the amount  required to satisfy
any  indebtedness or other  obligation of the Litigation Trust and the amount of
accrued  Expenses  as of the  end of such  calendar  year,  as of the  date of a
distribution or as of the date of  termination,  as the case may be, and (2) the
Budget for future Expenses in carrying out the Purposes of the Litigation Trust.
In  determining  the amount to be applied  for the  Purposes  of the  Litigation
Trust, the Litigation Trustees are authorized, in their discretion, to take into
account or disregard,  to such extent as they deem advisable,  the likelihood of
any future  settlements or recoveries  with respect to the Claims and the extent
to which such  settlements  will reduce the Expenses of the Litigation  Trust in
connection with the Litigations.

          Section 3.4.  REPORTS TO THE  BENEFICIARIES.  The Litigation  Trustees
will be required to issue annual reports to the Beneficiaries showing the assets
and  liabilities of the Litigation  Trust at the end of each fiscal year and the
receipts  and  disbursements  of the  Litigation  Trust for the fiscal year then
ended. The annual reports also will describe  changes in the Litigation  Trust's
assets, significant changes in the status of the Litigation during the reporting
period and  significant  actions  taken by the  Litigation  Trustees  during the
period.  The  financial  statements  contained in such reports may or may not be
audited,  as determined in the sole discretion of the Litigation  Trustees,  but
shall be prepared in accordance with generally accepted  accounting  principles.
The Litigation  Trustees are also required to distribute to the  Beneficiaries a
special report if, in the opinion of the Litigation  Trustees,  a material event
relating to the Litigation Trust's assets has occurred.

          Section 3.5. DEATH OR RESIGNATION OF A LITIGATION TRUSTEE. By delivery
of a written notice to the  Administrative  Trustee,  any Litigation Trustee may
resign as Litigation Trustee. In the event of the death or resignation of Joseph
Bernstein,  Ralph Bernstein shall be appointed a Litigation Trustee and if Ralph
Bernstein resigns or dies, Morad Tahbaz shall be appointed a Litigation Trustee.
In the event of the death or resignation of Paul deBary,  Robert Berman shall be
appointed  a  Litigation  Trustee  and if Robert  Berman  resigns  or dies Scott
Kaniewski shall be appointed a Litigation Trustee.

          Section 3.6. EXPENSES AND FEES OF LITIGATION TRUSTEES.

          (a) Each Litigation  Trustee shall be entitled to reimbursement of any
Expenses  incurred  in  carrying  out  the  Purposes  of the  Litigation  Trust,
including telephone, mail and messenger,  travel, conference,  meeting, research
and other  administrative  and  office  expenses  not paid for  directly  by the
Litigation  Trust and, in addition to the fees  provided for in Section  3.6(b),
each Litigation  Trustee shall also receive  compensation for his services equal
to $5,000, per month, in accordance with the terms of this Declaration of Trust,
to the extent  there are funds  available.  In the event of the  resignation  or
death of a Litigation Trustee,  the fees and expenses payable to such Litigation
Trustee  pursuant to this Section 3.6(a) shall be payable for services  actually
rendered  up to the date of such event of  resignation  or death and paid in the

                                       6




ordinary  course as and when the other  Litigation  Trustees  receive payment of
their fees and expenses under this Section 3.6(a).

          (b) In addition to the fees  provided  for in Section  3.6(a),  Joseph
Bernstein  and Paul deBary  shall  receive  compensation  for their  services as
Litigation  Trustees  equal  to 4% and 1%,  respectively,  of the  total  amount
deposited  into the  Recovery  Account  in  accordance  with  the  terms of this
Declaration of Trust, to the extent there are funds  available.  In the event of
the  resignation  or death of a  Litigation  Trustee,  the fees  payable to such
Litigation  Trustee pursuant to this Section 3.6(b),  if any, shall be pro rated
for time  served as a  Litigation  Trustee  between  the  resigned  or  deceased
Litigation  Trustee  and his  successor  Litigation  Trustee(s)  and the  amount
payable to such  resigned or deceased  Litigation  Trustee  shall be paid to the
Litigation Trustee or his estate in the case of a deceased  Litigation  Trustee;
provided,  however  that in the  case of the  resignation  or  death  of  Joseph
Bernstein,  the portion of the fee to be  pro-rated  shall be equal to 1% of the
total amount  deposited into the Recovery Account and Joseph Bernstein or Joseph
Bernstein's estate, as the case may be, shall continue to be entitled to receive
an amount equal to 3% of the total amount deposited into the Recovery Account.

          Section 3.7. FEES OF THE ADMINISTRATIVE TRUSTEE. So long as Christiana
Bank & Trust Company is the Administrative  Trustee, the Administrative  Trustee
shall receive compensation for its services as follows:

(i)  Acceptance  Fee..................................$5,000.00;
     Includes the first month administration fee

(ii) Monthly Administration Fee........................$ 500.00; and

(iii)Custody  Fee on any  cash  or  marketable  securities,  other  than on cash
     balances held in the SEI Daily Income Fund Class B:

     .05 of 1% (5.00  basis  points)  per  annum the  first  $10,000,000  of the
     accounts fair market value; and

     .03 of 1% (3.00 basis points) per annum on the balance of the accounts fair
     market value.

          Plus:  $15 for each DTC or FED  eligible  trade,  if  applicable,  and
outgoing wire transfers: $20 per transfer

          Out of pocket  expenses,  including legal fees,  which may be incurred
during the set-up and  administration of the Litigation Trust, will be billed at
cost in addition to the above. In the event that special administrative services
and  attention  are  required  due  to  unusual  circumstances,   an  additional
maintenance  fee will be  charged  to  cover  time and  expenses.  In the  event
Christiana Bank & Trust Company is no longer acting as  Administrative  Trustee,
the compensation of the Administrative Trustee shall be as mutually agreed to by
the Litigation Trustees and the Administrative Trustee.

          Section 3.8.  INTERESTS OF TRUSTEES.  Any Trustee may be a Beneficiary
of the  Litigation  Trust,  but no Trustee may have any interest in, or be under
the control of any of the defendants in the  Litigations.  No Trustee shall have
any  responsibility  or duty to any  Beneficiary for the value of the Litigation
Trust or for the  application  of any of the amounts  therein to any  particular
purpose of the Litigation  Trust. No Trustee shall be under any obligation to or
duty to perform any act that would involve him in any expense or liability or to
institute  or defend  any suit in  respect  of this  Declaration  of Trust.  The
Trustees  shall be fully  protected  in acting upon the advice of counsel and on
any  notice  resolution,  request,  consent,  order or other  paper or  document
believed  by him to be  genuine  and,  if  applicable,  to have  been  signed or
presented by the proper party.

          Section 3.9. DEFAULT AND NOTICE. The Litigation Trustees shall, within
ninety days after the occurrence of (i) a breach by Empire of any of its payment
obligations  under  the  Line of  Credit,  (ii) a breach  by the  Administrative
Trustee of its obligations hereunder, or (iii) a default by the Litigation Trust
in payment to the Beneficiaries pursuant to Section 2.4, transmit by mail, first

                                       7




class postage  prepaid,  to the  Beneficiaries,  notice of such default actually
known to the Litigation Trustees,  unless such default has been cured before the
giving of such notice;  provided,  however,  the  Litigation  Trustees  shall be
protected in withholding  such notice if and so long as the Litigation  Trustees
in good  faith  determine  that the  withholding  of such  notice is in the best
interests of the Beneficiaries.

          Section   3.10.   RETENTION  OF  ATTORNEYS,   ACCOUNTANTS   AND  OTHER
PROFESSIONALS AND POWER TO DIRECT LITIGANTS.

          (a) The  Litigation  Trustees  shall  retain,  at the  expense  of the
Litigation  Trust, such attorneys as counsel to the Litigation Trust (including,
without  limitation,  counsel  to  Litigants  or  any  of  their  successors  in
connection  with the  Litigations)  as the  Litigation  Trustees  in their  sole
discretion may select, and the Litigation Trustees may dismiss such attorneys in
their sole discretion.  The Litigation Trustees shall instruct the Litigants (or
any of their successors),  at the expense of the Litigation Trust, to aid in the
prosecution  of the  Litigations  and to perform such other  functions as may be
appropriate in the Litigation  Trustees' sole and absolute  discretion,  and the
Litigation  Trustees shall cause the Litigants (or any of their successors),  at
the  expense  of  the  Litigation   Trust,   to  follow  and  comply  with  such
instructions.  The Litigation  Trustees may commit the  Litigation  Trust to and
shall pay such attorneys compensation from the Expense Account or other funds of
the Litigation Trust for services  rendered and expenses  incurred and may enter
into  arrangements  on such terms as may be approved by the Litigation  Trustees
with such  counsel,  including  terms  providing  that all or a portion  of such
counsel's compensation may be contingent and may be based on a percentage of any
recovery, provided, however, that no such arrangement shall provide for recourse
against the Litigants or their  successors.  The Litigation  Trustees shall have
full authority to dismiss any such  attorneys  retained by the Litigants (or any
of their successors thereto). Unless and until instructed to the contrary by the
Litigation Trustees,  the attorneys currently retained to aid in the prosecution
of the Litigations shall continue in such roles for the Litigation Trust and all
parties hereto,  having been fully advised,  waive any conflict of interest,  if
any, which the attorneys  currently  retained may have with respect to any party
to this  Declaration of Trust. In addition,  any attorneys,  experts,  advisors,
consultants and investigators  retained by or at the direction of the Litigation
Trustees and any experts,  advisors,  consultants and investigators  retained by
attorneys to aid in the  prosecution of the  Litigations  shall be authorized by
this Declaration of Trust to accept directions from the Litigation Trustees with
respect to the  Litigations,  notwithstanding  any conflict of interest that may
arise by  reason  of such  directions  with the  interests  of any party to this
Declaration of Trust. The Litigation Trustees shall have no duty to the Settlors
(or any Affiliates, successor entities, or Affiliates of any successor entities)
to consider  any  interest the Settlors or any such entity may have with respect
to the Litigations.  All oral and written  communications  between any attorneys
retained by or at the direction of the Litigation  Trustees on the one hand, and
the Settlors, the Litigation Trust, any Litigation Trustee, their Affiliates, or
any successor entities or any Affiliates of any successor entities, on the other
hand,  relating  to the  Litigations  and/or to the  actions  of the  Litigation
Trustees, will be protected by the attorney-client privilege and/or the attorney
work product doctrine,  and no such  communication  will result in the waiver of
any applicable claim of confidentiality or privilege.

          (b) The  Litigation  Trustees  may but are not  required  to retain an
independent  public  accounting firm to audit the financial books and records of
the  Litigation  Trust and to perform such other reviews and/or audits as may be
appropriate  in the  Litigation  Trustees'  sole and  absolute  discretion.  The
Litigation  Trustees  may  commit  the  Litigation  Trust,  and shall  cause the
Litigation  Trust,  to pay such accounting  firm  compensation  from the Expense
Account  or other  funds of the  Litigation  Trust  for  services  rendered  and
expenses incurred.  The Litigation Trustees shall have full authority to dismiss
such accounting firm.

          (c) The  Litigation  Trustees  may retain on behalf of the  Litigation
Trust such other experts, advisors, consultants,  investigators or other support
staff,  assistants or employees as the  Litigation  Trustees,  in their sole and
absolute discretion,  may deem necessary or appropriate to assist the Litigation
Trustees to carry out their powers and duties under this  Declaration  of Trust.
The Litigation  Trustees may commit the Litigation  Trust to and shall cause the
Litigation Trust to pay all such Persons  compensation  from the Expense Account

                                       8




or other  funds of the  Litigation  Trust for  services  rendered  and  expenses
incurred.  The  Litigation  Trustees  shall have full  authority to dismiss such
Persons.


                                   ARTILCE IV

                                 ADMINISTRATION


          Section 4.1.  APPOINTMENT,  RESIGNATION AND REMOVAL OF  ADMINISTRATIVE
TRUSTEE.  The  Administrative  Trustee  shall be  appointed,  and be  subject to
removal,  by the  Litigation  Trustees.  By delivery of a written  notice to the
Litigation  Trustees,  the  Administrative  Trustee may resign as Administrative
Trustee.  The Litigation  Trustees may remove an Administrative  Trustee with or
without  cause.  In the  event  of the  death,  resignation  or  removal  of the
Administrative   Trustee,  the  Litigation  Trustees  may  appoint  a  successor
Administrative Trustee or any one of them may assume the responsibilities of the
Administrative  Trustee as set forth in this  Declaration of Trust,  except that
upon  such  death,   resignation  or  removal,  the  Litigation  Trustees  shall
contemporaneously  appoint  a  Trustee  meeting  the  requirements  set forth in
Section 3.2 hereof.

          Section 4.2.  RESPONSIBILITIES OF THE ADMINISTRATIVE TRUSTEE.

          (a) At least twice a year, the  Administrative  Trustee  shall provide
written statements to the Litigation  Trustees reflecting the balance and return
of the investments of the Litigation Trust and any withdrawals of funds from the
Litigation Trust in the prior period.

          (b) The  Administrative  Trustee shall not have any  responsibility or
duty to any Beneficiary for the value of the Litigation Trust or the application
of any of the amounts in the Expense  Account,  except to apply such  amounts as
directed by the Litigation  Trustees.  The  Administrative  Trustee shall not be
under any  obligation to or duty to perform any act that would involve it in any
expense  or  liability  or to  institute  or defend  any suit in respect of this
Declaration of Trust.  The  Administrative  Trustee shall be fully  protected in
acting  upon the  advice  of  counsel  and on any  notice  resolution,  request,
consent,  order or other paper or document  believed by it to be genuine and, if
applicable, to have been signed or presented by the proper party.

          (c)  The  Administrative  Trustee  is  not  authorized  to  cause  the
Litigation  Trust to engage in any  activities,  trade or business other than as
enumerated in the following sections:

               (i)  Section  2.2  (maintenance  of Fund  consisting  of  Expense
          Account and Recovery Account);

               (ii) Section 2.3(b) (making payments out of Expense Account);

               (iii)  Section  2.4(a) and (b)  (calculating  balance in Recovery
          Account and distributing as directed by Litigation Trustees);

               (iv) Section  4.2(a)  (providing  statements  with respect to the
          Litigation Trust);

               (v) Section 5.2 (keeping books for  registration  of ownership of
          Units); and

               (vi) Section 9.3 (amendments).

          The  Administrative  Trustee  shall not have any  discretionary  power
whatsoever  with respect to the  performance of its duties as provided above and
shall act only in accordance with the express written  direction from one of the
Litigation Trustees,  except with respect to making of payments for expenses not
provided  for in the  Budget  under  Section  2.3(b) in which  case the  express
written   direction  of  both  Litigation   Trustees  shall  be  required.   The
Administrative Trustee shall not be responsible for the preparation or filing of

                                       9



any tax returns for the Litigation Trust or for any federal,  state or local tax
reporting with respect to the Litigation Trust.


                                   ARTICLE V

                                      UNITS

          Section  5.1.  UNITS.  Each Unit  represents  a  fractional  ownership
interest in  theClaims,  and all Units shall be on a pari-passu  basis,  without
preference  or  priority  of any kind,  and  shall be  equally  entitled  to the
benefits of this Declaration of Trust. The Beneficiaries,  the respective number
of Units owned by each  Beneficiary and their  respective  pro-rata share of the
Claims  is based on each  Beneficiary's  percentage  ownership  interest  in the
Litigations and is set forth on Schedule I hereto.

          Section  5.2.   PROVISIONS   REGARDING  UNITS  NOT  REGISTERED   UNDER
SECURITIES  ACT. Until such time as the resale of the Units has been  registered
under  the  Securities  Act of  1933,  as  amended,  and  any  applicable  state
securities laws:

          (a) The  Administrative  Trustee shall keep books for the registration
of the  ownership of the Units as provided  herein.  The Units cannot be resold,
pledged,  assigned,  or  otherwise  disposed  of  unless  they are  subsequently
registered  under the  Securities  Act of 1933, as amended and under  applicable
state securities laws of certain states, in which case the provisions of Section
5.3 will  apply . Except by  operation  of law or by will or the laws of descent
and distribution,  Beneficiaries may not pledge,  hypothecate,  assign, encumber
sell,  transfer or alienate in any manner any Units,  nor shall such Units be in
any manner subject to the debts, contracts,  liabilities,  engagements, torts or
obligations  of any  Beneficiary  or any claims  against  any  Beneficiary.  The
transfer of Units by  operation  of law or by will or by the laws of descent and
distribution  may only be  recorded  on the  books of  registration  kept by the
Administrative  Trustee upon request by the Beneficiary in person or by his duly
authorized  attorney  or  legal   representative,   and  upon  the  delivery  of
documentation reasonably acceptable to the Litigation Trustees evidencing to the
satisfaction  of the  Litigation  Trustees the number of Units to be transferred
and the  circumstances  authorizing  such  transfer.  Upon delivery of a written
direction  from one of the  Litigation  Trustees at the principal  office of the
Administrative  Trustee, the Administrative Trustee shall cause such transfer to
be evidenced in the registration  books of the Litigation Trust. Any transfer in
violation of this Section 5.2(a) shall be void ab initio.

          (b)  The  Person  in  whose  name  any  Units  are  registered  on the
registration books of the Administrative Trustee shall be deemed and regarded as
the sole and absolute owner of such Units for all purposes, and payment of or on
account of such Units shall be made only to or upon the order of the  registered
owner thereof or his duly authorized attorney.  All such payments shall be valid
and effectual to satisfy and  discharge  any  liability for payments  under this
Declaration of Trust with respect to such Units to the extent of the sum or sums
so paid.  The  Administrative  Trustee may charge a fee to cover the  reasonable
cost of any such transfer and shall deposit such fee in the Expense Account, and
any taxes or other governmental  charges required to be paid with respect to the
same shall be paid by the Beneficiary  requesting such  registration of transfer
as a condition precedent to such transfer.

          (c) Any notice to be given or  payment  to be made to any  Beneficiary
hereunder  shall  be duly and  validly  given if  mailed  by the  Administrative
Trustee by first class mail, postage prepaid,  to the name and address shown for
such Beneficiary on the registration  books of the Administrative  Trustee.  Any
Beneficiary   may  deliver  a  written  notice  of  change  of  address  to  the
Administrative Trustee, and the Administrative Trustee shall be entitled to rely
thereon,  but no such change of address shall be effective if the Administrative
Trustee requests and does not receive satisfactory  assurances of the bona fides
of such change of address.

          (d) The inclusion of the foregoing  provisions  shall  constitute  the
appointment of the Administrative  Trustee as agent for the Litigation  Trustees
to do any and all things necessary to effect the registration of any transfer.

                                       10




          Section 5.3.  PROVISIONS  REGARDING UNITS  REGISTERED UNDER SECURITIES
ACT. Upon the  registration  for resale of the Units under the Securities Act of
1933, as amended, and any applicable state securities laws:

          (a) The Litigation  Trust shall issue  Certificates  representing  the
Units in the Litigation Trust.

          (b) The Trust shall  retain a Transfer  Agent for  purposes of keeping
books for the registration of the ownership of the Units as provided herein. The
Litigation   Trust  will  place  a  legend  denoting  the  restrictions  on  the
Certificates   representing  the  Units.   Units  may  only  be  registered  and
transferred on the books of registration kept by the Transfer Agent upon request
by the  Beneficiary  in  person  or by his  duly  authorized  attorney  or legal
representative,  and upon  the  surrender  of the  Certificate  or  Certificates
evidencing  the ownership of such Units,  together with a written  instrument of
transfer  executed by the  Unitholder or his duly  authorized  attorney or legal
representative  and stating the number of Units evidenced by such Certificate to
be transferred.  Upon surrender for transfer of any Certificate at the principal
office of the Transfer Agent, the Trustees shall execute and deliver in the name
of  the  transferee  or  the  respective   transferees  a  new   Certificate  or
Certificates  evidencing  the number of Units  owned  thereby  according  to the
records of the Transfer  Agent.  In the event that the  Unitholder  directs that
less than all of the Units represented by any Certificate are to be transferred,
the Trustees  shall also  execute and deliver to the  original  Unitholder a new
Certificate   representing   the  balance  of  the  Units  that  have  not  been
transferred.  All Units issued upon any  registration of transfer or exchange of
Units  shall be legal,  valid  and  entitled  to the same  benefits  under  this
Declaration of Trust as the Units surrendered upon such registration of transfer
or exchange.  Any transfer in violation of this Section  5.3(b) shall be void ab
initio.

          (c)  The  Person  in  whose  name  any  Units  are  registered  on the
registration  books of the  Transfer  Agent shall be deemed and  regarded as the
sole and  absolute  owner of such Units for all  purposes,  and payment of or on
account of such Units shall be made only to or upon the order of the  registered
owner thereof or his duly authorized attorney.  All such payments shall be valid
and effectual to satisfy and  discharge  any  liability for payments  under this
Declaration of Trust with respect to such Units to the extent of the sum or sums
so paid. The Transfer Agent may charge a fee to cover the reasonable cost of any
such transfer and shall deposit such fee in the Expense  Account,  and any taxes
or other governmental charges required to be paid with respect to the same shall
be paid  by the  holder  of the  Certificate  requesting  such  registration  of
transfer or exchange as a condition precedent to such transfer or exchange.

          (d) If: (a) any mutilated  Certificates  should be  surrendered to the
Transfer  Agent,  or if  the  Transfer  Agent  shall  receive  evidence  to  its
satisfaction of the destruction, loss or theft of any Certificate; and (b) there
shall be delivered to the  Transfer  Agent such  security or indemnity as may be
required  by it to keep it  harmless;  then,  in the absence of notice that such
Certificate  shall have been  acquired by a protected  purchaser,  the  Transfer
Agent on behalf of the Litigation  Trust shall execute and deliver,  in exchange
for or in lieu of any such mutilated,  destroyed, lost or stolen Certificate,  a
new Certificate of like denomination. In connection with the issuance of any new
Certificate  under this Section 5.3, the Transfer  Agent may require the payment
of a sum  sufficient to cover any tax or other  governmental  charge that may be
imposed in connection  therewith.  Any duplicate  Certificate issued pursuant to
this Section shall constitute  conclusive  evidence of an ownership  interest in
the relevant  Certificates,  as if originally  issued,  whether or not the lost,
stolen or destroyed Certificate shall be found at any time.

          (e) Any notice to be given or  payment  to be made to any  Beneficiary
hereunder  shall be duly and validly  given if mailed by the  Transfer  Agent by
first  class  mail,  postage  prepaid,  to the name and  address  shown for such
Beneficiary on the registration books of the Transfer Agent. Any Beneficiary may
deliver a written  notice of change of address to the  Transfer  Agent,  and the
Transfer Agent shall be entitled to rely thereon,  but no such change of address
shall  be  effective  if the  Transfer  Agent  requests  and  does  not  receive
satisfactory assurances of the bona fides of such change of address.

                                       11




          (f) The inclusion of the foregoing  provisions  shall  constitute  the
appointment of the Transfer Agent as agent for the Litigation Trustees to do any
and all things necessary to effect the registration of any transfer.

          (g) All Certificates which have been surrendered to the Transfer Agent
for  transfer  or  acquired  by the  Transfer  Agent for  cancellation  shall be
promptly canceled by the Transfer Agent. All cancelled Certificates shall not be
reissued and shall be destroyed by the Transfer Agent.


                                   ARTICLE VI

              LIMITATION OF RIGHTS OF, AND SUITS BY, BENEFICIARIES


          Section 6.1. LIMITATIONS ON RIGHTS OF BENEFICIARIES. The Beneficiaries
acknowledge that:


          (a) the Beneficiaries,  in their capacities as Beneficiaries,  are not
owners of the Litigation Trust or stockholders of the Litigants (or any of their
successors)  and  will  have no  rights  to  dividends,  interests,  liquidation
preferences or other  distributions other than the payments described in Section
2.4 and will  also  have no  voting  rights.  The  Line of  Credit  is  solely a
contractual  obligation  between  Empire  and  the  Litigation  Trust,  and  the
Beneficiaries  have no rights under the Line of Credit with respect to Empire by
reason of their ownership of Units and Empire has no liability under the Line of
Credit to the Beneficiaries;

          (b) the Units are not savings accounts or deposits and are not insured
by the Federal Deposit Insurance Corporation;

          (c) nothing in this  Declaration of Trust shall be construed to create
any partnership or joint venture between or among the Litigants (or any of their
successors), Empire and the Beneficiaries;

          (d) (i) the Litigations  are solely an asset of the Litigation  Trust,
(ii) the Litigations shall be conducted by and on behalf of the Litigation Trust
solely in accordance with the instructions of the Litigation  Trustees  pursuant
to this Declaration of Trust,  and (iii) the Litigation  Trustees shall have the
sole and exclusive right to direct and to take (or not take) actions relating to
the Litigations as contemplated by this Declaration of Trust (including, without
limitation,  any decision  with respect to the  incurrence of expenses) and may,
among other things,  dismiss, settle or cease prosecuting any of the Litigations
at any time without obtaining any cash or other recovery,  or upon obtaining any
such cash or other recovery as the Litigation Trustees may determine; and

          (e) the  liability  of the  Litigation  Trustees,  the  Administrative
Trustee and Settlors is limited to the extent set forth in Article VII hereof.

          Section 6.2. LIMITATIONS ON SUITS BY BENEFICIARIES.

          (a) To the fullest extent permitted by law, no Beneficiary  shall have
any right by virtue or by availing  itself of any provision of this  Declaration
of Trust  to  institute  any  action  or  proceeding  other  than a suit by such
Beneficiary  for  nonpayment  of  amounts  due and owing  with  respect  to such
Beneficiaries  pursuant to Section 2.4, at law or in equity or in  bankruptcy or
otherwise upon or under or with respect to this Declaration of Trust, or for the
appointment  of a trustee,  receiver,  liquidator,  custodian  or other  similar
official or for any other remedy hereunder,  unless such Beneficiary  previously
shall have given to the Litigation Trustees written notice of default and of the
continuance thereof as herein before provided, and unless also the Beneficiaries
of not less than fifty percent of the Units  outstanding shall have made written
request upon the  Litigation  Trustees to institute such action or proceeding in
their own names as trustees  hereunder  and shall have  offered to the  Trustees
such reasonable  indemnity as they may require  against the costs,  expenses and
liabilities  to be incurred  therein or thereby and the  Trustees for sixty days
after their  receipt of such notice,  request and offer of indemnity  shall have

                                       12




failed to  institute  any such action or  proceeding;  it being  understood  and
intended,  and being expressly  covenanted by the Beneficiary of every Unit with
every other  Beneficiary  and the  Trustees,  that no one or more  Beneficiaries
shall have any right in any manner  whatever by virtue or by availing  itself or
themselves of any provision of this  Declaration of Trust to effect,  disturb or
prejudice  the rights of any other  Beneficiary,  or to obtain or seek to obtain
priority  over or preference  to any other  Beneficiary  or to enforce any right
under this  Declaration of Trust,  except in the manner herein  provided and for
the equal,  ratable and common benefit of all Beneficiaries.  For the protection
and  enforcement of the provisions of this Section,  each and every  Beneficiary
and the  Litigation  Trustees  shall be  entitled to such relief as can be given
either at law or in equity.

          (b) Any  proceeding  by  Beneficiaries  shall  be  instituted  only in
accordance with the following procedures:

               (i) The prospective  plaintiff(s) shall deliver to the Litigation
          Trustees a printed or typewritten statement not more than ten pages in
          length  containing (i) the name(s) and  address(es) of the prospective
          plaintiff(s),  (ii) a  statement  of the  nature  and  amount  of each
          plaintiff's  interest  in the Units,  and (iii) a  description  of the
          nature  and  grounds of the  claims to be  asserted  and the relief or
          remedy sought.

               (ii)  The  Litigation   Trustees   shall   promptly   notify  the
          prospective   plaintiff(s)   of  the  number  of  copies   needed  for
          distribution   to   Beneficiaries   and  the  postage,   printing  and
          administrative  costs for  preparing  and mailing the statement of the
          prospective plaintiff(s),  a response by the Litigation Trustee, which
          shall not exceed ten pages in length,  a consent form described  below
          and a return  envelope.  Upon  receipt of a  certified  check for such
          postage,  printing and administrative  costs, the Litigation  Trustees
          shall promptly mail these materials to the  Beneficiaries.  Sixty days
          after mailing,  the responses  received shall be open to inspection by
          the prospective  plaintiff(s)  or any Beneficiary at reasonable  times
          during business hours at the office of the Litigation Trust designated
          for such purposes.

               (iii) The mailing to  Beneficiaries  shall include a consent form
          reading substantially as follows:

          "In response to the Catskill Litigation Trust mailing dated _________,
          200_,

          ______________ I HEREBY CONSENT TO SUCH SUIT.

          ______________ I DO NOT CONSENT TO SUCH SUIT.

                                          --------------------------------------
                                          Signature

                                          --------------------------------------
                                          Printed or Typed Name of Beneficiary

                                          --------------------------------------
                                          Date:

          If this response is not returned by ____________________________,  you
          will be considered as not consenting to such suit."

                                       13




                                  ARTICLE VII

                           LIMITATION OF LIABILITY OF
                       BENEFICIARIES, TRUSTEES AND OTHERS


          Section 7.1. LIABILITY.

          (a) Except as expressly set forth in this  Declaration  of Trust,  the
Trustees shall not be:

               (i) personally liable for the payment of any amounts,  including,
          without  limitation,  amounts payable  pursuant to Section 2.4, to the
          Beneficiaries,   which   payment   shall  be  made   solely  from  the
          Litigations,  if there are any proceeds  distributed to the Litigation
          Trust therefrom and other assets of the Litigation Trust, if any; or

               (ii)  required  to  pay  to  the  Litigation   Trust  or  to  any
          Beneficiary  any deficit upon  dissolution of the Litigation  Trust or
          otherwise.

          (b)  Pursuant  to Section  3803(a)  of the  Statutory  Trust Act,  the
Beneficiaries  shall be entitled to the same  limitation  of personal  liability
extended to stockholders of private  corporations for profit organized under the
General Corporation Law of the State of Delaware.

          Section 7.2. EXCULPATION.

          (a) Except as expressly set forth in this  Declaration of Trust to the
fullest  extent  permitted  by law,  no  Indemnified  Person  shall  be  liable,
responsible or  accountable in damages or otherwise to the Litigation  Trust for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such  Indemnified  Person,  except that (i) the  Litigation  Trustees
shall be liable for any such loss, damage or claim incurred by reason of any act
or omission  performed or omitted by them if it shall be  established in a final
judicial  determination  by clear and  convincing  evidence that any such act or
omission of the Litigation  Trustees was undertaken  with  deliberate  intent to
injure the  Beneficiaries  or with reckless  disregard for the best interests of
such  Beneficiaries  and, in any event, any liability will be limited to actual,
proximate, quantifiable damages, (ii) the Administrative Trustee shall be liable
for any such  loss,  damage,  or claim  if it  shall be  established  in a final
judicial  determination  by clear and  convincing  evidence  that any such loss,
damage or claim was  incurred  by reason  of its  gross  negligence  or  willful
misconduct  with  respect to such acts or  omissions,  and (iii) Empire shall be
liable  for any such  loss,  damage  or claim  incurred  by reason of any act or
omission if it is  established in a final  judicial  determination  by clear and
convincing  evidence in an action brought by the  Litigation  Trustees or by the
Beneficiaries in compliance with Section 6.2 hereof that such damages arose as a
result of Empire or its successor's material breach of its obligations under the
Line of Credit,  provided,  that nothing in this  Section  7.2(a) is intended to
limit  the  Litigation  Trustees'  and the  Administrative  Trustee's  right  to
insurance obtained by the Litigation Trust and the proceeds of such insurance.

          (b) Except as expressly set forth in this  Declaration of Trust to the
fullest extent permitted by law, none of the Beneficiaries (in their capacity as
Beneficiaries),  the  Trustees or the  Litigation  Trust shall have the right to
enforce,  institute  or  maintain  a  suit,  action  or  proceeding  against  an
Indemnified  Person  relating to the  formation  of the  Litigation  Trust,  the
entering  into  of the  Line  of  Credit,  the  Litigations  or  actions  of the
Litigation  Trustees in their  capacity (or  purportedly  in their  capacity) as
Trustees.  Notwithstanding  the preceding  sentence of this Section 7.2(b),  the
Litigation Trust (or the Litigation  Trustees on behalf of the Litigation Trust)
may enforce,  institute  or maintain a suit,  action or  proceeding  against (i)
Empire or its  successors,  for its breach of any of its  obligations  under the
Line of Credit;  provided,  that fees and expenses  incurred by Empire in such a
suit,  action or proceeding shall not be set off against any settlement or award
in connection with the Claims if the Litigation Trust or the Litigation Trustees
prevail in such a suit, and, if in connection  with suits brought  pursuant this
sentence  shall be  deemed  expenses  of the  Litigation  Trust  payable  by the
Litigation Trust out of the Recovery Account,  if the Litigation Trustees do not
prevail  and (ii)  against  the  Administrative  Trustee as  provided in Section
2.4(b).

                                       14



          (c) An Indemnified  Person shall be fully protected in relying in good
faith  upon the  records  of the  Litigation  Trust and upon  such  information,
opinions,  reports  or  statements  presented  to the  Litigation  Trust  or the
Indemnified Person by any Person as to matters the Indemnified Person reasonably
believes are within such other Person's  professional or expert  competence and,
if selected by such  Indemnified  Person,  has been selected by such Indemnified
Person  with  reasonable  care,  including  information,  opinions,  reports  or
statements  as to the value  and  amount of the  assets,  liabilities,  profits,
losses,  or any other facts pertinent to the existence and amount of assets from
which payment to Beneficiaries might properly be paid.

          Section 7.3. FIDUCIARY DUTY.

          (a) To the extent that, at law or in equity, an Indemnified Person has
duties  (including  fiduciary  duties) and liabilities  relating  thereto to the
Litigation  Trust or to any other  Indemnified  Person,  an  Indemnified  Person
acting  under this  Declaration  of Trust shall not be liable to the  Litigation
Trust or to any other  Indemnified  Person  for its good faith  reliance  on the
provisions of this  Declaration of Trust.  The provisions of this Declaration of
Trust,  to the  extent  that they  restrict  the duties  and  liabilities  of an
Indemnified Person otherwise existing at law or in equity,  including common law
fiduciary duties,  are agreed by the parties hereto to replace such other duties
and liabilities of the Indemnified Person.

          (b) Whenever in this  Declaration  of Trust an  Indemnified  Person is
permitted or required to make a decision:

               (i) in its  "discretion"  or under a grant of similar  authority,
          the  Indemnified  Person shall be entitled to consider such  interests
          and factors as it desires, including its own interests, and shall have
          no duty or obligation to give any  consideration to any interest of or
          factors affecting the Litigation Trust or any other Person; or

               (ii) in its "good faith" or under another express  standard,  the
          Indemnified Person shall act under such express standard and shall not
          be  subject  to any  other  or  different  standard  imposed  by  this
          Declaration of Trust or by applicable law.

          Section 7.4. INDEMNIFICATION.

          (a) The  Litigation  Trust  shall  indemnify,  to the  fullest  extent
permitted by law, any  Indemnified  Person in  connection  with any  threatened,
pending or  completed  action,  suit or  proceeding,  whether  civil,  criminal,
administrative or investigative by any Person, arising out of or relating to the
Litigation  Trust, the Line of Credit,  the Litigations or any acts or omissions
of the Litigation  Trustees or the  Administrative  Trustee in their capacity or
purportedly in their capacity as Litigation Trustees or Administrative  Trustee,
as the  case  may  be,  or  actions  taken  by the  Litigation  Trustees  or the
Administrative  Trustee (including  actions taken by the Litigation  Trustees or
Administrative  Trustee,  as the case may be in their  capacity  as  officers or
directors of the Settlors so long as such actions relate to the Litigation Trust
including,  without  limitation,  the negotiation of the terms of the Litigation
Trust and the approval of the  establishment of the Litigation Trust and related
transactions,  but otherwise  excluding actions taken by the Litigation Trustees
or Administrative  Trustee, as the case may be in such capacities),  against any
and  all  losses,  liabilities,  damages,  judgments,  demands,  suits,  claims,
assessments,  charges, fines, penalties and other costs and expenses,  including
attorneys'  fees and expenses and other fees and  expenses  associated  with the
defense  of a  claim  or  incurred  by  such  Indemnified  Person  in  obtaining
indemnification  under  this  Declaration  of Trust,  whether or not in a formal
proceeding (collectively, "Damages").

          (b)  Notwithstanding  the  preceding  Section (a), no  indemnification
shall apply in the case of the  indemnification of (i) the Litigation  Trustees,
if the  Beneficiaries  establish in a final judicial  determination by clear and
convincing  evidence  that such Damages arose as the result of acts or omissions
of the Litigation Trustees with deliberate intent to injure the Beneficiaries or
with reckless disregard for the best interests of such  Beneficiaries,  (ii) the
Administrative  Trustee, if it is established in a final judicial  determination
by clear and  convincing  evidence  that such  Damages  arose as a result of its
gross negligence or willful misconduct or (iii) Empire or its successors,  if it
is  established  in a final  judicial  determination  by  clear  and  convincing

                                       15




evidence in an action brought by the Litigation Trustees or by the Beneficiaries
in  compliance  with Section 6.2 hereof that such Damages arose as the result of
Empire or its successor's  material  breach of any of its obligations  under the
Line of Credit.  The termination of any action,  suit or proceeding by judgment,
order,  settlement,  conviction,  or  upon  a plea  of  nolo  contendere  or its
equivalent,  as applicable,  shall not, of itself, create a presumption that (i)
the Litigation  Trustees acted or decided with  deliberate  intent to injure the
Beneficiaries  or  with  reckless  disregard  for  the  best  interests  of such
Beneficiaries,  (ii) the  Administrative  Trustee acted with gross negligence or
willful  misconduct,  or (iii)  the  Litigation  Trustees  or the  Beneficiaries
established  by clear and  convincing  evidence  that  Empire  or its  successor
materially breached any of its obligations under the Line of Credit.

          (c) To the  fullest  extent  permitted  by  law,  expenses  (including
attorneys' fees and expenses)  incurred by an Indemnified  Person in defending a
civil,  criminal,  administrative  or investigative  action,  suit or proceeding
referred to in Section 7.4(a) shall be paid by the  Litigation  Trust in advance
of the final  disposition of such action,  suit or proceeding upon receipt of an
undertaking  (without  bond or  security)  by or on behalf  of such  Indemnified
Person to repay such amount if it shall  ultimately be determined that he is not
entitled to be indemnified by the Litigation Trust as authorized in this Section
7.4.

          (d) All  rights to  indemnification  under this  Section  7.4 shall be
deemed to be  provided  by a  contract  between  the  Litigation  Trust and each
Indemnified  Person who serves in such  capacity at any time while this  Section
7.4 is in  effect.  Any repeal or  modification  of this  Section  7.4 shall not
affect any rights or obligations then existing.

          (e) The Litigation Trust may purchase and maintain  insurance to cover
its  indemnification  obligations  and any other  liabilities  of the Litigation
Trustees and the Administrative  Trustee.  The Litigation Trust will use amounts
from the Expense Account (or amounts from other sources of the Litigation Trust)
to pay for such insurance.

          (f) For purposes of this Section 7.4,  references  to "the  Litigation
Trust" shall  include,  in addition to the  resulting or surviving  entity,  any
constituent  entity  (including any constituent of a constituent)  absorbed in a
consolidation or merger  involving the Litigation  Trust, so that any Person who
is or was a director,  trustee,  officer or employee of such constituent entity,
or is or was  serving at the request of such  constituent  entity as a director,
trustee,  officer,  employee or agent of another entity, shall stand in the same
position  under the provisions of this Section 7.4 with respect to the resulting
or surviving entity as he would have with respect to such constituent  entity if
its separate existence had continued.

          (g) The  indemnification  and advancement of expenses  provided by, or
granted  pursuant  to, this  Section  7.4 shall  continue as to a Person who has
ceased to be an Indemnified  Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.


                                  ARTICLE VIII

                           DISSOLUTION AND TERMINATION


          Section 8.1. TERMINATION.

          (a) If at any time the Litigation Trustees determine, in their sole
and  absolute  discretion,  that the  assets  of the  Litigation  Trust  are not
sufficient  to justify  its  continuance,  or that tax,  political  or  economic
changes  or  other  considerations  make  continuance  of the  Litigation  Trust
uneconomic,  the Litigation  Trustees are authorized to terminate the Litigation
Trust.  Upon a determination  to terminate the Litigation  Trust, the Litigation
Trustees   shall  deliver  a  written   notice  of  such   termination   to  the
Administrative  Trustee.  Any such determination shall be conclusive and binding
on all persons and in making such determination the Litigation Trustees shall be
fully discharged from all further liability or accountability for the Litigation
Trust.

                                       16




          (b) The Litigation  Trust shall  terminate on the date that the Claims
shall have been fully  prosecuted to final judgment or dismissal,  including all
appeals,  and all the Litigation Trust assets shall have been distributed to the
Beneficiaries,  or as the  Litigation  Trust shall be  terminated as provided in
this Declaration of Trust.

          (c) As soon as is  practicable  after  the  occurrence  of the  events
referred to in Sections 8.1(a) and 8.1(b), and after completion of winding up of
the Litigation  Trust and satisfaction of liabilities of the Litigation Trust in
accordance with the Statutory Trust Act, the Litigation Trustees shall terminate
the Litigation Trust by filing a certificate of cancellation  with the Secretary
of State of the State of Delaware.


                                   ARTICLE IX

                                  MISCELLANEOUS


          Section 9.1. NOTICES.  All notices provided for in this Declaration of
Trust shall be in  writing,  duly signed by the party  giving such  notice,  and
shall be delivered, telecopied or mailed by first class mail, as follows:

          (a) if given to the Litigation  Trust,  in care of the  Administrative
Trustee at the Litigation Trust's mailing address set forth below (or such other
address as the Litigation Trust may give notice of to the Beneficiaries):

                Christiana Bank & Trust Company
                1314 King Street
                Wilmington, DE  19801
                Attention:  James M. Young
                Facsimile: (302) 421-9015

          with a copy to:

                Olshan Grundman Frome Rosenzweig & Wolosky LLP
                505 Park Avenue
                New York, New York 10022
                Attention: Robert H. Friedman, Esq.
                Facsimile: (212) 451-2222

          (b) if given to the Litigation  Trustees,  at the mailing  address set
forth below (or such other address as Litigation  Trustees may give notice of to
the Beneficiaries):

               (i)  Joseph Bernstein
                    6663 Casa Grande Way
                    Delray Beach,  Florida
                    33446 Facsimile: 561-499-0764

               (ii) Paul  deBary
                    c/o  Marquette  deBary
                    477  Madison  Avenue
                    New York, New York 10022
                    Facsimile: 212-371-6054


          (c) if given to the  Settlors at the  mailing  address set forth below
(or such  other  address  as the  Litigation  Trust  may give  notice  of to the
Beneficiaries):

               (i)  Catskill  Development,  L.L.C.
                    c/o Monticello  Raceway
                    Route 17B
                    Monticello, New  York  12701

                                       17





                    Attention:   President
                    Facsimile: 845-791-1547

               (ii) Empire Resorts, Inc.
                    c/o Monticello Raceway
                    Route 17B
                    Monticello, New York 12701
                    Attention: President
                    Facsimile: 845-791-1547

              (iii) Mohawk Management, L.L.C.
                    c/o Monticello Raceway
                    Route 17B
                    Monticello, New York 12701
                    Attention: President
                    Facsimile: 845-791-1547

              (iv)  Monticello Raceway Development Company, L.L.C.
                    c/o Monticello Raceway
                    Route 17B
                    Monticello, New York 12701
                    Attention: President
                    Facsimile: 845-791-1547

          (d) if given to the Administrative Trustee, at the mailing address set
forth below (or such other address as the Litigation Trust may give notice of to
the Beneficiaries):

          Christiana Bank & Trust Company
          1314 King Street
          Wilmington, DE  19801
          Attention:  James M. Young
          Facsimile: (302) 421-9015

      with a copy to:

          Duane Morris LLP
          1100 N. Market Street, Suite 1200
          Wilmington, DE  19801-1240
          Attention:  Andrew G. Kerber, Esquire
          Facsimile:  (302) 657-4901

          (e) if given to any Beneficiary, at the address set forth on the books
and records of the Litigation Trust.

          (f) All such notices  shall be deemed to have been given when received
in person,  telecopied  with receipt  confirmed,  or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered  because of a changed  address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver the same.

          Section 9.2.  GOVERNING LAW. This  Declaration of Trust and the rights
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies  shall be governed
by such laws without  regard to the  principles of conflict of laws of the State
of Delaware or any other jurisdiction that would call for the application of the
law of any  jurisdiction  other than the State of Delaware;  provided,  however,
that, to the fullest  extent  permitted by law, there shall not be applicable to
the Litigation Trust, the Trustees or this Declaration of Trust any provision of
the laws  (statutory  or common) of the State of Delaware  pertaining  to trusts
that relate to or regulate,  in a manner  inconsistent with the terms hereof (a)
the filing with any court or governmental  body or agency of trustee accounts or
schedules of trustee fees and charges, (b) affirmative requirements to post

                                       18




bonds for trustees,  officers, agents or employees of a trust, (c) the necessity
for obtaining court or other governmental  approval  concerning the acquisition,
holding or  disposition  of real or  personal  property,  (d) fees or other sums
payable  to  trustees,  officers,  agents  or  employees  of a  trust,  (e)  the
allocation of receipts and expenditures to income or principal, (f) restrictions
or limitations  on the  permissible  nature,  amount or  concentration  of trust
investments or requirements relating to the titling,  storage or other manner of
holding or investing trust assets or (g) the establishment of fiduciary or other
standards of  responsibility  or  limitations  on the acts or powers of trustees
that are  inconsistent  with the  limitations or liabilities or authorities  and
powers of the Trustees as set forth or referenced in this  Declaration of Trust.
Section 3540 and Section  3561 of Title 12 of the Delaware  Code shall not apply
to the Litigation Trust.

          Section 9.3.  AMENDMENTS.  This  Declaration  of Trust may be amended,
modified or  supplemented  by the  Litigation  Trustees in accordance  with this
Section 9.3. In the event the  Litigation  Trustees  desire to amend,  modify or
supplement this Declaration of Trust, the Litigation Trustees shall give written
notice to the  Beneficiaries  (the "Amendment  Notice")  briefly  describing any
amendment,  modification  or supplement and the procedures for objecting to such
amendment,  modification  or  supplement.  If  Beneficiaries  holding  less than
twenty-five  (25%) percent of the aggregate number of the then outstanding Units
object to such  amendment,  modification or supplement on or before the 45th day
after the date of the Amendment  Notice,  then such  amendment,  modification or
supplement  shall become  effective on such 45th day. If  Beneficiaries  holding
twenty-five  (25%)  percent  or  more  of  the  aggregate  number  of  the  then
outstanding  Units object to such  amendment,  modification  or supplement on or
before the 45th day after the date of the Amendment Notice, then such amendment,
modification or supplement  shall become effective only upon the written consent
of  Beneficiaries  holding at least 66 2/3% of the aggregate  number of the then
outstanding Units.  Notwithstanding  the foregoing,  (i) the Litigation Trustees
may amend, modify or supplement this Declaration of Trust without the consent of
any  Beneficiaries to cure any ambiguity,  defect or  inconsistency  and (ii) no
amendment,  modification  or supplement may be made that  adversely  affects the
legal  rights  of  the  Administrative   Trustee  without  the  consent  of  the
Administrative  Trustee.  The  Administrative  Trustee shall sign any amendment,
modification or supplement authorized pursuant to this Section 9.3

          Section 9.4. INTENTION OF PARTIES.  It is the intention of the parties
hereto that the Litigation  Trust be classified for United States federal income
tax purposes as a grantor  trust that is formed to hold the Claims and liquidate
the Litigation Trust, as provided for herein. The provisions of this Declaration
of Trust shall be interpreted to further this intention of the parties.

          Section 9.5. HEADINGS. Headings contained in this Declaration of
Trust are inserted for convenience of reference only and do not affect the
interpretation of this Declaration of Trust or any provision hereof.

          Section 9.6.  SUCCESSORS AND ASSIGNS.  Whenever in this Declaration of
Trust any of the parties  hereto is named or  referred  to, the  successors  and
assigns of such party  shall be deemed to be  included,  and all  covenants  and
agreements in this  Declaration  of Trust by the Settlors and the Trustees shall
bind and  inure to the  benefit  of their  respective  successors  and  assigns,
whether or not so expressed.

          Section  9.7.  PARTIAL  ENFORCEABILITY.   If  any  provision  of  this
Declaration  of Trust,  or the  application  of such  provision to any Person or
circumstance, shall be held invalid, the remainder of this Declaration of Trust,
or the  application  of such  provision to persons or  circumstances  other than
those to which it is held invalid, shall not be affected thereby.

          Section  9.8.  SPECIFIC  PERFORMANCE.  The  Trustees  and the Settlors
hereby agree that the obligations  imposed on them in this  Declaration of Trust
are special, unique and of an extraordinary character, and that, in the event of
breach by the Trustees or the Settlors, as the case may be, damages would not be
an adequate  remedy and the Trustees or the Settlors,  as the case may be, shall
be entitled to specific  performance and injunctive and other equitable  relief,
including  declaratory relief, in addition to any other remedy to which they may
be entitled,  at law or in equity;  and the  Trustees  and the  Settlors  hereby

                                       19




further agree to waive any  requirement  for the securing or posting of any bond
in  connection  with the  obtaining of any such  injunctive  or other  equitable
relief.

          Section 9.9. COUNTERPARTS.  This Declaration of Trust may contain more
than one counterpart of the signature page and this  Declaration of Trust may be
executed  by the  affixing  of the  signature  of each of the  Trustees  and the
Settlors to any of such  counterpart  signature  pages.  All of such counterpart
signature  pages shall be read as though one, and they shall have the same force
and effect as though all of the signers had signed a single signature page.

                                       20





                     [SIGNATURE PAGE TO DECLARATION OF TRUST
                                       OF
                           CATSKILL LITIGATION TRUST]


          IN WITNESS WHEREOF, this Declaration of Trust has been executed by the
undersigned  Settlors and  acknowledged by the undersigned  Trustees so as to be
effective on the 12th day of January, 2004.

SETTLORS:

CATSKILL DEVELOPMENT, L.L.C.                    MOHAWK  MANAGEMENT, L.L.C.


/s/  Morad Tahbaz                               /s/ Robert A. Berman
- ------------------------------                  -------------------------------
By:  Morad Tahbaz, President                    By:  Robert A. Berman, Manager

EMPIRE RESORTS, INC.                            MONTICELLO RACEWAY
                                                DEVELOPMENT COMPANY, L.L.C.


/s/ Robert A. Berman                            /s/ Scott A. Kaniewski
- ------------------------------                  --------------------------------
By:  Robert A. Berman,                          By:  Scott A. Kaniewski, Manager
Chief Executive Officer

TRUSTEES:


/s/ Joseph E. Bernstein                         /s/ Paul A. deBary
- ------------------------------                  ---------------------------------
Joseph E. Bernstein, as Litigation Trustee      Paul A. deBary, as Litigation Trustee


CHRISTIANA BANK & TRUST COMPANY,
not in its individual capacity but solely
as Administrative Trustee


By: /s/ James M. Young
    -----------------------------
    By:     James M. Young
    Title:  Assistant Vice President


          The  Undersigned,  Rick  Werner  and Laura  Strache  have  placed  our
signatures  below as witnesses to the execution of this  Declaration of Trust by
the above parties, each of who is personally known to us, at January 12, 2004.


/s/ Rick Werner                                  /s/ Laura Strache
- ---------------------------                     ----------------------------
Witness:                                        Witness:


                                       21




                                    EXHIBIT A
                                    ---------

                                 LINE OF CREDIT

                                       22




                                   SCHEDULE I
                                   ----------

                              List of Beneficiaries
                              ---------------------

       Name                                               Number of Units
       ----                                               ---------------

Empire Resorts, Inc.*                                     3,693,794
Monticello Realty, L.L.C.                                 5,732,261
Americas Tower Partners                                   6,599,294
Robert Berman                                             4,531,425
Debbie Berman                                                47,410
Berman Family Trust                                         142,296
Scott Kaniewski                                              10,217
Kaniewski Family LP                                         333,870
KFP Trust                                                   395,703
Philip Berman                                               330,533
Brian Nastruz                                                10,016
Paul deBary                                                 198,319
Gunther Arzberger                                            33,053
Bill Bard                                                    33,053
Shlomo Ben-Hamoo                                              3,339
Daryl Cramer                                                  8,280
Kenneth Cramer                                               16,560
Philip Datloff                                              198,319
Stephen Goldenberg                                           54,555
Leonard Parker                                               33,053
Burt Bloom                                                   16,560
Steven Schwimmer                                             16,560
Bruce Rosen                                                  33,053
Richard Rose                                                 99,160
Kimi Sato                                                    33,053
Robin Rose                                                   99,160

- --------

*    Held on behalf of its  shareholders  of record at the close of  business on
     January 9, 2004.

EX-10.50

                                                                   EXHIBIT 10.50


                     Agreement Between Owner and Contractor

AGREEMENT made as of the 30th day of January in the year 2004

BETWEEN the Owner:             MONTICELLO RACEWAY MANAGEMENT, INC.

and the Contractor:            FLUOR ENTERPRISES, INC.

The Project is:                MONTICELLO RACINO
                               Fitup and Renovations at the Monticello Raceway,
                               Monticello, New York

The Architect is:              BRENNON, BEER AND GORMAN ARCHITECTS
                               515 Madison Avenue
                               New York, New York 10023

The Owner and Contractor agree as follows:



                                       1




ARTICLE I      THE CONTRACT DOCUMENTS


      The  Contract  Documents  consist  of this  Agreement,  Conditions  of the
      Contract  (General,   Supplementary  and  other   Conditions),   Drawings,
      Specifications, Addenda issued prior to execution of this Agreement, other
      documents  listed  in  this  Agreement  and  Modifications   issued  after
      execution of this Agreement;  these form the Contract,  and are as fully a
      part of the Contract as if attached so this Agreement or repeated  herein.
      The Contract  represents the entire and integrated  agreement  between the
      parties  hereto and  supersedes  prior  negotiations,  representations  or
      agreements,  either  written  or  oral.  An  enumeration  of the  Contract
      Documents, other than Modifications, appears in Article 15. If anything in
      the other Contract  Documents is inconsistent  with this  Agreement,  this
      Agreement shall govern.

ARTICLE 2      THE WORK OF THIS CONTRACT

      The  Contractor  shall fully  execute the Work  described  in the Contract
      Documents,  except  to the  extent  specifically   indicated  in  Contract
      Documents to be the  responsibility of others.  The scope of work is split
      into two phases:

      2.1 Phase I - Phase I Pre-Construction  Services shall be performed by the
      Contractor  consisting of estimating,  value engineering  constructability
      review,  preparation  of a Critical Path  Schedule,  bidding,  purchasing,
      subcontracting  and  developing an acceptable  Guaranteed  Maximum  Price.
      ("GMP") The  Pre-Construction  Services shall commence on October 24, 2003
      and be completed  upon  submission of an acceptable GMP and a receipt from
      the Owner of a Notice to Proceed for construction.

      2.2 Phase II Construction Services shall be performed by the Contractor in
      accordance  with the Contract  Documents and the Guaranteed  Maximum Price
      ("GMP") pursuant  to  Amendment  No 1.  Amendment  No. 1 shall be  jointly
      developed and shall include the GMP and scope of Work to be performed. The
      parties shall  endeavor to complete  Amendment No. 1 on or before March 1,
      2004.

ARTICLE 3      RELATIONSHIP OF THE PARTIES

      The  Contractor   accepts  the   relationship   of  trust  and  confidence
      established  by this  Agreement and covenants  with the Owner to cooperate
      with the  Architect  and exercise the  Contractor's  skill and judgment in
      furthering  the  interests  of the Owner;  to furnish  efficient  business
      administration and supervision; to furnish at all times an adequate supply
      of workers and materials,  and to perform the Work in an  expeditious  and
      economical manner consistent with the Owner's interests.  The Owner agrees
      to furnish and approve,  in a timely manner,  information  required by the
      Contractor and to make payments to the  Contractor in accordance  with the
      requirements of the Contract Documents.


                                       2





ARTICLE 4      DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION


      4.1. The date of commencement of the Phase I Pre-Construction  was October
      24, 2003. The date of commencement  of the Phase II Construction  Services
      shall be  established  by a Notice to  Proceed  issued by the Owner to the
      Contractor.

      4.2 The  Contract  Time shill be measured  from the date of the Notice to
      Proceed.

      4.3 The Contractor shall achieve Substantial Completion of the entire Work
      no later than one hundred  seventy-nine  (179) calendar days from the date
      of the Notice to Proceed  subject to  adjustments of this Contract Time as
      provided in the Contract  Documents  ("Contract  Time").  In the event the
      Contractor  fails to  substantially  complete the Work within the Contract
      Time, the  Contractor  shall pay to the Owner the amount of Three Thousand
      Dollars  ($3,000)  per day as  liquidated  damages  for each day after the
      Contract Time until the project has achieved Substantial  Completion.  The
      amount of  liquidated  damages is a  reasonable  estimate of the  damages,
      which damages are  impossible to  specifically  determine at the time this
      Contract is  exceuted,  that the Owner will incur in the event the Project
      is completed after the date of Substantial Completion and not a penalty.

          The parties  agree that  Contractor's  total  aggregate  liability for
      liquidated  damages  shall be  limited  to  $190,000  and such  liquidated
      damages are the Owner's  sole and  exclusive  remedy with  respect to late
      completion.

      4.4 In the event the Contractor is able to achieve Substantial  Completion
      of the entire  Work prior to the  expiration  of the  Contract  Time,  the
      Contractor  shall  receive  from the Owner,  the amount of Three  Thousand
      Dollars ($3,000) per day as a fee bonus for each day of early  completion.
      In the event the Contractor is able to achieve  Substantial  Completion on
      or prior to July 1, 2004, the Contractor  shall also receive an additional
      fee bonus of One Hundred Thousand Dollars ($100,000).

          In order for the  Contractor to earn the  additional  fee bonus of One
      Hundred  Thousand  Dollars  ($100,000),  Substantial  Completion  must  be
      achieved  by July 1,  2004,  without  regards  to any  adjustments  of the
      Contract Time as provided in the Contract.

ARTICLE 5      BASIS FOR PAYMENT

5.1   CONTRACT SUM
5.1            Contract Sum

      5.1.1 The Owner shall pay the Contractor the Contract Swan in current fund
      for the Contractor's  performance of the Contract. The Contract Sum is the
      Cost of the  Work as defined  in  Article  7 plus  the  Contractor's  Lump
      Sum Phase I Pre-Construction  Services Fee, Lump Sum Phase II Construction
      Services  Fee,  and Lump Sum General  Conditions,  which  Contract  Sum is
      limited to the provisions of Article 5.2

      5.1.2 The Lump Sum amount  for Phase I  Pre-Construction  Services  is One
      Hundred Three Thousand Dollars ($103,000).

      5.1.3 The Lump Sum amount for Phase II Construction Phase Fee and Lump Sum
      General Conditions is Six Hundred Twenty-four Thousand Dollars ($624,000).

      5.1.4 The  General  Conditions  included  within the Lump Sum for Phase II
      Construction  Phase Services include all staffing costs,  both Home office
      and field;  all staff  related costs such as taxes,  insurance,  benefits,
      travel  and  relocation  expenses;  all field  office  expenses  including
      consumables, office equipment, office rental, printing, telephone and

                                       3




      other  office  related  expenses;  all cost for  insurance  required to be
      provided  by the  Contractor;  Home office  expenses of any kind;  and any
      costs  associated with the Contractor  providing a Corporate  Guarantee of
      Completion to the Owner.

      5.1.5 In the event the Cost of Work plus the Lump Sum  amounts for Phase 1
      and Phase II Fee sad Lump Sum  General  Conditions  are less than the GMP,
      the savings shall revert one hundred percent (100%) to the Owner.

5.2            GUARANTEED MAXIMUM PRICE

      5.2.1  The Sum of the Cost of the Work and the  Contractor's  Lump Sum for
      Phase I and Phase 11 Services and General Conditions will be guaranteed by
      the  Conttactor  not to  exceed  the sum as set forth on  Amendment  No 1,
      subject to additions  and  deductions  by Change Orders as provided in the
      Contract  Documents.  Such  maximum  sum is  referred  to in the  Contract
      Documents as the  Guaranteed  Maximum  Price.  ("GMP").  Costs which would
      cause the  Guaranteed  Maximum  Price to be exceeded  shall be paid by the
      Contractor without reimbursement by the Owner.

      5.2.2 The Guaranteed  Maximum Price is based on the Contract Documents and
      Amendment  No.  1  which   describes  any   assumptions,   qualifications,
      exclusions and allowances.

      5.2.3 In providing the GMP, the Contractor  acknowledges that the Drawings
      and  Specifications  are  incomplete,  and the Contractor has  anticipated
      further  development by the Architect and its  consultants of the Drawings
      and  Specifications.  The  Contractor  has  provided  in the GMP for  such
      further  development  consistent with the intent of the Contract Documents
      ensuring  that  the Work is  complete  and  fully  operational  for  their
      intended  beneficial  use and  occupancy in  accordance  with the Contract
      Documents.

ARTICLE 6      CHANGES IN THE WORK

      6.1  Adjustments to the Guaranteed  Maximum Price on account of changes im
      the Work may be  determined by any of the methods  listed in  Subparagraph
      7.3.3 of AIA Document A201-1997.

      6.2 In calculating  adjustments to subcontracts (except those awarded with
      the  Owner's  prior  consent  on the basis of cost plus a fee),  the terms
      "cost" and "fee" as used in Clause  7.3.3.3 of AIA Document  A201-1997 and
      the terms "costs" and "a reasonable  allowance for overhead and profit" as
      used in  Subparagraph  7.3.6  of AIA  Document  A201-1997  shall  have the
      meanings  assigned  to them in AIA  Document  A201-1997  and  shall not be
      modified  by  Articles  5,  7  and 8 of  this  Agreement.  Adjustments  to
      subcontractors awarded with the Owner's prior consent on the basis of cost
      plus a fee  shall be  calculated  in  accordance  with the  terms of those
      subcontracts.

      6.3 In calculating  adjustments to the Guaranteed Maximum Price, the terms
      "cost"  and  "costs"  as used in the  above-referenced  provisions  of AIA
      Document A201-1997 shall mean the Cost of the Work as defined in Article 7
      of this  Agreement  and the terms "fee" and "a  reasonable  allowance  for
      overhead  and  profit"  shall  mean the  Contractor's  Fee as  defined  in
      Subparagraph 5.1.2 and 5.1.3 of this Agreement.

      6.4 For a change  in the  Work,  the  Contractor  shall be  entitled  to a
      mark-up  of five  (5%)  percent  of the cost of the  Change  for  Phase II
      Construction   Service  Fee  and  five   percent  (5%)  Lump  Sum  General
      Conditions.

      ___________ Cost of Change              Percent of Cost of Change Increase
                                              ----------------------------------
                 $  0 - $ 50,000                          10%
                 $ 50 - $100,000                           8%
                 $100 - $500,000                           6%
                 $ over $500,000                           4%

                                       4





      6.5 For a change in the Work, the  Subcontractors of the Contractors shall
      be limited to a mark-up of ten (10%) on the coat of work  performed by the
      Subcontractors for overhead and profit and a mark-up of five (5%) for work
      performed  by a  sub-subcontractor.  The  sub-subcontractor  shall also be
      limited to a ten (10%)  percent  mark-up on the cost of work  performed by
      the  sub-subcontractor for overhead and profit. In no event shall there be
      more than two tiers of mark-up allowed.

ARTICLE 7      COSTS TO BE REIMBURSED

      7.1 COST OF THE WORK

      The term Cost of the Work  shall mean costs  necessarily  incurred  by the
      Contractor in the proper  performance of the Work.  Such costs shall be at
      rates not higher than the standard paid at the place of the Project except
      with prior  consent of the Owner.  The Cost of the Work shall include only
      the items set forth in this Article 7.

     7.2 LABOR COSTS

      7.2.1 Wages of construction workers directly employed by the Contractor to
      perform  the  construction  of the Work at the site or,  with the  Owner's
      approval, at off-site workkhops subject to the Provisions of Article 5.

      7.2.2 Wages or salaries of the Coatractor's supervisory and administrative
      personnel  stationed  at the site or office  but only for that  portion of
      their time required for the Work subject to the Provisions of Article 5.

      7.2.3 Wages and salaries of the Contractor's supervisory or administrative
      personnel engaged,  at factories,  workshops or on the road, in expediting
      the production or  transportation  of materials or equipment  required for
      the Work,  but only for that  portion of their time  required for the Work
      subject to the Provisions of Article 5.

      7.2.4  Costs  paid or incurred by the  Contractor  for  taxes,  insurance,
      contributions,  assessments  and  benefits  required by law or  collective
      bargaining  agreements and, for personnel not covered by such  agreements,
      customary  benefits  such as sick  leave,  medical  and  health  benefits,
      holidays,  vacations and pensions,  provided such costs are based on wages
      and salaries  included in the Cost of the Work under  Subparagraphs  7.2.1
      through  7.2.3  subject to the  Provisions  of Article 5.

      7.3  SUBCONTRACT COSTS

      7.3.1 Payments made by the Contractor to Subcontractors in accordance with
      the requirements of the subcontracts.

                                       5





      7.4  COSTS  OF  MATERIALS  AND  EQUIPMENT  INCORPORATED  IN THE  COMPLETED
      CONSTRUCTION

      7.4.1  Costs,  including  transportation  and storage,  of  materials  and
      equipment   incorporated   or  to  be   incorporated   in  the   completed
      construction.

      7.4.2 Costs of materials described in the preceding  Subparagraph 7.4.1 in
      excess  of those  actually  installed  to allow for  reasonable  waste and
      spoilage.  Unused  excess  materials,  if any,  shall  become the  Owner's
      property at the completion of the Work.

      7.5 COSTS OF OTHER  MATERIALS AND  EQUIPMENT,  TEMPORARY  FACILITIES  AND
      RELATED ITEMS

      7.5.1  Costs,   including   transportation   and  storage,   installation,
      maintenance,  dismantling  and removal of materials,  supplies,  temporary
      facilities,  machinery, equipment, and hand tools not customarily owned by
      construction  workers, that are provided by the Contractor at the site and
      fully  consumed in the  performance of the Work; and cost of such items if
      not fully consumed,  whether sold to others or retained by the Contractor.
      Cost for items  previously  used by the Contractor  shall mean fair market
      value subject to the Provisions of Article 5.

      7.5.2 Rental charges for temporary facilities,  machinery,  equipment, and
      hand tools not customarily owned by construction workers that are provided
      by the  Contractor  at the site,  whether  rented from the  Contractor  or
      others,  and costs of  transportation,  installation,  minor  repairs  and
      replacements,  dismantling  and removal  thereof.  Rates and quantities of
      equipment rented shall be subject to the Owner's prior approval subject to
      the  Provisions  of Article 5.

      7.5.3 Costs of removal of debris from the site.

      7.5.4  Costs  of  document  reproductions,   facsimile  transmissions  and
      long-distance  telephone  calls,  postage  and  parcel  delivery  charges,
      telephone  service at the site and  reasonable  petty cash expenses of the
      site office subject to the Provisions of Article 5.

      7.5.5  That  portion  of  the  reasonable  expenses  of  the  Contractor's
      personnel  incurred while traveling in discharge of duties  connected with
      the Work subject to the Provisions of Article 5.

      7.5.6 Costs of materials and equipment  suitably  stored off the site at a
      mutually acceptable location, if approved in advance by the Owner.


                                       6





      7.6 MISCELLANEOUS COSTS

      7.6.1 That portion of  insurance  and bond  premiums  that can be directly
      attributed to this Contract subject to the Provisions of Article 5.

      7.6.2 Sales, use or similar taxes imposed by a governmental authority that
      are related to the Work.

      7.6.3 Fees and  assessments for the building permit and for other permits,
      licenses  and  inspections  for which the  Contractor  is  required by the
      Contract Documents to pay.

      7.6.4 Fees of laboratories  for tests required by the Contract  Documents,
      except  those  related  to  defective  or  nonconforming  Work  for  which
      reimbursement is excluded by Subparagraph 13.5.3 of AIA Document A201-1997
      or other  provisions  of the  Contract  Documents,  and  which do not fall
      within the scope of Subparagraph 7.7.3.

      7.6.5 Royalties and license fees paid for the use of a particular  design,
      process  or  product  required  by the  Contract  Documents;  the  cost of
      defending  suits or claims for  infringement of patent rights arising from
      such  requirement  of  the  Contract  Documents;   and  payments  made  in
      accordance with legal judgments against the Contractor resulting from such
      suits or claims and payments of settlements made with the Owner's consent.
      However,  such, costs of legal defenses,  judgments and settlements  shall
      not be included in the calculation of the  Contractor's  Fee or subject to
      the  Guaranteed  Maximum  Price.  If such  royalties,  fees and  costs are
      excluded  by the last  sentence  of  Subparagraph  3.17.1 of AIA  Document
      A201-1997 or other provisions of the Contract  Documents,  then they shall
      not be included in the Cost of the Work.

      7.6.6 Data processing  costs related to the Work subject to the Provisions
      of Article 5.

      7.6.7 Deposits lost for causes other than the  Contractor's  negligence or
      failure to fulfill a specific  responsibility to the Owner as set forth in
      the Contract Documents.

      7.6.8 Legal,  mediation and arbitration costs,  including attorneys' fees,
      other than those arising from disputes  between the Owner and  Contractor,
      reasonably  incurred by the Contractor in the  performance of the Work and
      with the Owner's  prior  written  approval;  which  approval  shall not be
      unreasonably withheld.

      7.6.9  Expenses  incurred in  accordance  with the  Contractor's  standard
      personnel  policy  for  relocation  and  temporary  living  allowances  of
      personnel  required for the Work,  if approved by the Owner subject to the
      Provisions of Article 5.

                                       7





      7.7 OTHER COSTS AND EMERGENCIES

      7.7.1 Other costs  incurred in the  performance  of the Work if and to the
      extent approved in advance in writing by the Owner.

      7.7.2  Costs  due to  emergencies  incurred  in taking  action to  prevent
      threatened  damage,  injury or loss in case of an emergency  affecting the
      safety of persons  and  property,  as provided  in  Paragraph  10.6 of AlA
      Document A201-1997.

      7.7.3 Costs of repairing or correcting damaged or nonconforming Work shall
      be  paid  by  the   contractor  who  damaged  the  Work  or  performed  it
      incorrectly.


ARTICLE 8      COSTS NOT TO BE REIMBURSED


      8.1 The Cost of the Work shall not include:

      8.1.1  Salaries  and  other  compensation  of the  Contractor's  personnel
      stationed at the  Contractor's  principal office or offices other than the
      site office,  except as specifically  provided in Subparagraphs  7.2.2 and
      7.2.3 or as may be provided in Article 14.

      8.1.2 Expenses of the Contractor's principal office and offices other than
      the site office.

      8.1.3 Overhead and general expenses,  except as may be expressly  included
      in Article 7.

      8.1.4  The  Contractor's  capital  expenses,  including  interest  on  the
      Contractor's capital employed for the Work.

      8.1.5 Rental  costs of machinery  end  equipment,  except as  specifically
      provided in Subparagraph 7.5.2.

      8.1.6 Except as provided in Subparagraph  7.7.3 of this  Agreement,  costs
      due to the negligence or failure to fulfill a specific  responsibility  of
      the  Contractor,  Subcontractors  and  suppliers  or  anyone  directly  or
      indirectly  employed  by any of them or for whose  acts any of them may be
      liable.

      8.1.7 Any cost not reasonably inferable from those described in Article 7.

      8.1.8 Costs,  other than costs  included in Change Orders  approved by the
      Owner, that would cause the Guaranteed Maximum Price to be exceeded.

      8.1.9  Costs and  Expenses  as  defined  in  Article 5 that are  otherwise
      included in the Lump Sum Fee and General Conditions.


ARTICLE 9      DISCOUNTS, REBATES AND REFUNDS

      9.1 All  discounts,  rebates and refunds obtained by the Contractor  shall
      accrue to the Cost of the Work.

                                        8




ARTICLE 10     SUBCONTRACTS AND OTHER AGREEMENTS

      10.1 Those portions of the Work that the Contractor  does not  customarily
      perform with the  Contractor's  own  personnel  shall be  performed  under
      subcontracts or by other appropriate  agreements with the Contractor.  The
      Owner may designate  specific persons or entities from whom the Contractor
      shall obtain bids if they meet Contractor's qualification requirement. The
      Contractor  shall obtain bids from  Subcontractors  and from  suppliers of
      materials  or  equipment  fabricated  especially  for the Work  and  shall
      deliver such bids to the  Architect or Owner's  Representative.  The Owner
      shall  then  timely  determine  with the  Contractor  which  bids  will be
      accepted.  The Contractor shall not be required to contract with anyone to
      whom the Contractor has reasonable objection.

      10.2 If a specific  bidder  among  those whose bids are  delivered  by the
      Contractor  to the  Architect  (1) is  recommended  to  the  Owner  by the
      Contractor;  (2) is qualified to perform that portion of the Work; and (3)
      has  submitted a bid that  conforms  to the  requirements of the  Contract
      Documents without reservations or exceptions,  but the Owner requires that
      another bid be  accepted,  then the  Contractor  may require that a Change
      Order be issued to adjust the  Guaranteed  Maximum Price by the difference
      between  the bid of the person or entity  recommended  to the Owner by the
      Contractor and the amount of the subcontract or other  agreement  actually
      signed with the person or entity designated by the Owner.

      10.3  Subcontracts  or other  agreements  shall conform to the  applicable
      payment  provisions  of this  Agreement,  and shall not be  awarded on the
      basis of cost plus a fee without the prior consent of the Owner.


 ARTICLE 11    ACCOUNTING RECORDS

      The  Contractor  shall keep full and detailed  accounts and exercise  such
      controls as may be necessary for proper  financial  management  under this
      Contract,  and the accounting and control systems shall be satisfactory to
      the Owner. The Owner and the Owner's  accountants shall be afforded access
      to, and shall be permitted to audit and copy,  the  Contractor's  records,
      books, correspondence,  instructions,  drawings,  receipts,  subcontracts,
      purchase  orders,  vouchers,  memoranda  and other data  relating  to this
      Contract,  and the  Contractor  shall preserve these for a period of three
      years after final payment, or for such longer period as may be required by
      law.


 ARTICLE 12 PAYMENTS

      12.1  PROGRESS PAYMENTS

      12.1.1 Based upon  Applications for Payment  submitted to the Architect by
      the Contractor and Certificates  for Payment issued by the Architect,  the
      Owner shall make  progress  payments on account of the Contract Sum to the
      Contractor as provided below and elsewhere in the Conract  Documents.  The
      Fixed Fee and General  Conditions amounts shall be paid in accordance with
      the attached Schedule of Payments.

      12.1.2 The period  covered by each  Application  for Payment  shall be one
      calendar month ending on the last day of the month, or as follows:

      12.1.3  Provided  that an  Application  for  Payment  is  received  by the
      Architect  not later than the 1st day of the month,  the Owner  shall make
      payment  to the  Contractor  not later  than the 1st day of the  following
      month.  If an Application  for Payment is received by the Architect  after
      the application  date fixed above,  payment shell be made by the Owner not
      later  than 30 days  after the  Architect  receives  the  Application  for
      Payment.

      12.1.4  With  each  Application  for  Payment  starting  with  the  second
      application,  the Contractor shall submit a Release of Lien and Claim from
      each  subcontractor  or  vendor  that  payments  have  been  made from the
      Application  for Payment  requested  by the  Contractor  for the  previous
      month.  The  Release of Lien and Claim shall show the amount paid for Work
      performed and the retainage  balance due for that Work.  The submission of
      Release of Lien and Claim shall continue until final  application at which
      time the Contractor shall submit Final Release of Lien and Claim for every
      subcontractor  and vendor  subject to receipt of such Final  Payment.  The
      Contractor  shall submit with its  Application  for Payment each month its
      Release  of Lien and Claims for all  payments  received  as of the date of
      application  and  subject to receipt of the current  application  payment.
      Such Release of Lien and Claim forms shall be approved by the Owner.

                                        9





      12.1.5  Each  Application  for  Payment  shall be based on the most recent
      schedule of values  submitted by the  Contractor  in  accordance  with the
      Contract  Documents.  The  schedule of values  shall  allocate  the entire
      Guaranteed  Maximum Price among the various  portions of the Work,  except
      that the  Contractor's  Fee shall be shown as a single  separate item. The
      schedule of values  shall be prepared in such form and  supported  by sucb
      data to  substantiate  its accuracy as the  Architect  may  acquire.  This
      schedule,  unless  objected to by the Architect,  shall be used as a basis
      for reviewing the Contractor's Applications for Payment.

      12.1.6 Applications for Payment shall show the percentage of completion of
      each  portion  of the  Work as of the  end of the  period  covered  by the
      Application for Payment.

      12.1.7 Subject to other provisions of the Contact Documents, the amount of
      each progress  payment shall be computed  based on the AIA G 702/703 Forms
      without retainage, except as provided in Section 12.1.8 herein:

      The  Contractor's  Lump  Sum  Fee  shall  be paid on a  monthly  basis  in
      proportion  to the  Cost  of  Work  to be paid  each  month.  The  General
      Conditions  amount shall be paid in accordance  with a mutually  agreeable
      schedule.

      12.1.8 Upon the Owner's prior approval,  payments to Subcontractors  shall
      be subject to retainage of not less than ten percent (10%).  The Owner and
      the Contractor shall agree upon a mutually acceptable procedure for review
      and  approval of payments  and  retention  for  Subcontractors.  Retainage
      amount   shall  be  reduced  to  5%  upon   completion   of  50%  of  such
      Subcontractor's  work in strict compliance with the Contract Documents and
      the Contract Time.

      12.1.9 In taking action on the Contractor's  Applications for Payment, the
      Architect  shall be entitled to rely on the accuracy and  completeness  of
      the  infomnation  furnished by the  Contractor  and shall not be deemed to
      represent  that the  Architect has made a detailed  examination,  audit or
      arithmetic  verification of the documentation submitted in accordance with
      Subparagraph  12.1.4 or other supporting data; that the Architect has made
      exhaustive or  continuous  on-site  inspections  or that the Architect has
      made examinations to ascertain how or for what purposes the Contractor has
      used  amounts   previously   paid  on  account  of  the   Contract.   Such
      examinations, audits and verifications, if required by the Owner, will be
      performed by the Owner's  accountants  acting in the sole  interest of the
      Owner.

      12.2 FINAL PAYMENT

      12.2.1  Final  payment,  constituting  the  entire  unpaid  balance of the
      Contract Sum, shall be made by the Owner to the Contractor when;

            .1 the  Contractor  has fully  performed the Contract except for the
            Contractor's   responsibility   to  correct   Work  as  provided  in
            Subparagraph 12.2.2 of AIA Document A201-1997,  and to satisfy other
            requirements, if any, which extend beyond final payment; and

            .2 a final Certificate for Payment has been issued by the Architect.

      12.2.2 The Owner's final  payment to the Contractor shall be made no later
      than 30 days after the issuance of the Architect's  final  Certificate for
      Payment, or as follows:

      12.2.3 The  Owner's  accountants  will review and report in writing on the
      Contractor's  final accounting  within 30 days after delivery of the final
      accounting to the Architect by the Contractor. Based upon such Cost of the
      Work  as  the  Owner's  accountants  report  to be  substantiated  by  the
      Contractor's  final  accounting,  and  provided  the  other  conditions  of
      Subparagraph  12.2.1 have been met, the Architect will,  within seven days
      after  receipt of the written  report of the Owner's  accountants,  either
      issue to the  Owner a final  Certificate  for  Payment  with a copy to the
      Contractor,  or  notify  the  Contractor  and  Owner  in  writing  of  the
      Architect's   reasons  for   withholding  a  certificate  as  provided  in
      Subparagraph 9.5.1 of the AIA Document A201-1997.  The time periods stated
      in this Subparagraph  12.2.3 supersede those stated in Subparagraph  9.4.1
      of the AIA Document A201-1997.

                                       10





       12.2.4  If the  Owner's  accountants  report  the  Cost  of the  Work  as
       substantiated  by the  Contractor's  final  accounting  to be  less  than
       claimed by the  Contractor,  the  Contractor  shall be entitled to demand
       arbitration  of the  disputed  amount  without a further  decision of the
       Architect.  Such demand for  arbitration  shall be made by the Contractor
       within  30  days  after  the  Contractor's  receipt  of  a  copy  of  the
       Architect's final Certificate for Payment;  failure to demand arbitration
       within  this  30-day  period  shall  result in the  substantiated  amount
       reported by the Owner's  accountants  becoming binding on the Contractor.
       Pending  a final  resolution  by  arbitration,  the  Owner  shall pay the
       Contractor the amount certified in the Architect's  final Certificate for
       Payment.

       12.2.5 If,  subsequent to final payment and at the Owner's  request,  the
       Contractor  incurs  costs  described  in  Article 7 and not  excluded  by
       Article 5 to correct  defective or  nonconforming  Work,  the Owner shall
       reimburse the Contractor  such costs and the  Contractors  Fee applicable
       thereto  on the same basis as if such  costs had been  incurred  prior to
       final payment,  but not in excess of the Guaranteed Maximum Price. If the
       Contractor has  participated in savings as provided in Paragraph 5.2, the
       amount of such savings shall be recalculated and appropriate credit given
       to the Owner in determining the net amount to be paid by the Owner to the
       Contractor.

ARTICLE 13     TERMINATION OR SUSPENSION

       13.1 The  Contract may be  terminated  by the Owner for  convenience,  as
       provided in Article 14 of AIA Document A201-1997.  However, the amount to
       be paid to the  Contractor  under  Subparagraph  14.1.3  of AIA  Document
       A201-1997 shall not exceed the amount the Contractor would be entitled to
       receive under  Paragraph 13.2 below.

       13.2 The Contract may be terminated by the Owner for cause as provided in
       Article 14 of AIA Document  A201-1997.  The amount, if any, to be paid to
       the Contractor under Subparagraph  14.2.4 of AIA Document A201-1997 shall
       not cause  the  Guaranteed  Maximum  Price to be  exceeded,  nor shall it
       exceed an amount calculated as follows:

       13.2.1 Take the Cost of the Work  incurred by the  Contractor to the date
       of termination;

       13.2.2  Add  the  Contractor's  General  Conditional  Fee  computed  upon
       approved  schedule of payments as of the date of termination  all Fee and
       General  Conditions  amounts  shall be  deemed  carried  when  billed  in
       accordance  with the Schedule of Payments to be included in Amendment No.
       1.

       13.2.3  Subtract the  aggregate of previous  payments  made by the Owner.

       13.2.3 The Owner shall also pay the Contractor fair compensation,  either
       by purchase or rental at the  election  of the Owner,  for any  equipment
       owned by the  Contractor  that the Owner elects to retain and that is not
       otherwise included in the Cost of the Work under Subparagraph  13.2.1. To
       the extent that the Owner elects to take legal assignment of subcontracts
       and purchase orders (including rental agreements),  the Contractor shall,
       execute and  deliver  all such papers and take all such steps,  including
       the legal assignment of such subcontracts and other contractual rights of
       the Contractor, as the Owner may require for the purpose of fully vesting
       in the Owner  the  rights  and  benefits  of the  Contractor  under  such
       subcontracts or purchase  orders.  Contractor shall be paid for all costs
       associated  with  assisting  Owner in such  assignment  or other  actions
       related to such subcontractors.

       13.3 The Work may be  suspended by the Owner as provided in Article 14 of
       AIA Document  A201-1997;  in such case, the Guaranteed  Maximum Price and
       Contract  Time shall be increased as provided in  Subparagraph  14.3.2 of
       AIA Document A201-1997, except that the term "profit" shall be understood
       to mean the  Contractor's  Fee as  described in  Subparagraphs  5.1.2 and
       Paragraph 6.4 of this Agreement.

                                       11







ARTICLE 14     MISCELLANEOUS PROVISIONS

       14.1  Where  reference  is made  in this  Agreement  to a  provision  AIA
       Document A201-1997 or another Contract Document,  the reference refers to
       that  provision as amended of  supplemented  by other  provisions  of the
       Contract Documents.

       14.2 Payments due and unpaid under the Contract  shall bear interest from
       the date  payment  is due at the rate  stated  below,  or in the  absence
       thereof,  at the  legal  rate  prevailing  from time to time at the place
       where the Project is located.

       14.3 The Owner's representative is: Phillip Berman

       14.4 The Contractor's representative is: Larry Allocco

       14.5  Neither  the Owner's nor the  Contractors  representative  shall be
       changed without ten days' written notice to the other party.

       14.6 Other provisions:  In no event shall Contractor or its affiliates be
       liable to Owner  whether  based upon  contract,  strict  liability,  tort
       (including  negligence)  or any  other  legal  theory  for any  indirect,
       incidental,  consequential,  or special damages of any nature  whatsoever
       including without limitation:  production related losses and expenses due
       to loss of use or  shutdown,  loss of actual or  anticipated  profits  or
       revenues,  increased  operating  expense,  costs  of or due  to  business
       interruption or downtime, cost of capital or interest expense on shutdown
       equipment or facility,  overhead and other costs for unrealized  work and
       services,  increased overhead expenses due to loss of production, loss of
       market share, or claims by customers due to missed deliveries, except for
       such damages caused by the willful misconduct of Contractor.

ARTICLE 15     ENUMERATION OP CONTRACT DOCUMENTS

       15.1 The  Contract  Documents,  except  for  Modifications  issued  after
       execution of this Agreement, are enumerated as follows:

       15.1.1  The  Agreement  is this  executed  Agreement  Between  Owner  and
       Contractor, AIA Document Al11-1997 as modified.

       15.1.2  The  General  Conditions  are the  1997  edition  of the  General
       Conditions of the Contract for  Construction,  AIA Document  A201-1997 as
       modified and attached hereto as Exhibit "__".

       15.1.3 The Specifications are those contained in the Project Manual dated
       as in Subparagraph 15.1.3, and are as follows:

       Section                    Title                    Pages


       15.1.4 The Drawings are as follows, and are dated unless a different date
       is shown below:

       Number                     Title                    Pages


                                       12





       15.15 The Addenda, if any, are as follows:

       Number                     Title                    Pages


       Portions of Addenda relating to bidding  requirements are not part of the
       Contract Documents unless the bidding requirements are also enumerated in
       this Article 15.

       15.1.6 Other Documents,  if any,  forming part of the Contract  Documents
       are as follows:


ARTICLE 16     INSURANCE AND BONDS


       This Agreement is entered into as of the day and year first written above
       and is  executed  in at least three  original  copies of  which one is to be
       delivered to the Contractor, and the remainder to the Owner.

/s/ Morad Tahbaz                             /s/ Terry Towle
- --------------------------------             -----------------------------------
OWNER (SIGNATURE)                            CONTRACTOR (SIGNATURE)


Morad Tahbaz                                 Terry Towle
- --------------------------------             -----------------------------------
Morad Tahbaz                                 Terry Towle
Executive V.P.                               Vice President
(Printed name and title)                     (Printed name and title)


                                       13



              GENERAL CONDITIONS OF THE CONTRACT FOR CONSTRUCTION


                                    ARTICLE 1
                      GENERAL PROVISIONS BASIC DEFINITIONS

1.1.1  The  Contract  Documents  consist  of the  Agreement  between  Owner  and
Contractor  (hereinafter  the Agreement),  Conditions of the Contract  (General,
Supplementary and other Conditions),  Drawings,  Specifications,  Addenda issued
prior to execution of the Contract,  other documents listed in the Agreement and
Modifications  issued after  execution of the Contract.  A Modification is (1) a
written  amendment to the Contract  signed by both parties,  (2) a Change Order,
(3) a Construction Change Directive or (4) a written order for a minor change in
the  Work  issued  by  the  Architect.  Unless  specifically  enumerated  in the
Agreement, the Contract Documents do not include other documents such as bidding
requirements  (advertisement  or  invitation  to bid,  Instructions  to Bidders,
sample forms,  the  Contractor's  bid or portions of Addenda relating to bidding
requirements).

1.1.2 THE CONTRACT The Contract  Documents  form the Contract for  Construction.
The Contract represents the entire and integrated  agreement between the parties
hereto and supersedes prior negotiations,  representations or agreements, either
written or oral. The Contract may be amended or modified only by a Modification.
The  Contract   Documents  shall  not  be  construed  to  create  a  contractual
relationship of any kind (1) between the Architect and  Contractor,  (2) between
the Owner and a Subcontractor  or  Sub-subcontractor,  (3) between the Owner and
Architect  or (4)  between  any  persons  or  entities  other than the Owner and
Contractor.  The  Architect  shall,  however,  be  entitled to  performance  and
enforcement of obligations under the Contract intended to facilitate performance
of the Architect's duties.

1.1.3 THE WORK
The term "Work" means the  construction  and  services  required by the Contract
Documents,  whether  completed  or partially  completed,  and includes all other
labor,  materials,  equipment  and  services  provided  or to be provided by the
Contractor to fulfill the Contractor's obligations.  The Work may constitute the
whole or a part of the Project.

1.1.4 THE PROJECT
The  Project is the total  construction  of which the Work  performed  under the
Contract Documents may be the whole or a part and which may include construction
by the Owner or by separate contractors.

1.1.5 THE DRAWINGS
The Drawings are the graphic and  pictorial  portions of the Contract  Documents
showing the design,  location and  dimensions of the Work,  generally  including
plans, elevations, sections, details, schedules and diagrams.

1.1.6 THE SPECIFICATIONS
The Specifications are that portion of the Contract Documents  consisting of the
written  requirements   for  materials,   equipment,   systems,   standards  and
workmanship for the Work, and performance of related services.

1.1.7 THE PROJECT MANUAL
The  Project  Manual is a volume  assembled  for the Work which may  include the
bidding   requirements,   sample   forms,   Conditions   of  the   Contract  and
Specifications.

1.2 CORRELATION AND INTENT OF THE CONTRACT DOCUMENTS

1.2.1 The intent of the Contract Documents is to include all items necessary for
the proper execution and completion of the Work by the Contractor.  The Contract
Documents are complementary,  and what is required by one shall be as binding as
if  required  by all;  performance  by the  Contractor  shall be required to the
extent consistent with the Contract Documents.

1.2.2 Organization of the Specifications into divisions,  sections and articles,
and  arrangement  of Drawings  shall not control the  Contractor in dividing the
Work among  Subcontractors or in establishing the extent of Work to be performed
by any trade.

1.2.3  Unless  otherwise  stated in the  Contract  Documents,  words  which have
well-known technical or construction  industry meanings are used in the Contract
Documents in accordance with such recognized meanings.

                                       -1-





1.3     CAPITALIZATION

1.3.1 Terms capitalized in these General  Conditions include those which are (1)
specifically  defined,  (2) the  titles  of  numbered  articles  and  identified
references to Paragraphs,  Subparagraphs  and Clauses in the document or (3) the
titles of other documents published by the American Institute of Architects.

1.4     INTERPRETATION

1.4.1  In the  interest  of  brevity  the  Contract  Documents  frequently  omit
modifying words such as "all" and "any" and articles such as "the" and "an," but
the fact that a modifier or an article is absent from one  statement and appears
in another is not intended to affect the interpretation of either statement.

1.5     EXECUTION OF CONTRACT DOCUMENTS

1.5.1 The Contract  Documents  shall be signed by the Owner and  Contractor.  If
either the Owner or Contractor  or both do not sign all the Contract  Documents,
the Architect shall identify such unsigned Documents upon request.

1.5.2 Execution of the Contract by the Contractor is a  representation  that the
Contractor has visited the site, become generally familiar with local conditions
under which the Work is to be performed  and  correlated  personal  observations
with requirements of the Contract Documents.

1.6     OWNERSHIP AND USE OF DRAWINGS,  SPECIFICATIONS  AND OTHER INSTRUMENTS OF
        SERVICE

1.6.1 The  Drawings,  Specifications  and other  documents,  including  those in
electronic form,  prepared by the Architect and the Architect's  consultants are
Instruments  of Service  through which the Work to be executed by the Contractor
is described.  The Contractor may retain one record set.  Neither the Contractor
nor any Subcontractor, Sub-subcontractor or material or equipment supplier shall
own or claim a copyright in the  Drawings,  Specifications  and other  documents
prepared by the Architect or the Architect's  consultants,  and unless otherwise
indicated  the  Architect and the  Architect's  consultants  shall be deemed the
authors of them and will retain all common  law,  statutory  and other  reserved
rights,  in addition to the  copyrights.  All copies of  Instruments of Service,
except the Contractor's  record set, shall be returned or suitably accounted for
to the Architect, on request, upon completion of the Work.

The Drawings,  Specifications  and other documents prepared by the Architect and
the Architect's consultants, and copies thereof furnished to the Contractor, are
for use  solely  with  respect to this  Project.  They are not to be used by the
Contractor  or any  Subcontractor,  Sub-subcontractor  or material or  equipment
supplier on other projects or for additions to this Project outside the scope of
the Work without the specific  written  consent of the Owner,  Architect and the
Architect's consultants. The Contractor, Subcontractors,  Sub-subcontractors and
material or equipment  suppliers are authorized to use and reproduce  applicable
portions of the Drawings,  Specifications  and other  documents  prepared by the
Architect  and the  Architect's  consultants  appropriate  to and for use in the
execution of their Work under the Contract Documents. All copies made under this
authorization  shall bear the statutory  copyright  notice, if any, shown on the
Drawings,  Specifications  and other documents prepared by the Architect and the
Architect's  consultants.  Submittal or distribution to meet official regulatory
requirements  or for other purposes in connection with this Project is not to be
construed  as  publication  in  derogation  of the  Architect's  or  Architect's
consultants' copyrights or other reserved rights.

                                    ARTICLE 2
                                      OWNER

2.1     GENERAL

2.1.1 The Owner is the person or entity  identified as such in the Agreement and
is referred to throughout the Contract  Documents as if singular in number.  The
Owner  shall  designate  in  writing a  representative  who shall  have  express
authority  to bind the Owner with respect to all matters  requiring  the Owner's
approval or authorization.  Except as otherwise provided in Subparagraph  4.2.1,
the Architect does not have such authority.  The term "Owner" means the Owner or
the Owner's authorized representative.

2.1.2 The Owner  shall  furnish  to the  Contractor  within  fifteen  days after
receipt  of a  written  request,  information  necessary  and  relevant  for the
Contractor to evaluate,  give notice of or enforce mechanic's lien rights.  Such
information  shall include a correct  statement of the record legal title to the
property on which the Project is located,  usually  referred to as the site, and
the Owner's interest therein.

                                       -2-




2.2     INFORMATION AND SERVICES REQUIRED OF THE OWNER

2.2.1 The Owner  shall,  at the  written  request  of the  Contractor,  prior to
commencement  of the Work and thereafter,  furnish to the Contractor  reasonable
evidence  that  financial  arrangements  have been made to fulfill  the  Owner's
obligations under the Contract. Furnishing of such evidence shall be a condition
precedent to  commencement or  continuation of the Work. After such evidence has
been furnished, the  Owner shall not materially vary such financial arrangements
without prior, notice to the Contractor.

2.2.2 Except for permits and fees,  including those required under  Subparagraph
3.7.1,  which  are the  responsibility  of the  Contractor  under  the  Contract
Documents,  the Owner shall secure and pay for necessary approvals,  easemments,
assessments and charges required for construction, use or occupancy of permanent
structures or for permanent changes in existing facilities.

2.2.3 The Owner shall furnish surveys describing physical characteristics, legal
limitations  and  utility  locations  for the site of the  Project,  and a legal
description  of the  site.  The  Contractor  shall  be  entitled  to rely on the
accuracy  of  information  furnished  by the  Owner but  shall  exercise  proper
precautions relating to the safe performance of the Work.

2.2.4 Information or services  required of the Owner by the Contract  Documents,
including without limitation all design and architectural services,  except such
services  specifically  provided by Contractor,  shall be furnished by the Owner
and provided  with  reasonable  promptness.  Any other  information  or services
relevant to the  Contractor's  performance of the Work under the Owner's control
shall be furnished by the Owner after  receipt from the  Contractor of a written
request for such information or services.

2.2.5 Unless otherwise provided in the Contract  Documents,  the Contractor will
be furnished, free of charge, such copies of Drawings and Project Manuals as are
reasonably necessary for execution of the Work.

2.3     OWNER'S RIGHT TO STOP THE WORK

2.3.1 If the Contractor fails to correct Work which is not in accordance with the
requirements of the Contract  Documents or persistently  fails to carry out Work
in  accordance  with  the  Contract  Documents,  the  Owner  may,  after  giving
Contractor  notice of such failure and the  reasonable  opportunity to cure such
failure,  issue a written  order,  to the  Contractor  to stop the Work,  or any
portion thereof,  until the cause for such order has been  eliminated;  however,
the  right of the  Owner to stop the Work  shall  not give rise to a duty on the
part of the Owner to exercise  this right for the benefit of the  Contractor  or
any other person or entity, except to the extent required by Subparagraph 6.1.3.

2.4     OWNER'S RIGHT TO CARRY OUT THE WORK

2.4.1 If the Contractor defaults or neglects to carry out the Work in accordance
with the Contract Documents and fails within a seven-day period after receipt of
written  notice  from the Owner to  commence  and  continue  correction  of such
default or  neglect  with  diligence  and  promptness,  the Owner may after such
seven-day  period give the  Contractor a second  written  notice to correct such
deficiencies  within a three-day period. If the Contractor within such three-day
period  after  receipt of such second  notice  fails to commence and continue to
correct any deficiencies, the Owner may, without prejudice to other remedies the
Owner may have pursuant to this Agreement,  correct such  deficiencies.  In such
case an appropriate Change Order shall be issued deducting from payments then or
thereafter  due  the  Contractor   the  reasonable   cost  of  correcting   such
deficiencies in excess of the Contract Sum. Such action by the Owner and amounts
charged to the  Contractor  are both subject to prior approval of the Architect.
If payments then or thereafter  due the  Contractor  are not sufficient to cover
such amounts,  the  Contractor  shall be  responsible to the extent set forth in
Section 14.2.

                                    ARTICLE 3
                                   CONTRACTOR
3.1     GENERAL

3.1.1 The Contractor is the person or entity identified as such in the Agreement
and is referred to throughout  the Contract  Documents as if singular in number.
The term  "Contractor"  means  the  Contractor  or the  Contractor's  authorized
representative.

3.1.2 The  Contractor  shall  perform the Work in  accordance  with the Contract
Documents.


                                       -3-





3.1.3 The Contractor shall not be relieved of obligations to perform the Work in
accordance  with the Contract  Documents  either by  activities or duties of the
Architect  in the  Architect's  administration  of the  Contract,  or by  tests,
inspections  or  approvals  required  or  performed  by  persons  other than the
Contractor.


3.2     REVIEW OF CONTRACT DOCUMENTS AND FIELD CONDITIONS BY CONTRACTOR

3.2.1 Since the Contract  Documents  are  complementary,  before  starting  each
portion of the Work,  the  Contractor  shall  carefully  study and  compare  the
various  Drawings and other Contract  Documents  relative to that portion of the
Work, as well as the information furnished by the Owner pursuant to Subparagraph
2.2.3, shall take field measurements of any existing  conditions related to that
portion of the Work and shall observe any  conditions at the site  affecting it.
These  obligations  are for the  purpose  of  facilitating  construction  by the
Contractor  and are not for the purpose of  discovering  errors,  omissions,  or
inconsistencies in the Contract Documents; however, any errors,  inconsistencies
or omissions  discovered  by the  Contractor  sha11 be reported  promptly to the
Architect  as a  request  for  information  in such  form as the  Architect  may
require.

3.2.2 Any design errors or omissions noted by the Contractor  during this review
shall be  reported  promptly to the  Architect,  but it is  recognized  that the
Contractor's review is made in the Contractor's capacity as a contractor and not
as a licensed design professional unless otherwise  specifically provided in the
Contract  Documents.  The  Contractor  is not  required  to  ascertain  that the
Contract Documents are in accordance with applicable laws, statutes, ordinances,
building codes, and rules and regulations,  but any nonconformity  discovered by
or made known to the Contractor shall be reported promptly to the Architect.

3.2.3  If the  Contractor  believes  that  additional  cost or time is  involved
because of clarifications or instructions issued by the Architect in response to
the Contractor's  notices or requests for information  pursuant to Subparagraphs
3.21 and 3.2.2,  the  Contractor  shall make Claims as provided in  Subparagraph
4.3.6 and 4.3.7.  The  Contractor  shall not be liable to the Owner or Architect
for damages resulting from errors,  inconsistencies or omissions in the Contract
Documents or for  differences  between field  measurements or conditions and the
Contract Documents unless the Contractor  recognized such error,  inconsistency,
omission or difference and knowingly failed to report it to the Architect.

3.3     SUPERVISION AND CONSTRUCTION PROCEDURES

3.3.1 The Contractor sha11 supervise and direct the Work, using the Contractor's
best skill and attention.  The Contractor  shall be solely  responsible  for and
have  control  over  construction  means,  methods,  techniques,  sequences  and
procedures and for  coordinating   all  portions of the Work under the Contract,
unless the Contract Documents give other specific instructions  concerning these
matters.  If  the  Contract  Documents  give  specific  instructions  concerning
construction means, methods, techniques, sequences or procedures, the Contractor
shall evaluate the jobsite safety thereof and, except as stated below,  shall be
responsible for the jobsite safety of such means, methods, techniques, sequences
or  procedures.   If  the  Contractor   determines  that  such  means,  methods,
techniques,  sequences or procedures may not be safe, the Contractor  sha11 give
timely written notice to the Owner and Architect and shall not proceed with that
portion of the Work without further written instructions from the Architect.  If
the Contractor is then instructed to proceed with the required  means,  methods,
techniques,  sequences or procedures  without  acceptance of changes proposed by
the Contractor,  the Owner shall be solely responsible for any resulting loss or
damage.

3.3.2 The Contractor shall be responsible to the Owner for acts and omissions of
the Contractor's employees,  Subcontractors and their agents and employees,  and
other  persons or entities  performing  portions of the Work for or on behalf of
the Contractor or any of its  Subcontractors  as if such acts and omissions were
the conduct of the Contractor.

3.4     LABOR AND MATERIALS

3.4.1 Unless otherwise provided in the Contract Documents,  the Contractor shall
provide and pay for labor, materials,  equipment,  tools, construction equipment
and machinery, water, heat, utilities,  transportation, and other facilities and
services  necessary  for proper  execution and  completion of the Work,  whether
temporary or permanent and whether or not  incorporated or to be incorporated in
the Work.

3.4.2 The Contractor may make  substitutions only with the consent of the Owner,
after evaluation by the Architect and in accordance with a Change Order.

3.4.3 The Contractor  shall enforce  strict  discipline and good order among the
Contractor's  employees  and  other  persons  carrying  out  the  Contract.  The
Contractor  shall not permit  employment of unfit persons or persons not skilled
in tasks assigned to them.

                                       -4-





3.5     WARRANTY

        The  Contractor  warrants to the Owner and Architect  that materials and
        equipment  furnished  under the Contract will be of good quality and new
        unless otherwise required or permitted by the Contract  Documents,  that
        the Work will be free from defects not inherent in the quality  required
        or permitted,  and that the Work will conform to the requirements of the
        Contract Documents. Work not conforming to these requirements, including
        substitutions  not properly  approved and authorized,  may be considered
        defective.  The  Contractor's  warranty  excludes  remedy  for damage or
        defect caused by abuse,  modifications  not executed by the  Contractor,
        improper or insufficient maintenance, improper operation, or normal wear
        and tear and normal usage. If required by the Architect,  the Contractor
        shall  furnish  satisfactory  evidence  as to the  kind and  quality  of
        materials and equipment. Contractor's  warranty obligations shall extend
        for a period of one year after  Substantial  Completion of the Work. All
        warranties or guarantees  made by the Contractor in connection  with its
        services  are  limited  to  those  set  forth  in  this  paragraph.  The
        Contractor makes no other warranties or guarantees,  express or implied,
        including any WARRANTY OF  MERCHANTABILITY  OR WARRANTY OR FITNESS FOR A
        PARTICULAR PURPOSE.

        The Contractor  shall, for the protection of the Owner,  demand from all
        vendors  from  which  the  Contractor  procures  machinery,   equipment,
        materials  or  services  guarantees  with  respect  to  such  machinery,
        equipment,  materials and services, which shall be made available to the
        Owner  to  the  full  extent  of the  terms  thereof.  The  Contractor's
        liability  with  respect  to such  machinery,  equipment  materials  and
        services shall be limited to procuring  guarantees from such vendors and
        rendering  all  reasonable  assistance  to the Owner for the  purpose of
        enforcing the same."

3.6     TAXES

3.6.1 The Contractor  shall pay sales,  consumer,  use and similar taxes for the
Work provided by the Contractor which are legally enacted when bids are received
or negotiations  concluded,  whether or not yet effective or merely scheduled to
go into effect.

3.7     PERMITS, FEES AND NOTICES

3.7.1  Unless  otherwise  provided in the  Contract  Documents,  the Owner shall
secure and pay for the building permit and other permits and governmental  fees,
licenses and inspections  necessary for proper  execution  and completion of the
Work which are customarily secured after execution of the Contract and which are
legally required when bids are received or negotiations concluded.

3.7.2 The  Contractor  shall  comply  with and give  notices  required  by laws,
ordinances,   rules,   regulations  and  lawful  orders  of  public  authorities
applicable to performance of the Work.

3.7.3 It is not the Contractor's  responsibility  to ascertain that the Contract
Documents are in accordance with applicable laws, statutes, ordinances, building
codes,  and rules and  regulations.  However,  if the  Contractor  observes that
portions of the Contract  Documents are at variance  therewith,  the  Contractor
shall promptly notify the Architect and Owner in writing,  and necessary changes
shall be accomplished by appropriate Modification.

3.7.4  If the  Contractor  performs  Work  knowing  it to be  contrary  to laws,
statutes,  ordinances,  building codes,  and rules and regulations  without such
notice to the  Architect  and Owner,  the  Contractor  shall assume  appropriate
responsibility   for  such  Work  and  shall  bear  the  costs  attributable  to
correction.

3.8     ALLOWANCES

3.8.1 The Contractor shall include in the Contract Sum all allowances  stated in
the Contract  Documents.  Items covered by allowances shall be supplied for such
amounts  and by such  persons  or  entities  as the  Owner may  direct,  but the
Contractor  shall not be  required  to employ  persons or  entities  to whom the
Contractor has reasonable objection.

3.8.2 Unless otherwise provided in the Contract Documents:

      .1   allowances  shall cover the cost to the  Contractor  of materials and
           equipment  delivered  at the  site  and  all  required   taxes,  less
           applicable trade discounts;


                                       -5-




      .2   Contractor's  costs for  unloading  and handling at the site,  labor,
           installation costs, overhead,  profit and other expenses contemplated
           for stated  allowance  amounts  shall be included in the Contract Sum
           but not in the allowances;

      .3   whenever  costs are more than or less than  allowances,  the Contract
           Sum shall be adjusted  accordingly by Change Order. The amount of the
           Change Order shall reflect (1) the  difference  between  actual costs
           and  the  allowances  under.   Clause  3.8.2.1  and  (2)  changes  in
           Contractors costs under Clause 3.8,2.2.

3.8.3 Materials and equipment under an allowance shall be selected by the Owner
in sufficient time to avoid delay in the Work.

3.9     PROJECT REPRESENTATIVE

3.9.1 The  Contractor  and Owner  shall  employ a competent  Representative  and
necessary  assistants  who shalll be in  attendance  at the Project  site during
performance of the Work. Such  Representative  shall represent the Parties,  and
communications  given to the  Representative  shall be as binding as if given to
such party.  Important  communications  shall be  confirmed  in  writing.  Other
communications shall be similarly confirmed on written request in each case.

3.10    CONTRACTOR'S CONSTRUCTION SCHEDULES

3.10.1 The Contractor,  promptly after being awarded the Contract, shall prepare
and  submit  for  the  Owner's  and   Architect's   information  a  Contractor's
construction  schedule for the Work. The construction schedule shall provide for
the commencement,  sequence and time of performance of the Work in such a manner
as to substantially complete the Work in accordance with the Contract Documents.
The construction  schedule shall be revised at appropriate intervals as required
by the  conditions  of the Work and  Project,  shall be  related  to the  entire
Project to the extent required by the Contract Documents,  and shall provide for
expeditious and practicable execution of the Work.

3.10.2 The  Contractor  shall  prepare  and keep  current,  for the  Architect's
approval,  a schedule of submittals  which is coordinated  with the Contractor's
construction  schedule  and  allows  the  Architect  reasonable  time to  review
submittals.

3.10.3 The Contractor shal1 perform the Work in general accordance with the most
recent schedules submitted to the Owner and Architect.

3.11    DOCUMENTS AND SAMPLES AT THE SITE

3.11.1 The  Contractor  shall maintain at the site for the Owner one record copy
of the Drawings, Specifications, Addenda, Change Orders and other Modifications,
in good order and marked  currently to record field changes and selections  made
during  construction,  and one record copy of approved  Shop  Drawings,  Product
Date, Samples and similar required  submittals.  These shall be available to the
Architect  and shall be delivered to the  Architect  for  submittal to the Owner
upon completion of the Work as a cost of the Work.

3.12    SHOP DRAWINGS, PRODUCT DATA AND SAMPLES

3.12.1 Shop Drawings are drawings,  diagrams, schedules and other data specially
prepared for the Work by the Contractor or a  Subcontractor,  Sub-subcontractor,
manufacturer, supplier or distributor to illustrate some portion of the Work.

3.12.2 Product Data are illustrations,  standard schedules,  performance charts,
instructions,  brochures,  diagrams  and  other  information  furnished  by  the
Contractor to illustrate materials or equipment for some portion of the Work.

3.12.3 Samples are physical  examples which illustrate  materials,  equipment or
workmanship and establish standards by which the Work will be judged.

3.12.4 Shop  Drawings,  Product  Data,  Samples and similar  submittals  are not
Contract  Documents.  The purpose of their submittal is to demonstrate for those
portions of the Work for which submittals are required by the Contract Documents
the way by which the Contractor proposes to conform to the information given and
the design concept expressed in the Contract Documents.  Review by the Architect
is subject to the limitations of Subparagraph  4.2.7.  Informational  submittals
upon which the  Architect  is not expected to take  responsive  action may be so
identified in the Contract  Documents.  Submittals which are not required by the
Contract Documents may be returned by the Architect without action.


                                       -6-




3.12.5 The Contractor  shall review for compliance with the Contract  Documents,
approve and submit to the Architect  Shop  Drawings,  Product Data,  Samples and
similar submittals required by the Contract Documents with reasonable promptness
and in such  sequence as to cause no delay in the Work or in the  activities  of
the  Owner or of  separate  contractors.  Submittals  which  are not  marked  as
reviewed  for  compliance  with  the  Contract  Documents  and  approved  by the
Contractor may be returned by the Architect without action.

3.12.6 By approving and  submitting  Shop  Drawings,  Product Data,  Samples and
similar submittals, the Contractor represents that the Contractor has determined
and verified  materials,  field  measurements  and field  construction  criteria
related thereto,  or will do so, and has checked and coordinated the information
contained  within such  submittals  with the  requirments of the Work and of the
Contract Documents subject to the provisions of Section 3.12.10.

3.12.7  The  Contractor  shall  perform  no  portion  of the Work for  which the
Contract Documents require submittal and review of Shop Drawings,  Product Data,
Samples or similar  submittals until the respective  submittal has been approved
by the Architect.

3.12.8 The Work shall be in accordance with approved  submittals except that the
Contractor  shall  not  be  relieved  of  responsibility   for  deviations  from
requirements  of the  Contract  Documents  by the  Architect's  approval of Shop
Drawing,  Product Data,  Samples or similar submittals unless the Contractor has
specifically  informed the Architect in writing of such deviation at the time of
submittal  and (1) the  Architect  has given  written  approval to the  specific
deviation as a minor change in the Work,  or (2) a Change Order or  Construction
Change Directive has been issued authorizing the deviation. The Contractor shall
not be relieved of  responsibility  for errors or  omissions  in Shop  Drawings,
Product Data, Samples or similar submittals by the Architect's approval thereof.

3.12.9  The  Contractor  shall  direct  specific  attention,  in  writing  or on
resubmitted  Shop  Drawings,  Product Data,  Samples or similar  submittals,  to
revisions other than those requested by the Architect on previous submittals. In
the absence of such written  notice the  Architect's  approval of a resubmission
shall not apply to such revisions.

3.12.10 The Contractor  shall not be required to provide  professional  services
which  constitute the practice of  architecture  or  engineering  except for the
design/build  services related to the pre-engineered  metal building  (including
its HVAC,  plumbing  and  electrical  services)  portion of the Work for the new
Paddock as described in Amendment No. 1, unless the Contractor  needs to provide
such  services  in order  to carry  out the  Contractor's  responsibilities  for
construction  means,  methods,   techniques,   sequences  and  procedures.   The
Contractor shall not be required to provide  professional  services in violation
of applicable law. The Contractor  shall cause such services or certification to
be provided by a properly  licensed  design  professional,  whose  signature and
seal, if necessary, shall appear on all drawings, calculations,  specifications,
certifications,  Shop  Drawings  and  other  submittals  prepared  by  any  such
professional. Shop Drawings and other submittals related to the Work designed or
certified  by  such  professional,  if  prepared  by  others,  shall  bear  such
professional's  written approval when submitted to the Architect.  The Owner and
the  Architect  shall be  entitled  to rely  upon  the  adequacy,  accuracy  and
completeness  of the  services,  certifications  or approvals  performed by such
design  professionals,  provided the Owner and Architect  have  specified to the
Contractor all  performance and design criteria that such services must satisfy.
Pursuant to this  Subparagraph  3.12.10,  the Architect will review,  approve or
take other  appropriate  action on  submittals  only for the limited  purpose of
checking for conformance with information given and the design concept expressed
in the Contract  Documents.  The  Contractor  shall not be  responsible  for the
adequacy  of the  performance  or  design  criteria  required  by  the  Contract
Documents.

3.13 The Owner shall  obtain  title to all  drawings,  specifications,  computer
programs or other information  which were initially  developed by the Contractor
during  and solely for the  purpose of the  Services  and which are based on the
Owner's proprietary  information.  If the Owner makes or authorizes reuse of any
such  documents or information  produced by the  Contractor  without the express
written consent of the  Contractor,  the Owner assumes full  responsibility  and
shall indemnify and hold the Contractor harmless from any and all risks involved
in such reuse.  Nothing in this  Agreement  shall be  construed  as limiting the
Contractor's  ownership of or rights to use its basic  know-how,  experience and
skills, and the experience and skills of its employees,  whether or not acquired
during  performance of the Services to perform any  engineering, design or other
services  for any other party.  Except as stated  above,  computer  programs and
other information used or prepared by the Contractor  pursuant to this Agreement
which the Owner may require the  Contractor  to supply in  accordance  with this
Agreement  shall remain the property of the Contractor;  however,  the Owner has
the right to use such information if such  information is incorporated  into the
Services.

3.13.1 The Contractor shall confine operations at the site to areas permitted by
law,  ordinances,  permits and the Contract Documents and shall not unreasonably
encumber the site with materials or equipment.

                                       -7-





3.14     CUTTING AND PATCHING

3.14.1 The  Contractor  shall be  responsible  for cutting,  fitting or patching
required to complete the Work.

3.14.2  The  Contractor  shall not  damage or  endanger a portion of the Work or
fully or partially completed  construction of the Owner or separate  contractors
by cutting, patching or otherwise altering such construction,  or by excavation.
The Contractor shall not cut or otherwise alter  such  construction by the Owner
or a separate  contractor  except with written  consent of the Owner and of such
separate  contractor,  such  consent  shall not be  unreasonably  withheld.  The
Contractor  shall  not  unreasonably  withhold  from  the  Owner  or a  separate
contractor the Contractor's consent to cutting or otherwise altering the work.

3.15    CLEANING UP

3.15.1 The  Contractor  shall keep the premises and  surrounding  area free from
accumulation  of waste  materials  or  rubbish  caused by  operations  under the
Contract.  At completion of the Work, the Contractor shall remove from and about
the Project waste  materials,  rubbish,  the  Contractor's  tools,  construction
equipment, machinery and surplus materials.

3.15.2  If the  Contractor  fails  to  clean  up as  provided  in  the  Contract
Documents,  the Owner may do so and the cost  thereof  shall be  charged  to the
Contractor,  provided  Owner has given  notice  and  reasonable  opportunity  to
perform such services.

3.16    ACCESS TO WORK

3.16.1 The Contractor  shall provide the Owner and Architect  access to the Work
in preparation and progress wherever located.

3.17    ROYALTIES, PATENTS AND COPYRIGHTS

3.17.1 The  Contractor  shall  include as a term or condition  of each  Purchase
Order  employed by it in the  performance  of the Work a patent  indemnification
extending  from  vendor  under the  Purchase  Order to the Owner for the  vendor
to defend  suits or claims for  infringement of copyrights and patent rights and
shall hold the Owner and Architect  harmless from loss on account  thereof,  but
shall not be  responsible  for such  defense or loss when a  particular  design,
process or product of a particular  manufacturer or manufacturers is required by
the  Contract  Documents  or where the  copyright  violations  are  contained in
Drawings,  Specifications or other documents prepared by the Owner or Architect.
However,  if the  Contractor  has reason to believe  that the  required  design,
process or product is an infringement of a copyright or a patent, the Contractor
shall notify the Owner of such infringement.

3.18    INDEMNIFICATION

3.18.1 To the fullest extent permitted by law the Contractor shall indemnify and
hold  harmless the Owner,  Architect,  Architect's  consultants,  and agents and
employees of any of them from and against claims,  damages, losses and expenses,
including but not limited to attorneys'  fees,  arising out of or resulting from
performance of the Work,  provided that such claim,  damage,  loss or expense is
attributable  to bodily injury,  sickness,  disease or death, or to injury to or
destruction of tangible  property  (other than the Work itself or other existing
facilities of Owner),  but only to the extent  caused by the  negligent  acts or
omissions of the  Contractor,  a  Subcontractor,  anyone  directly or indirectly
employed  by them or anyone  for whose acts they may be  liable,  regardless  of
whether or not such claim,  damage, loss or expense is caused in part by a party
indemnified  hereunder.  Such  obligation  shall  not be  construed  to  negate,
abridge,  or reduce  other  rights  or  obligations  of  indemnity  which  would
otherwise exist as to a party or person described in this Paragraph 3.18.

3.18.2 In claims against any person or entity  indemnified  under this Paragraph
3.18 by an employee  of the  Contractor,  a  Subcontractor,  anyone  directly or
indirectly  employed  by them or anyone for whose  acts they may be liable,  the
indemnification  obligation under Subparagraph  3.18.1 shall not be limited by a
limitation on amount or type of damages,  compensation or benefits payable by or
for  the  Contractor  or  a  Subcontractor  under  workers'  compensation  acts,
disability benefits acts or other employee benefit acts.


                                      -8-





                                   ARTICLE 4
                         ADMINISTRATION OF THE CONTRACT

4.1     ARCHITECT

4.1.1 The Architect is the person lawfully licensed to practice  architecture or
an entity lawfully practicing  architecture  identified as such in the Agreement
and is referred to throughout  the Contract  Documents as if singular in number.
The  term  "Architect"   means  the  Architect  or  the  Architects   authorized
representative.

4.1.2 Duties,  responsibilities and limitations of authority of the Architect as
set  forth in the  Contract  Documents  shall  not be  restricted,  modified  or
extended without written consent of the Owner, Contractor and Architect. Consent
shall not be unreasonably withheld.

4.1.3 If the employment of the Architect is terminated, the Owner shall employ a
new Architect against whom the Contractor has no reasonable  objection and whose
status under the Contract Documents shall be that of the former  Architect.

4.2     ADMINISTRATION OF THE CONTRACT

4.2.1 The  Architect  or Owner's  designee  will provide  administration  of the
Contract  as  described  in the  Contract  Documents,  and will  "be an  Owner's
representative (1) during  construction,  (2) until final payment is due and (3)
with the Owners  concurrence,  from time to time during the one-year  period for
correction of  Work  described in Paragraph  12.2.  The Architect or the Owner's
designee  will have  authority  to act on behalf of the Owner only to the extent
provided in the  Contract  Documents,  unless  otherwise  modified in writing in
accordance with other provisions of the Contract.

4.2.2 The Architect,  or the Owner's designee as a representative  of the Owner,
will visit the site at intervals  appropriate  to the stage of the  Contractor's
operations (1) to become generally  familiar with and to keep the Owner informed
about the  progress  and  quality of the portion of the Work  completed,  (2) to
endeavor to guard the Owner against  defects and  deficiencies  in the Work, and
(3) to  determine  in  general  if the  Work  is  being  performed  in a  manner
indicating that the Work, when fully  completed,  will be in accordance with the
Contract Documents.  However, the. Architect or the Owner's designee will not be
required to make  exhaustive  or  continuous  on-site  inspections  to check the
quality or quantity of the Work.  The  Architect  or the Owner's  designee  will
neither have control over or charge of nor be responsible  for, the construction
means,  methods,  techniques,   sequences  or  procedures,  or  for  the  safety
precautions and programs in connection with the Work, since these are solely the
Contractor's rights and responsibilities under the Contract Documents, except as
provided in Subparagraph 3.3.1.

4.2.3 The  Architect or the Owner's  designee  will not be  responsible  for the
Contractor's  failure to perform the Work in accordance with the requirements of
the Contract  Documents.  The  Architect or the Owner's  designee  will not have
control over or charge of and will not be  responsible  for acts or omissions of
the  Contractor,  Subcontractors,  or their  agents or  employees,  or any other
persons or entities performing portions of the Work.

4.2.4 COMMUNICATIONS  FACILITATING CONTRACT ADMINISTRATION.  Except as otherwise
provided  in the  Contract  Documents  or when direct  communications  have been
specially  authorized,  the Owner and  Contractor  shall endeavor to communicate
with each other  through the  Architect or the Owner's  designee  about  matters
arising  out of or  relating  to the  Contract. Communications  by and  with the
Architect's  consultants  shall be through the Architect.  Communications by and
with  Subcontractors  and material  suppliers  shall be through the  Contractor.
Communications by and with separate contractors shalll be through the Owner.

4.2.5 Based on the  Architect's  or the Owner's  designee's  evaluations  of the
Contractor's  Applications  for Payment,  the Architect or the Owner's  designee
will  review  and  certify  the  amounts  due  the  Contractor  and  will  issue
Certificates for Payment in such amounts.

4.2.6 The Architect or the Owner's  designee will have  authority to reject Work
that does not conform to the Contract  Documents.  Whenever the Architect or the
Owner's  designee  considers  it necessary or  advisable,  the  Architect or the
Owner's  designee  will have  authority to require  inspection or testing of the
Work in accordance  with  Subparagraphs  13.5.2 and 13.5.3,  whether or not such
Work is fabricated,  installed or completed.  However, neither this authority of
the  Architect or the Owner's  designee nor a decision made in good faith either
to  exercise  or not to  exercise  such  authority  shall give rise to a duty or
responsibility  of the  Architect  or the Owner's  designee  to the  Contractor,
Subcontractors,  material and equipment suppliers, their agents or employees, or
other persons or entities performing portions of the Work.

                                      -9-



4.2.7 The  Architect  or the  Owner's  designee  will review and approve or take
other appropriate action upon the Contractor's submittals such as Shop Drawings,
Product  Data and  Samples,  but only for the limited  purpose of  checking  for
conformance  with  information  given and the design  concept  expressed  in the
Contract  Documents.  The Architect's or the Owner's  designee's  action will be
taken with such reasonable promptness as to cause no delay in the Work or in the
activities of the Owner,  Contractor  or separate  contractors,  while  allowing
sufficient  time  in the  Architect's  or the  Owner's  designee's  professional
judgment to permit adequate  review.  Review of such submittals is not conducted
for the purpose of determining  the accuracy and  completeness  of other details
such as  dimensions  and  quantities,  or for  substantiating  instructions  for
installation  or  performance  of equipment or systems,  all of which remain the
responsibility  of the  Contractor  as required by the Contract  Documents.  The
Architect's  or the Owner's  designee's  review of the  Contractor's  submittals
shall not relieve the Contractor of the  obligations  under  Paragraphs 3.3, 3.5
and 3.12. The Architect's or the Owner's  designee's review shall not constitute
approval of safety precautions or, unless otherwise  specifically  stated by the
Architect or  the  Owner's  designee,   of  any  construction  means,   methods,
techniques,  sequences or procedures.  The Architect's or the Owner's designee's
approval of a specific item shall  not indicate approval of an assembly of which
the item is a component.

4.2.8 The  Architect  or the Owner's  designee  will prepare  Change  Orders and
Construction  Change Directives,  and may authorize minor changes in the Work as
provided in Paragraph 7.4.

4.2.9  The  Architect  or the  Owner's  designee  will  conduct  inspections  to
determine  the  date or dates of  Substantial  Completion  and the date of final
completion,  will receive and forward to the Owner,  for the Owner's  review and
records,  written  warranties and related documents required by the Contract and
assembled by the Contractor, and will issue a final Certificate for Payment upon
compliance with the requirements of the Contract Documents.

4.2.10 If the Owner and Architect  agree, the Architect will provide one or more
project   representatives   to   assist   in   carrying   out  the   Architect's
responsibilities  at the site. The duties,  responsibilities  and limitations of
authority of such project representatives shall be as set forth in an exhibit to
be incorporated in the Contract Documents.

4.2.11 The Architect will interpret and decide  matters  concerning  performance
under and  requirements  of the Contract  Documents on written request of either
the Owner or Contractor.  The Architect's response to such requests will be made
in writing  within any time limits  agreed  upon or  otherwise  with  reasonable
promptness.   If  no  agreement  is  made   concerning  the  time  within  which
interpretations  required of the Architect shall be furnished in compliance with
this  Paragraph 4.2, then delay shall not be recognized on account of failure by
the  Architect  to furnish  such  interpretations  until 15 days  after  written
request is made for them.

4.2.12  Interpretations  and decisions of the Architect will be consistent  with
the intent of and reasonably  inferable from the Contract  Documents and will be
in writing or in the form of  drawings.  When  making such  interpretations  and
initial decisions, the Architect will endeavor to secure faithful performance by
both Owner and  Contractor,  will not show  partiality to either and will not be
liable for results of interpretations or decisions so rendered in good faith.

4.2.13 The Architect's decisions on matters relating to aesthetic effect will be
final if consistent with the intent expressed in the Contract  Documents subject
to Section 4.3 below.

4.3     CLAIMS AND DISPUTES

4.3.1  Definition.  A Claim  is a  demand  or  assertion  by one of the  parties
seeking, as a matter of right, adjustment or interpretation  of Contract terms,
payment of money, extension of time or other relief with respect to the terms of
the  Contract.  The term "Claim"  also  includes  other  disputes and matters in
question  between  the Owner and  Contractor  arising  out of or relating to the
Contract. Claims must be  initiated by written  notice.  The  responsibility  to
substantiate Claims shall rest with the party making the Claim.

4.3.2 Time Limits on Claims.  Claims by either party must be initiated within 21
days after occurrence  of the event  giving rise to such Claim or within 21 days
after the claimant  first  recognizes  the  condition  giving rise to the Claim,
whichever is later.  Claims must be initiated by written notice to the Architect
and the other party.

4.3.3  Continuing  Contract  Performance.  Pending  final  resolution of a Claim
except as otherwise  agreed in writing or as provided in Subparagraph  9.7.1 and
Article 14, the  Contractor  shall proceed  diligently  with  performance of the
Contract and the Owner shall continue to make payments to Contractor,  including
any direct cost of the Contractor, related to disputed claims in accordance with
Section 7.3.6.

4.3.4 Claims for Concealed or Unknown Conditions.  If conditions are encountered
at the site which are (1) subsurface or otherwise  concealed physical conditions
which differ materially from those indicated in the Contract Documents or (2)

                                      -10-




unknown physical  conditions of an unusual nature,  which differ materially from
those  ordinarily  found  to exist  and  generally  recognized  as  inherent  in
construction activities of the character provided for in the Contract Documents,
then notice by the  observing  party shall be given to the other party  promptly
before  conditions  are disturbed and in no event later than 21 days after first
observance of the  conditions.  The Architect  will  promptly  investigate  such
conditions  and will  recommend an equitable  adjustment  in the Contract Sum or
Contract Time, or both. If the Architect  determines that no change in the terms
of the  Contract  is  justified,  the  Architect  shall so notify  the Owner and
Contractor in writing, stating the reasons. Claims by either party in opposition
to such  determination must be made within 21 days after the Architect has given
notice  of  the  decision.  If the  Owner  and  Contractor  cannot  agree  on an
adjustment in the Contract Sum or Contract  Time,  the dispute shall be resolved
pursuant to Paragraph 4.4

4.3.5 Claims for Additional Cost. If the Contractor  wishes to make Claim for an
increase in the Contract Sum,  written notice as provided  herein shall be given
before  proceeding to execute the Work.  Prior notice is not required for Claims
relating to an emergency  endangering  life or property  arising under Paragraph
10.6.

4.3.6  If the  Contractor  believes  additional  cost is  involved  for  reasons
including but not limited to (1) a written  interpretation  from the  Architect,
(2) an order by the  Owner to stop the  Work  where  the  Contractor  was not at
fault,  (3) a  written  order  for a minor  change  in the  Work  issued  by the
Architect,  (4) failure of payment by the Owner, (5) termination of the Contract
by the Owner,  (6) Owner's  suspension or (7) other  reasonable  grounds,  Claim
shall be filed in accordance with this Paragraph 4.3.

4.3.7 CLAIMS FOR ADDITIONAL TIME

4.3.7.1 If the  Contractor  wishes to make Claim for an increase in the Contract
Time,  written notice as provided herein shall be given. The Contractor's  Claim
shall include an estimate of cost and of probable effect of delay on progress of
the Work.  In the case of a continuing delay only one Claim is necessary.

4.3.7.2 If adverse  weather  conditions are the basis for a Claim for additional
time,  such  Claim  shall be  documented  by data  substantiating  that  weather
conditions were abnormal for the period of time,  could not have been reasonably
anticipated and had an adverse effect on the scheduled construction.

4.3.8  Injury or Damage to Person or  Property.  If either party to the Contract
suffers injury or damage to person or property  because of an act or omission of
the other party, or of others for whose acts such party is legally  responsible,
written notice of such injury or damage,  whether or not insured, shall be given
to the  other  party  within a  reasonable  time  not  exceeding  21 days  after
discovery.  The notice shall provide sufficient detail to enable the other party
to investigate the matter.

4.3.9 If unit prices are stated in the Contract Documents or subsequently agreed
upon,  and if quantities  originally  contemplated are  materially  changed in a
proposed Change Order or Construction  Change  Directive so that  application of
such unit prices to quantities of Work proposed will cause substantial  inequity
to the Owner or  Contractor,  the  applicable  unit  prices  shall be  equitably
adjusted.

4.4     ARBITRATION

4.4.1 Any Claim or dispute  arising out of or related to the  Contract  shall be
subject to  arbitration.  Prior to  arbitration,  the parties shall  endeavor to
resolve   disputes   by   negotiation   between   the   Owner   and   Contractor
representatives; however, if negotiation by the representatives fails such Claim
or dispute  shall be referred to a  representative  of senior  management of the
parties hereto for resolution prior to arbitration.

4.4.2 Claims not resolved by negotiation  as set forth in Paragraph  4.4.1 shall
be decided by arbitration  which,  unless the parties  mutually agree otherwise,
shall be in accordance with the Construction  Industry  Arbitration Rules of the
American Arbitration Association currently in effect. The demand for arbitration
shall be filed in  writing  with the other  party to the  Contract  and with the
American Arbitration Association,  and a copy shall be filed with the Architect,
unless  the  parties  hereto  mutually  agree to use  other  dispute  resolution
resources,  rules and  arbitrators to administer the proceedings and resolve the
Claim or dispute.

4.4.3 A demand for arbitration  shall be made within a reasonable time after the
Claim or dispute  has  arisen,  and in no event  shall it be made after the date
when institution of legal or equitable  proceedings based on such Claim would be
barred by the  applicable  statute of  limitations  as  determined  pursuant  to
Paragraph 13.7.

4.4.4 Clams and Timely Assertion of Claims.  The party filing a notice of demand
for arbitration must assert in the demand all Claims then known to that party on
which arbitration is permitted to be demanded.

                                      -11-




4.4.5 Judgment on Award.  The award  rendered by the arbitrator or  arbitrators,
whether interim or final,  shall be binding on the parties and shall include any
relief,  legal or equitable,  determined by the  arbitrator or arbitrators to be
supported by the evidence presented at the arbitration  hearing and judgment may
be entered upon it in accordance with applicable law in any court.

                                    ARTICLE 5
                                 SUBCONTRACTORS

5.1     DEFINITIONS

5.1.1 A  Subcontractor  is a person or entity who has a direct contract with the
Contractor   to  perform  a  portion   of  the  Work  at  the  site.   The  term
"Subcontractor"  is referred to throughout the Contract Documents as if singular
in number  and means a  Subcontractor  or an  authorized  representative  of the
Subcontractor.  The term  "Subcontractor" does not include a separate contractor
or subcontractors of a separate contractor.

5.1.2 A  Sub-subcontractor  is a person or entity  who has a direct or  indirect
contract with a Subcontractor  to perform a portion of the Work at the site. The
term  "Sub-subcontractor" is referred to throughout the Contract Documents as if
singular in number and means a Sub-subcontractor or an authorized representative
of the Sub-subcontractor.

5.2     AWARD OF SUBCONTRACTS AND OTHER CONTRACTS FOR PORTIONS OF THE WORK

5.2.1  Unless  otherwise  stated  in  the  Contract  Documents  or  the  bidding
requirements,  the  Contractor,  as  soon  as  practicable  after  award  of the
Contract,  shall furnish in writing to the Owner through the Architect the names
of  persons  or  entities  (including  those  who are to  furnish  materials  or
equipment fabricated to a special design) proposed for each principal portion of
the Work. The Architect will promptly reply to the Contractor in writing stating
whether  or not  the  Owner  or the  Architect,  after  due  investigation,  has
reasonable objection to any such proposed person or entity. Failure of the Owner
or  Architect  to  reply  promptly  shall  constitute  notice  of no  reasonable
objection.

5.2.2 The Contractor shall not contract with a proposed person or entity to whom
the Owner or Architect has made reasonable and timely objection.  The Contractor
shall not be required to contract  with anyone to whom the  Contractor  has made
reasonable objection.

5.2.3 If the Owner or Architect has  reasonable  objection to a person or entity
proposed by the  Contractor,  the Contractor  shall propose  another to whom the
Owner or Architect  has no  reasonable  objection.  If the proposed but rejected
Subcontractor  was  reasonably  capable of performing the Work, the Contract Sum
and Contract  Time shall be increased  or decreased by the  difference,  if any,
occasioned  by such  change,  and an  appropriate  Change  Order shall be issued
before commencement of the substitute Subcontractor's Work.

5.2.4  The  Contractor  shall  not  change a  Subcontractor,  person  or  entity
previously selected if the Owner or Architect makes reasonable objection to such
substitute.

5.3     SUBCONTRACTUAL RELATIONS

5.3.1 By appropriate agreement, written where legally required for validity, the
Contractor  shall  require each  Subcontractor,  to the extent of the Work to be
performed by the  Subcontractor,  to be bound to the  Contractor by terms of the
Contract Documents,  and to assume toward the Contractor all the obligations and
responsibilities, including the responsibility for safety of the Subcontractor's
Work,  which the Contractor,  by these  Documents,  assumes toward the Owner and
Architect.  Each subcontract  agreement shall preserve and protect the rights of
the Owner and Architect under the Contract Documents with respect to the Work to
be  performed  by the  Subcontractor  so that  subcontracting  thereof  will not
prejudice such rights, and shall allow to the Subcontractor, unless specifically
provided  otherwise  in the  subcontract  agreement,  the benefit of all rights,
remedies and redress against the Contractor that the Contractor, by the Contract
Documents,  has against  the Owner.  Where  appropriate,  the  Contractor  shall
require   each   Subcontractor   to   enter   into   similar   agreements   with
Sub-subcontractors.  The  Contractor  shall  make  available  to  each  proposed
Subcontractor,  prior to the execution of the subcontract  agreement,  copies of
the  Contract  Documents to which the  Subcontractor  will be bound,  and,  upon
written request of the  Subcontractor,  identify to the Subcontractor  terms and
conditions of the proposed  subcontract  agreement which may be at variance with
the Contract Documents.  Subcontractors will similarly make copies of applicable
portions   of  such   documents   available   to   their   respective   proposed
Sub-subcontractors.

                                      -12-
                                                                                                                                       VLT-CONST-GC(1-30.04).doc




5.4     ASSIGNMENT OF SUBCONTRACTS

5.4.1 Each subcontract agreement for a portion of the Work shall have provisions
allowing the assignment of such contract by the Contractor to the Owner.

5.4.2  Upon such  assignment,  if the Work has been  suspended  for more than 30
days, the Subcontractor's compensation shall be equitably adjusted for increases
in cost resulting from the suspension.

                                    ARTICLE 6
                CONSTRUCTION BY OWNER OR BY SEPARATE CONTRACTORS

6.1     OWNER'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE CONTRACTS

6.1.1 The Owner reserves the right to perform construction or operations related
to the Project with the Owner's own forces,  and to award separate  contracts in
connection  with  other  portions  of  the  Project  or  other  construction  or
operations  on  the  site  under   Conditions  of  the  Contract   identical  or
substantially similar to these including those portions related to insurance and
waiver of subrogation. In such event, the Owner shall assume sole responsibility
for  its own  employees,  contractors  and  agents  and  any  and  all of  their
respective acts and omissions. If the Contractor claims that delay or additional
cost is involved  because of such action by the Owner, the Contractor shall make
such Claim as provided in Paragraph 4.3.

6.1.2 When separate  contracts are awarded for different portions of the Project
or other  construction  or operations on the site, the term  "Contractor" in the
Contract  Documents in each case shall mean the  Contractor  who  executes  each
separate Owner-Contractor Agreement.

6.1.3 The Owner shall provide for  coordination of the activities of the Owner's
own forces and of each separate contractor with the Work of the Contractor,  who
shall cooperate with them. The Contractor shall  participate with other separate
contractors  and the  Owner  in  reviewing  their  construction  schedules  when
directed to do so. The Contractor  shall make any revisions to the  construction
schedule  deemed  necessary  after a  joint  review  and  mutual agreement.  The
construction  schedules  shall then  constitute  the schedules to be used by the
Contractor, separate contractors and the Other until subsequently revised.

6.2     MUTUAL RESPONSIBILITY

6.2.1 The Contractor shall afford the Owner and separate contractors  reasonable
opportunity  for  introduction  and storage of their materials and equipment and
performance  of  their   activities,   and  shall  connect  and  coordinate  the
Contractor's construction and operations with theirs as required by the Contract
Documents.

6.2.2 If part of the  Contractor's  Work depends for proper execution or results
upon construction  or  operations  by the Owner or a  separate  contractor,  the
Contractor  shall,  prior to proceeding with that portion of the Work,  promptly
report  to the  Architect  apparent  discrepancies  or  defects  in  such  other
construction  that would  render it  unsuitable  for such proper  execution  and
results.   Failure  of  the   Contractor  so  to  report  shall   constitute  an
acknowledgment that the Owner's or separate contractor's  completed or partially
completed  construction  is fit and proper to  receive  the  Contractor's  Work,
except as to defects not then reasonably discoverable.

6.2.3

6.2.4 The Contractor  shall  promptly  remedy damage  wrongfully  caused by the
Contractor to completed or partially  completed  construction  or to property of
the Owner or separate contractors as provided in Subparagraph 10.2.5.

6.2.5  The   Owner   and  each   separate   contractor   shall   have  the  same
responsibilities for cutting and patching as are described for the Contractor in
Subparagraph 3.14.

6.3     OWNER'S RIGHT TO CLEAN UP

6.3.1 If a dispute arises among the  Contractor,  separate  contractors  and the
Owner as to the responsibility  under their respective contracts for maintaining
the premises and  surrounding  area free from waste  materials and rubbish,  the
Owner  may  clean  up and the  Architect  will  allocate  the cost  among  those
responsible, subject to Section 3.15.2.


                                      -13-




                                    ARTICLE 7
                               CHANGES IN THE WORK



7.1     GENERAL

7.1.1 Changes in the Work may be  accomplished  after execution of the Contract,
and without  invalidating  the Contract,  by Change Order,  Construction  Change
Directive  or order for a minor change in the Work,  subject to the  limitations
stated in this Article 7 and elsewhere in the Contract Documents.

7.1.2. A Change Order shall be based upon agreement among the Owner, Contractor,
and Architect;  a Construction  Change Directive requires agreement by the Owner
and Architect and may or may not be agreed to by the Contractor;  an order for a
minor change in the Work may be issued by the Architect alone.

7.1.3 Changes in the Work sha11 be performed under applicable  provisions of the
Contract Documents, and the Contractor shall proceed promptly,  unless otherwise
provided in the Change Order, Construction Change Directive or order for a minor
change in the Work.

7.2     CHANGE ORDERS

7.2.1 A Change  Order is a  written  instrument  prepared  by the  Architect  or
Contractor  and signed by the Owner,  Contractor  and  Architect,  stating their
agreement upon all of the following:

        .1     change in the Work;

        .2     the amount of the adjustment, if any, in the Contract Sum; and

        .3     the extent of the adjustment, if any, in the Contract Time.

7.2.2 Methods used in  determining  adjustments  to the Contract Sum may include
those listed in Subparagraph  7.3.3, and those otherwise mutually agreed upon by
the Owner and Contractor.

7.3     CONSTRUCTION CHANGE DIRECTIVES

7.3.1 A  Construction  Change  Directive  is a  written  order  prepared  by the
Architect and signed by the Owner and Architect,  directing a change in the Work
prior to agreement on adjustment,  if any, in the Contract Sum or Contract Time,
or both. The Owner may by Construction  Change Directive,  without  invalidating
the Contract, order changes in the Work within the general scope of the Contract
consisting  of  additions,  deletions or other  revisions,  the Contract Sum and
Contract Time being adjusted accordingly.

7.3.2 A  Construction  Change  Directive  shall be used in the  absence of total
agreement on the terms of a Change Order.

7.3.3 If the  Construction  Change  Directive  provides for an adjustment to the
Contract Sum, the adjustment shall be based on one of the following methods:

       .1   mutual  acceptance of a lump sum properly  itemized and supported by
            sufficient substantiating data to permit evaluation;

       .2   unit prices stated in the Contract Documents or subsequently  agreed
            upon;

       .3   cost to be  determined  in a manner agreed upon by the parties and a
            mutually acceptable fixed or percentage fee; or

       .4   if the parties are unable to agree, then as provided in Subparagraph
            7.4.

7.3.4 Upon receipt of a Construction  Change  Directive,  the  Contractor  shall
promptly  proceed with the change in the Work  involved and advise the Architect
of the Contractor's  agreement or disagreement with the method, if any, provided
in the Construction  Change Directive for determining the proposed adjustment in
the Contract Sum or Contract Time.

                                      -14-




7.3.5 A Construction  Change  Directive  signed by the Contractor  indicates the
agreement of the Contractor therewith,  including adjustment in Contract Sum and
Contract  Time or the method  for  determining  them.  Such  agreement  shall be
effective  immediately  and shall be recorded as a Change Order.

7.4     DISPUTED CHANGES

7.4.1 In the case of disputed  Change Order Work,  the parties  agree to resolve
said dispute in the following manner If Fluor believes that it has been directed
to perform work that is outside the scope of its  Contract  Work it shall notify
the Owner's  Representative  in writing that the work in question is outside the
scope of its Contract  Work.  Fluor,  as soon as  practicable  but no later than
thirty  (30) days after the  notice,  shall  prepare and submit a Rough Order of
Magnitude  (ROM) to the  Owner's  Representative.  The ROM  shall  consist  of a
detailed  estimate of Owner's  maximum  exposure for the work in question.  Upon
receipt of Fluor's ROM, the Owner's  Representative  shall assign a Pending Item
Claim  (PIC)  number to the work in  question  and shall issue Fluor a notice to
proceed.  Fluor  shall  proceed to perform  the work in  question  on a time and
material  basis.  Using the PIC number to identify the work in  question,  Fluor
shall  account  for  the  time  and  material  costs  in  its  monthly   payment
requisition.  Fluor shall requisition costs incurred in connection with such PIC
on a monthly  basis.  Owner shall be obligated to pay Fluor one hundred  percent
(100%) of the ROM, for Reimbursable  Costs that are provided for in Article 7 of
the  Agreement.  If the  parties  are unable to resolve  either the scope or the
price  of the  work  in  question  within  thirty  (30)  days  after  the  Owner
Representative issued the PIC number, the dispute shall be settled in accordance
with the provisions set forth in Section 4.3 herein. Any arbitration award shall
be limited to a  determination  of whether the work in question is Contract Work
and the price for said work.  If said award  hold that the work in  question  is
Contract Work, the Owner shall not be required to increase the GMP in connection
with the PIC. If the arbitration  holds that the work in question is a change in
scope, a Change Order shrill be issued that adds the amount of the disputed work
to the GMP and the Owner shall pay for such Change  Order(s) in accordance  with
the Agreement

7.4.2 When the Owner and  Contractor  agree with the  determination  made by the
Architect  concerning the  adjustments in the Contract Sum and Contract Time, or
otherwise  reach  agreement  upon  the  adjustments,  such  agreement  shall  be
effective  immediately  and shall be recorded by preparation and execution of an
appropriate Change Order.

7.5     CONSTRUCTION CHANGE REQUESTS (CCR's)

7.5.1 In the event minor changes to the work are sought by the  Architect/Owner,
a Construction Change Request (CCR) will be issued by the Architect as follows:

       .1   A CCR will precede a Construction Change Directive.
       .2   A CCR will precede a Change Order.
       .3   Each CCR will contain sufficient documentation (sketches,  drawings,
            specifications,  etc.) to define the extent of work being requested.
            Each CCR will further  define the intent of the documents  issued as
            follows:
            - "Proceed Immediately - Owner will pay T&M
            - "Proceed Only After Cost and Schedule Approval"
            - "For Budget Pricing Only
            - "Proceed Immediately - For Clarification Only"
       .4   Upon  receipt of a CCR,  Contractor  shall  proceed  in the  fashion
            described.  Contractor   shall  submit   required   information   to
            Architect/Owner  for approval  via a Change Order  Request and shall
            only proceed in  accordance  with the  instructions  provided on the
            CCR.
       .5   If for any  reason a dispute  arises  relative  to the  Contractor's
            price and  schedules as submitted  via a Change Order  Request,  the
            Architect may issue a  Construction  Change  Directive in accordance
            with Section 7.3.
        .6  If no disputes  arises,  Contractor shall proceed in accordance with
            Section 7.3.

                                    ARTICLE 8
                                      TIME

8.1     DEFINITIONS

8.1.1 Unless otherwise provided,  Contract Time is the period of time, including
authorized  adjustments,  allotted in the  Contract  Documents  for  Substantial
Completion of the Work.

8.1.2  The  date of  commencement  of the Work is the  date  established  in the
Agreement.

                                      -15-





8.1.3 The date of Substantial  Completion is the date certified by the Architect
in accordance with Paragraph 9.8.

8.1.4 The term "day" as used in the Contract  Documents  shall mean calendar day
unless otherwise specifically defined.

8.2     PROGRESS AND COMPLETrON

8.2.1 The  completion  dates agreed to in the Schedule are of the essence of the
Contract.  By executing the Agreement the Contractor  confirms that the Contract
Time is a reasonable period for performing the Work.

8.2.2 The Contractor shall not knowingly,  except by agreement or instruction of
the Owner in writing,  prematurely  commence operations on the site or elsewhere
prior to the effective date of insurance  required by Article 11 to be furnished
by the Contractor and Owner.  The date of  commencement of the Work shall not be
changed by the effective date of such insurance. Unless the date of commencement
is  established  by the Contract  Documents or a notice to proceed  given by the
Owner,  the Contractor shall notify the Owner in writing not less than five days
or other agreed period before commencing the Work to permit the timely filing of
mortgages, mechanic's liens and other security interests.

8.2.3 The Contractor shall proceed  expeditiously with adequate forces and shall
achieve Substantial Completion within the Contract Time.

8.3     DELAYS AND EXTENSIONS OF TIME

8.3.1 If the Contractor is delayed at any time in the  commencement  or progress
of the Work by an act or neglect of the Owner or Architect, or of an employee of
either, or of a separate contractor employed by the Owner, or by changes ordered
in  the  Work,  or  by  labor  disputes,  fire,  unusual  delay  in  deliveries,
unavoidable  casualties or other causes beyond the Contractor's  control,  or by
delay authorized by the Owner pending  arbitration,  or by other causes that may
reasonably  justify  delay,  then the Contract Sum and the Contract  Time may be
equitably adjusted for any such delay.

8.3.2  Claims  relating  to time  shall be made in  accordance  with  applicable
provisions of Paragraph 4.3.

8.3.3 This  Paragraph  8.3 does not  preclude  recovery  of damages for delay by
either party under other provisions of the Contract Documents.

                                    ARTICLE 9
                             PAYMENTS AND COMPLETION

9.1     CONTRACT SUM

9.1.1 The  Contract Sum is stated in the  Agreement  and,  including  authorized
adjustments,  is the total  amount  payable by the Owner to the  Contractor  for
performance of the Work under the Contract Documents.

9.2     SCHEDULE OF VALUES

9.2.1 Before the first Application for Payment,  the Contractor shalll submit to
the  Architect a schedule of values  allocated to various  portions of the Work,
prepared in such form and supported by such data to substantiate its accuracy as
the Architect may require,  This schedule,  unless objected to by the Architect,
shall  be  used as a basis  for  reviewing  the  Contractor's  Applications  for
Payment.

9.3     APPLICATIONS FOR PAYMENT

9.3.1 At least ten days before the date  established for each progress  payment,
the Contractor shall submit to the Architect an itemized Application for Payment
for  operations  completed  in  accordance  with the  schedule  of values.  Such
application  shall  be  notarized,  if  required,  and  supported  by such  data
substantiating  the Contractor's  right to payment as the Owner or Architect may
require,  such as  copies  of  requisitions  from  Subcontractors  and  material
suppliers, and reflecting retainage if provided for in the Contract Documents.

9.3.1.1 As  provided  in  Subparagraph  7.3.8,  such  applications  may  include
requests for payment on account of changes in the Work which have been  properly
authorized by Construction  Change Directives,  or by interim  determinations of
the Architect, but not yet included in Change Orders.


                                      -16-




9.3.1.2 Such  applications  may not include requests for payment for portions of
the Work for which the Contractor does not intend to pay to a  Subcontractor  or
material  supplier,  unless  such Work has been  performed  by  others  whom the
Contractor intends to pay.

9.3.2 Unless  otherwise  provided in the Contract  Documents,  payments shall be
made on account of materials and equipment  delivered and suitably stored at the
site for  subsequent  incorporation  in the Work.  If approved in advance by the
Owner, payment may similarly be made for materials and equipment suitably stored
off the site at a location  agreed upon in writing.  Payment for  materials  and
equipment  stored on or off the site shall be conditioned upon compliance by the
Contractor  with  procedures  satisfactory to the Owner to establish the Owner's
title to such materials and equipment or otherwise protect the Owner's interest,
and sha1l include the costs of applicable insurance,  storage and transportation
to the site for such materials and equipment stored off the site.

9.3.3 The  Contractor  warrants that title to all Work covered by an Application
fox  Payment  will  pass to the  Owner no later  than the time of  payment.  The
Contractor  further  warrants that upon submittal of an Application  for Payment
all Work for which  Certificates  for Payment  have been  previously  issued and
payments  received  from  the  Owner  shall,  to the  best  of the  Contractor's
knowledge,  information and belief, be free and clear of liens, claims, security
interests or encumbrances in favor of the Contractor,  Subcontractors,  material
suppliers,  or other  persons  or  entities  making a claim by  reason of having
provided labor, materials and equipment relating to the Work.

9.3.4 Any delinquent  payment shall bear interest at the prime rate as published
in "The Money Rates" Section of THE WALL STREET JOURNAL (U.S. Edition), plus two
percent (2%),  until paid, but not to exceed the maximum contract rate permitted
by the applicable  usury laws. The payment of interest shall not excuse or defer
timely payment of the principal  amount on which such interest has accrued or is
accruing.

9.4     CERTIFICATES FOR PAYMENT

9.4.1 The Architect  will,  within seven days after receipt of the  Contractor's
Application  for Payment,  either issue to the Owner a Certificate  for Payment,
with a copy to the  Contractor,  for such amount as the Architect  determines is
properly due, or notify the Contractor  and Owner in writing of the  Architect's
reasons  for  withholding  certification  in  whole  or in part as  provided  in
Subparagraph 9.5.1.

9.4.2 The issuance of a Certificate for Payment will constitute a representation
by the Architect to the Owner,  based on the Architect's  evaluation of the Work
and the  data  comprising  the  Application  for  Payment,  that  the  Work  has
progressed  to the  point  indicated  and that,  to the best of the  Architect's
knowledge, information and belief, the quality of the Work is in accordance with
the  Contract  Documents.  The  foregoing  representations  are  subject  to  an
evaluation  of the  Work  for  conformance  with  the  Contract  Documents  upon
Substantial  Completion,  to results of  subsequent  tests and  inspections,  to
correction of minor  deviations from the Contract  Documents prior to completion
and to specific  qualifications  expressed by the  Architect.  The issuance of a
Certificate  for Payment  will  further  constitute  a  representation  that the
Contractor is entitled to payment in the amount certified. However, the issuance
of a Certificate for Payment will not be a representation that the Architect has
(1) made  exhaustive or continuous  on-site  inspections to check the quality or
quantity of the Work,  (2) reviewed  construction  means,  methods,  techniques,
sequences or  procedures,  (3) reviewed  copies of  requisitions  received  from
Subcontractors  and material  suppliers and other data requested by the Owner to
substantiate  the  Contractor's  right to payment,  or (4) made  examination  to
ascertain how or for what purpose the Contractor has used money  previously paid
on account of the Contract Sum.

9.5     DECISIONS TO WITHHOLD CERTIFICATION

9.5.1 The Architect may withhold a Certificate  for Payment in whole or in part,
to the extent  reasonably  necessary to protect the Owner, if in the Architect's
opinion the  representations  to the Owner required by Subparagraph 9.4.2 cannot
be made.  If the  Architect  is unable to  certify  payment in the amount of the
Application,  the Architect  will notify the Contractor and Owner as provided in
Subparagraph  9.4.1.  If the Contractor and Architect  cannot agree on a revised
amount,  the  Architect  will promptly  issue a Certificate  for Payment for the
amount  for which the  Architect  is able to make  such  representations  to the
Owner.  The Architect may also withhold a Certificate for Payment or, because of
subsequently  discovered  evidence,  may  nullify  the  whole  or  a  part  of a
Certificate for Payment previously issued, to such extent as may be necessary in
the Architect's  opinion to protect the Owner from loss for which the Contractor
is  responsible,  including loss resulting from acts and omissions  described in
Subparagraph 3.3.2, because of:

                                      -17-





       .1   defective Work not remedied;

       .2   third party claims filed or reasonable  evidence indicating probable
            filing of such claims for which the  Contractor  is liable under the
            Contract  and which  the  Contractor  has  unreasonably  denied  its
            obligations for such claims;

       .3   failure   of  the   Contractor   to  make   payments   properly   to
            Subcontractors or for labor, materials or equipment;

       .4   reasonable evidence that the Work cannot be completed for the unpaid
            balance of the Contract Sum;

       .5   damage to the Owner for which Contractor is liable hereunder;

       .6   persistent  failure  to carry  out the Work in  accordance  with the
            Contract Documents;

       .7   failure  to pay  liquidated  damages  or  reasonable  evidence  that
            Contractor is unable to pay such damages.

9.5.2  When  the  above  reasons  for  withholding  certification  are  removed,
certification will be made for amounts previously withheld.

9.6     PROGRESS PAYMENTS

9.6.1 After the Architect has issued a Certificate for Payment,  the Owner shall
make  payment  in the  manner  and  within  the time  provided  in the  Contract
Documents, and shall so notify the Architect.

9.6.2 The  Contractor  shall  promptly pay each  Subcontractor,  upon receipt of
payment from the Owner,  out of the amount paid to the  Contractor on account of
such Subcontractor's portion of the Work, the amount to which said Subcontractor
is entitled,  reflecting  percentages  actually  retained  from  payments to the
Contractor  on  account  of  such  Subcontractor's  portion  of  the  Work.  The
Contractor shall, by appropriate agreement with each Subcontractor, require each
Subcontractor to make payments to Sub-subcontractors in a similar manner.

9.6.3  The  Architect  will,  on  request,   furnish  to  a  Subcontractor,   if
practicable, information regarding  percentages of completion or amounts applied
for by the  Contractor  and action taken  thereon by the  Architect and Owner on
account of portions of the Work done by such Subcontractor.

9.6.4 Neither the Owner nor Architect  shall have an obligation to pay or to see
to the payment of money to a  Subcontractor  except as may otherwise be required
by law.

9.6.5 Payment to material suppliers shall be treated in a manner similar to that
provided in Subparagraphs 9.6.2, 9.6.3 and 9.6.4.

9.6.6 A Certificate for Payment, a progress payment, or partial or entire use or
occupancy of the Project by the Owner shall not  constitute  acceptance  of Work
not in accordance with the Contract Documents.

9.6.7 Unless the  Contractor  provides the Owner with a payment bond in the full
penal sum of the Contract  Sum,  payments  received by the  Contractor  for Work
properly  performed  by  Subcontractors  and  suppliers  shall  be  held  by the
Contractor for those Subcontractors or suppliers who performed Work or furnished
materials,  or both,  under  contract with the  Contractor for which payment was
made by the Owner.  Nothing contained herein shall require money to be placed in
a separate account and not commingled with money of the Contractor, shall create
any  fiduciary  liability or tort  liability on the part of the  Contractor  for
breach of trust or shall  entitle  any person or entity to an award of  punitive
damages against the Contractor for breach of the requirements of this provision.

9.7     FAILURE OF PAYMENT

9.7.1 If the  Architect  does not issue a  Certificate  for Payment,  through no
fault of the  Contractor,  within seven days after  receipt of the  Contractor's
Application  for  Payment,  or if the Owner does not pay the  Contractor  within
seven days  after the date  established  in the  Contract  Documents  the amount
certified by the Architect or awarded by  arbitration,  then the Contractor may,
upon seven additional days' written notice to the Owner and Architect,  stop the
Work until  payment of the amount owing has been  received.  The  Contract  Time
shall be extended  appropriately  and the Contract Sum shall be increased by the
amount of the Contractor's  reasonable  costs of shut-down,  delay and start-up,
plus interest as provided for in the Contract Documents.


                                      -18-




9.8     SUBSTANTIAL COMPLETION

9.8.1  Substantial  Completion is the stage in the progress of the Work when the
Work or designated  portion thereof is sufficiently  complete in accordance with
the Contract  Documents so that the Owner can occupy or utilize the Work for its
intended use.

9.8.2 When the Contractor  considers  that the Work, or a portion  thereof which
the Owner agrees to accept separately, is substantially complete, the Contractor
shall  prepare and submit to the Architect a  comprehensive  list of items to be
completed or  corrected  prior to final  payment.  Failure to include an item on
such list does not alter the  responsibility  of the  Contractor to complete all
Work in accordance with the Contract Documents.

9.8.3  Upon  receipt  of the  Contractor's  list,  the  Architect  will  make an
inspection  to  determine  whether  the Work or  designated  portion  thereof is
substantially  complete.  If the  Architect's  inspection  discloses  any  item,
whether or not  included  on the  Contractor's  list  which is not  sufficiently
complete in accordance with the Contract  Documents so that the Owner can occupy
or utilize the Work or  designated  portion  thereof for its  intended  use, the
Contractor shall, before issuance of the Certificate of Substantial  Completion,
complete or correct such item upon notification by the Architect.  In such case,
the  Contractor  shall  then  submit a request  for  another  inspection  by the
Architect to determine Substantial Completion.

9.8.4 When the Work or designated portion thereof is substantially complete, the
Architect  will prepare a  Certificate  of  Substantial  Completion  which shall
establish the date of Substantial Completion,  shall establish  responsibilities
of the Owner and Contractor for security,  maintenance,  heat, utilities, damage
to the Work and  insurance,  and shall fix the time within which the  Contractor
sha11  finish all items on the list  accompanying  the  Certificate.  Warranties
required by the Contract  Documents  shall  commence on the date of  Substantial
Completion of the Work or designated  portion thereof unless otherwise  provided
in the Certificate of Substantial Completion.

9.8.5 The Certificate of Substantial  Completion shall be submitted to the Owner
and Contractor for their written acceptance of responsibilities assigned to them
in such  Certificate.  Upon such  acceptance and consent of surety,  if any, the
Owner  shall  make  payment of  retainage  applying  to such Work or  designated
portion  thereof.  Such payment shall be adjusted for Work that is incomplete or
not in accordance with the requirements of the Contract Documents.

9.9     PARTIAL OCCUPANCY OR USE

9.9.1 The Owner may occupy or use any completed or partially  completed  portion
of the Work at any stage when such portion is designated  by separate  agreement
with the  Contractor,  provided  such  occupancy  or use is  consented to by the
insurer as required under Clause  11.4.1.5 and authorized by public  authorities
having  jurisdiction  over the Work. Such partial  occupancy or use may commence
whether or not the portion is  substantially  complete,  provided  the Owner and
Contractor  have  accepted in writing the  responsibilities  assigned to each of
them for payments,  retainage, if any, security,  maintenance,  heat, utilities,
damage to the Work and  insurance,  and have  agreed in writing  concerning  the
period for correction of the Work and commencement of warranties required by the
Contract  Documents.  When the  Contractor  considers  a  portion  substantially
complete,  the  Contractor  shall  prepare and submit a list to the Architect as
provided  under  Subparagraph  9.8.2.  Consent  of  the  Contractor  to  partial
occupancy or use sha11 not be unreasonably  withheld.  The stage of the progress
of the Work shall be  determined  by  written  agreement  between  the Owner and
Contractor or, if no agreement is reached, in accordance with Paragraph 4.4.

9.9.2 Immediately prior to such partial occupancy or use, the Owner,  Contractor
and Architect  shall  jointly  inspect the area to be occupied or portion of the
Work to be used in order to determine and record the condition of the Work.

9.9.3 Unless  otherwise  agreed upon,  partial  occupancy or use of a portion or
portions of the Work shall not constitute  acceptance of Work not complying with
the requirements of the Contract Documents.

9.10    FINAL COMPLETION AND FINAL PAYMENT

9.10.1  Upon  receipt  of  written  notice  that  the Work is  ready  for  final
inspection and acceptance and upon receipt of a final  Application  for Payment,
the Architect will promptly make such  inspection  and, when the Architect finds
the  Work  acceptable  under  the  Contract  Documents  and the  Contract  fully
performed,  the Architect  will promptly issue a final  Certificate  for Payment
stating that to the best of the  Architect's  knowledge,  information and belief
and on the basis of the Architect's on-site visits and inspections, the Work has
been completed in accordance with terms and conditions of the Contract Documents
and that the  entire  balance  found to be due the  Contractor  and noted in the
final  Certificate is due and payable.  The  Architect's  final  Certificate for
Payment  will  constitute a further  representation  that  conditions  listed in
Subparagraph  9.10.2 as precedent to the  Contractor's  being  entitled to final
payment have been fulfilled.

                                       -19-





9.10.2 Neither final payment nor any remaining retained  percentage shall become
due  until  the  Contractor  submits  to the  Architect  (1) an  affidavit  that
payrolls,  bills for materials and equipment,  and other indebtedness  connected
with the Work for which the Owner or the Owner's  property  might be responsible
or  encumbered  (less  amounts  withheld by Owner)  have been paid or  otherwise
satisfied,  (2) a certificate evidencing that insurance required by the Contract
Documents to remain in force after final payment is currently in effect and will
not be  canceled  or allowed  to expire  until at least 30 days'  prior  written
notice has been given to the Owner, (3) a written  statement that the Contractor
knows of no substantial reason that the insurance will not be renewable to cover
the period required by the Contract Documents, (4) consent of surety, if any, to
final payment and (5), if required by the Owner, other data establishing payment
or satisfaction of obligations, such as receipts, releases and waivers of liens,
claims,  security interests or encumbrances arising out of the Contract,  to the
extent and in such form as may be  designated by the Owner.  If a  Subcontractor
refuses to furnish a release or waiver required by the Owner, the Contractor may
furnish a bond  satisfactory  to the Owner to indemnify  the Owner  against such
lien. If such lien remains  unsatisfied  after payments are made, the Contractor
shall  refund to the Owner all money that the Owner may be  compelled  to pay in
discharging such lien, including all costs and reasonable attorneys' fees.

9.10.3 If, after Substantial Completion of the Work, final completion thereof is
materially  delayed  through no fault of the Contractor or by issuance of Change
Orders  affecting  final  completion,  and the Architect so confirms,  the Owner
shall,  upon  application by the Contractor and  certification by the Architect,
and without  terminating the Contract,  make payment of the balance due for that
portion of the Work fully completed and accepted.  If the remaining  balance for
Work not fully  completed or corrected is less than retainage  stipulated in the
Contract  Documents,  and if bonds have been  furnished,  the written consent of
surety  to  payment  of the  balance  due for that  portion  of the  Work  fully
completed  and accepted  shall be submitted by the  Contractor  to the Architect
prior to certification  of such payment.  Such payment shall be made under terms
and conditions  governing  final payment,  except that it shall not constitute a
waiver of claims.

9.10.4 The making of final  payment  shall  constitute a waiver of Claims by the
Owner except those arising from:

        .1   liens,  Claims,  security interests or encumbrances  arising out of
             the Contract and unsettled;

        .2   failure of the Work to comply with the requirements of the Contract
             Documents; or

        .3   terms of special warranties required by the Contract Documents.

9.10.5  Acceptance  of final  payment  by the  Contractor,  a  Subcontractor  or
material supplier shall constitute a waiver of claims by that payee except those
previously made in writing and identified by that payee as unsettled at the time
of final Application for Payment.

                                   ARTICLE 10
                       PROTECTION OF PERSONS AND PROPERTY

10.1    SAFETY PRECAUTIONS AND PROGRAMS

10.1.1 The  Contractor  shall be  responsible for  initiating,  maintaining  and
supervising  all  safety   precautions  and  programs  in  connection  with  the
performance of the Contract.

10.2    SAFETY OF PERSONS AND PROPERTY

10.2.1 The Contractor shall take reasonable  precautions for safety of and shall
provide reasonable protection to prevent damage, injury or loss to:

        .1  employees on the Work and other persons who may be affected thereby;

        .2  the Work and  materials and  equipment to be  incorporated  therein,
            whether  in  storage  on or off the site,  under  care,  custody  or
            control of the  Contractor  or the  Contractor's  Subcontractors  or
            Sub-subcontractors; and

        .3  other  property  at the site or  adjacent  thereto,  such as  trees,
            shrubs, lawns, walks, pavements,  roadways, structures and utilities
            not designated for removal,  relocation or replacement in the course
            of construction.

10.2.2 The  Contractor  shall give  notices  and comply  with  applicable  laws,
ordinances,  rules,  regulations and lawful orders of public authorities bearing
on safety of persons or  property or their  protection  from  damage,  injury or
loss.

                                      -20-




10.2.3  The  Contractor  shall  erect and  maintain,  as  required  by  existing
conditions and performance of the Contract, reasonable safeguards for safety and
protection,  including  posting danger signs and other warnings against hazards,
promulgating safety regulations and notifying owners and users of adjacent sites
and utilities.

10.2.4  When use or  storage  of  explosives  or other  hazardous  materials  or
equipment  or unusual  methods are  necessary  for  execution  of the Work,  the
Contractor  shall  exercise  utmost  care  and  carry on such  activities  under
supervision of properly qualified personnel.

10.2.5 The Contractor  shall promptly  remedy damage and loss (other than damage
or loss insured under property insurance required by the Contract  Documents) to
property referred to in Clauses 10.2.1.2 and 10.2.1.3 caused in whole or in part
by the Contractor, a Subcontractor,  a Sub-subcontractor,  or anyone directly or
indirectly  employed  by any of them,  or by anyone  for whose  acts they may be
liable and for which the  Contractor is responsible  under Clauses  10.2.1.2 and
10.2.1.3.  The cost of such repair shall be paid by insurance  provided by Owner
or reimbursed by Owner, except damage caused by willful misconduct of Contractor
or  any  subcontractor.  The  foregoing  obligations  of the  Contractor  are in
addition to the Contractor's obligations under Paragraph 3.18.

10.2.6 The Contractor  shall designate a responsible  member of the Contractor's
organization  at the site whose duty shall be the prevention of accidents.  This
person shall be the Contractor's  superintendent  unless otherwise designated by
the Contractor in writing to the Owner and Architect.

10.3    HAZARDOUS MATERIALS

10.3.1 If  reasonable  precautions  will be  inadequate  to prevent  foreseeable
bodily  injury or death to  persons  resulting  from a  material  or  substance,
including  but not  limited  to  asbestos  or  polychlorinated  biphenyl  (PCB),
encountered  on  the  site  by  the  Contractor,   the  Contractor  shall,  upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner and Architect in writing.

10.3.2 The Owner shall  obtain the services of a licensed  laboratory  to verify
the presence or absence of the material or substance  reported by the Contractor
and, in the event such  material or substance is found to be present,  to verify
that it has been rendered  harmless.  Unless otherwise  required by the Contract
Documents,  the Owner shall furnish in writing to the  Contractor  and Architect
the names and  qualifications  of persons or entities  who are to perform  tests
verifying  the  presence or absence of such  material or substance or who are to
perform the task of removal or safe  containment  of such material or substance.
The  Contractor  and the Architect  will promptly  reply to the Owner in writing
stating  whether  or not  either  has  reasonable  objection  to the  persons or
entities  proposed by the Owner.  If either the  Contractor  or Architect has an
objection to a person or entity  proposed by the Owner,  the Owner shall propose
another to whom the Contractor  and the Architect have no reasonable  objection.
When the material or substance has been rendered harmless,  Work in the affected
area shall  resume  upon  written  agreement  of the Owner and  Contractor.  The
Contract  Time shall be extended  appropriately  and the  Contract  Sum shall be
increased  in the  amount of the  Contractor's  reasonable  additional  costs of
shut-down,  delay  and  startup,  which  adjustments  shall be  accomplished  as
provided in Article 7.

10.3.3 Anything herein to the contrary notwithstanding,  title to, ownership of,
and  legal   responsibility   and  liability   for  any  and  all   pre-existing
contamination   shall  at  all  times  remain  with  the  Owner,   'Pre-existing
contamination is any hazardous or toxic substance  present at the site which was
not brought there by the  Contractor  or the  remediation  of such  pre-existing
contamination  was not the subject  matter of this  Contract or other  agreement
between  Contractor and Owner.  The Owner hereby  releases and agrees to defend,
indemnify and hold the  Contractor  harmless from and against any and all costs,
losses, damages, expenses (including attorneys' fees), fines, penalties,  claims
and  causes  of  action  which  arise  out of or  result  in any way  from  such
pre-existing  contamination,  except to the extent that the same result from the
Contractor's gross negligence or willful misconduct.

10.4 The Owner shall not be responsible  under  Paragraph 10.3 for materials and
substances  brought  to the site by the  Contractor  unless  such  materials  or
substances were required by the Contract Documents.

10.5 If the Contractor is held liable for the cost of remediation of a hazardous
material or  substance  solely by reason of  performing  Work as required by the
Contract  Documents,  the Owner shall  indemnify the Contractor for all cost and
expense thereby incurred, except as provided in Paragraph 10.3.3.

                                      -21-





10.6    EMERGENCIES

10.6.1 In an emergency  affecting safety of persons or property,  the Contractor
shall act, at the Contractor's discretion,  to prevent threatened damage, injury
or loss. Additional  compensation or extension of time claimed by the Contractor
on account of an emergency  shall be determined as provided in Paragraph 4.3 and
Article 7.

                                   ARTICLE 11
                               INSURANCE AND BONDS

11.1    CONTRACTOR'S LIABILITY INSURANCE

11.1.1 The Contractor shall purchase from and maintain in a company or companies
lawfully  authorized to do business in the  jurisdiction in which the Project is
located such insurance as will cover:

       .1    claims under workers'  compensation,  disability  benefit and other
             similar  employee benefit acts which are applicable to the Work to
             be performed;

       .2    claims for damages because of bodily injury,  occupational sickness
             or disease, or death of the Contractor's employees;

       .3    claims for damages  because of bodily injury,  sickness or disease,
             or death of any  person  other  than  the  Contractor's  employees;

       .4    claims for  damages  insured  by usual  personal  injury  liability
             coverage;

       .5    claims  for  damages,  other  than to the Work  itself,  because of
             injury to or  destruction of tangible  property,  including loss of
             use resulting therefrom;

       .6    claims for damages  because of bodily injury,  death of a person or
             property  damage arising out of ownership,  maintenance or use of a
             motor vehicle;

       .7    claims  for  bodily  injury  or  property  damage  arising  out  of
             completed operations;

       .8    claims involving  contractual liability insurance applicable to the
             Contractor's obligations under Paragraph 3.18; and

       .9    claims in excess of the coverages set forth above in the form of an
             excess   umbrella   policy  with  limits  of  Ten  Million  Dollars
             ($10,000,000).

11.1.2 The insurance  required by  Subparagraph  11.1.1 shall be written for the
limits of  liability  specified  in the  Contract  Documents or required by law,
whichever  coverage is greater.  Coverages,  whether written on an occurrence or
claims  made  basis,  sha1l be  maintained  without  interruption  from  date of
commencement  of the Work until date of final  payment  and  termination  of any
coverage required to be maintained after final payment.

11.1.3 Certificates of insurance acceptable to the Owner shall be filed with the
Owner prior to commencement of the Work.  These  certificates  and the insurance
policies  required  by this  Paragraph  11.1  shall  contain  a  provision  that
coverages  afforded under the policies will not be canceled or allowed to expire
until at least 30 days' prior written notice has been given to the Owner. If any
of the foregoing insurance coverages are required to remain in force after final
payment and are  reasonably  available,  an  additional  certificate  evidencing
continuation of such coverage shall be submitted with the final  Application for
Payment as required by Subparagraph 9.10.2.  Information concerning reduction of
coverage  on  account  of  revised  limits or  claims  paid  under  the  General
Aggregate,  or both,  shall  be  furnished  by the  Contractor  with  reasonable
promptness in accordance with the Contractor's information and belief.

11.2    OWNER'S LIABILITY INSURANCE

11.2.1 The Owner shall be responsible for purchasing and maintaining the Owner's
usual liability insurance.

11.3 Left blank intentionally

                                      -22-


11.4    PROPERTY INSURANCE

11.4.1 Unless otherwise  provided,  the Owner shall purchase and maintain,  in a
company or companies  lawfully  authorized to do business in the jurisdiction in
which the  Project is located,  property  insurance  written on a builders  risk
"all-risk" or equivalent  policy form in the amount of the initial Contract Sum,
plus value of subsequent  Contract  modifications and cost of materials supplied
or installed  by others,  comprising  total value for the entire  Project at the
site on a replacement  cost basis without  optional  deductibles.  Such property
insurance  shall  be  maintained,  unless  otherwise  provided  in the  Contract
Documents  or  otherwise  agreed in writing by all persons and  entities who are
beneficiaries  of such insurance,  until final payment has been made as provided
in  Paragraph  9.10 or until no  person or  entity  other  than the Owner has an
insurable  interest  in the  property  required  by  this  Paragraph  11.4 to be
covered,  whichever is later.  This  insurance  shall  include  interests of the
Owner, the Contractor, Subcontractors and Sub-subcontractors in the Project "The
Owner shall assume and at its election  insure all risk of loss or damage to any
existing  facilities,  the Work  itself,  and any other  property or Work of the
Owner now or  hereafter  at or near the site of the Work.  The Owner  waives its
recovery rights against the Contractor for any loss or damage arising from risks
assumed  hereunder  and agrees to obtain a waiver of  subrogation  rights of its
insurers against the Contractor for any such loss or damage. If the Owner is not
the sole owner of the  facility  or  existing  property  at or  adjacent  to the
jobsite,  the Owner shall obtain an  undertaking  from the other owners  thereof
sufficient to provide to the Contractor the same  protection  from liability for
loss or damage to such  property as would be afforded  to the  Contractor  under
this Section if the Owner were the sole owner.  "Property" insurance shall be on
an "all-risk" or equivalent policy form and shall include,  without  limitation,
insurance against the perils of fire (with extended  coverage) and physical loss
or  damage  including,   without  duplication  of  coverage,  theft,  vandalism,
malicious mischief, collapse,  earthquake, flood, windstorm, false work, testing
and  startup,  temporary  buildings  and  debris  removal  including  demolition
occasioned by enforcement of any applicable legal requirements,  and shall cover
reasonable  compensation for Architect's and Contractor's  services and expenses
required as a result of such insured loss.

11.4.1.1  If the Owner  does not  intend to  purchase  such  property  insurance
required by the Contract and with all of the  coverages in the amount  described
above, the Owner shall so inform the Contractor in writing prior to commencement
of the Work.  The Contractor  may then effect  insurance  which will protect the
interests of the Contractor,  Subcontractors and Sub-subcontractors in the Work,
and by appropriate  Change Order the cost thereof shall be charged to the Owner.
If the  Contractor is damaged by the failure or neglect of the Owner to purchase
or maintain insurance as described above, without so notifying the Contractor in
writing,  then the Owner shall bear all reasonable  costs properly  attributable
thereto.

11.4.1.2 If the property  insurance  requires  deductibles,  the Owner sha1l pay
costs not covered because of such deductibles.

11.4.1.3 This property insurance shall cover portions of the Work stored off the
site, and also portions of the Work in transit.

11.4.1.4  Partial  occupancy or use in accordance  with  Paragraph 9.9 shall not
commence until the insurance company or companies  providing  property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Contractor  shall take  reasonable  steps to obtain consent of the
insurance company or companies and shall,  without mutual written consent,  take
no  action  with   respect  to  partial   occupancy  or  use  that  would  cause
cancellation, lapse or reduction of insurance.

11.4.2 Boiler and  Machinery  Insurance.  The Owner shall  purchase and maintain
boiler and  machinery  insurance  required by the Contract  Documents or by law,
which shall  specifically  cover such insured  objects during  installation  and
until final acceptance by the Owner;  this insurance shall include  interests of
the Owner,  Contractor,  Subcontractors and  Sub-subcontractors in the Work, and
the Owner and Contractor shall be named insureds.

11.4.3 LOSS OF USE INSURANCE. The Owner, at the Owner's option, may purchase and
maintain  such  insurance  as will insure the Owner  against  loss of use of the
Owner's property due to fire or other hazards,  however caused. The Owner waives
all  rights of action  against  the  Contractor  for loss of use of the  Owner's
property,  including  consequential  losses due to fire or other hazards however
caused.

11.4.4

11.4.5 If during the Project  construction  period the Owner insures properties,
real or personal or both, at or adjacent to the site by property insurance under
policies  separate  from those  insuring the Project,  or if after final payment
property  insurance is to be provided on the completed  Project through a policy
or  policies  other than those  insuring  the  Project  during the  construction
period,  the Owner  shall  waive  all  rights  in  accordance  with the terms of
Subparagraph  11.4.7 for damages  caused by fire or other causes of loss covered
by this separate  property  insurance.  All separate policies shall provide this
waiver of subrogation by endorsement or otherwise.

                                       -23-





11.4.6  Before an  exposure  to loss may  occur,  the Owner  shall file with the
Contractor a copy of each policy that includes  insurance  coverages required by
this  Paragraph  11.4.  Each  policy  sha11  contain  all  generally  applicable
conditions,  definitions,  exclusions and endorsements  related to this Project.
Each policy  shall  contain a provision  that the policy will not be canceled or
allowed to expire,  and that its limits will not be  reduced,  until at least 30
days' prior written notice has been given to the Contractor.

11.4.7 Waivers of Subrogation. The Owner and Contractor waive all rights against
(1) each other and any of their subcontractors,  sub-subcontractors,  agents and
employees,  each of the other, and (2) the Architect,  Architect's  consultants,
separate  contractors  described  in  Article  6,  if  any,  and  any  of  their
subcontractors,  sub-subcontractors, agents and employees, for damages caused by
fire or  other  causes  of loss to the  extent  covered  by  property  insurance
obtained pursuant to this Paragraph 11.4 or other property insurance  applicable
to the Work,  except such rights as they have to proceeds of such insurance held
by the  Owner as  fiduciary.  The Owner or  Contractor,  as  appropriate,  shall
require  of  the  Architect,   Architect's  consultants,   separate  contractors
described  in Article  6, if any,  and the  subcontractors,  sub-subcontractors,
agents and employees of any of them, by  appropriate  agreements,  written where
legally  required for validity,  similar  waivers each in favor of other parties
enumerated  herein.  The policies  shall provide such waivers of  subrogation by
endorsement  or otherwise.  A waiver of  subrogation  shall be effective as to a
person or entity even though that person or entity would  otherwise  have a duty
of indemnification,  contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.

11.4.8 A loss insured under Owner's property  insurance shall be adjusted by the
Owner as fiduciary  and made payable to the Owner as fiduciary for the insureds,
as their  interests  may  appear,  subject  to  requirements  of any  applicable
mortgagee  clause  and  of  Subparagraph   11.4,10.  The  Contractor  shall  pay
Subcontractors   their  just  shares  of  insurance  proceeds  received  by  the
Contractor,  and by appropriate  agreements,  written where legally required for
validity,   shall   require   Subcontractors   to   make   payments   to   their
Sub-subcontractors in similar manner.

11.4.9 If required  in writing by a party in  interest,  the Owner as  fiduciary
shall,  upon occurrence of an insured loss, give bond for proper  performance of
the Owner's duties. The cost of required bonds shall be charged against proceeds
received as fiduciary. The Owner shall deposit in a separate account proceeds so
received,  which the Owner shall distribute in accordance with such agreement as
the parties in interest may reach, or in accordance with an arbitration award in
which case the  procedure  shall be as provided in Paragraph  4.6. If after such
loss no other  special  agreement  is made and unless the Owner  terminates  the
Contract for convenience,  replacement of damaged property shall be performed by
the Contractor  after  notification  of a Change in the Work in accordance  with
Article 7.

11.4.10 The Owner as fiduciary shall have power to adjust and settle a loss with
insurers  unless one of the parties in interest  shall object in writing  within
five days after  occurrence  of loss to the Owner's  exercise of this power;  if
such  objection is made, the dispute shall be resolved as provided in Paragraphs
4.5 and 4.6.  The Owner as fiduciary  shall,  in the case of  arbitration,  make
settlement with insurers in accordance with  directions of the  arbitrators.  If
distribution of insurance  proceeds by arbitration is required,  the arbitrators
will direct such distribution.

11.5    PERFORMANCE BOND AND PAYMENT BOND

11.5.1 The Owner shall have the right to require the Contractor to furnish bonds
covering faithful performance of the Contract and payment of obligations arising
thereunder as stipulated in bidding requirements or specifically required in the
Contract Documents on the date of execution of the Contract.

11.5.2  Upon the  request of any person or entity  appearing  to be a  potential
beneficiary of bonds covering payment of obligations arising under the Contract,
the Contractor shall promptly furnish a copy of the bonds or shall permit a copy
to be made.


                                   ARTICLE 12
                        UNCOVERING AND CORRECTION OF WORK

12.1    UNCOVERING OF WORK

12.1.1 If a portion of the Work is covered  contrary to the Architect's  request
or to requirements specifically expressed in the Contract Documents, it must, if
required  in  writing  by  the  Architect,  be  uncovered  for  the  Architect's
examination  and be replaced at the  Contractors  expense  without change in the
Contract Time.


                                       -24-




12.1.2 If a portion of the Work has been  covered  which the  Architect  has not
specifically  requested to examine prior to its being covered, the Architect may
request to see such Work and it shall be  uncovered by the  Contractor.  If such
Work is in  accordance  with the Contract  Documents,  costs of  uncovering  and
replacement  shall, by appropriate  Change Order, be at the Owner's expense.  If
such Work is not in accordance with the Contract Documents,  correction shall be
at the  Contractors  expense  unless the  condition was caused by the Owner or a
separate contractor in which event the Owner shall be responsible for payment of
such costs.

12.2    CORRECTION OF WORK

12.2.1   BEFORE OR AFTER SUBSTANTIAL COMPLETION

12.2.1.1 The Contractor shall promptly correct Work rejected by the Architect or
failing  to conform  to the  requirements  of the  Contract  Documents,  whether
discovered before or after Substantial Completion and whether or not fabricated,
installed or  completed.  Costs of correcting  rejected Work before  Substantial
Completion,  including  additional  testing and inspections and compensation for
the  Architect's   services  and  expenses  made  necessary   thereby  shall  be
reimbursable up to the GMP.

12.2.2  AFTER SUBSTANTIAL COMPLETION

12.2.2.1 If,  within one year after the date of  Substantial  Completion  of the
Work or  designated  portion  thereof  or after  the date  for  commencement  of
warranties  established under Subparagraph 9.9.1, any of the Work is found to be
not  in  accordance  with  the  requirements  of  the  Contract  Documents,  the
Contractor  shall correct it promptly  after receipt of written  notice from the
Owner to do so unless the Owner has  previously  given the  Contractor a written
acceptance of such  condition.  The Owner sha11 give such notice  promptly after
discovery of the  condition.  During the one year period for correction of Work,
if the  Owner  fails  to  notify  the  Contractor  and give  the  Contractor  an
opportunity  to make the  correction,  the Owner  waives  the  rights to require
correction by the Contractor and to make a claim for breach of warranty.  If the
Contractor fails to correct  nonconforming  Work within a reasonable time during
that period after receipt of notice from the Owner or  Architect,  the Owner may
correct it in accordance with Paragraph 2.4.

12.2.2.2  The  one-year  period for  correction  of Work shall be extended  with
respect to portions of Work first performed after Substantial  Completion by the
period of time between Substantial  Completion and the actual performance of the
Work.

12.2.2.3 The  one-year  period for  correction  of Work shall not be extended by
corrective Work performed by the Contractor pursuant to this Paragraph 12.2.

12.2.3 The Contractor  shall remove from the site portions of the Work which are
not in  accordance  with the  requirements  of the  Contract  Documents  and are
neither corrected by the Contractor nor accepted by the Owner.

12.2.4 Nothing  contained in this Paragraph 12.2 shall be construed to establish
a period of limitation,  with respect to other  obligations which the Contractor
might have under the Contract Documents.

12.3    ACCEPTANCE OF NONCONFORMING WORK

12.3.1 If the Owner prefers to accept Work which is not in  accordance  with the
requirements of the Contract Documents, the Owner may do so instead of requiring
its removal and  correction,  in which case the  Contract Sum will be reduced as
appropriate  and equitable.  Such  adjustment  shall be effected  whether or not
final payment has been made.


                                   ARTICLE 13
                            MISCELLANEOUS PROVISIONS

13.1    GOVERNING LAW

13.1.1 The Contract  shall be governed by the law of the place where the Project
is located.

13.2    SUCCESSORS AND ASSIGNS

13.2.1 The Owner and Contractor  respectively  bind themselves,  their partners,
successors,  assigns and legal  representatives to the other party hereto and to
partners,  successors,  assigns and legal representatives of such other party in
respect to  covenants,  agreements  and  obligations  contained  in the Contract

                                      -25-





Documents.  Except as  provided in  Subparagraph  13.2.2,  neither  party to the
Contract  shall assign the Contract as a whole  without  written  consent of the
other. If either party attempts to make such an assignment without such consent,
that party shall  nevertheless  remain legally  responsible  for all obligations
under the Contract

13.2.2 The Owner may, without consent of the Contractor,  assign the Contract to
an institutional  lender providing  constructionn  financing for the Project. In
such event, the lender shall assume the Owner's rights and obligations under the
Contract  Documents.  The  Contractor  shall  execute  all  consents  reasonably
required to facilitate such assignment.

13.3    WRITTEN NOTICE

13.3.1  Written  notice shall be deemed to have been duly served if delivered in
person to the  individual or a member of the  certified  firm or entity or to an
officer of the corporation for which it was intended, or if delivered at or sent
by registered or certified mail to the last business  address known to the party
giving notice.

13.4    RIGHTS AND REMEDIES

13.4.1 To the extent remedies are provided in this Agreement, then such remedies
would be the  exclusive  remedy  with  respect  to the  subject  matter  covered
thereby,  provided  however,  such  remedy  shall be in  addition  to all  other
remedies  set forth in this  Contract.  In the event a course of action or claim
arises for which a remedy is not  provided in this  Agreement,  then the parties
shall have the rights and remedies available at law or in equity, subject to the
waivers,  releases and limitations on liabilities set forth in the Agreement. To
the extent that any waivers, releases and limitations of liability are expressed
in this Agreement then such waivers, releases and limitations of liability shall
apply  even in the  event of  default,  negligence  or strict  liability  of the
officers to be released or whose  liability  is limited and shall  extend to the
officers, directors, employees, agents and related entities of such party.

13.4.2 No action or failure to act by the Owner,  Architect or Contractor  shall
constitute a waiver of a right or duty  afforded  them under the  Contract,  nor
shall such action or failure to act constitute  approval of or acquiescence in a
breach thereunder, except as may be specifically agreed in writing.

13.5    TESTS AND INSPECTIONS

13.5.1 Tests,  inspections and approvals of portions of the Work required by the
Contract  Documents  or by laws,  ordinances,  rules,  regulations  or orders of
public authorities having  jurisdiction  shall be made at an appropriate time.
Unless  otherwise  provided,  the Contractor  shall make  arrangements  for such
tests,  inspections  and approvals  with an  independent  testing  laboratory or
entity acceptable to the Owner, or with the appropriate  public  authority,  and
shall bear all related costs of tests, inspections and approvals. The Contractor
shall give the Architect  timely notice of when and where tests and  inspections
are to be made so that the  Architect may  be present  for such  procedures.  The
Owner shall bear costs of tests,  inspections  or approvals  which do not become
requirements until after bids are received or negotiations concluded.

13.5.2  If the  Architect,  Owner  or  public  authorities  having  jurisdiction
determine that portions of the Work require  additional  testing,  inspection or
approval not included  under  Subparagraph  13.5.1,  the  Architect  will,  upon
written   authorization  from  the  Owner,   instruct  the  Contractor  to  make
arrangements  for such  additional  testing,  inspection  or  approval by entity
acceptable  to the Owner,  and the  Contractor  shall give timely  notice to the
Architect  of when and where  tests and  inspections  are to be made so that the
Architect may be present for such procedures.  Such costs, except as provided in
Subparagraph 13.5.3, shall be at the Owner's expense.

13.5.3  If  such   procedures   for  testing,   inspection  or  approval   under
Subparagraphs  13.5.1 and 13.5.2  reveal  failure of the portions of the Work to
comply with requirements  established by the Contract Documents,  all costs made
necessary  by  such  failure   including   those  of  repeated   procedures  and
compensation  for  the  Architect's  services  and  expenses  shall  be  at  the
Contractor's expense.

13.5.4 Required  certificates of testing,  inspection or approval shall,  unless
otherwise required by the Contract  Documents,  be secured by the Contractor and
promptly delivered to the Architect.

13.5.5 if the Architect is to observe tests,  inspections or approvals  required
by the Contract -'  Documents,  the  Architect  will do so promptly  and,  where
practicable, at the normal place of testing.

13.5.6 Tests or inspections  conducted  pursuant to the Contract Documents shall
be made promptly to avoid unreasonable delay in the Work.


                                      -26-




13.6    INTEREST

13.6.1 Payments due and unpaid under the Contract  Documents shall bear interest
from the date  payment  is due at such rate as the  parties  may  agree  upon in
writing or, in the absence  thereof,  at the legal rate  prevailing from time to
time at the place where the Project is located.

13.7    COMMENCEMENT OF STATUTORY LIMITATION PERIOD

13.7.1 As between the Owner and Contractor:

            .1    Before Substantial  Completion.  As to acts or failures to act
                  occurring   prior  to  the   relevant   date  of   Substantial
                  Completion,   any  applicable  statute  of  limitations  shall
                  commence  to run and any  alleged  cause  of  action  shall be
                  deemed to have  accrued  in any and all  events not later than
                  such date of Substantial Completion;

            .2    Between  Substantial  Completion  and  Final  Certificate  for
                  Payment. As to acts or failures to act occurring subsequent to
                  the  relevant  date of  Substantial  Completion  and  prior to
                  issuance of the final Certificate for Payment,  any applicable
                  statute of  limitations  shall commence to run and any alleged
                  cause of action shall be deemed to have accrued in any and all
                  events  not  later  than the  date of  issuance  of the  final
                  Certificate for Payment; and

            .3    After Final Certificate for Payment. As to acts or failures to
                  act occurring after the relevant date of issuance of the final
                  Certificate for Payment, any applicable statute of limitations
                  shall  commence to run and  any alleged  cause of action shall
                  be deemed to have accrued in any and all events not later than
                  the  date  of any  act  or  failure  to act by the  Contractor
                  pursuant to any Warranty  provided  under  Paragraph  3.5, the
                  date of any  correction  of the Work or failure to correct the
                  Work by the Contractor  under  Paragraph  12.2, or the date of
                  actual  commission  of any other act or failure to perform any
                  duty or  obligation  by the  Contractor  or  Owner,  whichever
                  occurs last.

                                   ARTICLE 14
                    TERMINATION OR SUSPENSION OF THE CONTRACT

14.1    TERMINATION BY THE CONTRACTOR

14.1.1 The  Contractor  may  terminate the Contract if the Work is stopped for a
period of 30  consecutive  days through no act or fault of the  Contractor  or a
Subcontractor,  Sub-subcontractor  or their  agents  or  employees  or any other
persons or entities  performing  portions  of the Work under  direct or indirect
contract with the Contractor, for any of the following reasons:

           .1     issuance  of an order of a court  or  other  public  authority
                  having jurisdiction which requires all Work to be stopped;

           .2     an  act  of  government,  such  as  a declaration of  national
                  emergency which requires all Work to be stopped;

           .3     because the Architect has not issued a Certificate for Payment
                  and  has  not  notified  the  Contractor  of  the  reason  for
                  withholding  certification as provided in Subparagraph  9.4.1,
                  or because the Owner has not made payment on a Certificate for
                  Payment within the time stated in the Contract Documents; or

           .4     the Owner has  failed to furnish  to the Contractor  prompt1y,
                  upon the Contractor's request, reasonable evidence as required
                  by Subparagraph 2.2.1.

14.1.2 The  Contractor may terminate the Contract if, through no act or fault of
the  Contractor  or  a  Subcontractor,  Sub-subcontractor  or  their  agents  or
employees or any other persons or entities performing portions of the Work under
direct or indirect contract with the Contractor, repeated suspensions, delays or
interruptions  of the entire Work by the Owner as described  in  Paragraph  14.3
constitute  in the  aggregate  more than 100 percent of the total number of days
scheduled for completion, or 120 days in any 365-day period, whichever is less.

14.1.3 If one of the reasons described in Subparagraph  14.1.1 or 14.1.2 exists,
the Contractor  may, upon seven days' written notice to the Owner and Architect,
terminate  the Contract and recover from the Owner payment for Work executed and
for proven loss with respect to materials,  equipment,  tools,  and construction
equipment and machinery, including reasonable overhead, profit and damages.


                                      -27-





14.1.4 If the Work is stopped for a period of 60 consecutive days through no act
or fault of the  Contractor or a  Subcontractor  or their agents or employees or
any other  persons  performing  portions  of the Work  under  contract  with the
Contractor  because  the Owner has  persistently  failed to fulfill  the Owner's
obligations  under the Contract  Documents with respect to matters  important to
the  progress of the Work,  the  Contractor  may,  upon seven  additional  days'
written  notice to the Owner  and the  Architect,  terminate  the  Contract  and
recover from the Owner as provided in Subparagraph 14.1.3.

14.2    TERMINATION BY THE OWNER FOR CAUSE

14.2.1  The Owner may terminate the Contract if the Contractor:

            .1    persistently  or repeatedly  refuses or fails to supply enough
                  properly skilled workers or proper materials;

            .2    repeatedly  fails  to  make  payment  to  Subcontractors   for
                  materials  or  labor  in   accordance   with  the   respective
                  agreements between the Contractor and the Subcontractors;

            .3    persistently   disregards   laws,   ordinances,    or   rules,
                  regulations   or   orders   of  a  public   authority   having
                  jurisdiction;  or

            .4    otherwise  is guilty of  substantial  breach of a provision of
                  the Contract Documents.

14.2.2 When any of the above reasons exist, the Owner, upon certification by the
Architect  that  sufficient  cause exists to justify  such  action,  may without
prejudice  to any other  rights or  remedies  of the Owner and after  giving the
Contractor and the  Contractor's  surety,  if any,  seven days' written  notice,
terminate  employment of the Contractor and may,  subject to any prior rights of
the surety:

            .1    take  possession of the site and of all materials,  equipment,
                  tools, and construction  equipment and machinery thereon owned
                  by the Contractor under the terms of the assignment.

            .2    accept  assignment of subcontracts  pursuant to Paragraph 5.4;
                  and

            .3    finish the Work by  whatever  reasonable  method the Owner may
                  deem  expedient.  Upon  request of the  Contractor,  the Owner
                  shall furnish to the  Contractor a detailed  accounting of the
                  costs incurred by the Owner in finishing the Work.

14.2.3 When the Owner  terminates  the Contract for one of the reasons stated in
Subparagraph  14.2.1,  the Contractor  shall not be entitled to receive  further
payment until the Work is finished.

14.2.4 If the unpaid  balance of the Contract Sum exceeds costs of finishing the
Work,  including  compensation  for the  Architect's  services and expenses made
necessary  thereby,  such excess shall be paid to the Contractor.  If such costs
and damages exceed the unpaid balance,  the Contractor  shall pay the difference
to the Owner.  The amount to be paid to the Contractor or Owner, as the case may
be, shall be certified by the Architect,  upon application,  and this obligation
for payment shall survive termination of the Contract.

14.3    SUSPENSION BY THE OWNER FOR CONVENIENCE

14.3.1 The Owner may, without cause, order the Contractor in writing to suspend,
delay or;  interrupt the Work in whole or in part for such period of time as the
Owner may determine.

14.3.2 The Contract Sum and Contract Time shall be adjusted for increases in the
cost and time  caused by  suspension,  delay or  interruption  as  described  in
Subparagraph  14.3.1.  Adjustment of the Contract Sum shall include  profit.  No
adjustment shall be made to the extent:

            .1    that  performance  is,  was or would  have been so  suspended,
                  delayed  or   interrupted  by  another  cause  for  which  the
                  Contractor is responsible; or

            .2    that an equitable  adjustment  is made or denied under another
                  provision of the Contract.

                                      -28-





14.4    TERMINATION BY THE OWNER FOR CONVENIENCE

14.4.1 The Owner  may,  at  any time, terminate  the  Contract  for the  Owner's
convenience and without cause.

14.4.2 Upon receipt of written notice from the Owner of such termination for the
Owner's convenience, the Contractor shall:

            .1    cease operations as directed by the owner in the notice;

            .2    take actions necessary,  or that the Owner may direct, for the
                  protection and preservation of the Work; and

            .3    except  for  Work  directed  to  be  performed  prior  to  the
                  effective date of termination stated in the notice,  terminate
                  all existing  subcontracts  and purchase orders and enter into
                  no further subcontracts and purchase orders.

14.4.3 In case of such  termination for the Owners  convenience,  the Contractor
sha11 be entitled to receive  payment for Work  executed,  and costs incurred by
reason of such  termination,  along with  reasonable  overhead and profit on the
Work not executed.

EX-10.55

                                                                   EXHIBIT 10.55

                       STANDARD FORM OF AGREEMENT BETWEEN
                            OWNER AND DESIGN/BUILDER

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS USE,  COMPLETION OR MODIFICATION.  AUTHENTICATION
OF THIS  ELECTRONICALLY  DRAFTED AIA  DOCUMENT MAY BE MADE BY USING AIA DOCUMENT
D401.

This  document  comprises two separate  Agreements:  Part 1 Agreement and Part 2
Agreement. To the extent  referenced in these  Agreements,  subordinate  parallel
agreements  to A191 consist of AIA Document  A491,  Standard  Form of Agreements
Between  Design/Builder and Contractor,  and AIA Document B901, Standard Form of
Agreements Between Design/Builder and Architect.

Copyright  1985,  (C)1996 The American  Institute of  Architects,  1735 New York
Avenue,  NW, Washington,  DC 20006-5292.  Reproduction of the material herein or
substantial  quotation of its provisions  without the written  permission of the
AIA  violates  the  copyright  laws of the United  States and will  subject  the
violator to legal prosecution.

                                    AGREEMENT
                                  1996 EDITION
- --------------------------------------------------------------------------------

AGREEMENT
made as of the 11th day of November in the year of 2004
(IN WORDS, INDICATE DAY, MONTH AND YEAR.)

BETWEEN the Owner:
(NAME AND ADDRESS)
MONTICELLO RACEWAY MANAGEMENT, INC.
204 State Route 17B
Monticello. NY 12701

Design/Builder:
(NAME AND ADDRESS)
Armistead Mechanical
168 Hopper Avenue
Waldwick, NJ 74630

For the following Project:
(INCLUDE PROJECT NAME, LOCATION AND A SUMMARY DESCRIPTION.)
New Horse Paddock-consisting of approximately 16,000 s.f. located on the grounds
of Monticello Raceway, Monticello, NY 12701

The  Plumbinq and HVAC  services  described in Article 3 will be provided by the
Design Builder
(NAME AND ADDRESS)    (REGISTRATION NUMBER)     (RELATIONSHIP TO DESIGN/BUILDER)

Armistead Mechanical
168 Hopper Avenue
Waldwick, NJ 74630

Normal  Plumbing and HVAC  engineering  services will be provided  contractually
through Desgin Builder except as indicated below:

(NAME AND ADDRESS)    (REGISTRATION NUMBER)     (RELATIONSHIP TO DESIGN/BUILDER)


SJM Associates                                        Mechanical Engineer
4800 Route 28
Boiceville, NY 12412

The Owner and the Design/Builder agree as set forth below.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





                        TERMS AND CONDITIONS - AGREEMENT

                                   ARTICLE 1
                               GENERAL PROVISIONS

1.1         BASIC DEFINITIONS

1.1.1.      The Contract  Documents  consist of the documents  listed in Article
14, and this Agreement, the Design/Builder's Proposal and written addenda to the
Proposal  identified in Article 14, the Construction  Documents  approved by the
Owner in  accordance  with  Subparagraph  3.2.3 and  Modifications  issued after
execution  of this  Part 2  Agreement.  A  Modification  is a Change  Order or a
written  amendment to this Agreement  signed by both parties,  or a Construction
Change Directive issued by the Owner in accordance with Paragraph 8.3.

1.1.2       The term "Work" means the construction and services  provided by the
Design/Builder to fulfill the Design/Builder's obligations.

1.1.3       The term  "Contractor"  when  referred to in the Contract  Documents
shall be deemed to mean and refer to the Design/Builder herein.

1.2         EXECUTION, CORRELATION AND INTENT

1.2.1       It is the intent of the Owner and  Design/Builder  that the Contract
Documents include all items necessary for proper execution and completion of the
Work.  The Contract  Documents  are  complementary,  and what is required by one
shall be binding as if required by all;  performance by the Design/Builder shall
be required only to the extent consistent with and reasonably inferable from the
Contract  Documents as being  necessary to produce the intended  results.  Words
that have well-known  technical or construction  industry  meanings are used in
the Contract Documents in accordance with such recognized meanings.

1.2.2       If the Design/Builder  believes or is advised by the Architect or by
another  design  professional  retained to provide  services on the Project that
implementation  of any  instruction  received  from  the  Owner  would  cause  a
violation of any applicable  law, the  Design/Builder  shall notify the Owner in
writing.  Neither the  Design/Builder  nor the  Architect  shall be obligated to
perform any act which either believes will violate any applicable law.

1.2.3       Nothing   contained  in  this  Part  2  Agreement   shall  create  a
contractual  relationship  between the Owner and any person or entity other than
the Design/Builder.

1.3         OWNERSHIP AND USE OF DOCUMENTS

1.3.1  Drawings,   specifications,  and  other  documents  and  electronic  data
furnished by the Design/Builder are instruments of service. The Design/Builder's
Architect and other providers of  professional  services shall retain all common
law,  statutory  and  other  reserved  rights,  including  copyrights  in  those
instruments of service furnished by them.  Drawings,  specifications,  and other
documents and electronic  data are furnished for use solely with respect to this
Agreement. The Owner shall be permitted to retain copies, including reproducible
copies, of the drawings, specifications, and other documents and electronic data
furnished by the Design/Builder for information and reference in connection with
the Project except as provided in Subparagraphs 1.3.2 and 1.3.3.

1.3.2       Drawings,  specifications,  and other  documents and electronic data
furnished  by the  Design/Builder  shall  not be used by the  Owner or others on
other projects,  for additions to this Project or for completion of this Project
by others,  except by agreement in writing and with appropriate  compensation to
the Design/Builder, unless the Design/Builder is adjudged to be in default under
this Agreement or under any other subsequently executed agreement.

1.3.3       If the Design/Builder  defaults in the Design/Builder's  oblgiations
to the  Owner,  the  Architect  shall  grant a  license  to the Owner to use the
drawings,  specifications,  and other documents and electronic data furnished by
the  Architect  to the  Design/Building  for  the  completion  of  the  Project,
conditioned   upon  the   Owner's   execution   of  an   agrement  to  cure  the
Design/Builder's  default in payment to the  Architect  for services  previously
performed and to indemnify the Architect with regard to claims arising from such
reuse without the Architect's professional involvement.

1.3.4       Submission or distribution of the Design/Builder's documents to meet
official regulatory  requirements or for similar purposes in connection with the
Project  is not to be  construed  as  publication  in  derogation  of the rights
reserved in Subparagraph 1.3.1

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.






                                   ARTICLE 2
                                     OWNER

2.1         The Owner shall designate a representative  authorized to act on the
Owner's  behalf  with  respect  to the  Project.  The  Owner or such  authorized
representative shall examine documents submitted by the Design/Builder and shall
render decisions in a timely manner and in accordance with the schedule accepted
by the Owner. The Owner may obtain  independent review of the Contract Documents
by a separate architect,  engineer,  contractor or cost estimator under contract
to or employed by the Owner. Such independent  review shall be undertaken at the
Owner's  expense in a timely manner and shall not delay the orderly  progress of
the Work.

2.2         The Owner may appoint an on-site project  representative  to observe
the Work and to have such other responsibilities as the Owner and Design/Builder
agree in writing.

2.3         The  Owner  shall  cooperate  with the  Design/Builder  in  securing
building and other  permits,  licenses and  inspections.  The Owner shall not be
required to pay the fees for such permits, licenses and  inspections  unless the
cost of such fees is excluded from the Design/Builder's Proposal.

2.4         The Owner shall  furnish  services of land  surveyors,  geotechnical
engineers  and  other  consultants  for  subsoil,   air  and  water  conditions,
Agreement,  when such  services are deemed  necessary by the  Design/Builder  to
properly carry out the design services required by this Agreement.

2.5         The Owner  shall  disclose,  to the extent  known to the Owner,  the
results and reports of prior tests,  inspections or investigations conducted for
the Project involving: structural or mechanical systems; chemical, air and water
pollution;   hazardous   materials;   or  other   environmental  and  subsurface
conditions.  The  Owner  shall  disclose  all  information  known  to the  Owner
regarding the presence of pollutants at the Project's site.

2.6         The  Owner  shall  furnish  all  legal,   accounting  and  insurance
counselling services as may be necessary at any time for the Project,  including
such auditing  services as the Owner may require to verify the  Design/Builder's
Applications for Payment.

2.7         Those  services,  information,   surveys  and  reports  required  by
Paragraphs  2.4  through  2.6 which are  within  the  Owner's  control  shall be
furnished at the Owner's expense,  and the  Design/Builder  shall be entitled to
rely upon the accuracy and completeness thereof,  except to the extent the Owner
advises the Design/Builder to the contrary in writing.

2.8.        If the Owner  requires  the  Design/Builder  to maintain any special
insurance  coverage,  policy,  amendment,  or  rider,  the  Owner  shall pay the
additional cost thereof, except as otherwise stipulated in this Agreement.

2.9         If the  Owner  observes  or  otherwise  becomes  aware of a fault or
defect in the Work or nonconformity  with the  Design/Builder's  Proposal or the
Construction  Documents,  the Owner shall give prompt  written notice thereof to
the Design/Builder.

2.10        The Owner  shall,  at the  request of the  Design/Builder,  prior to
execution of this Agreement and promptly upon request thereafter, furnish to the
Design/Builder reasonable evidence that financial arrangements have been made to
fulfill the Owner's obligations under the Contract.

2.11        The Owner shall  communicate  with  persons or entities  employed or
retained by the  Design/Builder  through the  Design/Builder,  unless  otherwise
directed by the Design/Builder.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





                                   ARTICLE 3
                                 DESIGN/BUILDER

3.1         SERVICES AND RESPONSIBILITIES

3.1.1.      Design services required by this Agreement shall be performed by
qualified architects and other design professionals.  The contractual obligations
of such professional persons or entities are undertaken and performed in the
interest of the Design/Builder.

3.1.2       The agreements betweeen the Design/Builder and the persons or
entities identified in this Agreement, and any subsequent modifications, shall be
in writing.  These agreements, including financial arrangements with respect
to this Project, shall be promptly and fully disclosed to the Owner upon request.

3.1.3       The Design/Builder shall be responsible to the Owner for acts and
omissions of the Design/Builder's employees, subcontractors and their agents
and employees, and other persons, including the Architect and other design
professionals, performing any portion of the Design/Builder's obligations under
this Agreement.

3.2         BASIC SERVICES

3.2.1       The  Design/Builder's  Basic  Services  are  described  below and in
Article 14.

3.2.2       The  Design/Builder  shall designate a representative  authorized to
act on the Design/Builder's behalf with respect to the Project.

3.2.3       The Design/Builder  shall submit  Construction  Documents for review
and  approval  by  the  Owner.  Construction  Documents  may  include  drawings,
specifications,  and other documents and electronic data setting forth in detail
the requirements for construction of the Work, and shall:

            .1    be  consistent   with  the  intent  of  the   Design/Builder's
                  Proposal;

            .2    provide  information  for the  use of  those  in the  building
                  trades; and

            .3    include documents  customarily  required for regulatory agency
                  approvals.

3.2.4       The  Design/Builder,  with the  assistance of the Owner,  shall file
documents  required to obtain  necessary  approvals of governmental  authorities
having jurisdiction over the project.

3.2.5       The  Design/Builder  shall provide or cause to be provided and shall
pay for  design  services,  labor,  materials,  equipment,  tools,  construction
equipment  and  machinery,  water,  heat,  utilities,  transportation  and other
facilities  and services  necessary for proper  execution and  completion of the
Work,  whether  temporary or permanent and whether or not  incorporated or to be
incorporated in the Work.

3.2.6       The Design/Builder  shall be responsible for all construction means,
methods, techniques, sequences and procedures, and for coordinating all portions
of the Work under this Agreement.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.




3.2.7       The Design/Builder shall keep the Owner informed of the progress and
quality of the Work.

3.2.8       The  Design/Builder  shall be responsible  for correcting Work which
does not conform to the Contract Documents.

3.2.9       The  Design/Builder   warrants  to  the  Owner  that  materials  and
equipment  furnished  under the Contract  will be of good quality and new unless
otherwise required or permitted by the Contract Documents, that the construction
will be free from faults and  defects,  and that the  construction  will conform
with the requirements of the Contract Documents.  Construction not conforming to
these requirements,  including substitutions not properly approved by the Owner,
shall be corrected in accordance with Article 9.

3.2.10      The Design/Builder  shall pay all sales,  consumer,  use and similar
taxes which had been legally enacted at the time the  Design/Builder's  Proposal
was first  submitted  to the Owner,  and shall  secure and pay for  building and
other permits and governmental fees, licenses and inspections  necessary for the
proper execution and completion of the Work which are either customarily secured
after execution of a contract for  construction  or are legally  required at the
time the Design/Builder's Proposal was first submitted to the Owner.

3.2.11      The  Design/Builder  shall comply with and give notices  required by
laws,  ordinances,  rules,  regulations and lawful orders of public  authorities
relating to the Project.

3.2.12 The  Design/Builder  shall pay  royalties  and license  fees for patented
designs,  processes or products. The Design/Builder shall defend suits or claims
for infringement of patent rights and shall hold the Owner harmless from loss on
account  thereof,  but shall not be responsible  for such defense or loss when a
particular design,  process or product of a particular  manufacturer is required
by the Owner.  However, if the Design/Builder has reason to believe the use of a
required  design,  process  or  product  is an  infringement  of a  patent,  the
Design/Builder  shall be  responsible  for such loss unless such  information is
promptly furnished to the Owner.

3.2.13      The Design/Builder shall keep the premises and surrounding area free
from  accumulation of waste materials or rubbish caused by operations under this
Agreement.  At the completion of the Work, the Design/Builder  shall remove from
the site waste materials,  rubbish,  the  Design/Builder's  tools,  construction
equipment, machinery, and surplus materials.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





3.2.14      The  Design/Builder  shall notify the Owner when the  Design/Builder
believes  that the Work or an  agreed  upon  portion  thereof  is  substantially
completed. If the Owner concurs, the Design/Builder shall issue a Certificate of
Substantial Completion which shall establish the Date of Substantial Completion,
shall state the  responsibility of each party for security,  maintenance,  heat,
utilities, damage to the Work and insurance, shall include a list of items to be
completed  or corrected  and shall fix the time within which the  Design/Builder
shall  complete   items  listed   therein.   Disputes   between  the  Owner  and
Design/Builder  regarding the  Certificate  of Substantial  Completion  shall be
resolved in accordance with provisions of Article 10.

3.2.15      The  Design/Builder  shall  maintain  at the site for the  Owner one
record  copy  of the  drawings,  specifications,  product  data,  samples,  shop
drawings,  Change  Orders and other  modifications,  in good order and regularly
updated to record the  completed  construction.  These shall be delivered to the
Owner upon completion of construction and prior to final payment.

3.3         ADDITIONAL SERVICES

3.3.1       The  services  described in this  Paragraph  3.3 are not included in
Basic Services unless so identified in Article 14, and they shall be paid for by
the Owner as provided in this  Agreement,  in addition to the  compensation  for
Basic Services.  The services  described in this Paragraph 3.3 shall be provided
only if authorized or confirmed in writing by the Owner.

3.3.2       Making revisions in drawings, specifications, and other documents or
electronic data when such revisions are required by the enactment or revision of
codes,  laws or regulations  subsequent to the  preparation of such documents or
electronic data.

3.3.3       Providing  consultation  concerning  replacement  of Work damaged by
fire or other cause during  construction,  and furnishing  services  required in
connection with the replacement of such Work.

3.3.4       Providing services in connection with a public hearing,  arbitration
proceeding  or legal  proceeding,  except  where the  Design/Builder  is a party
thereto.

3.3.5       Providing  coordination of construction performed by the Owner's own
forces or  separate  contractors  employed  by the Owner,  and  coordination  of
services  required in  connection  with  construction  performed  and  equipment
supplied by the Owner.

3.3.6       Preparing a set of reproducible  record documents or electronic data
showing significant changes in the Work made during construction.

3.3.7       Providing assistance in the utilization of equipment or systems such
as  preparation of operation and  maintenance  manuals,  training  personnel for
operation and maintenance, and consultation during operation.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





                                   ARTICLE 4
                                      TIME

4.1         Unless otherwise  indicated,  the Owner and the Design/Builder shall
perform their  respective  obligations as  expeditiously  as is consistent  with
reasonable skill and care and the orderly progress of the Project.

4.2         Time limits stated in the Contract Documents are of the essence. The
Work to be performed  under this Part 2 Agreement shall commence upon receipt of
a  notice  to  proceed  unless  otherwise  agreed  and,  subject  to  authorized
Modifications,  Substantial  Completion  shall be achieved on or before the date
established in Article 14.

4.3         Substantial Completion is the stage in the progress of the Work when
the Work or designated  portion thereof is  sufficiently  complete in accordance
with the Contract  Documents so the Owner can occupy or utilize the Work for its
intended use.

4.4         Based on the  Design/Builder's  Proposal,  a  construction  schedule
shall be provided consistent with Paragraph 4.2 above.

4.5         If the  Design/Builder is delayed at any time in the progress of the
Work  by an  act or  neglect  of  the  Owner,  Owner's  employees,  or  separate
contractors  employed  by the Owner,  or by changes  ordered in the Work,  or by
labor disputes,  fire,  unusual delay in deliveries,  adverse weather conditions
not reasonably anticipatable,  unavoidable casualties or other causes beyond the
Design/Builder's   control,   or  by  delay  authorized  by  the  Owner  pending
arbitration,  or by other  causes which the Owner and  Design/Builder  agree may
justify  delay,  then the Contract Time shall be  reasonably  extended by Change
Order.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





                                   ARTICLE 5
                                    PAYMENTS

5.1         PROGRESS PAYMENTS

5.1.1       The Design/Builder shall deliver to the Owner itemized  Applications
for Payment in such detail as indicated in Article 14.

5.1.2       Within  Thirty  (30)  days  of the  Owner's  receipt  of a  properly
submitted and correct  Application for Payment,  the Owner shall make payment to
the Design/Builder.

5.1.3       The Application for Payment shall constitute a representation by the
Design/Builder  to the Owner that the design and construction have progressed to
the point  indicated,  the quality of the Work covered by the  application is in
accordance with the Contract  Documents,  and the  Design/Builder is entitled to
payment in the amount requested.

5.1.4       Upon receipt of payment  from the Owner,  the  Design/Builder  shall
promptly pay the Architect,  other design  professionals and each contractor the
amount  to  which  each is  entitled  in  accordance  with  the  terms  of their
respective contracts.

5.1.5       The Owner shall have no obligation under this Agreement to pay or to
be  responsible  in any  way  for  payment  to  the  Architect,  another  design
professional or a contractor performing portions of the Work.

5.1.6       Neither  progress  payment nor partial or entire use or occupancy of
the  Project  by the  Owner  shall  constitute  an  acceptance  of  Work  not in
accordance with the Contract Documents.

5.1.7       The Design/Builder  warrants that title to all construction  covered
by an  Application  for Payment will pass to the Owner no later than the time of
payment.  The  Design/Builder   further  warrants  that  upon  submittal  of  an
Application for Payment all  construction  for which payments have been received
from the Owner shall be free and clear of liens,  claims, security  interests or
encumbrances  in favor of the  Design/Builder  or any  other  person  or  entity
performing  construction  at the  site  or  furnishing  materials  or  equipment
relating to the construction.

5.1.8       At the time of  Substantial  Completion,  the  Owner  shall  pay the
Design/Builder  the retainage,  if any, less the  reasonable  cost to correct or
complete  incorrect or incomplete Work. Final payment of such withheld sum shall
be made upon correction or completion of such Work.

5.2         FINAL PAYMENT

5.2.1       Neither final payment nor amounts retained, if any, shall become due
until the  Design/Builder  submits to the Owner: (i) an affidavit that payrolls,
bills for materials and  equipment,  and other  indebtedness  connected with the
Work for which the Owner or Owner's  property might be responsible or encumbered
(less amounts withheld by the Owner) have been paid or otherwise satisfied;  (2)
a certificate  evidencing,  that insurance required by the Contract Documents to
remain in force  after  final  payment  is  currently  in effect and will not be
canceled or allowed to expire until at least 30 days' prior  written  notice has
been given to the Owner; (3) a written statement that the  Design/Builder  knows
of no  substantial  reason that the insurance will not be renewable to cover the
period  required by the Contract  Documents;  (4) consent of surety,  if any, to
final payment; and (5) if required by the Owner, other data establishing payment
or satisfaction of obligations, such as receipts, releases and waivers of liens,
claims,  security interests or encumbrances arising out of the Contract,  to the
extent and in such form as may be  designated  by the Owner.  If a contractor or
other person or entity  entitled to assert a lien  against the Owner's  property
refuses to furnish a release or waiver required by the Owner, the Design/Builder
may furnish a bond satisfactory to the Owner to indemnify the Owner against such
lien.  If  such  lien  remains   unsatisfied   after   payments  are  made,  the
Design/Builder  shall  indemnify  the  Owner  for all loss and  cost,  including
reasonable attorney's fees incurred as a result of such lien.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





5.2.2       When the Work has been completed and the contract  fully  performed,
the  Design/Builder  shall submit a final  application for payment to the Owner,
who shall make final payment within 30 days of receipt.

5.2.3       The making of final payment  shall  constitute a waiver of claims by
the Owner except those arising from:

            .1    liens, claims,  security interests or encumbrances arising out
                  of the Contract and unsettled;

            .2    failure  of the Work to comply  with the  requirements  of the
                  Contract Documents; or

            .3    terms  of  special   warranties   required  by  the   Contract
                  Documents.

5.2.4       Acceptance of final payment shall  constitute a waiver of all claims
by the Design/Builder  except those previously made in writing and identified by
the Design/Builder as unsettled at the time of final Application for Payment.

                                   ARTICLE 6
                       PROTECTION OF PERSONS AND PROPERTY

6.1         The Design/Builder shall be responsible for initiating,  maintaining
and providing  supervision of all safety  precautions and programs in connection
wwith the performance of this Agreement.

6.2         The Design/Builder shall take reasonable  precautions for the safety
of, and shall provide  reasonable  protection to prevent damage,  injury or loss
to: (i) employees on the Work and other persons who may be affected thereby; (2)
the Work and  materials  and equipment to be  incorporated  therein,  whether in
storage  on  or  off  the  site,  under  case,   custody,   or  control  of  the
Design/Builder or the Design/Builder's contractors; and (3) other property at or
adjacent thereto,  such as trees,  shrubs, lawns,  walks,  pavements,  roadways,
structures and utilities not designated for removal relocation or replacement in
the course of construction.

6.3         The  Design/Builder  shall give  notices and comply with  applicable
laws,  ordinances,  rules,  regulations and lawful orders of public  authorities
bearing on the safety of persons or property or their  protection  from  damage,
injury or loss.

6.4         The Design/Builder shall promptly remedy damage and loss (other than
damage or loss  insured  under  property  insurance  provided or required by the
Contract  Documents)  to  property at the site caused in whole or in part by the
Design/Builder,  a  contractor  of the  Design/Builder  or  anyone  directly  or
indirectly  employed  by any of them,  or by anyone  for whose  acts they may be
liable.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.






                                   ARTICLE 7
                              INSURANCE AND BONDS

7.1         DESIGN/BUILDER'S LIABILITY INSURANCE

7.1.1.      The Design/Builder shall purchase from and maintain, in a company or
companies  lawfully  authorized to do business in the  jurisdiction in which the
Project is located,  such insurance as will protect the  Design/Builder  or by a
contractor of the  Design/Builder,  or by anyone directly or indirectly employed
by any of them, or by anyone for whose acts any of them may be liable:

            .1    claims under  workers'  compensation,  disability  benefit and
                  other similar employee benefit laws that are applicable to the
                  Work to be performed;

            .2    claims  for  damages  because of bodily  injury,  occupational
                  sickness  or  disease,   or  death  of  the   Design/Builder's
                  employees;

            .3    claims for  damages  because  of bodily  injury,  sickness  or
                  disease,  or death of persons other than the  Design/Builder's
                  employees;

            .4    claims for damages covered by usual personal injury  liability
                  coverage which are sustained (1) by a person as a result of an
                  offense  directly or indirectly  rekated to employment of such
                  person by the Design/Builder or (2) by another person;

            .5    claims for damages,  other than to the Work itself, because of
                  injury to or destruction of tangible property,  including loss
                  of use resulting therefrom;

            .6    claims for damages because of bodily injury, death of a person
                  or property  damage  arising out of ownership,  maintenance or
                  use of a motor vehicle; and

            .7    claims involving contractual liability insurance applicable to
                  the Design/Builder's obligations under Paragraph 11.5.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





7.1.2       The insurance  required by  Subparagraph  7.1.1 shall be written for
not less than limits of  liability  specified  in this  Agreement or required by
law, whichever coverage is greater.  Coverages,  whether written on an occurence
or claims-made  basis,  shall be maintained  without  interruption  from date of
commencement  of the Work until date of final  payment  and  termination  of any
coverage required to be maintained after final payment.

7.1.3       Certificates of Insurance acceptable to the Owner shall be delivered
to the Owner immediately after execution of this Agreement.  These  Certificates
and the  insurance  policies  required  by this  Paragraph  7.1 shall  contain a
provision  that  coverages  afforded  under the policies will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Owner. If any of the foregoing insurance coverages are required to remain in
force after final payment, an additional certificate evidencing  continuation of
such  coverage  shall be  submitted  with the  application  for  final  payment.
Information   concerning  reduction  of  coverage  shall  be  furnished  by  the
Design/Builder    with   reasonable    promptness   in   accordance   with   the
Design/Builder's information and belief.

7.1.4       Design/Builder  shall cause the engineers to maintain throughout the
period of this Project, and for a period of one year thereafter, a standard form
errors and omissions  insurance  policy with One Million  Dollars,  ($1,000,000)
coverage per occurrence  with an insurance  company  satisfactory  to the Owner.
Design/Buider  shall assure that any and all consultants  engaged or employed by
Design/Builder  carry and maintain similar insurance in amounts  satisfactory to
Owner.  The  maintenance  in full and current  force and effect of such form and
amount of  insurance,  in such amount as Owner shall have  accepted,  shall be a
condition  precedent  to the  Design/Builder's  exercise or  enforcement  of any
rights under this Agreement.  Each policy required hereunder shall name Owner as
an additional  insured.  Any policy shall include an endorsement  providing that
the insurance company waive rights of subrogation against the Owner.

7.1.5       The limits of insurance as required in  Subparagraph  7.1.1 shall be
as  stated in  Design/Builder's  Certificate  of  insurance  attached  hereto as
Exhibit "I" to the Contract.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





7.2         OWNER'S LIABILITY INSURANCE

7.2.1       The Owner shall be responsible  for purchasing and  maintaining  the
Owner's  usual  liability  insurance.  Optionally,  the Owner may  purchase  and
maintain other insurance for self-protection against claims which may arise from
operations under this Agreement. The Design/Builder shall not be responsible for
purchasing and maintaining  this optional  Owner's  liability  insurance  unless
specifically required by the Contract Documents.

7.3         PROPERTY INSURANCE

7.3.1       Unless  otherwise  provided  under this  Agreement,  the Owner shall
purchase and  maintain,  in a company or companies  authorized to do business in
the jurisdiction in which the principal improvements are to be located, property
insurance  upon the Work to the full  insurable  value  thereof on a replacement
cost basis  without  optional  deductibles.  Such  property  insurance  shall be
maintained,  unless  otherwise  provided in the Contract  Documents or otherwise
agreed in writing by all  persons and  entities  who are  beneficiaries  of such
insurance,  until final payment has been made or until no person or entity other
than the  Owner has an  insurable  interest  in the  property  required  by this
Paragraph 7.3 to be insured,  whichever is earlier. This insurance shall include
interests of the Owner, the Design/Builder, and their respective contractors and
subcontractors in the Work.

7.3.2       Property  insurance  shall be on an  all-risk  policy form and shall
insure  against the perils of fire and extended  coverage  and physical  loss or
damage including,  without duplication of coverage, theft, vandalism,  malicious
mischief, collapse, falsework,  temporary buildings and debris removal including
demolition  occasioned by enforcement of any applicable legal requirements,  and
shall  cover  reasonable  compensation  for the  services  and  expenses  of the
Design/Builder's  Architect and other professionals required as a result of such
insured loss.  Coverage for other perils shall not be required unless  otherwise
provided in the Contract Documents.

7.3.3       If the Owner does not intend to  purchase  such  property  insurance
required by this Agreement and with all of the coverages in the amount described
above, the Owner shall so inform the Design/Builder prior to commencement of the
construction.  The  Design/Builder  may then effect insurance which will protect
the interests of the Design/Builder and the Design/Builder's  contractors in the
construction,  and by appropriate Change Order the cost thereof shall be charged
to the Owner. If the  Design/Builder is damaged by the failure or neglect of the
Owner to purchase or maintain insurance as described above, then the Owner shall
bear all reasonable costs properly attributable thereto.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.




7.3.4       Unless otherwise provided, the Owner shall purchse and maintain such
boiler and machinery insurance required by this Agreement or by law, which shall
specifically  cover such insured  objects  during  installation  and until final
acceptance by the Owner.  This insurance  shall include  interests of the Owner,
the Design/Builder,  the Design/Builder's  contractors and subcontractors in the
Work, and the  Design/Builder's  Architect and otehr design  professionals.  The
Owner and the Design/Builder shall be named insureds.

7.3.5       A loss  insured  under  the  Owner's  property  insurance  shall  be
adjusted by the Owner as  fiduciary  and made  payable to the Owner as fiduciary
for the insureds, as their interests may appear,  subject to requirements of any
applicable mortgagee clause and of Subparagraph 7.3.10. The Design/Builder shall
pay   contractors   their   shares  of  insurance   proceeds   received  by  the
Design/Builder, and by appropriate agreement, written where legally required for
validity,  shall require contractors to make payments to their subcontractors in
similar manner.

7.3.6       Before an exposure to loss may occur,  the Owner shall file with the
Design/Builder a copy of each policy that includes insurance  coverages required
by this  Paragraph  7.3.  Each policy  shall  contain all  generally  applicable
conditions,  definitions,  exclusions and endorsements  related to this Project.
Each policy  shall  contain a provision  that the policy will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Design/Builder.

7.3.7       If the  Design/Builder  requests in writing that insurance for risks
other than those  described  herein or for other special  hazards be included in
the  property  insurance  policy,  the Owner  shall,  if  possible,  obtain such
insurance,  and the cost  thereof  shall be  charged  to the  Design/Builder  by
appropriate Change Order.

7.3.8       The Owner and the Design/Builder waive all rights against each other
and the Architect and other design professionals,  contractors,  subcontractors,
agents and  employees,  each of the other,  for damages  caused by fire or other
perils to the extent  covered by property  insurance  obtained  pursuant to this
Paragraph 7.3 or other property  insurance  applicable to the Work,  except such
rights  as they may have to  proceeds  of such  insurance  held by the  Owner as
trustee.  The Owner or Design/  Builder,  as  appropriate,  shall  require  from
contractors and subcontractors by appropriate agreements,  written where legally
required for validity, similar waivers each in favor of other parties enumerated
in this Paragraph 7.3. The policies shall provide such waivers of subrogation by
endorsement  or otherwise.  A waiver of  subrogation  shall be effective as to a
person or entity even though that person or entity would  otherwise  have a duty
of indemnification,  contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.

7.3.9       If required in writing by a party in interest,  the Owner as trustee
shall,  upon occurrence of an insured loss, give bond for proper  performance of
the Owner's duties. The cost of required bonds shall be charged against proceeds
received as fiduciary. The Owner shall deposit in a separate account proceeds so
received,  which the Owner shall distribute in accordance with such agreement as
the parties in interest may reach, or in accordance with an arbitration award in
which case the procedure  shall be as provided in Article io. If after such loss
no other special agreement is made, replacement of damaged Work shall be covered
by appropriate Change Order.


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(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





7.3.10      The Owner as  trustee  shall  have power to adjust and settle a loss
with  insurers  unless one of the parties in interest  shall  object in writing,
within five (5) days after  occurrence  of loss to the Owner's  exercise of this
power;  if such  objection  be  made,  the  parties  shall  enter  into  dispute
resolution under procedures provided in Article lo. If distribution of insurance
proceeds  by  arbitration  is  required,   the  arbitrators   will  direct  such
distribution.

7.3.11      Partial  occupancy or use prior to Substantial  Completion shall not
commence until the insurance company or companies  providing  property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Design/ Builder shall take  reasonable  steps to obtain consent of
the  insurance  company or  companies  and shall  not,  without  mutual  written
consent,  take any action with  respect to partial  occupancy  or use that would
cause cancellation, lapse or reduction of coverage.

7.4            LOSS OF USE INSURANCE

7.4.1       The Owner,  at the Owner's  option,  may purchase and maintain  such
insurance as will insure the Owner  against loss of use of the Owner's  property
due to fire or other  hazards,  however  caused.  The Owner waives all rights of
action  against  the  Design/Builder  for loss of use of the  Owner's  property,
including consequential losses due to fire or other hazards, however caused.

                                    ARTICLE 8
                               CHANGES IN THE WORK

8.1         CHANGES

8.1.1       Changes  in the Work may be  accomplished  after  execution  of this
Agreement,  without invalidating this Agreement,  by Change Order,  Construction
Change  Directive,  or order  for a minor  change in the  Work,  subject  to the
limitations stated in the Contract Documents.

8.1.2       A Change Order shall be based upon  agreement  between the Owner and
the  Design/Builder;  a Construction Change Directive may be issued by the Owner
without the agreement of the Design/Builder;  an order for a minor change in the
Work may be issued by the Design/Builder alone.

8.1.3       Changes in the Work shall be performed under  applicable  provisions
of the Contract Documents, and the Design/Builder shall proceed promptly, unless
otherwise provided in the Change Order,  Construction Change Directive, or order
for a minor change in the Work.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





8.1.4       If unit prices are stated in the Contract  Documents or subsequently
agreed  upon,  and if  quantities  originally  contemplated  are so changed in a
proposed Change Order or Construction  Change Directive that application of such
unit prices to quantities of Work  proposed will cause  substantial  inequity to
the Owner or the  Design/Builder,  the applicable unit prices shall be equitably
adjusted.

8.2            CHANGE ORDERS

8.2.1       A  Change   Order  is  a   written   instrument   prepared   by  the
Design/Builder  and signed by the Owner and the  Design/Builder,  stating  their
agreement upon all of the following:

            .1    a change in the Work;

            .2    the amount of the adjustment, if any, in the Contract Sum; and

            .3    the extent of the adjustment, if any, in the Contract Time.

8.2.2       If the Owner  requests a proposal  for a change in the Work from the
Design/Builder and subsequently  elects not to proceed with the change, a Change
Order shall be issued to reimburse the Design/Builder for any costs incurred for
estimating services, design services or preparation of proposed revisions to the
Contract Documents.

8.3           CONSTRUCTION CHANGE DIRECTIVES

8.3.1       A  Construction  Change  Directive is a written  order  prepared and
signed by the  Owner,  directing  a change  in the Work  prior to  agreement  on
adjustment, if any, in the Contract Sum or Contract Time, or both.

8.3.2       Except as otherwise agreed by the Owner and the Design/Builder,  the
adjustment  to the Contract Sum shall be  determined  on the basis of reasonable
expenditures  and  savings  of those  performing  the Work  attributable  to the
change,  including  the  expenditures  for design  services and revisions to the
Contract  Documents.  In case of an increase in the Contract Sum, the cost shall
include a  reasonable  allowance  for  overhead  and profit.  In such case,  the
Design/Builder  shall keep and  present an  itemized  accounting  together  with
appropriate  supporting data for inclusion in a Change Order.  Unless  otherwise
provided in the Contract Documents, costs for these purposes shall be limited to
the following:

            .1    costs  of  labor,  including  social  security,  old  age  and
                  unemployment insurance,  fringe benefits required by agreement
                  or custom, and workers' compensation insurance;

            .2    costs of materials, supplies and equipment,  including cost of
                  transportation, whether incorporated or consumed;

            .3    rental  costs of  machinery  and  equipment  exclusive of hand
                  tools, whether rented from the Design/Builder or others;


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.



            .4    costs of premiums for all bonds and insurance permit fees, and
                  sales, use or similar taxes;

            .5    additional  costs of  supervision  and field office  personnel
                  directly  attributable  to the change;  and  fees  paid to the
                  Architect, engineers and other professionals.

8.3.3       Pending  final  determination  of cost to the Owner,  amounts not in
dispute may be included in Applications for Payment.  The amount of credit to be
allowed by the Design/Builder to the Owner for deletion or change which  results
in a net  decrease  in the  Contract  Sum will be  actual  net  cost.  When both
additions and credits covering  related Work or substitutions  are involved in a
change,  the  allowance for overhead and profit shall be figured on the basis of
the net increase, if any, with respect to that change.

8.3.4       When the Owner and the Design/Builder  agree upon the adjustments in
the  Contract  Sum  and  Contract  Time,   such  agreement  shall  be  effective
immediately and shall be recorded by preparation and execution of an appropriate
Change Order.

8.4         MINOR CHANGES IN THE WORK

8.4.1       The Design/Builder shall have authority to make minor changes in the
Construction  Documents  and  construction  consistent  with the  intent  of the
Contract  Documents  when such minor changes do not involve   adjustment  in the
Contract  Sum or  extension  of the  Contract  Time.  The  Design/Builder  shall
promptly  inform the Owner,  in writing,  of minor  changes in the  Construction
Documents and construction.

8.5         CONCEALED CONDITIONS

8.5.1       If conditions  are  encountered at the site which are (1) subsurface
or otherwise  concealed  physical  conditions which differ materially from those
indicated in the Contract  Documents,  or (2) unknown physical  conditions of an
unusual nature which differ  materially from those ordinarily found to exist and
generally  recognized  as inherent in  construction  activities of the character
provided for in the Contract Documents, then notice by the observing party shall
be given to the other party promptly  before  conditions are disturbed and in no
event later than 21 days after first observance of the conditions.  The Contract
Sum shall be equitably  adjusted for such  concealed  or unknown  conditions  by
Change  Order upon claim by either  party made within 21 days after the claimant
becomes aware of the conditions.

8.6         REGULATORY CHANGES

8.6.1       The   Design/Builder   shall  be  compensated  for  changes  in  the
construction  necessitated  by the  enactment  or  revisions  of codes,  laws or
regulations subsequent to the submission of the Design/Builder's Proposal.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.






                                    ARTICLE 9
                               CORRECTION OF WORK

9.1         The Design/Builder shall promptly correct Work rejected by the Owner
or known by the  Design/Builder  to be  defective  or  failing to conform to the
requirements  of the  Contract  Documents,  whether  observed  before  or  after
Substantial  Completion and whether or not  fabricated,  installed or completed.
The Design/Builder  shall bear costs of correcting such rejected Work, including
additional testing and inspections.

9.2         If, within one (1) year after the date of Substantial  Completion of
the Work or, after the date for  commencement  of  warranties  established  in a
written  agreement between the Owner and the  Design/Builder,  or by terms of an
applicable special warranty required by the Contract Documents,  any of the Work
is  found  to be  not in  accordance  with  the  requirements  of  the  Contract
Documents,  the  Design/Builder  shall  correct it promptly  after  receipt of a
written notice from the Owner to do so unless the Owner has previously given the
Design/ Builder a written acceptance of such condition.

9.3         Nothing  contained in this Article 9 shall be construed to establish
a  period  of   limitation   with  respect  to  other   obligations   which  the
Design/Builder  might have under the Contract  Documents.  Establishment  of the
time period of one (1)  year as described in  Subparagraph  9.2 relates only to
the specific  obligation of the  Design/Builder  to correct the Work, and has no
relationship to the time within which the obligation to comply with the Contract
Documents may be sought to be enforced, nor to the time within which proceedings
may be commenced to establish the Design/Builder's liability with respect to the
Design/Builder's obligations other than specifically to correct the Work.

9.4         If  the  Design/Builder  fails  to  correct  nonconforming  Work  as
required or fails to carry out Work in accordance  with the Contract  Documents,
the Owner,  by written order signed  personally or by an agent  specifically  so
empowered  by the Owner in writing,  may  order the  Design/Builder  to stop the
Work,  or any  portion  thereof,  until  the  cause  for  such  order  has  been
eliminated; however, the Owner's right to stop the Work shall not give rise to a
duty  on the  part of the  Owner  to  exercise  the  right  for  benefit  of the
Design/Builder or other persons or entities.

9.5         If the Design/Builder  defaults or neglects to carry out the Work in
accordance  with the  Contract  Documents  and fails within seven (7) days after
receipt of written notice from the Owner to commence and continue  correction of
such  default or neglect with  diligence  and  promptness,  the Owner may give a
second  written  notice to the  Design/Builder  and,  seven  (7) days  following
receipt  by the  Design/Builder  of  that  second  written  notice  and  without
prejudice to other remedies the Owner may have,  correct such  deficiencies.  In
such case an  appropriate  Change Order shall be issued  deducting from payments
then or  thereafter  due the  Design/  Builder,  the  costs of  correcting  such
deficiencies.  If the payments then or thereafter due the Design/Builder are not
sufficient to cover the amount of the deduction,  the  Design/Builder  shall pay
the  difference  to the  Owner.  Such  action by the Owner  shall be  subject to
dispute resolution procedures as provided in Article 10.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





                                   ARTICLE 10
                              DISPUTE RESOLUTION -
                            MEDIATION AND ARBITRATION

10.1        Claims, disputes or other matters in question between the parties to
this  Agreement  arising out of or relating to this  Agreement or breach thereof
shall be subject to and decided by mediation or  arbitration.  Such mediation or
arbitration  shall be conducted in  accordance  with the  Construction  Industry
Mediation or Arbitration Rules of the American Arbitration Association currently
in effect.

10.2        In addition to and prior to arbitration,  the parties shall endeavor
to settle disputes by mediation.  Demand for mediation shall be filed in writing
with the  other  party to this  Agreement  and  with  the  American  Arbitration
Association. A demand for mediation shall be made within a reasonable time after
the claim, dispute or other matter in question has arisen. In no event shall the
demand  for  mediation  be made  after  the date  when  institution  of legal or
equitable  proceedings based on such claim,  dispute or other matter in question
would be barred by the applicable statutes of repose or limitations.

10.3        Demand  for  arbitration  shall be filed in  writing  with the other
party to this Agreement and with the American Arbitration Association.  A demand
for arbitration shall be made within a reasonable time after the claim,  dispute
or other  matter in  question  has  arisen.  In no event  shall the  demand  for
arbitration  be made  after  the date  when  institution  of legal or  equitable
proceedings  based on such claim,  dispute or other matter in question  would be
barred by the applicable statutes of repose or limitations.

10.4        An  arbitration  pursuant  to this  Article  may be  joined  with an
arbitration  involving  common issues of law or fact between the  Design/Builder
and any  person  or  entity  with  whom  the  Design/Builder  has a  contractual
obligation  to  arbitrate  disputes.  No  other  arbitration  arising  out of or
relating to this Agreement shall include,  by  consolidation,  joinder or in any
other manner,  an additional  person or entity not a party to this  Agreement or
not a party to an agreement with the  Design/Builder,  except by written consent
containing a specific  reference  to this Part 2 Agreement  signed by the Owner,
the Design/Builder and any other person or entities sought to be joined. Consent
to  arbitration  involving an additional  person or entity shall not  constitute
consent to  arbitration  of any claim,  dispute or other  matter in question not
described  in the  written  consent  or with a person  or  entity  not  named or
described therein.  The foregoing agreement to arbitrate and other agreements to
arbitrate  with an additional  person or entity duly consented to by the parties
to  this  Agreement  shall  be  specifically   enforceable  in  accordance  with
applicable law in any court having jurisdiction thereof.

10.5        The award rendered by the arbitrator or arbitrators  shall be final,
and judgment may be entered upon it in  accordance  with  applicable  law in any
court having jurisdiction thereof.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.






                                   ARTICLE 11
                            MISCELLANEOUS PROVISIONS

11.1        Unless otherwise  provided,  this Agreement shall be governed by the
law of the place where the Project is located.

11.2        SUBCONTRACTS

11.2.1      The  Design/Builder,  as soon as practicable after execution of this
Agreement,  shall  furnish to the Owner in writing  the names of the  persons or
entities the Design/Builder will engage as contractors for the Project.

11.3        WORK BY OWNER OR OWNER'S CONTRACTORS

11.3.1      The Owner reserves the right to perform  construction  or operations
related to the  Project  with the  Owner's  own  forces,  and to award  separate
contracts in connection with other portions of the Project or other construction
or  operations  on  the  site  under  conditions  of  insurance  and  waiver  of
subrogation  identical  to the  provisions  of  this  Part 2  Agreement.  If the
Design/Builder  claims that delay or additional cost is involved because of such
action by the Owner, the Design/Builder  shall assert such claims as provided in
Subparagraph 11.4.

11.3.2      The  Design/Builder  shall afford the Owner's  separate  contractors
reasonable  opportunity  for  introduction  and storage of their  materials  and
equipment and  performance of their  activities and shall connect and coordinate
the Design/Builder's  construction and operations with theirs as required by the
Contract Documents.

11.3.3      Costs  caused  by  delays  or  by  improperly  timed  activities  or
defective construction shall be borne by the party responsible therefor.

11.4        CLAIMS FOR DAMAGES

11.4.1      If either party to this Agreement suffers injury or damage to person
or  property  because of an act or omission  of the other  party,  of any of the
other  party's  employees  or agents,  or of others for whose acts such party is
legally liable, written notice of such injury or damage, whether or not insured,
shall be given to the other party within a reasonable time not exceeding 21 days
after first observance. The notice shall provide sufficient detail to enable the
other party to  investigate  the matter.  If a claim of additional  cost or time
related to this claim is to be asserted, it shall be filed in writing.

11.5        INDEMNIFICATION

11.5.1      To the fullest  extent  permitted by law, the  Design/Builder  shall
indemnify  and hold  harmless  the Owner,  Owner's  consultants,  and agents and
employees of any of them from and against claims,  damages, losses and expenses,
including but not limited to attorneys'  fees,  arising out of or resulting from
performance of the Work,  provided that such claim,  damage,  loss or expense is
attributable  to bodily injury,  sickness,  disease or death, or to injury to or
destruction of tangible  property (other than the Work itself) including loss of
use  resulting  therefrom,  but only to the extent caused in whole or in part by
negligent acts or omissions of the Design/Builder, anyone directly or indirectly
employed by the  Design/Builder or anyone for whose acts the  Design/Builder may
be liable,  regardless of whether or not such claim,  damage, loss or expense is
caused in part by a party  indemnified  hereunder.  Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of indemnity
which  would otherwise exist as to a party or person described in this Paragraph
11.5.




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(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





11.5.2      In  claims  against  any  person or entity  indemnified  under  this
Paragraph  11.5  by an  employee  of  the  Design/Builder,  anyone  directly  or
indirectly  employed  by  the  Design/Builder  or  anyone  for  whose  acts  the
Design/Builder  may  be  liable,  the  indemnification   obligation  under  this
Paragraph  11.5  shall  not be  limited  by a  limitation  on  amount or type of
damages,  compensation or benefits  payable by or for the  Design/Builder  under
workers  compensation  acts,  disability  benefit acts or other employee benefit
acts.

11.6        SUCCESSORS AND ASSIGNS

11.6.1      The Owner and Design/Builder,  respectively,  bind themselves, their
partners,  successors,  assigns and legal  representatives to the other party to
this  Agreement and to the partners,  successors and assigns of such other party
with  respect to all  covenants  of this  Agreement.  Neither  the Owner nor the
Design/Builder  shall assign this Agreement  without the written  consent of the
other. The Owner may assign this Agreement to any institutional lender providing
construction  financing,  and the Design/Builder  agrees to execute all consents
reasonably required to facilitate such an assignment. If either party makes such
an assignment,  that party shall nevertheless remain legally responsible for all
obligations  under this Part 2 Agreement,  unless  otherwise agreed by the other
party.

11.7        TERMINATION OF PROFESSIONAL DESIGN SERVICES

11.7.1      Prior to  termination  of the services of the Architect or any other
design  professional  designated in this  Agreement,  the  Design/Builder  shall
identify to the Owner in writing another architect or other design  professional
with respect to whom the Owner has no reasonable objection, who will provide the
services  originally  to have been  provided by the  Architect  or other  design
professional whose services are being terminated.

11.8        EXTENT OF AGREEMENT

11.8.1      This Agreement represents the entire agreement between the Owner and
the  Design/Builder  and  supersedes  prior  negotiations,   representations  or
agreements,  either  written or oral.  This  Agreement  may be  amended  only by
written instrument and signed by both the Owner and the Design/Builder.

                                   ARTICLE 12
                          TERMINATION OF THE AGREEMENT

12.1        TERMINATION BY THE OWNER

12.1.1      This  Agreement may be terminated by the Owner upon i4 days' written
notice to the Design/Builder in the event that the Project is abandoned: If such
termination  occurs,  the Owner shall pay the  Design/Builder for Work completed
and for proven loss sustained upon materials, equipment, tools, and construction
equipment and machinery, including reasonable profit and applicable damages.

12.1.2      If the Design/Builder  defaults or persistently fails or neglects to
carry out the Work in accordance with the Contract Documents or fails to perform
the  provisions of this  Agreement,  the Owner may give written  notice that the
Owner  intends to  terminate  this  Agreement.  If the  Design/Builder  fails to
correct the defaults, failure or neglect within seven (7) days after being given
notice, the Owner may then give a second written notice and, after an additional
seven (7) days,  the Owner may without  prejudice to any other remedy  terminate
the employment of the  Design/Builder and take possession of the site and of all
materials,  equipment,  tools and construction  equipment and machinery  thereon
owned by the Design/Builder and finish the Work by whatever method the Owner may
deem expedient. If the unpaid balance of the Contract Sum exceeds the expense of
finishing the Work and all damages  incurred by the Owner,  such excess shall be
paid to the  Design/Builder.  If the  expense  of  completing  the  Work and all
damages  incurred by the Owner exceeds the unpaid  balance,  the  Design/Builder
shall pay the difference to the Owner. This obligation for payment shall survive
termination of this Agreement.


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(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





12.2        TERMINATION BY THE DESIGN/BUILDER

12.2.1      If the Owner fails to make payment when due, the  Design/Builder may
give  written  notice of the  Design/  Builder's  intention  to  terminate  this
Agreement.  If the Design/Builder fails to receive payment within seven (7) days
after receipt of such notice by the Owner, the  Design/Builder may give a second
written  notice and,  seven (7) days after receipt of such second written notice
by the Owner,  may  terminate  this Part 2 Agreement  and recover from the Owner
payment  for Work  executed  and for proven  losses  sustained  upon  materials,
equipment, tools, and construction equipment and machinery, including reasonable
profit and applicable damages.




- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.






                                   ARTICLE 13
                               BASIS COMPENSATION

The Owner shall  compensate  the  Design/Builder  in accordance  with Article 5,
Payments, and the other provisions of this Agreement as described below.

13.1        COMPENSATION

13.1.1      For the  Design/Builder's  performance  of the Work, as described in
Paragraph 3.2 and including any other  services  listed in Article 14 as part of
Basic  Services,  the Owner shall pay the  Design/Builder  in current  funds the
Contract  Sum  as  follows:  THREE  HUNDRED  FOURTY-FOUR  THOUSAND  SIX  HUNDRED
THIRTY-THREE DOLLARS ($344,633)

13.1.2      For Additional Services, as described in Paragraph 3.3 and including
any other  services  listed in Article 14 as Additional  Services,  compensation
shall be as follows:

Negotiated between Owner and  Design/Builder:  however, in no case shall changes
or  additional  services  exceed  actual cost plus an overhead and profit fee of
10%.

13.3        INTEREST PAYMENTS


13.3.1      The rate of interest  for past due  payments  shall be as follows:

Not Applicable
- --------------

(USURY LAWS AND  REQUIREMENTS  UNDER THE FEDERAL  TRUTH IN LENDING ACT,  SIMILAR
STATE AND LOCAL  CONSUMER  CREDIT LAWS AND OTHER  REGULATIONS AT THE OWNER'S AND
DESIGN/ BUILDER'S  PRINCIPAL PLACES OF BUSINESS,  AT THE LOCATION OF THE PROJECT
AND ELSEWHERE MAY AFFECT THE VALIDITY OF THIS  PROVISION.  SPECIFIC LEGAL ADVICE
SHOULD BE OBTAINED WITH RESPECT TO DELETION, MODIFICATION OR OTHER REQUIREMENTS,
SUCH AS WRITTEN DISCLOSURES OR WAIVERS.)

                                   ARTICLE 14
                          OTHER CONDITIONS AND SERVICES

14.1        The Basic  Services to be  performed  shall be  commenced on date of
Notice to Proceed and,  subject to authorized  adjustments and delays not caused
by the Design/Builder,  Substantial Completion shall be achieved in the Contract
Time of February 15, 2005.

14.2        The  Basic Services  beyond  those  described  in  Article  3 are as
follows:  In accordance  with the Bid Form/Form of Proposal dated  September 22,
2004  and the Bid  Documents  and  Contract  Documents  referenced  herein,  the
Contractor  shall  perform  all  Design/Build  Work  necessary  for  a  complete
operatble Paddock ready for use by the Owner, which Paddock design satisfies the
design concept as indicated within the Contract Documents.

14.3        Additional  Services  beyond  those  described  in  Article 3 are as
follows:

Not Applicable
- --------------

14.4        The  Design/Builder  shall submit an Application  for Payment on the
first ( ) day of each month.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.





14.5        The Design/Builder's Proposal includes the following documents:

(LIST THE DOCUMENTS BY SPECIFIC TITLE AND DATE; INCLUDE ANY REQUIRED PERFORMANCE
AND PAYMENT BONDS.)


Title                                                  Date

Exhibit "A" Scope of Work & Bidding Requirements, dated 09/01/04.
Exhibit "B" Clarifications to Drawings of Exhibit B, dated 09/01/04.
Exhibit "C" List of Bidding Schematic Drawings, dated 09/01/04.
Exhibit "D" Exhibit "D", Bid Form/Form of Proposal, dated 09/22/04.
Exhibit "E" Project Schedule Requirements, dated 09/22/04.
Exhibit "F" Form of Proposal, dated 10/04/04.
Exhibit "G" Addendum No. 1, dated 09/09/04.
Exhibit "H" Exhibit "H", List of Accepted Changes, dated 09/22/04.
Exhibit "I" Contractor's Certificate of Insurance

This Agreement entered into as of the day and year first written above.

MONTICELLO RACEWAY MANAGEMENT, INC.            ARMISTEAD MECHANICAL, INC.


/s/ Philip Berman                              /s/ Joseph Jerkowski
- -----------------------------------            ---------------------------------
OWNER (Signature)                              DESIGN/BUILDER (Signature)


Philip Berman, VP                              Joseph Jerkowski
- -----------------------------------            ---------------------------------
(Printed name and title)                       (Printed name and title)
Philip Berman, VP                              NY Operations Mgr.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted     below.     expiration     as    noted    below.     User     Document:
a191-armistead-11-9-04.aia  --  11/10/2004.  AIA License Number  1500563,  which
expires on 12/31/2004.

EX-10.56

                                                                   EXHIBIT 10.56

                       STANDARD FORM OF AGREEMENT BETWEEN
                            OWNER AND DESIGN/BUILDER

THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN ATTORNEY IS
ENCOURAGED WITH RESPECT TO ITS USE,  COMPLETION OR MODIFICATION.  AUTHENTICATION
OF THIS  ELECTRONICALLY  DRAFTED AIA  DOCUMENT MAY BE MADE BY USING AIA DOCUMENT
D4o1.

This  document  comprises two separate  Agreements:  Part 1 Agreement and Part 2
Agreement.  To the extent referenced in these Agreements,  subordinate  parallel
agreements  to A191 consist of AIA Document  A491,  Standard  Form of Agreements
Between  Design/Builder and Contractor,  and AIA Document B901, Standard Form of
Agreements Between Design/Builder and Architect.

Copyright  1985,  (C)1996 The American  Institute of  Architects,  1735 New York
Avenue,  NW, Washington,  DC 20006-5292.  Reproduction of the material herein or
substantial  quotation of its provisions  without the written  permission of the
AIA  violates  the  copyright  laws of the United  States and will  subject  the
violator to legal prosecution.

                                    AGREEMENT
                                  1996 EDITION
- --------------------------------------------------------------------------------

AGREEMENT
made as of the 11th day of November in the year of 2004
(IN WORDS, INDICATE DAY, MONTH AND YEAR.)

BETWEEN the Owner:
(NAME AND ADDRESS)
MONTICELLO RACEWAY MANAGEMENT, INC.
204 State Route 17B
Monticello. NY 12701

and the Design/Builder:
(NAME AND ADDRESS)
Darlind Construction
1540 Route 55
Lanrangeville, NY 12540

For the following Project:
(INCLUDE PROJECT NAME, LOCATION AND A SUMMARY DESCRIPTION.)
New Horse  Paddock-consisting  of  approximately  16.000  s.f.,  located  on the
grounds of Monticello Raceway, Monticello, NY 12701

The architectural services described in Article 3 will be provided by the Design
Builder

(NAME AND ADDRESS)    (REGISTRATION NUMBER)     (RELATIONSHIP TO DESIGN/BUILDER)

Darlind Construction
1540 Route 55
Lanrangeville, NY 12540

Normal structural  engineering services will be provided  contractually  through
Desgin Builder except as indicated below:

(NAME, ADDRESS
(AND DISCIPLINE)    (REGISTRATION NUMBER)     (RELATIONSHIP TO DESIGN/BUILDER)

Hillman & Miley, Consultant Engineers, PLLC               Structural Foundations
Consulting Engineers, PLLC
222 Memaroneck Avenue
White Plains, NY 10695-1315


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






Star Building Systems                                         Building Structure
Dennis P. Watson, PE, Dir. of Engineering
Robertson Ceco Company
PO Box 94910
Oklahoma City, OK 73143

The Owner and the Design/Builder agree as set forth below.

                        TERMS AND CONDITIONS - AGREEMENT


                                    ARTICLE 1
                               GENERAL PROVISIONS

1.1         BASIC DEFINITIONS.

1.1.1       The Contract  Documents  consist of the documents  listed in Article
14, and this Agreement, the Design/Builder's Proposal and written addenda to the
Proposal  identified in Article 14, the Construction  Documents  approved by the
Owner in  accordance  with  Subparagraph  3.2.3 and  Modifications  issued after
execution  of this  Part 2  Agreement.  A  Modification  is a Change  Order or a
written  amendment to this Agreement  signed by both parties,  or a Construction
Change Directive issued by the Owner in accordance with Paragraph. 8.3.

1.1.2       The term "Work" means the construction and services  provided by the
Design/Builder to fulfill the Design/Builder's obligations.

1.1.3       The term  "Contractor"  when  referred to in the Contract  Documents
shall be deemed to mean and refer to the Design/Builder herein

1.2         EXECUTION, CORRELATION AND INTENT

1.2.1       It is the intent of the Owner and  Design/Builder  that the Contract
Documents  include all items necessary for proper  execution.  and completion of
the Work. The Contract Documents are complementary,  and what is required by one
shall be as binding as if required  by all;  performance  by the  Design/Builder
shall be required only to the extent  consistent  with and reasonably  inferable
from the Contract  Documents as being necessary to produce the intended results.
Words that have well-known technical or construction  industry meanings are used
in the Contract Documents in accordance with such recognized meanings.

1.2.2       If the Design/Builder  believes or is advised by the Architect or by
another  design  professional  retained to provide  services on the Project that
implementation  of any  instruction  received  from  the  Owner  would  cause  a
violation of any applicable  law, the  Design/Builder  shall notify the Owner in
writing.  Neither the  Design/Builder  nor the  Architect  shall be obligated to
perform any act which either believes will violate any applicable law.

1.2.3       Nothing   contained  in  this  Part  2  Agreement   shall  create  a
contractual  relationship  between the Owner and any person or entity other than
the Design/Builder.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






1.3         OWNERSHIP AND USE OF DOCUMENTS

1.3.1       Drawings,  specifications,  and other  documents and electronic data
furnished by the Design/Builder are instruments of service. The Design/Builder's
Architect and other providers of  professional  services shall retain all common
law,  statutory  and  other  reserved  rights,   including  copyright  in  those
instruments of service furnished by them.  Drawings,  specifications,  and other
documents and electronic  data are furnished for use solely with respect to this
Agreement. The Owner shall be permitted to retain copies, including reproducible
copies, of the drawings, specifications, and other documents and electronic data
furnished by the Design/Builder for information and reference in connection with
the Project except as provided in Subparagraphs 1.3.2 and 1.3.3.

1.3.2       Drawings,  specifications,  and other  documents and electronic data
furnished  by the  Design/Builder  shall  not be used by the  Owner or others on
other projects,  for additions to this Project or for completion of this Project
by others,  except by agreement in writing and with appropriate  compensation to
the Design/Builder, unless the Design/Builder is adjudged to be in default under
this Agreement or under any other subsequently executed agreement.

1.3.3       If the Design/Builder  defaults in the Design/Builder's  obligations
to the Owner,  the  Architect  shall  grant a license  to the Owner.  to use the
drawings,  specifications,  and other documents and electronic data furnished by
the  Architect  to  the  Design/Builder  for  the  completion  of  the  Project,
conditioned   upon  the  Owner's   execution   of  an   agreement  to  cure  the
Design/Builder's  default in payment to the  Architect  for services  previously
performed and to indemnify the Architect with regard to claims arising from such
reuse without the Architect's professional involvement.

1.3.4       Submission or distribution of the Design/Builder's documents to meet
official regulatory  requirements or for similar purposes in connection with the
Project  is not to be  construed  as  publication  in  derogation  of the rights
reserved in Subparagraph 1.3.1.

                                    ARTICLE 2
                                      OWNER

2.1         The Owner shall designate a representative  authorized to act on the
Owner's  behalf  with  respect  to the  Project.  The  Owner or such  authorized
representative shall examine documents submitted by the Design/Builder and shall
render decisions in a timely manner and in accordance with the schedule accepted
by the Owner. The Owner may obtain  independent review of the Contract Documents
by a separate architect,  engineer,  contractor or cost estimator under contract
to or employed by the Owner. Such independent  review shall be undertaken at the
Owner's  expense in a timely manner and shall not delay the orderly  progress of
the Work.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






2.2         The Owner may appoint an on-site project  representative  to observe
the Work and to have such other responsibilities as the Owner and Design/Builder
agree in writing.

2.3         The  Owner  shall  cooperate  with the  Design/Builder  in  securing
building and other  permits,  licenses and  inspections.  The Owner shall not be
required to pay the fees for such permits,  licenses and inspections  unless the
cost of such fees is excluded from the Design/Builder's Proposal.

2.4         The Owner shall  furnish  services of land  surveyors,  geotechnical
engineers  and  other  consultants  for  subsoil,   air  and  water  conditions,
Agreement,  when such  services are deemed  necessary by the  Design/Builder  to
properly carry out the design services required by this Agreement.

2.5         The Owner  shall  disclose,  to the extent  known to the Owner,  the
results and reports of prior tests,  inspections or investigations conducted for
the Project involving:  structural or mechanical  systems;  chemical,  air , and
water pollution;  hazardous  materials;  or other  environmental  and subsurface
conditions.  The  Owner  shall  disclose  all  information  known  to the  Owner
regarding the presence of pollutants at the Project's site.

2.6         The  Owner  shall  furnish  all  legal,   accounting  and  insurance
counseling  services as may be necessary at any time for the Project,  including
such auditing  services as the Owner may require to verify the  Design/Builder's
Applications for Payment.

2.7         Those  services,  information,   surveys  and  reports  required  by
Paragraphs  2.4  through  2.6 which are  within  the  Owner's  control  shall be
furnished at the Owner's expense,  and the  Design/Builder  shall be entitled to
rely upon the accuracy and completeness thereof,  except to the extent the Owner
advises the Design/Builder to the contrary in writing.

2.8.        If the Owner  requires  the  Design/Builder  to maintain any special
insurance  coverage,  policy,  amendment,  or  rider,  the  Owner  shall pay the
additional cost thereof, except as otherwise stipulated in this Agreement.

2.9         If the  Owner  observes  or  otherwise  becomes  aware of a fault or
defect in the Work or nonconformity  with the  Design/Builder's  Proposal or the
Construction  Documents,  the Owner shall give prompt  written notice thereof to
the Design/Builder.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.







2.10        The Owner  shall,  at the  request of the  Design/Builder,  prior to
execution,  of this Agreement and promptly upon request  thereafter,  furnish to
the  Design/Builder  reasonable  evidence that financial  arrangements have been
made to fulfill the Owner's obligations under the Contract.

2.11        The Owner shall  communicate  with  persons or entities  employed or
retained by the  Design/Builder  through the  Design/Builder,  unless  otherwise
directed by the Design/Builder.

                                    ARTICLE 3
                                 DESIGN/BUILDER

3.1         SERVICES AND RESPONSIBILITIES

3.1.1       Design  services  required by this  Agreement  shall be performed by
qualified architects and other design professionals. The contractual obligations
of such  professional  persons or entities are  undertaken  and performed in the
interest of the Design/Builder.

3.1.2       The  agreements  between  the  Design/Builder  and  the  persons  or
entities identified in this Agreement, and any subsequent  modifications,  shall
be in writing.  These agreements,  including financial arrangements with respect
to this  Project,  shall be  promptly  and fully  disclosed  to the  Owner  upon
request.

3.1.3       The  Design/Builder  shall be  responsible to the Owner for acts and
omissions of the Design/Builder's employees, subcontractors and their agents and
employees,  and  other  persons,   including  the  Architect  and  other  design
professionals,  performing any portion of the Design/Builder's obligations under
this Agreement.

3.2         BASIC SERVICES

3.2.1       The  Design/Builder's  Basic  Services  are  described  below and in
Article 14.

3.2.2       The  Design/Builder  shall designate a representative  authorized to
act on the Design/Builder's behalf with respect to the Project.

3.2.3       The Design/Builder  shall submit  Construction  Documents for review
and  approval  by  the  Owner.  Construction  Documents  may  include  drawings,
specifications,  and other documents and electronic data setting forth in detail
the requirements for construction of the Work, and shall:

            .1    be  consistent   with  the  intent  of  the   Design/Builder's
                  Proposal;

            .2    provide  information  for the  use of  those  in the  building
                  trades; and

            .3    include documents  customarily  required for regulatory agency
                  approvals.

3.2.4       The  Design/Builder,  with the  assistance of the Owner,  shall file
documents  required to obtain  necessary  approvals of governmental  authorities
having jurisdiction over the Project.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





3.2.5       the  Design/Builder  shall provide or cause to be provided and shall
pay for  design  services,  labor,  materials,  equipment,  tools,  construction
equipment  and  machinery,  water,  heat,  utilities,  transportation  and other
facilities  and services  necessary for proper  execution and  completion of the
Work,  whether  temporary or permanent and whether or not  incorporated or to be
incorporated in the Work.

3.2.6       The Design/Builder shall, be responsible for all construction means,
methods, techniques, sequences and procedures, and for coordinating all portions
of the Work under this Agreement.

3.2.7       The Design/Builder shall keep the Owner informed of the progress and
quality of the Work.

3.2.8       The  Design/Builder  shall be responsible  for correcting Work which
does not conform to the Contract Documents.

3.2.9       The  Design/Builder   warrants  to  the  Owner  that  materials  and
equipment  furnished  under the Contract  will be of good quality and new unless
otherwise  required or permitted by the Contract Documents that the construction
will be free from faults and  defects,  and that the  construction  will conform
with the requirements of the Contract Documents.  Construction not conforming to
these requirements,  including substitutions not properly approved by the Owner,
shall be corrected in accordance with Article 9.

3.2.10      The Design/Builder  shall pay all sales,  consumer,  use and similar
taxes which had been legally enacted at the time the  Design/Builder's  Proposal
was first  submitted  to the Owner,  and shall  secure and pay for  building and
other permits and governmental fees, licenses and inspections  necessary for the
proper execution and completion of the Work which are either customarily secured
after execution of a contract for  construction  or are legally  required at the
time the Design/Builder's Proposal was first submitted to the Owner.

3.2.11      The  Design/Builder  shall comply with and give notices  required by
laws,  ordinances,  rules,  regulations and lawful orders of public  authorities
relating to the Project.

3.2.12      The Design/Builder shall pay royalties and license fees for patented
designs, processes or products. The Design/Builder shall defend suits, or claims
for infringement of patent rights and shall hold the Owner harmless from loss on
account  thereof,  but shall  not be responsible for such defense or loss when a
particular design,  process or product of a particular  manufacturer is required
by the Owner.  However, if the Design/Builder has reason to believe the use of a
required  design,  process  or  product  is an  infringement  of a  patent,  the
Design/Builder  shall be  responsible  for such loss unless such  information is
promptly furnished to the Owner.

3.2.13      The Design/Builder shall keep the premises and surrounding area free
from  accumulation of waste materials or rubbish caused by operations under this
Agreement.  At the completion of the Work, the Design/Builder  shall remove from
the site waste materials,  rubbish,  the  Design/Builder's  tools,  construction
equipment, machinery, and surplus materials.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






3.2.14      The  Design/Builder  shall notify the Owner when the  Design/Builder
believes  that the Work or an  agreed  upon  portion  thereof  is  substantially
completed. If the Owner concurs, the Design/Builder shall issue a Certificate of
Substantial Completion which shall establish the Date of Substantial Completion,
shall state the  responsibility of each party for security,  maintenance,  heat,
utilities, damage to the Work and insurance, shall include a list of items to be
completed  or corrected  and shall fix the time within which the  Design/Builder
shall  complete   items  listed   therein.   Disputes   between  the  Owner  and
Design/Builder  regarding the  Certificate  of Substantial  Completion  shall be
resolved in accordance with provisions of Article l0.

3.2.15      The  Design/Builder  shall  maintain  at the site for the  Owner one
record  copy  of the  drawings,  specifications,  product  data,  samples,  shop
drawings,  Change  Orders and other  modifications,  in good order and regularly
updated to record the  completed  construction.  These shall be delivered to the
Owner upon completion of construction and prior to final payment.

3.3         ADDITIONAL SERVICES

3.3.1       The  services  described in this  Paragraph  3.3 are not included in
Basic Services unless so identified in Article i4, and they shall be paid for by
the Owner as provided in this  Agreement,  in addition to the  compensation  for
Basic Services.  The services  described in this Paragraph 3.3 shall be provided
only if authorized or confirmed in writing by the Owner.

3.3.2       Making revisions in drawings, specifications, and other documents or
electronic data when such revisions are required by the enactment or revision of
codes,  laws or regulations  subsequent to the  preparation of such documents or
electronic data.

3.3.3       Providing  consultation  concerning  replacement  of Work damaged by
fire or other cause during  construction,  and furnishing  services  required in
connection with the replacement of such Work.

3.3.4       Providing services in connection with a public hearing,  arbitration
proceeding  or legal  proceeding,  except  where the  Design/Builder  is a party
thereto.

3.3.5       Providing  coordination of construction performed by the Owner's own
forces or  separate  contractors  employed  by the Owner,  and  coordination  of
services  required in  connection  with  construction,  performed  and equipment
supplied by the Owner.

3.3.6       Preparing a set of reproducible  record documents or electronic data
showing significant changes in the Work made during construction.

3.3.7       Providing assistance in the utilization of equipment or systems such
as  preparation of operation and  maintenance  manuals,  training  personnel for
operation and maintenance, and consultation during operation.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





                                    ARTICLE 4
                                      TIME

4.1         Unless otherwise  indicated,  the Owner and the Design/Builder shall
perform their  respective  obligations as  expeditiously  as is consistent  with
reasonable skill and care and the orderly progress of the Project.

4.2         Time limits stated in the Contract Documents are of the essence. The
Work to be performed  under this Part 2 Agreement shall commence upon receipt of
a  notice  to  proceed  unless  otherwise  agreed  and,  subject  to  authorized
Modifications,  Substantial  Completion  shall be achieved on or before the date
established in Article 14.

4.3         Substantial Completion is the stage in the progress of the Work when
the Work or designated  portion thereof is  sufficiently  complete in accordance
with the Contract  Documents so the Owner can occupy or utilize the Work for its
intended use.

4.4         Based on the  Design/Builder's  Proposal,  a  construction  schedule
shall be provided consistent with Paragraph 4.2 above.

4.5         If the  Design/Builder is delayed at any time in the progress of the
Work  by an  act or  neglect  of  the  Owner,  Owner's  employees,  or  separate
contractors  employed  by the Owner,  or by changes  ordered in the Work,  or by
labor disputes,  fire,  unusual delay in deliveries,  adverse weather conditions
not reasonably anticipatable,  unavoidable casualties or other causes beyond the
Design/Builder's   control,   or  by  delay  authorized  by  the  Owner  pending
arbitration,  or by other  causes which the Owner and  Design/Builder  agree may
justify  delay,  then the Contract Time shall be  reasonably  extended by Change
Order.

                                    ARTICLE 5
                                    PAYMENTS

5.1         PROGRESS PAYMENTS

5.1.1       The Design/Builder shall deliver to the Owner itemized  Applications
for Payment in such detail as indicated in Article 14.

5.1.2       Within  Thirty  (30)  days  of the  Owner's  receipt  of a  properly
submitted and correct  Application for Payment,  the Owner shall make payment to
the Design/Builder.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





5.1.3       The Application for Payment shall constitute a representation by the
Design/Builder  to the Owner that the design and construction have progressed to
the point  indicated,  the quality of the Work covered by the  application is in
accordance with the Contract  Documents,  and the  Design/Builder is entitled to
payment in the amount requested.

5.1.4       Upon receipt of payment  from the Owner,  the  Design/Builder  shall
promptly pay the Architect,  other design  professionals and each contractor the
amount  to  which  each is  entitled  in  accordance  with  the  terms  of their
respective contracts.

5.1.5       The Owner shall have no obligation under this Agreement to pay or to
be  responsible  in any  way  for  payment  to  the  Architect,  another  design
professional or a contractor performing portions of the Work.

5.1.6       Neither  progress  payment nor partial or entire use or occupancy of
the  Project  by the  Owner  shall  constitute  an  acceptance  of Work  not in
accordance with the Contract Documents.

5.1.7       The Design/Builder  warrants that title to all construction  covered
by an  Application  for Payment will pass to the Owner no later than the time of
payment.  The  Design/Builder   further  warrants  that  upon  submittal  of  an
Application for Payment all  construction  for which payments have been received
from the Owner shall be free and clear of liens,  claims,  security interests or
encumbrances  in favor of the  Design/Builder  or any  other  person  or  entity
performing  construction  at the  site  or  furnishing  materials  or  equipment
relating to the construction.

5.1.8       At the time of  Substantial  Completion,  the  Owner  shall  pay the
Design/Builder  the retainage,  if any, less the  reasonable  cost to correct or
complete  incorrect or incomplete  Work Final payment of such withheld sum shall
be made upon correction or completion of such Work.

5.2         FINAL PAYMENT

5.2.1       Neither final payment nor amounts retained, if any, shall become due
until the  Design/Builder  submits to the Owner: (i) an affidavit that payrolls,
bills for materials and  equipment,  and other  indebtedness  connected with the
Work for which the Owner or Owner's  property might be responsible or encumbered
(less amounts withheld by the Owner) have been paid or otherwise satisfied;  (2)
a certificate  evidencing that insurance  required by the Contract  Documents to
remain in force  after  final  payment  is  currently  in effect and will not be
canceled or allowed to expire until at least 3o days' prior  written  notice has
been given to the Owner; (3) a written statement that the  Design/Builder  knows
of no  substantial  reason that the insurance will not be renewable to cover the
period  required by the Contract  Documents;  (4) consent of surety,  if any, to
final payment; and (5) if required by the Owner, other data establishing payment
or satisfaction of obligations, such as receipts, releases and waivers of liens,
claims,  security interests or encumbrances arising out of the Contract,  to the
extent and in such form as may be  designated  by the Owner.  If a contractor or
other person or entity  entitled to assert a lien  against the Owner's  property
refuses to  furnish a release  or waiver  required  by the  Owner,  the  Design/
Builder  may furnish a bond  satisfactory  to the Owner to  indemnify  the Owner
against such lien. If such lien remains unsatisfied after payments are made, the
Design/Builder  shall  indemnify  the  Owner  for all loss and  cost,  including
reasonable attorneys' fees incurred as a result of such lien.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





5.2.2       When the Work has been completed and the contract  fully  performed,
the  Design/Builder  shall submit a final  application for payment to the owner,
who shall make final payment within 30 days of receipt.

5.2.3       The making of final payment  shall  constitute a waiver of claims by
the Owner except those arising from:

            .1    liens, claims,  security interests or encumbrances arising out
                  of the Contract and unsettled;

            .2    failure  of the Work to comply  with the  requirements  of the
                  Contract Documents; or

            .3    terms  of  special   warranties   required  by  the   contract
                  Documents.

5.2.4       Acceptance of final payment shall  constitute a waiver of all claims
by the Design/Builder  except those previously made in writing and identified by
the Design/Builder as unsettled at the time of final Application for Payment.


                                    ARTICLE 6
                       PROTECTION OF PERSONS AND PROPERTY

6.1         The Design/Builder shall be responsible for initiating,  maintaining
and providing  supervision of all safety  precautions and programs in connection
with the performance of this Agreement.

6.2         The Design/Builder shall take reasonable  precautions for the safety
of, and shall provide  reasonable  protection to prevent damage,  injury or loss
to: (1) employees on the Work and other persons who may be affected thereby; (2)
the Work and  materials  and equipment to be  incorporated  therein,  whether in
storage  on  or  off  the  site,  under  care,   custody,   or  control  of  the
Design/Builder or the Design/Builder's contractors; and (3) other property at or
adjacent thereto,  such as trees,  shrubs,  lawns, walks,  pavements,  roadways,
structures and utilities not designated for removal relocation or replacement in
the course of construction.

6.3         The  Design/Builder  shall give  notices and comply with  applicable
laws,  ordinances,  rules,  regulations and lawful orders of public  authorities
bearing on the safety of persons or property or their  protection  from  damage,
injury or loss.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





6.4         The Design/Builder shall promptly remedy damage and loss (other than
damage or loss  insured  under  property  insurance  provided or required by the
Contract  Documents)  to  property at the site caused in whole or in part by the
Design/Builder,  a  contractor  of the  Design/Builder  or  anyone  directly  or
indirectly  employed  by any of them,  or by anyone  for whose  acts they may be
liable.

                                    ARTICLE 7
                               INSURANCE AND BONDS

7.1         DESIGN/BUILDER'S LIABILITY INSURANCE

7.1.1       The Design/Builder shall purchase from and maintain, in a company or
companies  lawfully  authorized to do business in the  jurisdiction in which the
Project is located,  such  insurance  as will  protect the  Design/Builder  from
claims set forth below which may arise out of or result  from  operations  under
this Agreement by the  Design/Builder or by a contractor of the  Design/Builder,
or by anyone  directly or  indirectly  employed by any of them, or by anyone for
whose acts any of them may be liable:

            .1     claims under workers'  compensation,  disability  benefit and
                   other similar  employee  benefit laws that are  applicable to
                   the Work to be performed;

            .2     claims for  damages  because of bodily  injury,  occupational
                   sickness  or  disease,  or  death  of  the   Design/Builder's
                   employees;

            .3     claims for  damages  because of bodily  injury,  sickness  or
                   disease, or death of persons other than the  Design/Builder's
                   employees;

            .4     claims for damages covered by usual personal injury liability
                   coverage  which are  sustained by (1) by a person as a result
                   of an offense directly or indirectly related to employment of
                   such person by the Design/Builder or (2) by another person;

            .5     claims for damages, other than to the Work itself, because of
                   injury to or destruction of tangible property, including loss
                   of use resulting therefrom;

            .6     claims  for  damages  because  of bodily  injury,  death of a
                   person  or  property   damage   arising  out  of   ownership,
                   maintenance or use of a motor vehicle; and

            .7     claims involving  contractual  liability insurance applicable
                   to the Design/Builder's obligations under Paragraph 11.5.



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






7.1.2       The insurance  required by  Subparagraph  7.1.1 shall be written for
not less than limits of  liability  specified  in this  Agreement or required by
law, whichever coverage is greater. Coverages,  whether written on an occurrence
or claims  made basis  shall be  maintained  without  interruption  from date of
commencement  of the Work until date of final  payment  and  termination  of any
coverage required to be maintained after final payment.

7.1.3       Certificates of Insurance acceptable to the Owner shall be delivered
to the Owner immediately after execution of this Agreement.  These  Certificates
and the  insurance  policies  required  by this  Paragraph  7.1 shall  contain a
provision  that  coverages  afforded  under the policies will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Owner. If any of the foregoing insurance coverages are required to remain in
force after final payment, an additional certificate evidencing  continuation of
such  coverage  shall be  submitted  with the  application  for  final  payment.
Information   concerning  reduction  of  coverage  shall  be  furnished  by  the
Design/Builder    with   reasonable    promptness   in   accordance   with   the
Design/Builder's information and belief.

7.1.4       Design/Builder  shall cause the engineers to maintain  througout the
period of this Project, and for a period of one year therafter,  a standard form
errors and omissions  insurance  policy with One Million  Dollars,  ($1,000,000)
coverage per occurrence  with an insurance  company  satisfactory  to the Owner.
Design/Builder  shall assure that any and all consultants engaged or employed by
Design/Builder  carry and maintain similar insurance in amounts  satisfactory to
Owner.  The  maintenance  in full and current  force and effect of such form and
amount of  insurance,  in such amount as Owner shall have  accepted,  shall be a
condition  precedent  to the  Design/Builder's  exercise or  enforcement  of any
rights under this Agreement.  Each policy required hereunder shall name Owner as
an additional insured.  Any policy shall include an endoresement  providing that
the insurance company waive rights of subrogation against the Owner.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






7.1.5       The limits of insurance as rquired in Subparagrpah 7.1.1 shall be as
stated in  Design/Builder's  Certificate of Insurance attached hereto as Exhibit
"I" to the Contract.

7.1.6       The Design/Build Contractor shall provide, in a form satsifactory to
the Owner, a 100%  Performance  and Payment Bond from a Surety company with an A
rating or higher.

7.2         OWNER'S LIABILITY INSURANCE

7.2.1       The Owner shall be responsible  for purchasing and  maintaining  the
Owner's  usual  liability  insurance.  Optionally,  the Owner may  purchase  and
maintain other insurance for self-protection against claims which may arise from
operations under this Agreement. The Design/Builder shall not be responsible for
purchasing and maintaining  this optional  Owner's  liability  insurance  unless
specifically required by the Contract Documents.

7.3         PROPERTY INSURANCE

7.3.1.      Unless  otherwise  provided  under this  Agreement,  the Owner shall
purchase and  maintain,  in a company or companies  authorized to do business in
the jurisdiction in which the principal improvements are to be located, property
insurance  upon the Work to the full  insurable  value  thereof on a replacement
cost basis  without  optional  deductibles.  Such  property  insurance  shall be
maintained,  unless  otherwise  provided in the Contract  Documents or otherwise
agreed in writing by all  persons and  entities  who are  beneficiaries  of such
insurance,  until final payment has been made or until no person or entity other
than the  Owner has an  insurable  interest  in the  property  required  by this
Paragraph 7.3 to be insured,  whichever is earlier. This insurance shall include
interests of the Owner, the Design/Builder, and their respective contractors and
subcontractors in the Work.

7.3.2       Property  insurance  shall be on an  all-risk  policy form and shall
insure  against the perils of fire and extended  coverage  and physical  loss or
damage including,  without duplication of coverage, theft, vandalism,  malicious
mischief, collapse, falsework,  temporary buildings and debris removal including
demolition  occasioned by enforcement of any applicable legal requirements,  and
shall  cover  reasonable  compensation  for the  services  and  expenses  of the
Design/Builder's  Architect and other professionals required as a result of such
insured loss.  Coverage for other perils shall not be required unless  otherwise
provided in the Contract Documents.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





7.3.3       If the Owner does not intend to  purchase  such  property  insurance
required by this Agreement and with all of the coverages in the amount described
above, the Owner shall so inform the Design/Builder prior to commencement of the
construction.  The  Design/Builder  may then effect insurance which will protect
the interests of the Design/Builder and the Design/Builder's  contractors in the
construction,  and by appropriate Change Order the cost thereof shall be charged
to the Owner. If the  Design/Builder is damaged by the failure or neglect of the
Owner to purchase or maintain insurance as described above, then the Owner shall
bear all reasonable costs properly attributable thereto.

7.3.4       Unless  otherwise  provided,  the Owner shall  purchase and maintain
such boiler and machinery  insurance required by this Agreement or by law, which
shall  specifically  cover such insured  objects during  installation  and until
final  acceptance by the Owner.  This insurance  shall include  interests of the
Owner, the Design/Builder,  the Design/Builder's  contractors and subcontractors
in the Work, and the Design/Builder's  Architect and other design professionals.
The Owner and the Design/Builder shall be named insureds.

7.3.5       A loss  insured  under  the  Owner's  property  insurance  shall  be
adjusted by the Owner as  fiduciary  and made  payable to the Owner as fiduciary
for the insureds, as their interests may appear,  subject to requirements of any
applicable mortgagee clause and of Subparagraph 7.3.10. The Design/Builder shall
pay   contractors   their   shares  of  insurance   proceeds   received  by  the
Design/Builder, and by appropriate agreement, written where legally required for
validity,  shall require contractors to make payments to their subcontractors in
similar manner.

7.3.6       Before an exposure to loss may occur,  the Owner shall file with the
Design/Builder a copy of each policy that includes insurance  coverages required
by this  Paragraph  7.3.  Each policy  shall  contain all  generally  applicable
conditions,  definitions,  exclusions and endorsements  related to this Project.
Each policy  shall  contain a provision  that the policy will not be canceled or
allowed to expire until at least 30 days' prior written notice has been given to
the Design/Builder.

7.3.7       If the  Design/Builder  requests in writing that insurance for risks
other than those  described  herein or for other special  hazards be included in
the  property  insurance  policy,  the Owner  shall,  if  possible,  obtain such
insurance,  and the cost  thereof  shall be  charged  to the  Design/Builder  by
appropriate Change Order.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





7.3.8       The Owner and the Design/Builder waive all rights against each other
and the Architect and other design professionals,  contractors,  subcontractors,
agents and  employees,  each of the other,  for damages  caused by fire or other
perils to the extent  covered by property  insurance  obtained  pursuant to this
Paragraph 7.3 or other property  insurance  applicable to the Work,  except such
rights  as they may have to  proceeds  of such  insurance  held by the  Owner as
trustee.  The Owner or Design/  Builder,  as  appropriate,  shall  require  from
contractors and, subcontractors by appropriate agreements, written where legally
required for validity, similar waivers each in favor of other parties enumerated
in this Paragraph 7.3. The policies shall provide such waivers of subrogation by
endorsement  or otherwise.  A waiver of  subrogation  shall be effective as to a
person or entity even though that person or entity would  otherwise  have a duty
of indemnification,  contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.

7.3.9       If required in writing by a party in interest,  the Owner as trustee
shall,  upon occurrence of an insured loss, give bond for proper  performance of
the Owner's duties. The cost of required bonds shall be charged against proceeds
received as fiduciary. The Owner shall deposit in a separate account proceeds so
received,  which the Owner shall distribute in accordance with such agreement as
the parties in interest may reach, or in accordance with an arbitration award in
which case the procedure  shall be as provided in Article 10. If after such loss
no other special agreement is made, replacement of damaged Work shall be covered
by appropriate Change Order.

7.3.10      The Owner as  trustee  shall  have power to adjust and settle a loss
with  insurers  unless one of the parties in interest  shall  object in writing,
within five (5) days after  occurrence  of loss to the Owner's  exercise of this
power;  if such  objection  be  made,  the  parties  shall  enter  into  dispute
resolution under procedures provided in Article 10. If distribution of insurance
proceeds  by  arbitration  is  required,   the  arbitrators   will  direct  such
distribution.

7.3.11      Partial  occupancy or use prior to Substantial  Completion shall not
commence until the insurance company or companies  providing  property insurance
have consented to such partial occupancy or use by endorsement or otherwise. The
Owner and the Design/ Builder shall take  reasonable  steps to obtain consent of
the  insurance  company or  companies  and shall  not,  without  mutual  written
consent,  take any action with  respect to partial  occupancy  or use that would
cause cancellation, lapse or reduction of coverage.

7.4         LOSS OF USE INSURANCE

7.4.1       The Owner,  at the Owner's  option,  may purchase and maintain  such
insurance as will insure the Owner  against loss of use of the Owner's  property
due to fire or other  hazards,  however  caused.  The Owner waives all rights of
action  against  the  Design/Builder  for loss of use of the  Owner's  property,
including consequential losses due to fire or other hazards, however caused.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





                                    ARTICLE 8
                               CHANGES IN THE WORK

8.1         CHANGES

8.1.1       Changes  in the Work may be  accomplished  after  execution  of this
Agreement  without  invalidating this Agreement,  by Change Order,  Construction
Change  Directive,  or order  for a minor  change in the  Work,  subject  to the
limitations stated in the Contract Documents.

8.1.2       A Change Order shall be based upon  agreement  between the Owner and
the  Design/Builder; a Construction Change Directive may be issued by the Owner
without the agreement of the Design/Builder;  an order for a minor change in the
Work may be issued by the Design/Builder alone.

8.1.3      Changes  in the Work shall be performed under  applicable  provisions
of the Contract Documents, and the Design/Builder shall proceed promptly, unless
otherwise provided in the Change Order,  Construction Change Directive, or order
for a minor change in the Work.

8.1.4       If unit prices are stated in the Contract  Documents or subsequently
agreed  upon,  and if  quantities  originally  contemplated  are so changed in a
proposed Change Order or Construction  Change Directive that application of such
unit prices to quantities of Work  proposed will cause  substantial  inequity to
the Owner or the  Design/Builder,  the applicable unit prices shall be equitably
adjusted.

8.2         CHANGE ORDERS

8.2.1       A  Change   Order  is  a   written   instrument   prepared   by  the
Design/Builder  and signed by the Owner and the  Design/Builder,  stating  their
agreement upon. all of the following:

            .1     a change in the Work;

            .2     the amount of the  adjustment,  if any, in the Contract  Sum;
                   and

            .3     the extent of the adjustment, if any, in the Contract Time.

8.2.2       If the Owner  requests a proposal  for a change in the Work from the
Design/Builder and subsequently  elects not to proceed with the change, a Change
Order shall be issued to reimburse the Design/Builder for any costs incurred for
estimating services, design services or preparation of proposed revisions to the
Contract Documents.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





8.3         CONSTRUCTION CHANGE DIRECTIVES

8.3.1       A  Construction  Change  Directive is a written  order  prepared and
signed by the  Owner,  directing  a change  in the Work  prior to  agreement  on
adjustment, if any, in the Contract Sum or Contract Time, or both.

8.3.2       Except as otherwise agreed by the Owner and the Design/Builder,  the
adjustment  to the Contract Sum shall be  determined  on the basis of reasonable
expenditures  and  savings  of those  performing  the Work  attributable  to the
change,  including  the  expenditures  for design  services and revisions to the
Contract  Documents.  In case of an increase in the Contract Sum, the cost shall
include a  reasonable  allowance  for  overhead  and profit.  In such case,  the
Design/Builder  shall keep and  present an  itemized  accounting  together  with
appropriate  supporting data for inclusion in a Change Order.  Unless  otherwise
provided in the Contract Documents, costs for these purposes shall be limited to
the following:

           .1     costs  of  labor,  including  social  security,  old  age  and
                  unemployment insurance,  fringe benefits required by agreement
                  or custom, and workers' compensation insurance;

           .2     costs of materials, supplies and equipment,  including cost of
                  transportation, whether incorporated or consumed;

           .3     rental  costs of  machinery  and  equipment  exclusive of hand
                  tools, whether rented from the Design/Builder or others;

           .4     costs of premiums for all bonds and insurance permit fees, and
                  sales, use or similar taxes;

           .5     additional  costs of  supervision  and field office  personnel
                  directly  attributable  to the  change;  and fees  paid to the
                  Architect, engineers and other professionals.

8.3.3       Pending  final  determination  of cost to the Owner,  amounts not in
dispute may be included in Applications for Payment.  The amount of credit to be
allowed by the  Design/Builder to the Owner for deletion or change which results
in a net  decrease  in the  Contract  Sum will be  actual  net  cost.  When both
additions and credits covering  related Work or substitutions  are involved in a
change,  the  allowance for overhead and profit shall be figured on the basis of
the net increase, if any, with respect to that change.

8.3.4      When the Owner and the Design/Builder  agree upon the adjustments in
the  Contract  Sum  and  Contract  Time,   such  agreement  shall  be  effective
immediately and shall be recorded by preparation and execution of an appropriate
Change Order.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





8.4         MINOR CHANGES IN THE WORK

8.4.1       The Design/Builder shall have authority to make minor changes in the
Construction  Documents  and  construction  consistent  with the  intent  of the
Contract  Documents  when such minor  changes do not involve  adjustment  in the
Contract  Sum or  extension  of the  Contract  Time.  The  Design/Builder  shall
promptly  inform the Owner,  in writing,  of minor  changes in the  Construction
Documents and construction.

8.5         CONCEALED CONDITIONS

8.5.1       If conditions  are  encountered at the site which are (1) subsurface
or otherwise  concealed  physical  conditions which differ materially from those
indicated in the Contract  Documents,  or (2) unknown physical  conditions of an
unusual nature which differ  materially from those ordinarily found to exist and
generally  recognized  as inherent in  construction  activities of the character
provided for in the Contract Documents, then notice by the observing party shall
be given to the other party promptly  before  conditions are disturbed and in no
event later than 21 days after first observance of the conditions.  The Contract
Sum shall be equitably  adjusted for such  concealed  or unknown  conditions  by
Change  Order upon claim by either  party made within 21 days after the claimant
becomes aware of the conditions.

8.6         REGULATORY CHANGES

8.6.1       The   Design/Builder   shall  be  compensated  for  changes  in  the
construction  necessitated  by the  enactment  or  revisions  of codes,  laws or
regulations subsequent to the submission of the Design/Builder's Proposal.

                                    ARTICLE 9
                               CORRECTION OF WORK

9.1         The Design/Builder shall promptly correct Work rejected by the Owner
or known by the  Design/Builder  to be  defective  or  failing to conform to the
requirements  of the  Contract  Documents,  whether  observed  before  or  after
Substantial  Completion and whether or not  fabricated,  installed or completed.
The Design/Builder  shall bear costs of correcting such rejected Work, including
additional testing and inspections.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





9.2         If, within one (1) year after the date of Substantial  Completion of
the Work or, after the date for  commencement  of  warranties  established  in a
written  agreement between the Owner and the  Design/Builder,  or by terms of an
applicable special warranty required by the Contract Documents,  any of the Work
is  found  to be  not in  accordance  with  the  requirements  of  the  Contract
Documents,  the  Design/Builder  shall  correct it promptly  after  receipt of a
written notice from the Owner to do so unless the Owner has previously given the
Design/Builder a written acceptance of such condition.

9.3         Nothing  contained in this Article 9 shall be construed to establish
a  period  of   limitation   with  respect  to  other   obligations   which  the
Design/Builder  might have under the Contract  Documents.  Establishment  of the
time period of one (1) year as described in Subparagraph 9.2 relates only to the
specific  obligation  of the  Design/Builder  to  correct  the Work,  and has no
relationship to the time within which the obligation to comply with the Contract
Documents may be sought to be enforced, nor to the time within which proceedings
may be commenced to establish the Design/Builder's liability with respect to the
Design/Builder's obligations other than specifically to correct the Work.

9.4         If  the  Design/Builder  fails  to  correct  nonconforming  Work  as
required or fails to carry out Work in accordance  with the Contract  Documents,
the Owner,  by written order signed  personally or by an agent  specifically  so
empowered  by the Owner in  writing,  may order the  Design/Builder  to stop the
Work,  or any  portion  thereof,  until  the  cause  for  such  order  has  been
eliminated; however, the Owner's right to stop the Work so hall not give rise to
a duty on the  part of the  Owner to  exercise  the  right  for  benefit  of the
Design/Builder or other persons or entities.

9.5         If the Design/Builder  defaults or neglects to carry out the Work in
accordance  with the  Contract  Documents  and fails within seven (7) days after
receipt of written notice from the Owner to commence and continue  correction of
such  default or neglect with  diligence  and  promptness,  the Owner may give a
second  written  notice to the  Design/Builder  and,  seven  (7) days  following
receipt  by the,  Design/Builder  of that  second  written  notice  and  without
prejudice to other  remeies the Owner may have,  correct such  deficiencies.  In
such case an  appropriate  Change Order shall be issued  deducting from payments
then or  thereafter  due the  Design/  Builder,  the  costs of  correcting  such
deficiencies.  If the payments then or thereafter due the Design/Builder are not
sufficient to cover the amount of the deduction,  the  Design/Builder  shall pay
the  difference  to the  Owner.  Such  action by the Owner  shall be  subject to
dispute resolution procedures as provided in Article 10.

                                   ARTICLE 10
                              DISPUTE RESOLUTION -
                            MEDIATION AND ARBITRATION

10.1        Claims, disputes or other matters in question between the parties to
this  Agreement  arising out of or relating to this  Agreement or breach thereof
shall be subject to and decided by mediation or  arbitration.  Such mediation or
arbitration  shall be conducted in  accordance  with the  Construction  Industry
Mediation or Arbitration Rules of the American Arbitration Association currently
in effect.

10.2        In addition to and prior to arbitration,  the parties shall endeavor
to settle disputes by mediation.  Demand for mediation shall be filed in writing
with the  other  party to this  Agreement  and  with  the  American  Arbitration
Association. A demand for mediation shall be made within a reasonable time after
the claim, dispute or other matter in question has arisen. In no event shall the
demand  for  mediation  be made  after  the date  when  institution  of legal or
equitable  proceedings based on such claim,  dispute or other matter in question
would be barred by the applicable statutes of repose or limitations.

10.3        Demand  for  arbitration  shall be filed in  writing  with the other
party to this Agreement and with the American Arbitration Association.  A demand
for arbitration shall be made within a reasonable time after the claim,  dispute
or other  matter in  question  has  arisen.  In no event  shall the  demand  for
arbitration  be made  after  the date  when  institution  of legal or  equitable
proceedings  based on such claim,  dispute or other matter in question  would be
barred by the applicable statutes of repose or limitations.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






10.4        An  arbitration  pursuant  to this  Article  may be  joined  with an
arbitration  involving  common issues of law or fact between the  Design/Builder
and any  person  or  entity  with  whom  the  Design/Builder  has a  contractual
obligation  to  arbitrate  disputes.  No  other  arbitration  arising  out of or
relating to this Agreement shall include,  by  consolidation,  joinder or in any
other manner,  an additional  person or entity not a party to this  Agreement or
not a party to an agreement with the  Design/Builder,  except by written consent
containing a specific  reference  to this Part 2 Agreement  signed by the Owner,
the Design/Builder and any other person or entities sought to be joined. Consent
to  arbitration  involving an additional  person or entity shall not  constitute
consent to  arbitration  of any claim,  dispute or other  matter in question not
described  in the  written  consent  or with a person  or  entity  not  named or
described therein.  The foregoing agreement to arbitrate and other agreements to
arbitrate  with an additional  person or entity duly consented to by the parties
to  this  Agreement  shall  be  specifically   enforceable  in  accordance  with
applicable law in any court having jurisdiction thereof.

10.5        The award rendered by the  arbitrator or arbitrators  shall be final
and judgment may be entered upon it in  accordance  with  applicable  law in any
court having jurisdiction thereof.

                                   ARTICLE 11
                            MISCELLANEOUS PROVISIONS

11.1        Unless otherwise  provided,  this Agreement shall be governed by the
law of the place where the Project is located.

11.2        SUBCONTRACTS

11.2.1      The  Design/Builder,  as soon as practicable after execution of this
Agreement,  shall  furnish to the Owner in writing  the names of the  persons or
entities the Design/Builder will engage as contractors for the Project.

11.3        WORK BY OWNER OR OWNER'S CONTRACTORS

11.3.1      The Owner reserves the right to perform  construction  or operations
related to the  Project  with the  owner's  own  forces,  and to award  separate
contracts in connection with other portions of the Project or other  contruction
or  operations  on  the  site  under  conditions  of  insurance  and  waiver  of
subrogation identical to the provisions of this Agreement. If the Design/Builder
claims that delay or additional  cost is involved  because of such action by the
Owner, the  Design/Builder  shall assert such claims as provided in Subparagraph
11.4.

11.3.2      The  Design/Builder  shall afford the Owner's  separate  contractors
reasonable  opportunity  for  introduction  and storage of their  materials  and
equipment and  performance of their  activities and shall connect and coordinate
the Design/Builder's  construction and operations with theirs as required by the
Contract Documents.

11.3.3      Costs  caused  by  delays  or  by  improperly  timed  activities  or
defective construction shall be borne by the party responsible therefor.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






11.4        CLAIMS FOR DAMAGES

11.4.1      If either party to this Agreement suffers injury or damage to person
or  property  because of an act or omission  of the other  party,  of any of the
other  party's  employees  or agents,  or of others for whose acts such party is
legally liable, written notice of such injury or damage, whether or not insured,
shall be given to the other party within a reasonable time not exceeding 21 days
after first observance. The notice shall provide sufficient detail to enable the
other party to  investigate  the matter.  If a claim of additional  cost or time
related to this claim is to be asserted, it shall be filed in writing.

11.5        INDEMNIFICATION

11.5.1      To the fullest  extent  permitted by law, the  Design/Builder  shall
indemnify  and hold  harmless  the Owner,  Owner's  consultants,  and agents and
employees of any of them from and against claims,  damages, losses and expenses,
including but not limited to attorneys'  fees,  arising out of or resulting from
performance of the Work,  provided that such claim,  damage,  loss or expense is
attributable  to bodily injury,  sickness,  disease or death, or to injury to or
destruction of tangible  property (other than the Work itself) including loss of
use  resulting  therefrom,  but only to the extent caused in whole or in part by
negligent acts or omissions of the Design/Builder, anyone directly or indirectly
employed by the  Design/Builder or anyone for whose acts the  Design/Builder may
be liable,  regardless of whether or not such claim,  damage, loss or expense is
caused in part by a party  indemnified  hereunder.  Such obligation shall not be
construed to negate, abridge, or reduce other rights or obligations of indemnity
which would otherwise exist as to a party or person  described in this Paragraph
11.5.

11.5.2      In  claims  against  any  person or entity  indemnified  under  this
Paragraph  11.5  by an  employee  of  the  Design/Builder,  anyone  directly  or
indirectly  employed  by  the  Design/Builder  or  anyone  for  whose  acts  the
Design/Builder  may  be  liable,  the  indemnification   obligation  under  this
Paragraph  11.5  shall  not be  limited  by a  limitation  on  amount or type of
damages,  compensation or benefits  payable by or for the  Design/Builder  under
workers'  compensation  acts,  disability benefit acts or other employee benefit
acts.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





11.6        SUCCESSORS AND ASSIGNS

11.6.1      The Owner and Design/Builder,  respectively,  bind themselves, their
partners,  successors,  assigns and legal  representatives to the other party to
this  Agreement and to the partners,  successors and assigns of such other party
with respect to all covenants of this Party Agreement. Neither the Owner nor the
Design/Builder  shall assign this Agreement  without the written  consent of the
other. The Owner may assign this Agreement to any institutional lender providing
construction,  financing,  and the Design/Builder agrees to execute all consents
reasonably required to facilitate such an assignment. If either party makes such
an assignment,  that party shall nevertheless remain legally responsible for all
obligations under this Agreement, unless otherwise agreed by the other party.

11.7        TERMINATION OF PROFESSIONAL DESIGN SERVICES

11.7.1      Prior to  termination  of the services of the Architect or any other
design  professional  designated in this  Agreement,  the  Design/Builder  shall
identify to the Owner in writing another architect or other design  professional
with respect to whom the Owner has no reasonable objection, who will provide the
servies  originally  to have been  provided  by the  Architect  or other  design
professional whose services are being terminated.

11.8        EXTENT OF AGREEMENT

11.8.1      This Part 2 Agreement  represents the entire  agreement  between the
Owner and the Design/Builder and supersedes prior negotiations,  representations
or  agreements,  either  written or oral.  This Agreement may be amended only by
written instrument and signed by both the Owner and the Design/Builder.

                                   ARTICLE 12
                          TERMINATION OF THE AGREEMENT

12.1        TERMINATION BY THE OWNER

12.1.1      This  Agreement may be terminated by the Owner upon 14 days' written
notice,  to the  Design/Builder  in the event that the Project is abandoned.  If
such  termination  occurs,  the  Owner  shall  pay the  Design/Builder  for Work
completed and for proven loss sustained upon materials,  equipment,  tools,  and
construction equipment and machinery, including reasonable profit and applicable
damages.

12.1.2      If the Design/Builder  defaults or persistently fails or neglects to
carry out the Work in accordance with the Contract Documents or fails to perform
the  provisions of this  Agreement,  the Owner may give written  notice that the
Owner  intends to  terminate  this  Agreement.  If the  Design/Builder  fails to
correct the defaults, failure or neglect within seven (7) days after being given
notice,  the Owner may then give a second written notice and after an additional
seven (7) days,  the Owner may without  prejudice to any other remedy  terminate
the employment of the  Design/Builder and take possession of the site and of all
materials,  equipment,  tools and construction  equipment and machinery  thereon
owned by the Design/Builder and finish the Work by whatever method the Owner may
deem expedient. If the unpaid balance of the Contract Sum exceeds the expense of
finishing the Work and all damages  incurred by the Owner,  such excess shall be
paid to the  Design/Builder.  If the  expense  of  completing  the  Work and all
damages  incurred by the Owner exceeds the unpaid  balance,  the  Design/Builder
shall pay the difference to the Owner. This obligation for payment shall survive
termination of this Agreement.

12.2        TERMINATION BY THE DESIGN/BUILDER

12.2.1      If the Owner fails to make payment when due, the  Design/Builder may
give  written  notice  of  the  Design/Builder's  intention  to  terminate  this
Agreement.  If the Design/Builder fails to receive payment within seven (7) days
after receipt of such notice by the Owner, the  Design/Builder may give a second
written  notice and,  seven (7) days after receipt of such second written notice
by the Owner,  may  terminate  this Part 2 Agreement  and recover from the Owner
payment  for Work  executed  and for proven  losses  sustained  upon  materials,
equipment, tools, and construction equipment and machinery, including reasonable
profit and applicable damages.

- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.






                                   ARTICLE 13
                              BASIS OF COMPENSATION

The Owner shall  compensate  the  Design/Builder  in accordance  with Article 5,
Payments, and the other provisions of this Agreement as described below.

13.1        COMPENSATION

13.1.1      For the  Design/Builder's  performance  of the Work, as described in
Paragraph 3.2 and including any other  services  listed in Article 14 as part of
Basic  Services,  the Owner shall pay the  Design/Builder  in current  funds the
Contract  Sum as follows:  ONE MILLION ONE  HUNDRED  SEVENTY-ONE  THOUSAND  NINE
HUNDRED NINETY FOUR DOLLARS ($1,171,994)

13.1.2      For Additional Services, as described in Paragraph 3.3 and including
any other  services  listed in Article 14 as Additional  Services,  compensation
shall be as follows:

Negotiated between Owner and  Design/Builder;  however, in no case shall changes
or  additional  services  exceed  actual cost plus an overhead and profit fee of
10%.

13.3        INTEREST PAYMENTS

13.3.1      The rate of interest for past due payments shall be as follows:

Not Applicable
(Usury laws and  requirements  under the Federal  Truth in Lending Act,  similar
state and local  consumer  credit laws and other  regulations at the Owner's and
Design/ Builder's  principal places of business,  at the location of the Project
and elsewhere may affect the validity of this  provision.  Specific legal advice
should be obtained with respect to deletion, modification or other requirements,
such as written disclosures or waivers.)

                                   ARTICLE 14
                          OTHER CONDITIONS AND SERVICES

14.1        The Basic  Services to be  performed  shall be  commenced on date of
Notice to Proceed  and,  subject  to  authorized  adjustments  and to delays not
caused by the  Design/Builder,  Substantial  Completion shall be achieved in the
Contract Time of February 1, 2005

14.2        The  Basic  Services  beyond  those  described  in  Article 3 are as
follows:  In accordance  with the Bid Form/Form of Proposal dated  September 22,
2004  and the Bid  Documents  and  Contract  Documents  referenced  herein,  the
Contractor  shall  perform  all  Design/Build  Work  necessary  for  a  complete
operatble Paddock ready for use by the Owner, which Paddock design satisfies the
design concept as indicated within the Contract Documents.

14.3        Additional  Services  beyond  those  described  in  Article 3 are as
follows:

Not Applicable

14.4        The  Design/Builder  shall submit an Application  for Payment on the
first ( ) day of each month.


- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.





14.5        The Design/Builder's Proposal includes the following documents:

(List the documents by specific title and date; include any required performance
and payment bonds.)


Title                                                  Date

Exhibit "A" Scope of Work & Bidding Requirements. dated 09/01/04.
Exhibit "B" Clarifications to Drawings of Exhibit B, dated 09/01/04.
Exhibit "C" List of Bidding Schematic Drawings, dated 09/01/04.
Exhibit "D" Bid Form/Form of Proposal, dated 09/22/04.
Exhibit "E" Project Schedule Requirements, dated 09/22/04.
Exhibit "F" Darlind Construction Scope of Work Clarifications and Exclusions
            dated 09/22/04.
Exhibit "G" Addendum No. 1. dated 09/09/04.
Exhibit "H" List of Accepted Changes, dated 11/04/04.
Exhibit "I" Contractor's Certificate of Insurance

This Agreement entered into as of the day and year first written above.

MONTICELLO RACEWAY MANAGEMENT, INC.            DARLIND CONSTRUCTION


/s/ Philip Berman                              /s/ Maynard A. Darrow
- -----------------------------------            ---------------------------------
OWNER (Signature)                              DESIGN/BUILDER (Signature)


- -----------------------------------            ---------------------------------
(Printed named title)                          (Printed Name and title)
Philip Berman, VP                              Maynard A. Darrow, President



- --------------------------------------------------------------------------------
(C) 1996 THE AMERICAN  INSTITUTE  OF  ARCHITECTS,  1735 NEW YORK  AVENUE,  N.W.,
WASHINGTON, D.C. 20006-5292. AIA DOCUMENT A191 o OWNER-DESIGN/BUILDER  AGREEMENT
o 1996  EDITION  o AIA(R)  o  WARNING:  Unlicensed  photocopying  violates  U.S.
copyright  laws  and  is  subject  to  legal  prosecution.   This  document  was
electronically  produced  with  permission  of the AIA and can be  reproduced in
accordance with your license  without  violation until the date of expiration as
noted below. User Document:  a191-darlind-11-8-04.aia -- 11/10/2004. AIA License
Number 1500563, which expires on 12/31/2004.

EX-10

                                                                   Exhibit 10.66

Sonnenschein
Sonnenschein Nath & Rosenthal LLP



MEMORANDUM

To   Cayuga Nation
From Martin R. Gold
Date November 14, 2004
Re   Settlement Proposal

- --------------------------------------------------------------------------------

     Summarized below is our understanding of (A) the settlement agreement
executed between the Seneca-Cayugas and New York State on November 12, 2004, as
it impacts the Cayuga Nation, (B) the principal terms of the settlement New York
State may enter into with the Cayuga Nation, and (C) a proposed agreement
between the Cayuga Nation and Empire Resorts to be entered into simultaneously
with the agreement between New York State and the Cayuga Nation.

                   A. SENECA-CAYUGAS/NEW YORK STATE SETTLEMENT

     1.   The Seneca-Cayugas will limit the land in New York to which it has
governmental jurisdiction to approximately 30 acres it acquires in the Catskill
region for Class III gaming purposes. Such land may be used solely for gaming
and related purposes, and for no other purposes.

     2.   The Seneca-Cayugas will not exercise sovereignty over any land in the
Claim Area or elsewhere within New York State, apart from its Catskill casino
site.

     3.   The Seneca-Cayugas will release and extinguish all claims to any
monetary judgment or land against New York State, including the Land Claim.

     4.   The AURELIUS case will be dismissed.

     In addition (as described below but not included in its agreement with New
York State), the Seneca-Cayugas will sell or convey all land which it has in the
Claim Area.

                   B.  CAYUGA NATION/NEW YORK STATE POTENTIAL SETTLEMENT

     1 .  New York State will pay the Nation $150,000,000 in 10 equal annual
installments of $15,000,000 each, beginning in 2007.

     2.   The Nation will have the right to acquire and exercise sovereignty
over: (a) 10,000 acres in the Claim Area unless the decision of the Supreme
Court of the United States in City of Sherrill v. Oneida Nation determines that
the Cayugas have no right to exercise sovereignty over such land, and (b)
approximately 30 acres in Sullivan County, without condition. The Nation may
purchase any additional land, and may apply to the Bureau of Indian Affairs
under Section 151 of the Indian Laws to exercise sovereignty over additional



land in the Claim Area if the State and county in which such land is located
agree. All sovereign land will be exempt from taxation, lien, in lieu of
payment, or other assessment by New York State or any political subdivision of
New York State.

     3.  New York State and the Nation will enter into a gaming compact
authorizing the Nation to operate a Class III gaming facility at the Monticello
Raceway property. New York State will agree that no person or entity other than
Indian Nations will be permitted to operate slot machines in Bronx, Delaware,
Green, Kings, New York, Orange, Queens, Richmond, Westchester, Rockland,
Sullivan and Ulster counties.

     4.  The Nation will be obligated to pay to New York State 20% of the
amounts played in slot machines at its Class III casino less amounts returned to
players during the first four years of its Class III casino's operations, and
25% after the fourth year.

     5.  The Nation may continue to operate its Class II gaming facilities
until 3 years after its Class III gaming facility opens, or longer if the
county in which a Class II gaming facility is located agrees. If the Nation at
any time stops operating its Class III gaming facility, it could resume Class II
gaming operations.

     6.   In lieu of seeking to impose sales and similar taxes on the Nation,
New York State will enter into a tax parity agreement providing for the Nation
to retain any additional payments collected by it to effect price parity between
products sold on Nation lands and on lands adjacent thereto. The tax parity
compact would only become effective when the Nation commences Class III gaming
operations.

     7.   The Nation would agree to enter into negotiations of mutually
satisfactory agreements with local government authorities for the provision of
fire, police and other municipal services on sovereign land.

     8.   The Nation would adopt (and already has adopted) standard
international building codes applicable on its lands.

     9.   The Nation would comply with all federal and state environmental laws
on its lands, could adopt and enforce more stringent environmental laws on its
lands, and could seek to enforce applicable federal and state environmental laws
on the lands of others.

     10.  Commencing in 2007 and continuing so long as the Nation operates its
gaming facilities, the Nation would pay $3,000,000 annually to an economic
development fund to be spilt equally between Seneca and Cayuga counties.

     11.  The Land Claim, AURELIUS and UNION SPRINGS litigations will be
dismissed,

                       C. AGREEMENTS WITH EMPIRE RESORTS

     If a settlement agreement between the Nation and New York State is signed
by November 19, 2004, Empire Resorts will enter into the necessary agreements to
effect the following:


                                      -2-


     1.   Empire Resorts will purchase from the Seneca-Cayugas all land and
interests in land in New York State, including options, which the Seneca-Cayugas
have, and Empire Resorts will transfer same to the Nation for a nominal sum
($10.00).

     2.   Empire Resorts will in all respects honor its agreements with the
Nation, and extend the expiration dates of such agreements in order to make
the Class III casino a reality.

     3.   Upon execution of the settlement agreement, Empire Resorts will, in
conformity with applicable federal laws, establish a letter of credit or
similarly guaranteed fund in the amount of $5,000,000 for the sole use of the
Nation to immediately acquire land in the Claim Area. This fund will be
supplemented from time to time upon the achievement of agreed milestones.
Regardless of whether the settlement is approved, the Nation will not be
obligated to return lands which it purchases or repay this sum.

     4.   Empire Resorts will pay all outstanding legal fees of our firm
incurred on behalf of the Nation.

     5.   As a part of the financing of the Class III casino project, Empire
Resorts will advance $60,000,000 to pay the Nation's contingency legal fees in
connection with the Land Claim, and will receive in exchange $50,000,000 in
bonds on the same terms as other bondholders, if such additional amount of bonds
are not otherwise salable.


On November 14, 2004, at a meeting of the Council of the Cayuga Nation, a
resolution was duly enacted approving the execution of agreements with the State
of New York and Empire Resorts on the terms set forth herein, and authorizing
and empowering any representative of a clan of the Nation to execute the same on
behalf of the Cayuga Nation.


/s/ Clint Halftown
- -----------------
Clint Halfton

The terms set for above are agreed:

Empire Resorts, Inc.


By /s/ Robert Berman
- --------------------
Robert Berman

                                      -3-

EX-21.1

                                                                    EXHIBIT 21.1

List of Subsidiaries at December 31, 2004:

NAME                                               STATE OF INCORPORATION/FORMATION
- ----                                               --------------------------------
Alpha Monticello, Inc.                             Delaware
Alpha Casino Management Inc.                       Delaware
Monticello Casino Management, LLC                  New York
Mohawk Management, LLC                             New York
Monticello Raceway Development Company, LLC        New York
Monticello Raceway Management, Inc.                New York
Alpha Gulf Coast, Inc.                             Delaware
Alpha St. Regis, Inc.                              Delaware
Alpha Missouri, Inc.                               Delaware
Alpha Rising Sun, Inc.                             Delaware
Alpha Greenville Hotel, Inc.                       Delaware
Alpha Entertainment, Inc.                          Delaware
Alpha Peach Tree Corporation                       Delaware
Alpha Florida Entertainment, L.L.C.                Florida
Jubilation Lakeshore, Inc.                         Mississippi
New York Gaming, LLC                               Georgia

EX-23.1

                                                                    EXHIBIT 23.1





                        CONSENT OF INDEPENDENT AUDITORS
                        -------------------------------

            We consent to the  incorporation  by reference  in the  Registration
Statement on Form S-3 of our report dated February 14, 2005 relating to the 2004
and  2003  consolidated   financial  statements  of  Empire  Resorts,  Inc.  and
Subsidiaries (the "Company") which appear in the Company's annual report on Form
10-KSB for the year ended  December 31, 2004, as filed with the  Securities  and
Exchange Commission on March 3, 2005, and to the reference to our firm under the
caption "Experts" in this Registration Statement.



                                                  /s/ Friedman LLP
                                                  ----------------
                                                  Friedman LLP


New York, New York
March 3, 2005

EX-31

                                                                    Exhibit 31.1

                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Berman, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Empire Resorts, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the small business issuer as of, and for, the periods presented in this
     report;

4.   The small business issuer's other certifying officer and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
     business issuer and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the small
          business issuer, including its consolidated subsidiaries, is made
          known to us by others within those entities, particularly during the
          period in which this report is being prepared;

     b)   Evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures and presented in this report our conclusions
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and

     c)   Disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The small business issuer's other certifying officer and I have disclosed,
     based on our most recent evaluation of internal control over financial
     reporting, to the small business issuer's auditors and the audit committee
     of the small business issuer's board of directors (or persons performing
     the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the small business issuer's
          ability to record, process, summarize and report financial
          information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal control over financial reporting.

Date:  March 3, 2005                   /s/ Robert A. Berman
                                        ------------------------------------
                                        Robert A. Berman
                                        Chief Executive Officer

EX-31

                                                                    Exhibit 31.2

                      CERTIFICATION PURSUANT TO SECTION 302
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Scott A. Kaniewski, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Empire Resorts, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the small business issuer as of, and for, the periods presented in this
     report;

4.   The small business issuer's other certifying officer and I are responsible
     for establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
     business issuer and have:

     a)   Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the small
          business issuer, including its consolidated subsidiaries, is made
          known to us by others within those entities, particularly during the
          period in which this report is being prepared;

     b)   Evaluated the effectiveness of the small business issuer's disclosure
          controls and procedures and presented in this report our conclusions
          about the effectiveness of the disclosure controls and procedures, as
          of the end of the period covered by this report based on such
          evaluation; and

     c)   Disclosed in this report any change in the small business issuer's
          internal control over financial reporting that occurred during the
          small business issuer's most recent fiscal quarter (the small business
          issuer's fourth fiscal quarter in the case of an annual report) that
          has materially affected, or is reasonably likely to materially affect,
          the small business issuer's internal control over financial reporting;
          and

5.   The small business issuer's other certifying officer and I have disclosed,
     based on our most recent evaluation of internal control over financial
     reporting, to the small business issuer's auditors and the audit committee
     of the small business issuer's board of directors (or persons performing
     the equivalent functions):

     a)   All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the small business issuer's
          ability to record, process, summarize and report financial
          information; and

     b)   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the small business issuer's
          internal control over financial reporting.

Date:  March 3, 2005                    /s/ Scott A. Kaniewski
                                        ------------------------------------
                                        Scott A. Kaniewski
                                        Chief Financial Officer

EX-32

                                                                    Exhibit 32.1

                      CERTIFICATION PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (18 U.S.C.  ss.1350),
the  undersigned,  Robert A.  Berman,  Chairman and Chief  Executive  Officer of
Empire  Resorts,  Inc.,  a Delaware  corporation  (the  "Company"),  does hereby
certify, to his knowledge, that:

The  Annual  Report  Form  10-KSB for the year ended  December  31,  2004 of the
Company (the "Report") fully complies with the  requirements of section 13(a) or
15(d) of the Securities  Exchange Act of 1934, and the information  contained in
the Report fairly presents,  in all material respects,  the financial  condition
and results of operations of the Company.

March 3, 2005


BY:/s/ Robert A. Berman
   ------------------------------
   Robert A. Berman
   Chief Executive Officer

EX-32.2

                                                                    Exhibit 32.2


                      CERTIFICATION PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss.1350)

Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 (18 U.S.C.  ss.1350),
the undersigned,  Scott A. Kaniewski, Chief Financial Officer of Empire Resorts,
Inc.,  a Delaware  corporation  (the  "Company"),  does hereby  certify,  to his
knowledge, that:

The  Annual  Report  Form  10-KSB for the year ended  December  31,  2004 of the
Company (the "Report") fully complies with the  requirements of section 13(a) or
15(d) of the Securities  Exchange Act of 1934, and the information  contained in
the Report fairly presents,  in all material respects,  the financial  condition
and results of operations of the Company.

March 3, 2005


BY: /s/ Scott A. Kaniewski
   ------------------------------
   Scott A. Kaniewski
   Chief Financial Officer