<PAGE>

                                                                   Exhibit 10.21



                        RESORTS INTERNATIONAL HOTEL, INC.
                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the first day of October, 2001 by and between RESORTS INTERNATIONAL HOTEL, INC.,
a New Jersey corporation (the "Company"), and ROSALIND KRAUSE, an individual
residing at 209 Hagen Road, Brigantine, New Jersey 08203 ("Executive").

                              W I T N E S S E T H:

         WHEREAS, Executive is currently employed by the Company as its Senior
Vice President - Casino Operations; and

         WHEREAS, the Company believes that the future growth, profitability and
success of the Company's business will be enhanced by the continued employment
of Executive; and

         WHEREAS, Executive and the Company now desire to embody in this
Agreement the terms and conditions of Executive's employment with the Company,
which terms and conditions shall supersede all prior oral and written
agreements, arrangements and understandings relating to Executive's employment,
including all matters set forth in that certain employment agreement between
Executive and the Company, dated as of March 6, 2000.

         NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:

         1. SERVICES AND DUTIES. The Company hereby employs Executive, and
Executive hereby accepts employment from the Company in the capacity of its
Senior Vice President - Casino Operations. Executive will report directly to the
Company's President and Chief Operating Officer. The principal location of the
Executive's employment shall be at the Company's executive office located in
Atlantic City, New Jersey, although the Executive understands and agrees that
Executive may be required to travel from time to time for business reasons.
Executive shall be a full-time employee of the Company and shall dedicate all of
Executive's working time to the Company and shall have no other employment and
no other business ventures which are undisclosed to the Company or which
conflict with Executive's duties under this Agreement. Executive will perform
such duties as are required by the Company and normally associated with
Executive's position, together with such additional duties, commensurate with
the Executive's position, as may be assigned to the Executive from time to time
by the Company's President and Chief Operating Officer.

         2. TERM. Executive's employment under the terms and conditions of this
Agreement will commence on the date first set forth above (the "Effective
Date"). The term of this Agreement shall be for a period of two (2) years (the
"Initial Term") beginning on the Effective Date, subject to earlier termination
pursuant to Paragraph 6 herein. This Agreement shall automatically renew subject
to the same terms and conditions for additional one (1) year terms (each a
"Renewal Term") unless terminated by either party by providing the other party
with a written termination notice at least ninety (90) days prior to the end of
the Initial term or the then current Renewal Term. The Initial Term and each
Renewal Term are hereinafter


<PAGE>


collectively referred to as the "Term". Notwithstanding anything to the contrary
herein, in the event of any termination of this Agreement, Executive shall
nevertheless continue to be bound, to the extent applicable, by the terms and
conditions set forth in Paragraphs 7 and 8.

         3. COMPENSATION.

                  (a) Base Salary. In consideration of Executive's full and
faithful satisfaction of Executive's duties under this Agreement, the Company
agrees to pay to Executive, and Executive agrees to accept from the Company, a
salary in the amount of One Hundred and Eighty-Five Thousand Dollars
($185,000.00) per annum (the "Base Salary"), payable in such installments as the
Company pays its similarly placed employees, subject to usual and customary
deductions for withholding taxes and similar charges, and customary employee
contributions to health, welfare and retirement programs in which Executive is
enrolled. The Base Salary shall be reviewed on an annual basis in accordance
with Executive's annual performance evaluation and adjusted at the Company's
sole discretion.

                  (b) Bonus Compensation. Executive will be eligible to
participate in the Company's bonus program applicable to Executive's position
with thresholds and triggering events for payment based on the achievement of
the Company's annual budget and other business plan targets as determined by the
Company's Board of Directors and communicated to Executive. Annual bonus
payments hereunder shall be paid by the Company on the date year-end bonuses are
paid generally to executive employees of the Company.

         4. BENEFITS AND PERQUISITES.

                  (a) Retirement and Welfare Benefits. During the Term,
Executive will be entitled to all the usual benefits offered to employees at
Executive's level, including vacation, sick time, participation in the Company's
medical, dental and insurance programs, as well as the ability to participate in
the Company's 401(k) retirement savings plan, subject to the applicable
limitations and requirements imposed by the terms of such benefit plans. During
the Term, Executive shall be entitled to not less than three (3) weeks vacation.

                  (b) Stock Options. As of the Effective Date, Executive shall
be granted an option (a "Stock Option") to purchase 77 shares of the Class A
common stock, par value $.01 per share, of Colony RIH Holdings, Inc. ("Class A
Common Stock") at a price of $0.0475 per share, and 1,556 shares of the Class B
common stock, par value $.01 per share, of Colony RIH Holdings, Inc. ("Class B
Common Stock") at a price of $100.00 per share; provided, that the Stock Option
shall be subject in all respects to the terms of Colony RIH Holdings, Inc. 2001
Omnibus Stock Incentive Plan (the "Omnibus Plan"), the individual stock option
agreement to be entered into thereunder evidencing the Stock Option in the form
attached hereto as Exhibit A (the "Stock Option Agreement") and the Stockholders
Agreement, dated as of April 25, 2001, among Colony RIH Holdings, Inc., a
Delaware corporation ("Holdings"), Colony RIH Voteco, LLC, a Delaware limited
liability company, Colony Investors IV, L.P., a Delaware limited partnership,
and certain additional security holders of Holdings.

         5. LICENSING REQUIREMENTS. Executive hereby covenants and agrees that,
at all times during the Term of this Agreement, Executive shall keep and
maintain, in full force and



                                      -2-
<PAGE>


effect, any and all licenses, permits and work authorizations which may be
required by any Federal, State or local government agency, including but not
limited to any casino gaming regulatory agency having jurisdiction over
Executive or the Company and that are necessary for Executive to properly work
and perform the duties of Executive's position. The Company and Executive
further covenant and agree that the Company shall be responsible for Executive's
regulatory costs (not including attorney's fees or accountant's fees and costs)
incurred in procuring in the first instance and thereafter renewing such
required licenses, permits or work authorizations. Further, the Company and
Executive agree that this Agreement shall be subject to the provisions of all
applicable laws, rules and regulations of the jurisdiction(s) having authority
with respect to this Agreement, the Company and Executive.

         6. TERMINATION. Executive's employment with the Company may be
terminated (a) by the Company for Cause (as defined below); (b) by the Company
at any time without Cause; or (c) by Executive at any time.

                  (a) For Cause Termination. If Executive's employment with the
Company is terminated by the Company for Cause, Executive shall not be entitled
to any further compensation or benefits other than accrued but unpaid Base
Salary, accrued and unused vacation pay through the date of such termination and
any other compensation and benefits (other than severance benefits) to which she
is entitled under the terms of any of the Company's employee benefit plans,
policies, programs or arrangements (the "Accrued Benefits"). For purposes of
this Agreement, "Cause" shall mean the following: (i) fraud or embezzlement with
respect to the Company by Executive; (ii) material breach by Executive of this
Agreement, including, but not limited to, a breach of the Licensing Requirements
of Paragraph 5, after notice thereof is given in writing and such breach is not
cured to the satisfaction of the Company within a reasonable period of time
under the circumstances; (iii) material breach of any reasonable and lawful rule
or directive of the Company; (iv) gross or willful neglect of duties or gross
misconduct; (v) habitual use of drugs or habitual, excessive use of alcohol to
the extent that any of such uses materially interferes with the performance of
Executive's duties under this Agreement.

                  (b) Termination Without Cause. If Executive's employment is
terminated by the Company other than for Cause prior to the end of the Term
hereof, then Executive shall be entitled to, upon Executive's providing the
Company with a signed release of claims in a form adopted by the Company's Board
of Directors from time to time: (i) the Accrued Benefits, (ii) an amount equal
to six (6) months Base Salary in a lump sum payment payable on the date of
termination and (iii) continuation of Executive's coverage under the Company's
medical plan until the earlier of (A) the period of time it takes Executive to
become eligible for the medical benefits program of a new employer or (B) six
months from the date of such termination.

                  (c) Resignation, Death or Disability. If Executive's
employment is terminated by reason of Executive's death, disability or voluntary
resignation prior to the end of the Term, Executive shall not be entitled to
receive any further compensation or benefits other than the Accrued Benefits.



                                      -3-
<PAGE>


         7. RESTRICTIVE COVENANTS.

                  (a) Noncompetition. Should Executive voluntarily terminate
Executive's employment hereunder or should Executive be terminated for Cause
pursuant to the provisions of Paragraph 6 of this Agreement, Executive agrees
that for the six (6) month period immediately following such termination,
Executive shall not directly or indirectly, either as a principal, agent,
employee, employer, consultant, partner, shareholder of a closely held
corporation or shareholder in excess of five (5%) percent of a publicly traded
corporation, corporate officer or director, or in any other individual or
representative capacity, engage or otherwise participate in any manner or
fashion in any business that is in competition in any manner whatsoever with the
principal business activity of the Company or its affiliates within a fifty (50)
mile radius of Atlantic City. Executive further covenants and agrees that this
restrictive covenant is reasonable as to duration, terms and geographical area
and that the same protects the legitimate interests of the Company and its
affiliates, imposes no undue hardship on Executive, is not injurious to the
public, and that any violation of this restrictive covenant shall be
specifically enforceable in any court with jurisdiction upon short notice.

                  (b) Solicitation of Employees, Etc. During the Term and for
the one (1) year period immediately following the date of termination of
Executive's employment hereunder, Executive shall not, directly or indirectly,
solicit or induce any officer, director, employee, agent or consultant of the
Company or any of its successors, assigns, subsidiaries or affiliates to
terminate his, her or its employment or other relationship with the Company or
its successors, assigns, subsidiaries or affiliates for the purpose of
associating with any competitor of the Company or its successors, assigns,
subsidiaries or affiliates, or otherwise encourage any such person or entity to
leave or sever his, her or its employment or other relationship with the Company
or its successors, assigns, subsidiaries or affiliates, for any other reason.

                  (c) Solicitation of Clients, Etc. During the Term and for the
one (1) year period immediately following the date of termination of Executive's
employment hereunder, Executive shall not, directly or indirectly, solicit or
induce (i) any customers or clients of the Company or its successors, assigns,
subsidiaries or affiliates, or (ii) any vendors, suppliers or consultants then
under contract to the Company or its successors, assigns, subsidiaries or
affiliates, to terminate his, her or its relationship with the Company or its
successors, assigns, subsidiaries or affiliates, for the purpose of associating
with any competitor of the Company or its successors, assigns, subsidiaries or
affiliates, or otherwise encourage such customers or clients, or vendors,
suppliers or consultants then under contract, to terminate his, her or its
relationship with the Company or its successors, assigns, subsidiaries or
affiliates, for any other reason.

                  (d) Disparaging Comments. During the Term and thereafter,
Executive and the Company agree that they will make no disparaging or defamatory
comments regarding the other party in any respect or make any comments
concerning any aspect of the termination of their relationship. The obligations
of Executive and the Company under this subparagraph shall not apply to
disclosures required by applicable law, regulation or order of any court or
governmental agency.



                                      -4-
<PAGE>

         8. CONFIDENTIALITY. All books of account, records, systems,
correspondence, documents, and any and all other data, in whatever form,
concerning or containing any reference to the works and business of the Company
or its affiliated companies shall belong to the Company and shall be given up to
the Company whenever the Company requires Executive to do so. Executive agrees
that Executive shall not at any time during the term of Executive's employment
or thereafter, without the Company's prior written consent, disclosure to any
other person or business entity any such information or any trade secrets, plans
or other information or data, in whatever form, concerning the Company's or any
of its affiliated companies' or customers' practices, businesses, procedures,
systems, plans or policies (collectively, "Confidential Information"), nor shall
Executive disclose to any third party or utilize any such Confidential
Information in any way or communicate with or contact any such customer other
than in connection with Executive's employment by the Company. In addition, as
part of Executive's employment, Executive will be required to acknowledge and
sign appropriate confidentiality policy and nondisclosure agreements which the
Company shall adopt substantially in the form of the attached Exhibit B.
Executive hereby confirms that all Confidential Information constitutes the
Company's exclusive property, and that all of the restrictions on Executive's
activities contained in this Agreement and such other nondisclosure policies of
the Company are required for the Company's reasonable protection. This
confidentiality provisions shall survive the termination of this Agreement.

         9. ASSIGNMENT. This Agreement, and all of the terms and conditions
hereof, shall bind the Company and its successors and assigns and shall bind
Executive and Executive's heirs, executors and administrators. No transfer or
assignment of this Agreement shall release the Company from any obligation to
Executive hereunder. Neither this Agreement, nor any of the Company's rights or
obligations hereunder, may be assigned or otherwise subject to hypothecation by
Executive. The Company may assign the rights and obligations of the Company
hereunder, in whole or in part, to any of the Company's subsidiaries, affiliates
or parent corporations, or to any other successor or assign in connection with
the sale of all or substantially all of the Company's assets or stock or in
connection with any merger, acquisition and/or reorganization, provided the
assignee assumes the obligations of the Company hereunder.

         10. GENERAL.

                  (a) This Agreement shall be construed and governed by the laws
of the State of New York, without giving effect to conflicts of laws principles
thereof which might refer such interpretations to the laws of a different state
or jurisdiction.

                  (b) Except as necessary for the Company and its subsidiaries,
affiliates, successors or assigns or Executive to specifically enforce or enjoin
a breach of this Agreement (to the extent such remedies are otherwise
available), the parties agree that any and all disputes that may arise in
connection with, arising out of or relating to this Agreement, or any dispute
that relates in any way, in whole or in part, to Executive's services on behalf
of the Company or any subsidiary, the termination of such services or any other
dispute by and between the parties or their subsidiaries, affiliates, successors
or assigns, shall be submitted to binding arbitration in New York, New York
according to the National Employment Dispute Resolution Rules and procedures of
the American Arbitration Association. The parties agree that the prevailing
party in any such dispute shall be entitled to reasonable attorneys' fees,
costs, and necessary


                                       -5-
<PAGE>


disbursements in addition to any other relief to which he or it may be entitled.
This arbitration obligation extends to any and all claims that may arise by and
between the parties or their subsidiaries, affiliates, successors or assigns,
and expressly extends to, without limitation, claims or causes of action for
wrongful termination, impairment of ability to compete in the open labor market,
breach of an express or implied contract, breach of the covenant of good faith
and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the New York constitution, the United States
Constitution, and applicable state and federal fair employment laws, federal and
state equal employment opportunity laws, and federal and state labor statutes
and regulations, including, but not limited to, the Civil Rights Act of 1964, as
amended, the Fair Labor Standards Act, as amended, the Americans With
Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as
amended, the Employee Retirement Income Security Act of 1974, as amended, the
Age Discrimination in Employment Act of 1967, as amended, and any other state or
federal law.

                  (c) If any provision of this Agreement should be wholly or
partially invalid, unenforceable or unlawful, then this Agreement shall be
severable in respect of the provision in question (to the extent that it is
invalid, enforceable or unlawful), and the remaining provisions of this
Agreement shall continue in full force and effect. This Agreement constitutes
the entire understanding between the parties and shall supersede any and all
other understandings, oral or written. No addition to, or medication of, this
Agreement shall be of any force or effect unless in writing and signed by or on
behalf of both parties.

                  (d) The several rights and remedies provided for in this
Agreement shall be construed as being cumulative, and no one of them shall be
deemed to be exclusive of the others or of any right or remedy allowed by law.
No waiver by the Company or Executive of any failure by Executive or the
Company, respectively, to keep or perform any provision of this Agreement shall
be deemed to be a waiver of any preceding or succeeding breach of the same or
other provision.

                  (e) Unless expressly provided herein or therein, the
expiration of the Term shall not alter or affect any rights or obligations of
the Company or Executive under any other agreement or plan including, without
limitation, the Omnibus Plan or the Stock Option Agreement between the Company
and Executive.

                  (f) This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and the same
instrument.

         11. EXECUTIVE REPRESENTATION & ACCEPTANCE. By signing this Agreement,
Executive hereby represents that Executive is not currently under any
contractual obligation to work for another employer and that Executive is not
restricted by any agreement or arrangement from entering into this Agreement and
performing Executive's duties hereunder.



                                      -6-
<PAGE>


          IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREOF, the
parties hereto have executed and delivered this Agreement as of the year and
date first above written.



WITNESS:                                   RESORTS INTERNATIONAL HOTEL, INC.

/s/ Nicholas Amato                         By:  /s/ Nicholas L. Ribis
-------------------------                       --------------------------------





WITNESS:                                   EXECUTIVE

/s/ Nicholas Amato                         /s/ Rosalind Krause
-------------------------                  -------------------------------------
                                           Rosalind Krause




                                      -7-
<PAGE>

                                                                       EXHIBIT A



                            COLONY RIH HOLDINGS, INC.
                        2001 OMNIBUS STOCK INCENTIVE PLAN



                     ROSALIND KRAUSE STOCK OPTION AGREEMENT


                  THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of
the first day of October, 2001 (the "Effective Date"), by and between COLONY RIH
HOLDINGS, INC., a Delaware corporation (the "Company"), and ROSALIND KRAUSE (the
"Optionee") in her capacity as the Senior Vice President - Casino Operations of
the Resorts International Hotel, Inc., a New Jersey corporation and a Subsidiary
of the Company ("Resorts").

                  Pursuant to the Colony RIH Holdings, Inc. 2001 Omnibus Stock
Incentive Plan (the "Plan"), the Board of Directors of the Company (the
"Board"), as the Administrator of the Plan, has determined that the Optionee is
to be granted an option (the "Option") to purchase shares of the Company's Class
A Common Stock, par value $.01 per share (the "Class A Common Stock"), and
shares of the Company's Class B Common Stock, par value $.01 per share (the
"Class B Common Stock" and, together with the Class A Common Stock, the "Common
Stock"), each on the terms and conditions set forth herein, and hereby grants
such Option. Such grants shall be deemed to satisfy in full the obligations
under Paragraph 4(b) of that certain Employment Agreement between the Optionee
and Resorts, as hereinafter amended (the "Employment Agreement"). Such grants
shall also be conditioned on the Optionee agreeing to be bound by the
Stockholders Agreement (as defined below) with respect to the Common Stock, and
shall evidence such agreement by executing a joinder agreement substantially in
the form of Exhibit A attached hereto.

                  All capitalized terms not defined herein shall have their
respective meanings set forth in the Plan.

                  1. Terms of Option Grant. (a) The Option entitles the Optionee
to purchase 77 shares of the Company's Class A Common Stock at a price equal to
$0.0475 per share (the "Class A Option Exercise Price"), which the parties
acknowledge is not less than the fair market value of one share of the Class A
Common Stock as of the Effective Date. The Option also entitles the Optionee to
purchase 1,556 shares of the Company's Class B Common Stock at a price equal to
$100.00 per share (the "Class B Option Exercise Price" and, collectively with
the Class A Option Exercise Price, the "Option Exercise Price"), which the
parties acknowledge is not less than the fair market value of one share of the
Class B Common Stock as of the Effective Date. The shares of Class A Common
Stock and Class B Common Stock subject to the Option are referred to herein as
the "Option Shares." It is intended that the Option shall not constitute an
"incentive stock option" within the meaning of Section 422 of the Code.

                           (b) The term of the Option (the "Option Term") shall
commence on the Effective Date (the "Date of Grant") and, unless the Option is
previously terminated pursuant to this Agreement, shall terminate upon the
expiration of ten (10) years from the Date of Grant.


<PAGE>


Upon expiration of the Option Term, all rights of the Optionee hereunder shall
terminate.

                           (c) Except as otherwise provided in Section 5 hereof,
the Option shall vest and become exercisable if the conditions set forth below
are satisfied as of the end of the applicable vesting period:

                           (i) For the Company's fiscal year ended December 31,
         2001, 20% of the Option Shares shall vest and become exercisable
         provided the Company achieves the applicable operating performance
         targets as established by the Board for such fiscal year.

                           (ii) For the Company's fiscal year ended December 31,
         2002, 20% of the Option Shares shall vest and become exercisable
         provided the Company achieves the applicable operating performance
         targets as established by the Board for such fiscal year.

                           (iii) For the Company's fiscal year ended December
         31, 2003, 20% of the Option Shares shall vest and become exercisable
         provided the Company achieves the applicable operating performance
         targets as established by the Board for such fiscal year.

                           (iv) For the Company's fiscal year ended December 31,
         2004, 20% of the Option Shares shall vest and become exercisable
         provided the Company achieves the applicable operating performance
         targets as established by the Board for such fiscal year.

                           (v) For the Company's fiscal year ended December 31,
         2005, 20% of the Option Shares shall vest and become exercisable
         provided the Company achieves the applicable operating performance
         targets as established by the Board for such fiscal year.

                           (vi) Notwithstanding the foregoing clauses (i)
         through (v) of this Section 1(c), in the event that the Company fails
         to meet the applicable performance target described above for any
         fiscal year (a "Shortfall Year"), but it achieves more than 100% of the
         applicable performance target for the fiscal year immediately following
         the Shortfall Year and the excess is at least the amount of the
         shortfall in the Shortfall Year (that is, the difference between the
         Shortfall Year's performance target and the performance actually
         generated by the Company in such Shortfall Year), then the Option
         Shares that would have vested in the Shortfall Year if the performance
         target had been satisfied shall vest retroactively as if the
         performance target in the Shortfall Year had been satisfied. Until such
         time as the Option Shares described herein are retroactively vested,
         they shall be considered as forfeited for all purposes of the Plan and
         this Agreement.

                           (d) Except as otherwise provided herein, the right of
the Optionee to purchase Option Shares with respect to which the Option has
become exercisable may be exercised in whole or in part at any time or from time
to time prior to expiration of the Option Term, provided, that any exercise of
the Option shall be deemed to relate in tandem to both the Class A Common Stock
and the Class B Common Stock subject to the Option, such that the ratio of (i)
the number of shares of Class A Common Stock issuable upon such exercise to (ii)
the total number of shares of Class A Common Stock outstanding on the date
hereof shall be the same as the ratio of (iii) the number of shares of Class B
Common Stock issuable upon such exercise to (iv) the total number of shares of
Class B Common Stock outstanding on the date hereof.


                                       2
<PAGE>


                           (e) The Option may be exercised by means of written
notice of exercise to the Company specifying the number of Option Shares to be
purchased, accompanied by payment in full of the aggregate Option Exercise Price
and any applicable withholding amounts (i) in cash or by check, (ii) at any time
following the closing of the Company's Initial Public Offering (as defined in
Section 2 below) by means of a broker cashless exercise procedure, on terms
reasonably acceptable to the Company, providing proceeds sufficient to pay the
exercise price and any applicable withholding amounts or (iii) by any other
means of exercise authorized from time to time in the Plan and/or by the Board.

                  2. Certain Definitions. For purposes of this Agreement:

                           (a) "Initial Public Offering" shall mean the closing
of a public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), covering shares of
the Company's Common Stock, which shares are approved for listing or quotation
on the New York Stock Exchange, American Stock Exchange or Nasdaq National
Market.

                           (b) "Change in Control" shall mean the occurrence of
one or more of the following events:

                           (i) the sale, lease, transfer, conveyance or other
         disposition, in one or a series of related transactions, of all or
         substantially all of the assets of the Company and its Subsidiaries,
         taken as a whole;

                           (ii) the adoption by the Company's stockholders of a
         plan of liquidation or dissolution of the Company;

                           (iii) prior to the time the Company or any Parent
         Corporation completes an Initial Public Offering, the Company becomes
         aware (by way of a report or any other filing pursuant to Section 13(d)
         of the Exchange Act, proxy vote, written notice or otherwise) of the
         acquisition by any "Person" or related group (within the meaning of
         Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
         successor provision to either of the foregoing, including any "group"
         acting for the purpose of acquiring, holding or disposing of securities
         within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
         than a group consisting of the Principals and their Related Parties, in
         a single transaction or in a related series of transactions, by way of
         merger, consolidation or other business combination or purchase of
         direct or indirect beneficial ownership (within the meaning of Rule
         13d-3 under the Exchange Act, or any successor provision) of 50% or
         more of the total voting power entitled to vote in the election of the
         Board or such other Person surviving the transaction;

                           (iv) subsequent to the time the Company or any Parent
         Corporation completes an Initial Public Offering, the Principals and
         their Related Parties shall directly or indirectly beneficially own
         shares of capital stock representing less than 25% of the total voting
         power entitled to vote in the election of the Board and either (A) any
         other Person directly or indirectly beneficially owns shares of capital
         stock representing voting power in excess of the voting power
         represented by shares of capital stock owned by the



                                       3
<PAGE>


         Principals and their Related Parties or (B) individuals who were the
         voting members of the Board at the beginning of any two-year period
         commencing subsequent to the Initial Public Offering (together with any
         new voting directors whose election or appointment by the Board or
         whose nomination for election by the shareholders of the Company was
         approved by a vote of a majority of the directors then still in office
         who were either directors at the beginning of such period or whose
         election or nomination for election was previously so approved) cease
         for any reason to constitute a majority of the Board then in office.

                           (c) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.

                           (d) "Principals" shall mean Colony Investors IV,
L.P., Colony RIH Voteco, LLC and any of their respective affiliates and any of
the Company's officers and directors.

                           (e) "Related Party," with respect to any Principal,
shall mean (A) any controlling stockholder, 80% (or more) owned Subsidiary, or
spouse or immediate family member (in the case of an individual) of such
Principal or (B) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of such Principal and/or such
other Persons referred to in the immediately preceding clause (A).

                           (f) "Stockholders Agreement" shall mean that certain
Stockholders Agreement, dated as of April 25, 2001, among the Company, Colony
RIH Voteco, LLC, a Delaware limited liability company, Colony Investors IV,
L.P., a Delaware limited partnership, and certain additional security holders of
the Company.

                  3. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, a sale of substantially all of the assets of
the Company or other change in corporate structure by reason of any stock
dividend, stock split, reverse stock split or other change affecting the Common
Stock (including any change in circumstances which results in or would result in
any substantial dilution or enlargement of the rights granted to, or available
for, Participants in the Plan), an equitable substitution or proportionate
adjustment shall be made in the kind, number and option price of shares of
Common Stock subject to the Option, in each case as may be determined by the
Administrator, in good faith. Such other substitutions or adjustments shall be
made as may be determined by the Administrator, in its sole discretion. Anything
herein to the contrary notwithstanding, in connection with any event described
in this paragraph, the Administrator may provide, in its good faith discretion,
for the cancellation of any outstanding awards without the consent of
Participants and payment of an equitable amount in cash or securities therefor.

                  4. Nontransferability of Option and Option Shares; Option
Shares Subject to Stockholders Agreement. (a) The Option and this Agreement
shall not be transferable and, during the lifetime of the Optionee, the Option
may be exercised only by the Optionee; provided, however, that the Optionee
shall be permitted to transfer the Option and this Agreement to a trust
controlled by the Optionee during the Optionee's lifetime for estate planning
purposes. Without



                                       4
<PAGE>


limiting the generality of the foregoing, except as otherwise provided herein,
the Option may not be assigned, transferred, pledged or hypothecated in any way,
shall not be assignable by operation of law, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option shall be null and void and without effect.

                           (b) Notwithstanding any provision herein to the
contrary, the Optionee and, upon exercise of the Option, the Option Shares,
shall at all times and in all respects be subject to the Stockholders Agreement,
the provisions of which shall be deemed to be incorporated into this Agreement.

                  5. Forfeiture and Vesting Acceleration of Options. (a) If the
Optionee's services with Resorts are terminated by Resorts without Cause (as
defined in the Employment Agreement), the Option shall immediately vest and
become exercisable as to that number of Option Shares that would have vested
pursuant to Section 1(c) had the Optionee's services continued without
interruption under the Employment Agreement until December 31 following such
termination date notwithstanding any performance targets established with
respect to the Option Shares. Anything herein to the contrary notwithstanding,
the termination of the Optionee's services without Cause shall not result in the
vesting of any Option Shares that were forfeited at any time prior to such
termination date by reason of the Company's failing to satisfy any performance
targets relating to such Option Shares. Following the Optionee's termination
date, the unexercised portion of the Option, to the extent vested, shall remain
exercisable for ninety (90) days after the Optionee's termination date, at which
time all Option Shares, to the extent not exercised prior to the end of such
period, shall lapse and be canceled.

                           (b) If the Optionee's services with Resorts shall
terminate by reason of her death or disability, the Option shall immediately
vest and become exercisable as to that number of Option Shares that would have
vested pursuant to Section 1(c) had the Optionee's services continued without
interruption under the Employment Agreement until December 31 following the
Optionee's death or the forty-fifth (45th) day after receipt of notice of
termination for disability, as applicable, notwithstanding any performance
targets established with respect to the Option Shares. Anything herein to the
contrary notwithstanding, the termination of the Optionee's services due to
death or disability shall not result in the vesting of any Option Shares that
were forfeited at any time prior to such termination by reason of the Company's
failing to satisfy any performance targets relating to such Option Shares.
Following the Optionee's termination date, the unexercised portion of the
Option, to the extent vested, shall remain exercisable for ninety (90) days
after the Optionee's death or the forty-fifth (45th) day after receipt of notice
of termination for disability, as applicable, at which time all Option Shares,
to the extent not exercised prior to the end of such period, shall lapse and be
canceled.

                           (c) If the Optionee's services with Resorts are
terminated by the Optionee, the unexercised portion of the Option, to the extent
vested, shall remain exercisable for ninety (90) days after such termination, at
which time all Option Shares, to the extent not exercised prior to the end of
such period, shall lapse and be canceled.

                           (d) If the Optionee's services with Resorts are
terminated by Resorts



                                       5
<PAGE>


for Cause (as defined in the Employment Agreement), the unexercised portion of
the Option, whether exercisable or not, shall lapse and be immediately canceled
as of the date of such termination.

                           (e) Upon the occurrence of a Change in Control (as
defined in Section 2) at any time prior to the termination of the Optionee's
services with Resorts, for any or no reason, the Option shall immediately vest
and become exercisable as to 100% of the Option Shares (notwithstanding any
performance targets established with respect to such Option Shares) and all
provisions of this Agreement relating to the forfeiture of the Option in the
event of the Optionee's termination of service with Resorts shall expire.
Anything herein to the contrary notwithstanding, the occurrence of a Change in
Control shall not result in the vesting of any Option Shares that were forfeited
at any time prior to such Change in Control by reason of the Company's failing
to satisfy any performance targets relating to such Option Shares.

                  6. Call Rights. In the event of (i) the termination of the
Optionee's employment with Resorts at any time, under any circumstances and for
any or no reason, (ii) a Change in Control or (iii) any transfer of any Option
Shares by the Optionee under any circumstances (other than to a trust controlled
by the Optionee for estate planning purposes, the trustee of which agrees in
writing to be subject in all events and for all purposes to the Company's Call
as set forth herein), including pursuant to any arrangement, proceeding, decree,
judgment, order or application of law relating to the division of property for
domestic relations purposes (each a "Call Event"), for a period commencing on
the date of such event and expiring upon the Company's Initial Public Offering
(the "Call Exercise Period"), the Company shall have the right to purchase from
the Optionee, in accordance with the terms hereof and of Section 2.4(e) of the
Stockholders Agreement (the "Call") (y) any or all of such portion of the Option
as shall relate to vested and exercisable Option Shares as of the date written
notice is given (the "Call Exercise Date"), and/or (z) any or all Option Shares
owned by the Optionee as of the end of business on the Call Exercise Date.

                           (a) The following terms and conditions shall apply to
the exercise of the Call:

                           (i) If exercising its rights under (y) above, the
         Company shall pay the Optionee an amount in cash equal to the product
         of (A) the excess, if any, of the Fair Market Value (as defined, for
         purposes of this Section 6, in the Stockholders Agreement with respect
         to Employee Stockholders other than the Qualified Stockholders) of a
         share of Class A Common Stock or Class B Common Stock, as applicable,
         as of the first applicable Call Event (the "Call Price") over the Class
         A Option Exercise Price or Class B Option Exercise Price, as
         applicable, and (B) the number of shares of Class A Common Stock or
         Class B Common Stock, as applicable, that the portion of the Option
         being purchased by the Company pursuant to the Call would otherwise
         entitle the Optionee to purchase.

                           (ii) If exercising its rights under (z) above, the
         Company shall pay the Optionee an amount equal to the product of (A)
         the Call Price and (B) the number of Option Shares being purchased
         pursuant thereto.



                                       6
<PAGE>


                           (b) The Company may elect to exercise the Call, at
its discretion, at any time prior to the end of the Call Exercise Period in
accordance with the procedures set forth in Section 2.4 of the Stockholders
Agreement with respect to "Offered Securities;" provided, however, that if the
Company does not exercise the Call within fifteen (15) days after the occurrence
of the first Call Event, the Call Price for the Option Shares being repurchased,
as determined above, shall be increased by 10% interest (6% interest if the Call
Event occurs in connection with the Optionee's termination of employment by the
Company for Cause (as defined in the Employment Agreement) or the Optionee's
resignation from employment with the Company), compounded annually on the basis
of the actual number of days elapsed over a year of 365 days, from the date of
such Call Event until the date of the Company's payment.

                           (c) Notwithstanding any other provision hereof, the
Company may assign, without the consent of the Optionee, its rights under this
Section 6.

                           (d) Unless the Company shall have given prior notice
of its intent to exercise the Call, the Call shall terminate upon the closing of
the Company's Initial Public Offering.

                  7. Investment Representation. The Optionee hereby represents
and warrants to the Company that the Optionee, by reason of the Optionee's
business or financial experience (or the business or financial experience of the
Optionee's professional advisors who are unaffiliated with and who are not
compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly), has the capacity to protect the Optionee's own
interests in connection with the transactions contemplated under this Agreement.

                  8. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by first class mail, certified
or registered with return receipt requested, or by a nationally recognized
overnight delivery service to the respective parties named below:

         If to Company:             Colony RIH Holdings, Inc.
                                    660 Madison Avenue
                                    New York, New York
                                    Attention:  President
                                    Facsimile:  212-593-5433

         With a copy to:            Colony Capital, LLC
                                    1999 Avenue of the Stars, Suite 1200
                                    Los Angeles, California 90067
                                    Attention:  Jonathan Grunzweig
                                    Facsimile:  310-843-3663

         If to the Optionee:        Rosalind Krause
                                    209 Hagen Road
                                    Brigantine, New Jersey 08203



                                       7
<PAGE>


Either party hereto may change such party's address for notices by notice duly
given pursuant hereto.

                  9. Securities Laws Requirements. The Option shall not be
exercisable to any extent, and the Company shall not be obligated to transfer
any Option Shares to the Optionee upon exercise of the Option, if such exercise,
in the opinion of counsel for the Company, would violate the Securities Act (or
any other federal or state statutes having similar requirements as may be in
effect at that time). Further, the Company may require as a condition of
transfer of any Option Shares pursuant to any exercise of the Option that the
Optionee furnish a written representation that he is purchasing or acquiring the
Option Shares for investment and not with a view to resale or distribution to
the public. The Optionee hereby represents and warrants that he understands that
the Option Shares are "restricted securities," as defined in Rule 144 under the
Securities Act, and that any resale of the Option Shares must be in compliance
with the registration requirements of the Securities Act or an exemption
therefrom. Each certificate representing Option Shares shall bear the legend set
forth below:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
         SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER")
         EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF THAT CERTAIN STOCK OPTION
         AGREEMENT, DATED AS OF OCTOBER 1, 2001, BETWEEN COLONY RIH HOLDINGS,
         INC., A DELAWARE CORPORATION (THE "COMPANY"), AND ONE OF ITS EXECUTIVES
         AND THAT CERTAIN STOCKHOLDERS AGREEMENT, DATED AS OF APRIL 25, 2001, BY
         AND AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS. ANY TRANSFEREE
         OF THESE SECURITIES SHALL TAKE SUBJECT TO THE TERMS OF SUCH AGREEMENTS,
         COPIES OF WHICH ARE ON FILE WITH THE COMPANY.

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY STATE SECURITIES
         LAWS, AND NO TRANSFER OF THESE SECURITIES MAY BE MADE EXCEPT (A)
         PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR (B)
         PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT TO WHICH THE COMPANY
         MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF COUNSEL FOR THE
         HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE ACT.

Further, if the Company determines that the listing or qualification of the
Option Shares under any securities or other applicable law is necessary in order
to avoid a violation of any securities laws, the Option shall not be
exercisable, in whole or in part, unless and until such listing or
qualification, or a consent or approval with respect thereto, shall have been
effected or obtained free of any conditions not acceptable to the Company,
provided, that the Company shall pursue such listing or qualification diligently
and in good faith.

                  10. No Obligation to Register Shares. Except as provided in
the Stockholders Agreement, the Company shall be under no obligation to register
the Option Shares.



                                       8
<PAGE>


                  11. Protections Against Violations of Agreement. No purported
sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift,
transfer in trust (voting or other) or other disposition of, or creation of a
security interest in or lien on, any of the Option Shares by any holder thereof
in violation of the provisions of this Agreement, the Stockholders Agreement,
the Employment Agreement or the Certificate of Incorporation or the Bylaws of
the Company, will be valid, and the Company will not transfer any of said Option
Shares on its books nor will any of the Option Shares be entitled to vote, nor
will any dividends be paid thereon, unless and until there has been full
compliance with such provisions to the satisfaction of the Company. The
foregoing restrictions are in addition to and not in lieu of any other remedies,
legal or equitable, available to enforce such provisions.

                  12. Withholding Requirements. The Optionee shall, no later
than the date as of which the value of any award hereunder becomes includable in
her gross income (after taking into account the provisions of Section 3 hereof),
pay to the Company, or make arrangements satisfactory to the Company regarding
payment of, any federal, state, or local taxes or other amounts of any kind
required by law to be withheld with respect thereto. The obligations of the
Company hereunder shall be conditional on the making of such payments or
arrangements, and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Optionee.

                  13. Failure to Enforce Not a Waiver. The failure to enforce at
any time any provision of this Agreement shall in no way be construed to be a
waiver of such provision or of any other provision hereof.

                  14. Governing Law. This Agreement shall be governed by and
construed according to the laws of the State of New York without regard to its
principles of conflict of laws.

                  15. Incorporation of Plan. The Plan is hereby incorporated by
reference and made a part hereof, and the Option award and this Agreement shall
be subject to all terms and conditions of the Plan; provided, however, that in
the event of a conflict between the terms of this Agreement and the Plan, the
terms of this Agreement shall govern.

                  16. Amendments. This Agreement may be amended or modified at
any time only by an instrument in writing signed by each of the parties hereto.

                  17. Rights as a Stockholder. Neither the Optionee nor any of
the Optionee's successors in interest shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock subject to the Option
until the date of issuance of a stock certificate for such shares of Common
Stock.

                  18. Agreement Not a Contract of Service. Neither the Plan, the
granting of the Option, this Agreement nor any other action taken pursuant to
the Plan shall constitute or be evidence of any agreement or understanding,
express or implied, that the Optionee has a right to continue in the service of
the Company or any Subsidiary or affiliate of the Company for any period of time
or at any specific rate of compensation.



                                       9
<PAGE>


                  19. Authority of the Administrator. The Administrator shall
have full authority to interpret and construe the terms of the Plan and this
Agreement, and shall do so in good faith.

                  20. Dispute Resolution. Any dispute arising under this
Agreement shall be resolved in accordance with the arbitration provisions of the
Stockholders Agreement as in effect as of the date hereof, or as the same may be
amended from time to time, and such arbitration provisions shall be deemed to be
incorporated herein by this reference.

                  21. Market Stand-Off. In connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act for such period as the
Company or its underwriters may request (such period not to exceed 180 days
following the date of the applicable offering), the Optionee shall not, directly
or indirectly, sell, make any short sale of, loan, hypothecate, pledge, offer,
grant or sell any option or other contract for the purchase of, purchase any
option or other contract for the sale of, or otherwise dispose of or transfer,
or agree to engage in any of the foregoing transactions with respect to, any
Option Shares acquired under this Agreement without the prior written consent of
the Company or its underwriters, provided, that the Optionee shall not be
required to be subject to "lock-up" restrictions that are more restrictive than
such restrictions to which any other Employee Stockholder (as defined in the
Stockholders Agreement) is subject, or that would prevent the Optionee from
effectuating a sale pursuant to Section 2.5 of the Stockholders Agreement.

                  IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.

                                    COLONY RIH HOLDINGS, INC.


                                    By:  /s/ Nicholas L. Ribis
                                         ---------------------------------------
                                         Name:
                                         Title:


                                    The undersigned hereby accepts and agrees to
                                    all the terms and provisions of the
                                    foregoing Agreement and to all the terms and
                                    provisions of the Plan, the Employment
                                    Agreement and the Stockholders Agreement
                                    herein incorporated by reference.


                                    /s/ Rosalind Krause
                                    --------------------------------------------
                                    Rosalind Krause


                                       10
<PAGE>


                                                                       EXHIBIT A

                         STOCKHOLDERS AGREEMENT JOINDER


                  As of the date set forth below, the undersigned, Rosalind
Krause, is being issued options to acquire 77 shares of Class A Common
Stock, at a price equal to $0.0475 per share, and 1,566 shares of Class B
Common Stock, at a price equal to $100.00 per share (the "Shares"), of Colony
RIH Holdings, Inc. (the "Company"). By execution of this Stockholders Agreement
Joinder, the undersigned shall be deemed to be a party to that certain
Stockholders Agreement, dated as of April 25, 2001, by and between the Company
and the Stockholders identified therein (the "Stockholders Agreement"). Pursuant
to Section 4.8 (but subject to Sections 2.2 and 2.3) of the Stockholders
Agreement, the undersigned shall have all rights, and shall observe all the
obligations, applicable to a "Stockholder" as set forth in the Stockholders
Agreement. In order to give effect to this transaction, please add the
undersigned to the list of "Stockholders" as set forth in Schedule A to the
Stockholders Agreement.



Signature:                 /s/ Rosalind Krause
                           --------------------------

Address:                   4 Wexford Lane
                           Linwood, N.J. 08221

Date:                      10/25/01