1296785--12/29/2008--Seneca_Gaming

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{debt, indebtedness, cash}

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{cost, contract, operation}

{competitive, industry, competition}

{cost, regulation, environmental}

{personnel, key, retain}

{loss, insurance, financial}

{operation, natural, condition}

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We have substantial indebtedness and other financial obligations and commitments which could adversely affect our financial condition and prevent us from fulfilling our obligations, including our senior notes. Our failure to generate sufficient cash flow from our operations could adversely affect our ability to make payments on our senior notes and fulfill our other financial obligations and commitments. Our obligations under the Indenture governing the senior notes are not secured, and the senior note holders rights to receive payments on the senior notes are effectively subordinated to SGC s and the restricted subsidiary guarantors SGC conducts substantially all of its operations through its restricted subsidiaries and may be limited in its ability to access funds from its restricted subsidiaries to meet its obligations, including the senior notes. The senior notes are not the obligation of the Nation and the senior note holders rights as creditors are limited to the assets of SGC and the restricted subsidiary guarantors. The senior note holders ability to enforce their rights or have an adequate remedy against the Nation and us may be limited by the sovereign immunity of the Nation and us. If senior note holders are unable to enforce their rights, they may lose their entire investment in the senior notes. Uncertainty exists as to whether a federal or state court would have jurisdiction in an action related to the senior notes. Senior note holders may be required to dispose of their senior notes, or their senior notes may be redeemed, if their ownership of the senior notes jeopardizes our gaming operations or violates the Compact. It is uncertain whether we or the Nation may be subject to the U.S. Bankruptcy Code, which could impair the senior note holders ability to realize on our assets. If the guarantees of the senior notes are deemed fraudulent conveyances or preferential transfers, a court may subordinate or void them. SGC and the restricted subsidiary guarantors may not be able to repurchase senior notes upon a change of control. We are controlled by the Nation and the interests of the Nation may conflict with the interests of senior note holders. The Nation has a limited body of laws and has not adopted a corporate code. As a result, legal terms used in this Annual Report, the Indenture governing the senior notes and other relevant documents may have different meanings under the laws of the Nation than under laws with which you are familiar. A change in the Nation s current tax-exempt status could have a material adverse effect on our ability to repay our financial obligations, including the senior notes. We are subject to greater risks than a geographically diverse company. We compete with casinos, other forms of gaming and entertainment and other resort properties. If we are unable to compete successfully, we may not be able to generate sufficient cash flow to fund our operations or fulfill our financial obligations as they become due, including the senior notes. If we are unable to retain our key personnel, our ability to execute our business strategy could be impaired. We could face difficulties in attracting and retaining qualified employees. The Indenture governing the senior notes contains various covenants and provisions that limit our management s discretion in the operation of our business. The Senior Secured Revolving Loan Agreement contains various covenants and provisions that limit our management s discretion in the operation of our business. Our operations could be adversely affected during our expansion. Failure to complete expansion projects and any other future development projects on budget and on time could adversely affect our financial condition. We may not be able to generate enough cash flow, or obtain financing, to complete our current and any future expansion projects. We have limited experience operating casinos and hotels in Western New York. Our business could be affected by weather-related factors and seasonality. Although litigation challenging the validity of our Compact and our right to conduct Class III gaming in New York State has been unsuccessful to date, the validity of the Compact and our right to conduct Class III gaming in New York State could still be challenged in court or otherwise adversely affected by legislation, regulation, or judicial action relating to gaming generally, or our right to conduct Class III gaming, in particular. If our ability to operate Class III gaming facilities on land held in restricted fee were successfully challenged, it would have a material adverse effect on our ability to conduct gaming operations in Niagara Falls and Erie County pursuant to the Compact. Citizens Against Casino Gambling in Erie County v. Kempthorne (1:06-cv-00001-WMS (WDNY)) (formerly Citizens Against Casino Gambling v. Norton) CACGEC I Citizens Against Casino Gambling in Erie County v. Hogen (1:07-cv-00451-WMS (WDNY)) CACGEC II Scott v. Pataki (NYS Supreme Court, Erie County, Index No. 001189/06) Warren v. United States (1:06-c-00226-JTE (WDNY)) The current review by the NIGC of the Nation s use of gaming revenues could materially adversely affect our operations. SNFGC may be subject to material liabilities arising out of the condemnation process through which it is acquiring lands in the 50-acre footprint in the City of Niagara Falls, New York. Terrorism and war may directly or indirectly harm our business. We may be subject to material environmental liability as a result of unknown environmental hazards. We rely in part on federal and in part on common law trade name protection to protect certain of our trademarks. The entity that managed construction at our luxury hotel expansion project in Niagara Falls, New York, our resort hotel, casino and event center expansion projects in Allegany, and our temporary facility in Buffalo, New York,is an entity with limited operating experience and limited experience in construction management. Any adverse changes in the laws regulating our gaming operations or our failure to maintain licenses required under gaming laws and regulations and other permits and approvals required under applicable laws and regulations could have a material adverse effect on our ability to conduct gaming operations and to fulfill our financial obligations, including the senior notes. We are governmentally owned and will not necessarily be operated in the same way as if we were a privately owned for-profit business, which may materially adversely affect our ability to meet our financial obligations and commitments. Changes in the membership of the Council, its policies or the Nation s constitution could adversely affect our operations.

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1296785--12/29/2008--Seneca_Gaming_Corp