Document:

Exhibit 10.1

                               OPERATING AGREEMENT

                                       OF

                     AMERICAN RACING AND ENTERTAINMENT, LLC

      This  Operating   Agreement  (the  "Agreement")  of  American  Racing  and
Entertainment,  LLC  (the  "Company"),  dated  effective  as of the  24th day of
August,  2005,  is  hereby  executed  and  agreed  to,  for  good  and  valuable
consideration, by Nevada Gold NY, Inc., a New York corporation, ("Nevada Gold"),
TrackPower,  Inc.,  a Wyoming  corporation  ("TrackPower"),  and  Southern  Tier
Acquisition II LLC, a New York limited liability company ("Southern Tier").

      The parties agree as follows:

                     ARTICLE I. ORGANIZATION AND DEFINITIONS

1.1 Company Name.  The business of the Company will be conducted  under the name
"American  Racing  and  Entertainment,  LLC" or any other name  selected  by the
Company in accordance with governing law.

1.2 New York  Office . The  Company's  principal  place of  business is 125 Park
Avenue, New York, New York 10017. The Company may maintain offices at such other
place or places  within  or  outside  the  State of New York as the Board  deems
advisable.

1.3 Term. The Company shall begin on the date its Articles of  Organization  are
filed  with  the  New  York  Secretary  of  State  and  shall  continue  until a
Dissolution may occur.

1.4 Foreign  Qualification.  After  formation of the Company  under the Act, the
Company will apply for any required  certificate  of authority to do business in
any other state or jurisdiction where it conducts business, as appropriate.

1.5 Definitions.  Terms used with initial capital letters will have the meanings
specified in Exhibit "A," applicable to both singular and plural forms,  for all
purposes of this Agreement.

                         ARTICLE 2: PURPOSES AND POWERS

2.1 Principal Purposes. The purposes for which the Company is organized are:

      (a) to own, hold,  develop,  operate,  lease,  transfer,  sell,  exchange,
improve or otherwise dispose of all or any part of the Tioga Downs Complex;

      (b) to acquire,  own,  hold,  develop,  operate,  lease,  transfer,  sell,
exchange,  improve or  otherwise  dispose of all or any part of the Vernon Downs
Complex;

      (c) to enter  into and  perform  contracts  of any kind  necessary  to, in
connection with or incidental to the accomplishment of the foregoing purposes;

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      (d) to incur Debt from any source, including without limitation any Member
or Affiliate of a Member,  to accomplish  the foregoing  purposes or to meet the
obligations  of the Company;  to issue  evidences of the Company's Debt to repay
such  borrowings;  and to grant  security  interests in the Company's  assets to
secure repayment of such Debt; and

      (e) to do all  other  things  necessary,  desirable  or  conducive  to the
accomplishment  of the  aforesaid  purposes or  otherwise  contemplated  by this
Agreement.

      The  Company is a  single-purpose  venture and is intended to engage in no
business or project other than those  described  above regarding the Tioga Downs
Complex and the Vernon Downs  Complex.  Title to all Company  property  shall be
held in the name of the Company or a subsidiary of the Company.

2.2 Powers.  The Company  has all of the powers  granted to a limited  liability
company under the Act, as well as all powers  necessary or convenient to achieve
its purposes and to further its Business.

                              ARTICLE 3: MEMBERSHIP

3.1 Members. The Members of the Company are Nevada Gold, TrackPower and Southern
Tier. The initial Percentage of each Member in the Company shall be as follows:

                  Nevada Gold                        50.00%
                  TrackPower                         25.00%
                  Southern Tier                      25.00%

      The  Percentage  of each  Member as stated  in this  Section  3.1 shall be
adjusted from time to time pursuant to the provisions of this Agreement.

3.2 Rights of and Restrictions on Members. No Member will:

      (a) Be  personally  liable  for any of the  debts,  obligations  or losses
(including  deficits  in its Capital  Account  except as  specifically  provided
herein) of the Company or the other Members, except as otherwise provided in the
Act or an  agreement  signed by the  Member to be  subjected  to any  individual
liability;

      (b) Be assessed or  required to make any Capital  Contributions  except as
provided in Sections 7.1 and 7.2 hereof.

      (c) Except as  specifically  set forth herein or as otherwise  approved by
the Members, have the authority or power to act for or on behalf of the Company,
to do any act that would be binding on the Company, or to incur any expenditures
on behalf of the Company;

      (d) Except as  specifically  set forth herein or as otherwise  approved by
the  Members,  be  entitled  to be paid any salary or to have a Company  drawing
account;

      (e) Be  entitled to receive any  interest on any Capital  Contribution  or
Capital Account;

      (f) Be entitled to a partition of any property of the Company;

      (g) Except as expressly  provided to the contrary  herein,  be entitled to
priority over any Member,  either as to a return of its Capital  Contribution or
as to allocations of revenues,  gains, costs, expenses, losses or distributions;
or

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      (h) Be entitled to a return of, or to a withdrawal  of, all or any part of
its  contributions to the Company,  except to the extent that the Members may be
entitled to distributions  pursuant to the express provisions of this Agreement,
and  (unless  otherwise  provided)  no Member  shall have any right to demand or
receive property other than cash in return for its contributions,  and its right
to receive cash shall be, and is hereby expressly  limited and controlled by the
terms of this Agreement.

3.3 Information.

      (a) In  addition  to the  other  rights  specifically  set  forth  in this
Agreement,  each Member is entitled to all  information  to which that Member is
entitled to have access pursuant to the Act under the  circumstances and subject
to the conditions therein stated.

      (b) The  Members  acknowledge  that,  from time to time,  they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is  confidential,  the release of which may be damaging to the Company
or  Persons  with  which it does  business.  Each  Member  will  hold in  strict
confidence any information it receives  regarding the Company that is identified
as being  confidential (and if that information is provided in writing,  that is
so marked) and may not disclose it to any Person other than another  Member or a
Director except for disclosures (i) compelled by law (but the Member must notify
the Board promptly of any request for that information,  before disclosing it if
practicable),  (ii) required  under the  securities  laws,  (iii) to advisers or
representatives of the Member or Persons to whom any of that Member's Membership
Interests may be  transferred  as permitted by this  Agreement,  but only if the
recipients  have agreed to be bound by the  provisions  of this Section  3.3(b),
(iv) of information that such Member also has received from a source independent
of the Company that the Member  reasonably  believes  obtained that  information
without  breach  of any  obligation  of  confidentiality  or  (v)  as  otherwise
permitted  under this  Agreement.  The  Members  acknowledge  that breach of the
provisions of this Section  3.3(b) may cause  irreparable  injury to the Company
for which  monetary  damages are  inadequate,  difficult  to  compute,  or both.
Accordingly, the Members agree that the provisions of this Section 3.3(b) may be
enforced by specific performance.

3.4  Meetings.  Special  meetings of the Members  shall be held at the Company's
principal  place of  business in New York,  or such other place  approved by the
Members.  There shall be no regularly  scheduled  meetings of the Members of the
Company. A special meeting of the Members may be called by any Member.

3.5 Votes of Members.  Any  decision  or  approval  required of the Members as a
group pursuant to this Agreement  shall require  approval of the Members holding
at least 75% of the Membership Interests.

3.6  Notice of  Meetings.  Written  notice  of a meeting  shall be given to each
Member not less than three (3) days nor more than  thirty  (30) days  before the
date of the meeting, unless waived by all of the Members; provided,  however, if
the immediate attention of the Members to a matter is required, then twenty four
hours (24) notice, or such shorter notice if reasonable under the circumstances,
shall be given.  The notice shall state the place,  date and hour of the meeting
and the general nature of the business to be transacted.

3.7  Actions  Without a Meeting.  Any action that may be taken at any meeting of
Members may be taken  without a meeting and without prior notice if a consent in
writing, setting forth the action so taken, shall be signed and delivered to the
Board by all  Members.  Any Member  giving a written  consent  may  revoke  such
consent by a writing  received by the Board prior to the time that the Board has
received written consents of all Members.

3.8 No Resignation or Retirement.  Each Member agrees not to voluntarily  resign
or retire as a Member in the Company.  However, if such voluntary resignation or
retirement  occurs in  contravention of this Agreement,  the withdrawing  Member
will, without further act, become a Transferee of its Membership  Interest (with
the limited rights of a Transferee as set forth in Section 14.6). Any Member who
resigns or retires from the Company in  contravention  of this Agreement will be
liable to the Company and the other Members for proven monetary damages (but any
such  action or  proposed  action to resign or retire will not be subject to any
equitable  action  for  injunctive  relief  or  specific  performance  except as
permitted under Section 17.8).

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                              ARTICLE 4: MANAGEMENT

4.1 Management. The overall business and affairs of the Company shall be managed
by a Board of Directors (the "Board"),  which,  except as otherwise  provided in
this Agreement, shall have full and complete charge of all facets of the overall
business affairs of the Company,  and the overall  management and control of the
Company's  business shall rest  exclusively  with the Board. Any decision by the
Board shall require the affirmative vote of a majority of the directors  (except
as provided in Section 4.1(b)),  and shall bind the Company and the Members. The
Board, acting as a body pursuant to this Agreement, shall constitute a "manager"
for purposes of the Act. No Director,  in such  capacity,  acting singly or with
any other  Director,  shall have any  authority  or right to act on behalf of or
bind the Company,  other than by  exercising  the  Director's  voting power as a
member  of the  Board,  unless  specifically  authorized  by the  Board  in each
instance.  No Director  shall  represent  himself or herself as a manager of the
Company.  The Board shall make all  Unanimous  Decisions,  Major  Decisions  and
Non-Arbitrable Decisions.

      (a)  Decisions  other  than  Unanimous  Decisions,   Major  Decisions  and
Non-Arbitrable  Decisions may be made and related acts taken: (x) as provided in
this Agreement;  or (y) if not specifically  provided in this Agreement,  by the
President,  subject to the monetary limitations of the Budgets, or the Board (by
majority vote unless unanimous vote is specifically  required by this Agreement)
in the event there is no President;  or (z) as delegated by any contract entered
into by the Company  (including,  without limitation,  the Management  Agreement
defined in Section 4.5 hereof).

      (b) "Unanimous Decisions" shall mean decisions to:

            (i) invest in or operate  any  business  other than the Tioga  Downs
            Complex and the Vernon Downs Complex;

            (ii) make any single  voluntary  expenditure  in excess of  $250,000
            unless such expenditure is provided for in the Cost Budget or Annual
            Plan and Operating Budget (a voluntary expenditure shall not include
            an  expenditure  which (A) is  necessary  to comply with  applicable
            laws,  rules,  regulations  and  orders;  (B) is in  defense  of the
            Company's  interests  in any  proceedings  in any court,  before any
            governmental  agency,  or in  arbitration;  or (C) is  necessary  to
            comply with any contractual or other Company obligations);

            (iii)  during the nine (9) period  commencing  on the opening of the
            Tioga Downs  Complex,  approve any capital  expenditure in excess of
            those set forth in the Cost Budget for the Tioga Downs  Complex,  it
            being  agreed  that  any  approved  capital  expenditures  will  not
            actually be made until twelve (12) months  following  the opening of
            the Tioga Downs Complex;

            (iv) during the nine (9) month period  commencing  on the opening of
            the Vernon Downs Complex,  approve any capital expenditure in excess
            of those set forth in the Cost Budget for the Vernon  Downs  Complex
            it being  agreed that any  approved  capital  expenditures  will not
            actually be made until twelve (12) months  following  the opening of
            the Vernon Downs Complex;

      (c) "Major Decisions" shall mean decisions to:

            (i) select the president of the Company, the General Manager and the
            Racing Manager;

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            (ii) approve the Conceptual Plans and  Specifications  and the Final
            Plans  and   Specifications  or  a  Material   Modification  (but  a
            nonmaterial   amendment  or  modification   shall  not  be  a  Major
            Decision);

            (iii) after the  expiration of the nine (9) month period  commencing
            on the  opening of the Tioga  Downs  Complex,  approve  any  capital
            expenditure  in excess of those set forth in the Cost Budget for the
            Tioga  Downs  Complex  it being  agreed  that any  approved  capital
            expenditures  will not  actually  be made until  twelve  (12) months
            following the opening of the Tioga Downs Complex;

            (iv) after the expiration of the nine (9) month period commencing on
            the  opening  of the  Vernon  Downs  Complex,  approve  any  capital
            expenditure  in excess of those set forth in the Cost Budget for the
            Vernon  Downs  Complex it being  agreed  that any  approved  capital
            expenditures  will not  actually  be made until  twelve  (12) months
            following the opening of the Vernon Downs Complex;

            (v) approve the Cost Budgets, Annual Plan and Operating Budget;

            (vi) allocate a  condemnation  award or casualty  insurance or title
            insurance proceeds among the various items of property taken (if not
            allocated by the condemnee,  insurer or judicial or other  authority
            making such award);

            (vii)  enter  into  a  general  construction   contract  and/or  the
            architectural contract for any material portion of either Complex;

            (viii) enter into any contracts  with or pay any  compensation  to a
            Member or Director or any Affiliate of a Member, other than pursuant
            to the Management Agreement;

            (ix)   commence,   discontinue,   settle,   compromise,   submit  to
            arbitration,  or  participate  in any  single or  related  series of
            actions in the nature of legal proceedings in any court,  before any
            governmental  agency,  or in  arbitration,  or  other  than  actions
            arising  out of the  ordinary  course  of  business,  involving  any
            potential  liabilities to, or claims by or against,  the Company not
            covered  by  insurance  or  within  the  deductible  amount  of  any
            insurance policy,  the cost of which, if lost or settled,  would not
            exceed One Hundred Thousand Dollars ($100,000.00), adjusted annually
            on each anniversary of the Effective Date, to provide for increases,
            but not decreases, in the Consumer Price Index;

            (x) select (or change) attorneys, accountants or other professionals
            to render legal,  accounting or other  professional  services to the
            Company,  it being  agreed  that the  Board has  selected  Friedman,
            Alpert & Green as the accountants for the Company;

            (xi)  approve a proposed  transaction  between  the  Company  and an
            Affiliate of a Member.

      (d) "Non-Arbitrable Decisions" shall mean decisions to:

            (i) elect to dissolve the Company under Section 12.1;

            (ii) sell, assign, transfer, hypothecate, pledge, lease, encumber or
            otherwise  dispose of, in a single  transaction or related series of
            transactions,  all or any  portion  of the either  Complex  (or both
            Complexes)  or  enter  into  any  agreement  to do  so,  except  the
            Management  Agreement  and any  easements,  rights-of-way  or  title
            encumbrances incidental to the development of either Gaming Complex;

            (iii) incur Debt other than (A) Debt  provided for in a Cost Budget;
            (B) Debt provided for in an Operating  Budget;  (C) Debt provided in
            an approved budget for future  development;  (D) trade debt incurred
            in the ordinary course of business;  (E) Debt imposed by law; or (F)
            Debt incurred  under any  contract,  loan  document,  lease or other
            agreement authorized pursuant to this Agreement.

            (iv) elect to have the Members make additional capital contributions
            to the Company pursuant to Section 7.2;

            (v) construct any  improvements on the Project Site,  other than the
            work   shown  on  the  Plans  and   Specifications,   any   Material
            Modifications  and any work  approved  as part of an Annual  Plan or
            required by law;

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            (vi)  (A)  enter  into  any  management  agreement  other  than  the
            Management   Agreement;   or  (B)  enter  into  any   amendment   or
            modification of the Management Agreement;

            (vii)  commence,   discontinue,   settle,   compromise,   submit  to
            arbitration,  or  participate  in any  single or  related  series of
            actions in the nature of legal proceedings in any court,  before any
            governmental  agency,  or in  arbitration,  or  other  than  actions
            arising  out of the  ordinary  course  of  business,  involving  any
            potential  liabilities to, or claims by or against,  the Company not
            covered  by  insurance  or  within  the  deductible  amount  of  any
            insurance  policy,  the cost of  which,  if lost or  settled,  would
            exceed One Hundred Thousand Dollars ($100,000.00), adjusted annually
            on each anniversary of the Effective Date, to provide for increases,
            but not decreases, in the Consumer Price Index;

      (e) If the Board is unable to reach a majority  decision with respect to a
Major Decision, any Member may submit the matter to the procedures for resolving
deadlocks, including binding arbitration, in accordance with Section 4.7.

      (f) If the Board is unable to reach a majority  decision with respect to a
Non-Arbitrable  Decision,  the Company shall not  undertake the related  action,
except  that:  (i) any Member may cause the  Company to take such  action to the
extent it, in good faith,  determines  that such  action:  (A) is  necessary  to
comply with applicable laws, rules, regulations and orders; (B) is in defense of
the Company's interests in any proceedings in any court, before any governmental
agency, or in arbitration; or (C) is necessary to comply with any contractual or
other Company obligations.

      (g)  The  Conceptual  Plans  and  Specifications,   the  Final  Plans  and
Specifications (prepared by Climans, Green, Liang Architects, Inc.) and the Cost
Budget  for the  Tioga  Downs  Complex  have been  approved  by the  Board.  The
Conceptual  Plans and  Specifications,  and the Cost Budget for the Vernon Downs
Complex have been approved by the Board.  It is anticipated  that the Board will
(i) cause to be performed a cost benefit analysis of making capital improvements
to the 47,700 square foot  grandstand at the Vernon Downs Complex and, (ii) upon
reviewing  the results of such analysis  make a decision  (under either  Section
4.1(b)(iv)  or  Section  4.1(c)(iv))  as  to  whether  to  approve  the  capital
expenditures for such improvements.

      (h) The Management Company shall annually prepare, for the Board's review,
an Annual Plan for each Gaming Complex (the "Annual Plan").  Southern Tier shall
have certain  rights to approve  matters in the Annual Plan affecting the Racing
Operations  as provided  in Section  4.5  hereof.  The Annual Plan for the first
whole or partial  Fiscal  Year  following  the date the  Company  opens a Gaming
Complex for business will be prepared by the Management Company and presented to
the Board not less than sixty (60) days before the  anticipated  opening date of
the Gaming Complex except as otherwise provided in the Management Agreement. The
Annual Plan for each  subsequent  Fiscal Year shall be prepared and submitted to
the Board not later than sixty (60) days  before the  beginning  of such  Fiscal
Year.

      The  Annual  Plan  for  each  Gaming  Complex  will  be  comprised  of the
following:

            (i) a statement of the  estimated  income and expenses of the Gaming
Complex for the coming  Fiscal Year,  such  statement  to reflect the  estimated
income and expenses during each month of the subject Fiscal Year;

            (ii) either as part of the  statement  of the  estimated  income and
expenses referred to in the preceding clause (i), or separately, budgets for:

                  (A) repairs and maintenance;

                  (B) capital replacements and improvements; and

                  (C) equipment purchases or leases;

            (iii) a business  and  marketing  plan for the  subject  Fiscal Year
including, without limitation:

                  (A) room rates (if applicable),  food and beverage pricing and
other charges to persons using the Gaming Complex;

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                  (B) an  advertising  and marketing plan for the Gaming Complex
as a whole.

            (iv) the Minimum Balance (as defined in the  Management)  which must
remain in the Bank Account (as defined in the  Management  Agreement)  as of the
end of each Fiscal Month during the Fiscal Year to assure  sufficient monies for
working  capital  purposes and other  expenditures  authorized  under the Annual
Plan.

      The  "Operating  Budget" shall mean the budgeted  expenses  approved under
clauses (i),  (ii), and (iii) above.  References to budgeted items  contained in
the Annual  Plan  shall  refer to the  expenses  for such items set forth in the
Operating Budget.

      In connection  with the submission of the Annual Plan, the Board will meet
within  twenty (20) days after the proposed  Annual Plan is delivered to have an
in-depth review, including,  after the first full Fiscal Year, a comparison with
the previous Fiscal Year's performance of the Gaming Complex and a discussion of
proposed expenditures contained in the Operating Budget.

      It is the  intention  of the Board to complete  the review and approval of
the  proposed  Annual  Plan no later  than  thirty  (30) days  prior to: (x) the
opening date of the Gaming Complex; and (y) the commencement of each Fiscal Year
thereafter. The majority of the Board shall be required to approve each proposed
Annual  Plan.  If a majority of the Board does not approve the  proposed  Annual
Plan, the undisputed portions of the proposed Annual Plan shall be operative. In
the case of any  Annual  Plan after the  Annual  Plan for the first full  Fiscal
Year,  the item  corresponding  to the disputed item and contained in the Annual
Plan for the preceding  Fiscal Year shall be substituted in lieu of the disputed
portions of the proposed  Annual Plan.  In each instance  where  portions of the
Annual Plan from the  preceding  Fiscal Year are deemed to be the Annual Plan in
effect  until a new  Annual  Plan is  approved,  the  Operating  Budget  expense
contained  in  the  Annual  Plan  for  the   preceding   Fiscal  year  shall  be
automatically  increased by a percentage equal to the percent of increase in the
Consumer Price Index during the preceding Fiscal Year. If,  notwithstanding such
Consumer Price Index increase, the Board do not reach agreement as to a mutually
acceptable Annual Plan within thirty (30) days prior to: (x) the opening date of
the Gaming Complex;  or (y) the commencement of each Fiscal Year thereafter,  as
the case may be, the  item(s) of the  Annual  Plan that are in dispute  shall be
submitted to and resolved by arbitration in accordance with Section 4.7.

4.2 Election of Board of Directors.

      (a)  Number,  Term and  Qualifications.  The Board of  Directors  shall be
comprised of four members (each,  a "Director"),  two designated by Nevada Gold,
one designated by TrackPower  and one  designated by Southern Tier.  Each of the
Members  agrees  to  vote  or  express  consent  with  respect  to all of  their
respective Membership Interests in favor of the election of a slate of Directors
consisting  of  individuals  meeting the  requirements  of this Section 4.2. The
number of Directors of the Company,  and the manner of designation  and election
of such Directors,  may only be changed by unanimous vote of all Members, except
as  specifically  provided in Section 7.2 of this Agreement or elsewhere in this
Agreement. The initial members of the Board are as follows:

                  H. Thomas Winn               Nevada Gold
                  Jon Arnesen                  Nevada Gold
                  Ed Tracy                     TrackPower
                  Jeffrey Gural                Southern Tier

      (b)  Resignation.  Any Director  may resign at any time by giving  written
notice to the Company.  The  resignation of any Director shall take effect three
(3)  business  days  following  receipt of that  notice or at such later time as
shall be specified in the notice.  Unless otherwise specified in the notice, the
acceptance of the resignation shall not be necessary to make it effective.

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      (c)  Removal.  Any  Director  may be removed at any time,  with or without
Cause, by the vote of the Member entitled to designate such Director.  A finding
of Cause or  unsuitability  of a  Director  to engage  in  gaming by any  Gaming
Authority  shall result in the immediate  termination  of such Director  without
further action by the Members.

      (d) Vacancies. If a vacancy occurs for any reason in the Board, the Member
who designated the Director shall have the right to designate  another person to
fill that vacancy.

      (e)  Committees.  The Board may from  time to time  establish  one or more
committees of the Board,  which shall have such authority as shall be determined
from time to time by the Board.

      (f) Meetings of the Board.  Regular meetings of the Board shall be held on
a quarterly basis.  Special meetings of the Board may be called by any Director.
All meetings  shall be held upon at least two (2) days'  notice by mail,  notice
delivered personally or by telephone,  telegraph,  facsimile or electronic mail,
to the Directors setting forth the time and location of such meeting;  provided,
however, if the immediate  attention of the Board to a matter is required,  then
twenty four (24) hours notice,  or such shorter  notice if reasonable  under the
circumstances,  shall be given. Notice of a special meeting shall also state the
purpose or purposes for which such  meeting is called.  Notice of a meeting need
not be given to any  Director  who signs a waiver  of  notice  or a  consent  to
holding the meeting (which waiver or consent need not specify the purpose of the
meeting)  or an approval of the  minutes  thereof,  whether  before or after the
meeting,  or  who  attends  the  meeting  without   protesting,   prior  to  its
commencement,  the lack of notice to such Director.  All such waivers,  consents
and  approvals  shall be filed  with the  Company  records or made a part of the
minutes of the  meeting.  A majority  of the  Directors  present may adjourn any
meeting to another time.  If the meeting is adjourned for more than  twenty-four
(24) hours,  notice of any  adjournment  shall be given prior to the time of the
adjourned  meeting  to the  Directors  who are not  present  at the  time of the
adjournment.  Meetings of the Board may be held at the Company's principal place
of  business  in New York or such other  place as may be  approved by the Board.
Directors may  participate in a meeting  through use of conference  telephone or
similar communications equipment, so long as all Directors participating in such
meeting  can  hear  one  another.  Participation  in a  meeting  in such  manner
constitutes  presence  in  person  at such  meeting.  Any  Major  Decision,  any
Non-Arbitrable  Decision  and any other  decision  to be made by the Board under
this Agreement  requires the affirmative  vote of a majority of the entire Board
of Directors  cast in favor of that decision  (each  Director  having one vote).
Notwithstanding  the foregoing,  any Unanimous Decision requires the affirmative
vote of the entire Board of Directors cast in favor of that Unanimous Decision.

      (g) Quorum.  A quorum  shall exist when a majority  of the  Directors  are
present.

      (h) Written  Consent.  Any action required or permitted to be taken by the
Board  may be taken by the  Board  without  a  meeting  if all of the  Directors
consent in writing to such action. Such action by written consent shall have the
same force and effect as a vote at a duly constituted meeting of the Board.

4.3 Officers.

      (a)  Appointment  of  Officers.  The Company may at any time  appoint such
officers as it deems necessary or advisable for the operation of the business of
the Company.  Subject to approval of all compensation in accordance with Section
4.6,  Directors may serve as officers.  The officers shall serve at the pleasure
of the Company,  subject to all rights, if any, of an officer under any contract
of employment. Any individual may hold any number of offices. The officers shall
exercise such powers and perform such duties as shall be determined from time to
time by the Company.

      (b) Removal and Resignation.  Subject to the rights, if any, of an officer
under a contract of  employment,  any  officer  may be  removed,  either with or
without cause, by the Company at any time. Any officer may resign at any time by
giving notice to the Board.  Any  resignation  shall take effect upon receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified  in that  notice,  the  acceptance  of the  resignation  shall  not be
necessary to make it effective.

4.4  Devotion  to  Company   Business;   Conflicts  of  Interest;   Non-Compete.

                                      -8-
<PAGE>

      (a) The Members and the  Directors  shall  devote such time to the Company
business as they deem reasonably necessary in furtherance of, and shall exercise
their best judgment in all matters relating to, the Company's Business. However,
except as provided in this Section  4.4(a) (i.e.,  except for gross  negligence,
fraud, bad faith,  breach of this Agreement or criminal  conduct),  no Member or
Director  shall have  liability to the Company or to the Members for any failure
or  misfeasance  on the part of such  Member or Director  whatsoever  including,
without  limit,  a failure  or  misfeasance  with  respect  to any  Member's  or
Director's obligations under this Agreement.  Without limiting the generality of
the foregoing, the Company recognizes that innumerable decisions will have to be
made by the Members and the Directors  during the term of the Company which will
require the Members and the Directors to exercise broad discretion. Accordingly,
each of the Members hereby waives its right to institute any legal proceeding of
any kind  whatsoever  against  another Member or a Director for any action taken
by, or any  omission  of, a Member or  Director  in its  capacity as a Member or
Director in the Company,  except for gross negligence,  bad faith, fraud, breach
of this Agreement or criminal conduct.

      (b) Each of the  Members  understands  that  the  other  Members  or their
Affiliates (including their designees to the Board) may be interested,  directly
or indirectly,  in various other businesses and undertakings  including those in
competition with the Company.  The Members hereby agree that the creation of the
Company and the assumption by each of the Members of its duties  hereunder shall
be without  prejudice  to its rights (or the rights of its  Affiliates)  to have
such  other  interests  and  activities  and to  receive  and enjoy  profits  or
compensation  therefrom,  and each Member  waives any rights it might  otherwise
have to, by reason of any duty  otherwise  owed to the  Company or its  Members,
prevent or share or  participate  in such other  interests or  activities of the
other Member or the other Member's Affiliates.  The Members and their Affiliates
may engage in or  possess  any  interest  in any other  business  venture of any
nature or description  independently or with others,  including, but not limited
to, the  ownership,  financing,  leasing,  operation,  management,  syndication,
brokerage,  or development of real property and gaming  facilities,  and neither
the  Company  nor any  other  Member  shall  have the  right by  virtue  of this
Agreement  or  otherwise  to prevent or  participate  in any such venture or the
income or profits derived therefrom.

      (c) No Member need  disclose to any other  Member or the Company any other
business venture in which it or its Affiliates may have an interest or any other
business opportunity presented to it, even if such opportunity is of a character
which,  if  presented to the  Company,  could be taken by the Company,  and each
Member and its Affiliates shall have the right to take for its own account or to
recommend  to others any such  particular  investment  opportunity  or  business
venture.

      (d) Notwithstanding  the foregoing  provisions of this Section 4.4, during
the first forty eight (48) months of this Agreement but not thereafter,  any and
all opportunities to acquire,  own,  develop,  operate and/or manage projects in
the  Harness  Racing  and VLT  industry  in New York State  ("New  York  Harness
Racing/VLT  Opportunities")  shall be business  opportunities of the Company and
the  Members  shall owe the Company a  fiduciary  duty with  respect to New York
Harness  Racing/VLT  Opportunities.  The Members each agree for  themselves  and
their respective  Affiliates,  not to engage or invest in, independently or with
others,  any New York  Harness  Racing/VLT  Opportunities,  unless and until the
Company,  by  unanimous  vote of the  Members has elected not to pursue such New
York  Harness  Racing/VLT  Opportunity  and has approved the pursuit of such New
York Harness Racing/VLT  Opportunity by any of the Members (or their Affiliates)
for their own account; provided, that a vote of the Members shall be held within
fifteen  (15) days after  receipt by the Members of all  information  related to
such New York Harness Racing/VLT  Opportunity from the Member presenting the New
York  Harness  Racing/VLT  Opportunity  to the  Company.  It is  understood  and
acknowledged  that any election by the Members to pursue such  opportunity  must
include the  obligation by the Members to contribute,  on a prorata  basis,  all
equity required for the pursuit of the opportunity.

4.5 Transactions between the Company and the Directors,  Members and Affiliates.
Notwithstanding  that it may  constitute a conflict of interest,  the Directors,
Members  and their  Affiliates  may  provide the  Company  with  services  (e.g.
management,  accounting,  legal, computer support,  engineering,  etc.) provided
that such services are reasonably necessary,  are at a price that is competitive
with those available from  non-affiliates in an arms-length  transaction and the
terms and conditions of such  transaction are approved by the Board.  Directors,
Members and their  Affiliates  shall fully disclose to the Company any ownership

                                      -9-
<PAGE>

or financial  interest they may have in the services  provided or recommended to
the  Company.  The  Members  and the  Directors  may also  engage  in any  other
transaction  with  the  Company  so long as such  transaction  is not  expressly
prohibited  by this  Agreement  and so long as the terms and  conditions of such
transaction  are  approved by the Board.  The Company  (or a  subsidiary  of the
Company) has entered into a management  agreement (the  "Management  Agreement")
with Nevada Gold to manage all operations,  including casino operations,  racing
operations  (subject  to the  input and  approval  rights  of  Southern  Tier as
hereinafter  provided),  food and beverage  operations,  entertainment and hotel
operations,  of (a) the Tioga Downs Complex,  and (b) if the  acquisition of the
Vernon Downs Complex is consummated, the Vernon Downs Complex. The terms of such
management are set forth in the management agreement entered into on the date of
execution of this Agreement between the Company (or a subsidiary of the Company)
and Nevada Gold. As long as Jeffrey Gural (or in the event of retirement,  death
or disability of Jeffrey Gural, an Approved  Substitute Manager) is the managing
member of Southern  Tier and  designated  director of Southern  Tier pursuant to
Section 4.2(a), Southern Tier shall have the right to:

      (a)  designate the manager (the "Racing  Manager") for the harness  racing
and simulcast  facility  operations  (the "Racing  Operations") of (i) the Tioga
Downs  Complex,  and (ii) if the  acquisition  of the  Vernon  Downs  Complex is
consummated, the Vernon Downs Complex,

      (b) approve the compensation and all employment  decisions  related to the
Racing Manager, and

      (c) approve the operating expenses and capital expenditure allocations for
the Racing  Operations in the pre-opening  budgets,  start-up budgets and Annual
Plans that are prepared by Nevada Gold, as manager, for submission to the Board.

The  selection of the general  manager for the Project (the  "General  Manager")
designated  by Nevada Gold and the Racing  Manager  designated  by Southern Tier
shall be subject to the approval of the Board.  The  compensation of the General
Manager  and the  Racing  Manager  shall be an expense  of the  Company  (or its
subsidiary)  and shall be part of the  Operating  Budget.  No Member or Director
shall  represent  to any  party  that it or he is a manager  of the Tioga  Downs
Complex  or the  Vernon  Downs  Complex  unless  it or he is a  manager  under a
Management Agreement or is the General Manager or Racing Manager. The Board will
hold regular quarterly  meetings with the General Manager and the Racing Manager
to receive an update on the operations of the Company.

4.6 Payments to Directors.  Each Director  shall be  reimbursed  for  reasonable
out-of-pocket  expenses for  attending  Board  meetings  and  attending to other
Company Business. Except as specified in this Agreement, no Director is entitled
to remuneration for services rendered or goods provided to the Company in his or
her capacity as a Director.

4.7  Resolution  of Voting  Deadlock.  In the event of a failure of the Board to
approve any Major  Decision,  any Member  may,  by Notice to the other  Members,
require  that the  matter  be  decided  pursuant  to the terms set forth in this
Section 4.7.

      (a) The highest  ranking  executive  officer of each of the Members  shall
meet in person  within ten (10) days  following  the Notice and  attempt in good
faith to resolve the disagreement in one day.

      (b) If the disagreement is not resolved  pursuant to Section 4.7(a),  then
any  Member  may,  by Notice  to the other  Members,  elect to  proceed  with an
arbitration   which  shall  be  conducted  in  accordance   with  the  following
procedures:

            (i) The Members  shall  endeavor to appoint a single  qualified  and
disinterested  Arbitrator.  For purposes of this Section 4.7, an Arbitrator (the
"Arbitrator") shall be an individual who: (A) is independent of, and who has not
performed  work for,  any Member;  and who: (x) is a partner with any of the six
largest public accounting firms in the United States;  and (y) has at least five
(5) years of auditing or accounting  experience in the gaming industry;  or, (B)
if the Members so agree prior to the time for appointment  herein provided,  but
not otherwise,  is an expert in a field other than accounting  (including casino
management) having qualifications agreed to by the Members. Such Arbitrator,  if
agreed to by the Members,  shall meet with the Board within  thirty (30) days of
such  appointment  to discuss the disputed  decision and a vote of the Board and
the Arbitrator  shall be held, with a majority of such group  authorized to make
the decision.

                                      -10-
<PAGE>

            (ii) If the  Members  cannot  agree  on a single  Arbitrator  within
twenty (20) days after an election  to submit a Major  Decision to  arbitration,
then Nevada Gold,  on the one hand,  and  TrackPower  and Southern  Tier, on the
other hand,  shall each appoint one  Arbitrator  within ten (10) days  following
such twenty (20) day period. The two appointed Arbitrators shall within ten (10)
days of such referral  appoint a third  Arbitrator,  and if such Arbitrators are
not able to agree on such third  Arbitrator  within such time, then, on five (5)
days' Notice in writing to the other  Arbitrator,  either Arbitrator shall apply
to the branch of the American  Arbitration  Association in New York, New York to
designate and appoint such third  Arbitrator.  The three  Arbitrators shall meet
with the Board  within  twenty  (20) days  after  the  appointment  of the third
Arbitrator  to discuss  the  disputed  decision  and a vote of the Board and the
Arbitrators  shall be held, with a majority of such group authorized to make the
decision.

            (iii) If either  Nevada Gold,  on the one hand,  or  TrackPower  and
Southern Tier, on the other hand, fails timely to appoint an Arbitrator pursuant
to Section 4.7(b) (ii), then the single Arbitrator designated by the other shall
act as the sole  Arbitrator and shall be deemed to be the  unanimously  approved
Arbitrator to resolve such dispute.

            (iv) The fees and expenses of the  Arbitrators  shall be paid by the
Company.

            (v) The  Arbitrators  shall make their  decision based solely on the
best  interests  of  the  Company.  Unless  otherwise  agreed,  all  arbitration
proceedings  shall be  conducted in New York,  New York,  at a law office in New
York, New York, designated by the Member invoking arbitration.

ARTICLE 5: PROJECT FINANCING FOR THE GAMING COMPLEXES

5.1 Senior Note Financing. The Members acknowledge that the Company will arrange
certain  senior note  financing for the  development of the Vernon Downs Complex
and the Tioga Downs  Complex,  from a lender  (the  "Lender")  in the  aggregate
amount  of  approximately  $70.0  million  (the  "Senior  Note  Financing").  In
connection  with the Senior  Note  Financing,  Nevada  Gold agrees to provide an
approximately  $5.0  million  guarantee  to the Lender  and,  if  collateral  is
required by the Lender with respect to such  guarantee,  then Nevada Gold agrees
to provide  cash or a letter of credit to the Lender to the extent  required  to
collateralize  such  guarantee  on the terms set forth  below.  The Company will
endeavor to obtain Senior Note Financing on a non-recourse  basis, with payments
of interest  only at an interest  rate of  approximately  nine  percent (9%) per
annum and a term of  approximately  five to seven years,  or such other terms as
the Board shall approve.  If Nevada Gold provides collateral in the form of cash
or if  cash  is  drawn  from a  guaranty  or a  letter  of  credit  provided  as
collateral, such amounts shall be treated as loans by Nevada Gold to the Company
and evidenced by subordinated notes (the "Subordinated  Notes") bearing interest
at the rate of one percent (1%) per annum above the interest  rate of the Senior
Note Financing and maturing  thirty (30) days following the maturity date of the
Senior Note Financing.  The Subordinated Notes will be unsecured  obligations of
the Company.  The Company shall pay all reasonable  bank fees incurred by Nevada
Gold for any required letter of credit.

The Company  shall  proceed  with the  development  of the Tioga  Downs  Complex
whether or not the Company  acquires  the Vernon Downs  Complex.  If the Company
does not acquire the Vernon Downs Complex, then the Initial DIP Financing in the
net amount of $1,414,000  contributed  by TrackPower  and Southern Tier shall be
returned  to them as and when  repaid in  accordance  with,  and  subject to the
limitations  of, Section  7.1(f).  Additionally,  the Senior Note Financing will
decrease from  approximately $70 million to approximately $25 million and Nevada
Gold's guarantee will decrease from $5.0 million to $2.5 million.

              ARTICLE 6: FAIR MARKET VALUE; INDEPENDENT APPRAISALS

6.1 Fair Market Value.

      (a) The fair market value ("Fair Market Value") of any property shall mean
the price at which a willing  seller  would sell and a willing  buyer  would buy
such property  having full knowledge of the relevant  facts,  in an arm's-length
transaction without time constraints,  and without being under any compulsion to
buy or sell, or, in a transaction between Members, the value otherwise agreed by
the selling Member(s) (the "Selling  Member") and the purchasing  Member(s) (the
"Purchasing Member") to be the Fair Market Value.

                                      -11-
<PAGE>

      (b) The Fair Market Value of any property other than a Membership Interest
or  the  Company  shall  be  determined  by an  independent  appraisal  from  an
independent appraiser selected by the Board.

      (c) The Fair Market Value of the Company or a  Membership  Interest in the
Company shall be determined in accordance with this Section  6.1(c).  Membership
Interests in the Company shall be valued  without  regard to  classification  of
ownership,  rights to Excess Cash Flow,  incidents of  ownership  such as voting
rights, or level of Ownership  Percentage in the Company.  The Fair Market Value
of the  Company  shall be  determined  utilizing  then  current  methods for the
valuation of gaming  companies (and to the extent other  businesses  represent a
material  portion  of the  Company's  business,  then  current  methods  for the
valuation of such  businesses  shall be used for that portion of the business of
the Company) including without limitation EBIDTA multiples,  asset valuations or
cash  flow  analyses,  when  appropriate.  The Fair  Market  Value of all of the
Membership  Interests  shall be equal to the Fair Market  Value of the  Company,
less all  liabilities of the Company,  including  Debt,  and Unreturned  Capital
Contributions. The Fair Market Value of each Member's Membership Interests shall
be (i)  the  Percentage  represented  by  such  Member's  Membership  Interests,
multiplied  by the Fair Market Value of all of the  Membership  Interests,  plus
(ii) any Unreturned Capital  Contributions of such Member. If the Selling Member
and the  Purchasing  Member  cannot agree on a Fair Market Value of a Membership
Interest,  then the  Members  shall  proceed  under the terms of Section  6.2 to
provide for an independent appraisal process to determine the Fair Market Value.

      (d)  Notwithstanding  the  foregoing,  the Members have agreed on the Fair
Market Value of the contributions of property  contributed to the Company by the
Members as set forth in  Section  7.1  hereof.  In  addition,  the  Members  may
mutually agree on the Fair Market Value of any property,  including a Membership
Interest in the Company, by written agreement.

6.2  Independent  Appraisals.  The Selling  Member shall provide a Notice to the
Purchasing  Members,  which notice shall include the name,  mailing  address and
telephone number of an appraiser  appointed by it, to determine such fair market
value ("First Appraiser"). The Purchasing Members (or the Company if the Company
is the purchaser) shall then appoint one appraiser and furnish the name, mailing
address and telephone number of the appraiser so appointed to the Selling Member
("Second Appraiser"). If any Member fails to appoint an Appraiser to which it or
he is  otherwise  entitled,  the other  appointed  appraiser  shall  proceed  to
determine the Fair Market Value of the Membership  Interests or interest therein
to be conveyed and such determination shall be binding on the Selling Member and
Purchasing  Members  (or the  Company  if the  Company  is the  purchaser).  If,
however, another appraiser is appointed,  then the two appraisers shall meet and
attempt to reach a  determination  of the Fair Market Value.  If such appraisers
select  Fair Market  Values  within five  percent  (5%) of each other,  then the
mathematical  average of the two (2) appraisals shall constitute the Fair Market
Value of the Membership  Interests or interest therein. If the Fair Market Value
is not determined pursuant to the foregoing  provisions of this Section 6.2, the
two appraisers shall then select a third appraiser  ("Third  Appraiser") and the
three  appraisers shall then make such  determination.  A decision by any two of
the  appraisers  (or,  in  instances  where no two  appraisers  can  agree,  the
mathematical  average  of the two  closest  appraisals,  and the  average of the
appraisals if no two  appraisals  are closest)  shall be final and conclusive on
the Selling Member and Purchasing  Members (or the Company if the Company is the
purchaser) as to such Fair Market Value.  In the event no Third Appraiser can be
agreed  upon by the two  appraisers,  or by the  Selling  Member and  Purchasing
Members (or the Company if the Company is the  purchaser),  the third  appraiser
shall be appointed by the then Senior  Federal  District  Judge for the Southern
District  of New  York,  and  application  to such  Court  may be made by either
Selling  Member or  Purchasing  Members  (or the  Company if the  Company is the
purchaser).  Each appraiser or appraisal firm appointed pursuant to this Section
must be a member of the American Society of Appraisers with an ASA accreditation
or must be certified  as a Certified  Valuation  Analyst.  The  appraisers  must
establish  the Fair Market  Value  consistent  with the intent of the parties as
established in Section 6.1 hereof and shall generally appraise based on American
Society of Appraisers' standards,  utilizing EBIDTA multiples,  asset valuations
or cash flow analyses, when appropriate, for determination of Fair Market Value.
Each Member (and the Company if the Company is the purchaser) shall pay the fees
and expenses of its own appraiser and one-half (1/2) of the fees and expenses of
any Third  Appraiser.  Each appraiser  appointed  shall have been engaged for at
least five (5) years  prior to the date of his  appointment  in the  business of
appraising gaming and entertainment  businesses or the applicable  business that
is being appraised,  and shall not otherwise be disqualified  from exercising an
independent judgment as to the fair market value determination to be made.

                                      -12-
<PAGE>

                     ARTICLE 7: CAPITAL CONTRIBUTIONS; LOANS

7.1 Initial Capital Contributions.

      (a) In accordance with the terms of the  Contribution  Agreement,  certain
Affiliates of TrackPower  and Southern Tier have  contributed to the Company all
of their right, title and interest in and to the Tioga Downs Contributed Assets.
The  Members  agree that the Fair Market  Value of the Tioga  Downs  Contributed
Assets is $10,221,408, including $5,221,408 in cash, and $5,000,000 in increased
value. As a result of such contribution,  TrackPower and Southern Tier have each
been  credited  with a capital  account  equal to  $5,110,704.  For  purposes of
determining the pro-rata capital contributions  required of each Member from and
after the date hereof,  the $5,000,000 in increased value will not be taken into
account in determining  TrackPower's and Southern Tier's capital  contributions.
Certain  Affiliates of TrackPower and Southern Tier have also contributed to the
Company  all of their  right,  title and  interest  in and to the  Vernon  Downs
Contributed  Assets.  The Members agree that the Fair Market Value of the Vernon
Downs  Contributed  Assets  is  $1,745,360.  As a result  of such  contribution,
$872,680 shall be credited to each of  TrackPower's  and Southern Tier's Capital
Account,  resulting  in a  total  Capital  Account  of  $5,983,384  for  each of
TrackPower and Southern Tier.

      (b) In  accordance  with  the  terms  of the  Contribution  Agreement,  an
Affiliate of Nevada Gold has contributed to the Company all of its right,  title
and interest in and to the TDR Loan  ($1,001,550 in principal  outstanding).  In
addition,  an Affiliate of Nevada Gold made the Scott/Vestin  Settlement Payment
($526,550) on behalf of the Company.  As a result of the contribution of the TDR
Loan and the Scott/Vestin Settlement Payment, Nevada Gold has been credited with
a Capital  Account equal to $1,528,100  and the TDR Loan shall be converted from
debt to equity.

      (c) The equity  financing  necessary  to complete the  development  of the
Tioga Downs  Complex will be  approximately  $10,000,000.  The equity  financing
necessary  to complete  the  development  of the Vernon  Downs  Complex  will be
approximately  $10,000,000.  These  amounts  ($20,000,000)  are inclusive of the
capital contributions made pursuant to Section 7.1(a) (with the exception of the
$5,000,000 in increased value) and Section 7.1(b),  which total  $8,494,868.  If
the Company is not  successful in acquiring the Vernon Downs  Complex,  then the
Members  shall  not be  required  to  contribute  any  remaining  amount  of the
$10,000,000 equity financing for the Vernon Downs Complex.

      (d)  Nevada   Gold  agrees  to  make  the  next   $5,438,668   in  capital
contributions  to the Company,  as and when  required for items set forth in the
Cost Budget for the Tioga Downs Complex and the Cost Budget for the Vernon Downs
Complex,  in order to  equalize  the  capital  contributions  of the  Members in
accordance with their Percentages as follows:

                                      -13-
<PAGE>

            (i) Nevada Gold: $6,966,768

            (ii) TrackPower: $3,483,384

            (iii) Southern Tier: $3,483,384

      (e) Once  Nevada  Gold has made the  contributions  described  in  Section
7.1(d),  each Member  agrees to  contribute  to the capital of the  Company,  as
follows:

            (i) Nevada Gold will contribute $3,033,232, as and when required for
items set forth in the Cost  Budgets for the Tioga Downs  Complex and the Vernon
Downs Complex, on a pari passu basis with TrackPower and Southern Tier.

            (ii) TrackPower will contribute $1,516,616,  as and when required by
the Company for items set forth in the Cost Budgets for the Tioga Downs  Complex
and the Vernon  Downs  Complex,  on a pari passu  basis with  Southern  Tier and
Nevada Gold.

            (iii) Southern Tier will contribute $1,516,616, as and when required
by the  Company  for  items set forth in the Cost  Budgets  for the Tioga  Downs
Complex and the Vernon Downs Complex,  on a pari passu basis with TrackPower and
Nevada Gold.

      (f) If the  Company  is not  successful  in  acquiring  the  Vernon  Downs
Complex,  then the Company  shall return to  TrackPower  and  Southern  Tier the
interest in the Initial DIP  Financing  (in the net amount of  $1,414,000)  that
each of them contributed,  and their Capital  Contributions and Capital Accounts
shall be  adjusted  accordingly;  provided,  that no  distribution  (or  portion
thereof) will be made to the extent such distribution (or portion thereof) would
cause the Capital  Contributions  (as  adjusted  for such  distribution  and not
including the increased  value for the Tioga Downs Complex  described in Section
7.1(a))  of  either  TrackPower  and  Southern  Tier to be less  than 25% of the
aggregate  Capital  Contributions  (as  adjusted for such  distribution  and not
including the increased  value for the Tioga Downs Complex  described in Section
7.1(a)) made by all Members at the time of such distribution.

      (g) Aggregate Capital  Contributions  made by the Members pursuant to this
Section  7.1 shall not exceed (i) $10  million  in the  aggregate  for the Tioga
Downs Complex or (ii) $10 million in the aggregate for the Vernon Downs Complex,
except as provided in Section 7.2.

      (h) The Company  shall have three wholly owned  subsidiaries,  Tioga Downs
Racetrack, LLC, Vernon Downs Acquisition, LLC and Tioga Management Co., Inc. The
capital  contributions  described in Section 7.1(a) represent existing equity in
Tioga Downs Racetrack,  LLC and Vernon Downs Acquisition,  LLC. Unless otherwise
agreed by the Board,  the  capital  contributions  described  in Section 7.1 (b)
through  (f) shall be  loaned or  contributed  as equity to either  Tioga  Downs
Racetrack, LLC or Vernon Downs Acquisition, LLC, as appropriate.

7.2   Additional   Capital    Contributions;    Advances   from   Nevada   Gold.

      (a) In the event  the  Company  requires  financing  to fund  Cost  Budget
overruns  for the Tioga  Downs  Complex  and/or  the  Vernon  Downs  Complex  or
operating deficits of the Company after all initial Capital Contributions of the
Members as set forth in Section  7.1 above have been made,  then,  the Board may
elect to require (i) additional Capital  Contributions by the Members or (ii) in
the case of Cost Budget  overruns,  advances  from Nevada Gold,  but only on the
terms and conditions set forth in Section 7.2(b).

      (b) If the Lender has not required a guaranty of $5,000,000 ($2,500,000 in
the event the  Vernon  Downs  Complex  is not  acquired),  or if the  Lender has
required  such  guaranty  but  permits all or a portion of it to be used to fund
Cost  Budget  overruns  for the Tioga  Downs  Complex  and/or the  Vernon  Downs
Complex,  then Nevada Gold shall  provide  financing to the  Company,  up to the
amount of $5,000,000 (or $2,500,000 in the event the Vernon Downs Complex is not
acquired) to fund Cost Budget  overruns for the Tioga Downs  Complex  and/or the
Vernon Downs  Complex.  Any and all such advances  shall be treated as unsecured
loans by Nevada Gold to the Company and evidenced by subordinated  notes bearing
interest at the rate of one percent  (1%) per annum above the  interest  rate of
the Senior Note  Financing and maturing  thirty (30) days following the maturity
date of the Senior Note Financing.

                                      -14-
<PAGE>

      (c) If financing  from Nevada Gold is not required  under Section  7.2(b),
and the Board elects to require additional Capital Contributions by the Members,
the Board shall give  written  notice of such Cost Budget  overruns or operating
deficits to all of the Members,  which notice shall  summarize,  with reasonable
particularity,  the specific Cost Budget overruns or operating deficits,  as the
case may be, the Company's actual and projected cash obligations,  cash on hand,
and the projected sources and amounts of future cash flow and which notice shall
also specify a contribution date ("Contribution Date") ( which shall not be less
than thirty (30) days  following the  effective  date of such notice) upon which
each  Member  shall have the  obligation  to  contribute  to the  capital of the
Company, in cash, such Member's Percentage (as of the Contribution Date) of such
operating   deficits   ("Cash  Deficit   Contribution").   If  any  Member  (the
"Non-Contributing  Member")  fails to contribute  all or any portion of the Cash
Deficit  Contribution  or any other  amount  required  to be made by such Member
pursuant to Section 7.1  ("Delinquent  Contribution"),  and provided that one or
more of the  other  Members  (collectively,  the  "Contributing  Members")  have
contributed (in the proportion of their ownership  Percentages  unless otherwise
agreed) to the capital of the Company all of the Cash  Deficit  Contribution  or
any other amount required to be made by the Non-Contributing  Member pursuant to
Section 7.1 within thirty (30) days  following the  Contribution  Date,  then in
such  event  there  shall be a  dilution  penalty  of 150% of every  dollar  not
contributed  by the  Non-Contributing  Member.  The Members agree that if either
(but not both) Southern Tier or TrackPower is the Non-Contributing  Member, then
the other shall have the first right but not the  obligation to contribute  100%
of the Cash Deficit Contribution or other amount required by Section 7.1 of such
Non-Contributing  Member,  such  election to be  exercised  within five (5) days
following the  Contribution  Date.  The dilution  penalty shall be determined as
follows:  the  Percentage  of the  Contributing  Members will be increased by an
amount which is arrived at by multiplying  150% times a fraction,  the numerator
of which is the amount contributed by the Contributing  Members on behalf of the
Non-Contributing  Member,  and the denominator of which is the aggregate Capital
Contributions  of all of the Members after the making of the additional  Capital
Contribution by the Contributing Members. The Percentage of the Non-Contributing
Member will be decreased by the same amount.  For example,  if (i) $1,000,000 in
Cash Deficit  Contributions  are required,  (ii) Nevada Gold contributes 100% of
such amount, and (iii) the aggregate Capital Contributions of all of the Members
after the making of the $1,000,000  Cash Deficit  Contribution  is  $19,000,000,
then  Nevada  Gold's  Percentage  shall be  increased  by 3.95%,  calculated  as
follows:

      150% X $500,000/$19,000,000 = 3.95%

Trackpower's  Percentage  shall be  decreased  by  1.975%  and  Southern  Tier's
Percentage shall be decreased by 1.975%.

For purposes of this Section, the aggregate amount of Capital Contributions made
by the Members  shall not include the amount of $5,000,000  associated  with the
Tioga Downs Contributed Amount (representing the incremental increase in value),
which was credited one-half to TrackPower and one-half to Southern Tier.

      (d) If, as a result of the  dilution  penalty,  a Member's  (the  "Diluted
Member")  ownership  Percentage falls to or below 50% of its initial  Percentage
set forth in Section 3.1,  then the other  Members (in the  proportion  of their
respective  Percentages  unless otherwise agreed) shall have the right by notice
("Purchase Notice") to purchase all of the remaining Membership Interests of the
Diluted  Member at a purchase price equal to 85% of the Fair Market Value of the
remaining  Membership  Interests of the Diluted Member.  The Purchase Notice may
designate any date,  beginning  ninety (90) days before the date of such Notice,
and ending on the date of such Notice,  as to the  effective  date on which Fair
Market Value of the Membership  Interests  being  purchased shall be determined.
Upon giving of the  Purchase  Notice,  the Fair Market  Value of the  Membership
Interests shall be determined pursuant to Article 6. The purchase price shall be
payable  50% in cash due sixty (60) days from the date upon  which  Fair  Market
Value is  determined  pursuant  to Article 6 (the  "Valuation  Date"),  with the
balance  payable  in 4 equal  annual  payments,  plus  interest,  with the first
installment due one year following the Valuation  Date. The outstanding  balance
shall accrue  interest at the  interbank  borrowing  rate that banks charge each
other for overnight loans (the "fed funds rate").

                                      -15-
<PAGE>

      (e) If, as a result of this  Section 7.2 or any other  provisions  of this
Agreement,  a Member's Percentage increases to 60% or greater, then the Board of
Directors  shall be  increased  to five  members and such Member  shall have the
right to elect three  directors to the Board,  and each of the other two Members
shall  have the  right  to elect  one  director  (or if there is only one  other
Member,  the Member holding a 60% or greater  Percentage shall have the right to
elect three  directors to the Board and the other Member shall have the right to
elect two directors).

7.3 No Withdrawal.  Except as specifically provided in this Agreement, no Member
will be entitled to withdraw all or any part of such  Member's  capital from the
Company  or,  when  such  withdrawal  of  capital  is  permitted,  to  demand  a
distribution of property other than cash.

7.4 No Interest on  Capital.  No Member will be entitled to receive  interest on
such Member's Capital Contribution or Capital Account.

7.5 Loans by Members. Any advances by a Member to the Company shall constitute a
loan from the Member to the Company ("Member Loan"),  and shall bear interest at
an interest rate agreed to by the Board, and shall not be deemed to be a Capital
Contribution.  A loan account shall be established and maintained for the Member
making a loan  separate  from such  Member's  Capital  Account.  Loans made by a
Member to the Company will be credited to the Member's  loan  account.  A credit
balance in any Member's loan account shall constitute a liability of the Company
to such Member, and all such advances and accrued interest shall be repaid prior
to any  distributions to the Members unless  otherwise  provided by the terms of
the loan.

7.6 Capital  Accounts.  A Capital  Account will be  maintained  for each Member.

      (a) Each Member's  Capital  Account will be credited with (i) the Member's
Capital  Contributions (net of liabilities  secured by any property  contributed
that the Company takes subject to or assumes), (ii) the Member's allocable share
of Profits and (iii) all other items properly  credited to the Member's  Capital
Account.

      (b) Each Member's  Capital  Account will be charged with (i) the amount of
cash  distributed  to the Member by the  Company,  (ii) the Fair Market Value of
property distributed to the Member by the Company (net of liabilities secured by
such property  that the Member takes subject to or assumes),  (iii) the Member's
allocable  share of Losses  and (iv) all other  items  properly  charged  to the
Member's Capital Account.

      (c) Upon the  distribution of property in kind, all of the property of the
Company,  including  the  property to be  distributed,  will be revalued and any
unrealized  appreciation  or  depreciation  with  respect to any asset  shall be
allocated  among the Members in accordance  with the  provisions of Article 8 as
though  such  assets  had been sold for their Fair  Market  Value on the date of
Distribution. The Members' Capital Accounts will be adjusted to reflect both the
deemed  realization of such appreciation or depreciation and the Distribution of
such property in accordance with Regulations ss. 1.704-1(b)(2)(iv)(e), (f).

      (d) The Capital  Account of each Member shall be determined and maintained
in  accordance  with  Code  Section  704(b)  and  the  regulations   promulgated
thereunder.

                                      -16-
<PAGE>

7.7 Transfer.  If all or any part of any  Membership  Interest is transferred in
accordance with this Agreement,  the Capital Account and Membership  Interest of
the  Transferor  (including a pro-rata share of Capital  Contributions)  that is
attributable  to the  transferred  Membership  Interest  will  carry over to the
Transferee, unless otherwise provided by the express terms of this Agreement.

7.8  Liability to Company.  Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
paid to such Member in violation of the Act, the Articles or this Agreement.

                   ARTICLE 8: ALLOCATION OF PROFITS AND LOSSES

8.1 Profits and Losses.

      (a) Allocation of Losses other than from Capital Transactions.

      All Losses, other than Losses arising from Capital Transactions,  shall be
allocated to the Members in proportion to their respective Percentages.

      (b) Allocation of Profits other than from Capital Transactions.

      All  Profits,  other than  Profits  from  Capital  Transactions,  shall be
allocated in accordance with the following order and priority:

            (i) first,  to those Members who were allocated  Losses (or portions
thereof)  under Section 8.1(a) in proportion to such Losses until the cumulative
Profits  allocated  pursuant to this Section 8.1(b) to such Members are equal to
the total of such Losses allocated to such Members for all prior periods; and

            (ii)  second,  to the  Members  in  proportion  to their  respective
Percentages.

      (c) Allocation of Losses from Capital Transactions.

      All Losses arising from Capital  Transactions shall be allocated among the
Members in accordance with their respective Percentages.

      (d) Allocation of Profits from Capital Transactions

      All Profits shall be allocated in accordance  with the following order and
priority:

            (i) first,  to those Members who were allocated  Losses (or portions
thereof)  under Section 8.1(c) in proportion to such Losses until the cumulative
Profits  allocated  pursuant to this Section 8.1(d) to such Members are equal to
the total of such Losses allocated to such Members for all prior periods; and

            (ii)  second,  to the Members in  accordance  with their  respective
Percentages.

      (e) Special Allocation of Profits and Losses from Initial DIP Financing.

      If Section  7.1(f)  applies such that the interest and fees in the Initial
DIP Financing is returned to TrackPower and Southern Tier,  then all Profits and
Losses  with  respect  to the  Initial  DIP  Financing  shall  be  allocated  to
TrackPower and Southern Tier pro rata.

8.2 Regulatory Allocations.

      (a) Notwithstanding any of the foregoing  provisions of Section 8.1 to the
contrary:

            (i) If during any fiscal year of the Company there is a net increase
in Minimum Gain  attributable  to a Member  Nonrecourse  Debt that gives rise to
Member Nonrecourse Deductions, each Member bearing the economic risk of loss for
such Member  Nonrecourse Debt shall be allocated items of Company deductions and
losses  for  such  year  equal to such  Member's  share  of  Member  Nonrecourse
Deductions, as determined in accordance with applicable Treasury regulations.

            (ii) If for any fiscal year of the Company  there is a net  decrease
in Minimum Gain  attributable to Company  Nonrecourse  Liabilities,  each Member
shall be allocated  items of Company income and gain for such year equal to such
Member's share of such net decrease, as determined in accordance with applicable
Regulations.

                                      -17-
<PAGE>

            (iii) If for any fiscal year of the Company  there is a net decrease
in Minimum Gain  attributable to a Member  Nonrecourse Debt, each Member bearing
the economic  risk of loss for such Member  Nonrecourse  Debt shall be allocated
items of Company  income and gain for such year equal to such Member's  share of
such net decrease, as determined in accordance with applicable Regulations.

      (b) The Losses  allocated  pursuant to this Article 8 shall not exceed the
maximum  amount of Losses that can be allocated to a Member  without  causing or
increasing  a deficit  balance in the Member's  Adjusted  Capital  Account.  All
Losses in excess of the  limitations  set forth in this Section  8.2(b) shall be
allocated to Members with positive  Adjusted Capital Account balances  remaining
at such time in proportion to such balances.

      (c) In the  event  that a Member  unexpectedly  receives  any  adjustment,
allocation   or   distribution   described  in  Treasury   regulations   section
1.704-1(b)(2)(ii)(d)(4)-(6)  that causes or increases a deficit  balance in such
Member's  Adjusted  Capital  Account,  items of Company income and gain shall be
allocated to that Member in an amount and manner  sufficient  to  eliminate  the
deficit balance as quickly as possible.

      (d)  The  allocations   set  forth  in  subsections   (b),  (c),  and  (d)
(collectively, the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury regulations.  It is the intent of the Members that,
to the  extent  possible,  all  Regulatory  Allocations  that are made be offset
either with other Regulatory Allocations or with special allocations pursuant to
this Section 8.1(d).  Therefore,  notwithstanding  any other  provisions of this
Article 8 (other  than the  Regulatory  Allocations),  the Board shall make such
offsetting special  allocations in whatever manner it determines  appropriate so
that, after such offsetting allocations are made, each Member's Adjusted Capital
Account  balance  is, to the  extent  possible,  equal to the  Adjusted  Capital
Account  balance such Member would have had if the Regulatory  Allocations  were
not part of this Agreement and all Company items were allocated  pursuant to the
remaining sections of this Article 8.

      (e) In accordance with Section 704(c) of the Internal Revenue Code and the
Treasury  regulations  thereunder,  income and  deductions  with  respect to any
property  contributed  to or revalued by the Company  shall,  solely for federal
income tax  purposes,  be  allocated  among the Members in a manner to take into
account any  variation  between the adjusted  tax basis of such  property to the
Company and its fair market value at the time of contribution or revaluation. In
making such  allocations,  the Board shall use the  remedial  allocation  method
unless the Members agree to the contrary.

      (f) Except as otherwise provided in Section 8.2, if a Membership  Interest
is  transferred  during any Fiscal Year (whether by Transfer or liquidation of a
Membership Interest,  or otherwise),  the books of the Company will be closed as
of the  effective  date of  Transfer.  The Profits or Losses  attributed  to the
period  from the first day of such Fiscal Year  through  the  effective  date of
Transfer  will be  allocated  to the  Transferor,  and  the  Profits  or  Losses
attributed to the period  commencing  on the effective  date of Transfer will be
allocated to the  Transferee.  In lieu of an interim closing of the books of the
Company and with the agreement of the Transferor and Transferee, the Company may
agree to allocate Profits and Losses for such Fiscal Year between the Transferor
and Transferee  based on a daily  proration of items for such Fiscal Year or any
other reasonable method of allocation  (including an allocation of extraordinary
Company  items,  as  determined  by the  Company,  based on when such  items are
recognized for federal income tax purposes).

8.3 Tax Credits. Any tax credit, and any tax credit recapture, will be allocated
to the Members in the same ratio that the federal  income tax basis of the asset
(to which such tax credit relates) is allocated to the Members under the Section
46 Regulations,  and if no basis is allocated, in the same manner as Profits are
allocated to the Members under Section 8.1.

                                      -18-
<PAGE>

                            ARTICLE 9: DISTRIBUTIONS

9.1 Distributions.  Unless the Members unanimously agree otherwise,  the Company
will make  distributions  to its Members of 100% of Excess Cash Flow (as defined
below) no later than forty five (45) days after the end of each  fiscal  quarter
in the following order of priority:

      (a) First, the Company will make  distributions to TrackPower and Southern
Tier,  on a 50/50  basis,  until  each has  received  the  cumulative  amount of
$2,500,000  (the  cumulative  amount  of  which  represents  the  $5,000,000  in
increased value of the Tioga Downs Contributed Assets).

      (b)  Second,  the  Company  will  make  distributions  to the  Members  in
proportion  to  their  Capital   Contributions   until  the  Unreturned  Capital
Contributions of all of the Members equal zero.

      (c) Third,  the Company will  distribute  the remaining  Excess Cash Flow,
other than  distributions  of Net Sales Cash,  to the Members in  proportion  to
their respective Percentages.

      (d) Fourth,  the Company will make  distributions of Net Sales Cash to the
Members in accordance with their respective Percentages.

      (e) Distributions  made pursuant to the Dissolution and Liquidation of the
Company will be made pursuant to Article 13.

Notwithstanding  the  foregoing,  the  distributions  to Members (other than tax
distributions  under  Section  9.5)  shall not be made  until all  Member  Loans
(including the Subordinated  Notes and any loans under Section 7.2(b)) have been
fully repaid, and distributions,  including tax distributions under Section 9.5,
shall not be in excess of that  entitled to be made pursuant to any indenture or
credit facility entered into by the Company. As used herein,  "Excess Cash Flow"
means EBIDTA less:

            (i)  management  fees (to the extent  not taken into  account in the
calculation of EBIDTA),

            (ii) capital expenditures approved by the Board and actually paid,

            (iii) interest,

            (iv) tax distributions made pursuant to Section 9.5 actually paid to
Members within forty five (45) days after the end of each fiscal quarter,

            (v) scheduled principal payments on debt of the Company, and

            (vi) Reserves.

9.2 Other  Distributions.  Unless the Members otherwise  unanimously  agree, the
Members intend that all  Distributions,  except for Distributions  under Section
9.5,  will be made to the Members in  accordance  with Section 9.1. In the event
any  Distribution is made otherwise than in accordance with Sections 9.1 or 9.5,
without the  unanimous  consent of the  Members,  any excess  Distribution  to a
Member will be treated as an advance or loan made by the Company to such Member,
payable to the Company with interest payable at the Interest Rate and on demand.

                                      -19-
<PAGE>

9.3 Payment.  Any Distribution will be made to a Member only if such Person owns
a Membership Interest on the date of Distribution,  as reflected on the books of
the Company.

9.4  Withholding.  If required by the Code or by state or local law, the Company
will withhold any required amount from  Distributions to a Member for payment to
the appropriate  taxing authority.  Any amount so withheld from a Member will be
treated as a Distribution  by the Company to such Person.  Each Member agrees to
timely file any agreement  that is required by any taxing  authority in order to
avoid any withholding obligation that would otherwise be imposed on the Company.

9.5 Tax  Distributions.  Unless the Members  unanimously  agree  otherwise,  the
Company  will make  distributions  to its  Members no later than forty five (45)
days  after the end of each  fiscal  quarter  of an  amount  equal to 40% of the
Profits of the Company  allocated to each Member.  Any payments  made under this
Section 9.5 to a Member shall be deemed to be a draw against such Member's share
of future  distributions  under Section 9.1, so that such Member's share of such
future distributions shall be reduced by the amounts previously drawn under this
Section  9.5 until the  aggregate  reductions  in such  distributions  equal the
aggregate draws made under this Section 9.5.

           ARTICLE 10: REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

10.1  Representations and Warranties of Members. As used in this Article 10, the
term "Agreement" includes this Agreement and the Management  Agreement.  Each of
the Members represents and warrants (which  representations and warranties shall
survive the execution hereof) to the Company and each of the other Members that,
as of the signing of this Agreement:

      (a) (i)  Such  Member  is duly  organized,  validly  existing  and in good
standing under the laws of the  jurisdiction  where it purports to be organized,
and is a United States Person;

      (ii) Such  Member has full power and  authority  to enter into and perform
this Agreement;

      (iii) All actions  necessary to authorize the signing and delivery of this
Agreement and the  performance  of the  respective  obligations of the Member to
this Agreement, have been duly taken;

      (iv)  This  Agreement  has  been  duly  signed  and  delivered  by a  duly
authorized  officer  or other  representative  of each of the  Members  that are
signatories  thereto,  and each such agreement  constitutes the legal, valid and
binding  obligation  of each such  Member  enforceable  in  accordance  with its
respective  terms (except as such  enforceability  may be affected by applicable
bankruptcy,  insolvency  or  other  similar  laws  effecting  creditors'  rights
generally,  and except that the availability of equitable remedies is subject to
judicial discretion);

                                      -20-
<PAGE>

      (v) No consent or approval of any other  Person is required in  connection
with the signing, delivery and performance of this Agreement by the Members;

      (vi) The  signing,  delivery  and  performance  of this  Agreement  do not
violate the  organizational  documents of such Member, or any material agreement
to which such Member is a party or by which such Member is bound;

      (vii) It is not in  violation  or  default  under any  agreement  with any
Person, or under any law, judgment,  order, decree, license,  permit,  approval,
rule, or regulation of any court,  arbitrator,  administrative  agency, or other
governmental  authority  to which it may be subject  which could  reasonably  be
anticipated  to have a material  adverse  impact on the Company,  and  hereafter
shall take no action which shall be in  violation  or cause a default  under any
agreement with any Person, or under any law, judgment,  order, decree,  license,
permit, approval,  rule, or regulation of any court, arbitrator,  administrative
agency, or other  governmental  authority to which it may be subject which could
reasonably be anticipated to have a material adverse impact on the Company;

      (b) with  respect to its  investment  in the  Company  and the  Membership
Interests:

      (i) it  acknowledges  that the Membership  Interests are being offered and
sold without registration under The Securities Act of 1933, as amended, or under
similar provisions of state law;

      (ii) it has knowledge and experience in financial and business  matters in
general, and in investment of this type;

      (iii) it is capable of evaluating the merits and risks of such investment;

      (iv) it has either  secured  independent  tax advice with  respect to such
investment, upon which it is solely relying, or it is sufficiently familiar with
the income taxation of partnerships  that it has deemed such independent  advice
unnecessary;

      (v) it has  received  or  has  access  to  all  material  information  and
documents  with respect to such  investment  and has had an  opportunity  to ask
questions and receive  answers thereto and to verify and clarify and information
available;

      (vi)  notwithstanding  any  financial  projections  which  may  have  been
prepared  by any  other  Person,  it has  relied  solely  upon  its  independent
investigation,  and not on any  financial  projections,  statements,  actions or
representations  of the other Members or any Affiliate of the other Members,  in
making the decision to acquire such investment;

      (vii) it  understands  that no Federal or State  agency  has  reviewed  or
passed  upon the  adequacy  or  accuracy  of the  information  set  forth in the
documents  submitted  to it or  made  any  finding  or  determination  as to the
fairness  for  investment,   or  any   recommendation  or  endorsement  of  such
investment;

      (viii) it understands that there are  restrictions on the  transferability
of its Membership Interests;

                                      -21-
<PAGE>

      (ix) it understands that there will be no public market for its Membership
Interests,  and,  accordingly,   it  may  not  be  possible  to  liquidate  such
investment;

      (x) it  understands  that any  anticipated  Federal  or state  income  tax
benefits applicable to its Membership  Interests may be lost through changes in,
or adverse interpretations of, existing laws and regulations;

      (xi) it has entered into this Agreement  freely and  voluntarily,  without
coercion,  duress,  distress,  or undue  influence by any other Persons or their
respective  shareholders,  members,  directors,  officers,  partners,  agents or
employees; and

      (xii) it  understands  that this  Agreement may affect legal rights and it
has  received  legal advice from  counsel of its choice in  connection  with the
negotiation  and  execution of this  Agreement  and is satisfied  with its legal
counsel and the advice received from it.

      (c) each of the following is true and correct:

      (i) none of it or any of its Affiliates is a party to any other  agreement
or other  arrangement which would interfere with the development or operation of
the Gaming Complexes;

      (ii)  performance  of this  Agreement  will not violate any other material
agreement or other arrangement to which it or its Affiliates is a party;

      (iii) it and its  Affiliates  have not received  notice of any claim which
would interfere with its or their performance of this Agreement;

      (iv) none of it or its Affiliates has incurred any material liabilities or
obligations  on behalf of the Company or has  knowledge  of any  liabilities  or
obligations of the Company,  the Tioga Downs Complex or the Vernon Downs Complex
other than those  described  on Exhibit "B" to the  Contribution  Agreement  and
agrees hereafter that it or they, as the case may be, will not, nor cause any of
its  Affiliates,  to incur any liability or obligation on behalf of the Company,
except as otherwise expressly provided herein;

      (v) it knows of no actions or lawsuits, pending, planned or threatened, by
or against it, the Company, or its Affiliates,  which could create an obligation
or  liability  for the  Company  or any of the other  Members  other  than those
described in Exhibit "B" to the Contribution Agreement; and

      (vi) none of such Member,  its  Affiliates or any officers or directors of
any of them has been  determined  by any gambling  commission or authority to be
unsuitable, has been convicted of a crime (other than traffic offenses), and had
any  application  for any gambling  license or permit  rejected,  or has had any
gambling  licenses or permit,  once having been  issued,  rescinded,  suspended,
revoked or not  renewed or  reinstated,  and no Member  has  knowledge  that its
affiliation  with any other Member will threaten any gambling  license,  permit,
entitlement or approval in any  jurisdiction of any other Member or Affiliate of
a Member.

      (d) the execution, delivery and performance of this Agreement will not:

                                      -22-
<PAGE>

      (i) violate any law, judgment,  order, decree, license,  permit, approval,
rule or regulation of any court,  arbitrator,  administrative  agency,  or other
governmental authority to which it may be subject;

      (ii) result in a breach or default  under any  contract  or other  binding
commitment or any provision of the charter or by-laws or  partnership  agreement
or other organizational documents, as the case may be, of any such entity; or

      (iii)  require  any  consent,   or  approval  or  vote  of  any  court  or
governmental  authority  or of any Person that,  as of the date hereof,  has not
been given or taken ,and does not remain effective.

      (e) (i)  TrackPower  shall  and does  hereby  indemnify,  defend  and hold
harmless  the Company and the  Indemnified  Persons of Nevada Gold and  Southern
Tier, and each of them  separately,  from and against all loss,  cost, or damage
whatsoever  (including  reasonable attorneys fees) resulting from any act, claim
or omission of or by TrackPower or any Affiliates of  TrackPower's  prior to the
date hereof.

      (ii)  Southern  Tier  shall and does  hereby  indemnify,  defend  and hold
harmless the Company and the Indemnified  Persons of Nevada Gold and TrackPower,
and  each of them  separately,  from and  against  all  loss,  cost,  or  damage
whatsoever  (including  reasonable attorneys fees) resulting from any act, claim
or omission of or by Southern  Tier or any  Affiliates of Southern Tier prior to
the date hereof.

      (iii)  Nevada  Gold  shall  and does  hereby  indemnify,  defend  and hold
harmless  the Company and the  Indemnified  Persons of  TrackPower  and Southern
Tier, and each of them  separately,  from and against all loss,  cost, or damage
whatsoever  (including  reasonable attorneys fees) resulting from any act, claim
or omission of or by Nevada Gold or any Affiliates of Nevada Gold's prior to the
date hereof.

      (iv) Each Member shall and does hereby indemnify, defend and hold harmless
the Company and each other  Member  from and against any loss,  cost,  or damage
whatsoever  (including  reasonable  attorneys fees) resulting from any breach by
any of them of the  representations and warranties under Section 10.1 hereof, or
any losses or expenses as a result of or in  connection  with any breach of this
Agreement.

10.2 Indemnification.

                                      -23-
<PAGE>

      (a) To the fullest extent permitted by applicable laws, regulations, rules
or  orders,  each  Member  and its  Indemnified  Persons  shall  not be  liable,
responsible or accountable in damages or otherwise to the Company,  or to any of
the Members,  for any act or omission performed or omitted by them in good faith
on behalf  of the  Company  and in a manner  reasonably  believed  by them to be
within the scope of their  authority  and in the best  interests of the Company;
provided,  however,  that this exculpation  shall not apply to acts or omissions
which are determined, by final decision of a court of competent jurisdiction, to
constitute either fraud, bad faith, breach of this Agreement,  gross negligence,
or criminal conduct.

      (b) To the fullest extent  permitted by law, the Company shall  indemnify,
defend and hold  harmless  each  Member  and its  Indemnified  Persons  from and
against any and all loss, cost, damage,  expense or liability (other than a loss
of any equity  contributions,  loan or other  investment in the Company),  which
relate to or arise out of the  Company,  the  Gaming  Complexes,  the  Company's
business and affairs,  regardless of whether the Members continue to be Members,
an Affiliate of a Member, or an agent, officer, member, director, stockholder or
employee  of such Member or such  Affiliate  at the time any such  liability  or
expense  is paid or  incurred,  if such  Member's  or its  Indemnified  Persons'
conduct did not constitute  fraud,  bad faith,  breach of this Agreement,  gross
negligence  or criminal  conduct.  With  respect to the  expenses  actually  and
reasonably  incurred  by a  Member  or  Indemnified  Person  who is a party to a
Proceeding, the Company shall provide funds to such Member or Indemnified Person
for its documented  costs of defense in advance of the final  disposition of the
Proceeding if the Member or Indemnified  Person  furnishes the Company with such
Person's written affirmation of a good-faith belief that such Person has met the
standard of conduct described herein, and such Person agrees in writing to repay
the advance if it is  subsequently  determined that such Person has not met such
standard of conduct.

      (c) To the extent that, at law or in equity,  a Member or its  Indemnified
Persons  have  duties  (including  fiduciary  duties) and  liabilities  relating
thereto  to the  Company or to the  Members,  each  Member  and its  Indemnified
Persons  acting under this  Agreement  or  otherwise  shall not be liable to the
Company or to any Member for its good faith  reliance on the  provisions of this
Agreement.  The  provisions of this Section 10.2, to the extent that they expand
or restrict the duties and  liabilities of a Member or its  Indemnified  Persons
otherwise  existing  at law or in equity,  are agreed by the  Members to replace
such other duties and liabilities of such Member and its Indemnified Person.

      (d) (i) (A)  Promptly  after the  assertion  of any claim by a third party
which may give rise to a claim for  indemnification  from an Indemnifying Member
under this Agreement, an Indemnified Person shall notify the Indemnifying Member
in  writing  of such  claim and  advise  the  Indemnifying  Member  whether  the
Indemnified Person intends to contest such claim.

                  (B) The  Indemnified  Person  shall  permit  the  Indemnifying
Member to contest and defend against such claim,  at the  Indemnifying  Member's
expense,  if the Indemnifying  Member has confirmed to the Indemnified Person in
writing   that  it  agrees   that  the   Indemnified   Person  is   entitled  to
indemnification  hereunder  in respect  of such  claim,  unless the  Indemnified
Person can establish, by reasonable evidence, that the conduct of its defense by
the Indemnifying Member could be reasonably likely to prejudice such Indemnified
Person  due to the  nature of the  claims  presented  or by virtue of a conflict

                                      -24-
<PAGE>

between the interests of such Indemnified  Persona and such Indemnifying  Member
and  another   Indemnified   Person  whose  defense  has  been  assumed  by  the
Indemnifying Member.  Notwithstanding a determination by the Indemnifying Member
to  contest  such  claim,  the  Indemnified  Persons  shall have the right to be
represented by its own counsel and accountants at its own expense.  In any case,
the Indemnified  Person shall make available to the Indemnifying  Member and its
attorneys and accountants, at all reasonable times during normal business hours,
all books,  records,  and other  documents  in its  possession  relating to such
claim.  The party  contesting  any such claim shall be furnished all  reasonable
assistance in  connection  therewith by the other party (with  reimbursement  of
reasonable  expenses by the Indemnifying  Member).  If the  Indemnifying  Member
fails to undertake the defense of or to settle or pay any such third-party claim
within  fifteen (15) days after the  Indemnified  Person has given Notice to the
Indemnifying  Member advising the  Indemnifying  Member of such claim, or if the
Indemnifying Member, after having given Notice to the Indemnified Person that it
intends to undertake the defense,  fails forthwith to defend, settle or pay such
claim,  then the  Indemnified  Person may take any and all  necessary  action to
dispose of such claim  including,  without  limitation,  the  settlement or full
payment  thereof  upon  such  terms as it shall  deem  appropriate,  in its sole
discretion.

                  (C) The Indemnifying  Member shall not consent to the terms of
any  compromise  or  settlement  of  any  third-party   claim  defended  by  the
Indemnifying  Member in accordance  herewith (other than terms related solely to
the  payment  of money  damages  and only  after  the  Indemnifying  Member  has
furnished the Indemnified  Person with such evidence as the  Indemnified  Person
may  reasonably  request of the  Indemnifying  Member's  capacity and capability
(financial  and  otherwise)  to pay promptly the amount of such money damages at
such times as  provided  in the  compromise  or  settlement)  without  the prior
written consent of the  Indemnified  Person if as a result of such compromise or
settlement such Indemnified Person could be adversely affected.

                  (D) Any claim for  indemnification  under this Agreement which
does not result from the assertion of a claim by a third party shall be asserted
by written notice given by the Indemnified  Person to the  Indemnifying  Member.
Such Indemnifying Member shall have a period of thirty (30) days within which to
respond thereto. If such Indemnifying Member does not respond within such thirty
(30) day  period,  such  Indemnifying  Member  shall be deemed to have  accepted
responsibility  to make payment,  and shall have no further right to contest the
validity of such claim.  If the  Indemnifying  Member does  respond  within such
thirty  (30) day  period  and  rejects  such  claim  in  whole or in part,  such
Indemnified  Person shall be free to pursue such remedies as may be available to
such party under applicable laws, regulations, rules or orders.

      (ii) Mitigation

      Each  Indemnifying  Member and  Indemnified  Person  shall use  reasonable
efforts and shall  consult  and  cooperate  with each other with a view  towards
mitigating  claims,  losses,  liabilities,   damages,  deficiencies,  costs  and
expenses that may give rise to claims for indemnification.

      (iii) Payment

                                      -25-
<PAGE>

      Each  Indemnifying  Member  agrees to pay any  amounts due  hereunder  (A)
within ten (10) days of written  notice in respect of its indemnity  obligations
which it has accepted or which it has been deemed to accept; (B) within five (5)
days of any  final  adjudication  by a court of  competent  jurisdiction  of any
indemnity obligations as to which it has not so accepted;  and (C) as reasonable
attorneys' fees and other costs of defense are incurred and invoiced.

10.3 Insurance.  The  indemnification  provisions of this Article do not limit a
Member's or Indemnified  Person's right to recover under any insurance policy or
other financial arrangement by the Company (including any self-insurance,  trust
fund, letter of credit,  guaranty or surety). If, with respect to any liability,
any Member or Indemnified Person receives an insurance or other  indemnification
payment which,  together with any  indemnification  payment made by the Company,
exceeds the amount of such  liability,  then such Member or  Indemnified  Person
will immediately repay such excess to the Company.

                      ARTICLE 11: ACCOUNTING AND REPORTING

11.1 Fiscal Year. For income tax and accounting purposes, the Fiscal Year of the
Company shall end on the last Sunday in April or as otherwise  determined by the
Board.

11.2 Accounting  Method.  For accounting  purposes,  the Company will use United
States generally accepted accounting  principles as in effect from time to time,
applied on a consistent  basis using the accrual  method of accounting  ("GAAP")
and all financial statements will be prepared in accordance with GAAP.

11.3 Tax  Elections.  The  Company  will  have the  authority  to make  such tax
elections,  and to revoke any such election, as the tax matters partner may from
time to time  determine.  No Director or Member  shall have the right to file an
election to treat the Company as an  association  taxable as a  corporation  for
federal income tax purposes.

11.4 Returns.  The Company will cause the  preparation  and timely filing of all
tax returns required to be filed by the Company pursuant to the Code, as well as
all other tax returns  required in each  jurisdiction  in which the Company does
business.

11.5 Reports.  The Company will furnish a Profit or Loss statement and a balance
sheet to each  Member  within a  reasonable  time  after the end of each  fiscal
quarter.  The  Company  books will be closed at the end of each  Fiscal Year and
audited  financial  statements  prepared showing the financial  condition of the
Company and its Profits or Losses from  operations.  Copies of these  statements
will be given to each Member.  In addition,  as soon as is practicable after the
close of each Fiscal Year (and in any event within 90 days  following the end of
each Fiscal  Year),  the Company will provide each Member with all necessary tax
reporting information.

11.6  Books  and  Records.  Full  and  accurate  books of the  Company  shall be
maintained by the Company, at the Company's principal place of business, showing
all receipts and  expenditures,  assets and liabilities,  Profits and Losses and
all other records  necessary  for recording the Company's  business and affairs.
The books and  records of the  Company  will be  available  for  inspection  and
examination  at  reasonable  times  by all  Members  or  their  duly  authorized
representatives who have executed confidentiality agreements.

                                      -26-
<PAGE>

11.7 Banking.  The Company may establish one or more bank or financial  accounts
and safe deposit  boxes.  The Company may authorize one or more  individuals  to
sign checks on and withdraw  funds from such bank or  financial  accounts and to
have  access to such safe  deposit  boxes,  and may place such  limitations  and
restrictions on such authority as the Company deems advisable.

11.8 Tax Matters  Partner.  Until further action by the Company,  Nevada Gold is
designated as the tax matters partner under Section  6231(a)(7) of the Code. The
tax matters  partner will be  responsible  for  notifying all Members of ongoing
proceedings,  both  administrative and judicial,  and will represent the Company
throughout any such proceeding. The Members will furnish the tax matters partner
with such  information  as it may  reasonably  request to provide  the  Internal
Revenue  Service  with  sufficient  information  to allow  proper  notice to the
Members.  If an  administrative  proceeding  with respect to a partnership  item
under the Code has begun,  and the tax matters partner so requests,  each Member
will notify the tax matters partner of its treatment of any partnership  item on
its federal income tax return,  if any, which is inconsistent with the treatment
of that item on the partnership return for the Company. Any settlement agreement
with the  Internal  Revenue  Service  will be binding  upon the Members  only as
provided in the Code. The tax matters  partner will not bind any other Member to
any extension of the statute of limitations or to a settlement agreement without
such Member's written consent. Any Member who enters into a settlement agreement
with  respect to any  partnership  item will  notify  the other  Members of such
settlement agreement and its terms within 30 days from the date of settlement If
the tax  matters  partner  does  not file a  petition  for  readjustment  of the
partnership  items in the Tax  Court,  Federal  District  Court or Claims  Court
within  the  90-day   period   following   a  notice  of  a  final   partnership
administrative  adjustment, any notice partner or 5-percent group (as such terms
are defined in the Code) may institute such action within the following 60 days.
The tax matters  partner will timely  notify the other Members in writing of its
decision.  Any notice partner or 5-percent group will notify any other Member of
its filing of any petition for readjustment.

11.9 No Partnership.  The  classification  of the Company as a partnership  will
apply  only for  federal  (and,  as  appropriate,  state and  local)  income tax
purposes.  This characterization,  solely, for tax purposes,  does not create or
imply a  general  partnership  between  the  Members  for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a limited
liability company formed under the Act.

                     ARTICLE 12: DISSOLUTION OF THE COMPANY

12.1 Dissolution.  Dissolution of the Company will occur only upon the happening
of any of the following events:

      (a) The occurrence of any act or omission by a Member which results in the
dissolution of the Company by operation of law under the provisions of the Act;

      (b) The  sale or  other  disposition  of all or  substantially  all of the
assets of the Company and the  collection of all sales  proceeds,  including any
involuntary "sale" as a result of condemnation or casualty that is not restored;
or

                                      -27-
<PAGE>

      (c) By unanimous written agreement of the Members.

      (d) The  election of the  remaining  Members to dissolve as  permitted  by
Section 15.4(g) of this Agreement.

      (e) The entry of a decree of judicial  dissolution pursuant to Section 702
of the Act.

The withdrawal, retirement, resignation, bankruptcy or dissolution of any Member
or the occurrence of any event that  terminates the continued  membership of any
Member  in the  Company  shall  not,  in  and of  itself,  cause  the  Company's
dissolution.

12.2 Events of Withdrawal. An event of Withdrawal of a Member occurs when any of
the following occurs:

      (a) With respect to any Member,  upon the Transfer of all of such Member's
Membership Interests not approved by the Members;

      (b) With  respect to any  Member,  upon the  voluntary  withdrawal  of the
Member (including any resignation or retirement in contravention of Section 3.8)
by notice to all other Members;

      (c) With  respect  to any Member  that is a  corporation,  upon  filing of
articles of dissolution of the corporation;

      (d)  With  respect  to any  Member  that  is a  partnership  or a  limited
liability company, upon dissolution of such entity;

      (e) With respect to any Member who is an individual, upon either the death
or retirement of the individual,  or upon such Person's insanity or the entry by
a court of competent  jurisdiction of an order adjudicating the individual to be
incompetent to manage such individual's person or estate;

      (f) With respect to any Member that is a trust,  upon  termination  of the
trust;

      (g) With respect to any Member that is an estate,  upon final distribution
of the estate's Membership Interests;

      (h) Any other event which terminates the continued  membership of a Member
in the Company;

      (i) With respect to any Member,  the bankruptcy of the Member,  so long as
there is one or more remaining Members.

Within 30 days  following the happening of any event of Withdrawal  with respect
to a Member,  such  Member  must give  notice of the date and the nature of such
event to the Company.  Any Member  failing to give such notice will be liable in
damages  for the  consequences  of such  failure as  otherwise  provided in this
Agreement.  Upon the  occurrence  of an event of  Withdrawal  with  respect to a
Member,  such Member (and its  designated  Directors)  will cease to have voting
rights hereunder, and such Member will, without further act, become a Transferee
of its Membership  Interest (with only the limited rights of a Transferee as set

                                      -28-
<PAGE>

forth  in  Section  14.6).   Any  Member  who  withdraws  from  the  Company  in
contravention  of this  Agreement  will be liable to the  Company  and the other
Members for proven  monetary  damages (but any such action or proposed action to
resign or retire  will not be subject  to any  equitable  action for  injunctive
relief or specific performance except as permitted under Section 17.8).

12.3 Bankruptcy.  The bankruptcy of a Member will not dissolve the Company.  The
bankruptcy of a Member will be deemed to occur when such Person:

      (a) files a voluntary petition in bankruptcy,

      (b) is  adjudged a bankrupt or  insolvent,  or has  entered  against  such
Person an order for relief in any bankruptcy or insolvency proceeding,

      (c) files a petition or answer seeking for such Person any reorganization,
arrangement,  composition,  readjustment,  liquidation,  dissolution  or similar
relief under any statute, law or regulation,

      (d) files an answer or other pleading  admitting or failing to contest the
material  allegations  of a petition filed against such Person in any insolvency
proceeding of this nature, or

      (e) seeks,  consents to or  acquiesces  in the  appointment  of a trustee,
receiver  or  liquidator  of  all or  any  substantial  part  of  such  Person's
properties.  In addition,  the bankruptcy of a Member will be deemed to occur if
any  proceeding  filed  against a Member  seeking  reorganization,  arrangement,
composition, readjustment,  liquidation, dissolution or similar relief under any
statute,  law  or  regulation  is  not  dismissed  within  120  days  or if  the
appointment without the Member's consent (or acquiescence of a trustee, receiver
or liquidator of the Member or of all or any  substantial  part of such Person's
properties)  is not vacated or stayed within 90 days (or if after the expiration
of any stay, if the appointment is not vacated within 90 days).

                             ARTICLE 13: LIQUIDATION

13.1 Liquidation.  Upon Dissolution of the Company, the Company will immediately
proceed  to  wind up its  affairs  and  liquidate.  The  Board  will  appoint  a
liquidating  trustee which may be one or more of the Directors or a Member.  The
winding up and Liquidation of the Company will be accomplished in a businesslike
manner  as  determined  by the  liquidating  trustee  and  this  Article  13.  A
reasonable  time will be allowed for the orderly  Liquidation of the Company and
the discharge of liabilities to creditors so as to enable the Company to provide
for any losses reasonably anticipated to be attendant upon Liquidation. Any gain
or loss on disposition of any Company assets in Liquidation will be allocated to
Members and  credited  or charged to Capital  Accounts  in  accordance  with the
provisions  of Articles 7 and 8. With respect to all Company  property  that has
not been sold,  the Fair Market Value of that property  shall be determined  and
the Capital  Accounts of the Members  shall be adjusted to reflect the manner in
which the unrealized income, gain, loss, and deduction inherent in property that
has not been  reflected in the Capital  Accounts  previously  would be allocated
among the Members if there were a taxable  disposition  on that property for the
Fair Market Value of that  property on the date of  distribution  in  accordance
with the provisions of Articles 7 and 8. Any liquidating  trustee is entitled to
reasonable  compensation for services actually  performed,  and may contract for
such assistance in the liquidation process as such Person deems necessary. Until
the  filing of  articles  of  dissolution  as  provided  in  Section  13.6,  the
liquidating trustee may settle and close the Company's  business,  prosecute and
defend  suits,  dispose of its  property,  discharge or make  provision  for its
liabilities,  and make distributions in accordance with the priorities set forth
in Section 13.2.

                                      -29-
<PAGE>

13.2  Priority of  Payment.  The assets of the Company  will be  distributed  in
Liquidation of the Company in the following order:

      (a) First, to non-Member  creditors of the Company in order of priority as
provided  by law in payment of unpaid  liabilities  of the Company to the extent
required by law or under agreements with such creditors;

      (b) Second,  to the setting up of any reserves which the Board  reasonably
deem  necessary for any  anticipated,  contingent or unforeseen  liabilities  or
obligations of the Company  arising out of or in connection  with the conduct of
the Company's Business. At the expiration of such period as the Board reasonably
deem advisable, the balance thereof shall be distributed in accordance with this
Section 13.2;

      (c) Third, to any Member for any other loans or debts owing to such Member
by the Company;

      (d) Fourth, to the Members in accordance with Section 9.1.

13.3  Distribution to Members.  Distributions  in Liquidation due to the Members
may be made by either or a  combination  of the following  methods:  selling the
Company assets and distributing the net proceeds, or by distributing the Company
assets to the Members at their net Fair Market  Value in kind.  Any  liquidating
Distribution  in  kind  to  the  Members  may  be  made  either  by  a  pro-rata
Distribution  of  undivided  interests  or,  upon  the  affirmative  vote of all
Members, by non pro-rata Distribution of specific assets at Fair Market Value on
the effective date of Distribution. Any Distribution in kind may be made subject
to, or require assumption of, liabilities to which such property may be subject,
but in the case of any non pro-rata  Distribution  only upon the express written
agreement of the Member receiving the Distribution. Each Member hereby agrees to
save and hold harmless the other Members from such Member's share of any and all
such  liabilities  which  are  taken  subject  to or  assumed.  Appropriate  and
customary  prorations and adjustments shall be made incident to any Distribution
in kind.  The  Members  will look  solely to the assets of the  Company  for the
return  of  their  Capital  Contributions,  and if  the  assets  of the  Company
remaining  after the payment or  discharge of the debts and  liabilities  of the
Company  are  insufficient  to  return  such  contributions,  they  will have no
recourse against any other Member.

13.4 No Restoration  Obligation.  Except as otherwise  specifically  provided in
Section  7.8,  nothing  contained  in this  Agreement  imposes  on any Member an
obligation to make a Capital  Contribution in order to restore a deficit Capital
Account  upon  Liquidation  of the Company.  Furthermore,  each Member will look
solely to the  assets of the  Company  for the return of such  Member's  Capital
Contribution and Capital Account.

13.5  Liquidating  Reports.  A report will be  submitted  with each  liquidating
distribution   to  Members,   showing   the   collections,   disbursements   and
distributions  during the period which is subsequent to any previous  report.  A
final report, showing cumulative  collections,  disbursements and distributions,
will be submitted upon completion of the liquidation process.

                                      -30-
<PAGE>

13.6 Articles of Dissolution. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file articles of dissolution
(to cancel its Articles of  Organization)  with the New York  Secretary of State
pursuant to the Act. At such time, the Company will also file an application for
withdrawal of its certificate of authority in any jurisdiction  where it is then
qualified to do business.

                        ARTICLE 14: TRANSFER RESTRICTIONS

14.1  General  Restriction.  No  Member  may  Transfer  all or any  part  of its
Membership  Interests in any manner  whatsoever  (and no constituent  owner of a
Member shall be permitted to transfer its  interests in such Member)  except (a)
to a  Permitted  Transferee  as set  forth in  Section  14.3 or (b)  after  full
compliance  with the right of first  refusal set forth in Section  14.4,  and in
either case only if the  requirements  of Section 14.5 have also been satisfied.
Any other  Transfer of all or any part of its  Membership  Interests is null and
void, and of no effect.  Any Member who makes a Transfer of all of such Member's
Membership  Interests  will be  treated  as  resigning  from the  Company on the
effective  date of such  Transfer.  Any Member who makes a Transfer of part (but
not all) of such Member's  Membership  Interests will continue as a Member (with
respect to the interest retained), and such partial Transfer will not constitute
an event of  Withdrawal  of such  Member.  The  rights  and  obligations  of any
resigning Member or of any Transferee of a Membership  Interest will be governed
by the other provisions of this Agreement.

14.2 No  Member  Rights.  No Member  has the  right or power to confer  upon any
Transferee (other than a Permitted Transferee) the attributes of a Member in the
Company. The Transferee of all or any part of a Membership Interest by operation
of law  (except as  contemplated  by Section  14.3) does not,  by virtue of such
Transfer, succeed to any rights as a Member in the Company.

14.3  Permitted  Transferee.  Subject to the  requirements  set forth in Section
14.5, a Person may Transfer all or any part of such Person's Membership Interest
without the consent of any other Member:

      (a) To a wholly-owned subsidiary of such Person;

      (b) To the Company;

      (c) To a Person approved by all the Members;

      (d) In the case of Nevada Gold,  to another  Person as part of a change in
control, merger,  reorganization,  consolidation or sale of all or substantially
all of the assets of its parent company;

      (e) In the case of  TrackPower,  to another  Person as part of a change in
control, merger,  reorganization,  consolidation or sale of all or substantially
all of its assets;

      (f) In the case of Southern Tier only, ownership interests within Southern
Tier may be  transferred  provided  that (i) Jeffrey  Gural remains the managing
member, (ii) Jeffrey Gural, together with his immediate family members or family

                                      -31-
<PAGE>

trusts for the benefit of his immediate family members,  retains ownership of at
least 35% of the  ownership  interests of Southern  Tier and (iii) Jeffrey Gural
has the ability,  by ownership of voting  securities  or  membership  interests,
contract or otherwise,  to direct the  management  and affairs of Southern Tier;
provided,  that upon the retirement,  death or disability of Jeffrey Gural,  the
provisions of Section 14.7 shall be applicable.

      (g) A pledge or  encumbrance  of a Membership  Interest in favor of one or
more lenders to secure a loan  provided by such  lender(s) to such Member or its
Affiliates,  provided that a foreclosure  upon such pledge or encumbrance  shall
not be a Permitted Transfer.

      Each of the foregoing  transferees  shall be a "Permitted  Transferee" and
shall become a Member of the Company in accordance with Section 602 of the Act.

14.4 Right of First Refusal.  Prior to any proposed  Transfer of all or any part
of  Membership  Interests  of a Member,  other  than to a  Permitted  Transferee
pursuant to Section 14.3,  the Transferor  must obtain a Third Party Offer.  For
purposes of this  Section  14.4,  a Transfer of the  Membership  Interests  of a
Member  shall be deemed to occur upon any change in control of such Member other
than to a  Permitted  Transferee  pursuant to Section  14.3(d).  The Third Party
Offer must not be subject to unstated  conditions or contingencies or be part of
a larger transaction such that the price for the Membership  Interests stated in
such Third Party Offer does not accurately reflect Fair Market Value (reduced by
the amount of associated  liabilities of such Membership  Interests).  The Third
Party Offer must contain a  description  of all of the  consideration,  material
terms and conditions of the proposed  Transfer.  The Transferor will give notice
of the Third  Party  Offer to the Company  and the other  Member  (such  Members
called  the  "Other  Members"),  together  with a  written  offer  to  sell  the
Membership  Interests  (which is the  subject of the Third  Party  Offer) to the
Other  Member on the same price and terms as the Third  Party  Offer as provided
herein. The Other Members shall have the right, to purchase, in whole but not in
part, the Membership Interests of the Transferor in accordance with the terms of
the Third Party Offer by giving  notice to the  Transferor  within 30 days after
notice of such offer.  The Other Members shall each have the right to purchase a
proportionate  part  of  the  Transferor's  Membership  Interest,   equal  to  a
percentage determined by dividing its Percentage by the total Percentages of the
Other Members;  provided that if only Member elects to purchase then that Member
shall have the right to purchase 100% of the Transferor's  Membership  Interest.
Unless otherwise agreed,  the closing of such sale will be held at the Company's
principal  place of business in New York on a date to be  specified by the Other
Members  which  is not  later  than 60 days  after  the  date of the  notice  of
acceptance by the Other Members. At the closing,  the Other Members will deliver
the consideration in accordance with the terms of the Third Party Offer, and the
Transferor  will by  appropriate  documents  assign  to the  Other  Members  the
Membership  Interests  to be sold,  free  and  clear of all  liens,  claims  and
encumbrances.  If all of the Other Members  reject the right of first refusal or
if the acceptance of the right of first refusal is not closed in accordance with
this Section 14.4, the Transferor will be free for a period of 60 days after the
last  day for such  acceptance  to sell  all,  but not less  than  all,  of such
Membership  Interests so offered, but only to the Third Party for a price and on
terms no more  favorable  to the  Third  Party  than the Third  Party  Offer and
subject to Section  14.5.  If such  Membership  Interests are not so sold within
such 60-day period (or within any extensions of such period agreed to in writing
by the Company),  all rights to sell such Membership  Interests pursuant to such
Third Party Offer (without making another offer to the Other Members pursuant to
this  Section  14.4) will  terminate  and the  provisions  of this  Article will
continue to apply to any proposed future Transfer.

                                      -32-
<PAGE>

14.5 General Conditions on Transfers. No Transfer of a Membership Interest after
the date of this  Agreement  will be effective  unless all of the conditions set
forth below are satisfied:

      (a) Unless waived by the Company, the Transferor signs and delivers to the
Company an undertaking in form and substance  satisfactory to the Company to pay
all reasonable  expenses incurred by the Company in connection with the Transfer
(including,  but not limited to,  reasonable fees of counsel and accountants and
the costs to be incurred with any additional  accounting  required in connection
with the Transfer,  and the cost and fees attributable to preparing,  filing and
recording such amendments to the  organizational  documents or filings as may be
required by law);

      (b) Such transfer does not require the  registration  of such  transferred
Membership  Interests  pursuant to any  applicable  federal or state  securities
laws, and the  Transferor  delivers to the Company an opinion of counsel for the
Transferor  satisfactory in form and substance to the Company to the effect that
the Transfer of the  Membership  Interests is in compliance  with the applicable
federal and state securities laws, and a statement of the Transferee in form and
substance  satisfactory to the Company making  appropriate  representations  and
warranties  in respect  to  compliance  with the  applicable  federal  and state
securities laws and as to any other matter reasonably required by the Company;

      (c) The Company receives an opinion from its counsel that (i) the Transfer
does not cause the  Company  to lose its  classification  as a  partnership  for
federal or state income tax purposes, and (ii) unless waived by the Company, the
Transfer,  together with all other Transfers within the preceding twelve months,
does not cause a  termination  of the Company  for  federal or state  income tax
purposes;

      (d)  The  Transferor  signs  and  delivers  to the  Company  a copy of the
assignment  of the  Membership  Interests to the  Transferee,  together with the
Certificates   representing  such  Membership   Interests,   duly  executed  for
assignment;

      (e) The  Transferee  signs and delivers to the Company its agreement to be
bound by this Agreement;

      (f) Such Transfer does not cause the Company to become a "Publicly  Traded
Partnership,"  as such term is defined in Sections  469(k)(2)  or 7704(b) of the
Code;

      (g) Such  Transfer  does not subject the Company to  regulation  under the
Investment  Company  Act of 1940,  the  Investment  Advisers  Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended;

      (h)  Such  Transfer  is in  compliance  with any and all  gaming  acts and
regulations  now or  hereafter  existing  in the State of New York,  including a
finding of suitability of such Transferee or any owners or beneficial  owners of
a Transferee;

      (i) Such  Transfer  is not made to any Person  who lacks the legal  right,
power or capacity to own such Membership Interest; and

      (j) The  Transfer  is in  compliance  with the  other  provisions  of this
Article.

                                      -33-
<PAGE>

      Except as the Company and the Transferee may otherwise agree, the Transfer
of a Membership  Interest will be effective as of 12:01 a.m.  (Eastern  Time) on
the first day of the month following the Transfer.

      Notwithstanding  anything  to the  contrary  expressed  or implied in this
Agreement,  the sale, assignment,  transfer,  pledge or other disposition of any
direct or  indirect  interest in the Company is subject to the laws of the State
of New  York and the  requirements,  limitations  and  decisions  of any  gaming
commission or other gaming regulatory body for the State of New York.

14.6 Rights of Transferees.  A Permitted Transferee shall become a Member of the
Company  in  accordance  with  Section  602  of the  Act.  Any  Transferee  of a
Membership Interest will, on the effective date of the Transfer, have only those
rights of an  assignee as  specified  in the Act and this  Agreement  unless and
until such  Transferee  is  admitted  as a  substitute  Member.  This  provision
limiting the rights of a Transferee will not apply if such Transferee is already
a Member;  provided that, any Member who withdraws from the Company  pursuant to
an event of Withdrawal described in Section 12.2 will have only the rights of an
assignee as specified in the Act and this  Agreement.  Any  Transferee of all or
any part of a Membership  Interest who is not admitted as a substitute Member in
accordance  with this  Agreement has no right (a) to participate or interfere in
the management or  administration of the Company's  Business or affairs,  (b) to
vote or agree on any matter affecting the Company or any Member (and if a Member
has  transferred  its entire  Membership  Interest to a Transferee  who is not a
substitute Member, then (x) if the transferring Member is Nevada Gold, the Board
shall be decreased by the number of directors such  transferring  Member had the
right to appoint or (y) if the  transferring  Member is either  Southern Tier or
TrackPower,  then the Board shall be increased  to 5 members,  Nevada Gold shall
have the right to appoint 3 directors  and the other Member shall have the right
to appoint 2 directors),  (c) to require any  information  on account of Company
transactions,  or (d) to inspect the Company's books and records. The only right
of a Transferee of all or any part of an Membership Interest who is not admitted
as a  substitute  Member in  accordance  with this  Agreement  is to receive the
allocations  and  Distributions  to which the  Transferor  was  entitled (to the
extent of the  Membership  Interest  transferred)  and to receive  required  tax
reporting  information.  However,  each  Transferee  of  all or  any  part  of a
Membership  Interest  (including both immediate and remote  Transferees) will be
subject to all of the obligations, restrictions and other terms contained in the
Agreement as if such Transferee  were a Member.  To the extent of any Membership
Interest  transferred,  the  Transferee  or Member does not possess any right or
power as a Member  and may not  exercise  any such  right or power  directly  or
indirectly  on behalf of the  Transferee.  The  Members  acknowledge  that these
provisions  may differ  from the rights of an  assignee as set forth in the Act,
and the Members agree that they intend, to that extent, to vary those provisions
by this Agreement.

14.7 Ownership Interests in Members. Each Member represents and warrants that on
the date of this Agreement its  directors,  officers and owners (and in the case
of Nevada Gold and TrackPower,  shareholders owning five percent (5%) or more of
stock in their parent companies) in such Member is listed on Exhibit "B" to this
Agreement.  Southern Tier further represents that no transfers or assignments of
ownership  interests  in Southern  Tier will be made except in  compliance  with
Article 14, it being agreed that a transfer of a Membership Interest by Southern
Tier (or its  Permitted  Transferee)  shall  include  a  transfer  of  ownership
interests within Southern Tier (or its Permitted  Transferee) by its members and
shall require  compliance  with the  provisions of this Article 14. In the event
the  retirement,  death or  disability of Jeffrey Gural causes a Transfer of the
Membership  Interest of Southern Tier, then Southern Tier shall  thereafter have

                                      -34-
<PAGE>

only the rights of an assignee pursuant to Section 14.6; provided, however, such
Transfer shall be considered a Permitted Transfer if and for so long as Southern
Tier's managing member and designated director pursuant to Section 4.2 is either
an  Approved  Substitute  Manager or  approved  by a majority in interest of the
remaining Members.  An event described in Section 14.3(d),  (e) or (f) shall not
be deemed to be a transfer of a Membership  Interest by Nevada Gold,  TrackPower
or Southern Tier,  respectively.  The Members shall have a continuing obligation
to update the list on Exhibit "B".

                    ARTICLE 15: PRIVILEGED LICENSE PROTECTION

(a) 15.1. No Unsuitability  Knowledge.  Each Member represents to the other that
it is not aware of any facts or circumstances  which would make it an Unsuitable
Person.

(b)  15.2.  Regulatory  Compliance  in  the  State  of  New  York.  Each  Member
acknowledges that it and its Affiliated Persons will be subject to licensing and
other  regulatory  review  and  approval   procedures  by  New  York  Regulatory
Authorities.  Each Member agrees to cooperate  fully and to cause its Affiliated
Persons to cooperate fully with the  representatives  of all New York Regulatory
Authorities.  If any New York Regulatory Authority determines at any time that a
necessary Gaming License will not be issued or renewed for the Company,  or must
be  revoked,  as a result  of a  Member's,  or a  Member's  Affiliated  Person's
relationship  to the Company or a Member,  then such Member shall,  if possible,
remedy or cause its Affiliated  Person to remedy the condition that gave rise to
such determination to the satisfaction of the New York Regulatory Authority.  If
the Member (the "Non-Compliant  Member") does not remedy the condition that gave
rise to such  determination  prior to the expiration of the period prescribed by
the New York Regulatory Authority, then the Licensed Members may provide written
notice to the Non-Compliant  Member that it is an Unsuitable  Person, and of its
intention to exercise the provisions set forth in Section 15.4.

(c) 15.3. Gaming Regulations in Jurisdictions Outside of New York.

(d) (a) Each  Member  acknowledges  that each other  Member  and its  Affiliated
Persons may or will be a Licensed Member because of Gaming  Licenses  related to
Gaming  Authorities  other than New York  Regulatory  Authorities.  Each  Member
acknowledges  that the issuance and  maintenance  of Gaming  Licenses are highly
regulated  by these other  Gaming  Authorities  and that the laws of  applicable
jurisdictions  may require a Licensed  Member to disclose  private or  otherwise
confidential information about the other Members and their respective Affiliated
Persons.  If  requested  to do so by a Licensed  Member,  any other Member shall
obtain any Gaming License,  qualification,  clearance or the like which shall be
requested  or  required  of such  other  Member by any Gaming  Authority  having
jurisdiction over the Licensed Member.

(i) (b) All  Members  acknowledge  and agree  that if a Gaming  Authority  shall
determine  that any Member or any of its  Affiliated  Persons (a) is or might be
engaged in, or is about to be engaged in, any activity or activities, or (b) was
or is involved  in a  relationship  with any Person,  and if as a result of such
determination  any Gaming  Authority (i) fails to issue a Gaming  License,  (ii)
fails to grant or renew any  required  or  requested  Gaming  License or related
application  upon  terms  and  conditions  which  are in the  Licensed  Member's
reasonable  discretion  acceptable to the Licensed  Member,  (iii)  unreasonably
delays any Gaming License  sought by the Licensed  Member,  (iv)  conditions any
Gaming License sought by the Licensed Member upon terms and conditions which are
in the Licensed  Member's  reasonable  discretion not acceptable to the Licensed
Member, (v) revokes any Gaming License, or (vi) disciplines,  in any manner, the
Licensed  Member,  then such other  Member (the  "Non-Compliant  Member")  shall
immediately (A) terminate any  relationship  with the Person which is the source
of the  problem,  or (B) cease the activity  creating the problem.  In the event
that the  Non-Compliant  Member does not comply with item (A) or (B) above, then
the Licensed Member may provide written notice to the Non-Compliant  Member that
it is an Unsuitable  Person, and of its intention to exercise the provisions set
forth in Section 15.4.

                                      -35-
<PAGE>

(ii) 15.4. Buy-Out Provisions.

(iii) (a) In the event of an  unremedied  finding that a Member is an Unsuitable
Person  and the  sending  of notice by a  Licensed  Member of its  intention  to
exercise  the rights set forth in this  Section  15.4,  the  provisions  of this
Section  15.4 shall apply,  notwithstanding  any other  provision  herein to the
contrary.

(iv) (b) During the period  commencing with the Trigger Date and ending with the
transfer or sale of the  Affected  Member's  Membership  Interest  pursuant to a
subsection  of this  Section  15.4,  (i) the  Company  shall not be  required or
permitted  to pay any  distribution  or interest  with regard to the  Membership
Interests  and the amount of such  distributions  or  interest  shall be held in
escrow by the Company, (ii) the holder of such Membership Interests shall not be
entitled  to vote  on any  matter,  and  (iii)  the  Company  shall  not pay any
remuneration  in any form to the holder of the  Membership  Interests  except in
exchange for such  Membership  Interests as provided in this Section 15.4.  Upon
any sale or transfer of the Affected Member's  Membership Interest in accordance
herewith,  all voting rights shall be reinstated  with respect to the Membership
Interest  and all amounts held in escrow shall be applied to pay to the Affected
Member the purchase price of the Membership Interest.

(v) (c) For a period of 120 days  following  the Trigger  Date (or such  shorter
period of time as the New York Regulatory Authority or the Gaming Authority,  as
applicable,  otherwise allows), the Affected Member shall have the right to sell
its Membership  Interest to a third party for cash, subject to the provisions of
Section  14.5 and the  right  of first  refusal  in favor of the  other  Members
pursuant to and in accordance with the terms of Section 14.4.

(vi) (d) If the Affected  Member has not given notice to the other Members on or
before 120 days  following  the Trigger Date (or such shorter  period of time as
the New York  Regulatory  Authority  or the  Gaming  Authority,  as  applicable,
otherwise allows), that a third party (who is permitted to receive an assignment
of the Membership Interest pursuant to Section 14.5), has entered into a binding
agreement to purchase the Membership  Interest for cash, or if the cash purchase
is not consummated  within the period provided in Section 14.4), any one or more
of the remaining Members may purchase the Membership  Interest by giving written
notice of such  Member's  or  Members'  purchase  intent to the  Company and the
Affected Member.  The price of this purchase shall be an amount equal to the sum
of (a) the outstanding  principal  balance of and accrued and unpaid interest on
the Affected  Member's  loans to the Company,  plus (b) the Fair Market Value of
the Affected Member's  Membership Interest as of the Trigger Date. Such purchase
price  shall  be  payable,  without  interest  on the Fair  Market  Value of the
Affected Member's Membership Interest, by the Company applying the distributions
from the Company that would have  otherwise  gone to the Affected  Member to pay
the Affected  Member until the  purchase  price has been paid in full,  provided
that  any  remaining  balance  shall  be  repaid  at the end of five  (5)  years
following the Trigger Date.

(vii) (e) In the event that the Affected Member does not give proper notice that
it has entered into a binding agreement to sell its Membership Interest pursuant
to  Section  15.4(c),  or if, in the case of a sale,  the cash  purchase  is not
consummated within the period provided in Section 14.4, and if no Member chooses
to purchase  the  Membership  Interest as provided for in Section  15.4(e),  the
majority  in  interest  of the  remaining  Members  may choose to  continue  the
business of the Company.  In such event,  the Company shall repay any loans owed
to the Unsuitable Person and shall repurchase the Unsuitable Person's Membership
Interest  for its Fair Market  Value plus any  escrowed  amounts  under  Section
15.4(b).  The Company shall repay the Unsuitable Person's loans when the Company

                                      -36-
<PAGE>

receives  revenues  that the  Company  would have been  required to use to repay
loans  made by the  Unsuitable  Person,  had the  Unsuitable  Person  remained a
Member.  The Fair Market Value of the Unsuitable  Person's  Membership  Interest
(without interest) shall be payable when the Company receives cash payments that
the Company  would have been required to distribute to all Members under Article
9 had the  Unsuitable  Person  remained a Member;  provided  that any  remaining
balance shall be repaid at the end of five (5) years following the Trigger Date.

(viii) (f) In the event that the  remaining  Members  decide not to continue the
business of the Company, the Company shall be dissolved.

(ix) Article 16: GOVERNING LAW; DISPUTE RESOLUTION

16.1  Governing  Law.  THIS  AGREEMENT  IS GOVERNED BY AND WILL BE  CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, EXCLUDING ANY CONFLICT-OF-LAWS
RULE OR PRINCIPLE  THAT MIGHT REFER THE GOVERNANCE OR THE  CONSTRUCTION  OF THIS
AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.  In the event of a direct conflict
between the provisions of this Agreement and any mandatory provision of the Act,
the applicable provision of the Act, will control.

16.2  Disputes.  Except as to any  disputes for which  injunctive  relief may be
available,  in the event a dispute of any kind  arises in  connection  with this
Agreement  (including any dispute  concerning its  construction,  performance or
breach),  the parties to the dispute (who may be any  combination of the Company
and any one or more of the  Members)  will attempt to resolve the dispute as set
forth in Section 16.3 before  proceeding to  arbitration  as provided in Section
16.4.  All  documents,  discovery  and  other  information  related  to any such
dispute,  and the  attempts to resolve or  arbitrate  such  dispute will be kept
confidential to the fullest extent possible.  This Article 16 shall not apply to
disputes arising under the Management Agreement.

16.3 Negotiation. If a dispute arises, any party to the dispute will give notice
to each other party.  If the Company is not a party to the dispute,  notice will
be given to the Company.  After notice has been given, the parties in good faith
will attempt to negotiate a resolution of the dispute.

16.4 Arbitration.  If, within 30 days after the notice provided in Section 16.3,
a dispute is not resolved through negotiation or mediation,  the dispute will be
arbitrated.  The parties to the dispute agree to be bound by the selection of an
arbitrator,  and to settle the dispute  exclusively  by binding  arbitration  in
accordance with the following provisions:

      (a) All parties to the dispute will collectively select one arbitrator. If
they fail to do so within 45 days after the notice provided in Section 16.3, one
or more parties will request the American  Arbitration  Association  to submit a
panel of five  arbitrators  who are  qualified to resolve the matters in dispute
from which the choice will be made. The party  requesting the  arbitration  will
strike first, followed by alternative striking until one name remains. A similar
procedure  will be followed if there are more than two parties.  The parties may
by agreement  reject one entire list, and request a second list. If selection by
the above method is not  completed  within 90 days after the notice  provided in
Section 16.3, or if there are more than four parties, then an arbitrator will be
selected by the American  Arbitration  Association.  The  arbitrator so selected
will then arbitrate the dispute in New York, New York, and issue an award.

                                      -37-
<PAGE>

      (b) To the extent  consistent  with the  provisions of this  Article,  the
arbitration  will be conducted  under the  Commercial  Arbitration  Rules of the
American  Arbitration  Association  and in  accordance  with New York  law.  The
arbitrator's  decision will be made pursuant to the relevant  substantive law of
the State of New York.  The award of the arbitrator  will be final,  binding and
non-appealable.  Judgment  on the award may be entered  in any  court,  state or
federal court having jurisdiction.

      (c) The fees and expenses of the arbitrator, and the other direct costs of
the  arbitration,  will  be  shared  by the  parties  to the  dispute  in  equal
proportions. Each party to the dispute will bear all other costs and expenses as
provided  in  Section  17.11.  If  one  or  more  Members  are  included  in the
arbitration  because of their  membership  or former  membership in the Company,
such group will collectively be treated as one party to the dispute (through the
Company as a party).

      (d) The  arbitrator(s)  shall have the authority to award equitable relief
and  compensatory  damages.  The  arbitrator(s)  shall not have any authority to
award punitive  damages or other  non-compensatory  damages against the Company,
Nevada  Gold,  TrackPower,   Southern  Tier,  or  any  Transferee  or  Permitted
Transferee  notwithstanding  any action  based on gross  negligence,  bad faith,
fraud, breach of this Agreement,  or any other conduct that might give rise to a
claim for punitive damages.

      (e) The decision of the arbitrator(s) shall be rendered within ninety (90)
calendar  days after the date of the  selection of the  arbitrator(s)  or within
such period as the parties may otherwise agree.

                         ARTICLE 17: GENERAL PROVISIONS

17.1 Covenants.

      (a)  Securities  Law  Requirements.  The Members  acknowledge  that Nevada
Gold's Parent and TrackPower are publicly held corporations, and that trading in
the  securities  of such  corporations  based  upon  non-public  information  or
unauthorized  disclosure or other use of material developments could expose such
publicly  held  corporations  to liability.  The Members shall take  appropriate
precautions  to inform its employees and agents of such fact and to prevent such
persons from making such disclosure.

      (b)  Regulatory  Information.  Each Member shall provide to the Company or
regulatory  agency,  as the  case  may  be,  as  required  by  applicable  laws,
regulations,  rules or orders,  all information  pertaining to the Company,  the
Gaming Complexes, and each Member's officers, directors, shareholders, financial
sources,  and  associations  as  shall  be  required  by any  Federal  or  state
securities law or any regulatory  authority with  jurisdiction over the Company,
the  Complexes,  or any Member or any  Affiliates  of such Person  including the
regulatory  authorities  in  the  states  of  New  York,  Colorado,  California,
Oklahoma,  New  Mexico  or any  other  jurisdiction.  Specifically  and  without
limitation,  each Member shall  provide the other  Members with all  information
necessary  to  determine  such  Member's  and its  Affiliates'  suitability  for
licensing  applications  and  renewals,   including  regarding  their  ownership
structure, corporate structure, officers and directors,  stockholders,  members,
and  partners'  identity,  financing,  transfers of interest,  etc., as shall be
required by any regulatory authority with jurisdiction over the other Members or
any of  their  Affiliates,  whether  foreign  or  domestic,  including,  without
limitation,  Colorado,  California, New Mexico, Oklahoma, Texas and New York, or
with respect to any federal,  state or other  security  law  requirement  - this
shall be a continuing obligation during the term of the Agreement.

      (c) Prohibited Payments.

                                      -38-
<PAGE>

            Each Member agrees that it and its  Affiliated  Persons will conduct
all activities that affect the Company,  and will cause any activities affecting
the Company  conducted on their  behalf,  to be conducted in a lawful manner and
specifically will not engage in the following transactions:

            (i) payments or offers of payment,  directly or  indirectly,  to any
domestic or foreign government official or employee in order to obtain business,
retain  business or direct  business  to others,  or for the purpose of inducing
such government official or employee to fail to perform or to perform improperly
his official functions;

            (ii)  receive,   pay  or  offer  anything  of  value,   directly  or
indirectly,  from or to any  private  party in the form of a  commercial  bribe,
influence payment or kickback for any such purpose; or

            (iii) use, directly or indirectly,  any funds or other assets of the
Company  for any  unlawful  purpose  including,  without  limitation,  political
contributions in violation of applicable laws, regulations, rules or orders.

17.2  Amendments.  This  Agreement  may  be  amended  by the  unanimous  written
agreement  of the  Members.  Any  amendment  will  become  effective  upon  such
approval,  unless otherwise  provided.  Notice of any proposed amendment must be
given at least 5 days in advance of the meeting at which the  amendment  will be
considered  (unless the approval is evidenced by duly signed minutes of action).
Any duly adopted  amendment to this Agreement is binding upon, and inures to the
benefit  of,  each  Person who holds a  Membership  Interest at the time of such
amendment.  Notwithstanding any other provision of this Agreement,  with respect
to any Transferee not admitted as a substitute  Member, any amendment to Article
8  (relating  to  allocation  of  Profits or  Losses),  Article 9  (relating  to
Distributions),  Section 13.2 (relating to  Distributions  in  Liquidation)  and
Section 17.2 (relating to amendment of this  Agreement) will not be effective if
it adversely affects a Member's rights under such Articles or Sections, nor will
such Person be required to make any Capital Contribution,  without such Person's
written consent.  Non-material amendments relating to this Agreement or that are
necessary for compliance with applicable law may be made by the Board.

17.3 Intentionally Deleted.

17.4 Confidentiality.  In addition to and as provided in Section 3.3 and Article
17, the Members  shall  consult  with each other as to the form,  substance  and
timing of all public announcements regarding the Company or this Agreement,  and
no public announcements regarding the Company or this Agreement shall be made by
one Member without the consent of the Board.  Notwithstanding  the foregoing,  a
Member  may  make  such  announcements,  file  such  documents  (including  this
Agreement)  with the  Securities and Exchange  Commission  and other  regulatory
authorities,  and take other actions to comply with the  requirements of federal
and state securities laws as it deems necessary.

17.5 Intentionally Deleted.

                                      -39-
<PAGE>

17.6 Waiver of Partition Right.  Each Member waives and renounces any right that
such  Person may have prior to  Dissolution  and  Liquidation  to  institute  or
maintain any action for partition with respect to any real property owned by the
Company.

17.7  Waivers  Generally.  No  course  of  dealing  will be  deemed  to amend or
discharge any provision of this Agreement. No delay in the exercise of any right
will  operate as a waiver of such  right.  No single or partial  exercise of any
right  will  preclude  its  further  exercise.  A waiver of any right on any one
occasion  will not be construed as a bar to, or waiver of, any such right on any
other occasion.

17.8  Equitable  Relief.  If any Person  proposes to Transfer all or any part of
such Person's  Membership  Interest in violation of the terms of this Agreement,
the Company or any Member may apply to any court of competent  jurisdiction  for
an injunctive order  prohibiting  such proposed  Transfer except upon compliance
with the terms of this  Agreement,  and the Company or any Member may  institute
and maintain any action or proceeding  against the Person proposing to make such
Transfer to compel the specific  performance  of this  Agreement.  Any attempted
Transfer in  violation of this  Agreement is null and void,  and of no force and
effect.  The Person against whom such action or proceeding is brought waives the
claim or defense that an adequate remedy at law exists, and such Person will not
urge in any such action or  proceeding  the claim or defense that such remedy at
law exists.

17.9  Remedies  for Breach.  The rights and remedies of the Members set forth in
this  Agreement  are neither  mutually  exclusive  nor exclusive of any right or
remedy provided by law, in equity or otherwise. The Members agree that all legal
remedies (such as monetary  damages) as well as all equitable  remedies (such as
specific  performance)  will be available for any breach or threatened breach of
any provision of this Agreement.

17.10 Notices. All notices,  consents, waivers and other communications required
or permitted by this Agreement  shall be in writing and shall be deemed given to
a party when (a) delivered to the  appropriate  address by hand or by nationally
recognized  overnight courier service (costs prepaid);  (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting  equipment;  or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses,  facsimile numbers or e-mail
addresses  and  marked  to the  attention  of the  person  (by  name  or  title)
designated below (or to such other address,  facsimile number, e-mail address or
person as a party may designate by notice to the other parties):

                                      -40-
<PAGE>

If to Nevada Gold:

Nevada Gold NY, Inc.
3040 Post Oak Blvd., Suite 675
Houston, Texas 77056
Attention: Chief Executive Officer
Fax no.: (713) 621-6919
E-mail address: twinn@nevadagold.com

      With a copy to:

            Nevada Gold & Casinos, Inc.
            3040 Post Oak Blvd., Suite 675
            Houston, Texas 77056
            Attention: General Counsel
            Fax no.: (713) 621-6919
            E-mail address: cporter@nevadagold.com

If to Southern Tier:

Southern Tier Acquisition II LLC
125 Park Avenue
New York, NY 10017
Attention: Mr. Jeffrey Gural
Fax no.: 212-372-2409
E-mail address: JGural@newmarkre.com

      With a copy to:

            Goldberg Weprin & Ustin LLP
            1501 Broadway - 22nd Floor
            New York, New York 10036
            Attention: Andrew W. Albstein, Esq
            Fax no.: 212 730 4518
            E-mail address: aalbstein@gwulaw.com

If to TrackPower:

TrackPower, Inc.
765 15th Side Road
King City, Ontario Canada L7B1K5
Attention: John Simmonds
Fax:  905-773-1241
E-mail address: jgs@trackpower.com

                                      -41-
<PAGE>

      With a copy to:

            Towne Law Firm
            421 New Karner Rd
            P.O. Box 15072
            Albany, NY 12212-5072
            Attention Jim Towne, Esq.
            Fax: 518-452-6435
            E-mail address: jamestowne@TowneLaw.com

17.11  Costs.  If the Company or any Member  retains  counsel for the purpose of
enforcing or preventing the breach or any threatened  breach of any provision of
this Agreement or for any other remedy relating to it, then the prevailing party
will be entitled to be reimbursed by the non-prevailing  party for all costs and
expenses so incurred (including  reasonable attorneys' fees, costs of bonds, and
fees and expenses for expert  witnesses) unless the arbitrator or other trier of
fact determines otherwise in the interest of fairness.

17.12 Partial  Invalidity.  Wherever possible,  each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law.  However,  if for any  reason  any one or  more of the  provisions  of this
Agreement are held to be invalid,  illegal or unenforceable in any respect, such
action will not affect any other  provision  of this  Agreement.  In such event,
this  Agreement will be construed as if such invalid,  illegal or  unenforceable
provision had never been contained in it.

17.13  Survivability  of the August 24, 2005  Agreement.  This Agreement  hereby
amends,  restates and  supersedes  any and all of the  provisions  of the letter
agreement dated August 24, 2005, by and among Tioga Downs Racetrack, LLC, Vernon
Downs  Acquisition,  LLC,  Nevada Gold & Casinos,  Inc.,  TrackPower,  Inc.  and
Southern Tier Acquisition, LLC.

17.14 Entire  Agreement.  This  Agreement  the  Exhibits  attached  hereto,  the
Contribution Agreement and the Management Agreement contain the entire agreement
and  understanding  of the Members  with respect to its subject  matter,  and it
supersedes all prior or other  contemporaneous  understandings,  correspondence,
negotiations,  or agreements  between them respecting the within subject matter.
No amendment,  modification or interpretations hereof shall be binding unless in
writing  and  signed by all the  Members  unless it is made in  accordance  with
Section 17.2.

17.15 Binding Effect.  This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted  successors and assigns;  provided that, any
Transferee  will have only the rights  specified in Section 14.6 unless admitted
as a substitute Member in accordance with this Agreement.

17.16 Further Assurances. Each Member agrees, without further consideration,  to
sign and deliver such other documents of further  assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.

17.17 Headings. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.

                                      -42-
<PAGE>

17.18  Terms.  Terms used with  initial  capital  letters will have the meanings
specified,  applicable to both  singular and plural  forms,  for all purposes of
this Agreement.  All pronouns (and any variation) will be deemed to refer to the
masculine,  feminine or neuter,  as the identity of the Person may require.  The
singular or plural include the other,  as the context  requires or permits.  The
word include (and any variation) is used in an illustrative  sense rather than a
limiting sense.

17.19 Effectiveness. This Agreement shall automatically,  without further action
by any of the parties,  become effective and enforceable  according to its terms
immediately upon execution hereof.

17.20   Counterparts.   This   Agreement  may  be  executed  in  any  number  of
counterparts,  each of which shall be an original for all  purposes,  but all of
which taken together shall constitute only one agreement.  The production of any
executed  counterpart  of this  Agreement  shall be sufficient  for all purposes
without producing or accounting for the other counterparts hereof.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                             SIGNATURE PAGE FOLLOWS

                                      -43-
<PAGE>

      IN WITNESS WHEREOF,  the Members have executed this Operating Agreement of
American Racing and Entertainment,  LLC as of the 8th day of November,  2005 but
to be effective as of the date first set forth above.

                                        NEVADA GOLD:

                                        NEVADA GOLD NY, INC.

                                        By:
                                           ------------------------------
                                           H. Thomas Winn, President

                                        SOUTHERN TIER:

                                        SOUTHERN TIER ACQUISITION II LLC

                                        By:
                                           ------------------------------
                                           Jeffrey Gural, Manager

                                        TRACKPOWER:

                                        TRACKPOWER, INC.

                                        By:
                                           ------------------------------
                                        John Simmonds, Chairman

                                        By:
                                           ------------------------------
                                           Ed Tracy
                                           President and Chief Executive Officer

                                LIST OF EXHIBITS

Exhibit "A" Definitions

Exhibit "B" Constituent Interests in Members

                                      -44-
<PAGE>

                                   EXHIBIT "A"

                                   Definitions

In addition to other terms which are defined  elsewhere in this  Agreement,  the
following  terms,  for purposes of this  Agreement,  shall have the meanings set
forth in this Exhibit "A":

Act:              The New York Limited  Liability  Company Law and any successor
                  statute, as amended from time to time.

Adjusted Capital
Account:          The Capital Account  maintained for each Member as provided in
                  Section  7.6 of the  Regulations,  (a)  increased  by (i)  the
                  amount  of  any  unpaid  Capital  Contributions  agreed  to be
                  contributed  by such Member,  if any,  (ii) an amount equal to
                  such Member's  allocable  share of Minimum Gain as computed on
                  the  last  day of such  Fiscal  Year in  accordance  with  the
                  applicable  Regulations,  and  (iii)  the  amount  of  Company
                  liabilities  allocable to such Member under Section 752 of the
                  Internal  Revenue Code with respect to which such Member bears
                  the economic  risk of loss to the extent such  liabilities  do
                  not constitute Member Nonrecourse Debt, and (b) reduced by the
                  adjustments     provided     for    in     Regulations     ss.
                  1.704-1(b)(2)(ii)(d)(4)-(6).

Affected Member:  A Member  that is  notified  that it is an  Unsuitable  Person
                  under Section 15.2 or Section 15.3(b).

Affiliate:        An  "Affiliate"  of  a  Person  means  a  Person  directly  or
                  indirectly controlling,  controlled by or under common control
                  with such Person. For this purpose and for purposes of the use
                  of the term  "control" in this  Agreement,  control  means the
                  possession,  direct  or  indirect,  of the  power to direct or
                  cause  the  direction  of the  management  and  policies  of a
                  Person, whether through the ownership of voting securities, by
                  contract or otherwise.

Affiliated
Person:           A Person whose  relationship to a Member is such that a Gaming
                  Authority  considers such Person's  suitability as a factor in
                  determining  the  Member's or the  Company's  suitability  for
                  receiving a Gaming License.

Agreement:        This Agreement, as amended from time to time.

Annual Plan:      The Annual Plan set forth in Section 4.1(h) of the Agreement.

                                      -45-
<PAGE>

Approved
Substitute
Manager:          Barry M. Gosin,  Vice Chairman and Chief Executive  Officer of
                  Newmark  &  Company  Real  Estate,  Inc.,  or James  D.  Kuhn,
                  President of Newmark & Company Real Estate, Inc.

Articles:         The Articles of Organization of the Company as filed under the
                  Act, as amended from time to time.

Board:            The Board of Directors  established pursuant to Section 4.2 of
                  this Agreement.

Budgets:          The Cost  Budgets  that are  approved or  otherwise  operative
                  under  this  Agreement  or  the  Operating  Budgets  that  are
                  approved or otherwise operative under this Agreement.

Business:         The  business  of the  Company set forth in Section 2.1 of the
                  Agreement.

Capital Account:  The capital  account  maintained for each Member under Section
                  7.6 of this Agreement.

Capital
Contribution:     The aggregate of the dollar amounts of any cash contributed to
                  the capital of the  Company  and the Fair Market  Value of any
                  property contributed to the capital of the Company, or, if the
                  context  in which such term is used so  indicates,  the dollar
                  amounts  of cash and the  Fair  Market  Value of any  property
                  agreed to be contributed, by such Member to the capital of the
                  Company.

Capital
Transaction:      Any sale, exchange, condemnation (including any eminent domain
                  or similar transaction),  casualty, financing,  refinancing or
                  other  disposition  with  respect  to  any  real  or  personal
                  property  owned by the  Company  which is not in the  ordinary
                  course of business.

Cause:            Cause as to the  termination of any Director under Section 4.2
                  (c)  shall  be  defined  as any  breach  of the  terms of this
                  Agreement,   breach  of  any  term  of  employment   including
                  violation of policies and procedures of the Company, fraud, or
                  willful misconduct, by the Director who is being terminated.

Code:             The  Internal  Revenue  Code of 1986,  as amended from time to
                  time (including corresponding provisions of subsequent revenue
                  laws).

Company:          American  Racing and  Entertainment,  LLC, as formed under the
                  Articles and as operating under this Agreement.

Company
Nonrecourse
Liabilities:      Nonrecourse  liabilities (or portions  thereof) of the Company
                  for which no Member (or a related person within the meaning of
                  Treasury  Regulation  section 1.752-4) bears the economic risk
                  of loss.

                                      -46-
<PAGE>

Conceptual
Plans and
Specifications:   The Conceptual Plans and  Specifications  for a Gaming Complex
                  (or any portion thereof), approved by the Board.

Consumer Price
Index:            The Consumer Price Index for All Urban Consumers most recently
                  published  by the  Bureau of Labor  Statistics  of the  United
                  States  Department of Labor,  U.S.  City  Average,  all items,
                  (1997-98=100),  or any successor or replacement index thereto.
                  If the Consumer Price Index shall,  after the date hereof,  be
                  converted  to a  different  standard  reference  base or shall
                  otherwise be revised,  any determination  hereunder which uses
                  the  Consumer  Price  Index shall be made with the use of such
                  conversion  factor,   formula  or  table  for  converting  the
                  Consumer  Price  Index as may be  published  by the  Bureau of
                  Labor  Statistics,  or, if said  Bureau  shall not publish the
                  same, then with the sue of such conversion factor,  formula or
                  table as may be published by Prentice Hall,  Inc., or, failing
                  such publication, by any other nationally recognized publisher
                  of similar  statistical  information.  If the  Consumer  Price
                  Index  shall  cease to be  published,  then for the purpose of
                  this  Agreement  there shall be  substituted  for the Consumer
                  Price   Index  such  other   similar   index  as  the  Company
                  accountants  shall  determine  which  measures  changes in the
                  relative  purchasing  power of United States currency over the
                  term of this Agreement.

Contribution
Agreement:        The  Contribution   Agreement  dated  the  same  date  as  the
                  execution date of this Agreement,  between the Company, Nevada
                  Gold,  TrackPower,  Inc. and Southern Tier  Acquisition,  LLC,
                  relating to the contribution of certain assets to the Company.

Cost Budget:      The Cost Budget for all development and construction costs for
                  each  Gaming  Complex (or any part  thereof),  approved by the
                  Board.

Debt:             (a) all liabilities and obligations,  contingent or otherwise:
                  (i) in respect to borrowed  money (whether or not the recourse
                  of the lender is to the whole or the assets of the  Company or
                  only to a portion  thereof);  (ii) evidenced by bonds,  notes,
                  debentures  or similar  instruments;  (iii)  representing  the
                  balance  deferred  and  unpaid  of the  purchase  price of any
                  property  or  services,  if  and  to  the  extent  any  of the
                  foregoing  described  in  clauses  (i),  (ii) and (iii)  would
                  appear as a  liability  on the balance  sheet of the  Company;
                  (iv) evidenced by bankers'  acceptances or similar instruments
                  issued or  accepted  by banks;  (v) for the  payment  of money
                  relating to a capitalized lease obligation;  or (vi) evidenced
                  by a letter  of  credit or  reimbursement  obligation  of such
                  person  with  respect  to  any  letter  of  credit;   (b)  all
                  liabilities  of others of the kind  described in the preceding
                  clause  (a)  that  the  Company  has  guaranteed  or  that  is

                                      -47-
<PAGE>

                  otherwise its legal liability; and (c) all obligations secured
                  by a lien to which the property or assets (including,  without
                  limitation,  leasehold  interests  and any other  tangible  or
                  intangible  property  rights)  of  the  Company  are  subject,
                  whether or not the obligations secured thereby shall have been
                  assumed  by  or  shall   otherwise  be  the  Company's   legal
                  liability, provided, that the amount of such obligations shall
                  be  limited  to the  lesser  of the fair  market  value of the
                  assets or property to which such lien  attaches and the amount
                  of the obligation so secured.

Director:         Any Person named in the  Articles and any Person  elected as a
                  Director of the Company as  provided  in this  Agreement,  but
                  does not include any Person who has ceased to be a Director of
                  the Company.

Dissolution:      The dissolution of the Company as provided in Section 12.1.

Distribution:     A distribution  of money or other property made by the Company
                  with respect to a Membership Interest.

EBIDTA:           Earnings of the Company before interest,  depreciation,  taxes
                  and amortization.

Fair Market
Value:            Fair Market Value as defined in Section 6.1.

Final Plans and
Specifications:   The final plans and  specifications  for a Gaming  Complex (or
                  any portion thereof), approved by the Board.

Fiscal Year:      The fiscal and taxable year of the Company as determined under
                  this  Agreement,  including  both  12-month and short  taxable
                  years.

Gaming Authority  Any national,  state,  tribal,  local and other  governmental,
                  regulatory  and  administrative   authority,   agency,  board,
                  commission  or  official  responsible  for or  involved in the
                  regulation of gaming  activities of the Company or its Members
                  in any jurisdiction.

Gaming Complex:   For each of the  Vernon  Downs  Complex  and the  Tioga  Downs
                  Complex,  the Project Site,  and any building  structures  and
                  improvements  construed on or affixed to the Project Site; and
                  all roads,  utilities,  dredging,  grading,  landscaping,  and
                  other  off-site  improvements  constructed or developed by the
                  Company on or in support of the Project Site.

Gaming
Facilities:       Any and all buildings  within a Gaming  Complex  including but
                  not  limited  to  hotel,  parking,   gaming,   restaurant  and
                  entertainment  facilities and all surface parking lots serving
                  such buildings.

                                      -48-
<PAGE>

Gaming Laws:      The laws  pursuant  to which any  Gaming  Authority  possesses
                  regulatory,  licensing or permit  authority over gaming within
                  any jurisdiction.

Gaming License:   Any  license,  permit,  authorization,  consent  or  favorable
                  determination from or issued by a Gaming Authority pursuant to
                  any Gaming Laws.

General Manager:  The General Manager for the Gaming Complexes.

Indemnified
Person:           As to any Member indemnified under Article 10, such Member and
                  any  Affiliate  of such Member  (other  than the  Indemnifying
                  Member),  and  any  agents,  attorneys,   officers,   members,
                  directors,  stockholders  or  employees of such Member or such
                  Affiliate.

Indemnifying
Member:           The  Member  that woes any  amount or duty to any  Indemnified
                  Person pursuant to Article 10.

Initial DIP
Financing:        The  debtor-in-possession  financing  in  the  net  amount  of
                  $1,414,000  provided to Mid-State  Raceway,  Inc. by VDA. Such
                  amount is net of (a)  loans  advanced  by Nevada  Gold for the
                  purpose of funding  any  portion of such  debtor-in-possession
                  financing,  which loans have been converted to equity pursuant
                  to Section 7.1,  and (b) any loans  advanced by the Company to
                  Mid-State  Raceway,  Inc. from and after the execution date of
                  this Agreement.

Interest Rate:    The prime  interest  rate of J.P.  Morgan  Chase & Co. (or any
                  successor bank), plus 2%.

Licensed Member:  Any Member to which a Gaming  License has been granted,  or to
                  whose Affiliate a Gaming License has been granted.

Liquidation:      The  process of  terminating  the  Company  and winding up its
                  business under Article 13 after its Dissolution.

Losses:           The  net  losses,   deductions  and  credits  of  the  Company
                  determined in accordance  with generally  accepted  accounting
                  principles and as reported separately or in the aggregate,  as
                  appropriate,  on the tax  returns  of the  Company  filed  for
                  federal income tax purposes.

Major Decisions   As defined in Section 4.1(c).

Management
Company           Nevada Gold NY, Inc.

Material
Modification:     A modification  of addition to or deletion from the Conceptual
                  Plans and Specifications or the Final Plans and Specifications
                  for a Gaming Complex,  including without limitation,  the sign
                  layouts as well as the use of proprietary marks.

                                      -49-
<PAGE>

Member(s):        Each of the Persons  executing this Agreement as a Member,  or
                  who is subsequently  admitted as a substitute or an additional
                  Member as provided in this  Agreement,  but not  including any
                  Person who has ceased to be a Member in the Company.

Member Nonrecourse
Debt:             Any nonrecourse debt of the Company (or portions  thereof) for
                  which any Member (or a related  person  within the  meaning of
                  Treasury  Regulation  section 1.752-4) bears the economic risk
                  of loss.

Member Nonrecourse
Deductions:       The amount of deductions, losses and expenses equal to the net
                  increase  during the year in Minimum  Gain  attributable  to a
                  Member  Nonrecourse  Debt,  reduced  (but not  below  zero) by
                  proceeds of such Member  Nonrecourse Debt  distributed  during
                  the year to the Members who bear the economic risk of loss for
                  such  debt,  as  determined  in  accordance   with  applicable
                  Regulations.

Membership
Interest:         The Membership Interests established under Section 3.1 of this
                  Agreement;  with  respect to each Person  owning a  Membership
                  Interest in the Company,  all of the  Membership  Interests of
                  such Person in the Company expressed as a Percentage.

Minimum Gain:     With respect to Company Nonrecourse Liabilities, the amount of
                  gain that would be  realized  by the Company if it disposed of
                  (in a taxable  transaction) all properties that are subject to
                  Company  Nonrecourse  Liabilities in full satisfaction of such
                  liabilities,    computed   in   accordance   with   applicable
                  Regulations. With respect to each Member Nonrecourse Debt, the
                  amount of gain that  would be  realized  by the  Company if it
                  disposed of (in a taxable  transaction)  the property  that is
                  subject to such Member  Nonrecourse Debt in full  satisfaction
                  of  such  debt,   computed  in  accordance   with   applicable
                  Regulations.

Net Sales Cash:   Cash receipts of the Company from a Capital Transaction,  less
                  payment  of  fees  or   expenses   related   to  the   Capital
                  Transaction.

Nevada Gold:      Nevada Gold NY,  Inc., a New York  corporation,  owned 100% by
                  Nevada Gold & Casinos, Inc.

New York
Regulatory
Authority         A Gaming  Authority  whose  approval is necessary in order for
                  the Company to obtain or maintain Gaming Licenses with respect
                  to the Gaming Complexes.

                                      -50-
<PAGE>

Non-Arbitrable
Decisions:        As defined in Section 4.1(d).

Non-Compliant
Member            As defined in Sections 15.2 or 15.3(b) hereof, as applicable.

Notice:           Written  notice  (including  any  communication  or delivery),
                  actually given pursuant to Section 17.10.

Operating Budget: The Operating Budget defined in Section 4.1.

Percentages:      The  percentage  ownership  of a  Member  in the  Company,  as
                  initially  set forth in  Section  3.1;  subject,  however,  to
                  appropriate  adjustment in the event of any dilution  pursuant
                  to  Section  7.2,  in the event of any  transfer  pursuant  to
                  Articles  14 or 15, or as may be  otherwise  provided  in this
                  Agreement.

Permitted
Transferee:       A  person  described  in  Section  14.3 to  whom a  Membership
                  Interest may be transferred without compliance with a right of
                  first refusal.

Person:           An  individual,   corporation,  trust,  partnership,   limited
                  liability    company,     limited    liability    association,
                  unincorporated organization, association or other entity.

Profits:          The  net  income  and  gains  of  the  Company  determined  in
                  accordance with generally accepted  accounting  principles and
                  as reported separately or in the aggregate, as appropriate, on
                  the tax  returns of the Company  filed for federal  income tax
                  purposes.

Project Site(s):  The sites on which  the Tioga  Downs  Complex  and the  Vernon
                  Downs Complex are located.

Racing Manager:   The manager for the Racing Operations.

Racing
Operations:       As defined in Section 4.5 hereof.

Regulations:      The Regulations (including temporary regulations)  promulgated
                  under  the  Code,  as  amended  from  time to time  (including
                  corresponding provisions of succeeding regulations).

Reserves:         With  respect  to any  Fiscal  Period,  cash set  aside by the
                  Company for working capital and to pay taxes, insurance,  debt
                  service, repairs, capital replacements,  capital improvements,
                  contingent liabilities or other costs and expenses incident to
                  the  ownership or operation of the  Company's  properties,  as
                  estimated in good faith by the Board.

                                      -51-
<PAGE>

Scott/Vestin
Settlement
Payment:          The amount of $526,550 paid by Nevada Gold to Vestin Mortgage,
                  Inc., Shawn Scott,  Victoria Scott, All Capital,  LLC, and All
                  Vernon Acquisition, LLC on September 12, 2005.

Southern Tier:    Southern Tier Acquisition II LLC, a New York limited liability
                  company owned 36.364% by Jeff Gural.

TDR Loan:         The loan in the original  principal  amount of $1,125,000 made
                  by Nevada Gold to Tioga Downs  Racetrack,  LLC, of which there
                  is an  outstanding  principal  balance  of  $1,001,550  on the
                  execution date of this Agreement.

Third Party:      With respect to any Member, a Person other than an Affiliate.

Third Party
Offer:            A bona  fide,  non-collusive,  binding,  arm's-length  written
                  offer from a Third Party stated in terms of U.S. dollars.

Tioga Downs
Complex:          Tioga Downs Racetrack, a harness track located in Nichols, New
                  York,  located on approximately 145 acres of real estate,  and
                  all improvements located thereon.

Tioga Downs
Contributed
Assets:           100% of the ownership interests in Tioga Downs Racetrack,  LLC
                  and Tioga Downs Management Co., Inc.

TrackPower:       TrackPower, Inc., a Wyoming corporation.

Transfer:         A  sale,  exchange,  assignment  or  other  disposition  of  a
                  Membership Interest, whether voluntary or by operation of law.

Transferee:       A Person  to whom a  Membership  Interest  is  transferred  in
                  compliance with this Agreement.

Transferor:       A Person who  transfers a  Membership  Interest in  compliance
                  with this Agreement.

Trigger Date:     The later of the date of receipt by the Company and receipt by
                  all other  Members of a notice  from a Licensed  Member  under
                  Sections  15.2 or 15.3 that it intends to exercise  the rights
                  set forth in Section 15.4.

Unanimous
Decisions         As defined in Section 4.1(b).

Unreturned
Capital
Contributions:    The total amount of Capital  Contributions made to the Company
                  by a Member  less the  total  distributions  received  by that
                  Member.  In  no  event  will  the  total  Unreturned   Capital
                  Contribution of a Member be less than zero.

                                      -52-
<PAGE>

Unsuitable Person (i) any  Person  who,  if the  Person is an  Affiliate  of the
                  Company or any Member,  will cause the Company,  any Member or
                  any  Affiliate  of any  Member  (A) not to obtain  any  Gaming
                  License,  or (B) to  have a  Gaming  License  revoked  or note
                  renewed,  or (ii) a Member  who is  properly  determined  by a
                  second  Member to be an Unsuitable  Person in accordance  with
                  Sections 15.2 or 15.3(b) for reasons that remain unremedied.

VDA:              Vernon Downs  Acquisition,  LLC, a Delaware limited  liability
                  company owned 50% by Southern Tier and 50% by TrackPower, Inc.

Vernon Downs
Complex:          Vernon Downs Raceway,  a harness track located in Vernon,  New
                  York,  located on approximately 600 acres of real estate,  and
                  all improvements  located  thereon,  including a 47,700 square
                  foot grandstand, clubhouse, 34,000 square foot VLT facility, a
                  175-room hotel, surface parking and other amenities.

Vernon Downs
Contributed
Assets:           100% of the ownership interests in VDA.

Withdrawal:       The  occurrence  of an event with  respect  to a Member  which
                  terminates  membership in the Company,  as provided in Section
                  12.2.

                                      -53-
<PAGE>

                                   EXHIBIT "B"

                        Constituent Interests in Members

Directors, Officers and Owners of Southern Tier:

    Manager:                   Jeffrey Gural
    Owners:                    Jeffrey R. Gural            36.364%
                               Aaron Gural                 18.182%
                               Barry Gosin                  9.091%
                               Peter Kleinhans              9.091%
                               Ted Gewertz                  7.273%
                               Buzzy Geguld                 5.455%
                               Gerry Ritterman              5.455%
                               James Kuhn                   4.545%
                               Howard Kaye                  2.727%
                               Marc Holiday                 1.817%
                               TOTAL                          100%

Directors, Officers and Owners (5% or more) of TrackPower, Inc.

    Directors:                 John G. Simmonds, Chairman
                               Kenneth J. Adelberg
                               Edward M. Tracy
                               James Ahearn

    Officers:                  Edward M. Tracy, CEO and President
                               Gary Hokkanen, CFO and Treasurer
                               Carrie Weiler, Secretary

    Shareholders (5% or more): Paul Marsiglio
                               Asolare II, LLC

Directors, Officers and Owners (5% or more) of Nevada Gold & Casinos, Inc.

    Directors:                 H. Thomas Winn
                               Paul Burkett
                               Wayne White
                               Francis Ricci
                               William Jayroe
                               Joe Juliano

    Officers:                  H. Thomas Winn, CEO
                               Jon Arnesen, President & COO
                               Cathryn L. Porter, General Counsel and Secretary
                               Don Brennan, Vice President - Development

    Shareholders (5% or more): Clay County Holdings, Inc.

                                      -54-Exhibit 10.2

                             CONTRIBUTION AGREEMENT

      THIS CONTRIBUTION  AGREEMENT (this  "Agreement"),  dated as of November 8,
2005,  is entered  into by and among  TrackPower,  Inc.,  a Wyoming  corporation
("TrackPower"),  Southern Tier  Acquisition,  LLC, a New York limited  liability
company  ("Southern  Tier"),  Nevada Gold & Casinos,  Inc., a Nevada corporation
("Nevada Gold") and American Racing and  Entertainment,  LLC, a New York limited
liability  company  ("American  Racing").  The  Parties  to this  agreement  are
collectively referred to as "Parties".

                                    RECITALS

      WHEREAS, the following actions have been taken prior to the date hereof:

      1. TrackPower and Southern Tier formed Tioga Downs Racetrack, LLC ("TDR"),
      which  is 50%  owned  by  TrackPower  and  50%  owned  by  Southern  Tier.
      TrackPower and Southern Tier formed Vernon Downs Acquisition, LLC ("VDA"),
      which is 50% owned by TrackPower and 50% owned by Southern Tier.

      2. On June 21, 2004,  TDR  purchased  the assets  described in Exhibit "A"
      attached  hereto  and  incorporated  herein  for all  purposes  (the  "TDR
      Assets") from Tioga Park, LLC, Chapter 11 Debtor in Possession.

      3.  On  September  13,  2005,  VDA  submitted  a  Third  Modified  Amended
      Disclosure  Statement in the Bankruptcy Court for the Northern District of
      New York relating to the Chapter 11 Petition  filed by Mid-State  Raceway,
      Inc. and  Mid-State  Development  Corporation,  and VDA has paid legal and
      consulting  fees in the  amount  of  $321,360  and has  made  loans to the
      debtor-in-possession of $1,889,000 ($475,000 of which was funded by a loan
      from Nevada Gold to TDR) (the "VDA Assets").

      4. On September  8, 2005,  Nevada Gold made a loan to TDR in the amount of
      $1,125,000, of which $1,001,550 in principal is currently outstanding, and
      has agreed to make capital  contributions  to American Racing in an amount
      equivalent to the cash equity  contributed by TrackPower and Southern Tier
      to VDA and TDR as more  particularly  provided in the Operating  Agreement
      for American Racing (the "Nevada Gold Asset").

      WHEREAS, at the Effective Time, each of the following matters shall occur:

      1. TrackPower  will contribute its 50% ownership  interests in TDR and VDA
      (the  "TrackPower  Interests")  to American  Racing in exchange  for a 25%
      ownership  interest  in  American  Racing to be held by  TrackPower  or an
      affiliate of TrackPower.

      2. Southern Tier will  contribute  its 50% ownership  interests in TDR and
      VDA (the "Southern Tier  Interests") to American  Racing in exchange for a
      25% ownership  interest in American  Racing to be held by Southern Tier or
      an affiliate of Southern Tier.

      3. Nevada Gold will contribute the Nevada Gold Asset to American Racing in
      exchange  for a 50%  ownership  interest in American  Racing to be held by
      Nevada Gold or an affiliate of Nevada Gold.

                                       -1-
<PAGE>

      NOW,  THEREFORE,   in  consideration  of  their  mutual  undertakings  and
agreements hereunder, the Parties undertake and agree as follows:

                                    ARTICLE 1

                                  CONTRIBUTION

      Section 1.1  Contribution  by  TrackPower to American  Racing.  TrackPower
hereby contributes, grants, bargains, conveys, assigns, transfers, sets over and
delivers to American  Racing,  its successors and assigns,  for its use forever,
all right, title and interest in and to the TrackPower  Interests,  and American
Racing hereby accepts the TrackPower  Interests as a contribution to the capital
of American Racing.

      TO HAVE AND TO HOLD the  TrackPower  Interests unto American  Racing,  its
successors  and  assigns,   together  with  all  and  singular  the  rights  and
appurtenances thereto in anywise belonging,  subject,  however, to the terms and
conditions stated in this Agreement, forever.

      Section 1.2  Contribution  by Southern Tier to American  Racing.  Southern
Tier hereby contributes,  grants, bargains,  conveys,  assigns,  transfers, sets
over and delivers to American  Racing,  its successors and assigns,  for its use
forever,  all right,  title and interest in and to the Southern Tier  Interests,
and American  Racing  hereby  accepts such  interests as a  contribution  to the
capital of American Racing.

      TO HAVE AND TO HOLD the Southern Tier Interests unto American Racing,  its
successors  and  assigns,   together  with  all  and  singular  the  rights  and
appurtenances thereto in anywise belonging,  subject,  however, to the terms and
conditions stated in this Agreement, forever.

      Section 1.3  Contribution by Nevada Gold to American  Racing.  Nevada Gold
hereby contributes, grants, bargains, conveys, assigns, transfers, sets over and
delivers to American  Racing,  its successors and assigns,  for its use forever,
all right,  title and  interest in and to the Nevada Gold  Asset,  and  American
Racing  hereby  accepts  such  interests  as a  contribution  to the  capital of
American Racing.

      TO HAVE AND TO HOLD the  Nevada  Gold  Asset  unto  American  Racing,  its
successors  and  assigns,   together  with  all  and  singular  the  rights  and
appurtenances thereto in anywise belonging,  subject,  however, to the terms and
conditions stated in this Agreement, forever.

                                       -2-
<PAGE>

                                    ARTICLE 2

                               FURTHER ASSURANCES

      Section  2.1  Further  Assurances.  From time to time after the  Effective
Time,  and  without  any further  consideration,  the Parties  agree to execute,
acknowledge and deliver all such additional deeds,  assignments,  bills of sale,
conveyances,  instruments,  notices, releases, acquittances and other documents,
and will do all such other acts and things,  all in accordance  with  applicable
law,  as may be  necessary  or  appropriate  (a) more  fully to assure  that the
applicable Parties own all of the properties, rights, title, interests, estates,
remedies, powers and privileges granted by this Agreement, or which are intended
to be so  granted,  or (b)  more  fully  effectively  to vest in the  applicable
Parties and their respective  successors and assigns beneficial and record title
to the interests  contributed  and assigned by this  Agreement or intended to be
and (c) more fully and  effectively to carry out the purposes and intent of this
Agreement.

                                    ARTICLE 3

                         REPRESENTATIONS AND WARRANTIES

      Section 3.1 Representations of Parties Other than American Racing. Each of
the Parties to this  Agreement  other than  American  Racing (the  "Contributing
Parties")  hereby  represents  and  warrants  to  American  Racing and the other
Parties as follows as of the date of this Agreement:

      (a)   Such Contributing Party has been duly formed or incorporated, as the
            case may be, and is validly existing in good standing under the laws
            of its jurisdiction of formation or  incorporation,  as the case may
            be, with all corporate, limited liability company or partnership, as
            the case may be,  power and  authority  necessary to own or hold its
            properties and conduct the businesses in which it is engaged and, to
            execute  and  deliver  this   Agreement   and  to   consummate   the
            transactions  contemplated hereby, and, as applicable, to assume the
            obligations  and  liabilities  being  assumed by it pursuant to this
            Agreement.

      (b)   Such  Contributing  Party  is duly  registered  or  qualified  to do
            business and is in good standing as a foreign  corporation,  limited
            liability  company  or limited  partnership,  as the case may be, in
            each jurisdiction in which its ownership or lease of property or the
            conduct  of  its   businesses   requires   such   qualification   or
            registration.

      (c)   All corporate,  partnership and limited liability company action, as
            the case may be, required to be taken by such Contributing  Party or
            any  of  their   securityholders,   partners   or  members  for  the
            authorization,  execution  and  delivery of this  Agreement  and the
            consummation of the transactions  contemplated by this Agreement has
            been validly taken.

      (d)   This  Agreement  has been  duly  authorized,  validly  executed  and
            delivered by such  Contributing  Party,  and constitutes a valid and
            legally binding  agreement of such Contributing  Party,  enforceable
            against such Contributing Party in accordance with its terms.

      (e)   None of the (i) the  execution,  delivery  and  performance  of this
            Agreement by such  Contributing  Party, or (ii)  consummation of the
            transaction  contemplated hereby (A) conflicts or will conflict with
            or constitutes or will  constitute a violation of the certificate of
            limited partnership or agreement of limited partnership, certificate
            of formation or limited liability company agreement,  certificate or
            articles  of  incorporation   or  bylaws  or  other   organizational
            documents of such Contributing Party, (B) conflicts or will conflict
            with or constitutes or will  constitute a breach or violation of, or
            a default (or an event  that,  with notice or lapse of time or both,

                                       -3-
<PAGE>

            would  constitute  such a default) under,  any indenture,  mortgage,
            deed  of  trust,  loan  agreement,   lease  or  other  agreement  or
            instrument to which any of such Contributing  Party is a party or by
            which such Contributing Party or any of its properties may be bound,
            (C) violates or will violate any statute,  law or  regulation or any
            order, judgment,  decree or injunction of any Governmental Authority
            or body having  jurisdiction over such Contributing Party, or any of
            its  properties  or assets,  or (D)  results  or will  result in the
            creation or imposition of any lien,  charge or encumbrance  upon any
            property  or assets of such  Contributing  Party,  which  conflicts,
            breaches, violations,  defaults or liens, in the case of clauses (B)
            or (D),  would,  individually  or in the aggregate,  have a material
            adverse  effect  on  (i)  the   transaction   contemplated  by  this
            Agreement,  (ii)  the  business,  properties  or  prospects  of such
            Contributing Party,  whether or not arising from transactions in the
            ordinary  course  of  business  or (iii)  the  ownership  and use by
            American  Racing of the assets and interests  being  transferred  to
            American Racing  hereunder.  "Governmental  Authority" means (i) the
            United  States  of  America,  (ii)  any  state,  province,   county,
            municipality  or other  governmental  subdivision  within the United
            States of America,  (iii) any court or any governmental  department,
            commission,  board, bureau,  agency or other  instrumentality of the
            United  States  of  America,  or of  any  state,  province,  county,
            municipality  or stockholder of the  Contributing  Party or American
            Racing or the assets of the Contributing Parties or American Racing.

      Section 3.2  Representations  of TrackPower.  TrackPower hereby represents
and warrants to American Racing,  Southern Tier and Nevada Gold as follows as of
the date of this Agreement:

      (a)   Immediately   prior  to  the  Effective  Time  of  this   Agreement,
            TrackPower  owns  50%  of  the  issued  and  outstanding   ownership
            interests in each of TDR and VDA;  such  membership  interests  have
            been duly  authorized  and  validly  issued in  accordance  with the
            organizational  documents  agreement  of  each of TDR  and  VDA,  as
            amended  and/or  restated  on or  prior  to the  Effective  Time and
            TrackPower  owns  such  ownership  interests  free and  clear of all
            liens,  encumbrances,  contracts,  liabilities,  security interests,
            equities, charges or claims (collectively, "Liens").

      (b)   The TDR  Assets  and the VDA  Assets are free and clear of all Liens
            except as set forth in Exhibit "B" hereof.

      (c)   As of the Effective  Time,  after giving effect to the  transactions
            contemplated by this Agreement, American Racing will own 100% of the
            issued and outstanding  ownership  interests in TDR and VDA free and
            clear of all Liens.

      Section  3.3  Representations  of  Southern  Tier.  Southern  Tier  hereby
represents  and  warrants  to  American  Racing,  TrackPower  and Nevada Gold as
follows as of the date of this Agreement:

      (a)   Immediately prior to the Effective Time of this Agreement,  Southern
            Tier owns 50% of the issued and outstanding  ownership  interests in
            each of TDR and in VDA;  such  ownership  interests  have  been duly
            authorized and validly issued in accordance with the  organizational
            documents of each of TDR and VDA, as amended  and/or  restated on or
            prior to the Effective  Time and Southern Tier owns such  membership
            interests free and clear of all Liens.

      (b)   The TDR  Assets  and the VDA  Assets are free and clear of all Liens
            except as set forth in Exhibit "B" hereof.

                                       -4-
<PAGE>

      (c)   As of the Effective  Time,  after giving effect to the  transactions
            contemplated by this Agreement, American Racing will own 100% of the
            issued and outstanding  ownership  interests in TDR and VDA free and
            clear of all Liens.

      Section 3.4  Representations of Nevada Gold. Nevada Gold hereby represents
and warrants to American  Racing,  TrackPower and Southern Tier as follows as of
the date of this Agreement:

      (a)   Immediately  prior to the Effective Time of this  Agreement,  Nevada
            Gold is the holder of 100% of the  Nevada  Gold Asset free and clear
            of all Liens.

      (b)   As of the Effective  Time,  after giving effect to the  transactions
            contemplated by this  Agreement,  American Racing will be the holder
            of 100% of the Nevada Gold Asset free and clear of all Liens.

                                    ARTICLE 4

                                 EFFECTIVE TIME

      The  Effective  Time of this  Agreement  shall  be the  date  and  time of
execution of the Operating Agreement of American Racing by Nevada Gold, Southern
Tier, and TrackPower,  or their respective affiliates.  Notwithstanding anything
contained in this Agreement to the contrary, none of the provisions of Article 1
of this  Agreement  shall be operative  or have any effect  until the  Effective
Time, at which time all the provisions of Article 1 of this  Agreement  shall be
effective and operative in accordance  with Article 6, without further action by
any party hereto.

                                    ARTICLE 5

                                 INDEMNIFICATION

      Section 5.1 Indemnification.  Each Party (other than American Racing) (the
"Indemnifying Party") shall and does hereby indemnify,  defend and hold harmless
American  Racing and each other Party and its affiliates,  officers,  directors,
employees,  agents or independent  contractors (the "Indemnified  Persons") from
and against any loss, cost, or damage whatsoever (including reasonable attorneys
fees)  resulting from any breach of the  representations  and warranties made by
the  Indemnifying  Party  under this  Agreement,  or any losses or expenses as a
result of or in connection with any breach of this Agreement.

      Section 5.2. Procedures.

      (a)   Promptly after the assertion of any claim by a third party which may
            give rise to a claim for indemnification  from an Indemnifying Party
            under  this  Agreement,  an  Indemnified  Person  shall  notify  the
            Indemnifying   Party  in  writing  of  such  claim  and  advise  the
            Indemnifying Party whether the Indemnified Person intends to contest
            such claim.

      (b)   The  Indemnified  Person  shall  permit  the  Indemnifying  Party to
            contest and defend against such claim, at the  Indemnifying  Party's
            expense,  if the Indemnifying Party has confirmed to the Indemnified
            Person in  writing  that it agrees  that the  Indemnified  Person is
            entitled  to  indemnification  hereunder  in respect of such  claim,
            unless the Indemnified Person can establish, by reasonable evidence,
            that the conduct of its defense by the  Indemnifying  Party could be
            reasonably  likely to prejudice such  Indemnified  Person due to the

                                       -5-
<PAGE>

            nature of the claims  presented  or by virtue of a conflict  between
            the  interests  of such  Indemnified  Persons and such  Indemnifying
            Party and another  Indemnified Person whose defense has been assumed
            by the Indemnifying  Party.  Notwithstanding  a determination by the
            Indemnifying  Party to contest such claim,  the  Indemnified  Person
            shall  have  the  right to be  represented  by its own  counsel  and
            accountants at its own expense.  In any case, the Indemnified Person
            shall make available to the Indemnifying Party and its attorneys and
            accountants,  at all reasonable  times during normal business hours,
            all books,  records,  and other documents in its possession relating
            to such  claim.  The  party  contesting  any  such  claim  shall  be
            furnished all reasonable  assistance in connection  therewith by the
            other  party  (with  reimbursement  of  reasonable  expenses  by the
            Indemnifying  Party).  If the Indemnifying  Party fails to undertake
            the defense of or to settle or pay any such third-party claim within
            fifteen (15) days after the  Indemnified  Person has given notice to
            the  Indemnifying  Party  advising  the  Indemnifying  Party of such
            claim, or if the  Indemnifying  Party,  after having given notice to
            the  Indemnified  Person that it intends to  undertake  the defense,
            fails  forthwith  to  defend,  settle  or pay such  claim,  then the
            Indemnified  Person may take any and all necessary action to dispose
            of such claim including,  without limitation, the settlement or full
            payment thereof upon such terms as it shall deem appropriate, in its
            sole discretion.

      (c)   The  Indemnifying  Party  shall  not  consent  to the  terms  of any
            compromise or settlement of any  third-party  claim  defended by the
            Indemnifying Party in accordance  herewith (other than terms related
            solely  to  the  payment  of  money   damages  and  only  after  the
            Indemnifying  Party has furnished the  Indemnified  Person with such
            evidence as the  Indemnified  Person may  reasonably  request of the
            Indemnifying   Party's   capacity  and  capability   (financial  and
            otherwise)  to pay promptly the amount of such money damages at such
            times as provided in the compromise or settlement) without the prior
            written  consent  of the  Indemnified  Person if as a result of such
            compromise or settlement such Indemnified  Person could be adversely
            affected.

      (d)   Any claim for  indemnification  under this Agreement  which does not
            result  from  the  assertion  of a claim by a third  party  shall be
            asserted by written  notice given by the  Indemnified  Person to the
            Indemnifying  Party. Such Indemnifying  Party shall have a period of
            thirty  (30)  days  within  which  to  respond   thereto.   If  such
            Indemnifying  Party does not  respond  within  such  thirty (30) day
            period,  such  Indemnifying  Party shall be deemed to have  accepted
            responsibility  to make payment,  and shall have no further right to
            contest the validity of such claim. If the  Indemnifying  Party does
            respond within such thirty (30) day period and rejects such claim in
            whole or in part,  such  Indemnified  Person shall be free to pursue
            such  remedies as may be  available  to such party under  applicable
            laws, regulations, rules or orders.

      Section 5.3 Mitigation.  Each  Indemnifying  Party and Indemnified  Person
shall use  reasonable  efforts and shall consult and  cooperate  with each other
with  a  view  towards  mitigating   claims,   losses,   liabilities,   damages,
deficiencies,   costs  and   expenses   that  may  give   rise  to  claims   for
indemnification.

                                       -6-
<PAGE>

      Section 5.4 Payment. Each Indemnifying Party agrees to pay any amounts due
hereunder (a) within ten (10) days of written notice in respect of its indemnity
obligations  which it has  accepted or which it has been  deemed to accept;  (b)
within  five  (5)  days  of any  final  adjudication  by a  court  of  competent
jurisdiction  of any indemnity  obligations  as to which it has not so accepted;
and (c) as  reasonable  attorneys'  fees and other costs of defense are incurred
and invoiced.

      Section 5.5 Insurance.  The indemnification  provisions of this Article do
not limit an Indemnified Person's right to recover under any insurance policy or
other financial arrangement (including any self-insurance, trust fund, letter of
credit, guaranty or surety). If, with respect to any liability,  any Indemnified
Person receives an insurance or other  indemnification  payment which,  together
with any  indemnification  payment made by the Indemnifying  Party,  exceeds the
amount of such liability,  then such Indemnified  Person will immediately  repay
the  indemnification  payment  (but only to the  extent of such  excess)  to the
Indemnifying Party.

                                       -7-
<PAGE>

                                    ARTICLE 6

                                  MISCELLANEOUS

      Section 6.1  Successors and Assigns.  The Agreement  shall be binding upon
and inure to the  benefit of the  Parties and their  respective  successors  and
assigns.

      Section 6.2 No Third Party Rights.  The  provisions of this  Agreement are
intended to bind the Parties as to each other and are not intended to and do not
create  rights in any other person or confer upon any other person any benefits,
rights  or  remedies  and  no  person  is or is  intended  to be a  third  party
beneficiary of any of the provisions of this Agreement.

      Section 6.3 Counterparts.  This Agreement may be executed in any number of
counterparts,  all of which together shall  constitute one agreement  binding on
the Parties hereto.

      Section 6.4  Governing  Law.  This  Agreement  shall be  governed  by, and
construed in accordance  with,  the laws of the State of New York  applicable to
contracts  made and to be  performed  wholly  within such state  without  giving
effect to conflict of law principles thereof.

      Section 6.5  Severability.  If any of the provisions of this Agreement are
held by any court of  competent  jurisdiction  to  contravene,  or to be invalid
under,  the laws of any  political  body  having  jurisdiction  over the subject
matter hereof,  such contravention or invalidity shall not invalidate the entire
Agreement.  Instead,  this Agreement shall be construed as if it did not contain
the  particular  provision  or  provisions  held to be invalid and an  equitable
adjustment  shall be made and necessary  provision added so as to give effect to
the  intention  of the Parties as  expressed  in this  Agreement  at the time of
execution of this Agreement.

      Section 6.6 Amendment or  Modification.  This  Agreement may be amended or
modified  from time to time only by the written  agreement  of all the  Parties.
Each such instrument  shall be reduced to writing and shall be designated on its
face as an Amendment to this Agreement.

      Section 6.7  Integration.  This Agreement and the  instruments  referenced
herein (including the Operating Agreement) supersede all previous understandings
or agreements among the Parties,  whether oral or written, with respect to their
subject  matter.   This  document  and  such  instruments   contain  the  entire
understanding  of the  Parties  with  respect to the subject  matter  hereof and
thereof. No understanding, representation, promise or agreement, whether oral or
written,  is  intended  to be or  shall  be  included  in or  form  part of this
Agreement  unless it is contained in a written  amendment hereto executed by the
Parties hereto after the date of this Agreement.

      Section 6.8 Bill of Sale; Assignment. To the extent required and permitted
by applicable  law,  this  Agreement  shall also  constitute a "bill of sale" or
"assignment" of the assets and interests referenced herein.

      IN WITNESS  WHEREOF,  this Agreement has been duly executed by the Parties
hereto as of the date first above written.

NEVADA GOLD:

NEVADA GOLD & CASINOS, INC.

                                       -8-
<PAGE>

By:
   -------------------------------------
   H. Thomas Winn, President

TRACKPOWER:

TRACKPOWER, INC.

By:
   -------------------------------------
   John Simmonds
   Chairman

By:
   -------------------------------------
   Ed Tracy
   President and Chief Executive Officer

SOUTHERN TIER:

SOUTHERN TIER ACQUISITION, LLC

By:
   -------------------------------------
   Jeffrey Gural, Manager

AMERICAN RACING:

AMERICAN RACING AND ENTERTAINMENT, LLC

By its Board of Directors:

--------------------------
Ed Tracy

--------------------------
Jeffrey Gural

--------------------------
H. Thomas Winn

--------------------------
Jon Arnesen

                                       -9-
<PAGE>

                                   Exhibit "A"

                             Contribution Agreement

Certain real and personal  property  comprising the race track commonly known as
"Tioga Downs" located at West River Road, Town of Nichols,  County of Tioga, New
York, consisting of four parcels totaling  approximately 145 acres identified as
Tax Map No. 158.00-3-40,  Tax Map No.  158.00-3-51,  Tax Map No. 158.00-3-52 and
Tax Map  No.  158.00-3-53,  together  with  certain  personal  property  used in
connection with said real property,  cash and accounts,  and intangible property
constituting  property of the Chapter 11 Bankruptcy  Estate of Tioga Park,  LLC,
Case No. 03-60078.

                                      -10-
<PAGE>

                                   Exhibit "B"

                             Contribution Agreement

                                      LIENS

                               A. TIOGA CONTRACTS
                              CONSTRUCTION RELATED

1. May 18, 2005                     Contract for Artwork and Theming  Components
                                    for the  interior of the Tioga Downs  Racino
                                    between  Artists  Design  Group and  Newmark
                                    Realty.

2. September 9, 2004                Agreement  between Charles E. Coon and Sons,
                                    Inc.  and  Tioga  Downs  Racetrack  LLC with
                                    regard to rebuilding the 5/8 mile racetrack.

3. November 15, 2004                Proposal  between  Lineburgs   Excavation  &
                                    Paving  and  Tioga  Downs   Racetrack,   LLC
                                    regarding the Race track site work

4.                                  September 10, 2004 Proposal  between  Dennis
                                    Laninger's General  Contracting  Residential
                                    Roofing  Specialist and Tioga Park Downs for
                                    roof re-construction on building

5. December 2, 2004

                                    Agreement and Waiver between Premier Utility
                                    Locating   and  Tioga   Downs   Raceway  for
                                    identifying  the  approximate   location  of
                                    privately  owned  underground  facilities at
                                    the site location

6. May 5,  2005                     AIA Contract  between Tioga Downs Racetrack,
                                    LLC   and   Matco   Electrical   Corporation
                                    (Contractor)  and  McFarland-Johnson,   Inc.
                                    (Architect) for Cable Testing

7.  July 5, 2005                    Estimated  cash  flow  chart  for the  Tioga
                                    Racetrack  project  prepared for Tioga Downs
                                    Racetrack  and prepared by Newmark & Company
                                    Real Estate, Inc.

8. December 15, 2004                Fee Proposal prepared by  McFarland-Johnson,
                                    Inc.  to  provide  mechanical,   electrical,
                                    pluming and fire protection  engineering and
                                    for   Keystone    Associates    to   provide
                                    site/civil  engineering,  and  environmental
                                    for  Tioga  Park   complete   renovation  of
                                    property

9. January 7, 2005                  Proposal  for Traffic  Engineering  Services
                                    prepared by Newmark & Company  Real  Estate,
                                    Inc. for Tioga Park

10.  July  15,  2004                Proposal for  Integration  of Video  Lottery
                                    Terminals  (Architectural,  Interior  Design
                                    and  Theming)  Design  &  Revitalization  of
                                    Tioga Park  prepared by Climans  Green Liang
                                    Architects, Inc.

11. not specified                   Consulting  Agreement  between  Tioga  Downs
                                    Racetrack,   LLC  and  Jerry  Schweibel  for
                                    consulting services

                                      -11-
<PAGE>

12. November 8, 2004                Professional   Service   Agreement   between
                                    Newmark & Co Real Estate, Inc. and Navarro &
                                    Wright   Consulting   Engineers,   Inc.  for
                                    surveying services

13. March 23, 2005                  Agreement   between   owner  and   landscape
                                    architect  between  Newmark &  Company  Real
                                    Estate, Inc. and Trowbridge & Wolf Landscape
                                    Architects  for the Tioga  downs  Racino for
                                    design for landscape

14. December 2004                   Structural   Engineering   Design   Services
                                    Consultant   Agreement   for   Services  for
                                    Development of Video Lottery Gaming Facility
                                    between Newmark & Company Real Estate,  Inc.
                                    and Acres International Corporation.

15. June 28, 2005                   AIA Agreement  between Tioga Downs,  LLC, LP
                                    Ciminelli,  Inc.  and Climans  Green & Liang
                                    Architects   for  new   gaming   and  racing
                                    facility,  including  750 VLTs,  pari-mutuel
                                    and  simulcast   betting   parlors,   buffet
                                    dining, sports bar and multi-function rooms,
                                    new   14,000   sf   paddock   building   and
                                    significant site improvements.

                               B. TIOGA BANKRUPTCY

1. May 28, 2004                     Order  Approving  Disclosure  Statement  and
                                    Confirming   Joint   Chapter   11   Plan  of
                                    Reorganization  for Debtor  Tioga Park,  LLC
                                    together  with  Asolare II, LLC and Southern
                                    Tier Acquisition, LLC.

2. May 17, 2004                     Order   Directing   Combined   Hearing   for
                                    Approval of Disclosure Statement and Hearing
                                    on   Confirmation  of  Chapter  11  Plan  on
                                    Consent  to  Amendment  of  Chapter  11 Plan
                                    Terms  Combined with Notice of  Confirmation
                                    for Tioga  Park,  LLC,  Asolare  II, LLC and
                                    Southern Tier Acquisition, LLC

3. March 10, 2004                   Joint Chapter 11 Plan of  Reorganization  of
                                    Tioga Park, LLC.

4. March 5, 2004                    Disclosure Statement of Tioga Park, LLC

5.                                  Memorandum Agreement [this agreement and the
                                    consulting  agreement  with  Hawkins is null
                                    and void as a result of a settlement between
                                    Tioga Downs Racetrack and the trustee]

6.                                  Assignment of Asolare II, LLC's  interest in
                                    Tioga Downs.

7.                                  Hawkins    Objections   to   the   Plan   of
                                    Reorganization.

8.                                  Proof  of   payment   of   Porter   Concrete
                                    Judgment.

9.                                  Southern Tiers's Escrow account for payments
                                    made by Tioga Park.

10.                                 Satisfaction of Tioga Park mortgage.

11.                                 Satisfaction  of  Assignment  of Tioga  Park
                                    Leases.

12.                                 UCC-3's   filed  by  BSB  Bank  and  Reserve
                                    Capital.

                                      -12-
<PAGE>

                                   C. LAWSUITS

1. June 14, 2005                    All  Vernon  Acquisition,  LLC.  v. New York
                                    State  Division  of the  Lottery  and  Tioga
                                    Downs Racetrack, LLC

2. September 6, 2005                LaMar E. Bell v. Tioga Downs Racetrack, LLC

                         D. GAMING LICENSE APPLICATIONS

1. November 9, 2004                 Racetrack  License  Application  of James T.
                                    Towne, Jr.

2. November 15, 2004                Simulcast  Facility  License  Application of
                                    James T. Towne Jr.

                          E. TIOGA AND VERNON - GENERAL

1. January 1, 2005                  Consulting  Agreement  between Southern Tier
                                    Acquisition,  LLC.  c/o  Newmark  Realty and
                                    Crane  Consulting  Group,  LLC. for business
                                    and   political   consulting   services  and
                                    conducts lobbying of public officials

2. February 15, 2005                Consulting   Agreement   between   Mid-State
                                    Raceway,  Inc.  and Ed Tracy for  consulting
                                    services

3. August 27, 2004                  Consulting  Agreement  between  Tioga  Downs
                                    Racetrack   LLC  and  Jerry   Schweibel  for
                                    consulting  services  related  primarily  to
                                    local   and  state   government   relations,
                                    technical requirements and employment issues

4. August 26, 2005                  Tioga Downs Race Track Employee List

5. May 25, 2005                     Engagement  Letter with  Innovation  Capital
                                    [this agreement is being modified]

6. September 2, 2005                Preliminary   Breakdown   of   Costs-to-Date
                                    relating to Tioga Downs and Vernon Downs and
                                    list of contracts (email from Jeff Gural)

7. September 3, 2005                Monthly  Management  reports for Tioga Downs
                                    from July 2004 through July 2005

8. September 2, 2005                $150,000  finders  fee to  Morton  Finder if
                                    Vernon is acquired

9.                                  Articles  of   Organization   and  operating
                                    agreements  for Asolare II, LLC, Tioga Downs
                                    Racetrack, LLC, Vernon Downs Racetrack, LLC.

10.                                 Certificate of Incorporation for Tioga Downs
                                    Management Co., Inc.

11. February 2, 2005                Application  for Ed Tracy's  employment  and
                                    supporting affidavits and exhibits.

12. March 3, 2005                   Order  approving  Ed Tracy's  employment  at
                                    Vernon Downs.

                                      -13-
<PAGE>

13.                                 Payroll for Tioga Downs.

14.                                 Deeds for Tioga Downs.

15.                                 Survey of Tioga Downs.

16.                                 Phase 1 Environmental Study for Tioga Downs.

17.                                 Abstract  of Title and  updated  Abstract of
                                    Title for Tioga Downs.

18.                                 September 10, 2005 Final SEQR  agreement for
                                    Tioga Downs.

                                      -14-

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